Member Briefing December 11, 2023
U.S. Manufacturing Profits Have Slowed Year Over Year
Data by the U.S. Census Bureau on Wednesday showed that profits of manufacturing corporations have fallen steadily since 2021. Seasonally adjusted after-tax profits in the third quarter of this year for manufacturing corporations totaled $226.6 billion, down from the $241.8 billion recorded in the third quarter of 2022 and $251 billion in 2021. The pandemic total was $139 billion.
The aggregate statistics were shared as part of the Quarterly Financial Report (QFR), which dates back to World War II and surveys U.S. manufacturers with at least domestic assets of $5 million and over. The data suggest a slowdown in the manufacturing activity, corroborating the Institute for Supply Management’s (ISM) data that showed activity slowing as well.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Biden Admin Uses Emergency Authority to Approve Tank Shells Sale to Israel – The Hill
- Heavy Fighting Across Gaza as Israel Presses Ahead – Politico
- Violence Escalates Between Israel, Lebanon's Hezbollah - Reuters
- Israel's Netanyahu Criticizes Putin's Ties to Iran in 50-Minute Phone Call - Bloomberg
- U.S. Vetoes Israel-Hamas Cease-Fire Resolution at U.N. Security Council - NYT
- Israel and Palestine: How Peace is Possible – The Economist
- Hamas Claims Israeli Operation Ended in Hostage Death - BBC
- Overcrowded and Dangerous: Life in Gaza’s ‘Deconfliction Zones’ - WSJ
- War Stranded Gaza Workers in Israel. How it Dashed Their Dreams. – Christian Science Monitor
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Troubled by a Resurgent Russia and Bickering Allies, Ukraine Hunkers Down - WSJ
- Ukraine War Maps Show Ground Won, Lost as Russia Steps Up Offensives - Newsweek
- Ukraine in 'Mortal Danger' Without Aid, Olena Zelenska Warns - BBC
- Vladimir Putin is Running Russia’s Economy Dangerously Hot – The Economist
- The Sanctions Against Russia Are Starting to Work – The Atlantic
- A Ukrainian Photographer on the Horror—and the Normality—of Covering a War at Home - WSJ
- Ukraine Claims Killing of 'Traitor' Ex-MP Illya Kyva in Russia - BBC
- Ukraine Denounces Polish Truckers for harming its War Effort – Politico
- Germany Warns of ‘Warmonger Putin’ Pushing Propaganda at Paris Olympics - Politico
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
U.S. Hiring Pace Continued to Moderate in November
Nonfarm payrolls rose by a seasonally adjusted 199,000 for the month, slightly better than the 190,000 Dow Jones estimate and ahead of the unrevised October gain of 150,000, the Labor Department reported Friday. The unemployment rate declined to 3.7%, compared to the forecast for 3.9%, as the labor force participation rate edged higher to 62.8%. A more encompassing unemployment rate that includes discouraged workers and those holding part-time positions for economic reasons fell to 7%, a decline of 0.2 percentage point.
Average hourly earnings, a key inflation indicator, increased by 0.4% for the month and 4% from a year ago. The monthly increase was slightly ahead of the 0.3% estimate, but the yearly rate was in line. Health care was the biggest growth industry, adding 77,000. Other big gainers included government (49,000), manufacturing (28,000) and leisure and hospitality (40,000).
NFIB Jobs Report: Labor Quality Remains a Top Concern for Owners
According to NFIB’s monthly jobs report, 40% (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down three points from October. The percent of small business owners reporting labor quality as their top small business operating problem remains elevated at 24%. Labor costs reported as the single most important problem for business owners decreased one point to 8%, five points below the highest reading of 13% reached in December 2021.
Overall, 54% of owners reported hiring or trying to hire in November, down seven points from October. Of those hiring or trying to hire, 93% reported few or no qualified applicants for the positions they were trying to fill. Twenty-six percent of owners reported few qualified applicants for their open positions and 24% reported none. Seasonally adjusted, a net 36% of owners reported raising compensation, unchanged from last month. A net 30% plan to raise compensation in the next three months, up six points from October.
COVID 19 News – Hospitalizations Are Increasing in U.S.
For nearly a month, COVID-19 hospitalizations have been increasing following weeks of decline and relatively low levels throughout the summer, according to data from the Centers for Disease Control and Prevention (CDC). As of Nov. 25, there were 19,444 weekly hospitalizations due to the virus compared to 15,006 four weeks earlier, data shows. While this marks an increase of 29.6%, it is lower than the 150,650 weekly hospitalizations at the peak of the omicron wave during the 2021-22 season.
