Member Briefing June 21, 2023
Is a Manufacturing Investment Supercycle is Starting?
There is massive new investment taking place in U.S. heavy industry that's set to shape the economic landscape for years to come. The 2010s were a period of chronic underinvestment. By contrast, now there are billions flooding into large, expensive megaprojects to manufacture batteries, solar cells, semiconductors and much more. It is fueled by hundreds of billions of dollars allocated by the inflation Reduction Act, Bipartisan Infrastructure Law, and CHIPS and Science Act — as well as pent-up demand.
It implies sustained upward pressure on demand for workers and raw materials for years to come and makes a recession less likely by creating a floor of activity under normally volatile industries. "We believe the U.S. is in the early stages of a manufacturing supercycle." wrote Joseph P. Quinlan, head of CIO Market Strategy at Merrill and Bank of America Private Bank, in a report this week. He emphasizes the role of foreign direct investment in the surge, as global companies rush to build large-scale facilities in the United States. He sees the trend extending well into the second half of the 2020s.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russian Air Strikes Hit Kyiv, Other Ukrainian Cities far from Front Lines - Reuters
- Ukraine Downs Russian Drones but Some Get Through Due to Gaps in Air Protection - AP
- Ukraine Wants Commitment on NATO Membership Bid -Politico
- Ukrainian Troops Grind Forward Near Bakhmut Thanks To Captured Russian Tanks – Radio Free Europe
- Biden Says Threat of Putin Using Tactical Nuclear Weapons is 'Real' - Reuters
- The Russians Debuted A New Rocket-Armed Fighting Vehicle. Ten Days Later, The Ukrainians Blew it Up - Forbes
- Ukrainian Artillerymen Praise US Howitzers Outside Russian-Held Town – Reuters
- Ukraine Dam Disaster: WHO Requests Access to Russian-Occupied Territory – Politico
- How Ukraine Created an 'Army of Drones' to Take on Russia - NPR
- 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
5 Takeaways from Blinken’s Trip to China
U.S. President Joe Biden said Secretary of State Antony Blinken “did a hell of a job” in Beijing. His comments came after Blinken’s high-profile diplomatic mission to China, aimed at soothing strained ties with Beijing. In a surprise meeting, Blinken met Chinese President Xi Jinping for a 35-minute meeting toward the end of his two-day visit. He is the highest-level American official to visit China in nearly five years. Blinken also met China’s top diplomat Wang Yi as well as Foreign Minister Qin Gang during the visit.
Here are other takeaways from Blinken’s trip to China: Both sides “made progress and reached agreement on some specific issues.” Future talks are in the works. The rivalry will continue, keep the status quo on Taiwan. Tensions will continue.
NFIB Survey: Inflation Returns to Top Small Business Problem, Followed by Labor Quality
The NFIB Small Business Optimism Index increased 0.4 points in May to 89.4, which is the 17th consecutive month below the 49-year average of 98. The last time the Index was at or above the average was in December 2021. Other key findings include:
- Forty-four percent of owners reported job openings that were hard to fill, down one point from April and remaining historically very high.
- The net percent of owners raising average selling prices decreased one point to a net 32% (seasonally adjusted), still an inflationary level but trending down.
- The net percent of owners who expect real sales to be higher deteriorated two points from April to a net negative 21%.
Overall, 63% of owners reported hiring or trying to hire in May, up three points from April. Of those hiring or trying to hire, 89% of owners reported few or no qualified applicants for their open positions.
COVID Update - Pfizer, Moderna and Novavax Gear up for Fall Covid Vaccine Rollout
The U.S. Food and Drug Administration’s Covid strain selection for the next round of shots puts Pfizer, Moderna and Novavax on track to deliver new jabs in time for the fall – a decisive win for the vaccine makers as they gear up to compete against one another. The FDA on Friday advised the three companies to manufacture single-strain jabs targeting the omicron subvariant XBB.1.5, one of the most immune-evasive Covid variants to date.
That strain accounted for nearly 40% of all Covid cases in the U.S. in early June, but that proportion is slowly declining, according to data from the Centers for Disease Control and Prevention. But facing pressure to deliver new shots by the fall, Pfizer, Moderna and Novavax began development on versions of their vaccines targeting XBB.1.5 months before the FDA’s decision. Preliminary data those companies presented last week indicates that their jabs produce strong immune responses against all XBB variants.
