Member Briefing February 6, 2023
US Factory Orders Increased Slightly in December
Orders for manufactured goods increased 1.8% in December after falling 1.9% in the previous reading, according to U.S. Census Bureau data. Durable goods: Durable goods orders increased 5.6%, bolstered by defense and nondefense aircraft and parts, which are often volatile month to month. Excluding transportation equipment, new durable goods orders fell 0.2% in December.
New orders for core capital goods, or nondefense capital goods excluding aircraft, declined 0.1% in December. Core capital goods are a proxy for capital spending in the U.S. economy. Factory shipments dipped 0.7%, while core capital goods shipments declined 0.6% (with 7.4% year-over-year growth). “These data are consistent with a manufacturing sector that weakened in the final months of the year amid an uncertain and slowing economic outlook,” said NAM Chief Economist Chad Moutray. “New factory orders soared 8.9% in the first six months of 2022 but edged down 0.3% in the second half of the year.”
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- US Aid Worker Killed While Evacuating Civilians in Bakhmut, Ukraine - Politico
- Zelenskiy Vows to Defend 'Fortress' Bakhmut, Hosts EU Leaders in Kyiv - Reuters
- New U.S. Aid Package Includes Longer-Range Bombs for Ukraine - Politico
- Air Defense Systems, Long-Range Fires Capability to be Sent to Ukraine – Department of Defense
- US Raises Pressure on Turkey and UAE to Curb Russia Trade Ties - Bloomberg
- China Aids Russia’s War in Ukraine, Trade Data Shows - WSJ
- The Biggest Mortars In Ukraine Are Slow, Devastating Siege Weapons – Forbes
- Soaring Russian Death Toll in Ukraine Gives Grim Insight Into the War - NYT
- Colorado State Sorry for 'Russia' Chant at Ukrainian Player - ESPN
- Long Read - Kennan’s Warning on Ukraine – Foreign Affairs
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Jobs Report: Unemployment Falls to 3.4%, Wages Soften
The U.S. economy accelerated at the start of the year as broad-based January hiring added a robust 517,000 jobs and pushed the unemployment rate to a 53-year low. The unexpectedly strong report raises questions about whether the economy, which had been losing momentum over the past several months, is starting to pick up steam again. If so, that could prompt a more aggressive response by the Federal Reserve. December job growth was also stronger than previously estimated, pushing the average job gains for the last three months to 356,000, well above the 2019 prepandemic average of 163,000.
Wage growth continued to soften, despite the strong job gains. Average hourly earnings grew 4.4% in January from a year earlier, down from a revised 4.8% in December. Annual revisions to employment and pay data suggest that wage growth has been cooling—but at a slower pace than previously thought.
Labor Department: Manufacturing Employment Rose in January
Manufacturing employment increased 19,000 in January, starting 2023 with continued growth, according to U.S. Department of Labor data. Hiring in both the durable and nondurable goods sectors rose. Wages increased, too, with average hourly earnings of production and nonsupervisory workers at $25.84 in January, up from $25.64 in December. The unemployment rate in the sector edged down in January to its lowest level since May 1969.
While it stayed below pre-pandemic levels, the participation rate increased slightly in January as well. The largest increases in manufacturing employment were seen in food manufacturing, miscellaneous nondurable goods, nonmetallic mineral products and apparel. Meanwhile, chemical, computer and electronic products and furniture and related products saw declining employment in.
U.S. COVID – Cases, Hospitalizations and Deaths all Decline Week on Week
The US CDC is reporting:
- 2 million cumulative cases
- 1 million deaths
- 295,140 cases week of January 25 (down from previous week)
- 3,756 deaths week of January 25 (down from previous week)
- 4% weekly decrease in new hospital admissions
- 5% weekly decrease in current hospitalizations
The Omicron sublineages XBB.1.5 (61%), BQ.1.1 (22%), and BQ.1 (9%) account for a majority of all new sequenced specimens, with various other Omicron subvariants accounting for the remainder of cases.
Read more at The Johns Hopkins Center for Health Security
NYS COVID Update
The Governor updated COVID data through February 3.
