Member Briefing February 5, 2024
U.S. Factory Orders Rebound in December
New orders for U.S.-manufactured goods rebounded in December, but higher interest rates are weighing on business spending on equipment, which could keep manufacturing under pressure. The Commerce Department said on Thursday that factory orders increased 1.8% after dropping 1.9% in November. Economists polled by Reuters had forecast orders would rebound 2.2%. Orders increased 11.8% on a year-on-year basis in December.
The rebound in factory orders in December was driven by a 16.9% jump in bookings for transportation equipment, which followed a 5.2% drop in November. Transportation equipment orders were boosted by a 115.5% surge in orders for civilian aircraft. Motor vehicle orders fell 0.7%. There were decreases in orders for machinery as well as computers and electronic products. But orders for electrical equipment, appliances and components rose 1.1%. The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, dipped 0.1% in December, instead of 0.2% as reported last month.
Jobs Report: U.S. Employment Soars by 353,000, Manufacturing + 23K, Unemployment Rate Stays at 3.7%
The U.S. economy added a whopping 353,000 new jobs in January, but the surprisingly large gain may have been flattered by the adjustments the government makes to smooth out seasonal swings in employment. Still, the increase in employment last month easily beat the market estimate and underscores the remarkable strength of the U.S. labor market. The unemployment rate, meanwhile, stayed at 3.7% in January. It's near the lowest level since the 1960s. Some Key Points:
- The increase in employment in December, for example, was raised to 333,000 from an originally reported 216,000. That was another big surprise.
- The sharp increase in wages over the past few years also tell the story. Businesses had to pay a lot more to retain and attract talent, especially after inflation spiked.
- Hourly wages rose a a sharp 0.6% in January, the biggest increase in almost two years.
- The increase in wages over the past year moved up to 4.5% from 4.3%, reversing a recent downtrend and leaving it still well above pre-pandemic levels.
- Health employment jumped 100,000. Professional jobs rose by 74,000. And retailers added 45,000 jobs.
- Manufacturing added 23,000 jobs.
US Manufacturing Sector on Cusp of Recovery in January – ISM
The Institute for Supply Management (ISM) said on Thursday that its manufacturing PMI increased to 49.1 last month from a slightly downwardly revised 47.1 in December. It was the 15th straight month that the PMI stayed below 50, which indicates contraction in manufacturing. That is the longest such stretch since the period from August 2000 to January 2002. The ISM survey's forward-looking new orders sub-index rebounded to 52.5 last month from 47.0 in December.
Production at factories improved slightly, with the sub-index coming in at 50.4 from 49.9 in December. With orders picking up, goods inflation is stirring after months of deflation. The survey's measure of prices paid by manufacturers increased to 52.9 from 45.2 in December. The survey's measure of supplier deliveries rose to 49.1 from 47.0 in the prior month. A reading below 50 indicates faster deliveries. Factory employment remained subdued. That is however, unlikely to impact expectations for solid job growth in January.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Biden Issues Executive Order Targeting Israeli Settlers Who Attack Palestinians - Axios
- Thousands Flee Khan Younis to Escape Israeli Bombardment - VOA
- A U.N. Agency Is Accused of Links to Hamas. The Clues Were There All Along. - WSJ
- Hostages or Hamas? Cracks Spread in Israeli Unity Over War Aims. - CSM
- Russian Police Detain Western Journalists at Protest by Soldiers’ Wives - Politico
- Satellite Images Show 30% of Gaza Destroyed, UN Centre Says – Reuters
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine Tells White House of Pplan to Fire Top Commander: Sources – Reuters
- Russian Drones Knock Out Power in Central, Northeastern Ukraine - VOA
- Ukraine Suspends Senior Defence Official Amid Corruption Probe – Reuters
- The Surprising Resilience of the Russian Economy – Financial Times
- Russia Has Massed 500 Tanks For An Attack On Kupyansk. Thousands Of Ukrainian Drones Await Them. - Forbes
- Ukraine’s Army Chief: The Design of War Has Changed - CNN
- 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
Other Headlines
- What to Know About Wave of Deadly US Strikes in Middle East – The Hill
- U.S. Strikes Steer Clear of Iran’s Red Lines - WSJ
- Why U.S. Troops Are in the Middle East - Reuters
- Yemen: US and EU Ignored Our Warnings About Houthis to Court Iran for Nuclear Deal – Politico
- El Salvador’s Anti-Gang Crusader Heads for Sweeping Re-Election Win - WSJ
- Three Years Post-Coup, Myanmar's Crisis Deepens: 2.6 Million Displaced, $994 Million Sought for 2024 Aid - VOA
Policy and Politics
Senators Reach a Deal on Border Policy Bill. Now it Faces an Uphill Fight to Passage
Senate negotiators on Friday reached a deal on a proposal to overhaul the asylum system at the U.S. border with Mexico, clearing the way for Democratic and Republican Senate leaders to begin the difficult task of convincing Congress to pass a national security package that will include tens of billions of dollars for Ukraine and immigration enforcement, as well as funding for Israel and other American allies.
