Member Briefing July 26, 2023
UPS, Teamsters Reach Agreement on New Contract, Averting Strike
United Parcel Service and the International Brotherhood of Teamsters have reached an agreement over a five-year labor contract, preventing a potential strike by roughly 330,000 package delivery drivers and package sorters. The labor union said the contract was worth around $30 billion overall. The agreement still has to be ratified by employees. The UPS-Teamsters contract is the largest collective-bargaining agreement involving a private employer in North America, and a strike could harm the supply chains of many companies.
A dispute that was holding up negotiations in recent weeks was over wages for part-time workers. The Teamsters were seeking an hourly wage for part-time workers north of $20. Under the agreement, UPS would pay new part-time workers a wage of $21 an hour, the Teamsters said. Currently, starting part-time hourly wages are $16.20 and could be higher in places where there is more competition for labor. Existing workers would get a raise of $7.50 an hour over the life of the contract, including a $2.75-an-hour pay bump this year. Workers’ wages rose roughly $5.30 an hour in the five-year deal that runs through July 31.
War in Ukraine Headlines
Ukraine and Russia: The Latest News – The Guardian
Russia Attacks Kyiv in New Air Strikes, No Casualties Reported - Reuters
Russia's Danube Attacks Tighten Noose on Ukraine's Grain Sector – Reuters
Kremlin Rejects UN Call to Rejoin Grain Deal – Al Jazeera
Trevor Reed, Who Was Released in U.S.-Russia Swap in 2022, Injured While Fighting in Ukraine - CBS
China Sending Russia Masses of Military Gear, Including Drones: Report -Business Insider
Ukraine’s Stalled Offensive Puts Biden in Uneasy Political Position - WSJ
US Accuses Russia of Dangerous ‘Behavior’ Harming Drone – Jerusalem Post
Ukraine Reports Small Advances Against Russian Forces - 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
Top Euro-Area Economies Flash Recession Warning Signals
Germany and France kicked off the third quarter with contractions in their private-sector economies, with sustained weakness in manufacturing seeing increased spillover to services. The Manufacturing PMI in Eurozone’s economic powerhouse Germany came in at 38.8 this month, compared with 41.0 expected and 40.6 previous figure. The index hit its lowest level in 38 months. Meanwhile, Services PMI dropped further from 54.1 in June to 52.0 in July.
A downturn of French business activity extended into July as both the services and the manufacturing sectors did worse than expected, adding to concerns the country could be headed for a recession. HCOB's flash Composite Purchasing Managers Index (PMI), compiled by S&P Global fell to 46.6 points from a final reading of 47.2 last month . The PMI for the manufacturing sector reached its lowest since the start of the COVID-19 pandemic, falling to 44.5 points from a final 46.0 in June and missing a forecast of 46.0.
IMF Raises Global Growth Forecasts but Warns Recovery is Slowing
The International Monetary Fund (IMF) has slightly raised its forecasts for global growth this year but warned that the outlook remains “weak by historical standards” with inflation proving more persistent than previously anticipated. In its latest world Economic Outlook, the Washington-based fund said growth in global economic output is now expected to fall from 3.5 per cent in 2022 to 3 per cent this year, slightly better than the 2.8 per cent forecast in April but well below the historical average of 3.8 per cent.
The IMF left its global growth forecast for 2024 unchanged at 3 per cent. Forecasts for growth in the euro area remain “broadly unchanged”, the IMF said, projected to fall from 3.5 per cent in 2022 to 0.9 per cent in 2023, before rising to 1.5 per cent in 2024. Global inflation, meanwhile, is projected to decline from 8.7 per cent last year to 6.8 per cent this year, a 0.2 percentage point downward revision.
COVID Update – Early COVID-19 Indicators Show Increase: CDC Data
Certain COVID-19 indicators continued their recent rise last week, according to data from the Centers for Disease Control and Prevention. Both coronavirus emergency department visits and test positivity increased, according to CDC data. The agency no longer tracks COVID-19 cases. Instead, it focuses on hospitalizations and deaths, which don’t yet show an increase. The CDC reported last week that it was the first time since January that COVID-19 metrics showed an increase. The uptick is small, but it’s a notable reversal after months of declining coronavirus numbers.
Last week, WHO added EG.5 to its list of “variants under monitoring.” The strain has been increasing globally since the end of May, but there is “no evidence of rising cases and deaths or a change in disease severity associated with EG.5,” according to WHO. EG.5 is also on the rise in the U.S. It was responsible for about 11% of new coronavirus cases over the past two weeks, according to CDC estimates. The so-called arcturus variant, or XBB.1.16, continues to be the most prevalent strain circulating in the U.S. at nearly 15% of new infections.
