Member Briefing June 22, 2023

Posted By: Harold King Daily Briefing,

Powell Expects More Fed Rate Hikes Ahead as Inflation Fight ‘Has a Long Way to Go’

Federal Reserve Chairman Jerome Powell on Wednesday affirmed that more interest rate increases are likely ahead until additional progress is made on bringing down inflation. Speaking a week after Federal Open Market Committee officials decided for the first time in more than a year not to push rates higher, the central bank leader indicated that the move likely was just a brief respite rather than an indication that the Fed is done hiking.

“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” Powell said in prepared remarks for testimony he will deliver to the House Financial Services Committee. The speech is part of his semiannual appearance on Capitol Hill to update lawmakers on monetary policy. Noting that inflation has cooled but “remains well above” the Fed’s 2% target, Powell said the central bank still has more work to do.

Read more at CNBC

War in Ukraine Headlines


Hudson Valley Unemployment Rate Rises to 2.8% as Labor Force Participation Ticks Higher

The May 2023 unemployment rate for the Hudson Valley Region is 2.8 percent.  That is up from 2.3 percent in April 2023 and unchanged from May 2022.  In May 2023, there were 32,600 unemployed in the region, up from 27,000 in April 2023 and down from 32,900 in May 2022.  Year-over-year in May 2023, labor force increased by 3,300 or 0.3 percent, to 1,176,200. Manufacturing employment in the region rose by 100 to 42,000 in May from 41,900 in April.  That is 800 fewer than were employed in the sector in May of 2022.

All seven counties in the Hudson Valley had unemployment rates under 3 with Rockland have the lowest at 2.5% and Orange the highest at 2.9%. Across the entire state The Capital Region had the lowest rate at 2.5%, New York City was the highest at 5.1%.

Read more at the WSJ

Top 20 Manufacturing Countries in the World

According to the World Bank, around 17% of the global GDP comes from the manufacturing sector. In 2021, manufacturing contributed around $16 trillion directly, and trillions more indirectly as it is the backbone of several other industries, most of which would not be possible if the manufacturing industry was to shut down. Manufacturing also allows countries to improve and make more efficient their agricultural processes, thus improving efficiency and increasing output, which result in higher standards of living.

To determine the top manufacturing companies in the world, we relied on data from the World Bank, and ranked each country according to its 2021 manufacturing output in USD. These 20 countries alone accounted for 75% of the total global manufacturing output of $16 trillion.  China leads the list with total manufacturing value added in 2021 of $4,865.8.  The United States was number 2 with a total manufacturing value added in 2021 of $2,497.1

Read more at YahooFinance

COVID Update - Biden Ignores Deadline to Declassify Covid Origins Info

President Joe Biden missed a key deadline set by a bipartisan law he signed that called for the declassification and release of intelligence on the Wuhan lab and its possible links to the origins of COVID-19.

The House and Senate unanimously passed the COVID-19 Origin Act of 2023 in March, with the law giving the Office of the Director of National Intelligence 90 days to declassify and release intelligence on the Wuhan Institute of Virology and its connections to the emergence of SARS-CoV-2. The deadline passed on Sunday without the declassification happening.

Read more at The Washington Examiner

NYS COVID Paid Leave Developments

With much of COVID-19 in the rearview mirror, many New York employers have wondered when, or even if, New York would take action to end COVID-19 Paid Leave requirements. Notably, New York’s COVID-19 Paid Leave law does not include a sunset provision and New York remains one of only a handful of jurisdictions that continue to maintain an active COVID-19 Paid Leave requirement. At long last, it seems that we may have some movement from the State towards ending COVID-19 Paid Leave. On May 25, 2023 the New York State legislature referred a bill to the Standing Committee on Labor proposing the following changes:

  • removing the requirement of a 14-day period of sick leave for private employers with 100 or more employees and replacing it with 5-days of sick leave and PFL/TBI if necessary; and
  • lessening the required 14-days to 5-days of leave for public employers.

Perhaps more significant for employers, the bill also proposes that by April 1, 2024, the New York State Department of Labor and New York State Department of Health must prepare a report regarding the number of employees who were provided unpaid or paid sick leave and disability benefits under the law. If, after that point, the Legislature does not adopt a resolution declaring the continued need for the sick leave within 60 days of receipt of the report, the law will expire and be deemed repealed.