Deaths:
- Daily: 25
- Total Reported to CDC: 78,037
Hospitalizations:
- Patients Currently in Hospital statewide: 2,470
- Patients Currently in ICU Statewide: 254
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 5.55% - 17.09 positive cases per 100,00 population
- Mid-Hudson: 6.93% - 14.57 positive cases per 100,00 population
Useful Websites:
Minimum Wage Debate Heats Up as State Budget Talks Begin
Lawmakers and legislative leaders agree with Gov. Kathy Hochul's plan to tie the state's minimum wage to increasing inflation, but are pushing back on the governor's plans on how to achieve it, and preparing to battle over the details as budget negotiations begin. Hochul proposes automatic increases tied to inflation beginning the year after the rate hits $15 per hour upstate, or likely in 2025.
Senate Labor Committee Chair Jessica Ramos sponsors legislation to increase the minimum wage to $21.25 by 2027 to immediately help workers struggling to make ends meet with higher costs. Ramos said Hochul's proposal falls short, and wouldn't be the correct policy to give New Yorkers a living wage. Pat Bailey, spokesman with the Business Council of New York State, says the council supports Hochul's proposal if minimum wage changes are inevitable, as they would be easier for businesses to manage.
Read more at NY State of Politics
DiNapoli Calls for State Debt Reform
A new report by State Comptroller DiNapoli identifies policy and fiscal weaknesses that have allowed State debt to grow to troubling levels. New York has one of the nation’s highest debt levels, largely because measures to restrict debt have been circumvented over the years. The Comptroller offers new reform measures, including comprehensive and binding limits and more accountability to voters.
“New York State has a history of misusing borrowing to pay for short-term needs while a backlog of long-term infrastructure projects languishes,” DiNapoli said. “Caps and other restrictions on debt set in statute have not worked to rein in our debt or stop inappropriate borrowing practices. New York needs comprehensive and binding debt reform to ensure more affordable borrowing levels, more responsible debt decisions, and greater accountability to the public.”
Read more at The Comptroller’s Website
Bank of England Hikes Rates by 50 Basis Points, Now Sees ‘Much Shallower’ Recession
The Monetary Policy Committee voted 7-2 in favor of a second consecutive half-point rate hike, taking the main Bank rate to 4%, but indicated in its decision statement that smaller hikes and an eventual end to the hiking cycle may be in the cards in coming meetings. The two dissenting members voted to leave rates unchanged at this meeting. Crucially, the Bank also dropped the word “forcefully” from its rhetoric around continuing to raise rates as necessary to rein in inflation. It sees a forthcoming easing in the annual Consumer Price Index.
The Bank previously forecast that the U.K. economy was entering its longest recession on record, but GDP unexpectedly grew by 0.1% in November after also exceeding expectations in October, suggesting that the impending recession may not be as long or as deep as previously feared.
ECB Raises Interest Rate by Half Percentage Point
The European Central Bank on Thursday raised its key rate to 2.5%, its fifth large increase in a row, and signaled it would enact another half-point rate increase in March. That leaves the ECB some way behind the Fed, which raised rates to 4.5% to 4.75% on Wednesday, and the Bank of England, which increased rates by a half percentage point to 4% earlier Thursday.
At a news conference, ECB President Christine Lagarde said the ECB would “stay the course” and stressed that its job was “not done,” suggesting that the bank will raise rates more aggressively than the Fed and Bank of England over the coming months. “We know that there is an element of catch-up…we know that we have ground to cover,” Ms. Lagarde said. The ECB intends to raise rates by another half percentage point in March, to 3%, and could continue to raise rates after that, she added.
The Bosses Are Back in Charge
Inside many organizations, there is a shift in sentiment, executives and their advisers say. Employers who felt they had less leverage in the tight labor market of the past couple of years say they have more power in negotiations with employees. Many feel less pressure to hire quickly to avoid losing a top candidate. Others are enforcing in-office attendance mandates that previously were ignored by some staffers.
In recent years, the balance of power in the labor market shifted toward workers, executives say, as companies had to aggressively lure employees. As layoffs occur, some employees might be more accommodating to the needs of companies, said Christian Ulbrich, CEO of real-estate company Jones Lang LaSalle Inc. That includes consideration about where people do their jobs
Industry Earnings: Ford
Ford Motor Co. posted disappointing quarterly results Thursday, leading the U.S. auto maker to miss its full-year profit guidance for 2022, as supply-chain snags, quality problems and structural inefficiencies continued to drag on earnings. The Dearborn, Mich. auto maker posted $1.3 billion in net income for the fourth quarter, an 89% drop from the prior-year period, when its profits were lifted by one-time items, such as a multibillion paper gain on its investment in EV startup Rivian Automotive Inc.
