Member Briefing February 17, 2022

February 17, 2022

Posted By: Harold King in Daily Briefing,

NY Fed Survey: Omicron Wave Stalled Growth and Led to High Absenteeism in the Region

The New York Fed’s regional business surveys indicate that economic growth stalled in early 2022 as manufacturing and service-sector firms continued to struggle to find workers. Moreover, employee absenteeism was reported to be nearly three times its normal level.

Survey participants were asked about supply disruptions and delays. Insofar as recent trends go, slightly over half of manufacturers report that disruptions have worsened in the past month.
Looking to the month ahead, businesses foresee further worsening in supply chain issues. Among manufacturers, pessimists outnumber optimists by a margin of 35 to 16 percent.
85 percent of manufacturers report currently having trouble obtaining needed supplies.
Asked about staffing issues— In the manufacturing survey, the median respondent reported that job openings represented about 5 percent of their firm’s total employment. This question has been included in these surveys at the beginning of the year for more than eight years now, and this proportion had never exceeded 3 percent for manufacturers.
More than three in five manufacturers characterized absenteeism as unusually high.
When asked specifically what percentage of staff had at least one day of unscheduled absence this January, and what the comparable percentage was in a typical (pre-pandemic) January, the average incidence among both manufacturers and service firms was reported to be roughly 12 percent last month versus about 5 percent in a typical January.
When asked what actions firms were taking to mitigate its effects, businesses in manufacturing and distribution increased the hours of those who were present at work, as well as made more use of outside contractors or temporary workers.

Read the Survey Results at the NY Fed

Fed Minutes – A Bit Less Hawkish Than Expected

With no explicit discussion of a date to begin balance sheet runoff, or of the idea of a 50 basis point hike in March, the The January minutes are on the less-hawkish side of expectations. But they aren’t the last word on anything, given the worse-than-expect inflation and wages data released since the meeting.

The minutes make it clear that the FOMC is in agreement that both the pace of rate increases and balance sheet runoff will need to be faster than in the tightening cycle which began in December 2015, given the extremely tight labor market and persistent elevated inflation. The FOMC remains optimistic about growth once the Omicron hit fades, despite higher inflation crimping real incomes, because households’ balance sheets are “strong” and wages are rising rapidly. But these wage gains are threat to future inflation if they outstrip productivity growth by too big a margin, given that firms have “largely been able to pass on [cost increases] to their customers”, thanks to the strength of demand. As a result, “elevated inflation had broadened beyond sectors most directly affected” by Covid and the reopening.

U.S. Industrial Production Rises Moderately in January

Production at U.S. factories increased moderately in January as motor vehicle output fell for a second straight month amid an ongoing global shortage of semiconductors. Manufacturing output gained 0.2% last month after dipping 0.1% in December, the Federal Reserve said on Wednesday. Manufacturing, which accounts for 11.9% of the U.S. economy, remains supported by still-lean inventories at businesses as demand for goods remains strong.

Shortages of materials have also afflicted other segments of manufacturing, in addition to the motor vehicle industry. Spending shifted towards goods from services during the COVID-19 pandemic, but manufacturers have struggled to cope amid an acute shortage of workers on factory floors and other places along the supply chain, caused by the coronavirus.

U.S. Retail Sales Surprise to the Upside, Rise 3.8% in January

U.S. shoppers sharply boosted retail spending by 3.8% in January as inflation accelerated, the Commerce Department said Wednesday. The retail-sales report doesn’t cover spending on services, other than restaurants. Services likely bore the brunt of a pullback in spending in early January because of the Omicron variant, only part of which is reflected in the retail-sales report.

Economists expect purchases of goods such as electronics and furniture to decline and for services spending to pick up as the latest pandemic wave eases. That in turn could take some pressure off goods inflation, with more people returning to dining out, travel and entertainment. There are early signs of this shift in spending patterns. Spending rose 12% year-over-year for the week ended Feb. 5, according to Bank of America credit- and debit-card data. Spending on airfares, lodging, entertainment and dining out all improved from levels seen just before the start of the pandemic, the bank found.

US COVID – CDC Study Vaccines Prevent Hospitalizations in Kids and Teens

Coinciding with increased circulation of the Omicron variant, COVID-19–associated hospitalization rates among children and adolescents aged 0–17 years increased rapidly in late December 2021, especially among children aged 0–4 years who are not yet eligible for vaccination.

Throughout the periods of Delta and Omicron predominance, hospitalization rates remained lower among fully vaccinated adolescents aged 12–17 years than among unvaccinated adolescents. During December 2021, the monthly hospitalization rate among unvaccinated adolescents aged 12–17 years (23.5) was six times that among fully vaccinated adolescents (3.8).

NYS Vaccine and COVID Update –

Vaccine Stats as of February 16:

One Vaccine Dose

88.4% of all New Yorkers – 16,318,291 (plus 6,439 from a day earlier).
In the Hudson Valley 1,696,810 (plus 903).

Fully Vaccinated

75.0% of all New Yorkers – 14,557,085 (plus 9,829).
In the Hudson Valley – 1,484,005 (plus 1,030).

Boosters Given

All New Yorkers – 6,827,706
In the Hudson Valley – 818,273

The Governor updated COVID data through February 16. There were 37 COVID related deaths for a total reported of 68,439.