U.S.-Funded Scientist Among Three Chinese Researchers Who Fell Ill Amid Early Covid-19 Outbreak
A prominent scientist who worked on coronavirus projects funded by the U.S. government is one of three Chinese researchers who became sick with an unspecified illness during the initial outbreak of Covid-19, according to current and former U.S. officials. The identity and role of the researchers is one piece of intelligence that has been cited by proponents of the judgment that the pandemic originated with a lab leak, though the nature of their illness hasn’t been conclusively established.
More than three years after the pandemic began, and with almost seven million deaths around the world, the virus’s origins remain a subject of debate, with implications for U.S.-China relations, global biosafety and international research practices. Robert Kadlec, a former senior Health and Human Services Department official, said the three scientists “published on SARS-related coronavirus experiments done at inappropriately low biosafety settings that could have resulted in a laboratory infection.”
China Cuts Borrowing Rates Again in Bid to Juice Recovery
Chinese banks trimmed benchmark interest rates on loans to households and businesses, a telegraphed move that follows earlier rate cuts aimed at reigniting a fading economic recovery. Economists say lower borrowing costs might not be the right medicine for China’s economy, however, as households and businesses have shown little appetite to borrow with debt levels already high and prospects for jobs and growth deeply uncertain.
On Friday, Chinese Premier Li Qiang said the government is studying a package of policy measures to promote sustained economic growth. “The external environment is becoming more complex and severe, and the slowdown in global trade and investment will directly affect the recovery process of our country’s economy,” Li said at a meeting of China’s cabinet, known as the State Council, according to state television.
Reminder - DHS Ends Form I-9 Requirement Flexibility
In March 2020, ICE announced that it would defer the requirement that employers review employees’ identity and employment authorization documents in the employees’ physical presence, instead allowing that to occur remotely, with the expectation that physical inspection would occur within three business days after normal operations resumed. In follow-on guidance, ICE noted that employers could continue to implement the flexibilities until affected employees undertake non-remote employment on a regular, consistent, or predictable basis, or the extension of the flexibilities related to such requirements is terminated, whichever is earlier.
In October 2022, DHS and ICE announced that the flexibilities would be extended until July 31, 2023. A May announcement from ICE clarifies for employers that they have until Aug. 30, 2023, to perform all required physical examination of identity and employment eligibility documents for those individuals hired on or after March 20, 2020, and who have only received a virtual or remote examination under the flexibilities.
Manufacturing Jobs Growth – Washington State Takes the Crown in May
Washington created the most net new manufacturing jobs in May, adding 2,300 workers. Other states with notable employment growth for the month included Michigan (up 1,900), Kentucky (up 1,700), Colorado (up 1,300) and Arkansas (up 1,100). At the same time, Texas (up 26,100) reported the greatest growth in manufacturing employment over the past 12 months. Other states with significant year-over-year gains included Florida (up 10,400), Washington (up 10,100), Missouri (up 10,000) and Kentucky (up 9,600).
New York Added 800 manufacturing workers in May and has had a net increase of 1,000 year on year.
Lawmakers Look to Address Decline in R&D Investment
The bipartisan American Innovation and R&D Competitiveness Act seeks to counter the decrease in US research and development investment by introducing immediate expensing for eligible R&D costs. This decline has been driven by a tax provision mandating businesses to allocate R&D expenses over several years. "Rather than investing in R&D, which includes growing their workforce, many (small businesses) are at a standstill with how to proceed unless Congress acts soon," said Eric Fanning, president and CEO of the Aerospace Industries Association.
The legislation is simple — it allows for immediate expensing on eligible R&D costs, bringing us back to where we were just a few years ago and helping us secure our dominance in research and development.
What You Needs to Know About the EEOC AI Guidance
How can employers do their part to mitigate potential harm from emerging Artificial Intelligence technology? That question drove a recent technical assistance document issued by the U.S. Equal Employment Opportunity Commission, which one employment labor says organizations must pay attention to. EEOC Chair Charlotte A. Burrows recently commented that the technical assistance document represents “another step in helping employers and vendors understand how civil rights laws apply to automated systems used in employment.”
Marissa Mastroianni, an employment member at national law firm Cole Schotz, explains that, most importantly, the document cautions employers that the EEOC will use its longstanding disparate impact analysis to consider whether employers that are using AI for hiring and employment decisions are compliant with Title VII of the Civil Rights Act of 1964.In the document, Mastroianni says, the EEOC unequivocally confirms that improper use of AI could violate Title VII, outlining several examples of AI tools that could give rise to such violations:
UPS Teamsters Overwhelmingly Authorize Strike if no Deal is Reached by August 1
The members at the country’s largest delivery service voted 97% in favor of authorizing a strike to start on August 1, if there is no agreement in contract talks now taking place between the company and the union. The Teamsters represent more than 340,000 UPS logistics warehouse workers and package delivery drivers nationwide. The current five-year contract expires on July 31, meaning a strike could start on August 1 if there is no agreement on a new deal before then. But there have been signs of progress at the negotiating table.
