Member Briefing December 12, 2023
Manufacturing Sector Details in Last Week’s Jobs Report
Manufacturing employment rose by 28,000 in November, rebounding from the automotive strike-induced decline of 35,000 in October. At the same time, hiring has been quite sluggish this year among manufacturers, with the sector adding 11,000 workers year to date, following robust gains in 2021 and 2022. As such, there were 12,985,000 workers in November, just shy of September’s pace (12,992,000), which was the best reading since November 2008.
- The average hourly earnings of production and nonsupervisory workers in manufacturing rose 0.7% to $26.87 in November, with 5.0% growth over the past 12 months. This continues to point to a solid overall labor market, with wages rising strongly despite signs that manufacturing hiring has softened year to date.
- The largest increase in manufacturing employment in November came from transportation equipment, up 33,200, including 30,000 from motor vehicles and parts as strikes in the sector have ended. Other sectors with strength for the month included fabricated metal products (up 1,700), machinery (up 1,600), petroleum and coal products (up 1,400) and wood products (up 1,000).
- In contrast, employment declined for plastics and rubber products (down 3,400), chemicals (down 1,800), primary metals (down 1,200), miscellaneous durable goods (down 1,100) and printing and related support activities (down 1,000).
- On a year-over-year basis, the strongest hiring gains included transportation equipment (up 81,700, including 38,100 from motor vehicles and parts), machinery (up 22,200), food manufacturing (up 16,100), fabricated metal products (up 11,300) and nonmetallic mineral products (up 8,800).
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Israeli Tanks Reach Centre of Khan Younis in New Storm of Southern Gaza – Reuters
- Ceasefire in Gaza Chances Shrinking, Qatar Says - BBC
- 4 EU Countries Urge Leaders’ Summit to Demand Gaza Cease-Fire – Politico
- Gazans Say Hunger is Causing Social Breakdown, Fuelling Fears of Exodus Into Egypt - Reuters
- Netanyahu Says Dozens of Hamas Militants Surrendering – USA Today
- Houthi Militia Threatens to Block All Ships Headed to Israel - NYT
- US ‘Concerned’ About Reports that Israel Used White Phosphorus, Kirby Says - Politico
- People Around the World Go on Global Strike for a Ceasefire in Gaza - Time
- The Hamas Leader Who Studied Israel’s Psyche—and Is Betting His Life on What He Learned - WSJ
- 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
- Russian Opposition Leader Alexei Navalny Has Gone Missing, His Spokesperson Says - NPR
- Ukrainian Troops Train in Poland for Harsh Winter Warfare – Reuters
- Biden Hosts Ukrainian President Volodymyr Zelensky at White House - CNN
- Speaker Johnson Will Meet With Zelensky During US Visit – The Hill
- Ukraine's Zelenskiy Says Had 'Frank' Talk With Hungary's Orban – Reuters
- Dutch PM Rutte Presses for EU to Reach €5B Ukraine Arms Deal – Politico
- Asked About Peace Talks, Russia's Lavrov Says: Ask Ukraine – Reuters
- Ukraine Looks toward an Anxious Winter - NPR
- Where the Russia-Ukraine War is Headed in 2024 – The Hill
- 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
China’s Deflation Fears Intensify as Consumer Prices Fall at the Steepest Pace in Three Years
China's producer price index (PPI), which measures costs for goods at the factory gate, went down 3 percent year on year in November, the National Bureau of Statistics said Saturday. On a monthly basis, the November PPI went down 0.3 percent compared to October when the PPI stayed unchanged, according to data. Prices of means of production fell 0.3 percent month on month, contributing 0.24 percentage points to the overall decline in monthly PPI for November, NBS data showed.
In terms of producer prices for major industries, prices for the oil and gas extraction industry went down 2.8 percent month on month in November; prices for the non-ferrous metal ores mining industry went down 0.5 percent, and prices for the agricultural and sideline food processing industry went down 0.8 percent, the data showed. Meanwhile, prices for the ferrous metal ores mining industry went up 1.8 percent and that for the production and supply of gas went up 1.4 percent month on month, the data showed.
