Member Briefing July 11, 2022

July 11, 2022

Posted By: Harold King in Daily Briefing,

Manufacturing Achieves Pre-Pandemic Employment Levels After Months of Incremental Gains

Manufacturing companies in the U.S. added 29,000 jobs last month, slightly beating the sector’s last pre-pandemic employment numbers in February 2020. Nondurable goods manufacturing companies notably added more workers than the larger durable goods sector last month. Durable goods companies, which now employ about 7.9 million people, added 11,000 jobs in July; Nondurable goods industries added 18,000 more workers to its total pool of 4.8 million people.

U.S. manufacturing companies currently employ, according to the latest, preliminary numbers, about 12,797,000 people. That’s about 2,000 more people than the 12,795,000 who worked in manufacturing as of February 2020 before employment in the industry started its nosedive by losing 48,000 manufacturing workers in March.

War in Ukraine Headlines

Goods Exports Lead Way as US Trade Gap Narrows

The U.S. trade deficit narrowed in May as slowing domestic demand amid rising interest rates curbed imports, which could see trade contributing to economic growth in the second quarter after being a drag for nearly two years. The Commerce Department said on Thursday that the trade deficit declined 1.3% to $85.5 billion. Imports of goods and services rose 0.6%, which was offset by a 1.2% increase in exports to a record high.

Imports of goods rose 0.1%, while services scaled a record high. Goods exports shot up 1.7% to an all-time. Exports of services were also the highest on record. A record trade deficit weighed on the economy in the first quarter, resulting in gross domestic product declining at a 1.6% annualized rate. Trade has subtracted from GDP for seven straight quarters.

372,000: June Jobs Number Higher Than Expected – Points to Continued Inflation

Hiring in June was near monthly gains logged earlier in the year, the Labor Department on Friday said. Companies added an average of nearly 400,000 workers over the previous three months, keeping the job market on strong footing. The unemployment rate, at 3.6%, was near the half-century low reached before the pandemic hit in spring 2020. Employers hired across industries, with government the only major category to shed jobs.

Many economists expect job growth will slow but say it isn’t clear whether companies will broadly cut jobs as economic output weakens, which is the typical recessionary dynamic. With too few workers for all the available jobs, companies have been reluctant to let go of the workers they have. Jobless claims, a proxy for layoffs, have ticked up in recent months but remain historically low.

U.S. COVID – Americans Reflect on Nation’s COVID-19 Response

A Pew Research Center survey of 10,282 U.S. adults conducted from May 2 to 8, 2022, finds 62% of Americans say the country has given too little priority to meeting the educational needs of K-12 students during its response to the coronavirus outbreak; far fewer (31%) say this has received about the right amount of priority since the outbreak first began in February of 2020.

The overall findings reflect two competing critiques of the nation’s response. One, widely expressed among Republicans, is that the country has not focused enough on business concerns and respecting individual choices. The other, more widely held by Democrats, centers concern around efforts to protect public health and limit health risks for vulnerable populations.

NYS Vaccine and COVID Update –

Editor’s Note: Given the small changes in vaccinations we will no longer track this information in the briefing. Instead we will provide a link to the NYS Vaccination Tracker below)

The Governor updated COVID data through July 7. There were 15 COVID related deaths for a total reported of 72,218

Hospitalizations:

Patients Currently in Hospital statewide: 2,255
Patients Currently in ICU Statewide: 209

7 Day Average Positivity Rate – Cases per 100K population

Statewide 8.89% – 28.30 positive cases per 100,00 population
Mid-Hudson: 8.39% – 29.39 positive cases per 100,00 population

Useful Websites:

New COVID Vaccine Developed by University of Washington Scientists

A COVID-19 vaccine developed by UW Medicine researchers has been approved in Korea, becoming the first COVID therapeutic technology from the Seattle health care system to be greenlighted for patient use.

UW Medicine scientists who worked on the technology behind the vaccine say their version is a “second-generation” COVID immunization that’s protein-based — different from the mRNA vaccines developed by Pfizer and Moderna. As a result, the vaccine, trademarked as SKYCovione, is effective in low doses, simple to manufacture and stable without deep freezing, said Neil King and David Veesler, both UW Medicine biochemistry professors and vaccine co-developers. Several donors, including the Bill & Melinda Gates Foundation, National Institutes of Health and Pew Charitable Trust, among others, also helped fund the vaccine development.

Mastercard: U.S. Retail Sales in June Reflect Rising Prices for Essentials, Continued Leisure Spending

According to Mastercard SpendingPulseTM, which measures in-store and online retail sales across all forms of payment, U.S. consumer retail spending excluding automotive increased +9.5% year-over-year (YOY) in June, while retail sales excluding auto and gas rose +6.1% YOY. Rising prices—particularly for necessities such as food and fuel—were a contributing factor, as Mastercard SpendingPulse reflects nominal spending and is not adjusted for inflation.

As inflation persists, consumers are paying more for essentials. Two of the categories that have higher inflation have seen a lift in sales: June sales for Fuel & Convenience are up +42.1% YOY and Grocery +14% YOY. Meanwhile, discretionary spending continued to drive growth across the fashion-forward sectors in June, including Jewelry +16.2% YOY, Luxury +4% and Department Stores +8.6% YOY. And with summer in full swing, consumers continue to spend on travel experiences: Airline and Lodging are both up +18.2% YOY and +33.7% YOY, respectively.

Report: Cuomo Office ‘Overpowered’ Ethics Watchdogs in Book Approval

The report provides a window into the approval process by the commission’s staff for Cuomo’s memoir about the pandemic, which became the focus of several investigations that carried over after he left office, and the strong-armed tactics that were alleged to have been used. A spokesman for the former governor asserted in a statement once again no wrongdoing was committed.