If a strike does come, it would be the largest against a single employer in America’s history, as UPS (UPS) is the largest unionized employer in the private sector. And it is crucial to the nation’s economy, with an estimated 6% of the United States’ gross domestic product, the broadest measure of economic activity, moving aboard UPS (UPS) trucks. It delivered 18.7 million domestic packages a day in the first three months of the year.
Auto-Finance Delinquencies Rise Past Great Recession Peak, But Are Concentrated in Subprime
Surpassing levels last seen during the Great Recession, account-level delinquency rates of auto loans 60+ days past due (DPD) have risen 26 basis points from Q1 2021's 1.43% to 1.69% in Q1 2023, according to a recent Credit Industry Insight Report (CIIR) by TransUnion. This has resulted in captive finance companies, banks, credit unions and independent lenders tightening underwriting standards on new- and used-vehicle loans to stem losses due to charge-offs, according to TransUnion/S&P Global Mobility AutoCreditInsight.
That said, there is nuance in the numbers, and TransUnion and S&P Global Mobility analysts urged caution in drawing sensationalistic conclusions across the broader auto-financing market. The spike in delinquencies is not impacting a large slice of lenders - represented by OEM captive finance companies and major banks - doing near-prime, prime, prime-plus and super-prime originations. The brunt of the delinquencies is being felt by the independent lenders who operate in the subprime space and primarily lend for used-vehicle purchases.
SUNY New Paltz Win Innovation Prize with Cooking Oil Disposal Solution
William Gonzalez ’23, and Alexander Cabrera ’23, along with Alexander Knobloch ’24, conceived the Dispose O Oil–a disposable bag designed to be secured in a closed container to store excess cooking oil and to be composted once the bag is full–while taking Professor Chris Napolitano’s fall 2022 Entrepreneurship and Business Planning course. “Professor Napolitano always talked about how we should approach product ideas by first answering what the problem is we’re trying to address,” said Gonzalez. “I realized then and there I had the perfect idea.”
They fine-tuned their pitch for the March 2023 Mid-Hudson Regional Business Plan Competition. They took a first place award in the competition, earning $500 and qualifying them to compete at the New York State Business Plan Competition, where they took top prize in their category, earning them $10,000 and attention from investors.
Boeing Predicts Surge in Global Aircraft Demand
Boeing Co. issued a new 20-year forecast (2023-42) for the commercial aviation sector, anticipating continued growth in demand for new jets – with the total number of aircraft in service increasing by almost 100%. This development will result as individual markets’ domestic air travel continues to expand and international traffic returns to its pre-pandemic level. The latter detail will be apparent by 2024, according to Boeing, three years after most airlines and their suppliers were grounded by Covid-focused restrictions.
In the current report Boeing projects the global industry will be comprised of 48,600 aircraft by 2042, nearly doubling its present size, Boeing noted, of which total 42,595 will be new aircraft – valued at $8 trillion. That amount will not include a separate $3.8 trillion for commercial services over the period of the forecast. In terms of new aircraft demand, more than three-quarters (32,420) of the total to be delivered over the 20-year period will be single-aisle jets. Wide-body aircraft (7,440) and regional jets (1,810), plus new freighter jets (7,440) represent the rest of the new aircraft deliveries that Boeing forecasts. About half of all new deliveries over the 20-year period will involve various new, fuel-efficient models that will reduce aircraft emissions.
NYSERDA is Releasing $10 Million For Carbon Neutral Projects with Industrial/Manufacturing Companies Through CFA Process
The CFA was put in place a few years ago as part of the State's initiative to make the process of pursuing grant funding easier and more efficient. The distribution of funding is decided by Regional Economic Development Councils (REDC), which work closely with municipal and business concerns to ensure that money is allocated equitably and fairly. This year, the New York State Energy Research and Development Authority (NYSERDA) is releasing $10 million in funding for carbon-neutral projects and meeting the REDC goals in that region.
The funding in question will be available in two categories (Category A and Category B) of up to $5 million each. In Category A, sites considered commercial, industrial, institutional, municipal, or mixed-use may be eligible for funding of up to $2 million or 60 percent of the project's total cost. Work that could be covered includes planning, design, construction, and installation of technology to achieve carbon neutral or net zero energy performance. Category B provides funding for planning, energy modeling, and design to convert certain structures to achieve carbon neutral or net zero energy performance.
Read more at Walden Engineering