Member Briefing February 23, 2023
Fed Minutes Show Members Resolved to Keep Fighting Inflation
Federal Reserve officials at their most recent meeting indicated that there are signs inflation is coming down, but not enough to counter the need for more interest rate increases, meeting minutes released Wednesday showed. While the Jan. 31-Feb. 1 meeting concluded with a smaller rate hike than most of those implemented since early 2022, officials stressed that their concern over inflation is high.
Inflation “remained well above” the Fed’s 2% target, the minutes stated. That came with labor markets that “remained very tight, contributing to continuing upward pressures on wages and prices.“ Consequently, the Fed approved a 0.25 percentage point rate increase. But the minutes stated that the reduced pace came with a high level of concern that inflation was still a threat. A “few” members said they wanted a half-point, or 50 basis points, hike that would show even greater resolve to get inflation down. The minutes, however did not elaborate on how many a “few” were nor which Federal Open Market Committee members wanted the half-point increase.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Biden Reassures Eastern NATO Allies on Security After Putin's Nuclear Warning - Reuters
- China Blames United States for Russia’s War in Ukraine – Washington Post
- Why China’s Ukraine Balancing Act Might be Tilting in Putin’s Favor - CNBC
- China’s Economic Support for Russia Could Elicit More Sanctions - NYT
- On the Ground in Ukraine, the War Depends on U.S. Weapons – USA Today
- The Environmental Scars of Russia’s War in Ukraine - Politico
- Ukraine’s Zelensky Is Challenged by Return of Domestic Political Troubles - WSJ
- Russia's Wagner Group Boss Releases Image of Dead Soldiers Accusing Defence Ministry of Depriving Them of Ammunition - Sky News
- Here's How Ukraine Could Retake Crimea – 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
Supply-Chain Headaches Ease for Many Companies
Supply-chain snarls are fading from among the top challenges facing some U.S. companies as freight congestion eases, shipping costs fall and factories in Asia are freed from Covid-19 lockdowns. The benefits are being felt most among importers of finished goods, such as game company Hasbro Inc., Sharpie pen maker Newell Brands Inc. and sportswear manufacturer Under Armour Inc., whose executives on recent earnings calls pointed to the supply chain as a bright spot among darker clouds from rising interest rates and a pullback in consumer spending.
Today, freight congestion has cleared and ocean shipping costs have fallen close to prepandemic levels. The challenge for retailers is to maintain vigorous sales and to clear out bloated inventories. But some manufacturers still sound cautious as shortages of key parts hold up production lines and hurt productivity. Dave Regnery, chief executive of air-conditioning manufacturer Trane Technologies PLC, said on a Feb. 2 call that supply-chain issues had improved but it would take “several quarters before the supply chain gets back to what I would call normal.”
NAM’s Timmons Gives NAM State of Manufacturing Address
Timmons spoke to a gathering of manufacturing team members and the media at Husco International in Waukesha, Wisconsin. In his remarks, he laid out the NAM’s view of where the industry is and where it’s going. Timmons cited a variety of manufacturing challenges. These included Supporting immigration, Promoting permitting reform, Fighting for tax fixes, competing with China, and pushing back on new EPA rules.
Timmons also spoke about Russia’s invasion of Ukraine, the importance of the manufacturing industry’s support for the Ukrainian people and the larger struggle between freedom and tyranny. “Despite everything happening around us, like the threat of a recession and global conflict, manufacturers are still leading the way forward,” said Timmons. “And although our industry and our country will need to make audacious and sometimes uncomfortable changes to adapt to economic, political and global challenges … I’m confident in reporting that the state of manufacturing in America remains steadfast and resolute.”
US COVID Update – CDC Study Confirms Effectiveness of Bivalent Booster
A CDC study found that people aged 12 years and older who got an updated Bivalent booster vaccine were less likely to get infected or die from COVID-19 compared with those who did not get an updated COVID-19 vaccine. Bivalent booster recipients in 24 U.S. jurisdictions had slightly higher protection against infection and significantly higher protection against death than was observed for monovalent booster recipients or unvaccinated persons, especially among older adults.
Although long-term protection could not yet be assessed, evidence of waning protection against infection 3 months after bivalent booster dose receipt was observed. This study supports previous findings of protection afforded by bivalent vaccines against infection and medically attended illness and provides additional evidence of enhanced protection against COVID-19–associated mortality. To date, however, bivalent booster coverage has been low (17.5% among persons aged ≥12 years).
NYS COVID Update
The Governor updated COVID data through February 3.
