Member Briefing January 4, 2024
Top Story
ISM: There Was no Soft Landing for Manufacturing in 2023
Manufacturing is contracting, albeit at a slightly slower pace with the headline index coming in at 47.4 for the last month of 2023. This bellwether for manufacturing has now been below the breakeven 50 for 14 consecutive months. The report, however, signaled a tilt toward less-bad, bordering on outright good, prospects. Start with production activity, which rose to 50.3—signaling expansion, if only at a scant pace. New orders faltered a bit slipping to 47.1 from 48.3 last month, but order backlogs jumped six points to a still-low 45.3.
The labor situation remains grim for manufacturing. Even as the employment component rose 2.3 points, at 48.1 it remains comfortably below the 50.4 level typically consistent with an increase in manufacturing employment (chart). A weak hiring backdrop is little surprise amid a sector that has more or less been in stall speed for over a year. Only three industries reported employment growth in December, and we don't anticipate a turnaround in hiring until activity more meaningfully picks up.
JOLTS: Openings, Quits and Hiring Ease as Labor Market Cools
Demand for workers fell to its lowest level in more than 2½ years in November while hirings and layoffs both moved lower, the Labor Department reported Wednesday. The department’s Job Openings and Labor Turnover Survey showed employment listings nudged lower to 8.79 million, about in line with the Dow Jones estimate for 8.8 million and the lowest since March 2021. Openings fell by 62,000, though the rate of vacancies as a measure of employment was unchanged at 5.3%.
There were 547,000 manufacturing job openings in November, a decline from 561,000 in September. Manufacturers hired 358,000 workers in November, the fewest since July 2020. November's manufacturing job openings numbers are “a sign that churn, which has been a major issue for manufacturers amid a tight labor market, has eased significantly, approaching (but still above, for now) pre-pandemic levels," said NAM Chief Economist Chad Moutray.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- A Plan for Gaza’s Future is Taking Shape. Obstacles Loom. – CS Monitor
- Israel-Gaza War: Displaced Gazans 'Living in the Open', UN Says - BBC
- Sanders Calls for End of US Funding for Netanyahu’s ‘Immoral’ War – The Hill
- Hamas Leader's Killing Raises Fears of Wider War – Reuters
- Hezbollah Chief Says Group 'Cannot be Silent' After Hamas Leader's Killing - Reuters
- Hamas Leader Killed in Beirut Was Linchpin of Relations With Iran, Hezbollah - WSJ
- IDF Reports 'Intense Fighting' in Khan Younis - UPI
- Why an Israeli Occupation of Gaza is Likely in 2024 - Reuters
- 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
- Russian Missiles Hammer Kyiv in Large-Scale Attack on Ukraine - NYT
- Missiles Fired at Russian City Belgorod and Occupied Crimea - BBC
- NATO Partners Pledge 1,000 Patriot Missiles for Ukraine - UPI
- Grim New Year for Ukrainians Under Shadow of Russian Attack - BBC
- Stoltenberg: Sweden will join NATO by July – Politico
- EU Adds Russia's Biggest Diamond Producer Alrosa to Sanctions List - 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
- Thailand, China Agree on Visa-Free Travel in Boost for Tourism Recovery - BBC
- Earthquakes in Japan Leave at Least 62 Dead - Politico
- U.S. to Reopen 4 Border Crossings as Encounters Drop - UPI
- US and Allies Warn Houthis of ‘Consequences’ as Red Sea Crisis Intensifies - Politico
- At Least 103 Dead in Blasts at Memorial for Killed Iranian Commander Soleimani - CNN
- Pro-Democracy Advocate Jimmy Lai Faces National Security Charges in Hong Kong
- China's Rise To The World's Largest Economy Is Delayed – Wells Fargo
- Taliban Balk At UN Security Council Plan For Special Afghan Envoy – Barron’s
- Protests Shut Down Libya's Sharara Oilfield – Engineers – Reuters
- Lee Jae-myung, South Korea’s Opposition Leader, Survives a Stabbing – The Economist
Policy and Politics
5 Things to Watch as NY's 2024 Legislative Session Begins
Fiscal uncertainty and a projected $4.3 billion budget deficit hangs over elected officials as they wait for the details of Gov. Kathy Hochul's annual State of the State and budget addresses later this month. And Democrats and Republicans are expected to continue their annual spar over public safety measures and other policies affecting the affordability of the state — top concerns for New York voters, especially after hundreds of thousands of people have left the state. Here are five things to watch for as the 2024 legislative session gets underway:
- Housing is expected to be at the forefront of state budget discussions as the governor and Legislature must work together to close a $4.3 billion project deficit ahead of the April 1 deadline.