Sen. Chris Murphy, the lead Democratic negotiator, posted on social media Friday that a deal had been reached and that text of the bill would be released over the weekend. Senators are still working on finishing the rest of the package, which was initiated by a request from President Joe Biden for $110 billion for wartime aid for allies, domestic defense manufacturing, humanitarian assistance for conflicts around the world and managing the influx of migrants at the U.S.-Mexico border. Senators are preparing for a key test vote on the package next week, but it already faces a steep climb through Congress. Republicans in both chambers have balked at compromises on border security policy.
Harry Bronson is ‘Home Again’ as New Assembly Labor Committee Chair
The Assembly Labor Committee started off the year with a leadership shakeup when former Assembly Member Latoya Joyner abruptly resigned just days into 2024. While the election for her replacement is coming up on Feb. 13 in the Bronx, Assembly Speaker Carl Heastie selected Assembly Member Harry Bronson of Rochester to take over the influential committee Joyner had chaired.
Bronson represented a break from the norm when it came to the committee chair. He’s the first upstate member to head the committee in over a decade. In the upper chamber, state Sen. Jessica Ramos of Queens chairs the Labor Committee. Before her was former state Sen. Diane Savino of Staten Island, so New York City has dominated the labor committees in the recent past. But Bronson got his start working on labor issues and has deep ties to unions statewide. He spoke with City & State about his new position, his history with the labor movement and his role as a rare upstate chair.
Early Voting Kicks Off in Special Election to Fill Former George Santos Seat in Congress
The first ballots in a closely watched New York special election were cast on Saturday, for the first day of early voting. New York’s 3rd Congressional district covers parts of Queens and Nassau County. Democrat Tom Suozzi, who previously represented the area before George Santos, is looking to win back the seat. Meanwhile, the Republican in the race Mazi Pilip, a relative newcomer, is looking to hold on to the seat for House Republicans.
The GOP holds a slim majority in the House. Speaker Mike Johnson met with Pilip and supporters in the district on Friday. She has been critical of Suozzi and Democrats over immigration. The race is being closely watched nationally. More than $5 million in spending has been poured into the election for attack ads and air time.
Read more at NY State of Politics
Health and Wellness
$3.9 Million Award for Albany Medical College to Study Long COVID
Albany Medical College has led efforts to find biomarkers that identify long COVID in blood samples. That’s why the college received a $3.9 million grant from the National Institute of Health to expand the research. “If you were able to identify a molecular biomarker in the blood that indicates the disease, you could monitor the disease resolution objectively,” said Dr. Ariel Jaitovich, associate professor of medicine at Albany Medical College. “And for that reason we published landmark papers early on, initially during the pandemic, and that gave us a kind of a niche.”
At the Albany Medical College lab they separate DNA, which is then sent out for further processing to determine if there is evidence of long COVID. Researchers hope to develop a simple blood test that could be used to identify, with precision, people who are most vulnerable to long COVID. He said the goal is to use their preliminary research to further investigate biomarkers, on a larger scale, in hopes of speeding up recovery for patients. Many long COVID patients have signed up to participate in the study.
NYS COVID Update
The Governor updated COVID data for the week ending January 12th.