Manufacturers Cutting Jobs, ADP Says
US companies scaled back hiring in November, and manufacturers reduced headcount to the lowest level since early last year, adding to evidence of a cooling labour market. Private payrolls increased 103,000 last month and October’s reading was revised lower, according to figures published by the ADP Research Institute with Stanford Digital Economy Lab. The median estimate in a Bloomberg survey of economists called for a reading of 130,000.
While job creation remains healthy and wage growth is once more topping inflation, employers are increasingly scaling back hiring amid high borrowing costs and lingering price pressures. The ADP data showed a further cooling in wage growth. Workers who stayed in their job saw a 5.6 per cent median pay bump in November from a year ago, according to the report. For those who changed jobs, wages rose 8.3 per cent. Both figures represented the slowest pace of increase since 2021.
COVID 19 News – It’s Not Too Late to Get Vaccinated, as the Holidays – and Respiratory Virus Season – Ramp Up
Now is the time to get vaccinated to stay safe and healthy amid holiday gatherings and rising levels of respiratory viruses, including the flu, Covid-19 and RSV, experts say. “To protect yourself and your family this holiday season, take the steps that we do every year to protect ourselves,” Dr. Mandy Cohen, director of the US Center for Disease Control and Prevention, said in a video posted to social media Wednesday. “It’s not too late to get vaccinated if you haven’t already.”
It takes about two weeks for vaccines to provide optimal protection, so getting the shot now would lead right into Christmas. But the shots offer some additional protection before that, and well after. “Do it right away,” said Dr. William Schaffner, an infectious disease expert at Vanderbilt University. “The bulk of the winter is yet to come, so still protect yourself.” So far this season, vaccination rates are low – but respiratory virus transmission is high.
Congress Stares Down Hefty to-do List in its Final Week of 2023
Congress is staring down a hefty to-do list as it heads into the final legislative week of 2023, sparking a last-ditch effort in both chambers to complete must-pass legislation and check various priorities off of party agendas. Toward the top of that list for the Senate is striking a deal on border security and sending more aid to Ukraine, which the White House and lawmakers in both parties have underscored as a pressing need as the year closes out. That goal will come under acute focus this week with Ukrainian President Volodymyr Zelensky visiting Capitol Hill, giving him an opportunity to ask lawmakers for more support directly as Kyiv battles against Russia.
Also in the Senate, lawmakers will consider the annual defense bill, known as the National Defense Authorization Act (NDAA), with hopes of sending it to the House before the chambers break for the holiday recess. On the House side, Republicans this week are slated to hold a vote on bolstering their impeachment inquiry into Biden, a priority as the probe enters a more difficult phase that includes landing high-profile witnesses.
BAE Systems’ New Hampshire Computer Chip Plant the First to get Funding from CHIPS Law
The Biden administration said Monday it would provide $35 million to BAE Systems to increase production at a New Hampshire factory making computer chips for military aircraft, including F-15 and F-35 jets. This is the first allocation of incentives from last year’s bipartisan CHIPS and Science Act, which provides more than $52 billion to boost the development and manufacturing of semiconductors in the United States.
The Commerce Department’s choice of a military contractor instead of a conventional chip manufacturer reveals the national security focus of the law, as more and more weapons systems depend on advanced chips that could be decisive in both preventing and fighting wars. Government officials said the investment in the BAE Systems’ facility will ultimately save money for taxpayers. The money being paid out as the company hits benchmarks will help quadruple the plant’s production capacity, helping to halve the price of making the chips and leading to net savings for the federal agencies buying the chips.
Hundreds More Cannabis Licenses to be Approved in Early 2024
The state Cannabis Control Board met Friday in Albany for the first time since the long-awaited resolution of two lawsuits that brought New York's marijuana industry to a standstill since August. "I think between now and the end of the year, we're going to see a lot more doors opening," Cannabis Control Board chair Tremaine Wright told Capital Tonight after Friday's meeting.