Rates of COVID hospitalizations remain elevated among senior citizens, middle-aged adults and children under age 4, meaning the virus is affecting both the oldest and youngest Americans. Americans aged 65 and older have the highest rate of weekly hospitalizations of any age group in the U.S., as they have throughout the pandemic, at 13.5% per 100,000 for the week ending Dec. 2, CDC data shows.
NYS COVID Update
The Governor updated COVID data for the week ending December 8th.
Deaths:
- Weekly: 69
- Total Reported to CDC: 81,253
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,635
- Average Daily Patients in ICU Statewide: No Data
7 Day Average Cases per 100K population
- 14.1 positive cases per 100,00 population, Statewide
- 14.0 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
The ‘Megafactories’ Are Coming. Now the Hustle Is On to Find Workers
U.S. manufacturers have long struggled to find all the employees they need. The coming wave of megafactories, aided by billions of dollars in public incentives, could push the shortage into a crisis, executives and industry officials say. The anxiety is particularly acute in Central Ohio, where Intel INTC 1.30%increase; green up pointing triangle is building two semiconductor plants at a combined cost of more than $20 billion, and Honda and LG Energy Solution are constructing a $3.5 billion electric-vehicle battery plant. The companies aim to hire more than 5,000 workers between them, and local suppliers that will serve the factories likely will need thousands more.
That leaves smaller manufacturers bracing for an intensifying labor battle. “Workforce is the No. 1 problem anywhere we go in Ohio, and it’s more so in Central Ohio,” said Ryan Augsburger, president of the Ohio Manufacturers’ Association. “It’s going to get a lot worse with large companies like Intel.” Representatives for Intel and the Honda/LG joint venture declined to detail their planned wage rates, though Intel said its manufacturing technicians elsewhere in the country can earn $50,000 to $90,000 a year, including incentives.
Why is Childcare So Expensive When Providers Are Paid So Little? Let’s Do the Math
There’s a paradox that lies at the heart of the childcare industry: parents dole out high fees, while childcare centers make very little and workers don’t get paid much. The annual cost of childcare in 2022 stood at $10,853, according to Childcare Aware of America. Meanwhile, the median pay for childcare workers in 2022 was just $13.71 per hour or $28,520 a year, according to Labor Department data. “The main reason that childcare is so expensive has to do with just how many people you need in a classroom to make sure that little, little children are healthy, safe and learning every day,” said Susan Gale Perry, the CEO of Childcare Aware of America.
There are ratios that classrooms have to follow, which can vary from state to state and program to program. Federal guidelines show that adults at childcare centers shouldn’t care for more than a few toddlers or infants at a time, with these restrictions becoming more lax the older the children. Because of these limits, that means more staffing, which means higher payroll costs. You also have to pay for supplies, insurance, utilities, equipment and advertising, among other expenses.
U.S. Consumer Sentiment Jumps as Inflation Concerns Dissipate
US consumer sentiment rebounded sharply in early December, topping all forecasts as households dialed back their year-ahead inflation expectations by the most in 22 years. The University of Michigan’s consumer sentiment index jumped 8.1 points to a four-month high of 69.4, the preliminary December reading showed. The median estimate in a Bloomberg survey of economists called for the gauge to edge up to 62.
Consumers see prices rising at an annual rate of 3.1% over the coming year, the lowest level since March 2021. The 1.4 percentage points decline from the prior month was the largest since October 2001. They see costs rising 2.8% over the next five to 10 years, matching the lowest since September 2022 and down from last month’s 3.2%, the report showed Friday. Consumers’ perception of their financial situation improved to a three-month high. Despite higher borrowing costs, the university’s report showed buying conditions for durable goods advanced to the highest level since June 2021.
First Medicine Using CRISPR Gene-Editing Gets the Go-Ahead
The U.S. Food and Drug Administration (FDA) on Friday approved two gene therapies for sickle cell disease, making one of them the first treatment in the United States based on the Nobel Prize-winning CRISPR gene editing technology. Casgevy, developed by partners Vertex Pharmaceuticals and CRISPR Therapeutics, as well as bluebird bio's Lyfgenia were approved for people aged 12 years and older.
