Member Briefing February 7, 2024
Full-Year 2023 Report Shows Slow Year-Over-Year Manufacturing Jobs Growth
Preliminary data released February 2 by the Bureau of Labor Statistics shows manufacturing employment increased by 23,000 — a slight gain that nevertheless put the number of manufacturing workers at 12,979,000, the most employed in the U.S. since November 2008. Nondurable goods companies increased their payroll by a net 19,000 workers in January, compared to just 4,000 net workers in durable goods. Chemical manufacturing saw a strong month for new blood as it picked up just under 7,000 new employees, while printing and related support companies collectively hired 5,000.
As usual, the largest durable-goods sector also saw the most dramatic change, as transportation-equipment manufacturing companies added 5,600 employees to their payrolls, about 3,000 of whom went to work in motor vehicles and parts production. Gains there were offset by losses of roughly 3,000 workers in furniture and 2,600 workers in electrical equipment manufacturing, respectively. On an annual basis, the manufacturing economy added a net 23,000 jobs between January 2023 and January 2024, an increase of 0.2%. Durable goods employment rose by 0.8%, and nondurable goods employment fell by 0.6%.
Just How Restrictive Rates Are Current Interest Rates? Strong Economic Growth Raises Questions
The Fed's strategy over the last two years has been to push interest rates upward to the point that they are restrictive, slowing down economic activity. But robust growth in the face of those higher rates is raising new questions about just how restrictive these rates really are. If rates north of 5% aren't enough to slow the U.S. economy — as was the case in 2023 — it raises the possibility that the world is in a new normal, with persistently higher borrowing costs than prevailed in the 2010s.
In his news conference last week, Fed Chair Jerome Powell noted that the neutral rate is "not something you can identify with any precision." "You look at the economy, and you say this is an economy that grew 3.1% last year. And you say, what does that tell you about the neutral rate? "What's happening, though, is the supply side has been recovering in the middle of this. So that won't go on forever," Powell said. If the neutral rate has risen, "we're not really going to know that," he said in December. "People will be writing papers about that 10 years from now and still fighting about it … it's going to be uncertain."
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Hamas Has Responded Positively to Cease-Fire Proposal, Officials Say - AP
- Pentagon: Don’t Expect Houthis or Other Iran-Backed Groups to Stop Shooting – Defense One
- IDF Reportedly Believes More than a Fifth of Remaining Israeli Hostages are Dead – The Guardian
- Blinken Meets Saudi Crown Prince on Mideast Push for Pause in Gaza War, Egypt Next - NYT
- Palestinians Hope Blinken Visit Can Deliver Gaza Truce Before Rafah Assault – Reuters
- 'US Threat to Peace in the Middle East' - Russia Declares at UNSC – Al Jazeera
- 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
- Russians are Freezing as Soviet-Era Infrastructure in the Country Crumbles - Insider
- With Demise of Border Deal, No Clear Path for Ukraine and Israel Aid in Congress - NYT
- Turkey's Drone Maker Baykar Begins to Build Plant in Ukraine - Reuters
- Russia Wasn't Supposed To Deploy Its 70-Year-Old T-55 Tanks In Direct Attacks. But They Got Desperate - Forbes
- Why Russia’s TOS-1A Thermobaric Weapon Is So Deadly and Controversial - WSJ
- Kremlin Warns West Against Using Frozen Russian Assets as Collateral for Ukraine – Reuters
- 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
- Hungary’s Ruling Party Balks at Swedish NATO Vote – Politico
- Anger at Turkish Government Spills Over at Earthquake Anniversary Vigil – Reuters
- Hong Kong Police Say a Financial Firm is out $25 Million After an Employee was Duped by a Deepfake Video Call - CNN
- Senegal on the Brink After Elections Postponed - BBC
- "Forgotten War" in Sudan Driving Hunger, Displacement - AP
- King Charles’ Cancer Was ‘Caught Early,’ UK Prime Minister Sunak Says- Forbes
- 'Boiler Tax' That Would Have Fined UK Manufacturers that Missed Heat Pump Targets is 'set to be scrapped' Daily Mail
Policy and Politics
Border Bill Looks Doomed as Senate Opposition Mounts
Facing a growing torrent of intra-party criticism, Senate Republicans on Monday resisted advancing a bipartisan proposal intended to clamp down on illegal border crossings, signaling a likely defeat in Congress that would leave leaders with no clear path to approve wartime aid for Ukraine. In a dramatic turnaround, Senate Republican Leader Mitch McConnell recommended to GOP senators in a closed-door meeting that they vote no on the first procedural vote Wednesday. The McConnell about-face came just hours after the Kentucky Republican had urged colleagues on the Senate floor that “it’s now time for Congress to take action.”
