Member Briefing July 24, 2023
DiNaploi: New York State's Fiscal Outlook Declines
Just a year after the Division of the Budget forecast fiscal stability and no projected budget gaps in the State Fiscal Year (SFY) 2022-23 Enacted Budget Financial Plan, the SFY 2023-24 plan shows looming gaps cumulatively totaling $36.4 billion through SFY 2026-27. Reasons for the deteriorating fiscal outlook include declines in revenue from a weaker economic forecast, stock market volatility, and increases in recurring spending, according to a report by State Comptroller Thomas P. DiNapoli.
In the three months between the release of the SFY 2023-24 Executive Budget Updated for the 30-Day Amendments and the SFY 2023-24 Enacted Budget Financial Plan, DOB’s budget gap projections grew by $4 billion in SFY 2024-25, $5.3 billion in SFY 2025-26, and $6.3 billion in SFY 2026-27. The gaps are now projected to be $9.1 billion, $13.9 billion and $13.4 billion, respectively. The estimated gaps are well above typical forecasted levels over the previous 15 years. The updated financial plan reduced General Fund tax receipts from the SFY 2023-24 Executive Budget estimates by more than $5 billion annually
War in Ukraine Headlines
Ukraine and Russia: The Latest News – The Guardian
Ukraine’s Lack of Weaponry and Training Risks Stalemate in Fight With Russia - WSJ
Ukrainian Offensive Was Delayed by Lack of Munitions, Zelenskyy Says - Politico
U.S. Unleashes Russia-Related Sanctions, Blacklisting 120 People and Firms - UPI
Russia Boosts Interest Rates as Ukraine War Costs Mount - WSJ
Putin Tells Poland any Aggression Against Belarus is Attack on Russia – Reuters
Drone Hits Crimean Ammunition Depot as Strikes Kill, Wound Civilians and Journalists in Ukraine - AP
Historic Ukrainian Cathedral Badly Damaged in Russian Strikes - CNN
Wagner Mutiny: Junior Commander Reveals his Role in the Challenge to Putin - BBC
Putin Hosts Lukashenko, Calls Ukraine Counter-Offensive a Failure – 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
U.S. Leading Indicators Point to Recession Starting Soon
The Conference Board on Thursday said its Leading Economic Index, a measure that anticipates future economic activity, declined by 0.7% in June to 106.1 following a revised decrease of 0.6% in May. The decline was slightly greater than the median expectation among economists in a Reuters poll for a 0.6% decrease. The Conference Board said the contraction in the LEI is accelerating, falling 4.2% over the last six months compared to 3.8% between June and December 2022.
“Taken together, June’s data suggests economic activity will continue to decelerate in the months ahead,” Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, said in a statement. The Conference Board reiterated its forecast that the U.S. economy is likely to be in recession from the current third quarter to the first quarter of 2024. "Elevated prices, tighter monetary policy, harder-to-get credit, and reduced government spending are poised to dampen economic growth further," Zabinska-La Monica said.
JPMorgan Global Manufacturing PMI: Worldwide Manufacturing Activity Contracts
The J.P. Morgan Global Manufacturing PMI slipped from 49.6 in May to 48.8 in June, with activity contracting in the sector for the 10th consecutive month. New orders (down from 49.3 to 48.0), output (down from 51.4 to 49.2) and exports (down from 47.3 to 47.1) contracted in June, with production falling for the first time since January. Employment (up from 50.0 to 50.1) remained mostly unchanged, expanding ever so marginally.
Only ten out of the 29 nations for which June data were available saw production increase, seven of which were located in Asia (including growth in India and mainland China). Sector data showed output falling in the intermediate and investment goods sectors and stagnating at consumer goods producers. Nonetheless, the index for future output (down from 61.0 to 59.6) continued to signal cautious optimism about production growth over the coming months despite easing in the latest data to the lowest level since November.
COVID Update – Super Dodgers: Why Some People Never Get COVID Symptoms
Studies have shown about 20% of people infected with COVID avoid severe sickness, the researchers note. These "super dodgers" appear to have a mutation in the immune system-supporting human leukocyte antigen, allowing virus-killing cells to identify the coronavirus, according to the study. These virus-killing cells, called T cells, were able to find the coronavirus even if it was the first encounter due to a resemblance to already familiar seasonal cold viruses.
Researchers found the mutation was carried by about 10% of the study's population and having two copies of the variant further increased protection from feeling sick by more than eight times. "It doesn't prevent the virus from infecting cells but, rather, prevents people from developing any symptoms. That includes a runny nose or even a barely noticeable sore throat," according to the release.
NYS COVID Update
The Governor updated COVID data for the week ending July 21.
