Member Briefing January 5, 2023
U.S. Factory Activity Weakened Further at Year-End – ISM
U.S. manufacturing contracted further in December but weakening demand amid higher borrowing costs pushed a measure of prices paid by factories for inputs to the lowest level in more than 2-1/2 years, signaling that goods disinflation was underway. The Institute for Supply Management (ISM) said on Wednesday that its manufacturing PMI dropped to 48.4 last month from 49.0 in November, contracting for a second straight month. Some additional data from the survey includes
- The ISM survey's forward-looking new orders sub-index tumbled to 45.2, the lowest reading since May 2020, from 47.2 in November.
- The survey's measure of supplier deliveries fell to 45.1 from 47.2 in November. A reading below 50 indicates faster deliveries to factories.
- The measure of prices paid by manufacturers dropped to 39.4 from 43.0 in November. Outside the plunge in April 2020, this was the lowest reading since February 2016.
- The ISM survey's measure of factory employment rebounded to 51.4 from 48.4 in November. This gauge, which has swung up and down, has not been a good predictor of manufacturing payrolls in the government's closely watched employment report.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russia Blames Troops’ Cellphone Use for Deadly Ukrainian Strike - WSJ
- Ukrainian Military Says it Intercepted Dozens of Drones – USA Today
- Top Geopolitical Risks for 2023 Include Russia, "Weapons of Mass Disruption," Report Says - CBS
- Ukraine Says Russia Plans New Mobilisation to 'Turn Tide of War' - Reuters
- Russia Points Fingers After Deadliest Ukraine Attack - BBC
- Putin Deploys New Zircon Hypersonic Cruise Missiles to Atlantic – Reuters
- Russia’s Depraved Decadence – The Atlantic
- Why U.S. HIMARS Rockets Are Key to Ukraine's War Success - Time
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
JOLTS: Job Openings Hold Strong Despite Rate Hikes
The Job Openings and Labor Turnover Survey for the month showed available positions at 10.46 million, down just fractionally from October’s total and above the 10 million forecast by FactSet. The JOLTS survey is closely watched by Federal Reserve officials for signs of labor market slack. As a share of the labor force, job openings remained at 6.4%, indicating demand for workers is still high despite the Fed’s efforts to cool the economy and bring down inflation, which has been driven partially by rising wages.
The report showed a slight decrease in hiring and a bit of an increase in layoffs. However, the report had little indication of substantial labor market softening. The quits level increased by 126,000, which took the rate up one-tenth of a percentage point to 2.7%, for a reading that is indicative of worker confidence that they can leave their jobs and find other employment. Open positions outnumbered available workers by about 1.7 to 1.
Manufacturing Job Openings, Quits Up in November - Hiring Down
The Job Openings and Labor Turnover Survey for the month showed 779,000 job opening in manufacturing, up from 722,000 in October, but lower than the 806,000 from a year earlier. The sector hired 402,000 people in November. 22,000 fewer than in October and 63,000 fewer than in November of 2021. Also, in the Manufacturing Sector the quits level increased to 393,000 last month, 5,000 more than in October but 9,000 fewer than one year ago.
A separate report from the ISM also showed that the labor market for the manufacturing sector is solid. The jobs index component of the reading rose 3 points to 51.4. At the same time, the prices index, a gauge of inflation, declined to 39.4, a drop of 3.6 points.
U.S. COVID - XBB.1.5 Appears to be More Contagious, Not More Dangerous
The latest COVID-19 variant to sweep across the country, XBB.1.5, doesn't appear to cause more serious disease than its predecessors, experts say. But it appears to be about five times more contagious than an earlier omicron variant, which was five times more contagious than the original virus, said Mehul Suthar, who studies emerging viral infections at the Emory University School of Medicine in Atlanta. "The numbers start adding up."
As of Dec. 31, XBB.1.5 accounted for more than 40% of cases in the United States, up from about 1% less than a month earlier, according to the Centers for Disease Control and Prevention. Still, vaccines remain effective at preventing severe disease and death and the antiviral Paxlovid, given in the first few days after infection, "dramatically reduces progression to hospitalization," said Dr. Daniel Griffin, an infectious disease specialist at Northwell Health in New York.
NYS COVID Update
The Governor updated COVID data through December 23
- Daily: 33
- Total Reported to CDC: 76,728
- Patients Currently in Hospital statewide: 3,908
- Patients Currently in ICU Statewide: 419
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 8.29% - 23.22 positive cases per 100,00 population
- Mid-Hudson: 8.50% - 26.65 positive cases per 100,00 population
COVID Vaccines and New Variant XB.1.5: What to Know
The primary concern with any new variant is whether vaccines and treatments will remain effective. "The vaccines are holding. That's good," said Dr. Jeremy Luban, an expert on viruses at the University of Massachusetts Chan Medical School. Luban led a study, published in December, showing that COVID-19 booster shots, designed to target two different variants, still provide protection against this new one – and better protection than a vaccine directed at just the original virus. "I think we're heading in the right direction," he said.