Senate Appropriators Agree to Bypass Spending Limits, Add $8 Billion for Defense
The leaders of the Senate Appropriations Committee reached an agreement to add $8 billion to the FY24 defense budget, using emergency spending authority to bypass spending limits put in place by the recent debt ceiling agreement. The debt agreement suspends the debt limit in exchange for capping federal spending over the next two years. National security spending would be limited to the president’s requested level of $886 billion in FY25 and $895 billion in FY25.
As soon as the agreement was reached, lawmakers began discussing options for bypassing their own spending limits to bolster the defense budget. The simplest option is to use an emergency supplemental spending bill, which wouldn’t be subject to the spending caps. That option is exactly what Senate appropriators have done. During opening remarks at a recent budget markup of several federal spending bills, Senator Patty Murray (D-WA), Chair of the Senate Appropriations Committee, outlined plans to increase federal discretionary spending by $13.7 billion above the caps, including $8 billion for defense and $5.7 billion for non-defense.
Read more at Defense & Security Monitor
U.S. Consumer Confidence Jumps to a Two-Year High as Inflation Eases
The Conference Board, a business research group, said its consumer confidence index rose to 117 in July from a revised 110.1 in June. The gauge beat the 110.5 that economists had expected and was the highest since July 2021. The index measures both Americans’ assessment of current economic conditions and their outlook for the next six months. Both improved in July. The future expectations index rose to 88.3 in July, clearing the recession threshold of 80 recorded in June.
Economists closely monitor Americans’ spirits because consumer spending accounts for around 70% of U.S. economic activity. The Conference Board index fell more or less steadily from mid-2021 to mid-2022 as surging prices ate into household budgets. But confidence has come back, in fits and starts, over the past year as inflation eased in the face of 10 interest-rate hikes by the Federal Reserve. Fed policymakers are expected to raise their benchmark rate again Wednesday to the highest level in 22 years.
Flagship Pioneering and Pfizer Partner to Accelerate Development of Innovative Medicines Targeting Unmet Needs
Flagship Pioneering, Inc. and Pfizer Inc. today announced the companies have partnered to create a new pipeline of innovative medicines. Under the terms of the novel agreement, Flagship and Pfizer will each invest $50M upfront to explore opportunities to develop 10 single-asset programs by leveraging Flagship's ecosystem of more than 40 human health companies and multiple biotechnology platforms. Pfizer will fund and have an option to acquire each selected development program. Flagship and its bioplatform companies will be eligible to receive up to $700M in milestones and royalties for each successfully commercialized program.
Pioneering Medicines, an initiative of Flagship Pioneering, working in collaboration with Pfizer's research and development leadership, will lead the exploration process to drive rapid potential portfolio creation. The focus will be addressing unmet needs within Pfizer's core strategic areas of interest, including in broad patient populations and diseases with high potential to benefit from a diverse range of technology platforms and modalities.
GM Q2 Revenue, Earnings Soar as Automaker Boosts Profit Guidance for 2nd Time
For the quarter, GM reported top-line revenue of $44.7 billion, beating street estimates of $42.82 billion. GM's Q2 revenue rose 25% jump from a year ago and 11.8% sequentially. GM's adjusted earnings per share (EPS) came in at $1.91, versus the $1.65 the street was expecting. Of note, GM hiked its profit guidance for the 2nd time this year, with the company now seeing full-year adjusted EBIT earnings at $12.0 billion-$14.0 billion compared to prior guidance of $11.0 billion-$13.0 billion. GM also sees full-year adjusted EPS in a range of $7.15 - $8.15, up from prior projections of $6.35-$7.35.
GM reiterated its plans to produce 400,000 EVs through the first half of 2024 and 1 million by the end of 2025. GM said it built 50,000 EVs in North America in the first half of 2023, and is set to double that in the second half. The company was targeting 100,000 EVs produced in the 2nd half of the year. Notable GM EVs coming in the back half of this year include the Silverado EV, Blazer EV, and Equinox EV.
Goodbye, College Degrees; Hello, Certifications
According to Capterra’s survey of 300 U.S. recruiters, 41% said their employers have dropped degree requirements. Meanwhile, the nation is facing a steep drop in applications for college enrollment, a trend that began several years ago, and can ultimately contribute to fewer job candidates with a bachelor’s or associate’s degree, according to a Fortune report.
How, then, is HR evaluating candidates’ experiences? Instead of college degrees appearing on resumes, increasingly, job applicants are listing professional and training certifications and even digital badges. And this presents challenges for TA and HR leaders, who need to create new models for collecting, evaluating and verifying certifications and other alternative credentials.