The quarterly performance also fell short of analysts’ expectations, sending the stock down 6% in aftermarket trading. For the full-year 2022, Ford recorded a $2 billion net loss. Fourth-quarter revenue increased 16.7% to $44 billion, largely benefiting from buyers continuing to splurge on its vehicles as a lack of dealership inventory has led manufacturers to dial back discounts and prioritize pricier pickup trucks and SUVs.
Global 15 % Minimum Tax Deal Advances With Partial Reprieve for U.S.-Based Companies
The U.S. prodded other major countries to agree to a coordinated global corporate tax increase. Now, international officials are moving ahead with their tax increases while giving U.S. companies a temporary break from some tax hikes in hopes of prompting the U.S. to implement the deal. The Organization for Economic Cooperation and Development on Thursday spelled out how the U.S. tax system will interact with the minimum taxes being implemented in the European Union, the U.K., South Korea and other countries.
The rules offer a partial reprieve for U.S. companies through 2025. Still, U.S. companies are likely to face higher taxes abroad. Rep. Jason Smith (R., Mo.), chairman of the House Ways and Means Committee, said the OECD agreement has no path forward in Congress and said it threatens to let foreign countries get U.S. tax revenue. “The Biden administration cannot override Congress’s sole tax-writing authority under the Constitution or turn that power over to foreign bureaucrats,” he said. “
States With the Highest and Lowest Health Care Spending (NY is 3rd Highest)
According to a study from Health Affairs, the United States has the highest health care spending per person in the world and it is expected to grow. With inflation, between 2000 and 2020, U.S. health spending per person doubled. Further, by 2030, total health spending is expected to reach $6.8 trillion. However, health spending per person varies from state to state. In 2014, the state with the lowest spend was Utah at $5,982, and the state with the highest spend was Alaska at $11,064. The factors for varied health care spending depends on the demand for care, demographics, population health, and how health services are provided, paid for, and regulated.
One of the biggest factors is health care policies like the Affordable Care Act and Medicaid services. With policies changing and new ones being introduced, health care spend can change drastically year over year.
U.S. Weekly Jobless Claims Drop to Nine-Month Low
The number of Americans filing new claims for unemployment benefits dropped to a nine-month low last week as the labor market remains resilient despite higher borrowing costs and mounting fears of a recession this year. Initial claims for state unemployment benefits dropped 3,000 to a seasonally adjusted 183,000 for the week ended Jan. 28, the lowest level since April 2022. It was the third straight weekly decline in applications. Economists polled by Reuters had forecast 200,000 claims for the latest week.
The technology sector accounted for 41% of the job cuts, with 41,829 layoffs. Retailers announced 13,000 job cuts, while financial firms planned to lay off 10,603 workers. The claims report showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 11,000 to 1.655 million during the week ending Jan. 21.
Global Steel Output Dropped 4% in 2022
Global steel production increased slightly to 140.7 million metric tons during December 2022, up 1.1% from the total reported for November but also closing out 2022 with the first annual decrease in raw-steel output since 2015. According to data published by the World Steel Association, raw-steel tonnage from 64 countries totaled 1.875 billion metric tons for the January-December period, which is -4.2% less than the 2021 total global tonnage.
In addition to the decrease in output, the reported annual total is higher than World Steel’s October forecast for 2022 global steel demand, 1.796 billion metric tons. The falling demand is the result of multiple global and regional factors, including rising interest rates worldwide, declining manufacturing and construction activity (notably in China), and the Russian invasion of Ukraine disrupting supplies of raw materials and energy, especially in Europe.
Read more at American Machinist
State of the Union 2023: What to Know Ahead of Biden's Speech
President Joe Biden will deliver his third State of the Union address on Tuesday, Feb. 7, at 9 p.m. EST during a joint session of Congress in the House of Representatives chamber. House Speaker Kevin McCarthy (R-Calif.) sent a letter to Biden on Jan. 13, inviting the president to address Congress and the nation – a constitutionally mandated tradition that dates back to George Washington.
During a press briefing Thursday, White House spokesperson Karine Jean-Pierre confirmed that the president would address the economy and infrastructure. In recent speeches, Biden has frequently touted the bipartisan infrastructure act passed in 2021, as well as the sweeping Inflation Reduction Act that became law last year – legislation he’ll likely invoke in his address. Biden may also use his platform to address the debt ceiling debate unfolding in Congress. Jean-Pierre said the president will also talk about “how he is optimistic about the future of this country.”