Member Briefing February 8, 2023
U.S. Trade Deficit Hit Record in 2022
U.S. imports rose in December as demand for consumer goods and autos picked up, partially offsetting a weakening in global trade late last year and widening the U.S. trade deficit by 10.5%. The U.S. trade deficit for all of 2022 rose 12.2% to $948.1 billion, the widest gap on record, as the U.S. continued to depend heavily on imports from other countries to meet domestic demand. Exports also rose last year as global demand for U.S.-made products picked up. A U.S. dollar rally last year drove up the cost of U.S. goods and helped widen the annual deficit. U.S. imports rose 1.3% in December from November and exports decreased 0.9% during the same period.
Demand for exported goods like industrial supplies and consumer goods made by the world’s largest economy waned in December, and Americans bought more foreign-made products such as cellphones and vehicles. The trade figures aren’t adjusted for inflation. International commerce weakened across the globe at the end of the year. In China, an export boom that propelled the world’s second-largest economy through much of the pandemic has sputtered as inflation and rising interest rates squeeze spending in the U.S. and Europe
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine Says Russians Endure Deadliest Day So Far as Fighting Intensifies in East – Reuters
- Russia Pushes on Several Fronts in Ukraine - WSJ
- Russia's Oil and Gas Revenue Crashed by Nearly 50% at the Start of 2023 – Business Insider
- U.S. to Penalize Russian Aluminum Imports – American Machinist
- German Defence Minister In Surprise Kyiv Visit: Ukraine - Barrons
- Ukraine's Zelenskiy Says Stop 'Rumours' as Defence Minister Remains - Reuters
- IMF Issues Russian Economic Growth Outlook That is More Optimistic Than Bank of Russia's - Intellinews
- Ukrainian Nobel Peace Prize Winner: 'This Violence, This Cruelty Have Become Part Of Russian Culture' – Radio Free Europe
- Swiss Neutrality on the Line as Arms-for-Ukraine Debate Heats Up - Reuters
- Fighting Wagner is Like a Zombie Movie’ says Ukrainian Soldier - CNN
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Fed’s Powell: The ‘Disinflationary Process’ Has Begun
Federal Reserve Chair Jerome Powell on Tuesday reiterated that continued interest-rate increases will be appropriate, and that the “disinflationary process” has begun. Powell’s remarks come in the wake of last week’s interest-rate increase of 0.25 percentage point, followed by Friday’s blowout jobs number. Markets have been anticipating the central bank will pause rate hikes or even cut soon, and investors and economists will parse Powell’s words for clues to the central bank’s latest thinking.
Powell said, in a Q&A session at the Economic Club of Washington, that he expects 2023 to be a year of "significant declines in inflation". "He's (Powell) not saying anything that would make you think he's going to raise rates more than what the market is anticipating at this point," said Joe Saluzzi, co-manager of trading at Themis Trading in New Jersey.
Yellen Sees ‘Path In Which Inflation is Declining Significantly’
Treasury Secretary Janet Yellen on Monday said she sees the possibility of “significantly” easing inflation in the U.S. economy, even as the government deals with the ramifications of reaching its borrowing limit and as economists worry about a potential recession. “What I see is a path in which inflation is declining significantly, and the economy is remaining strong,” Yellen said on ABC’s “Good Morning America” when asked if she thinks a recession is likely.
But Yellen has said she’s concerned the country could fall into a recession if lawmakers don’t take action to address the debt limit. The U.S. hit its borrowing maximum of around $31.4 trillion in January, and the Treasury Department has since been using what it has described at “extraordinary measures” to help the government pay its bills, a fix expected to last until sometime this summer.
U.S. COVID –‘Tripledemic’ Infected Nearly 40 Percent of Households, Survey Finds
The flu and RSV hit much harder and earlier this year than in years past, as viruses kept at bay during the height of the pandemic began infecting people again following the resumption of every-day activities. The winter’s “tripledemic” of respiratory viruses impacted nearly 40 percent of U.S. households, with someone there getting sick with the flu, COVID-19 or respiratory syncytial virus (RSV), according to a new survey from KFF released Tuesday.
The flu affected 27 percent of households over the past month or so, with 15 percent saying someone in their homes got sick with COVID-19. RSV infected someone in about 10 percent of homes, the survey found. But as the COVID-19 pandemic turns 3 years old, 69 percent of the public said they are “not too” or “not at all” worried about getting seriously ill from the virus.