- Some state lawmakers want the Legislature to pass measures this session to help connect migrants and asylum seekers with housing, employment opportunities and health care.
- Updated financial estimates show the Legislature must pass its next budget and close a $4.3 billion shortfall.
- Members of the state Independent Redistricting Commission met last week with less than two months to draft new congressional district lines.
- Gov. Hochul and the Legislature have done each other favors and collided in the past, but it's unclear how the governor's recent decision to veto several high-profile bills at the end of the year will fracture their relationship in 2024.
Read more at NY State of Politics
Biden Administration’s 2023 Federal Register Page Count Is The Second-Highest Ever
The closing of the books on 2023 marks the third calendar year under the Joe Biden administration, affording an opportunity observe how the regulatory output of departments and agencies under his command compares to that of predecessors. The Federal Register, the daily depository of rules and regulations, wrapped up 2023 with 90,402 pages. That happens to be the second-highest tally of all time. Biden closed out the current year with 3,018 rules compared to 3,168 in 2022.
Biden posted a big jump over the 79,856 Federal Register pages he scored in 2022. While the number of rules and regulations contained within Biden’s hefty Federal Register set no records, he has spurned regulatory streamlining as a priority (deeming Trump’s efforts “harmful”) and instead instructed agencies to pursue “net benefits” via top-down “whole-of-government” initiatives in climate, equity and other economic and social engineering policies.
State of the State Preview – Hochul to Focus on Consumer Protections
Gov. Kathy Hochul on Tuesday offered the first sneak peek into her State of the State agenda. Rather than rolling out a cornerstone proposal, like last year’s ill-fated housing plan, the governor chose to highlight a much lower-profile part of her agenda for the year: consumer protections. Speaking at her Manhattan office, Hochul said she wanted to preview her State of the State with a proposal that might otherwise get swept up among other high-profile aspects of her annual address, which is scheduled for next week.
Notably, Hochul said she wanted to take steps to tackle medical debt and prescription drug costs, saying she would propose legislation that would eliminate co-pays for insulin. Hochul also said she plans to propose “the first major expansion” to the state’s consumer protection laws in 40 years. “There are only seven states where abusive and unfair business practices are not covered by the law,” Hochul said. “Guess who’s one of the seven. Guess who’s no longer going to be one of the seven.”
Health and Wellness
Signs of Mental Health Issues in Your Workplace
Companies are trying a number of methods to tackle mental health issues in the workplace. A recent article called out seven companies who are providing "world class" programs. Companies include Johnson & Johnson, Unilver and Union Pacific. Even with the example of these companies, and the increased focus on the important of mental health, and its effect on workplace engagement and productivity, it's not always easy to spot.
A recent article in HR Digest provided a list of signs that can "open the door to a conversation on what can be done to help."
Frequent tardiness and inability to keep up with work deadlines
Constant tiredness and apparent exhaustion or frequent illness
Inconsistent moods and frequent fluctuations
Sudden change in personality traits—includes withdrawal from projects, social circles, and activities
Extreme nervousness and being on the edge
Difficulty concentrating, keeping up with instructions, completing tasks, etc.
Frequent conflicts with team members
Increased sensitivity as compared to their previous demeanor
Decline of interest in initiatives
Severe Covid-19 Infections linked to Increased Risk of Schizophrenia
Recent findings indicate a grim correlation between severe COVID-19 infections and an increased susceptibility to schizophrenia, a severe mental disorder. Individuals who have undergone severe COVID-19 infections are over four times more likely to be diagnosed with schizophrenia compared to those who have not contracted the virus, reinforcing the hypothesis that the coronavirus might act as a trigger for the development of such mental conditions. The link between severe COVID-19 and amplified risk of psychotic disorders adds a new dimension to the growing body of evidence concerning the long-term mental health implications of the coronavirus. This underscores the necessity for further research and interventions to mitigate the aftermath of severe COVID-19 infections on mental health.
Schizophrenia manifests through symptoms such as hallucinations, delusions, and cognitive difficulties. While the precise cause of schizophrenia remains a mystery, previous research has suggested that viral infections, including influenza and potentially COVID-19, could be catalysts for this condition. This recent discovery strengthens this hypothesis and calls for a more in-depth investigation.