GE Lifts Guidance as Sales and Earnings Rise
General Electric raised its cash flow and sales targets for the year after reporting strong orders and improved results across most of its operations in the second quarter. The manufacturer cited rising demand for its jet engines and improved demand for its wind-energy turbines. Per-share earnings, after adjustments, rose to 68 cents for the second quarter, from 36 cents a year earlier. Sales rose to $16.7 billion from $14.1 billion. The company reported free cash flow, a measure watched closely by investors, of $415 million for the quarter, up from $192 million in second-quarter 2022.
GE said it now expects full-year earnings per share, after adjustments, to land between $2.10 and $2.30, improved from earlier guidance of $1.70 to $2.00. Revenue excluding currency and effects is likely to grow by a low double-digit percentage, improved from high single digits, GE said. Free cash flow is likely to range between $4.1 billion and $4.6 billion, up from the company’s previous guidance of $3.6 billion to $4.2 billion. The company said it would buy back all outstanding preferred shares, for about $2.8 billion, on Sept. 15, to simplify the company’s balance sheet.
RTX (Raytheon) Shares Tumble After Disclosing Jet Engine Problem Will Require Accelerated Inspections
Shares of RTX tumbled 13% on Tuesday after the aerospace giant said a manufacturing problem with some of its popular engines will require “accelerated” inspections on about 200 of them. The problem stems from powdered metal used to make some engine parts, RTX, the parent of airplane engine maker Pratt & Whitney, said during a quarterly earnings call. Engines currently in production are not affected, the company said.
RTX, previously known as Raytheon Technologies, trimmed its cash flow outlook for the year by $500 million to $4.3 billion due to the problem. “It’s going to be expensive,” RTX CEO Greg Hayes said during the company’s earnings call. “We’re going to make the airlines whole as a result of the disruption we’re going to cause them.” Pratt & Whitney said that it also expects about 1,000 more engines will have to be removed from airline fleets over the next nine to 12 months. However, the company said it will continue to deliver new aircraft engines and parts.
China Removes Foreign Minister Qin Gang After Unexplained Absence
China has removed Qin Gang as foreign minister less than seven months after he was appointed to the post. The role will be taken up by the Communist Party's foreign affairs chief, Wang Yi, who was previously foreign minister. Mr Qin's prolonged disappearance from public view - and official silence over it - has fuelled furious speculation. The 57-year-old's last known public engagements were on 25 June. No reason was given for his removal.
Appointed to his post last December, Mr. Qin was seen as a trusted aide of Chinese President Xi Jinping. "China's top legislature voted to appoint Wang Yi as foreign minister," state news agency Xinhua said. "Qin Gang was removed from the post of foreign minister." The report said President Xi had signed the decree authorising the move. Under the Chinese Communist Party system, foreign policy is formulated by a high-level official, who then directs the foreign minister to implement it.
China Politburo Talks Stimulus But Actual Policy Still to Come
Providing more support for the beleaguered property sector and reducing the local-government debt burden were key messages from the meeting of the Communist Party’s Politburo on Monday, according to a readout from Xinhua. There was, however, no language indicating major fiscal or monetary loosening. The property market accounts for around 40% of Chinese steel demand and is also important for consumption of metals like copper, aluminum and zinc. The market reaction was positive but relatively muted. Steel-making staple iron ore rose as much 2.2% in Singapore on Tuesday. Copper extended gains after closing up 0.8% on the London Metal Exchange on Monday.
The pro-growth shift in tone related to property and local government debt was the main takeaway, Macquarie Group Ltd. economists Larry Hu and Yuxiao Zhang said in a note. The lack of a “bazooka-like stimulus package” wasn’t surprising, given the Politburo meeting isn’t typically the venue for announcements of specific measures, and authorities have made it clear they like to roll out policy in a piecemeal way, they said.
Hudson Valley Labor Force Grows to 1.2% Year on Year
The June 2023 unemployment rate for the Hudson Valley Region is 3.0 percent. That is up from 2.8 percent in May 2023 and down from 3.1 percent in June 2022. In June 2023, there were 35,600 unemployed in the region, up from 32,500 in May 2023 and down from 36,600 in June 2022. Year-over-year in June 2023, labor force increased by 14,700 or 1.2 percent, to 1,203,000.
At 3.0 percent the Hudson Valley Region’s June 2023 unemployment rate is ranked third among the 10 labor market regions in New York State, trailing only the Capital Region (2.8 percent) and the Long Island Region (2.9 percent). New York City has the highest rate at 5.9 percent. Within the region Sullivan County’s rate is lowest at 2.7percent. Ulster County is the highest at 3.1 percent