McConnell has struggled to marshal his conference to move on the package of $118 billion package of border-enforcement policy and funding for Ukraine, Israel and other U.S. allies. Senate negotiators on Sunday night released the text of the bill, expressing hope that the details would win over skeptics. The carefully negotiated deal represented a rightward election-year tilt in Senate negotiations over border measures, yet the backlash was intense from conservatives. They savaged the border-policy proposal as insufficient. Many Senate Republicans — even those who have expressed support for Ukraine aid and the contours of the border-policy changes — raised doubts Monday they would support advancing the package. Senate Majority Leader Chuck Schumer has planned to call a key test vote Wednesday.
State’s Mayors Seek Municipal Funds from Albany in ‘Tin Cup Day’
Yesterday was Tin Cup Day, an annual Albany rite requiring local elected officials to plead for cash before a panel of state lawmakers. Mayor Eric Adams appeared before a joint hearing of the Senate and Assembly pitching lawmakers on several major legislative asks. And unlike his first two turns at the state Capitol, Adams has backed away from pushing hot-button criminal justice initiatives and is instead focused on migrant funding, housing, education and cannabis.
Albany Mayor Kathy Sheehan reiterated Albany's case for Capital City Funding, which, for the first time, is included Governor Kathy Hochul's budget proposal. "I have been typically coming to this group with a challenge that's unique to the city of Albany, talking about the inequities of AIM funding, the fact that the state owns 64% of the property, or 64% of the property in the city is not taxable and the overwhelming majority of that is owned by the state," Sheehan said. "And this body has always been very supportive of our requests for Capital City Funding. And I am very pleased to see that the governor for the first time has also recognized that this funding is critically important to the city of Albany and put it in the executive budget."
Health and Wellness
Heavy Marijuana Use May Fuel Anxiety Disorders, New Research Finds
Nearly a third of people who visited the emergency room for a cannabis-related concern developed a new anxiety disorder within three years, according to research released Monday. The study—published today in The Lancet’s open access journal eClinical Medicine. Canadian researchers examined the health records of more than 12 million people living in Ontario between 2008 and 2019 who had no record of an anxiety disorder, or of receiving treatment for one.
Those who had an emergency room visit for cannabis use during that period were more than three times more likely to be diagnosed with a new anxiety disorder—at an outpatient visit, emergency room, or hospital—within three years, the study found. They were also nine times more likely to require another health care visit—an outpatient or ER visit, or a hospitalization—for an anxiety disorder down the road. The study’s authors cautioned against the use of cannabis to treat anxiety. Scientists aren’t sure if cannabis use leads to anxiety, or if anxiety symptoms in many cannabis users are pre-existing but underdiagnosed, prompting users’ attempt to self-medicate. There’s a lack of evidence for its efficacy, they wrote. What’s more, using it may delay some from starting evidence-based treatments like prescription medication and/or therapy, or make their symptoms worse.
Election 2024
- Biden Wins Dem Nevada Primary, “None of These” Wins Republican Side With Caucus Thursday - NBC
- Nikki Haley Requests Secret Service Protection As Threats Increase, Report Says - Forbes
- Biden Age and Health, Trump Legal Battles Concern Voters in New Poll – The Hill
- Trump Not Immune From Election Subversion Charges, US Appeals Court Rules - Reuters
- NY Board of Elections Votes to Keep Trump on the Primary Ballot – 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
NSTB: Hybrids Key Bolts Were Missing From a Boeing Door Plug that Blew Out in Mid-Air
Investigators from the National Transportation Safety Board on Tuesday said evidence shows four bolts that hold the door plug in place on the Boeing 737 Max 9 were missing at the time of last month’s blowout on Alaska Airlines flight 1282. The bombshell new finding from federal investigators comes one month and a day after the January 5 incident that triggered a 19-day emergency grounding of all Max 9s, and re-ignited scrutiny of Boeing following the fatal Max 8 crashes of 2018 and 2019.