Industry News
Why Manufacturing Is in a Slump, Despite Signs of a Renaissance
U.S. manufacturing is entering a golden age, with government subsidies sparking a boom in factory construction. Yet the industry is also mired in the longest slump in more than two decades. Activity has weakened for 13 straight months, the longest stretch since 2002, according to surveys of purchasing managers by the Institute for Supply Management. Behind that split-screen image: U.S. manufacturing is large and varied. Investment in factories has occurred in the most high-tech sliver of the sector while other industries struggle with a pandemic-induced inventory overhang and higher interest rates.
This divergence won’t last forever, economists say. They expect factory output to pick up as the Federal Reserve cuts rates and the lagged effects from the inventory buildup of 2022 and early 2023 fade. Bringing the new factories online would further support the sector’s growth.
Fed Minutes Suggest Rate Hikes Are Over, but Offer No Timetable on Cuts
Federal Reserve officials thought they were probably done raising interest rates when they decided last month to hold rates steady, but minutes of the meeting didn’t show a meaningful debate about when to start lowering rates. While nearly all officials anticipated policy rates would be lowered this year, they kept the prospect of higher rates on the table at their Dec. 12-13 meeting, according to minutes released Wednesday.
Fed Chair Jerome Powell’s news conference at the conclusion of the meeting sparked some confusion. Comments from Powell—along with rate projections released after the meeting penciling in rate reductions this year—suggested the Fed’s next move was more likely to be a cut even though the central bank maintained written guidance that said officials were more attentive to risks that would require higher and not lower interest rates. The minutes offered little to shed light on how officials view the prospect of rate reductions. Participants thought that the risks of higher-than-expected inflation had diminished late last year, and the minutes said some officials highlighted uncertainty over how long their policy rate should remain at a restrictive setting.
Loose Nut - New Inspections Ordered for 737 MAX Jets
Boeing Commercial Airplanes has instructed 737 MAX jet operators to inspect all aircraft for a possible defect in the rudder control system after a non-U.S. carrier reported a loose bolt during routine maintenance. That detail was reported by the U.S. Federal Aviation Administration, which added: “The company (Boeing) discovered an additional undelivered aircraft with a nut that was not properly tightened.”
“The issue identified on the particular airplane has been remedied,” according to a Boeing a statement. “Out of an abundance of caution, we are recommending operators inspect their 737 MAX airplanes and inform us of any findings.” The inspections will take about two hours to completed on each jet, according to Boeing, and all new 737 MAX jets will be checked before delivery. There has been no information on the cause of the loose bolt, but the matter represents a new detail in a series of problems for Boeing’s manufacturing supply chain in recent months.
Read more at American Machinist
60% of Gen Z, Millennials Have Less Than $5K in Retirement Savings
Many Americans worry that they will not have enough savings for retirement. That worry was seen again in a November YouGov poll, which found Americans expressing a lack of confidence in their retirement plans. The results of the poll, published as part of the YouGov profile series, found that two in five Americans adults said they were not confident about their retirement provisions (43%).
The report outlines where the different generations are in their preparation for retirement and finds a “troubling” trend: “A considerable portion of Americans are at the nascent stages of saving for retirement or have not started at all,” the analysis said. “This is evident with a quarter of adults having made no financial arrangements (24%), and another 15% having saved less than $5,000. Only a sliver, 2%, report having saved over a million dollars.”
U.S. Auto Sales Bounced Back in 2023
U.S. auto sales rebounded in 2023, boosted by pent-up demand and better availability on dealership lots. But this year could prove more challenging for automakers as stock levels continue to rise and higher interest rates stretch more U.S. car buyers financially. Major automakers are expected to report their year-end sales tallies throughout the day Wednesday. Analysts project industrywide sales of new cars for the U.S. could reach nearly 15.5 million in 2023, about a 13% increase from the prior year, once all car companies have released their figures.
Supply-chain snags, manufacturing disruptions and poorly stocked dealerships have weighed on new-vehicle sales since the start of the pandemic, leading the U.S. auto industry to report its worst sales year in more than a decade in 2022. Through the first nine months of 2023, sales rose by a double-digit percentage. Now, consumers are finding more options at dealerships as some of the snarls that impeded factory production in recent years have eased. Increasing inventory levels have led to moderating new-vehicle prices, discounts and sales promotions, providing a welcome relief for car shoppers who have dealt with sharply increasing price tags.