Deaths:
- Weekly: 28
- Total Reported to CDC: 79,887
Hospitalizations:
- Average Daily Patients in Hospital statewide: 447
- Average Daily Patients in ICU Statewide: 56
7 Day Average Cases per 100K population
- 2.5 positive cases per 100,00 population, Statewide
- 3.1 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Busy Week for Central Banks
The calendar this week includes several major central bank meetings. The U.S. Federal Reserve is expected to boost interest rates a quarter point after being on hold at the June FOMC meeting. While inflation and the economy are both cooling, the statement from the Fed is anticipated to keep the existing policy rate guidance in place and reiterate that it will remain data dependent. Meanwhile, across the pond, the European Central Bank is forecast to raise its benchmark rate by 25 basis points as well and not rule out another rate hike in September.
Bank of Japan officials will also meet this week but see little urgent need to address the side effects of its yield curve control program at this point, though they expect to discuss the issue, according to people familiar with the matter. The central bank looks at the costs and benefits of YCC at every meeting and will reach a final decision at its policy meeting this week The BOJ will begin a two-day policy meeting Thursday.
Private Sector Job Growth Up 1.6% in the Hudson Valley Region, Mfg Jobs Decline
The Hudson Valley's private sector job count grew by 13,200, or 1.6 percent, to 818,800 in the year ending June 2023. Gains were centered in leisure and hospitality (+10,200), private education and health services (+7,300), other services (+1,600) and mining, logging and construction (+300). Employment losses were focused in professional and business services (-3,800), information (-900), financial activities (-600), trade, transportation and utilities (-500).
Manufacturers added 500 jobs in June for a regional total of 42,500. This, however, is 400 fewer than the 42,900 who were working in the sector in June of 2022. Leisure and hospitality remained the region’s leading job generator. Year-over-year in June 2023, the sector grew by 10.5 percent, to reach 107,600 – its highest June employment count on record.
Senate Works to Avoid Defense Bill Drama After House Brawl
Senators aren’t bracing for the sort of drama that gripped the House as it passed its annual defense bill last week, but there could still be bumps in the road as the Senate attempts to pass its own version before the August recess. Sending the National Defense Authorization Act to the president’s desk is normally a bipartisan affair — in the face of Washington gridlock, it’s one of the only bills to get through Congress reliably.
The legislation, which sets defense priorities for the coming year, passed out of the House Armed Services Committee last month in a 58-1 vote. But a series of “culture war” amendments adopted on the House floor led Democrats to vote against it en masse. So far, the Senate has avoided floor fights. It held six amendment votes this week and adopted a bipartisan manager’s package of 51 measures plus several other amendments. Senate leaders are hopeful the bill will pass without fireworks, but with days of negotiations ahead, every member the Washington Examiner spoke to hedged their optimism.
Read more at The Washington Examiner
India—The World’s Largest Exporter of Rice—Banned all Exports of “Non-Basmati White Rice”
India—the world’s largest exporter of rice—banned all exports of “non-basmati white rice” late Thursday in an effort to keep domestic prices in check, raising fears it could further threaten global food security, which has already been impacted by Russia scrapping a key UN-brokered deal that allowed Ukrainian grains through the Black Sea. India’s Food and Consumer Affairs Ministry said the move was taken to “ensure adequate availability” in the country and “allay the rise in prices in the domestic market.”
The ministry added rice prices rose 11.5% over the past year and 3% over the past month in India. India is the world’s largest exporter of rice, accounting for 40% of the world’s rice shipments and the country exported a record 22.2 million tons in 2022. Around half of India’s rice exports from 2022—10.3 million—were made up of non-basmati white rice.The most severe impact of this ban is likely to be felt by India’s neighbors Bangladesh and Nepal, along with several African nations including Benin, Angola, Cameroon, Djibouti, Guinea, Ivory Coast, Kenya—who are the major buyers of non-basmati rice according to Reuters.
TSMC Delays Start of Arizona Chip Factory
Taiwan Semiconductor Manufacturing Co. will delay production at its new Arizona chip plant to 2025 due to a shortage of skilled labor, the company’s chairman said on TSMC’s second-quarter earnings call Thursday. TSMC Chairman Mark Liu told analysts on an earnings call Thursday that the company does not have enough skilled workers to install advanced equipment at the facility on its initial timeline. The company previously anticipated it would begin making 5-nanometer chips in 2024.
Liu said the company is working to send technicians from Taiwan to train local workers to help accelerate installation. The U.S. has embarked on a major push to bring semiconductor manufacturing back stateside, including through funding the multibillion-dollar CHIPS and Science Act to turbocharge development. The Covid pandemic highlighted the significant dependence the U.S. has on countries like Taiwan to develop computer chips, creating a national security risk and giving the U.S. less control over the supply chain.
White House Moves on from Confirmation Effort for Su as Labor Secretary
The Biden administration is ready to move on from Julie Su’s nearly five-month confirmation battle, looking instead to indefinitely leave her in the role as acting Labor secretary, according to two people familiar with the discussions. the president and his team are set to move forward in defiance of the Senate confirmation process. It amounts to an implicit admission that the first Cabinet-level official to be replaced in the Biden administration lacks the votes.