Boeing acknowledged its responsibility for the blowout in a statement issued after the NTSB report and said it is working to make sure incidents like this do not reoccur.“Whatever final conclusions are reached, Boeing is accountable for what happened,” said Boeing CEO Dave Calhoun in a statement. “An event like this must not happen on an airplane that leaves our factory. We simply must do better for our customers and their passengers.” Boeing said it was taking new actions to improve the way it makes the 737 Max 9 planes. That includes more inspections, giving the 737 teams more time “to focus on and implement quality improvements,” and bringing in outside safety experts to assess its operations.
Hybrids Drive Toyota Q4 Earning, 2024 Forecast Higher
Toyota Motor raised its full-year operating profit forecast by nearly 9% on Tuesday, after its third-quarter earnings raced past analysts’ estimates thanks to a weaker yen and strong sales of high-margin cars and hybrid vehicles. The higher forecast from the world’s best-selling automaker contrasts with a downbeat outlook from many of its rivals who have warned of tepid sales growth and announced production cuts this year due to high interest rates and slowing demand for electric vehicles (EVs).
Toyota, a laggard in battery-powered EVs, is seen outperforming competitors this year, helped by robust demand for hybrid vehicles, which it pioneered more than a quarter century ago with the Prius model. Toyota’s operating profit for the three months to Dec. 31 totaled 1.68 trillion yen, up 75.7% from a year earlier and beating the average 1.3 trillion yen profit estimate in a poll of nine analysts by LSEG. Hybrids accounted for around one third of the total sales of more than 10 million vehicles of its Toyota and luxury Lexus brands last year.
Is China in a Renewed Recovery? Takeaways from January’s Manufacturing, Services Data
China’s official manufacturing purchasing managers’ index (PMI) stood at 49.2 in January, compared with a reading of 49 in December. Within the manufacturing PMI, January’s new export orders subindex increased to suggest internal and external demand had improved. The production subindex also improved from the previous month, indicating that sentiment in the manufacturing sector had improved. An increase was also seen in the new orders subindex, indicating demand for the manufacturing sector had improved slightly.
China’s official non-manufacturing PMI – an indicator of services activity – continued to improve in January, climbing to 50.7 from 50.4 in December. China’s official composite PMI, which includes manufacturing and services, stood at a four-month high of 50.9 in January compared with 50.3 the previous month. The International Monetary Fund said last week that it expects China’s gross domestic product (GDP) to grow by 4.6 per cent this year, weighed down by the ongoing property market slump, with Beijing again expected to set a growth target of around 5 per cent for 2024.
Read more at South China Morning Post
Credit Card Delinquencies and Other Consumer Debt, Surged in 2023 New York Fed says
Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday. Debt that has transitioned into “serious delinquency,” or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards. With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported. The quarterly increase at an annualized pace was around 8.5%, New York Fed researchers said.
Delinquencies also rose in mortgages, auto loans and the “other” category. Student loan delinquencies moved lower as did home equity lines of credit. Overall, 1.42% of debt was 90 days or more past due, up from just over 1% at the end of 2022.
Eli Lilly Forecasts Strong Profits Amid Rollout Of Weight Loss Drug
Eli Lilly reported global revenues of $9.35 billion during the last three months of 2023, an increase of nearly 30% from the same period the year before. This was buoyed by strong sales and higher prices of Mounjaro, the company’s blockbuster diabetes drug, which raked in $2.2 billion, as well as the launch of Zepbound, its newly-approved weight loss drug, which pulled in $175.8 million.
The company revised its sales forecasts upwards for the upcoming year, estimating annual sales in the range of $40.4 billion to $41.6 billion. Eli Lilly shares were up nearly 5% during premarket trading. Earnings per share are now expected to be in the range of $11.80 to $12.30, the company said.
Tesla Stock Sinks To 9-Month Low As Musk Controversies Weigh
Tesla’s stock fell as much as 6% to $175 before recovering slightly by market close to a 3.7% loss, bringing the limping auto titan’s year-to-date loss to a whopping 27%. Tesla’s 2024 decline began with a post-earnings plunge after the company missed Wall Street estimates for quarterly profit and revenue, but the latest selloff coincides with increased controversy surrounding Musk, who has clamored for significantly higher power within Tesla and taken to his X social media platform to spew fringe-right claims.
Shares of Tesla have fallen more this year than the likes of Boeing, whose shares are down 21% in 2024 amid controversy about the safety of its commercial airplanes, and agricultural giant Archers-Daniels-Midland, whose shares are down 21% as it grapples with a probe into alleged accounting fraud.
