Member Briefing January 16, 2023
Economists in WSJ Survey Still See Recession This Year
On average, business and academic economists polled by the Journal put the probability of a recession in the next 12 months at 61%, little changed from 63% in October’s survey. Both figures are historically high outside actual recessions. That is despite a slightly more optimistic outlook for inflation. Employers are expected to cut jobs starting in the second quarter through the end of the year, the survey found. For 2023 as a whole, economists expect that payrolls will decline by 7,000 a month on average.
While economists don’t think a recession can be avoided, they expect it to be relatively shallow and short-lived, in line with other recent surveys.On average, they expect gross domestic product to expand at a 0.1% annual rate in the first quarter of 2023 and contract 0.4% in the second. They see no growth for the third quarter and a 0.6% growth rate for the fourth. Economists expect GDP to stagnate this year, posting growth of just 0.2% in the fourth quarter of 2023 compared with the fourth quarter of 2022. In the WSJ survey in October, economists forecast 0.4% GDP growth in 2023.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- U.N. to Post Inspectors to All of Ukraine’s Nuclear Plants - WSJ
- UK to Send Challenger 2 Tanks to Ukraine, Rishi Sunak Confirms - BBC
- Russia Says its Forces Capture Soledar in East Ukraine - Reuters
- Giant Ukrainian Salt Mine Takes Center Stage in War - WSJ
- Russia Fires New Waves of Missiles at Ukraine and Hits Energy Infrastructure - BBC
- 'Simply Not Human': 29 Dead in Russian Missile Strike on Ukraine Apartments – USA Today
- WATCH: Ukraine Forces Ambush Russian Wagner Unit With Lethal Crossfire – Business Insider
- ‘I’m Sorry, We’re From Moscow.’ In Bali, Warring Sides Learn to Cohabitate - NYT
- Ukrainian "Yurt of Invincibility" Serves as Heating Point During Russia's Invasion – USA Today
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Three Things to Know About the Looming Debt Ceiling ‘Crisis’
On Friday, Treasury Secretary Janet Yellen warned that the U.S. is on track to reach the debt limit, or the cap on how much money the federal government can borrow, by Thursday. The ceiling was last raised by $2.5 trillion in December 2021 to a total of $31.4 trillion. In the past, Congress has avoided breaching the limit by simply raising it. But House Republicans said they will only support increasing the debt ceiling if there are spending cuts or other concessions.
In a letter to congressional leaders, Yellen said deadlock around the debt ceiling can cause "irreparable harm" to the economy and even global financial stability. She harkened back to 2011, when the U.S. reached its debt limit, wreaking havoc on the stock market. So far, the U.S. has never defaulted on its debt. But Yellen warns that if Congress fails to act, that may happen as soon as June. If there's a stalemate, a few things can happen.
Are the Latest Consumer Price Index Numbers a Good Sign for the Economy?
When you look at the numbers, it’s a bit of a glass half-full, glass half-empty situation. Prices were up 6.5% over the past year, well above the Federal Reserve’s inflation target of 2%. They’ve exceeded that target for almost two years now. On the other hand, inflation has been slowing down ever since June. In fact, 6.5% is the smallest 12-month increase since October 2021. On average, prices actually fell in December compared to the month before, when you factor in energy costs — which dropped — and food prices — which went up, but more slowly.
If the trend continues, Laura Veldkamp at Columbia Business School said it’s possible that the economy could avoid a recession. In the past, she noted, the Federal Reserve has brought down prices by engineering recessions. But now? “Given that prices are falling without the recession, I would hope that we don’t need to squeeze the economy so hard to cause the recession after that.”
U.S. COVID – Incidences Up, Hospitalizations, Mortality Down
The US CDC is reporting:
- 1 million cumulative cases
- 09 million deaths
- 470,699 cases reported week of January 4
- 14% increase in weekly incidence as of January 4
- 2,731 deaths reported week of January 4
- 6% increase in weekly mortality as of January 4
- 6% decrease in new hospital admissions
- 7% increase in current hospitalizations
The Omicron sublineages BQ.1.1 (34%), XBB.1.5 (28%), and BQ.1 (21%) account for a majority of all new sequenced specimens, with various other Omicron subvariants accounting for the remainder of cases.
NYS COVID Update
The Governor updated COVID data through January 13.
