Member Briefing January 25, 2023
Business Economists Seem a Little More Optimistic, Survey Finds
More than half of the economists surveyed by NABE think the United States is either already in a recession or expect a downturn in the next year. Joseph Brusuelas, chief economist at tax and consulting company RSM, is one of them. He doesn’t think the Federal Reserve’s interest rate hikes, meant to slow the economy, have really hit yet. But economists love to play the “on the one hand” and “on the other hand” game and the latest survey from the National Associate of Business Economists is a classic example.
On the one hand, more economists in Monday’s survey expect the price of materials that go into their products to fall, according to Sara Rutledge, an economist with the private equity firm StepStone Group. Two-thirds of the survey respondents expect their firms to increase wages for the workers they’re going to keep, Rutledge added. On the other hand, there will be layoffs. “For the first time since 2020, we had more firms say they expect a decrease in their head count than expect an increase,” said Ken Simonson, chief economist for the Associated General Contractors of America. “And this is pretty rare. We’ve only seen this in the past during periods of recession.”
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- U.S. Leans Toward Providing Abrams Tanks to Ukraine - WSJ
- Germany Set to Send Leopard 2 Tanks to Ukraine, Der Spiegel Reports - CNN
- An FBI Agent Who Led Investigations of Russian Oligarchs During the Trump Years Was Secretly Working for One: Indictment – Fortune
- Ukraine Purges Officials and Governors in Biggest Shake-Up of War - Reuters
- Putin's Pivot in Ukraine Will Bring About Permanent War in Europe – Fox News
- Russian Ally Belarus Pulls Out Armored Vehicles in Latest Threat to Ukraine – Daily Beast
- Deadly and Disposable: Wagner’s Brutal Tactics in Ukraine Revealed by Intelligence Report - CNN
- Finland Says Time-Out Needed in Talks with Turkey Over NATO Bid – Reuters
- The Russian Draft-Dodgers Who Fed to Alaska in a Dinghy – 1843 Magazine
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Walmart Raises Minimum Wage as Retail Labor Market Remains Tight
Walmart said Tuesday that it is raising its minimum wage for store employees to $14 an hour, representing a roughly 17% jump for the workers who stock shelves and cater to customers. Starting in early March, store employees will make between $14 and $19 an hour. They currently earn between $12 and $18 an hour, according to Walmart spokeswoman Anne Hatfield.
With the move, the retailer’s U.S. average wage is expected to be more than $17.50, Walmart U.S. CEO John Furner said in an employee-wide memo on Tuesday. About 340,000 store employees will get a raise because of the move, Hatfield said. That’s roughly a quarter of Walmart’s 1.3 million workers who work in the field, driving trucks, packing up online purchases and serving in stores.
Companies Cut Temp Workers in Warning Sign for Labor Market
In the last five months of 2022, employers cut 110,800 temp workers, including 35,000 in December, the largest monthly drop since early 2021. Many economists view the sector as an early indicator of future labor-market shifts. Temporary employment declined before some recent recessions and during economic slowdowns. Temporary workers, typically employed through staffing agencies, are easy for companies to bring on board—and let go.
“For me, it’s a real warning sign,” said James Knightley, chief international economist at ING. “The jobs market may not be invulnerable to the downturn story.” Pullbacks in temp employment preceded broader payroll declines by several months in recent downturns, including the 2001 and 2007-09 recessions. For instance, employment in the temp sector began falling in early 2007, while employment across all sectors started to descend about a year later.
U.S. COVID – Some Experts Worry it’s Too Soon, and Too Simple, to Move to Annual COVID Shots
An FDA advisory committee is expected to discuss the possibility of a simplified COVID vaccination schedule—which could include one annual dose of an updated booster for many, and two doses for the high-risk—on Thursday. The committee is also expected to discuss the decision-making process on the composition of future boosters, including a potential new version to be released this fall.
But it may be too soon to commit to annual boosters, some experts tell Fortune. The virus has not yet fully settled into a pattern of seasonality and may never. COVID spikes do tend to occur in winter, along with the flu, due to factors that drive both, like cold weather and increased indoor gatherings. But COVID waves can and do occur throughout the year, as new variants arise. Timing of waves aside, those at high risk for COVID—due to age and/or health conditions—may continue to require more frequent dosing, they caution.