China’s Biggest Solar Companies are Expanding in the U.S., Where They Will Reap Generous Government Aid
During the past year, the world’s biggest solar companies, all of which do the bulk of their manufacturing in China, have quietly launched plans to set up or expand panel factories in locations from Ohio to Texas—part of a rush to build in the U.S. following the introduction of generous production subsidies with the Inflation Reduction Act in 2022. China-based companies are behind nearly a quarter of the roughly 80 gigawatts in new solar-panel capacity that has been announced since that legislation, according to an analysis by The Wall Street Journal.
At least four new factories backed by giant Chinese manufacturers are slated to come online this year, with enough capacity when complete to supply more than half of the record 33 gigawatts of panels the U.S. is estimated to have installed last year. Industry trackers estimate that more than 80% of global solar production takes place inside China. Such manufacturers have the know-how, suppliers and deep pockets needed to set up plants in the U.S. quickly—a boon for local economies and the U.S.’s ambitious clean-energy deployment goals. But the U.S. subsidies were also supposed to lessen the country’s dependence on China in clean energy.
Wintry End to 2023 - Eurozone Retail Sales Slip
Eurozone retail sales slumped in the last months of 2023, capping a bleak year for a sector hit by a squeeze on consumers' wallets. Total retail trade was 1.1% lower in December than a month earlier, figures from European Union statistics agency Eurostat showed Tuesday. This was a little worse than the 0.8% fall expected by economists, according to a poll compiled by The Wall Street Journal ahead of the release. Sales did however rise slightly in November, according to revised figures that reverse previous estimates for a decline.
The downturn in retail comes despite easing inflation, suggesting shoppers are still wary of spending amid an enduring cost-of-living crisis that weighed on household outlay throughout last year. For 2023 as a whole, retail trade was 1.8% lower than the previous year. Germany, the eurozone's most important economy, booked a particularly sharp slowdown in retail in December at a 1.6% decline, while other major members including France, Spain and the Netherlands also registered falling sales.
The U.S. Invested Millions to Produce Masks at Home. Now Nobody’s Buying
Domestic production of protective medical equipment that was in short supply during the pandemic is now collapsing as hospitals and other healthcare buyers return to foreign-based suppliers. About 70% of the 100 or so U.S. mask companies launched during the pandemic have closed, according to industry estimates. U.S. production of N95 and surgical masks fell by more than 90% in 2023 from 2021 levels after elimination of masking requirements knocked out consumer demand.
As overseas supply chains faltered in early 2020, the federal government doled out an estimated $1.5 billion to companies building U.S. plants to make synthetic rubber gloves, N95 respirators, surgical masks and other protection gear, according to government and industry reports. Many of those plants now sit idle, unfinished or operating at far below their capacity, underscoring the challenges of reshoring manufacturing that mostly left the U.S. years ago. U.S. makers of gloves and masks are calling on the Biden administration to help preserve domestic production capacity as a hedge against future pandemics and cross-border supply disruptions.
Army Aims to Double 155mm Shell Production by October
U.S. production of 155mm artillery shells is slated to rise from 28,000 last October—the most recent month for which hard numbers have been released—to roughly 37,000 in April and about 60,000 in October 2024, according to a slide shared at a CSIS think tank event. The Army then hopes to rapidly increase production in 2025, from just under 75,000 shells that April to 100,000 in October, the slide also showed.
The Army has already sharply increased its production of 155mm shells since Russia’s full-scale invasion of Ukraine in February 2022, with monthly production rates rising from 14,000 past 28,000 by last October. The Army originally planned a smaller increase, to 40,000 rounds per month by 2025, Army Secretary Christine Wormuth said in 2022. The availability of ammunition, especially large artillery shells like 155mm, has kept Ukraine from matching Russia’s volume of fire. Currently, Ukrainian forces fire around 2,000 shells per day, about one-fifth the Russian output.
Layoffs in 2024: A List of Companies Cutting Jobs This Year
Companies are cutting staff and focusing on efficiency amid a commitment to do more with less following a year of widespread layoffs. Alphabet, Amazon and UPS are among those that have announced job cuts in recent weeks. The layoffs so far this year suggest that companies are cutting in more targeted areas.
The labor market, which flashed some warning signs at the end of last year, has defied market predictions of a significant slowdown. Employers added a seasonally adjusted 353,000 jobs in January, according to the Labor Department, beating economists’ expectations. The unemployment rate also held steady at 3.7%. Here’s a look at some of the companies that have announced layoffs so far this year.