Member Briefing June 23, 2022
Powell Testimony: Fed Chair Says Higher Interest Rates Could Cause a Recession
Federal Reserve Chairman Jerome Powell said the central bank’s battle against inflation could lead it to raise interest rates high enough to cause an economic downturn. “It’s certainly a possibility,” Mr. Powell said Wednesday during the first of two days of congressional hearings. “We are not trying to provoke and do not think we will need to provoke a recession, but we do think it’s absolutely essential” to bring down inflation, which is running at a 40-year high.
Mr. Powell said the Fed plans to continue raising interest rates until it sees clear proof that inflation is slowing to the central bank’s 2% target. Officials raised interest rates by 0.75 percentage point last week, the largest increase since 1994, and Mr. Powell and several colleagues have signaled that another such increase could be warranted at their next meeting, July 26-27.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – Reuters
- U.S. Attorney General Merrick Garland Visits Ukraine to Discuss Investigating War Crimes – WSJ
- EU Moves Toward Russian Lobbyist Ban – Politico
- Finland is Ready to Fight Russia if Attacked – Defense Chief – Reuters
- Germany Delivers First Heavy Weapons to Ukraine, Five Months Into War – The Telegraph
- Russian Hackers Targeting U.S., Other Ukraine Allies – Politico
- Drone Strike Hits Russian Refinery Near Ukraine – AP
- Fifteen Killed as Russia Rains Rockets on Kharkiv – Reuters
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Biden Calls for Three-Month Federal Gasoline Tax Suspension
Mr. Biden and his advisers have been discussing the issue for months in the midst of increasing political pressure to take action to address record-high gas prices. “Today I’m calling for a federal gas tax holiday [and] state gas tax holiday for the equivalent relief to customers,” he said during a Wednesday speech
A suspension of the 18.4-cents-a-gallon federal gasoline tax and 24.4-cents-a-gallon diesel tax through September would require congressional approval, so a move by Mr. Biden to throw his support behind the effort would be largely symbolic. Lawmakers of both parties have expressed resistance to suspending the tax, a move that would likely need bipartisan support to become law. Some Democrats worry that a suspension of the tax would have a limited effect on prices, with oil companies pocketing much of the savings.
Dudley: The US Economy Is Headed for a Hard Landing
If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it. A recession is inevitable within the next 12 to 18 months. Much like Wile E. Coyote heading off a cliff, the US economy has plenty of momentum but rapidly disappearing support. Falling back to earth will not be a pleasant experience.
In their latest set of projections, Fed officials laid out a benign scenario, in which the economy keeps growing at a moderate pace and unemployment increases only slightly, even as the central bank raises interest rates significantly to get inflation under control. While the Fed’s forecasts have become more plausible over time, I see several reasons to expect a much harder landing.
U.S. COVID Update – UAW, Detroit Automakers Make Face Masks Optional
Face masks are now optional at the Detroit Three’s plants, the automakers and the United Auto Workers announced Tuesday. The decision to make mask-wearing optional follows a meeting Monday of the COVID-19 Joint Task Force, a group formed in the early days of the coronavirus pandemic to establish safety protocols and made up of the three automakers and the union. Each of the companies will communicate to its employees when the change goes into effect at their facilities.
Last week, Michigan’s hospitalization and new case rates declined for the fourth straight week, according to Michigan Department of Health and Human Services data. Much of southeast Michigan is classified by the CDC as being low risk, according to the state’s COVID-19 dashboard.
COVID Vaccines are Here for Young Kids. But the Logistics Aren’t Easy
The White House has rolled out a plan for vaccinating the 19 million kids under 5 in the U.S., but if you’re just coming out of the holiday weekend trying to figure out where to find an appointment, you’re not alone. Claire Hannan has been helping immunization managers from all 50 states navigate COVID-19 vaccine rollouts since fall 2020 as the executive director of the Association of Immunization Managers. She told NPR what’s been happening behind the scenes to get this new low-dose formulation of Moderna and Pfizer’s vaccines out so that little kids can finally get protected.