The nearly four-month hiatus prevented hundreds of people issued licenses under the state's Conditional Adult-Use Retail Dispensary program — which focused on issuing licenses to people with past marijuana convictions — from opening up shop. A week after the court order was lifted, board members have turned their attention to a new priority: Approving retail licenses for aspiring entrepreneurs who have already secured store space.
Read more at NY State of Politics
What To Look For From The Fed’s December Meeting
Policymakers on the Federal Open Market Committee (FOMC) are widely expected to leave interest rates alone for the third straight meeting. Here are the three big themes to watch ahead of the Fed’s last meeting of the year:
- Will officials ever admit they’re likely done raising interest rates? The danger with loosening financial conditions is that it could fuel inflation or more gains in asset prices if it gets out of control. Housing activity, for example, is rate-sensitive.
- How will the Fed keep markets from getting ahead of itself? In their last update from September, policymakers penciled in just 50 basis points worth of cuts for next year. “That’s the way to protest markets pricing in a quick pivot,” Reinhart says. “The Fed is prepared for the last mile to be hard. That’s why they’ve got to keep the policy rate firm for a while.”
- What will the Fed look for when determining it’s time to cut interest rates? There are two ways to cut rates. The messy way is in response to data activity saying you need a lower real funds policy rate in a hurry. The other way is the way you’d want to do it every time, which is (to) follow inflation down. But monetary policy acts with a lag, and officials can still discover they’ve slowed the economy too much when it’s already too late.
Durable Goods, Travel Prices Fall But Food Costs Still Rising
After inflation surged to a four-decade high, consumers are finally finding deals. Supply-chain constraints have eased and manufacturers’ staffing has improved, executives and economists say, helping get production lines humming again and helping push down prices. Prices on consumer technology started falling last year as supply-chain delays eased for the typically imported items. Imports from Asia started to flow more reliably into the U.S., and demand dropped since many people had already updated their tech products earlier in the pandemic.
Overall, prices for durable goods—long-lasting items such as consumer electronics—have fallen on a year-over-year basis for five straight months, according to the Commerce Department. For some product categories such as televisions, prices are lower now than before the pandemic, according to Circana, a firm that tracks consumer goods. Grocery and clothing prices have continued to move higher, the Commerce Department data show.
Building Wind Power, Canceling Coal — it’s All Drowning Under Borrowing Costs
Plans to push South Africa and Indonesia off coal sputtered. So have offshore wind farms on the New Jersey and British coasts, and a green hydrogen project in an Italian port city. Climate projects around the world are sinking because of high borrowing costs driven by interest rates — jeopardizing a major plank of the international effort to prevent the most catastrophic damage from warming temperatures.
Essentially, persistent rate spikes have scrambled economic fundamentals for large, capital-intensive projects with long repayment periods — the exact type of projects needed if the world wants to hit its goals of massively slashing carbon emissions by mid-century. The economic climate is also making it harder to wean the world off fossil fuels. Rising rates have made it infeasible to do the debt-refinancing needed to decommission carbon-spewing coal plants, said Joseph Curtin, power and climate managing director at the Rockefeller Foundation. Already, he said, that reality has gummed up tens of billions of dollars that wealthy countries once offered to help nudge South Africa, Indonesia and Vietnam off coal.
Boeing Has a Frontrunner to Be Its Next CEO
Boeing BA 3.11%increase; green up pointing triangle is elevating Stephanie Pope to become its No. 2 executive, setting her up as the heir apparent to Chief Executive David Calhoun as the plane maker prepares for its next leadership transition. Pope, who heads Boeing’s services arm, is expected to be named chief operating officer as soon as Monday, according to people familiar with the matter. The three-decade Boeing veteran beat out other top executives for the role.