Read more at Bond Schoeneck & King

The Rollout of Heavy-Duty Electric Trucks in the U.S. is Facing a Supply-Chain Problem

Executives say high competition for new electrification projects has led to a shortage of critical equipment, slowing the construction of crucial infrastructure such as charging stations. The WSJ Logistics Report’s Paul Berger writes the lack of transformers, switchgear and electrical steel is adding months to the time it takes to build charging facilities to power electric fleets.

The problem is being fueled by the boom in big, power-hungry projects, including semiconductor plants, data centers and renewable-energy installations that tax the capacity of utilities. Truckload carrier Schneider National says it took nearly three years to get a new charging station running in California, thanks to a long permitting process and delays in getting power to the site. Electrical equipment makers say delays will likely worsen as demands on power-generation supply chains grow.

Read more at The WSJ

Earnings: FedEx Announces Mixed Results, Soft Guidance

Airfreight and delivery giant FedEx (FDX) posted mixed results for its late Q4 report Tuesday to wrap up its 2023 fiscal year. FedEx announced late Tuesday its earnings fell 28% in Q4, vs. an average 27% over the prior three quarters. The company's sales declines accelerated for a third straight quarter, and for a third consecutive period missed Wall Street views.

For the Q4 results late Tuesday, FedEx reported a 28% earnings drop to $4.94 per share while revenue fell 10.2% to $21.9 billion. FactSet analysts expected earnings diving to $4.85 per share on $22.55 billion in sales. Full year adjusted earnings tumbled 27% to $14.96 per share while revenue slipped 3.5% to $90.2 billion. The results topped earnings estimates of $14.80 per share but fell short of sales predictions of $90.88 billion. For the 2024 fiscal year, FedEx guided adjusted earnings from $16.50 to $18.50 per share on flat to low single digit revenue growth. FactSet analysts forecast fiscal 2024 earnings rising to $18.33 per share on $90.91 billion in sales.

Read more at Investors Business Daily

How the Panama Canal Is Adapting to the Worst Drought in a Century

The Panama Canal is going through its driest spell in more than a century, and an extended lack of rainfall could saddle global supply chains with delays and higher fees to move cargo. The government agency that manages the artificial waterway implemented travel restrictions in May to avoid ships running aground, and since then some large vessels have had to reduce container loads by roughly one-quarter.

The Panama Canal, whose daily water use is triple that of New York City, relies on rainfall. More than 50 million gallons of water are lost to the sea every time a ship moves through the locks. That water is replenished from a reservoir, which is in turn filled up when it rains. If there isn’t enough rain, as was the case during droughts in the late 1990s, a number of ships could avoid the passage, according to canal executives. Canal officials are hoping the second half of the year brings some relief. Panama is one of the world’s wettest countries, but in the first five months of the year accumulated rainfall in the area around the canal was 47% below the historical average, according to the Panama Canal Authority.

Learn more at The WSJ

Modi’s Visit - Tech's Stake in the U.S.-India Relationship

U.S. President Joe Biden welcomes India's prime minister, Narendra Modi, on Wednesday for two days of talks that the White House sees as bolstering "one of the defining partnerships of our age," despite ongoing concerns about human rights. Washington wants India to be a strategic counterweight to China while Modi is seeking to raise the influence that his country, now the world's most populous, has on the world stage.

India is a huge supplier of tech talent, both to American companies operating in India and directly to the U.S. itself — a role that's grown as friction with China has made it harder for the U.S. to tap Chinese tech talent and industrial capacity. Also, key elements of American AI are often made in India — usually at much lower wages that prevailing U.S. rates, as workers manually label data to improve AI foundation models.

Read more at Axios

Bill Gates’ Venture Firm Invests in A.I. to Use Machine Learning for Mining Rare Earth Metals

KoBold Metals, a Berkeley-based mining company that uses artificial intelligence to mine for rare earth elements, has closed out a funding round that crowns it an A.I. “unicorn” worth $1 billion and ropes in some of the biggest investors in the world. The $200 million round, reported in the Wall Street Journal, included money from Breakthrough Energy Ventures, a Bill Gates–backed venture capital firm that invests in clean energy companies on behalf of people including Jeff Bezos and Jack Ma.

KoBold, founded in 2018, uses machine learning to look for deposits of metals that are crucial to the construction of batteries for electric vehicles—specifically lithium, nickel, cobalt, and copper. The company has more than 60 projects across three continents, in which it is currently investing $100 million annually. It also has an extensive research and development budget devoted to A.I.’s use in modeling the earth’s subsurface and exploring depths beyond the reach of conventional techniques.