CDC Talking to Airlines About Testing Plane Wastewater for Coronavirus
The Centers for Disease Control and Prevention is talking to airlines about the possibility of testing for the coronavirus in sewage from planes, the federal agency told NBC News. Since September 2021, the CDC has been testing international travelers for Covid on a volunteer basis via nasal swabs. The program now includes seven major airports. Expanding that surveillance to include wastewater could allow the CDC to collect more data about emerging variants.
The U.S. has been monitoring for the coronavirus in wastewater since the CDC launched its National Wastewater Surveillance System in September 2020. But that testing mainly involves wastewater from households or buildings, not samples from airports or plane. A study published Thursday in the journal PLOS Global Public Health shows how this approach could be useful: A team of researchers from Bangor University in Wales found that the coronavirus circulated widely in wastewater from airports and planes in the U.K., even while Covid testing was required for unvaccinated passengers.
A Bill to Ban New Gas Hook-Ups is Getting a Renewed Push in Albany
At the top of the agenda for climate change activists in the Capitol is the “all-electric building act,” which would ban new gas and oil hookups in all new construction by the end of the decade. The governor has already included her own version of the “all-electric building act” in her State of the State address earlier this month, something she also did last year. But ultimately, the legislation didn’t get done in the budget, nor did it pass in the Legislature last session.
Despite hitting roadblocks in the past, activists are confident that with a finalized scoping plan from the Climate Action Council – a group formed through the Climate Leadership and Community Protection Act to figure out how to meet the goals set by the law – electric buildings will get through this year. Electrifying buildings was one of the key goals of the massive climate bill. Advocates are also pushing to retrofit existing buildings that use gas or oil with electric heating instead.
China’s Economic Recovery Expected to Drive Rising Demand for Power
Electricity consumption in China is set to rise by 6 per cent this year, according to a power trade association which is also predicting the country’s swift economic return after its reopening from Covid-19 restrictions. “In 2023, China’s economic operation as a whole is expected to recover, driving the growth rate of electricity consumption higher than in 2022,” the China Electricity Council said in a report last week.
The council report said macroeconomics and climate would be important factors affecting electricity demand, while the development of new energy is expected to drive up total power generation capacity. Last August, heatwaves in southwest China led to an ongoing power crisis in Sichuan province where continuous high temperatures severely hampered hydropower capacity, a main source of the region’s electricity. A nationwide power crisis in October 2021 also threw the country into chaos, disrupting manufacturing and consumer activities as well as daily lives.
OSHA Follows White House’s Pro Labor Lead in 2023
Federal agencies throughout the government, including OSHA have dedicated themselves to promoting organized labor’s interests following a unified effort mounted early in 2022 after Biden appointed a cabinet-level task force. This included formal agreements for agencies to work jointly on a range of issues that encourage union organizing efforts. OSHA has made a major target of the logistics industry in the form of targeting warehousing and distribution centers, deploying inspectors to search for safety violations of all sorts, but with a special focus on forklift truck safety.
Although OSHA points to an increasing number of accidents in these work environments, it also doesn’t seem to be just a coincidence that a union drive to organize Amazon’s vast distribution network also reignited around the time Biden took office. A decades-long effort by the unions to organize all sorts of warehouse operations also led to a new OSHA heat regulation that is expected to be finalized in 2023.
Tech Analyst Just Warned Another 15% to 20% of Big Tech Employees Could be Laid Off Over the Next 6 Months
Big tech giants have laid off tens of thousands of employees over the past few months as recession fears, persistent inflation, and rising interest rates continue to weigh on earnings results. The likes of Google, Amazon, and Meta have let go of nearly 40,000 employees combined.
Pandemic of Avian flu’ is Wreaking Havoc on the U.S. Poultry Industry. Humans May De at Risk Too, Experts Warn
The H5N1 strain of avian flu responsible for the deaths of tens of millions of birds in the U.S. in recent months, and countless more worldwide, poses an existential threat to the poultry industry in the U.S.—and a potentially widespread human health threat, experts say. The strain—first identified in domestic waterfowl in China in 1996—is behind nearly 58 million U.S. bird deaths in the past year. These deaths have occurred both directly due to the virus and indirectly, when flocks are culled to curb further exposure, according to the U.S. Centers for Disease Control and Prevention. The virus has a near 100% fatality rate among birds, killing most infected within 48 hours.
