Member Briefing January 8, 2024
Top Story
December Hiring: Still Chugging, but Losing Some Steam
U.S. job growth surged unexpectedly in December, government data showed Friday, wrapping up a solid year for the labor market. The world's biggest economy added 216,000 jobs in the final month of 2023 despite expectations of a slowdown from the prior month, according to Department of Labor data. The unemployment rate was unchanged at 3.7%, holding at a historically low level and defying forecasts of a small uptick.
Wage growth was steady in December, rising 0.4% from November 2023, said the Labor Department. Compared with the same period a year before, average hourly earnings rose by 4.1%, slightly above November's reading. Among sectors where employment continued to trend up were government, health care, social assistance and construction. But transportation and warehousing lost jobs. Beyond hiring numbers, EY Chief Economist Gregory Daco said policymakers are seeking a "balanced labor market." This means the demand and supply of labor are well-matched and pressures from wage growth are not excessive. He noted that indicators like hours worked have shown a return towards pre-pandemic levels, while both the rates of hiring and quits are "the lowest since 2014 and 2018 if you exclude the pandemic."
NFIB: Labor Quality Remains Top Concern for Small Business Owners
The percent of small business owners reporting labor quality as their top small business operating problem remains elevated at 20%, according to NFIB’s monthly jobs report. Labor costs reported as the single most important problem for business owners increased one point to 9%, four points below the highest reading of 13% reached in December 2021. Forty percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, unchanged from November.
Overall, 55% of owners reported hiring or trying to hire in December, up one point from November. Of those hiring or trying to hire, 89% of owners reported few or no qualified applicants for the positions they were trying to fill. Seasonally adjusted, a net 36% of owners reported raising compensation, unchanged for the fifth consecutive month. Thirty-three percent of owners have job openings for skilled workers and 14% have openings for unskilled labor. The manufacturing and construction sector growth is held back by a lack of skilled labor.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Israel Signals it Has Wrapped Up Major Combat in Northern Gaza - Politico
- EU, US Warn Against Israel-Hamas War Expanding Into Regional Conflict - Politico
- Israeli Defence Minister Outlines New Phase in Gaza War - Reuters
- The ‘CEO’ of Hamas Who Found the Money to Attack Israel - WSJ
- Israel Cabinet Slated to Vote on 2024 War Budget This Week - Reuters
- UN Human Rights Chief Urges De-Escalation Of Fighting Between Russia, Ukraine – Radio Free Europe
- Israel Presses Egypt to Better Secure Borderland Against Hamas Smugglers - WSJ
- 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
- Russia Moves Forward With Plans to Buy Iranian Ballistic Missiles - WSJ
- Ukraine Racks up Wins Against Russia in the Black Sea – The Hill
- Russia Launches 28 Drones, Three Missiles at Ukraine, Ukraine's Air Force Says – Reuters
- Von der Leyen Presses Ahead for Quick Solution on EU Aid to Ukraine - Politico
- The War in Ukraine Is Not a Stalemate – Foreign Affairs
- A Ukrainian Saboteur Traveled 900 Miles to Russian Airfield and Lit a Sukhoi Fighter-Bomber On Fire - Forbes
- 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
- Eurozone Inflation Rose 2.9%, Less Than Expected, Keeping Rate-Cut Talk on Track -- Update
- Islamic State Claims Responsibility for Deadly Iran Attack, Tehran Vows Revenge - Reuters
- India Wanted a Manufacturing Boom. Its Workers Are Back on the Farm Instead. - WSJ
- Libya's NOC Declares Force Majeure at Sharara Oilfield – Reuters
- Red Sea Attacks Leave Shipping Companies With Difficult Choices - NYT
- USS Dwight D. Eisenhower Nuclear Aircraft Carrier Enters Red Sea - Report - I24NEWS
- Poland Reaches Deal with Farmers to Call off Blockade of Ukraine Border Crossing - Politico
- Iran Moves To Seal Borders With Afghanistan And Pakistan After Deadly Blasts – Radio Free Europe
- North Korea Fires Artillery Shells Towards South Korean Border Islands - Forbes
- U.S. Seeks Drone Bases in Coastal West Africa to Stem Islamist Advance - WSJ
Policy and Politics
Battered Congress Has Two Weeks to Fix Three Big Problems
Democratic and Republican lawmakers have just two weeks to craft a new spending deal to avoid a partial government shutdown while also trying to fix the border and approve more funds to rearm Ukrainian soldiers, setting up a frantic and unpredictable January that also features the nation’s first presidential contests. That to-do list would be a tall order for any Congress returning to work after a holiday break, but this divided group of lawmakers has a particularly poor record of passing legislation. A fresh failure could reverberate beyond America’s borders, leaving allies concerned that U.S. politicians who have so often led the way in addressing the world’s problems are deepening them with their dysfunction.
