Member Briefing July 3, 2024
Fire Up IndustryWeek’s July 4th Manufacturing Quiz
Picnics, sketchy backyard fireworks shows and five manufacturing trivia questions adjacent to the holiday. What a way to celebrate our Independence!
US Job Openings Unexpectedly Increase From a Three-Year Low
The number of job openings on the last business day of May stood at 8.14 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This reading followed the 7.9 million (revised from 8.05 million) openings reported in April and came in above the market expectation of 7.9 million. "Over the month, both the number of hires and total separations were little changed at 5.8 million and 5.4 million, respectively," the BLS noted in its publication. "Within separations, quits (3.5 million) and layoffs and discharges (1.7 million) changed little."
May's JOLTS report showed a labor market that in many ways looks like its pre-pandemic self. Job openings partially rebounded from the three-year low hit in April, but the number of job openings per unemployed worker remained unchanged at 1.22, essentially back in line with its 2019 average. Turnover, meanwhile, remains depressed. Gross hiring stayed near the lowest share of total employment since 2015, and businesses are reluctant to cut ties with existing workers as indicated by the layoff & discharge rate remaining near a historic low at 1.0%. The share of workers quitting their job also remains below the rate registered prior to the pandemic, which, along with the downward trend in demand for new workers, should continue to temper wage growth.
Global Sea Transport Leaps Most Since 2010 After Red Sea Attacks
A gauge of global sea transport is heading for its biggest annual jump since 2010 after attacks in the Red Sea have forced ships to travel longer distances. Shipping activity measured in ton miles is set for the second largest annual increase on record as a result of geopolitical disruptions in the Middle East and Europe, according to Clarksons Research, a unit of the world’s largest shipbroker. The marker, which multiplies the volume of cargo transported by the distance it sails, is heading for an increase of 5.1% compared to 2023, or 3.2 trillion ton miles.
The longer distances are likely to spell bad news for global efforts to reduce carbon emissions. At the same time, “an encouraging start to the year” in terms of trade volumes is part of the reason ton miles are up, suggesting the increase isn’t only related to longer journeys, Clarkson analyst Trevor Crowe wrote. The impact of the Red Sea disruption on ton miles has been most acutely felt in container shipping, with about 690 ships currently sailing around the Cape of Good Hope. Average seaborne trade hauls will rise by 2.8% this year compared with 1.8% a year earlier.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- US Bases Across Europe Bracing for Possible Terror Attack - VOA
- Robberies, Revenge Killings Send Gaza Deeper Into Chaos - WSJ
- Turkish Police Arrest Hundreds After Anti-Syrian Riots in Several Cities – France 24
- Israel Strikes Khan Younis After Ordering Evacuations: Gaza War Live Updates - NYT
- Palestinians Flee Khan Younis as Israeli Forces Strike South Gaza - BBC
- Iran's Presidential Election: Hardliner Jalili and Moderate Pezeshkian Face Voter Apathy – Reuters
- 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
- NATO to Establish Kyiv Post, and Seeks to ‘Trump-Proof’ Ukraine Aid - WSJ
- Crimea Photo Shows Ruins as Kyiv Strikes Russian Black Sea Fleet 'Object' - Newsweek
- Ukraine Thwarts Alleged Coup Attempt, Security Service Says - CNN
- Hungary's Orban Visits Ukraine for First Time Since Russia's 2022 Invasion - VOA
- Charity Founder Dies in Ukraine 'Battlefield' - BBC
- Modi’s Russia Visit Dents West’s Efforts to Cast Putin as Pariah - Bloomberg
- Putin Finds Loophole to Keep Selling Russian Gas - Newsweek
- 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
- Satellite Images Show Expansion of Suspected Chinese Spy Bases in Cuba - WSJ
- South Korea to Create Birth Rate Ministry for Declining Population - Newsweek
- Climate, Demographics and Geoeconomic Cracks Top Challenges: EU Economist Rolf Strauch - SCMP
- Campaigners Seek to harness Gaza Anger Among UK Muslim Voters – Reuters
- The Other Age Issue: Old Voters Are Gaining Power Around World - WSJ
- More Than 100 Killed in Crush at India Religious Event - BBC
- Britain Set for General Election, as Polls Indicate opposition Landslide - VOA
- Philippines to be 'Relentless' in Protecting Interests in South China Sea, it Says – Reuters
- Girmay First Black African to Win Tour de France Stage - BBC
Policy and Politics
Workplace-Safety Rules Survive as Supreme Court Rejects Appeal
A Supreme Court that has tried to rein in what it views as regulatory overreach by executive branch agencies nonetheless declined to decide if Congress violated the Constitution when it gave a federal agency the power to set workplace safety rules. The court rejected a challenge to the Occupational Safety and Health Administration brought by an Ohio-based general contractor and supported by some business and conservative groups, and by Republican attorneys general. The federal agency survived challenges to its rulemaking authority in 1978 and 2011.