Boeing is making the change as Calhoun nears his retirement age, which was extended in 2021, and the company is in a more stable position, with some regulatory matters behind it and a rising stock price. Calhoun expects to remain in the top job at least one more year, some of the people said. Pope, 51 years old, has worked in various parts of the company, including stints as the finance chief of both the commercial airline business and services unit, which she helped form. The services unit, which she took over in 2022, generates about a quarter of the company’s revenue and is the only unit making a profit.
EV Tax Credits Are Getting Complicated
Andrew Rosen in Chattanooga, Tennessee, has been shopping for a Tesla. He's weighing not just the model, color and trim choices, but also the calendar. "Do I buy it now? Do I buy it next year?" he said. If he waits, the tax incentive can be taken immediately off the price of the car in 2024. But it could be cut in half for some models. "People saying, like, 'Take delivery this year to take advantage of it,' and then you see other people saying, 'Next year will be more beneficial,'" he said.
The calculus for buying an electric car got more complicated this month with some new guidance from the Department of Energy. The upshot is that some popular EVs like Tesla’s cheaper Model 3 cars, the Nissan Leaf and the Ford Mustang Mach-E will no longer qualify for the full $7,500 federal tax credit as of Jan. 1, because too many of their components originate in China. "I have a Ph.D. in this stuff, and I still have to go on a case-by-case basis to figure out which car is eligible for what," said John Paul Helveston at George Washington University.
Car Dealers on Why Some Customers Hesitate With EVs
Auto dealers across many parts of the country say electric vehicles are becoming too hard a sell for buyers worried about the range, reliability and price of these models. When Paul LaRochelle heard Ford Motor F 1.76%increase; green up pointing triangle was coming out with an electric pickup truck, the dealer was excited about the prospects for his business.
“We thought we could build a million of them and sell them,” said LaRochelle, a vice president at Sheehy Auto Stores, which sells vehicles from a dozen brands in Virginia, Maryland and Washington, D.C. The reality has been less positive. On Sheehy’s car lots, LaRochelle says there is a six- to 12-month supply of EVs, compared with a month of gasoline-powered vehicles.
U.S. Air Force Begins Testing 100% Electric Airplane
Flying from Plattsburg, New York to Florida would not be considered an unusual event in today’s world. But when Beta Technologies’ Alia landed at Duke Field/Eglin Air Force Base it marked a historic event in the development of clean aviation. The U.S. Air Force will now begin test-flying Alia and recharging its batteries with a charging system supplied by Beta. Prior to the delivery of the aircraft, Beta supplied a flight simulator that allowed Air Force pilots to practice with Alia’s flight controls.
Despite the optics of the long-range flight, the intended purpose of the aircraft has not changed. The flight included multiple layovers for recharging as it made its way to the Florida military base. The Beta flight testing team will stay at the base working with the Air Force’s 413th Squadron to conduct training exercises and flight tests. The testing is expected to continue for several months while the team explores multiple uses for the aircraft, including, in addition to medical supply delivery, personnel transport, and the delivery of non-medical supplies critical to military missions.
Why Billions of CHIPS Act Dollars Have Not Been Distributed
The first round of CHIPS Act incentives totaling $39 billion for the construction of large-scale fabrication facilities became available in February. In September, a second funding opportunity for small-scale fabrication projects opened. But to date, none of the money has been distributed, and some fabrication plant projects run into hurdles. At the beginning of 2023, TSMC, the world’s largest chip maker, began construction on a second chip fabrication plant near Phoenix, Ariz. For Biden, TSMC’s two plants represented the flagship of his CHIPS Act incentive program.
ASM CEO Benjamin Loh said his company is encouraged by the promise of the US CHIPS Act. What is needed now is for the DoC to start giving out money to companies whenever possible. The DoC said the CHIPS ACT has moved extremely fast for a government program. For example, as part of the funding application process, the agency has received over 530 statements of interest from companies in 42 states. The federal agency has also received 120 pre-applications and full applications for the funding opportunities. The DoC said it is in active dialogues with chip makers and R&D facilities and expect to make major announcements in coming months.