President Biden Addressed a Joint Session of Congress Tuesday – Here are Five Key Economic Points
President Joe Biden delivered his second State of the Union address to Congress on Tuesday night, marking the halfway point of his tenure. It was an opportunity for him to highlight his administration’s achievements to date, as well as set the tone for how he hopes the next two, possibly more, years go. Biden has been upbeat on his economic policies after recent reports showed near record low unemployment and strong job growth, but his speech exhibited his broader ambitions to reshape the economy.
Biden renewed his call for levying a tax on billionaires and corporate stock buybacks to reduce the federal deficit, and he berated companies that make workers sign noncompete agreements as well as stoking antitrust concerns.
Derailment Disrupts Rail Transport – Forces Evacuations Along Ohio Pennsylvania Border
A derailment along the border of Ohio and Pennsylvania is triggering fear across communities and turmoil along major rail corridors. Authorities were working to drain the chemical vinyl chloride from cars of a Norfolk Southern train that derailed near the Ohio village of East Palestine, triggering a fire. Residents were evacuated from a large area as workers sought to prevent a potentially catastrophic explosion.
Norfolk Southern says shipments are being delayed across an area from Chicago to New York and Kansas City as workers try to clear the scene. The 50-car derailment is the latest accident to draw attention to the hazardous industrial loads hauled on the tracks. Environmental groups said this and other recent accidents in the region tied to petrochemicals, including a natural gas compressor station fire in December and six other train derailments since 2021, are putting residents at risk.
Germany's Habeck Optimistic EU and US Can Reduce Trade Tension
German Economy Minister Robert Habeck expressed optimism on Monday about resolving a European Union trade dispute with Washington, saying he saw room for compromise on certain elements of the U.S. Inflation Reduction Act and its green subsidies. Many EU leaders are worried the local content requirements of $369 billion of green subsidies in the U.S. Inflation Reduction Act will encourage companies to relocate, making the United States a leader in green tech at Europe's expense.
Habeck, who is slated to meet with U.S. Treasury Secretary Janet Yellen on Tuesday along with French Finance Minister Bruno Le Maire, told reporters before leaving for Washington that he was "quite confident" that solutions would be found in coming days and weeks. Yellen welcomed the meeting with Habeck and Le Maire as part of Washington's "ongoing and sustained engagement" on the Inflation Reduction Act and the European Union's Green Deal Industrial Plan, a Treasury official said.
NY Fed Multivariate Core Trend Indicates More Persistent Inflation
The MCT is a dynamic factor model estimated on monthly data for the seventeen major sectors of the PCE price index. It decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares.
The MCT ticked up modestly to 3.7 percent in December from 3.6 percent in November (the value for November being itself revised down from 3.7 percent). As many sectors continue to experience high price volatility, uncertainty is high resulting in a 68 percent probability band. Despite the apparent stability of the trend in the last two months, there were notable changes in its composition. The core goods trend subtracted 0.2 percentage points (ppts) from the MCT, while housing added 0.2 ppt. The core services ex-housing trend was essentially flat.
Germany's Habeck Optimistic EU and U.S. Can Reduce Trade Tension
German Economy Minister Robert Habeck expressed optimism on Monday about resolving a European Union trade dispute with Washington, saying he saw room for compromise on certain elements of the U.S. Inflation Reduction Act and its green subsidies. Many EU leaders are worried the local content requirements of $369 billion of green subsidies in the U.S. Inflation Reduction Act will encourage companies to relocate, making the United States a leader in green tech at Europe's expense.
Habeck, who is slated to meet with U.S. Treasury Secretary Janet Yellen on Tuesday along with French Finance Minister Bruno Le Maire, told reporters before leaving for Washington that he was "quite confident" that solutions would be found in coming days and weeks. Yellen welcomed the meeting with Habeck and Le Maire as part of Washington's "ongoing and sustained engagement" on the Inflation Reduction Act and the European Union's Green Deal Industrial Plan, a Treasury official said.
EU Considers Ban on 'Forever Chemicals'
The European Union on Tuesday started to consider a proposal to ban widely used, potentially harmful substances known as PFAS or "forever chemicals" in what could become the bloc's most extensive piece of regulation of the chemical industry. The chemicals have been used in tens of thousands of products, including cars, textiles, medical gear, wind mills and non-stick pans due to their long-term resistance to extreme temperatures and corrosion.