There were two waves of pre-orders. The first wave closed earlier in June, and the provider had to be able to accept vaccine [Monday] — on the holiday — so the wave one pre-orders were small. There were significantly more orders in wave two of the pre-orders, which begin being delivered [Wednesday] or Thursday. So I think that it’ll be easy to find vaccines by the end of the week.
2.9% – The Hudson Valley Region’s May 2022 Unemployment Rate
The New York State Department of Labor today released preliminary local area unemployment rates for May 2022. The State’s area unemployment rates rely in part on the results of the Current Population Survey, which contacts approximately 3,100 households in New York State each month. New York State’s seasonally adjusted unemployment rate decreased from 4.5% in April to 4.4% in May 2022.
The May 2022 unemployment rate for the Hudson Valley Region is 2.9 percent. That is unchanged from April 2022 and down from 4.6 percent in May 2021. In May 2022, there were 33,300 unemployed in the region, up from 33,000 in April 2022 and down from 52,000 in May 2021. Year-over-year in May 2022, labor force increased by 28,000 or 2.5 percent, to 1,160,700.
NY Business Leaders, Attorneys at Odds Over Proposed Workers Comp Changes
Business owners and personal injury attorneys are butting heads over the Justice for Injured Workers Act, which would increase workers compensation for milder injuries and make it easier for injured workers to seek additional benefits during their recovery. The bill, which passed the Senate and Assembly in the final hours of legislative session, is headed for Gov. Kathy Hochul’s desk. If signed into law, a worker who is partially disabled due to a workplace injury will receive the full benefit awarded employees with a total disability throughout their recovery unless the employer can provide suitable, light-duty work.
Business leaders say the changes to the state’s worker’s compensation system would devastate small businesses already struggling to stay afloat amid pandemic and inflation-related hardship. “I truly believe that the bill really helps workers comp claimant attorneys more than it helps anyone else while increasing costs for business at a time when businesses are facing absolute record increases in unemployment insurance, labor costs and everything else in the supply chain and the cost of doing business,” said Lev Ginsburg, counsel for the Business Council of New York State.
9.1 – UK Inflation Rises at Fastest Rate for 40 Years as Food Costs Jump
UK inflation edged up to 9.1% in the 12 months to May, from 9% in April, the Office for National Statistics (ONS) said. Fuel and energy prices are the biggest drivers of inflation, but the ONS said food costs had pushed it up further. Currently, inflation is at the highest level since March 1982, when it also stood at 9.1% and the Bank of England has warned it will reach 11% this year.
Workers and unions are pushing for pay rises to cope with higher prices. But the government has warned against employers handing out big increases in salaries over fears of a 1970s style “inflationary spiral” where firms hike wages and then pass the cost on to customers through higher prices. Inflation is the pace at which prices are rising. For example, if a bottle of milk costs £1 and that rises by 5p compared with a year earlier, then milk inflation is 5%.
IEA Chief Warns Europe to Prepare for Total Shutdown of Russian Gas Exports
The International Energy Agency has warned that Europe must prepare immediately for the complete severance of Russian gas exports this winter, urging governments to take measures to cut demand and keep ageing nuclear power stations open. Fatih Birol, the head of the IEA, said Russia’s decision to reduce gas supplies to European countries in the past week may be a precursor to further cuts as Moscow looks to gain “leverage” during its war with Ukraine.
“Europe should be ready in case Russian gas is completely cut off,” Birol told the Financial Times in an interview. “The nearer we are coming to winter, the more we understand Russia’s intentions,” he said. “I believe the cuts are geared towards avoiding Europe filling storage, and increasing Russia’s leverage in the winter months.” The IEA, which is primarily funded by members of the OECD, was last year one of the first official bodies to accuse Russia publicly of manipulating gas supplies to Europe in the build-up to Moscow’s invasion of Ukraine.
Canada is Banning Single-Use Plastics
Canada is moving forward with a comprehensive plan to ban “harmful” single-use plastics, in a sweeping effort to fight pollution and keep them out of the environment. Most plastic bags, disposable cutlery and plastic straws would fall under the new ban, as well as stir sticks, cups and six-pack rings that hold cans together. Few exceptions have been made for medical needs and accessibility reasons, or other recognized specific cases.