The report found, however, the commission, known commonly as JCOPE, was pushed aggressively by Cuomo’s office in winning sign off for the lucrative deal. Ethics watchdogs, meanwhile, failed to recognize the potential “moral quandary” created by the approval and failed to serve as an effective watchdog, the report found. “Rather than JCOPE telling the Executive Chamber what information it needed to provide in order to obtain approval, the Executive Chamber told JCOPE what information the Governor would provide, which was not much.”

Recruiting, Overtime and Onboarding Costs are Also Affecting the Bottom Line

While 89% of U.S. manufacturers, surveyed by The Workforce Institute at UKG in their report “Is Stability in Sight?” reported year-over-year growth in April 2022 compared to 54% in 2021 and 65% in 2022, there are still factors affecting their bottom line.

And another statistic causing concern is that four out of five companies report having trouble hitting production goals. Not surprisingly, a major reason for this is the skilled labor gap, the impact of which is being felt “more than ever” by 87% of those surveyed for the study.

Unemployment Claims Rise to 235,000

Applications for jobless aid for the week ending July 2 rose to 235,000, up 4,000 from the previous week and the most since mid-January, the Labor Department reported Thursday. First-time applications generally track with the number of layoffs. Until early June, claims hadn’t eclipsed 220,000 since January and have often been below 200,000 this year.

The four-week average for claims, which evens out some of the week-to-week volatility, inched up by 750 from the previous week, to 232,500. The total number of Americans collecting jobless benefits for the week ending June 25 rose by 51,000 from the previous week, to 1,375,000. That figure has hovered near 50-year lows for months.

Mortgage Rates Fall to 5.30%, Reflecting Recession Fears

Mortgage rates recorded their largest decline since 2008 as investors raise their bets that the economy is headed for a downturn. The average rate on a 30-year fixed-rate mortgage fell to 5.30%, mortgage-finance giant Freddie Mac said Thursday. That is down from 5.70% last week. Mortgage rates haven’t recorded such a big weekly decline since December 2008, when the rate fell from 5.97% to 5.53%.

Growing fears of a recession in the U.S. stand to further push down mortgage rates as investors pile into U.S. Treasuries, widely seen as safe investments during times of economic uncertainty. Mortgage rates are closely tied to yields on the benchmark 10-year U.S. Treasury, which fell to their lowest level in more than a month this week. Yields fall when prices rise.

Housing-Affordability Index Drops to Lowest Level Since 2006

The National Association of Realtors’ housing-affordability index fell to 102.5 in May, the association said Friday, the lowest level since the index fell to 100.5 in July 2006. It was close to the lowest level since July 1990, when the index stood at 100.2. The affordability index incorporates median existing-home prices, median family incomes and average mortgage rates.

On a national basis, homebuying was relatively affordable in 2020 and last year, thanks to record-low mortgage rates even as strong demand sent home prices skyrocketing. But this year, mortgage rates have moved up sharply and house prices have climbed to new highs nationwide.

What Next for UK Economy as Boris Johnson Quits?

The race to replace Johnson, who announced on Thursday that he would quit office, could take weeks. That would leave the world’s fifth-biggest economy at risk of further drift at a time when sterling is near two-year lows against the dollar and the Bank of England is in a dilemma about raising interest rates without damaging economic activity.

The duration of Conservative Party leadership contests varies. Theresa May needed less than three weeks to win after David Cameron quit in 2016 as other contenders dropped out. But it took Johnson two months to become the new leader after May announced her intention to resign in 2019. Following is a summary of the key questions hanging over the British economy as the political drama plays out.

Countries From the U.K. to Japan are Sending out Inflation Relief Checks to Help People Face Soaring Food and Energy Bills

Governments across Asia and Europe have begun distributing inflation relief money to their neediest citizens, too, as economies buckle under surging energy costs and worrying food shortages.

In Italy, inflation hit a 36-year high of 8% last month. In May, the government announced a $14.7 billion relief package that included one-off payments of about $200 to pensioners and people earning under $35,000 a year. The government has left it to employers to distribute the funds, parceling the $200 bonus into eligible people’s pay checks.
The Netherlands said in March it would issue a “one-off energy allowance” of roughly $800 per household for people on low incomes, to subsidize rising gas and fuel costs which surged 84% in June.
Germany, which is experiencing its highest inflation levels in 40 years, rolled out a $300 direct payment to all employed individuals in April to help offset rising energy costs, which had surged 35% over the year before.
France was among the first countries to deliver relief payments, pledging $100 payments to roughly 38 million citizens earning less than $2,000 per month last October.

Shinzo Abe Brought Transformation to Japan That Will Last for Generations

When Shinzo Abe, Japan’s longest-serving prime minister, stepped down in 2020, he hadn’t quite achieved what he’d set out to. Abe, who served two stints as prime minister from 2006 to 2007 and from 2012 to 2020, was shot twice on Friday morning while giving a speech in the city of Nara in western Japan, where he was campaigning for the ruling Liberal Democratic Party (LDP) ahead of Sunday’s legislative elections. He died in the early evening hours at the age of 67.

“He was a political giant,” says Jeff Kingston, the director of Asian Studies at Temple University Japan. “He has been a continued towering presence… His voice carried considerable weight.” Abe will be remembered for remaking Japan. Kingston says he succeeded in “reviving Japanese confidence and projecting a more confident, upbeat Japan,” following an asset price bubble collapse in the early 1990s that threw Japan into a period of economic stagnation known as “the Lost Decades.”