- Daily: 19
- Total Reported to CDC: 78,401
- Patients Currently in Hospital statewide: 2,144
- Patients Currently in ICU Statewide: 232
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 4.28% - 10.61 positive cases per 100,00 population
- Mid-Hudson: 3.39% - 10.88 positive cases per 100,00 population
Biden Administration Releases Records to GOP-Led Panel Probing COVID "Wuhan Lab Leak" Theory
The Health and Human Services (HHS) Department has released 900 pages of records to the House Select Subcommittee on the Coronavirus Pandemic, according to an HHS official, as the Republican-led panel launches its review of the Biden administration's handling of the pandemic crisis. Committee chairman Rep. Brad Wenstrup, Republican of Ohio, had requested records from the agency.
The panel said it is probing whether COVID-19 originated from a lab in Wuhan, China and the Chinese Communist Party covered it up, as well as whether U.S. taxpayer dollars were being sent to the lab. "We have concerns about (Wuhan), and the type of research and studies that were taking place there," Wenstrup said. "So, we do want to dig in to that." The panel's top ranking Democrat, Raul Ruiz, of California, said the committee must avoid allowing the investigation to fuel conspiracy theories about COVID.
Shifting Supply Chain Winds Favor Regionalism, Restructuring
The world economy is undergoing significant changes as we shift from a global approach to one focused on regional and national production. Demographic, geographic and political factors are reshaping our world and driving the change. Going forward, companies will need to continue to navigate supply chain disruptions, China risk and concerns about capital outlays in a rising interest-rate environment.
The new paradigm will not be defined by the globalization that dominated the last half-century. While this transition presents challenges, it also opens up exciting new opportunities for those who are willing to adapt. 2023 is an opportunity for companies to work together to restructure and regionalize their manufacturing value chains.
British Trade Chief Kemi Badenoch Reveals Major Rift With US Over Green Subsidies
Joe Biden's "protectionist" Inflation Reduction Act won't help the U.S. counter the rise of China and could create a "single point of failure" in key supply chains, Britain's trade chief Kemi Badenoch warned. The Inflation Reduction Act offers billions in subsidies and tax credits to try and incentivize take-up of electric vehicles and build up green infrastructure. But European and British carmakers are particularly concerned about the impact on their own industries of massive help for U.S. firms.
Speaking at a POLITICO event Tuesday night, Badenoch — recently promoted to head up the U.K.'s new Department for Business and Trade — predicted the flagship law would not achieve its key aims, and insisted the U.K. is not sitting on the sidelines in the transatlantic tussle over the plan. The comments came just minutes after the U.S. ambassador to the U.K. mounted a spirited defense of the IRA at the same event.
Credit Card Debt is Rising. Again
There was a moment there during the height of the pandemic when credit card balances fell. But now they’re back up. The total amount of credit card debt people have in this country is at a record high of $986 billion, according to new data from the Federal Reserve Bank of New York. Delinquencies — which also fell during the pandemic — are rising again too.
It’s become more expensive to carry debt in recent months since the Federal Reserve has been raising interest rates to try to get inflation under control. That may be contributing to the increase in credit card balances in a couple of ways, according to David Silberman at the Center for Responsible Lending. “As interest rates go up, the amount of any payment that goes to interest rather than to repaying the principal goes up,” he said.
Bond Yields Keep on Rising
Day by day, financial markets worldwide are adjusting to the reality that rates are going to go higher. That's the takeaway from the upward march in bond yields that has taken place throughout February and continued today. In December and January, it looked like inflationary pressure was cooling, and that central banks worldwide were on track to be able to declare victory on inflation and even cut rates later this year. Ten-year U.S. Treasury yields are up another 0.08 percentage points, to 3.91% as of mid-morning. That rate was under 3.4% on Feb. 1.
Now, a series of economic indicators point to robust growth and continued inflation pressure, and that outlook is shifting — and not just in the United States. Markets are now betting that major central banks will push rates higher, and that they will keep those high rates in place longer in their efforts to quash price pressures.
New Tactics Thwart More Ransomware Attacks
After ballooning for years, the amount of money being paid to ransomware criminals dropped in 2022, as did the odds that a victim would pay the criminals who installed the ransomware. The hacking groups behind ransomware attacks have been slowed by better company security practices. Federal authorities have also used new tactics to help victims avoid paying ransom demands. Asset seizures have disrupted major ransomware gangs, one of which recently had layoffs, cybersecurity officials say.
Alphabet Inc.’s Mandiant cybersecurity group said it had responded to fewer ransomware intrusions in 2022—a 15% decrease from 2021. The blockchain-analytics firm Chainalysis Inc. says that payments that it tracked to ransomware groups dropped by 40% last year, totaling $457 million. That is $309 million less than 2021’s tally. The evidence of progress reflects just one year of a decline and could amount to an aberration.