The order will phase in over the next several years, starting with a ban on the manufacture and import of single-use plastics from December 2022. Sales of the items will be prohibited the following year, while the measure will put an end to the export of Canadian plastics by the end of 2025. Banning single-use plastics will be a complex task given that they are abundant, convenient and cheap. Businesses that heavily rely on the material will also need to come up with new solutions, like the restaurant sector where plastic takeout containers, cutlery and bags are the norm.
America Faces a Housing Bust
The National Association of Realtors’ measure of home affordability, based on mortgage rates, home prices and household income, showed that as of April existing homes were at their least affordable level since July 2007. They are even less affordable now. On Tuesday, the NAR said the median price on an existing home rose to $407,600 in May from $395,500 in April, while Freddie Mac reported last week that the average rate on a 30-year fixed mortgage was 5.78%, up from 5.23% a week earlier and from an April average of 4.98%.
Disappointing as some of the recent housing data have been, it will only get worse in the months ahead. The NAR on Tuesday said that existing-home sales in May slipped to 5.41 million from April’s 5.6 million, at a seasonally adjusted annual rate—the lowest level since July 2020. But the figures are based on closings, so many of the buyers locked in rates at earlier, lower levels. When home builder Lennar reported results for its fiscal quarter ended May 31 on Tuesday, it said that the combination of rising rates and rising prices “began to drive buyers in many markets to pause and reconsider.”
LinkedIn CEO Reveals the Generational Data Behind the Great Reshuffle – Gen Z Trend Should Frighten Employers
LinkedIn CEO Ryan Roslansky has issued a word of warning to employers grappling with an intensifying battle for talent: “Motivate and inspire Gen Z, or risk being left behind.” People are switching jobs at a higher rate than ever before as they figure out not only how and where they work, but why they work.
“What’s fascinating to look at is the fact that the Great Reshuffle has played out differently among generations,” he noted. The surge in job-hopping was mainly driven by Gen Z and millennials, who moved at a record pace in what represented an unprecedented shift in the advertising industry. “This generation believes it’s not only okay to move around frequently, but it’s expected, and potentially have a side gig or two along the way.
Tesla Faces WARN Act Suit Over Layoffs
In a lawsuit filed Sunday, two former Tesla employees claim the electric carmaker violated federal law by laying off hundreds of employees on short notice. On June 2, Tesla CEO Elon Musk sent an internal email to executives saying he had a “super bad feeling” about the economy and saying the company needed to terminate about 10% of its salaried workforce, according to Reuters. Over the next few days, two workers at Tesla’s Gigafactory in Sparks, Nevada, say they were terminated. John Lynch said he was notified of his immediate dismissal on June 10, while Daxton Hartsfield said he was informed on June 15 and terminated on the same day.
Lynch and Hartsfield, who filed the lawsuit, said at least 500 of their coworkers in Nevada lost their jobs at around the same time, the document showed. The court document showed the plaintiffs stated Tesla’s actions violated the Worker Adjustment and Retraining Notification Act, which requires employers to notify workers at least 60 calendar days in advance before shutting down a plant or laying off 50 or more workers at the same site.
Airbus Draws Multi-Billion Order from Budget Carrier Easy Jet
The U.K. low-cost airline easyJet confirmed it will buy 56 new Airbus A320neo aircraft and convert existing orders for 18 A320neo jets to A321neo models. The OEM has not confirmed the contract, though the list price for such a purchase could be nearly $6.5 billion. Based in London and serving more than 30 European destinations, easyJet operates an all-Airbus fleet of 324 A320 and A320neo series aircraft.
The A320neo series jets are narrow-body aircraft powered by CFM International LEAP-1A or Pratt & Whitney PW1000G geared turbofan engines, and featuring sharklet wings, as part of fuel-saving design. Airbus maintains that the A320neo series achieves 15-20% greater fuel efficiency than the previous A320 series. Deliveries for the new aircraft will begin in 2026 and continue to 2029, as easyJet replaces older A319 and A320 jets.