In 2019, OSHA issued a penalty against Allstates after a catwalk brace fell and injured a construction worker. Allstates agreed to pay a penalty of $5,967 but then took OSHA to court, arguing that Congress improperly told the agency it could set safety rules for virtually every business in America. But the Labor Department said several safety standards − those intended to prevent immediate physical harm − would fall, returning the nation to the patchwork of federal and state rules that existed before the Occupational Safety and Health Act.
New York Likely to Miss 70 Percent Renewable Target
New York will likely fail to meet one of its major renewable electricity targets, state officials acknowledged in a report Monday. The state will miss its statutory target of 70 percent renewable electricity at the beginning of the next decade by three years, as Gov. Kathy Hochul’s administration considers shifting the goalpost to 2033 instead. The forecasted three year delay is partly driven by higher electricity demand spurred by large manufacturing projects and the decimation of New York’s renewable plans after developers backed out of contracts amid record inflation and rising costs.
New York’s 70 percent renewable mandate — which would ensure the state relies far less on fossil fuel power plants for electricity in the coming decade — is a key tenet of its nation-leading climate law, approved by the Democratic Legislature and then-Gov. Andrew Cuomo in 2019. Much of the law’s other emissions reduction goals rest on a cleaner electric grid, calling the likelihood of meeting those already tenuous targets further into question. The review released Monday of the state’s progress, required under the climate law, paints a stark picture of the challenges facing policymakers in achieving the legislative mandate. It includes recommendations by the Department of Public Service and NYSERDA, which will be considered by the Public Service Commission. It will be available for public comment for 60 days before it is finalized and the Public Service Commission considers actions.
Federal Judge Blocks Biden’s Pause on LNG Export Permits
A federal judge in Louisiana on Monday put the Energy Department’s pause on natural gas export permits on hold, dealing another legal blow to the Biden administration’s climate agenda. Judge James Cain of the Western District of Louisiana, a Trump appointee, granted a request for a stay from 16 red states that had challenged the pause, arguing it will harm their economies.
The decision to stay the LNG pause upends one of Joe Biden’s major policy nods to climate-focused activists who have accused the president of not doing enough to mitigate planet-warming emissions despite Democrats passing the largest investment in climate in history via the Inflation Reduction Act. Cain ruled that DOE failed to justify why it needed to pause approvals to review the process by which it permits projects. “Past precedent, which the applicants relied upon, allowed the approval of the applications to proceed when updates were made,” wrote Cain, who also blocked the Biden administration’s social cost of carbon estimate in 2022 — a decision overruled by the 5th Circuit Court of Appeals.
Health and Wellness
Moderna Scores Federal Funding For mRNA Bird Flu Vaccine As Pandemic Fears Grow
Moderna has secured $176 million in federal funding to develop mRNA vaccines against a potential bird flu pandemic, the Boston-based company announced Tuesday, a move that could bolster U.S. vaccine stockpiles as health officials and experts worry the highly contagious H5N1 influenza virus tearing through poultry farms and cattle herds could spread to humans. Moderna said the U.S. government funds will bankroll “late-stage development for an mRNA-based vaccine” against H5 influenza virus to enable a “pre-pandemic” shot to be licensed.
Flu viruses are classified by two proteins on the surface of the virus, hemagglutinin (H) and neuraminidase (N), and the research will cover the new strain of H5N1 avian influenza that has been spreading among animals worldwide since 2020 but causing increasing alarm among experts this year as it began showing up in more mammals, notably livestock like dairy cattle in the U.S., as well as occasionally infecting humans. Moderna began early stage clinical trials of an mRNA pandemic flu vaccine in 2023, including shots against the H5 and H7 strains known for their potential to mutate into highly virulent and lethal forms, and said results from the study are expected at some point in 2024. These results will inform late-stage development plans for the vaccine candidate, Moderna said.