The White House feels emboldened to keep Su in the role by a Labor Department rule that allows a deputy to serve in an acting capacity indefinitely, unlike other nominees who are subject to a time limit by a federal vacancies rule. The Federal Vacancies Reform Act “places limits on the amount of time—210 days—that an advice and consent position may be filled by an acting officer.” Critics like Louisiana Sen. Bill Cassidy argue that it unlikely the Labor Department rule would trump the Federal Vacancies Law and will open any DOL action under Julie Su’s leadership to legal challenges.
UAW President Meets With Biden as Union Opens Automaker Contract Talks
United Auto Workers President Shawn Fain met Wednesday with President Joe Biden at the White House as the union briefed staff on contract talks with the Detroit Three automakers, a White House official told Reuters. The UAW leadership had asked for time to brief White House senior staff on negotiations, the official said. That meeting took place on Wednesday in the West Wing, and when Biden learned of it, he asked to also talk directly with Fain and the two had a brief meeting, the official added.
Fain, who is on Capitol Hill meeting with lawmakers to discuss the labor talks, has not yet endorsed Biden for re-election and has criticized some administration EV policies. "We have expectations and that's why we haven't made endorsements yet," Fain said last week. "We expect people to be there for us if they want our endorsement." Last month, Fain harshly criticized the U.S. Energy Department plan to lend $9.2 billion to a joint venture of Ford and South Korea's SK On to build three U.S. battery plants.
DOL Expands Submission Requirements for High-Hazard Industries
The U.S. Department of Labor announced on July 17 a final rule that will require certain employers in designated high-hazard industries to electronically submit injury and illness information – that they are already required to keep – to the department’s Occupational Safety and Health Administration. The final rule takes effect on Jan. 1, 2024, and now includes the following submission requirements.
Establishments with 100 or more employees in certain high-hazard industries must electronically submit information from their Form 300-Log of Work-Related Injuries and Illnesses, and Form 301-Injury and Illness Incident Report to OSHA once a year. These submissions are in addition to submission of Form 300A-Summary of Work-Related Injuries and Illnesses. OSHA will publish some of the data collected on its website to allow employers, employees, potential employees, employee representatives, current and potential customers, researchers and the general public to use information about a company’s workplace safety and health record to make informed decisions.
The U.S. Power Grid Withstands the Heat, So Far
A punishing heat wave is pushing electricity demand to record levels in some parts of the U.S., but the power grid has held up because of a combination of luck and new energy supplies. “The grid seems to be holding up OK, and it proves we need all resources for all times of year and all types of weather,” said Bernard McNamee, a former member of the Federal Energy Regulatory Commission. “Just because one resource is performing well today doesn’t mean it’s going to perform as well tomorrow.”
The grid is likely to face sustained stress for the rest of summer as high temperatures are expected to persist or worsen in many parts of the country, pushing utility customers to blast air conditioners. Extreme heat has blanketed other parts of the West and South, with temperatures soaring above 110 degrees Fahrenheit in Phoenix for more than 20 consecutive days. Arizona Public Service, which provides electricity for much of the state, saw a record 8,191 megawatts of electricity demand on July 15.
Global LNG Trade Hit a Record High in 2022
Global trade in LNG reached an average of 51.7 billion cubic feet per day in 2022, a record high and a 5% improvement from 2021, reports the Energy Information Administration. An expansion of liquefaction capacity, mainly in the U.S., led to the increase. Another factor was greater European demand for LNG, as Europe transitions away from Russian natural gas transported by pipeline.
U.S. LNG exports jumped 16% in 2022 from the previous year. In fact, the U.S. became the top LNG exporter in the world in early 2022 thanks to the new Calcasieu Pass LNG export facility—the first time it had ever reached the top spot. Later in 2022, however, U.S. exports declined after the Freeport LNG terminal closed. “LNG imports into EU-27 countries and the UK increased substantially in 2022—by 73% (6.3 Bcf/d) compared with 2021—replacing imports by pipeline from Russia. Five countries—France, the UK, Spain, the Netherlands and Belgium—increased LNG imports by a combined 5.4 Bcf/d, accounting for 85% of the total increase.
Self-Healing Metal? It's Not just the Stuff of Science Fiction
In the 1991 film "Terminator 2: Judgment Day," a malevolent time-traveling and shape-shifting android called T-1000 that was made of liquid metal demonstrated a unique quality. Hit with blasts or bullets, its metal would heal itself. Self-healing metal is still just science fiction, right? Apparently not. Scientists on Wednesday described how pieces of pure platinum and copper spontaneously healed cracks caused by metal fatigue during nanoscale experiments. They expressed optimism that this ability can be engineered into metals to create self-healing machines and structures in the relatively near future.
Metal fatigue occurs when metal - including parts in machines, vehicles and structures - sustains microscopic cracks after being exposed to repeated stress or motion, damage that tends to worsen over time. Metal fatigue can cause catastrophic failures in areas including aviation - jet engines, for instance - and infrastructure - bridges and other structures. In the experiments at the U.S. government's Sandia National Laboratories in New Mexico, the researchers used a technique that pulled on the ends of the tiny metal pieces about 200 times per second. A crack initially formed and spread. But about 40 minutes into the experiment, the metal fused back together.