Now, all the deferred work on the border, foreign aid and the federal budget is threatening to converge, just as the government is facing a partial shutdown on Jan. 19, when appropriations for some federal agencies expire, followed by a total lapse on Feb. 2. A shutdown would stop paychecks for federal workers and the military, and bring nonessential functions to a halt.
NAM Redoubles Tax-Priority Push – You Can Help
The NAM continues to push for manufacturers’ top three tax priorities: immediate R&D expensing, a pro-growth interest deductibility standard and full expensing for capital investments. Congress has just a few weeks to reach a government funding deal before a Jan. 19 deadline, “when funding for a range of government agencies is scheduled to lapse,” according to POLITICO. There is a second funding deadline on Feb. 2. If these fixes aren’t made, manufacturing R&D, jobs and competitiveness could all suffer.
The NAM has been calling on Congress to prioritize inclusion of the three tax provisions in any measure it passes. The NAM recently led a coalition of more than 1,300 businesses and associations in highlighting the urgent need for congressional action. Some 78% of manufacturers say the higher tax burden has decreased the funds available to expand their manufacturing activities within the U.S., according to the Q2 2023 NAM Manufacturers’ Outlook Survey. “These tax provisions are some of the most critical issues facing manufacturers today,” said NAM Vice President of Domestic Policy Charles Crain. “Congress must act immediately to protect manufacturing jobs and maintain America’s competitiveness on the world stage.”
Learn more and Add your Voice at The NAM
Pentagon Waited Three Days to inform White House That the Defense Secretary Was Hospitalized in ICU
Amid tensions in the Middle East, Secretary of Defense Lloyd Austin was hospitalized, including spending four days in the intensive care unit, according to two senior administration officials. The Pentagon did not inform senior officials in the White House’s National Security Council of Austin’s hospitalization until Thursday — three days after he arrived at Walter Reed Medical Center, a U.S. official confirms. Austin was admitted to the hospital Monday night for “complications following a recent elective medical procedure,” Pentagon press secretary Maj. Gen. Pat Ryder said in a statement Friday evening.
"I am very glad to be on the mend and look forward to returning to the Pentagon soon. I also understand the media concerns about transparency and I recognize I could have done a better job ensuring the public was appropriately informed. I commit to doing better," Austin said. He was not able to perform his duties since New Year’s Day, a senior defense official said Friday. It was unclear when he would be released, the source said. Austin “resumed his full duties” on Friday evening. He remained hospitalized Saturday.
Health and Wellness
The Ozempic "Ripple Effect" and Other Wellness Trends for 2024
The new year means new opportunities for wellness trends. After a year dominated by mental health discussions, COVID variants and weight-loss drugs hitting the market, we're looking toward 2024 and what health topics will capture consumers most. To get an idea of what we might see, we asked experts in different corners of the health and wellness space what they expect to make waves in the year ahead.
Experts expect to see a resurgence in weight loss-focused trends in 2024 prompted by drugs like Ozempic becoming more mainstream. Wearable devices and smartwatches will continue to move beyond monitoring and add more screening features to warn us of health issues before they become bigger problems. Consumers will look more consciously toward wellness strategies backed by clinical studies and research. Health trends with staying power — like a focus on plant-based eating, sleep health and gut health will remain a priority in 2024.
NYS COVID Update
The Governor updated COVID data for the week ending January 5th.