Election 2024
- How Donald Trump and Joe Biden Polls Look Four Months Before Election - Newsweek
- Trump Rallies the Base After Immunity Ruling and Debate - WSJ
- Democrats Weigh Mid-July Vote to Formally Tap Biden as Nominee - Bloomberg
- Trump Leads Biden In New Hampshire After Debate, Poll Finds—Which GOP Hasn’t Won In 24 Years - Forbes
- Latimer’s Win Paves Way for Westchester’s First Black County Executive – City & State
- Examining the Impact of Public Financing in Primaries for New York Legislature – NY State of Politics
- Here’s How Much State Senate and Assembly Candidates Spent Per Vote – City & State
- 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
Christopher Chidzik, Principal Economist for the Association for Manufacturing Technology Provided and Economic Update at Allendale Machine Systems Open House
Christopher Chidzik from the Association of Manufacturing Technology was the keynote speaker for the Executive Breakfast at Council member Allendale Machinery Systems’ Tooling and Technology Showcase on June 13, 2024. The topic of his presentation was "The Current Economic Landscape and US Manufacturing".
Chris provides insights on the state of the manufacturing economy, predictions for economic growth, the availability of skilled labor, the effects of higher interest rates on the manufacturing sector, the possibility of a recession, and what manufacturing executives can expect over the next six months and beyond.
Watch the Video of the Presentation
Toyota's Q2 US Auto Sales Up 9% on SUV Demand
Toyota Motor North America posted an about 9.2% rise in second-quarter U.S. auto sales on Tuesday, aided by demand for its affordable and premium crossover SUVs. The company, a unit of Japan's Toyota Motor Corp sold 621,549 vehicles in the quarter, compared with 568,962 units a year earlier. Sales of Toyota's SUVs, such as the Land Cruiser and 4Runner, rose nearly 8.6% from a year earlier.
Toyota division posted June sales of 164,777 vehicles, down 2.3 percent on a volume and DSR basis. For the second quarter, the division sold 532,809 vehicles, up 9.2 percent on a volume and DSR basis. For the first half, the division sold 1,019,436 vehicles, up 14.7 percent on a volume basis and up 13.2 percent on an DSR basis. Lexus division posted June sales of 28,343 vehicles, up 5.9 percent on a volume and DSR basis. For the second quarter, the division sold 88,740 vehicles, up 9.3 percent on a volume and DSR basis. For the first half, the division sold 167,211 vehicles, up 11.9 percent on a volume basis and up 10.5 percent on an DSR basis.
Energy Brokers Report More Customers Willing to Pay a Green Energy Premium
There’s a considerable momentum behind the renewables market in the US, and the market for these green supply products commands a premium. High-level findings from this year’s Business Energy Census show that there is an increase in willingness to pay a green energy premium. In fact, according to more than 100 independent brokers, 62% percent of customers are willing to pay a small premium in 2024, compared to 56% in 2023, indicating a growing acceptance of green energy solutions.
Year to year, the report cites a decrease from 28% to 18% of survey participants who said their customers are not willing to pay any premium at all for renewable energy. These trends could be an indication of the future of energy and an increase in company initiatives to transition to net-zero emissions.
Read more at Engie Business Energy Census
eCommerce Giants Shein, Temu Are Swamping Airfreight Capacity, Sending Rates Soaring
Bargain shopping apps Temu and Shein are reshaping the air cargo market out of China, eating up aircraft space at a pace that is driving up freight rates and sparking fears of a capacity squeeze during the busy peak shipping season later this year. Shipping volumes from China’s manufacturing hubs in the south in particular are surging, triggering growing competition for aircraft space. Prices out of the airfreight-heavy region in June were up about 40% from a year ago during what is normally a slack season before business accelerates for the end-of-year holiday shopping period.
Tim Scharwath, chief executive of DHL Global Forwarding, said Chinese e-commerce companies have expanded so rapidly in less than two years that they consume more than 30% of cargo space on some routes out of Asia. Airfreight is typically dominated by small, high-value items such as smartphones and laptops as well as perishables such as fish and flowers. Temu and Shein are swamping air routes with low-cost clothing and household goods that they are shipping to consumers in Europe and North America.
Culp Extends Stay with GE Aerospace Through 2027
H. Lawrence (Larry) Culp Jr., chairman and CEO of GE Aerospace, looks to be sticking around. The GE Aerospace board of directors on June 30 extended the contract of Culp through the end of 2027, with the possibility of a further extension through 2028, the company reported. Earlier in the month, Culp had declined an opportunity to lead beleaguered Boeing Co., according to the Wall Street Journal. His employment agreement with GE Aerospace was set to end Aug. 17, 2024, prior to the extension. According to an SEC filing, Culp’s new contract, with an effective date of July 1, 2024, will earn him more than $17 million in 2025, including an annual equity award valued at $15.25 million, a base salary of $2 million annually and a target annual bonus opportunity at 200% of base salary, among other compensation.