Deaths:
- Weekly: 116
- Total Reported to CDC: 82,357
Hospitalizations:
- Average Daily Patients in Hospital statewide: 2,065
- Percent Available ICU Beds: 19%
7 Day Average Cases per 100K population
- 15.1 positive cases per 100,00 population, Statewide
- 18.8 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Biden Gets the South Carolina Victory He Needed, But Turnout is Low- NBC
- GOP Puts Dems on Defensive Over Border Security in Bellwether Special Election – Politico
- Nikki Haley Tries to Keep South Carolina From Ending Her Campaign - WSJ
- Latest Fundraising Numbers Show Dems Are Serious About Taking Back NY House Seats – City & State
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Manufacturing Labor Productivity Rose in Q4, Down Overall for 2023
NAM Chief Economist Chad Moutray reports that manufacturing labor productivity rose 2.3% at the annual rate in the fourth quarter, rebounding after declining by 0.8% in the third quarter. Output in the sector declined for the fourth time in the past five quarters, dropping by 2.4% in the fourth quarter. The number of hours worked fell 4.6% in the fourth quarter, with unit labor costs up 4.2%. Overall, manufacturing labor productivity decreased 0.8% in 2023, extending the 1.3% decline seen in 2022, with output down 0.5% and unit labor costs rising 5.5%.
Labor productivity for durable goods manufacturing increased 1.4% in the fourth quarter, bouncing back somewhat after falling by 2.0% in the third quarter. Output and hours worked dropped 4.4% and 5.7%, respectively, with unit labor costs soaring 7.4%. At the same time, nondurable goods labor productivity rose for the fourth straight quarter, up 2.5% in the latest data. Output and hours worked decreased 0.3% and 2.7% in the fourth quarter, respectively, with unit labor costs flat. In 2023, labor productivity for nondurable goods firms rose 0.3%, but output per worker declined 1.2% for the year for durable goods.
Construction Spending Picked Up in December
Construction spending gained a bit of momentum in the final month of 2023. Total outlays picked up 0.9% in December, besting expectations for a softer improvement. The monthly rise was largely the result of another strong increase in residential outlays. Despite higher interest rates, a structural shortfall of available homes appears to be boosting new single-family and home improvement project spending. Public sector expenditures was another bright spot, primarily from a robust gain in highway & street spending. Meanwhile, private nonresidential spending pulled back slightly during the month as the hot pace of manufacturing spending cooled down and commercial and institutional construction weakened.
Moving forward, the promise of lower interest rates and sturdy economic growth should help bolster construction in the year ahead. Residential spending should continue to lift overall spending as mortgage rates continue to move lower. On the other hand, the lagged impact of reduced credit access and higher interest rates has likely yet to be fully realized. A recent downshift in new commercial construction starts and moderating manufacturing spending suggests a weaker pace of nonresidential outlays in coming months.
Deloitte: EV Momentum Slows Down
From September through October 2023, Deloitte surveyed more than 27,000 consumers in 26 countries to explore opinions regarding a variety of critical issues impacting the automotive sector, including consumer interest in electric vehicles (EVs), brand perceptions, and connected technology adoption. Our 2024 Global Automotive Consumer Study provides important insights that can help companies prioritize and better position their business strategies and investments in the year to come. In this year’s study, four key trends emerged:
- Slowing EV momentum may be putting current decarbonization timelines in jeopardy.
- A significant number of consumers may be thinking about switching vehicle brands.
- Interest in connectivity features may not fully translate into revenue and profit.
- Younger consumers are interested in vehicle subscriptions, as a growing number of them question if they need to own a vehicle going forward.
Eurozone Economy Slipping, But Not Slumping
Last week's Eurozone GDP data offered the first insight into the broader performance of the region's economy during Q4, and offered further indications of the region's underwhelming economic performance toward the end of last year. Eurozone Q4 GDP was unchanged for the quarter which, while far from impressive, was actually slightly better than the 0.1% quarter-over-quarter decline forecast by consensus economists. It also meant that, for now, the Eurozone avoided a technical recession—two consecutive quarters of negative GDP growth—during the second half of last year.
With respect to the region's largest economies, German GDP shrank 0.3% quarter-over-quarter, French GDP was unchanged, Italy's GDP rose 0.2% and Spain's GDP rose by a more solid 0.6%. Even though the Eurozone avoided recession, it has stuttered in recent quarters, and as a result Eurozone Q4 GDP was up just 0.1% year-over-year. There are reasons to expect the region will avoid a pronounced slump. As inflation has decelerated, Eurozone real household incomes have begun to grow again, albeit slowly. The further slowing of inflation through the fourth quarter suggests those positive real income trends may have gathered further momentum in recent months.
Three in Custody After Hopewell Amazon Warehouse Incident
Three Amazon employees who work at the East Fishkill warehouse facility were taken into police custody Thursday evening after violence broke out at the Route 52 facility. The act of violence caused widespread fear and panic at the building, according to sources. The incident occurred just after 7 p.m. on February 1. Multiple EMS ambulances were summoned to the location after it was deemed secure by police. The EMS personnel treated several workers who sustained minor injuries during the “stampede” of workers trying to escape the reported violence. One employee is believed to have suffered a seizure and was transported to a local hospital for treatment.