Deaths:
- Weekly: No data
- Total Reported to CDC: No data
Hospitalizations:
- Average Daily Patients in Hospital statewide: 3,320
- Percent Available ICU Beds: 19%
7 Day Average Cases per 100K population
- 28.3 positive cases per 100,00 population, Statewide
- 32.3 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
2024 Iowa Caucus FAQ: What it is and Why it's First – Yahoo
NY Independent Redistricting Commission Shares Update on Process – News 10
Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
Real Clear Politics Latest General Election Polls – Real Clear Politics
Latest Polls - FiveThirtyEight
Industry News
U.S. Factory Orders Rebound More Than Expected In November
New orders for U.S.-made goods increased more than expected in November amid a surge in demand for civilian aircraft, government data showed on Friday Factory orders rose 2.6% after declining by 3.4% in October, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast orders would rebound by 2.1%. Orders climbed 0.7% on a year-on-year basis in November. Manufacturing, which accounts for 10.3% of the economy, is being constrained by high interest rates.
Civilian aircraft orders soared 80.1% after declining by 43.9% in October, while orders for motor vehicles, parts and trailers were unchanged. There were also increases in orders for primary metals, machinery, computers and electronic products as well as electrical equipment, appliances and components. Shipments of manufactured goods rose 0.5%. Manufactured goods inventories edged up 0.1%, while unfilled orders jumped 1.3%, reflecting the surge in aircraft orders.
As Uncertainty Fades, Leaders Grow More Confident—And Prepared to Invest
A handful of recently published surveys, reports and forecasts have shown that leaders in manufacturing and beyond are pretty upbeat about what lies ahead in 2024. The "vibecession" that writer and financial educator Kyla Scanlon coined to sum up persistent negativity in the face of improving economic data looks to be leaving C-suites. Here’s a rundown:
- Nearly 60% of respondents to the Institute for Supply Management’s semiannual economic forecast survey—which was conducted in November—expect to grow revenues this year. Leaders in 15 of the 18 industries the ISM tracks expect revenue growth and the average increase is forecast to be 5.6%—a big bump from the 0.9% booked in 2023.
- The purchasing and supply executives responding to the ISM are putting money behind those growth expectations: They predict that their capital expenditures will grow an average of 11.9% this year.
- The CFO Survey conducted by Duke University and the Federal Reserve Banks of Richmond and Atlanta in the second half of November found that executives’ confidence in a solid economy ahead has risen. The more than 400 leaders who took part in the study also are, as they have been consistently since mid-2022, far more upbeat about the prospects for their own companies than about the economy as a whole.
- A wide-ranging survey of perceived business risks by consulting firm Protiviti and the Poole College of Management at North Carolina State University found that North American leaders’ assessment of the overall “magnitude and severity of risks” to their plans has nearly returned to its level of two years ago.
- Of the top 10 risks identified by the more than 1,100 executives Protiviti and NCSU polled globally, seven are today seen as lessening in severity versus late 2022. On top of that, it’s worth noting that the three risks seen as more acute now—cybersecurity, third-party risks and regulatory changes/scrutiny—aren’t directly related to macroeconomic factors such as demand or inflation.
Certain Boeing Max Jets Grounded After Alaska Airlines Emergency Landing
Following the serious incident Friday when a part of a Boeing 737 MAX 9 fuselage blew out at 16,000 feet on an Alaska Airlines flight out of Portland, the authorities on Saturday ordered the grounding of all similar aircraft operated by U.S. airlines. Depressurization followed after a section of fuselage meant to plug a gap where an emergency exit could be installed fell away from the aircraft in the air, leaving a gaping hole in the plane’s main cabin.
Images taken by passengers show no damage to the frame around the neat rectangular hole. It appears that the plug, which is fastened to the airframe with just four bolts, came loose and fell away. But after Friday’s incident, FAA’s Emergency Airworthiness Directive, or AD, states that for all MAX 9s “further flight is prohibited until the airplane is inspected and all applicable corrective actions have been performed.” Aviation authorities around the globe are likely to follow the FAA lead.
Read more at the Seattle Times
Maersk to Divert Vessels Away from the Red Sea ‘for the Foreseeable Future’
Danish shipping giant Maersk said Friday it would extend its diversion of vessels from the Red Sea for the “foreseeable future” due to safety concerns amid a spate of attacks by Houthi militants. It added that it hoped to now bring customers “more consistency and predictability,” despite delays to deliveries. The diversion means avoiding the quickest path between Europe and Asia through Egypt’s Suez Canal, and taking the longer Cape of Good Hope route around southern Africa. Uncertainty for firms has not eased despite a U.S.-led multilateral military operation in the region.