Hospitalizations:

Patients Currently in Hospital statewide: 3,265.
Patients Currently in ICU Statewide: 530

7 Day Average Positivity Rate – Cases per 100K population

Statewide 2.78% – 20.43 positive cases per 100,00 population
Mid-Hudson: 2.83% – 16.65 positive cases per 100,00 population

Useful Websites:

HERO Act COVID-19 Designation Extended Again: Safety Plans Required Through March 17

Council of Industry Associate member Bond Schoeneck & King report that on Feb. 15, 2022, the NYS Commissioner of Health extended the NY HERO Act designation for a fifth time through March 17, 2022. The Commissioner will review the CDC’s level of transmission of COVID-19 at that time and determine whether to continue the designation (extend further) or not. Based on the Commissioner’s designations, if the CDC’s level of transmission in New York continues to be “high” or “substantial,” it seems highly likely that the Commissioner will continue the designation.

In light of the continued designation, covered employers (all private employers with a worksite(s) in New York state) should continue to have their NY HERO Act Airborne Infectious Disease Exposure Prevention Plans in place.

BioNTech Unveils Mobile Covid-19 Vaccine Factories for Developing World

BioNTech SE, the German biotech company that with Pfizer Inc. developed the first Western Covid-19 shot, unveiled mobile vaccine production units that it aims to deploy across Africa and other regions that have had limited access to supplies.

The modular factories, encased in shipping containers, will produce so-called messenger RNA vaccines and operate on a not-for-profit basis in developing countries, the company said Wednesday. Each unit, comprising 12 containers, can produce around 50 million doses a year. The modules can be transported by air, sea, road or rail and will be able to produce future mRNA-based vaccines to be developed by BioNTech, including shots for malaria and tuberculosis, as well as cancer treatments currently in clinical trials.

CDC Study: COVID-19 Vaccine in Pregnancy May Protect Babies After Birth

COVID-19 vaccines during pregnancy can protect babies after they’re born and lead to fewer hospitalized infants, a U.S. government study released Tuesday suggested. Infants in the study were treated at 20 hospitals in 17 states from July 2021 through mid-January, during surges involving the delta and omicron variants

The study is the first to show potential benefits to infants born to people who received two doses of Pfizer or Moderna vaccines during pregnancy, Centers for Disease Control and Prevention researchers said during a briefing. It was already known that antibodies developed by COVID-19 vaccines transfer to the fetus through the umbilical cord. How that might affect infants after birth was uncertain.

This is Getting Personal – Rising Beer Prices

Heineken NV warned it’s facing the worst inflation in a decade and said consumers may cut back on beer, threatening the industry’s recovery from the pandemic. The brewer said it will raise prices for its beer by “courageous” amounts as it seeks to offset rising raw material and energy costs and “crazy” shipping rates. This is likely to dent demand for beer in households already strained from the rising cost of heating, food and clothing.

“If you look at the inflation that we’re currently experiencing, it’s the highest in 10 years and it’s not just in our product categories — there might be a macroeconomic thing happening here,” Chief Executive Officer Dolf van den Brink said in a phone interview.

UK Inflation Rate Hits New 30-Year High at 5.5%

U.K. inflation came in at an annual 5.5% in January, slightly ahead of forecasts and remaining at a 30-year high. On a monthly basis, consumer prices contracted by 0.1%, slightly less than expected by economists in a Reuters poll. The annual print was expected to remain at 5.4%.

December’s 5.4% annual rise in consumer prices was the highest since 1992, and the Bank of England has imposed consecutive interest rate hikes for the first time since 2004 in a bid to contain runaway inflation. The Bank expects inflation to peak at 7.25% in April, having previously projected a 6% ceiling in its December report.

Great Resignation? At IBM, it’s the Great Reevaluation

As voluntary turnover continues to hit all-time highs, the “Great Resignation” is becoming less of a trendy, new term and more of a constant and growing source of concern for HR and business leaders. Many are reacting to the prolonged retention challenges by investing heavily in talent acquisition—a necessary, but not the only, component of a smart strategy, says HR veteran and IBM CHRO Nickle LaMoreaux.

she says, HR should look closely at what the Great Resignation is really all about: Employees are taking ownership over what they want from their careers, where and when they want to work, how they want their personal goals and professional purpose to align; ultimately, she says, it’s their “Great Reevaluation.” HR needs to follow their lead and reevaluate how the company is meeting employees’ evolving needs. “This is an opportunity for HR departments to be working with business leaders and managers to re-recruit existing employees,” LaMoreaux says.

Orders of Manufacturing Tech Hit Nearly $6 Billion in 2021

According to a February 14 report from the Association for Manufacturing Technology, technology orders from manufacturers broke $5.9 billion last year, the highest year on record. AMT reports the $5.9 billion in 2021 orders beat 2020’s $3.8 billion total by 55%.

According to AMT, the later half of the year in particular saw orders increase dramatically. August through December 2021, the association reported, saw a streak of orders breaking $500 million each month, the first such five-month streak on the agency’s records.

Long-Term Rates Rising for Asia-West Coast Shipping

American importers can expect to pay long-term rates of as much as $8,000 per 40-foot equivalent unit — compared with early 2021’s $3,000 — for Asia-West Coast delivery this year, says Patrik Berglund of Xeneta, which tracks ocean shipping rates.

“What that means is that the ones being penalized the most and struggling the most are the smaller importers, and the longer this situation goes on, the more favorable it is — even though it’s painful — to the big-volume shippers,” Berglund says.

Demand Declines for COVID-19 Prevention Products

Demand is weakening for masks and other COVID-19 prevention products and the trend will likely cut into sales growth at 3M and Honeywell International, said the companies during recent earnings forecasts. 3M posted $1.5 billion in masks sales for fiscal 2021 and said it has distributed a total of 4.3 billion respirators.

Masks became a billion-dollar business for the 3M starting in 2020, when the virus’s rapid spread sent consumers and healthcare workers looking to secure facial coverings to try to avoid infection. Now, as the latest U.S. surge caused by the Omicron variant fades, 3M said slowing mask sales will probably reduce its organic growth by about 2 percentage points this year