- Daily: 30
- Total Reported to CDC: 77,325
- Patients Currently in Hospital statewide: 3,518
- Patients Currently in ICU Statewide: 358
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 6.75% - 25.85 positive cases per 100,00 population
- Mid-Hudson: 7.04% - 22.03 positive cases per 100,00 population
China: 60,000 Covid-Related Deaths in Just Over a Month
China has reported 60,000 Covid-related deaths in just over a month, the first major death toll released since the country stopped its zero-Covid policy. According to officials, China recorded 59,938 Covid-related deaths between 8 December and 12 January. Most of those who died were over 80, with most having underlying conditions.
The figures, include 5,503 deaths caused by respiratory failure directly due to the virus, and 54,435 caused by underlying conditions combined with the virus. The real total is likely to be higher because which the figures refer only to deaths recorded at medical facilities. Last month, Beijing changed the way it categorises Covid deaths, only counting towards its total those who died of respiratory failure directly induced by the virus.
World Economic Forum Releases Global Risk Report Ahead of Davos Meeting
What are the global risks facing business leaders in the new year? It’s a question the World Economic Forum attempts to answer each year ahead of its annual meeting. And with “Davos” starting next week, the Swiss organization on last week revealed its 2023 risk survey results As 2023 begins, the world is facing a set of risks that feel both wholly new and eerily familiar.
“We have seen a return of ‘older’ risks – inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare – which few of this generation’s business leaders and public policy-makers have experienced. These are being amplified by comparatively new developments in the global risks landscape, including unsustainable levels of debt, a new era of low growth, low global investment and de-globalization, a decline in human development after decades of progress, rapid and unconstrained development of dual-use (civilian and military) technologies, and the growing pressure of climate change impacts and ambitions in an ever-shrinking window for transition to a 1.5°C world. Together, these are converging to shape a unique, uncertain and turbulent decade to come.”
China Set for Historic Demographic Turn, Accelerated by COVID Traumas
A glimpse of the scars caused by the pandemic to China's already bleak demographic outlook may come to light when it reports its official 2022 population data on Jan. 17. Some demographers expect China's population in 2022 to post its first drop since the Great Famine in 1961, a profound shift with far-reaching implications for the global economy and world order.
New births for 2022 are set to fall to record lows, dropping below 10 million from last year's 10.6 million babies - which were already 11.5% lower than in 2020. "With this historical turn, China has entered a long and irreversible process of population decline, the first time in China and the world's history,” said Wang Feng, professor of Sociology at University of California. "In less than 80 years China’s population size could be reduced by 45%. It will be a China unrecognisable by the world then."
China’s Covid Wave Threatens Another Snarl of U.S. Medical Supply Chain
U.S. hospitals, health care companies and federal officials worked to lessen their dependence on China for medical goods after the first wave of Covid infections in 2020 laid bare the major role China plays in manufacturing such crucial items as masks, latex gloves and surgical gowns, along with the key drugs and components in many medical devices.
Those efforts over the past three years are expected to be tested in the coming weeks and months as the virus rolls through China following the lifting of nearly all Covid restrictions there last month. Media reports show hospitals overwhelmed and factories unable to operate with so many workers ill. The U.S. is already grappling with unrelated shortages of medications for children, including pain relievers and antibiotics.
Workforce Development Institute (WDI) Releases 2022 Annual Impact Report
The Workforce Development Institute’s (WDI) 2022 Impact Report tells the story of the organization’s statewide reach, commitment to worker advancement, and ever-growing partner network (including the Council of Industry)
WDI’s Executive Director, Amy Desjardins said “It’s rewarding to reflect on the accomplishments and impact from the past year. The report reaffirms the talent and dedication of our staff as well as the support and guidance from our board of directors. Successful workforce development is always the result of collective action, no matter the industry or region. This year’s impact report proves this with example after example of how we seek to lift up and amplify the work of our many partners in the labor movement, government, business, education, and non-profit sectors. On behalf of our staff and board of directors, I want to thank all our partners for their continued collaboration. In 2022, we answered the call of worker advancement together.”
World Cup Drinkers Boost UK GDP, Easing Recession Risk
Britain's economy unexpectedly eked out some growth in November after a boost from World Cup drinkers and video game sales, reducing the chance that it has already slipped into recession, but the picture for 2023 remains gloomy. Gross domestic product rose 0.1% from October, figures from the Office for National Statistics showed on Friday, a higher reading than any forecast in a Reuters poll of economists which had pointed to a 0.2% decline.