Several European firms, including Sweden’s Ikea, British retailer Next and appliance firm Electrolux, have warned of delays on some products due to supply chain disruption. Traveling around Africa can add between two and four weeks to a ship’s transit time between Asia and Europe depending on the speed traveled, Maersk CEO Vincent Clerc told CNBC in a December interview. Nearly 15% of global seaborne trade transits the Red Sea, according to the U.S. Analysts broadly do not see the current disruption as causing as much upheaval to supply chains as was seen during the coronavirus pandemic due to a sharp increase in supply capacity since 2021.
U.S. Factory Orders Rebound More Than Expected In November
New orders for U.S.-made goods increased more than expected in November amid a surge in demand for civilian aircraft, government data showed on Friday Factory orders rose 2.6% after declining by 3.4% in October, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast orders would rebound by 2.1%. Orders climbed 0.7% on a year-on-year basis in November. Manufacturing, which accounts for 10.3% of the economy, is being constrained by high interest rates.
Civilian aircraft orders soared 80.1% after declining by 43.9% in October, while orders for motor vehicles, parts and trailers were unchanged. There were also increases in orders for primary metals, machinery, computers and electronic products as well as electrical equipment, appliances and components. Shipments of manufactured goods rose 0.5%. Manufactured goods inventories edged up 0.1%, while unfilled orders jumped 1.3%, reflecting the surge in aircraft orders.
ISM: Services Activity Drops Sharply in December
The US services sector slowed considerably in December, with a measure of employment dropping to the lowest level in nearly 3-1/2 years, a survey showed on Friday. The Institute for Supply Management (ISM) said that its non-manufacturing PMI fell to 50.6 last month, the lowest reading since May, from 52.7 in November. Demand for services initially surged as Americans resumed normal lives after COVID-19 lockdowns. But momentum has ebbed, with spending swinging back to goods. Spending on goods far outpaced outlays on services in the third quarter.
A measure of new orders received by services businesses dropped to 52.8 last month from 55.5 in November. Export order growth also slowed considerably. Services inflation remained elevated, with a measure of prices paid for inputs by businesses slipping to 57.4 from 58.3 in the prior month. The ISM survey's measure of services sector employment plunged to 43.3 last month, the lowest level since July 2020 when the economy was reeling from the first wave of the pandemic. The index was at 50.7 in November.
The West Badly Needs More Missiles—But the Wait to Buy Them Is Years Long
The Ukraine war has highlighted the West’s deficiencies in quickly producing more weapons at a time of need. The Gaza conflict may tighten supplies for certain armaments. The constraint is particularly acute for missiles and the systems that defend against them, and also guard against the swarms of drones that have become a central element of modern warfare. On Wednesday, NATO said a coalition of members, including Germany and the Netherlands, is buying up to 1,000 Patriot missiles, or $5.5 billion worth, to strengthen their air defenses amid Russia’s war against Ukraine.
The problem is that modern weapons are hugely complex, often requiring thousands of parts. Kongsberg, like most Western defense firms, designs and assembles its weapons systems but doesn’t manufacture most of the components. Over 1,500 suppliers contribute to the products at this factory. For example the Nasams supply chain alone consists of over a thousand companies and is built across two continents, with the U.S. defense contractor RTX, formerly known as Raytheon Technologies, supplying the radar and the actual missiles.
U.S. Awards $162 Million in CHIPS Act Funds to Microchip Technology to Bolster Critical Industries
The U.S. Commerce Department said on Thursday it plans to award Microchip Technology $162 million in government grants to step up U.S. production of semiconductors and microcontroller units (MCUs) key to the consumer and defense industries. The funds will allow Microchip to triple production of mature-node semiconductor chips and microcontroller units at two U.S. factories, officials said. The components are crucial for cars, washing machines, cell phones, internet routers, airplanes, and the defense-industrial base.