Read more at YahooFinance

Bill Ford: UAW and Ford are Not Enemies, US Can’t Compete with China on EV’s

Speaking on Fareed Zakaria GPS, Bill Ford somewhat candidly said that the company is unprepared to go against the EVs currently coming out of China.” He later added “they’re not here, but they’ll come here, we think, at some point. When I look back when the Japanese came to America, we weren’t ready. Then the Koreans came, and we really weren’t ready. Well guess what, it’s going to happen again and we are going to be ready because we are acutely aware of what not being ready will do to us.” The company’s current goal is to dramatically scale EV production while broadly shifting to a profitable business model for its second generation battery electric products.

In a separate interview Ford balked at UAW ‘enemy' rhetoric saying ‘That's just wrong.' Ford Motor Co.'s executive chair was referring to comments made by UAW Presdienht Shawn Fain who threatened strikes against the Big Three aoutomakers in advance on contract negotiation.

Read more at the Detroit Free Press

In Paris: Ukraine, China Dictate Global Trends in Defense Spending

Upward trends in defense spending across the globe are largely triggered by the same catalysts that could send them spiraling the other direction or multiply even further: the war in Ukraine and a potential conflict with China. The European market has seen defense spending on the rise since 2014 after the Russian takeover of Crimea, said Dan Darling, Forecast International’s director of military and defense markets, during a talk at the Paris Air Show June 20.

Also contributing to defense spending trends are Sweden and Finland’s applications for NATO membership, with Finland accepted and Sweden waiting in the wings. Adding the two countries to the European market makes it a bit more robust, as both have to commit to the 2 percent GDP standard.

Read more at National Defense

UK's Stubborn Inflation Fails to Fall, Turning up Heat on BoE

British inflation defied predictions of a slowdown and held at 8.7% in May, putting yet more pressure on the Bank of England a day before it is expected to raise interest rates for the 13th time in a row. Markets increased bets on further rate rises following Wednesday's official figures, which also showed underlying inflation hit its highest since 1992 last month. The headline figure means British inflation is once again the fastest of any major advanced economy.

Economists polled by Reuters had forecast the annual consumer price inflation rate would drop to 8.4% in May, moving further away from October's 41-year high of 11.1%.Analysts said the BoE's Monetary Policy Committee was now likely to increase borrowing costs by more over the coming months. Citi said it expected Bank Rate - which currently stands at 4.5% - to peak at 5.25%, up from its previous 5% call.

Read more at Reuters

Rivian Adopts Tesla's EV Charging Standard, Joining Ford and GM

Rivian Automotive Inc. will incorporate Tesla Inc.’s electric-vehicle charging ports into future automobiles and gain access to its supercharger network, marking another high-profile adopter of technology that is rapidly becoming the industry standard. The agreement will give Rivian drivers access to more than 12,000 Tesla superchargers across the U.S. and Canada beginning next year, according to a statement Tuesday. Rivian will also incorporate Tesla’s North American Charging Standard port into its existing EV models from 2025 and a future model called R2.

There’s been a domino effect of EV makers and charging infrastructure companies shifting toward Tesla’s technology in North America since Ford Motor Co. struck a deal with Elon Musk’s company last month. That was followed shortly by a similar announcement between General Motors Co. and Tesla, along with moves by companies such as ChargePoint Holdings Inc., Blink Charging Co. and EVgo Inc. to offer compatible chargers.

Read more at Bloomberg

Chicken Grown From Cells Headed to U.S. Dinner Tables

The U.S. Agriculture Department gave the green light Wednesday for two California-based companies to sell “cell-cultivated” chicken, which is grown outside of animals, to U.S. consumers. The USDA’s approval means a small group of diners in the U.S. will be able to taste chicken meat developed by scientists and entrepreneurs who are hoping to meet growing global meat demand without slaughtering animals, and while exacting a smaller toll on the planet.

The first approvals Wednesday went to Alameda, Calif.-based company Good Meat, an arm of food technology company Eat Just, and Berkeley-based Upside Foods, marking the end of a long regulatory review of the frontrunners of the new cell-cultivated meat industry. The U.S. Food and Drug Administration already said months earlier it views the cultivated chicken from Good Meat and Upside Foods as safe to eat.

Read more at The WSJ