Unfortunately, as has been true for at least the last year with omicron and its subvariants – including this one – the vaccines aren't as good at preventing infection and mild disease. And the medical definition of "mild" may not match the average person's, Dr. Daniel Griffin, an infectious disease specialist at Northwell Health in New York said. "People are still pretty miserable."
China Media Plays Down COVID Severity as WHO Seeks Detail on Variants
State media in China played down the severity of a surge of COVID-19 infections on Tuesday, while its scientists briefed the World Health Organization, which has been seeking detailed information about the evolution of the virus. The global body had invited the scientists to present detailed data on viral sequencing at a technical advisory group meeting on Tuesday, and has asked China to share data on hospitalizations, deaths and vaccinations.
China's abrupt U-turn on COVID controls on Dec. 7, as well as the accuracy of its case and mortality data, have come under increasing scrutiny at home and abroad. The WHO has urged Chinese health officials to regularly share specific and real-time information on the outbreak.
Manufacturing Alliance 2023 Legislative Session Survey
To best guide our advocacy efforts toward some of the state legislative and policy issues that are most important to you, The Council of Industry and The Manufacturing Alliance of New York ask that you please take a few minutes to complete this brief survey--it should take about 3 minutes to complete.
Your responses will remain confidential, and we will inform you of the survey’s results within the next few weeks. Please complete the survey by January 6, 2023.
McCarthy Falls Short Again - These 21 House Members Didn't Vote for Kevin McCarthy. Here's What they Want
To be elected speaker in this new Congress with just Republican votes, any Republican can only lose four votes. Because of how narrow Republicans' majority is after the midterm election results, a small cadre of intransigent members on the party's far right have a lot of leverage — and they're showing they're willing to use it.
It's not clear, though, if there's anything McCarthy can do to persuade them. Some have made clear they want further concessions from him. McCarthy backed the hard-right faction's proposal for a five-vote threshold to remove the speaker, but he wouldn't accept other demands, like putting more restrictions in place from members earmarking spending on unrelated bills for their own projects, or committing to bringing a bill to the floor to impose term limits. So who are they and what, if anything, do they want?
Hearing Planned for Hochul's Chief Judge Pick Despite Growing Opposition
Supporters of Hector LaSalle's nomination are pushing for a confirmation hearing amid opposition to his elevation to chief judge in New York. Democrats say they'll hold one, but doubt it could make much difference. But as Democrat after Democrat in the state Senate says they can't support him, supporters of LaSalle's like Carol Robles Roman say critics are cherry picking reasons to vote no.
But LaSalle's opponents are varied, from progressive advocates skeptical of his background as an assistant district attorneys, to labor leaders like Kevin Elkins, the political director of the New York City District Council of Carpenters, who point to a ruling of LaSalle's they consider anti-union. "To us this is an extensional moment for the labor movement to stand up and say we need to make sure we're not giving the Supreme Court an assist in dismantling worker protections," Elkins said. "Right now, the Supreme Court is doing just fine by themselves."
Auto Industry Posts Worst U.S. Sales Year in More Than Decade
On Wednesday, General Motors Co., Toyota Motor Corp. and other auto makers are released their year-end sales results, in the midst of growing concern over an economic slowdown that could further damp demand for cars and trucks and put pressure on profits this year. Ford Motor Co. plans to report its 2022 sales on Thursday.
Industrywide, U.S. auto sales are projected to total 13.7 million vehicles in 2022, the lowest figure in more than a decade and an 8% decrease from the prior year, according to a joint forecast by J.D. Power and LMC Automotive. Sales are expected to remain well below prepandemic levels of roughly 17 million.
Automakers Are Catching Up With Supply Right as Demand is Falling.
The auto industry is coming off a difficult year. In 2022, the semiconductor chip shortage squeezed the supply of new cars and drove up prices, shrinking the pool of potential buyers. Last year’s new vehicle sales in the U.S. are expected to fall 8% below 2021 numbers, according to Cox Automotive — hitting the lowest levels in about a decade.
Now, those supply chain issues are smoothing out and the industry is starting 2023 with healthier inventories. But automakers are swapping the supply problem for new troubles on the demand side. Inventories are catching up just as would-be buyers of those new vehicles are getting cold feet.
Lagging Arms Production Makes Pentagon Wary of Further Industry Consolidation
U.S. defense companies are finding it tough to quickly replenish weaponry such as missiles and artillery shells for Ukraine, leading Pentagon officials to revisit whether industry consolidation has gone too far. Two decades of mergers and acquisitions have left the top six contractors to share the majority of Pentagon spending on military equipment. In the 1990s, some 50 firms vied for big contracts.