The award, not yet finalized, is the second in a $52.7 billion program, "Chips for America", that Congress approved in August 2022 to subsidize semiconductor manufacturing and research. The first award of $35 million to a BAE Systems (BAES.L) facility to produce chips for fighter planes, was announced in December. The planned award to Microchip, which consists of $90 million to expand a fabrication facility in Colorado and $72 million for expansion of a similar facility in Oregon, will help cut reliance on foreign production, officials said.
Tech Startup in $100 Million DeWitt Factory Built by New York Taxpayers Closes
A startup technology company that moved into a $100 million factory built by New York taxpayers in DeWitt five years ago and received more than $13 million in state grants has gone out of business. NexGen Power Systems closed down and laid off its workers shortly before Christmas. Company officials did not respond to phone calls and emails from syracuse.com | The Post-Standard seeking comment. Empire State Development, the state’s development arm, said NexGen notified it that it was ending operations at the facility because it had been unable to secure new venture financing.
The facility was built at a cost of $90 million by SUNY Polytechnic Institute’s Fort Schuyler Management Corp. Empire State Development took over the property in the wake of the SUNY Poly corruption scandal, then reached an agreement to lease the building to NexGen, a startup company then based in Santa Clara, California. ESD said it will seek to recapture as much of the grants as is legally permissible for NexGen’s failure to meet its employment commitments.
Natural Gas Futures Soar on Cold Weather, EIA Supply Drop
U.S. natural gas futures are witnessing a significant rise, reaching a one-month high, driven by a drop in daily production and forecasts for colder weather. These conditions are expected to increase heating demand over the next two weeks, pushing futures up by about 4%.
NatGasWeather forecasts diverse weather conditions across the U.S., indicating moderate demand in the coming days. In tandem, the market is eyeing the Energy Information Administration (EIA) weekly storage report. Analysts predict a smaller-than-usual withdrawal from storage for the week ended Dec. 29, estimating a decrease of around 40 billion cubic feet (bcf), notably lower than the five-year average. Internationally, Germany’s significant reduction in gas imports, a response to Russia’s export stoppage, is reshaping the global energy market. The nation’s turn to LNG imports from various global sources, including the U.S., reflects adaptive strategies in response to changing energy supply dynamics.
SpaceX Sues NLRB After It Accused it of Firing Workers Critical of Elon Musk
SpaceX on Thursday sued a U.S. labor board that had accused the rocket and satellite maker of illegally firing employees who sent a letter to company executives calling CEO Elon Musk "a distraction and embarrassment." SpaceX in the lawsuit filed in Brownsville, Texas federal court claims the structure of the National Labor Relations Board (NLRB), which issued a complaint against the company on Wednesday, violates the U.S. Constitution.
SpaceX on Thursday sued a U.S. labor board that had accused the rocket and satellite maker of illegally firing employees who sent a letter to company executives calling CEO Elon Musk "a distraction and embarrassment." SpaceX in the lawsuit filed in Brownsville, Texas federal court claims the structure of the National Labor Relations Board (NLRB), which issued a complaint against the company on Wednesday, violates the U.S. Constitution. SpaceX recently utilized a similar tactic to block an administrative case by the U.S. Department of Justice claiming the company illegally refused to hire refugees and asylum recipients.
Carrefour Drops PepsiCo Products in France Over High Prices
French grocery giant Carrefour has halted the sale of Pepsi products due to unacceptable price increases. The move is in addition to their late 2023 decision to physically highlight the sneaky tactic of “shrinkflation” in their grocery stores. The decision to stop selling Pepsi products comes amid rising food prices that have hit consumers hard. PepsiCo’s price hikes, which the company attributes to increasing costs, have led Carrefour to draw a line in the grocery aisle, prioritizing consumer interests over supplier relationships. In a statement, PepsiCo retaliated: “We've been in discussion with Carrefour for many months and we will continue to engage in good faith in order to try to ensure that our products are available.”
Carrefour’s move is significant, signaling a refusal to pass on undue cost burdens to customers. It’s a stance that echoes a broader and global societal concern about the rising cost of living, and Carrefour is effectively using its market influence to advocate for more reasonable pricing practices. Of note, in Canada, a parliamentary committee has been working on a “grocery code of conduct” to avoid such situations, with various grocery CEOs being called to parliamentarian committees to explain their pricing practices. (It’s not going all that well for the CEOs.)