Casgevy is based on CRISPR, discovered by Jennifer Doudna and CRISPR Therapeutics co-founder Emmanuelle Charpentier, that uses molecular "scissors" to trim faulty parts of genes that can then be disabled or replaced with new strands of normal DNA. Bluebird's gene therapy, on the other hand, is designed to work by inserting modified genes into the body through disabled viruses. The Vertex-CRISPR therapy has a U.S. list price of $2.2 million, while bluebird's is $3.1 million. Both therapies, pitched as one-time treatments, will be available in early 2024.
Reshoring and Foreign Investment Driving US Job Creation
During the first half of 2023, nearly 300,0000 announced new U.S. jobs were attributable to businesses’ “reshoring” activity plus foreign direct investment, the Reshoring Initiative reported – in line with the record total of jobs reported for 2022 reshoring activity. According to the Reshoring Initiative, those new jobs will be predominantly the result new plants to manufacture electric-vehicle batteries and semiconductor chips according to a release. The group also identified “geopolitical risk” as a prompter for businesses’ to reevaluate their “supply chain priorities.”
“Reshoring” describes those actions taken by manufacturers to relocate production of raw materials and products to the U.S., to overcome supply-chain inefficiencies. Retired GF Machining Solutions president Harry Moser established the Reshoring Initiative in 2010 to track that trend, and to move lost jobs back to the U.S. “We publish this data to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” according to Moser. “With 5 million manufacturing jobs still offshore, as measured by our $1.2 trillion/year goods trade deficit, there is potential for much more growth.” Moser said.
Read more at American Machinist
Stellantis Plans Layoffs at Assembly Plants in Mich., Ohio
Stellantis on Thursday said it plans to eliminate production shifts at two assembly plants because it needs to build fewer SUVs so it can meet stricter emissions standards. The company's plant in Toledo, Ohio, which builds the Jeep Wrangler and Gladiator, and one of two Jeep Grand Cherokee plants in Detroit will move from three shifts of workers to two, Stellantis said. The changes, effective as soon as Feb. 5, "will result in job losses," the automaker said in an emailed statement, without providing specific numbers.
Stellantis said the plants are each losing a shift "in part becuase of the need to manage sales of the vehicles they produce to comply with California emissions regulations that are measured on a state-by-state basis." In June, the company said it was no longer sending gasoline vehicles to dealerships in 14 states that follow the California regulations unless customers had ordered them. By moving the Detroit plant to two shifts, Stellantis said it can "focus its attention on improving the operational performance and throughput at the plant in the event that a change in the regulations or marketplace allows for an increase in volume."
Automakers Are Working to Cut Scope 1-3 Emissions Impacting Suppliers
The automotive industry is undergoing a transformative shift toward sustainability. Central to the industry’s evolution is the decarbonization of the entire automotive value chain, with a particular focus on Scope 3 emissions. Scope 3 emissions encompass indirect emissions generated across the entire value chain, including the production of materials like steel, plastics, aluminum, batteries and glass. Many challenges related to value-chain decarbonization are addressed at the C-suite level. However, material engineers, procurement department leaders, quality managers and supplier management leaders must also deal with these strategies. We are not talking about emissions related solely to logistics, but about the carbon footprint of the production process itself.
Products like steel, aluminum, electric batteries, and plastics are often referred to as “hotspots” — that is, major producers of CO2 emissions and other greenhouse gases. According to a McKinsey & Company study, typical upstream EV emissions include the battery (40%–60%), steel (15%–20%), aluminum (10%–20%) and plastics (around 10%). Upstream internal combustion engine (ICE) vehicle emissions include steel (25%–35%), aluminum (20%–30%) and plastics (15%–20%).
UAW Says it Signed 1,000 VW Workers in Tenn. Organizing Push
The UAW said it has signed up more than 1,000 employees at Volkswagen Group's non-union Tennessee auto plant, setting up a high-stakes showdown at a site where the union suffered painful past defeats. The union has now gained the support of more than 30 percent of workers at the Chattanooga facility, it said. That’s a key threshold for the group because it means Volkswagen employees who have been working with the UAW will go public with their efforts as they seek to win more support, according to the union.
Once 70 percent of employees at a plant the UAW is targeting support organizing efforts, and if company management declines to voluntarily recognize the union, the labor group will try to win a government-supervised unionization election. The UAW is trying to quickly capitalize on its recent contract victories in Detroit and reverse labor’s decades-long decline in the auto sector. Last week, it announced it was mounting simultaneous, public campaigns to organize 13 carmakers’ non-union plants.
