Member Briefing July 25, 2022

July 25, 2022

Posted By: Harold King in Daily Briefing,

Supply Chain: Truckers Block Oakland Port to Protest a California Labor Law

Independent truckers who have been protesting at California’s busy Oakland seaport over the past week against a new state law known as the “gig-worker” law took a break on Saturday, when the port business slowed to a crawl. Operations at the Northern California port ground to a near standstill after protesters used pickets and tractor-trailers to block terminal gates. But some truckers said protests may resume on Monday when normal port traffic is scheduled.

California labor law, AB 5, has run afoul of independent truck drivers, of which there are about 70,000 in the state. The law, passed in 2019, reclassified gig workers like truckers from independent contractors to employees to address disparities in benefits and pay. Enforcement in the trucking industry was held up over legal challenges, which the U.S. Supreme Court declined to advance last month. Now, many independent truckers fear it will undermine their way of doing business.

War in Ukraine Headlines

PMI: Eurozone Business Activity Slid Into a Contraction in July

S&P Global’s flash Composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good gauge of overall economic health, fell to 49.4 in July – the lowest since February 2021 – from 52.0 in June, well below all forecasts in a Reuters poll that had predicted a more modest dip to 51.0.

Businesses across the euro zone continued to report mounting inflation pressures and an acceleration in wage growth, even as the overall growth outlook becomes increasingly murky, the European Central Bank said on Friday, based on a survey of 71 major firms. Inflation in the currency union was 8.6% last month, official data showed, and on Thursday the ECB raised interest rates by 50 basis points, more than expected, confirming that concerns about runaway inflation now trump growth considerations.

PMI: U.S. Business Activity Slid Into a Contraction in July

U.S. business activity contracted in July on the sharpest pullback in output since early in the Covid-19 pandemic, according to surveys of purchasing managers, while eurozone surveys pointed to a higher probability the continent could soon slide into a recession.

Data firm S&P Global said its Composite PMI Index for the U.S.—which combines the manufacturing and services sectors—dropped to 47.5 in July from 52.3 in June. The services index slid to 47 in July from 52.7 the prior month. The drop in U.S. services activity was particularly sharp, with the biggest fall in output since May 2020—a worrying sign on consumer spending, the engine for U.S. growth. while the manufacturing index was 52.3 in July, a two-year low.

U.S. COVID – Cases Rise, Mortality Steady

The US CDC is reporting 89.7 million cumulative cases of COVID-19 and 1,020,355 deaths. After plateauing over the past several weeks around 100-110,000 new cases per day, the weekly average increased to 126,018 on July 19. The average daily mortality has held relatively steady at approximately 275-350 deaths per day since late April. Both new hospital admissions (+7.8% over the past week) and current hospitalizations (+6.9%) continue to increase.

Community transmission in the US is primarily driven by the Omicron BA.5 sublineage. BA.5 is projected to have accounted for more than half of sequenced specimens starting the week of July 2, and the estimate reached 77.9% for the week of July 16. The BA.4 sublineage accounts for a smaller proportion of cases and appears to be decreasing in prevalence. The BA.4 sublineage fell from an estimated 16% over the past 2 weeks to 12.8% the week of July 16, and is now outpacing BA.2.12.1 as the second most prevalent sublineage. Together, Omicron variants represent essentially all new cases in the US.

NYS 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 22.

Deaths:

Daily: 15
Total Reported to CDC: 72.569

Hospitalizations:

Patients Currently in Hospital statewide: 2,629
Patients Currently in ICU Statewide: 251

7 Day Average Positivity Rate – Cases per 100K population

Statewide 9.22% – 36.22 positive cases per 100,00 population
Mid-Hudson: 9.85% – 32.01 positive cases per 100,00 population

Useful Websites:

Prior Omicron Infection Protects Against BA.4 and BA.5 Variants

The Omicron BA.4 and BA.5 subvariants of SARS-CoV-2 have proven to be stealthier at evading people’s immune defences than all of their predecessors. But recent research shows that previous infection with an older variant (such as Alpha, Beta or Delta) offers some protection against reinfection with BA.4 or BA.5, and that a prior Omicron infection is substantially more effective. That was the conclusion of a study that evaluated all of Qatar’s COVID-19 cases since the wave of BA.4 and BA.5 infections began.

The researchers found that infection with a pre-Omicron variant prevented reinfection with BA.4 or BA.5 with an effectiveness of 28.3%, and prevented symptomatic reinfection with either subvariant with an effectiveness of 15.1%. Prior infection with Omicron granted stronger protection: it was 79.7% effective at preventing BA.4 and BA.5 reinfection and 76.1% effective at preventing symptomatic reinfection.

New York State Launches Pandemic Review

The state is kicking off a long-awaited review of its pandemic response looking back to the earliest days of the virus. Gov. Kathy Hochul offered some details last week about the forthcoming retrospective on the state’s policies, an analysis she’s been pressed to provide since taking office nearly one year ago. Its goal is to create best practices for future crises, Hochul said.

The administration will put out an RFP for a one-year contract, with a six-month initial report, for an outside entity to analyze what went well during the pandemic, what didn’t and why. It’s not likely to reflect kindly upon Hochul’s predecessor, whose initial stardom from fighting Covid-19 has now been overshadowed by reports his administration undercounted deaths in nursing homes and ignored state experts in his pandemic response. The six-month timeline means the findings won’t be out before the November general election.

New York State Launches Hotline For Complaints of Workplace Sexual Harassment

In March of 2022, New York Governor Kathy Hochul signed legislation directing the New York State Division of Human Rights (“DHR”) to establish a toll-free confidential hotline designed to provide counsel and assistance to individuals with complaints of workplace sexual harassment. Employees in New York state may now call 1-800-HARASS-3 (1-800-427-2773) for issues relating to workplace sexual harassment. The hotline is open during regular business hours.