The largest defense companies, like auto makers, manufacture fewer things themselves than they used to and rely more on subcontracting. The broader defense industrial base shrank to 55,000 vendors in 2021 from 69,000 in 2016, and those smaller companies have become a choke point as shortages of labor, chips, rocket motors and other components are hobbling efforts to boost arms production.
What’s Keeping HR Up at Night?
After a year that saw ongoing turnover, a complex economic situation including record inflation and startlingly high levels of employee burnout and stress, it’s no wonder that HR leaders are concerned. Exactly what is mostly capturing their attention? That’s what HRE sought to find out in their annual What’s Keeping HR Up at Night? survey.
Nearly 500 HR and technology professionals responded to the survey this fall, sharing the issues challenging their organizations’ people functions and what they’re doing to address them. Among the issues are: hiring and retention, culture, HR tech, and learning and development.
Falling French Inflation Sparks Hope of End to Europe’s Price Surge
French inflation fell to 6.7 per cent in the year to December, against economists’ expectations of a slight rise following the 7.1 per cent figure recorded for November. European stocks built on their early 2023 rally after the inflation report came out. The region-wide Stoxx 600 rose 0.9 per cent, leaving it up almost 3 per cent this week. Shares in the region are on track to post one of their top five performances for the first five trading days of any year since 1987, according to Financial Times calculations based on Refinitiv data.
The measure of harmonised prices — produced by Insee, France’s statistics agency — follows similar slides in Spain and Germany and boosted expectations that headline inflation in the eurozone will fall sharply following last year’s surge to double-digit levels.
New Paltz Attains University Status
SUNY New Paltz has officially attained University status in the State of New York, effective January 1, after receiving approval from SUNY Interim Chancellor Deborah Stanley and the SUNY Board of Trustees at their December 2022 meeting.
“Designation as a university comes as well-deserved recognition of the more than 100 high-quality undergraduate and more than 50 high-quality graduate programs offered in the liberal arts, sciences, business, education, engineering and fine and performing arts and the great work that has been done and is being done every day across campus to advance our mission,” said President Darrell Wheeler. “It sends a strong message to future generations of New Paltz students, including graduate and international students, that this institution is providing high-value academic experiences and actively helping address the challenges we face at a local, state, national and global level.”
Natural Gas Prices Plunge to Lowest Level Since 2021 as Natural Gas Supply Outlook Strengthens, Weather Warms
European natural gas prices hit the lowest level since 2021 on Tuesday as warmer weather has eased concerns that the region won’t have enough of the fuel to make it through winter. The Dutch Title Transfer Facility (TTF) February contract fell to nearly $22/MMBtu on Tuesday. That’s a low not seen since November 2021 before Russia invaded Ukraine and sent natural gas prices soaring to record highs on supply fears.
Unseasonably warm weather has weighed down TTF in recent weeks, giving the market a reprieve and a chance to build storage inventories during the heating season. European storage inventories were at 83.5% on Tuesday, up slightly from 83.1% a week ago. LNG imports have also helped replace pipeline gas shipments that have been suspended by Russia.
Oil Prices Fall Further as Concerns Grow Over Global Economy
Oil fell sharply on Wednesday after slumping in the previous session, weighed down by demand concerns stemming from the state of the global economy and rising COVID cases in China. Brent futures fell $3.04 to $79.06 a barrel for a 3.7% loss by 1452 GMT. U.S. crude dropped $2.91, or 3.8%, to $74.02. Both benchmarks plunged more than 4% on Tuesday, with Brent suffering its biggest one-day decline in more than three months.
"Worries about the state of the global economy are front and centre of traders' minds and will remain so for the foreseeable future," said PVM Oil analyst Stephen Brennock. Lending oil some support, the dollar weakened on Wednesday after posting big gains in the previous session. A weaker dollar typically boosts demand for oil because dollar-denominated commodities become cheaper for buyers holding other currencies.
Trucking: Gap Between Contract, Spot Rates Narrowing
Contract rates have spent the second half of 2022 on a slide, following a downward trendline that spot rates have seen for almost the entire calendar year. Both spot and contract rates are likely to ring in the New Year on the same slope, with the spread between the two narrowing. Average spot and contract van rates were virtually equal in February, but the gap between spot and contract van rates reached an all-time high in November: 69 cents, according to DAT. It started to close in December.
“November contract replacement rates — the difference in the rate when one contract ends and another begins — were 12% and 16% lower for vans and reefers, respectively, compared to October,” said Ken Adamo, DAT Chief of Analytics. A year ago, contract replacement rates for van freight were 10%, 12%, and in some cases 20% higher than the rate they replaced. Today, the average replacement rate is closer to minus-15%, meaning the new rate is 15% lower.