Germany, the Netherlands, Denmark, Sweden and non-EU state Norway - which have been collaborating on the proposal said in a joint statement on Tuesday that, if passed, it would become "one of the largest bans on chemical substances ever in Europe". Once the ban is in force, companies will be given between 18 months and 12 years to introduce alternatives to the more than 10,000 PFAS affected, depending on the availability of alternatives, according to the draft proposal.
U.S. Business Owners Pay Premium to Hire Migrant Workers in Extremely Tight Labor Market
Migrants who come to the U.S. to find work are now being hired more quickly, at higher pay and under better working conditions than at any time in recent memory. In many cases, employers and economists say, migrant workers are being paid as well as their American counterparts.
The pool of migrants seeking employment in the U.S. includes those with and without valid work permits. Some migrants have crossed the border illegally and evaded capture, relying on underground networks of friends and relatives to find work. Many others have asked for asylum upon entering the country, triggering a multiyear court process that eventually allows them to get work permits—which result in higher wages—while they wait. Still others have been granted seasonal work visas, but employers say there aren’t nearly enough of these visas to meet demand.
NY Warehouse Worker Law Aimed at Amazon – But Impact All Warehouses
New York State has a new law, which goes into effect on Feb. 19, aimed at preventing warehouse workers from being subjected by management to work quotas that are so demanding that they are considered to be risks to the safety and health of the employees. Called the Warehouse Worker Protection Act (WWPA), the new law establishes requirements for distribution centers (DCs) to disclose work speed data to current and former employees and to inform workers about their performance and rights in the workplace
Although unions have been trying hard to organize Amazon DCs for years now, they have managed to make only little progress after expending a large amount of effort and money on the campaign. One reason is that the company largely blunted the threat by raising wages and adopting sweeping safety measures in 2021. Recognizing that about 40% of its workers’ injuries are related to musculoskeletal disorders (MSDs), at that time Amazon developed algorithms to automate staffing schedules, rotating employees around jobs using different muscle-tendon groups to decrease repetitive motion and help protect employees from MSD risks.
Lab-Grown Meat Has a Bigger Problem Than the FDA
Meat grown from animal cells could soon be on the menu at American restaurants. Recently, the California startup UPSIDE Foods became the first to get FDA approval for its cultivated chicken. It’s now waiting on the greenlight from the USDA. UPSIDE and other makers of what’s sometimes called lab-grown meat are optimistic their products will be available at a handful of Bay Area restaurants before the end of the year. The challenge now is scaling their businesses up and marketing this unfamiliar product.
The emerging industry has supply chain and production challenges to work out, said David Block, a professor in the department of Food Science at UC Davis. “I think it’s the goal of every cultivated meat company to reach price parity with conventionally grown meat,” Block said. Right now, the production process is far too expensive for that. Block said if these companies can manage to scale up, they could help address growing global demand for meat, which is projected to double before 2050.
Housing Market Shows Signs of Thawing
Falling mortgage rates are beginning to stir demand in the housing market. The average 30-year home loan rate has come down by just about a full percentage point from a 20-year high above 7% in November, largely in response to signs that the Federal Reserve is nearly finished lifting rates. That has brought some new buyers into the market.
Mortgage applications are up by about a quarter since the end of last year. A measure of signed real-estate contracts rose in December after six months of declines. And the number of people contacting real-estate agents to start the buying process has rebounded from a November low, according to brokerage Redfin Corp.’s internal data. Rates are still well above the 3% range from a year ago, but “the fact that they are a percent lower—no one is complaining about that,” said Michael Menatian, president of Sanborn Mortgage Corp. in West Hartford, Conn. “If anything, they are pleasantly happy.”
CEO Jim Farley Identifies Key Pain Points Ford Must Fix, Starting With Engineering
Ford CEO Jim Farley, just days after telling industry analysts the company's 2022 earnings report was disappointing and billions below his expectations, went another step to outline his perspective on the company he says is taking too long to fix. "I think probably it takes us 25% more engineers to do the same work statements as our competitors. I can't afford to be 25% inefficient. And those are controllable by the team leaders at Ford. They are there to make those changes to be competitive," Farley said.
“We need to measure technical expertise. We need to measure if someone is a change agent like they are solving problems. They lean into action. Their first intuition is to do something, not talk about doing something. … We are getting better at measuring these things," Farley said. "It's going to dictate your compensation with the company if you manage people whether you fit the culture. It'll dictate who gets hired, who gets ahead, who gets more responsibility. It won't be seniority, necessarily, although that matters. It will be based on meritocracy, on the kind of behaviors we think are important like collaboration, excellence and problem solving.”
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