The man who was originally reported to have sustained a knife wound to his hand was evaluated for what a source at the scene described as “a scratch to the hand that was no bigger than a wound from a fingernail.” The victim refused medical treatment. The initial police investigation, according to a source, says that the suspect is a current employee and is known to the victim. The source told Mid-Hudson News that two female employees who were taken into custody were responsible for bringing the assailant to the scene and then attempted to help him flee before police arrived. The two women were joined in police custody by the apprehended suspect.
Pentagon Looks to AI to Predict Prices of Critical Minerals for Weapons
Amid global supply chain risks and China’s growing control over critical mineral refinement and production, the US Department of Defense (DoD) is fast making these minerals a priority. The Pentagon has unveiled plans to develop a new AI-driven program, known as the ‘Open Price Exploration for National Security’ (OPEN) project, to estimate prices and availability of critical minerals. By pre-empting the market effect of disruptive factors such as labour strikes or foreign sanctions, OPEN aims to minimise the risk posed to critical mineral supply chains, and, by proxy, US national security.
Overseen by the Pentagon’s Defense Advanced Research Projects Agency (DARPA), OPEN has certain benefits for US military security, but defence markets will be hesitant to depend on it, according to GlobalData defence analyst Tristan Sauer. DARPA sources have confirmed that OPEN does not intend to set an official US government metals price or replace the London Metal Exchange futures market, Reuters reported.
Truck Freight Has Double Digit Drop in 2023
The U.S. truck freight market ended 2023 with further declines in both shipment volume and spending, according to the latest U.S. Bank Freight Payment Index. Compared to the same period in 2022, fourth quarter shipment volume was down 15.7% while spending by shippers contracted 13.5%. The year-over-year drop in volume was the largest in the history of the Index.
All regions in the fourth quarter felt the slowdown in volume versus the same quarter in 2022, but it was most acute in the Southeast (-25.4%) and Northeast (-23.8%). Spending also dropped in all regions year over year, with the most significant in the Midwest (-17%). The Northeast was one of the most challenged truck freight markets in 2023. Headwinds for the market include consumer spending moderation and manufacturing activity softening.
Read more at Material Handling & Logistics
Intermodal Volumes Increase in Q4
The fourth quarter of 2023 was good for the intermodal market, as volumes gained 3.1% year-over-year, according to the Intermodal Association of North America. While trailers dropped 21.6%, domestic container and international container originations grew 6% and 2.9%, respectively. Total IMC volume, however, fell 11.8% year-over-year in Q4, with intermodal down 6.6% and highway traffic down 14.9%. It was the first of the past nine quarters showing year-over-year growth. All but one of the seven highest-density trade corridors, which collectively handled more than 60% of total volume, were up in the fourth quarter.
"The fourth quarter may have been an inflection point for intermodal. Both trade flows and inventories started to swing in its favor,” said Joni Casey, CEO of IANA, in a statement. “Monetary actions by the Federal Reserve to bring down interest rates in 2024 could further set the industry up for more sustainable growth."
Read more at Material Handling & Logistics
Viral Layoff Videos Reflect a Sea Change in Work Culture
"Your last day is today." These five brutal words, integral to most layoffs, have typically been heard privately. Not anymore. As a spate of layoffs continues in tech and media, workers — especially younger ones — are sharing the intimate details publicly on TikTok, LinkedIn, X, and other platforms. This is a sea change for work culture. Getting laid off or fired was once a process kept relatively private. But today's workers have shaken off whatever stigma was once attached to job loss.
They're sharing feelings ("feels like a breakup but one-sided"), posting videos of the actual moment they get the news, openly crying, and generally seeking support and new opportunities by going public. Earlier this month, 27-year-old Brittany Pietsch shared a video of herself being fired, remotely, by two people she'd never met. It went viral, ultimately prompting the CEO of her former employer to respond. Though Pietsch is feisty in her video, openly questioning her executioners about the process, her TikTok ends painfully, her eyes shiny with tears. Similar videos on TikTok are emotional and, frankly, hard to watch for anyone who's been let go. After watching one, a woman who'd been laid off a few years ago said her heart was pounding, "triggered."