GM Retains Crown as Top-Selling US Automaker in 2023, Hyundai and Kia Sales Fall Short
General Motors retained its crown as the top-selling automaker in the U.S. in 2023, edging past rival Toyota Motor, as easing supply snags and sustained demand drive the industry to its best year since the pandemic. The Detroit automaker shrugged off a hit from a costly auto strike to report 2023 U.S. new vehicle sales of 2,594,698 units, up 14.1% from last year, while Toyota's annual sales rose 6.6% to 2,248,477 vehicles.
South Korea's Hyundai Motor Co and affiliate Kia Corp forecast on Wednesday that their combined global sales will rise about 2% in 2024, even as last year's sales fell short of target. The duo sold 7.3 million vehicles in 2023, about 3% less than their combined target of 7.52 million, largely due to a difficult economic environment, including rising interest rates and inflation that pushed vehicles out of the reach of some buyers. Ford is expected to announce its 2023 sales numbers Thursday.
Xerox Is Cutting 15% of Workforce
Xerox Holdings said it is looking to turn around the company and is cutting its workforce by 15%. The workplace and digital printing solutions company on Wednesday said its transformation strategy, to be led by a new leadership team, aims to improve and stabilize its core print business.
John Bruno will lead the enterprise alignment of print, digital services, and IT services businesses as president and chief operating officer, and Louie Pastor will return to the company as its chief transformation and administrative officer. The company has also appointed Flor Colon as its chief legal officer.
Surpassing Tesla, China’s BYD Will Take On the World in 2024
China’s electric-vehicle maker BYD will be on top of the world this year, with overseas markets its main battleground. In the fourth quarter of 2023, it surpassed Tesla T to become the bestselling pure EV maker in the world, having already overtaken Volkswagen last year as the most popular brand of any kind of car in China. Mostly that is because China’s EV market has been speeding ahead at full throttle. Sales of new-energy vehicles, which include plug-in hybrids, grew 37% year-over-year in the first 11 months of 2023. More than one in three cars sold in China were EVs.
BYD, The Warren Buffett-backed carmaker, sold more than 3 million new-energy vehicles in 2023, an increase of 62% from a year earlier. Around half of that were plug-in hybrids, but its sales of pure EVs grew even faster at 73%. BYD data indicate it sold 526,409 pure EVs in the fourth quarter of 2023, compared with 484,507 vehicles that Tesla said Tuesday it delivered in the same period. Though nearly 90% of BYD’s sales still came from China in December, its exports have been growing fast. BYD’s overseas sales in the second half of 2023 more than tripled from a year earlier.
US Was Top LNG Exporter in 2023, Hit Record Levels
U.S. liquefied natural gas exports hit monthly and annual record highs in December, tanker tracking data showed, with analysts saying it positioned the United States to leapfrog Qatar and Australia to become the largest exporter of LNG in 2023. The U.S. was the stand out in global LNG supply growth in 2023, said Alex Munton, director of global gas and LNG research at consulting firm Rapidan Energy Group of the rise to 8.6 million metric tons leaving U.S. terminals in December. Qatar was the largest LNG exporter in 2022 and Australia the second-largest that year, U.S. government data showed.
Full year exports from the U.S. rose 14.7% to 88.9 million metric tons (MT) driven largely by the return to full production of the Freeport LNG plant that had suffered a fire in 2022, and as others increased processing efficiency, LSEG data showed. Europe remained the main destination for U.S. LNG exports in December, with 5.43 MT, or just over 61%. In November, 68% of U.S. LNG exports were to Europe, LSEG data showed.
How Rolls-Royce’s New CEO Took the UK’s Biggest Manufacturer From a ‘Burning Platform’ to a 30-Year-Best Stock Return in Just 12 Months
In the space of a year, Rolls-Royce Holdings Plc has gone from being derided as a “burning platform” by its own chief executive officer to achieving by far the best annual return of any company across Europe. But Tufan Erginbilgic, who took over as CEO in January, says he’s not guided by quick wins, focusing his sights instead into the latter part of the decade and beyond. That’s when the former BP Plc executive says Rolls-Royce’s overhaul will really bear fruit, making the company nimbler and vastly more profitable as a result.
Along the way, Erginbilgic is breaking with old habits. Gone are the days when the jet-engine maker would agree to loss-making contracts, hoping to recoup the money through maintenance work later. Going, too, is a complicated structure as Rolls-Royce combines business functions, cuts jobs and sells assets. Instead, the biggest UK manufacturer is charting a path with bold bets like its UltraFan propulsion system, a cutting-edge technology that aims to give the company a seat again at the table for single-aisle engines, a market Rolls left more than decade ago.