The law requires the DHR to disseminate information about the hotline, including by working with the New York State Department of Labor (“DOL”) “to ensure that information on the hotline is included in any materials employers must post or provide to employees regarding sexual harassment.” This means that employers should expect an update to the DHR and DOL’s model sexual harassment prevention materials. In the meantime, employers should update their sexual harassment policies and related materials to include the new hotline number.

NYS Added 11,400 Mfg Jobs Over the Past 12 Months –1,000 of Them Were in the Hudson Valley

Private sector jobs in the Hudson Valley rose over the year by 30,500, or 4.0 percent, to 797,200 in June 2022. For the month of June the region gained 16,000 jobs For the 12 months since June of 2021 job gains were largest in leisure and hospitality (+9,700), but manufacturing added 1,000 jobs.

Statewide there were 8,074,800 people working in June 2022 up 77,900 from the month before and 433,600 from June of 2021. 420,800 of those were working in manufacturing 1,500 more than in May and 11,400 more than in June of 2021.

Hudson Valley Labor Market Profile June 2022

Employers Are Budgeting Big Pay Raises for 2023

In response to a tight labor market, employers are planning to up employee salaries in the biggest projected hike in 15 years, new data from Willis Towers Watson finds. Companies, on average, are budgeting a 4.1% salary increase for 2023, just above this year’s average 4% increase. The 2022 and 2023 salary increases are the largest since the Great Recession of 2008, according to the consulting firm, which surveyed 1,430 employers for insights in April and May.

Nearly two in three (64%) U.S. companies are budgeting for higher pay raises than last year, while two-fifths (41%) increased their budgets since original projections were made earlier this year, the survey found. Less than half of companies (45%) are sticking with the pay budgets they set at the start of the year.

US Chamber Takes a Closer Look at Labor Force Participation

To further understand shifts in the labor force Chamber researchers look at labor force participation across different industries. Some have a shortage of labor, while others have a surplus of workers. You guessed it – durable goods manufacturing has a labor shortage—there are more unfilled job openings than unemployed workers with experience in their respective industry.

Even if every unemployed person with experience in the durable goods manufacturing industry were employed, the industry would only fill 65% of the vacant jobs. Conversely, in the transportation, construction, and mining industries, there is a labor surplus. There are more unemployed workers with experience in their respective industry than there are open jobs. The manufacturing industry faced a major setback after losing roughly 1.4 million jobs at the onset of the pandemic. Since then, the industry has struggled to hire entry level and skilled workers alike.

Raimondo Warns of the ‘Scary’ Supply Chain Scenario that Would Lead to a ‘Deep and Immediate’ U.S. Recession

Semiconductors are essential to every scrap of modern technology powering society today. Yet the chip industry is dominated by manufacturers in the small island of Taiwan, where a handful of firms churn out roughly 90% of the world’s most advanced chips. Policy makers in the U.S. have started to see that as a problem. To guard against A chip shortage striking in the future, Congress is in the process of passing the roughly $52 billion needed to fund the CHIPS for America Act, which incentivizES semiconductor manufacturers to increase production capacity in the U.S.

Although Taiwan is a self-governing island with its political capital in Taipei, the government of mainland China in Beijing insists it has sovereignty over Taiwan and has frequently warned that it will assert that claim with force if necessary. If the U.S. suddenly “no longer had access” to chips in Taiwan, as Raimondo put it, the most likely cause would be a Beijing-led invasion of the island.

Chinese Chip Manufacturing is Advancing

The U.S. may be wielding sanctions in a bid to slow the rise of the Chinese chipmaker Semiconductor Manufacturing International Corp., but it seems SMIC recently made a major technological leap. The company is reportedly now shipping chips for Bitcoin mining that use a 7-nanometer manufacturing process (a reference to generations of manufacturing technology.)

Taiwan’s TSMC and South Korea’s Samsung are a generation ahead, but still, it appears SMIC is doing just fine.

These Firms are Trying to Loosen China’s Grip on Rare Earths

China is the world’s largest producer of rare earth metals, dominating 80% of global supply for the materials that are essential to much of today’s high-end tech. Magnets spun from rare earth are needed to create the engines that power electric vehicles, the motors inside wind turbines and guiding systems inside missiles.

Rare earths are so vital that in 2019, after Beijing threatened to limit global supply, the U.S. launched a slew of legislative action to bolster domestic supply. And the U.S. isn’t the only country trying to loosen China’s stranglehold on the industry. Companies in Australia and the U.K. are investing millions to develop new rare earth refineries too, with the global efforts to pry Beijing’s hand loose of the industry converging, by chance, around the year 2025.

The US Dollar is Stronger than its Been in Decades, What That Means for the Rest of the World

The WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, rose 8.7% through June to notch its best first half since 2010. It is up another 1.4% this month. While currencies in emerging markets typically feel pressure when investors flock to a strong dollar, those of developed countries also have fallen. The euro slid below parity with the dollar last week, hitting its weakest level since 2002.

Countries that issue debt in foreign currency are at risk when their currencies depreciate because that debt becomes more expensive to pay off. Governments that default on their debt risk losing access to international markets and the ability to finance critical functions. Emerging-market countries have varying degrees of their debt in dollars. Dollar-denominated debt issued by governments in Argentina, Ukraine and Colombia all exceeded 20% as a share of their gross domestic product as of the first quarter, according to the IIF, while that figure is below 2% for a handful of Asian and European countries.