Much of the gain reflected people going to the pub to watch the men's soccer World Cup - with food and beverage services output jumping 2.2% on the month - as well as early pre-Christmas spending on video games, the ONS said. Manufacturing output dropped by 0.5%, driven by a drop in pharmaceuticals production which is often volatile.
Ulster Home Sales Drop 20 Percent in 2022
Sales of single-family homes in Ulster County fell 20 percent in 2022 from the number sold in 2021. The number of home sales in 2021 totaled 1,871 compared with 1,496 last year. At the same time, the average selling price rose by 10 percent and homes sold 3.6 percent faster, the Ulster County Board of Realtors reports.
The average selling price in 2022 was $479,102 compared with $436,298. The realtors’ organization said homes sold in an average of 53 days last year compared with 55 days in 2021.In December 2022, there were 252 homes listed, compared with 229 one year earlier.
Cutting Tool Orders Slowed in Q4 2022
Machine shops and other U.S. manufacturers began to decelerate their activities during the last quarter of 2022, as indicated by the -3.1% drop in cutting-tool consumption from October to November. The $194.4 million total for November still indicated a 20.8% improvement over the November 2021 consumption total, and boosted year-to-date cutting-tool consumption to $2.0 billion, a 10.4% increase over the January-November 2021 total.
The data is compiled by the U.S. Cutting Tool Institute and AMT – the Assn. for Manufacturing Technology for their monthly Cutting Tool Market Report, which represents actual purchases of cutting tools as reported by manufacturers and distributors that comprise a majority of the domestic market for cutting tools.
Chip Maker TSMC Warns of Possible Revenue Drop, Spending Cut
Taiwan Semiconductor Manufacturing Co. said that its revenue could drop as much as around 5% in the current quarter and that it could cut this year’s capital expenditures compared with last year, citing weak demand. TSMC which reported record full-year revenue in 2022, said Thursday that it expected to post between $16.7 billion and $17.5 billion in revenue in the January-to-March quarter, compared with $17.57 billion from a year earlier. The last time TSMC’s quarterly revenue declined year-over-year was in the first quarter of 2019, according to data from S&P Global Market Intelligence.
The possible drop and cut—even if relatively slim—are a sign that TSMC, a major supplier to the world’s most important chip developers including Apple Inc., is running out of steam, and underscore the headwinds faced by the semiconductor industry after a period of strong expansion that started in 2020.
Tesla Slashes Prices Across Lineup on Demand Worries
Tesla Inc. slashed prices across its four-vehicle lineup late Thursday after missing its delivery forecast for last year. On its website, Tesla listed its top-selling Model Y Long Range with all-wheel-drive — its entry version in the U.S. market — at $52,990 before shipping. The price cut to the base Model Y, Tesla's No. 1 seller in the U.S., makes it more competitive vs. rivals that have been chipping away at its EV market share.
In recent guidance from the IRS, the two-row Model Y was given a price cap of $55,000 to qualify for the new EV incentive of up to $7,500 under last year's Inflation Reduction Act. Under the previous version of the incentive, Tesla had lost of eligibility after hitting its quota of 200,000 vehicles in 2020. With the automaker's new pricing and assuming the full $7,500 tax incentive for a qualifying customer, the Model Y's effective starting price would fall to $45,490.
Zero-sum: The Destructive New Logic Threatens Globalization
Since 1945 the world economy has run according to a system of rules and norms underwritten by America. This brought about unprecedented economic integration that boosted growth, lifted hundreds of millions of people out of poverty and helped the West prevail over Soviet Russia in the cold war. Today the system is in peril. Countries are racing to subsidise green industry, lure manufacturing away from friend and foe alike and restrict the flow of goods and capital. Mutual benefit is out and national gain is in. An era of zero-sum thinking has begun.
The old system was already under strain, as America’s interest in maintaining it waned after the global financial crisis of 2007-09. But President Joe Biden’s abandonment of free-market rules for an aggressive industrial policy has dealt it a fresh blow. America has unleashed vast subsidies, amounting to $465bn, for green energy, electric cars and semiconductors. Bureaucrats tasked with scrutinising inward investments to prevent undue foreign influence over the economy now themselves hold sway over sectors making up 60% of the stockmarket. And officials are banning the flow of ever more exports—notably of high-end chips and chipmaking equipment to China.