In November 2021, General Electric announced plans to divide into three businesses focused on healthcare, energy and aviation. The healthcare business separated in 2023, while GE Aerospace and GE Vernova separated into independent companies in April 2024. Culp became CEO of GE in 2018 and in June 2022 was named CEO of GE Aerospace.
Boeing, Airbus Agree to Split Spirit AeroSystems
Boeing Co. has a definitive agreement to acquire its supplier Spirit AeroSystems approximately $8.3 billion, which includes Spirit’s current debt total. While an earlier report contended that Boeing’s offer would be comprised mostly of stock, the definitive agreement is for an all-stock transaction at an equity value of approximately $4.7 billion. The transaction is expected to close mid-2025, subject to a contingent sale of the certain Spirit operations related to Airbus programs, and other closing conditions including regulatory and shareholder approvals.
The side deal with rival jet-builder Airbus calls for Spirit AeroSystems to transfer operations in Kinston, N.C., and St. Nazaire, France, that manufacture fuselage sections of widebody A350 jets; and plants in Belfast, Northern Ireland and Casablanca, Morocco, that produce A220 wings and mid-fuselage sections; and an A220 pylon production line in Wichita, Kan. In taking over those operation Airbus will pay a nominal $1.00, and will be compensated with $559 million from Spirit AeroSystems.
Read more at American Machinist
Stellantis Cutting Shifts at Warren Truck Plant, Invests in Air Taxi Maker Archer
Stellantis announced this week that it will reduce its production hours for the month of July at the Warren Truck Assembly Plant. The Warren plant will go from two shifts to one for the month, officials confirmed on Monday, July 1. It was not immediately clear whether more shifts would be added at the plant again in August. Stellantis officials say the decision to cut hours is meant to align production with the company’s sales. The Detroit-based automaker will "continue to monitor demand and take the necessary action to balance inventories,” a spokesperson said Monday.
Meanwhile the company will invest an additional $55 million in Archer Aviation after the air taxi maker's flagship aircraft completed a transition flight last month, the companies said on Tuesday. Stellantis had also invested $110 million in Archer last year through a combination of open market stock purchases and a funding agreement between the two companies. Archer's "Midnight" eVTOL achieved a milestone after it completed a transition flight last month.
Read more at Yahoo and Click on Detroit
Car Dealers are Ramping up Legal Fights After a Massive Cyberattack Shut Down Their Operations
Software provider CDK Global has been slapped with at least eight lawsuits in federal court since a pair of cyberattacks took its dealer management service offline — and likely exposed the personal information of tens of thousands of people. The majority of those lawsuits — which, bar one, have been filed in Illinois — were brought by people who had either worked for or used the services of one of the almost 15,000 car dealerships across North America that use CDK’s software.
Several lawsuits are seeking class-action status and accuse CDK of neglecting to properly protect their personal information from cyberattacks, which have become increasingly common. They’re requesting damages, for CDK to increase its efforts to protect personal information, and to purge all personally identifiable information (PII) related to the plaintiffs. The six largest public U.S. dealers will likely see a 10% drop in their second-quarter earnings because of the disruptions, according to J.P. Morgan analysts.
NY Fed Research on Distributional Effects of Inflation and Rate Hikes to Fight it
NY Federal Reserve Economists looked into the distributional effects of inflation and inflation stabilization through the lens of a Heterogeneous Agent New Keynesian (HANK) model. This model combines the features of New Keynesian models that have been the workhorse for monetary policy analysis since the work of Woodford (2003) with inequality in wealth and income at the household level following the seminal contribution of Kaplan, Moll, and Violante (2018). The authors find that while inflation hurts everyone, it hurts the poor in particular.
The distributional effects of inflation, when the source of inflation is a cost push shock, are very uneven across the wealth distribution: the poor lose while the very rich benefit. The source of these losses and gains is the decline in real wages which hurts hand-to-mouth households especially, as it translates almost one to one into a decline in consumption. At the same time, the falling labor costs translate into increases in corporate profits and benefit the very rich who receive these profits. Yet while inflation hurts the poor the most when viewed through a distributional lens, disinflationary policies hurt them even more. That is, an aggressive policy response to a cost push shock leads to a further deterioration in the labor market together with higher interest rates, which make debt more expensive. If the Phillips curve is flat, as it is in this estimated model, the gains in taming inflation are limited and do not reverse these disadvantages for households at the bottom of the wealth distribution.