EPA Outlines Cleanup Efforts for Train Derailment Response
The U.S. Environmental Protection Agency (EPA) has ordered Norfolk Southern railroad to conduct all necessary actions associated with the cleanup from the East Palestine, Ohio, train derailment, which occurred on February 3. As part of EPA’s legally binding order, Norfolk Southern will be required to:
- Identify and clean up contaminated soil and water resources.
- Reimburse EPA for cleaning services to be offered to residents and businesses to provide an additional layer of reassurance, which will be conducted by EPA staff and contractors.
- Attend and participate in public meetings at EPA’s request and post information online.
- Pay for EPA’s costs for work performed under this order.
The EPA’s announcement, however, did not acknowledge the efforts Norfolk Southern has already undertaken. For instance, in a prior statement, the railroad noted that it “is committed to coordinating the cleanup project and paying for its associated costs.
Lockheed to Integrate Hypersonic Weapons for US Navy
The U.S. Dept. of Defense assigned a $1.18-billion contract to Lockheed Martin to work with the U.S. Navy to integrate hypersonic missile-strike capability to the current Zumwalt-class guided missile destroyers. Lockheed noted the award could be worth more than $2 billion if all options are exercised. The project involves adapting the U.S. Army’s hypersonic weapon capabilities – the so-called Conventional Prompt Strike (CPS) weapon systems – for surface-launched, sea-based hypersonic strike capability.
Hypersonic weapons are high speed (Mach 5 or above) weapons that travel at suborbital heights, making them difficult for air-defense systems to track and intercept due to their speed and maneuverability. They represent one of DoD’s top developmental priorities, including establishing a secure domestic supply base: Lockheed has been active in the development and testing of hypersonic missiles with the U.S. Air Force, and has initiated manufacturing of the missiles for the U.S. Army and Navy at its plant in Courtland, Ala.
Read more at American Machinist
Stellantis Says 2022 Profits Surged 26% and UAW Member Employees to Get $14,760 Each.
Stellantis, the parent company of the Ram, Jeep, Dodge, Chrysler and Fiat brands, posted robust profit and revenue gains in 2022 along with the largest payout to UAW employees among the Detroit 3 automakers. The automaker, which doesn't disclose quarterly results under French financial reporting rules, on Wednesday said net profits for the year surged 26 percent to 16.8 billion euros ($17.9 billion) while global revenue rose 18 percent to 179.6 billion euros ($190.9 billion).
North American results paced the company's 2022 gains. Stellantis said North American adjusted operating income rose 23 percent to 13.9 billion euros ($14.8 billion). Revenues surged 23 percent to 85.5 billion euros ($90.9 billion). Deliveries rose 2 percent to 1.86 million vehicles. In the U.S., Stellantis will distribute $14,760 each to eligible UAW-represented workers as part of a profit-sharing plan. About 40,500 workers are eligible for the bonus. The payout is up slightly from 2021, when workers received $14,670 each.
After Testing Four-Day Week, Companies Say They Don’t Want to Stop
In one of the largest trials of a four-day week to date, 61 British businesses ranging from banks to fast-food restaurants to marketing agencies gave their 2,900 workers a paid day off a week to see whether they could get just as much done while working less, but more effectively. More than 90% said they would continue testing the shorter week, while 18 planned to make it permanent, according to a new report from the study’s organizers.
The idea of working less than the conventional 40 hours over five days a week has been discussed for decades. The concept has gained new momentum recently as employers and employees seek new and better ways to work. The Covid-19 era ushered in broader acceptance of remote and hybrid work arrangements. Now, some employers, as well as policy makers, are exploring whether a shorter workweek can improve employee well-being and loyalty.
Number of Workers on Strike Spiked 50% in 2022, Mostly in Service Sector
More than 120,000 workers went on strike or stopped working in 2022 amid the tightest labor market since 1969, according to Labor Department data released Wednesday. That’s a 50 percent increase from 2021, during which 80,700 workers stopped working, and more than a four-fold increase from 2020 when the economy was shut down and only 27,000 workers stopped working.
2022 saw widespread unionization and labor activity, with unions organized at a number of high-profile companies including Amazon, Starbucks and Tesla. U.S. employment levels are the highest they’ve been in more than 50 years, with 96.6 percent of the workforce now employed. There are currently about two job openings for every job seeker now in the U.S. economy. “Part of the story here is labor market conditions, where maybe workers do feel more empowered,” Johnnie Kallas, a doctoral candidate at Cornell’s ILR school, said in an interview.