This season’s bird flu outbreak is the worst in U.S. history, having surpassed a 2015 outbreak the CDC once called “arguably the most significant animal health event in U.S. history.” That year, nearly 51 million birds died nationally due to H5N1 and related avian flu viruses. This season’s outbreak is also the worst in U.K. history, with farmers in England ordered to keep their birds indoors as of Nov. 7 in a poultry “lock down” of sorts.
Industry Earnings 3M
3M Co said on Tuesday it would cut 2,500 manufacturing jobs after reporting a lower profit, as the U.S. industrial conglomerate faces a demand slowdown in its unit that sells products including notebooks, air purifiers and respirators. The move comes as corporate America has seen a string of layoffs with companies trying to rein in costs amid fears of a potential economic downturn.
The company reports GAAP earnings per share of $0.98, which included a $1.15 per share pre-tax charge relating to PFAS manufacturing exit costs adjusted for in special items. They also reported sales of $8.1 billion, down 6 percent year-on-year, which included impacts of negative 2 percent from divestitures and negative 5 percent from foreign currency translation due to strength of U.S. dollar. 3M expects adjusted sales growth to drop 6% to 2% this year due to declining disposable respirator sales and its exit from Russia.
Industry Earnings: GE
General Electric Co. reported strong demand for its jet engines and power equipment in the fourth quarter, lifting the manufacturer to a quarterly profit and higher revenue than a year ago. The final quarter of the year is typically the strongest for the company, which generated cash flow of $4.3 billion in the period, bringing its total to $4.8 billion for the year. The latest results include GE HealthCare Technologies Inc., GEHC 4.12%increase; green up pointing triangle which it spun off in early January.
The company had a fourth-quarter profit of $2.1 billion on a 7% increase in total revenue to $21.8 billion. The earnings results topped Wall Street’s expectations. GE forecast higher revenue for 2023 but set a cash flow target for the year below some expectations after the healthcare spinoff. GE shares slipped 2% in premarket trading.
Industry Earnings: Lockheed Martin
The world’s largest defense company by sales is one of the biggest beneficiaries of the $27 billion in military equipment committed by the U.S. to Ukraine, though so far only $6.6 billion is under contract to industry. Defense executives have cited shortages of labor and components, as well as the need for more certainty that if companies invest more to boost capacity, orders will flow. The company reported a net profit of $1.91 billion for the quarter ended Dec. 31, compared with $2.05 billion a year earlier. Per-share profit slipped to $7.40 from $7.47, just short of the consensus forecast of analysts polled by FactSet.
The company, which also makes F-35 combat jets, has said it will take two years to double production of Javelin antitank missiles, co-produced with partner Raytheon Technologies Corp., and Himars rocket launchers, both being widely used by Ukraine in its conflict with Russia.
Natural Gas Demand Record Set December 23rd
From December 21 through December 26, a historic winter storm moved across North America, bringing blizzards, high winds, and extremely cold temperatures. On December 23, 2022, estimated total consumption of natural gas in the U.S. L48 reached a daily record high of 141.0 Bcf, exceeding the previous daily record high of 137.4 Bcf set on January 1, 2018, according to EIA. Pittsburgh, for example, saw its coldest day in 40 years as temps never climbed above 0⁰ Fahrenheit on December 23.
Total consumption includes natural gas consumed in the residential, commercial, industrial, and power generation sectors. Below-normal temperatures in mid- to late-December increased demand for residential and commercial heating, as well as for electric power generation, and contributed to a steep weather-related decline in natural gas production.
Cushman Wakefield: Warehouse Demand Remains Strong
The industrial real estate (IRE) market may be losing some steam, but its remarkably consistent growth in 2022 supports a forecast of continued strength in spite of economic softening, predicts global real estate giant Cushman & Wakefield (C&W). Throughout 2023, supply should continue to outpace demand as the development pipeline remains robust, with the majority of developments anticipated to deliver in 2023, the company says.
C&W warns in a recent look at the past year and what the future holds “In the face of an increasingly difficult economic climate and the Fed pursuing additional hike rates, we anticipate construction starts to slow down.” Overall tenant demand should remain positive, it adds, “but it can be expected to continue to decelerate as choppier economic conditions emerge and consumer spending continues to rotate back towards services.”