U.K. Makes Arrest in Probe Into Jet-Engine Parts Scandal
The U.K. has launched a criminal investigation into alleged fraud at an aircraft-parts supplier suspected of selling thousands of jet-engine components with fake safety certificates that have been found in dozens of jets, including some operated by major U.S. airlines. The Serious Fraud Office said Wednesday it had raided an address and arrested an individual as part of its probe into AOG Technics.
Aviation regulators in the U.K., U.S. and European Union earlier this year issued notices warning airlines that it suspected AOG of having provided false documentation for engine components. Those parts, ranging from simple nuts and bolts to more critical turbine blades, went into engines manufactured by General Electric and France’s Safran, which are used to power one of Boeing’s best-selling jets.
Apple Aims to Make a Quarter of the World’s iPhones in India
Apple and its suppliers aim to build more than 50 million iPhones in India annually within the next two to three years, with additional tens of millions of units planned after that, according to people involved. If the plans are achieved, India would account for a quarter of global iPhone production and take further share toward the end of the decade. China will remain the largest iPhone producer.
Apple has gradually boosted its reliance on India in recent years despite challenges including rickety infrastructure and restrictive labor rules that often make doing business harder than in China. Among other issues, labor unions retain clout even in business-friendly states and are pushing back on an effort by companies to get permission for 12-hour work days, which Apple suppliers find helpful during crunch periods. Apple and its suppliers, led by Taiwan-based Foxconn 2317 0.50%increase; green up pointing triangle Technology Group, generally believe the initial push into India has gone well and are laying the groundwork for a bigger expansion, say people involved in the supply chain.
Yellow Rejects Bidder
An effort to bring failed trucker Yellow back from the ashes is effectively over. Attorneys for the bankrupt business rejected an offer to revive the company and rehire thousands of its former workers. Yellow’s lawyers wrote to the group seeking to resurrect the company shortly after an auction in bankruptcy court raised nearly $1.9 billion for a swath of terminals around the country.
The rejection underscores the difficulty in trying to build what would essentially be a new less-than-truckload operation in the U.S., even with Yellow’s extensive assets. A dozen of the company’s rivals have scooped up many of the most prized facilities, with XPO alone putting $870 million on the table for 28 sites. Three others are spending more than $200 million, and truckload carrier Knight-Swift Transportation is putting out $51.3 million to expand its growing LTL business.
GM Developing Zero-Tailpipe-Emissions Trucks with Autocar
General Motors announced an agreement with Autocar Industries LLC to jointly develop service vehicles with “zero tailpipe emissions,” to be powered by GM’s Hydrotec hydrogen fuel cell propulsion system. The Hydrotec “power cubes” store hydrogen in a series of fuel cells that are used to generate an electrical current to power a motor (or multiple motors.) The automaker describes the system as compact and flexible, with each Hydrotec power cube containing over 300 hydrogen-fuel cells, plus thermal- and power-management systems.
The Hydrotec fuel cell power cubes will be produced by GM in Brownstown, Mich. The fuel cells combine hydrogen and oxygen to generate electricity through an electrochemical reaction, converting energy stored in the hydrogen into electricity. Each power cube contains more than 300 hydrogen fuel cells, along with thermal and power management systems and proprietary controls to fuel cell and battery life and performance. The first trucks to be developed are forecast to enter production in 2026 at the Autocar Truck Plant, Birmingham, Ala., starting with cement mixers, roll-off and dump trucks, which all share a common architecture.
Read more at American Machinist
A Moving Company Touts Its Young, Chiseled Workers. Feds Say That’s Age Discrimination.
The Equal Employment Opportunity Commission sued Fresno, Calif.-based Meathead Movers this year for violating age-discrimination law by not hiring enough older workers. Employment attorneys and trade groups say the case will offer clues as to how the agency will approach antidiscrimination laws now that President Biden’s picks are installed. EEOC Chair Charlotte Burrows, whom Biden elevated, has said she would vigorously enforce age-discrimination laws as older workers regularly face age bias, stereotypes and discrimination.
The focus on age discrimination comes as America’s workforce is getting older. Nearly a quarter of U.S. workers are 55 and older, and the Labor Department estimates that the number of people 65 and older in the labor force will grow by a third over the next decade. Meathead Movers executives say that the company is providing good jobs and quality services to the community and that it isn’t discriminating against anyone—older workers just don’t want to carry chests downstairs. “We are 100% open to hiring anyone at any age if they can do the job,” said company owner Aaron Steed.