Member Briefing June 27, 2022
IMF Slashes U.S. Growth Forecast, Sees ‘Narrowing Path’ to Avoid Recession
The International Monetary Fund on Friday slashed its U.S. economic growth forecast as aggressive Federal Reserve interest rate hikes cool demand but predicted that the United States would “narrowly” avoid a recession. In an annual assessment of U.S. economic policies, the IMF said it now expects U.S. Gross Domestic Product to grow 2.9% in 2022, less than its most recent forecast of 3.7% in April. For 2023, the IMF cut its U.S. growth forecast to 1.7% from 2.3% and it now expects growth to trough at 0.8% in 2024.
Last October, the IMF predicted 5.2% U.S. growth this year, but since then, new COVID-19 variants and stubborn supply chain disruptions have slowed recovery, while a sharp spike in fuel and food prices further stoked inflation to 40-year highs.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – Reuters
- Russia Strikes Kyiv as Troops Consolidate Gains in the East – Politico
- Ukraine Becomes an Official EU Membership Candidate – WSJ
- Ukraine’s Severodonetsk ‘Fully Occupied’ by Russian Forces – France 24
- Boris Johnson Urges World Leaders to Hold Firm on Ukraine – The Guardian
- Ukraine Orders Withdrawal From Severodonetsk to Avoid Encirclement – WSJ
- Nike to Leave Russia Permanently Over Ukraine Invasion – The Hill
- Briefly United by Ukraine, Europe Faces Divisions on the Home Front – The Economist
- U.S. Gas Sales to China Dry Up as Ukraine War Disrupts Energy Trade – WSJ
- U.S. Long-Range Rocket Systems Arrive in Ukraine – Minister – Reuters
- G7 Leaders Gather for Summit Amid Ukraine War, Stagflation Risk – France 24
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
S&P Global Flash – U.S. Manufacturing PMI Falls:
The S&P Global Flash U.S. Manufacturing PMI declined from 57.0 in May to 52.4 in June, the lowest reading since July 2020.
- Both new orders (down from 56.1 to 48.4) and output (down from 55.2 to 49.6) contracted in June for the first time in roughly two years, with global challenges, supply chain bottlenecks, workforce shortages and inflationary pressures weighing heavily on activity.
- Delivery times (up from 31.1 to 33.0) remained too long but lessened a bit in June.
- Exports (down from 52.2 to 49.7) fell for the first time since January, and growth in employment (down from 53.1 to 52.3) slowed.
- Raw material costs (down from 84.2 to 77.9) remained highly elevated but decelerated in June, growing at the weakest pace since April 2021.
U.S., European Economies Slow Sharply as Recession Risks Grow
New figures on manufacturing and services activity underline how dark the outlook has become in both Europe and the U.S. Russia’s war in Ukraine has hit global growth as high inflation spread across the globe. Economies also face continuing supply-chain disruptions and the prospect of rising interest rates that curb business investment. Europe faces additional pressure from a possible energy shortage this winter.
Data firm S&P Global said on Thursday that its U.S. composite purchasing managers index—which measures activity in both the manufacturing and services sectors—fell to 51.2 in June from 53.6 the previous month to reach a five-month low. In the eurozone, the index fell to 51.9 in June from 54.8 in May, a 16-month low. A reading above 50.0 points to an expansion in activity, while a figure below that threshold points to a contraction.
U.S. COVID – Plateaued Cases
The US CDC is reporting 86.4 million cumulative cases of COVID-19 and 1,009,444 deaths. The average daily incidence has plateaued over the past several weeks, holding relatively steady at approximately 100-110,000 new cases per day. The current 7-day average is 99,365 new cases per day. Likewise, the average daily mortality has held relatively steady at approximately 250-300 deaths per day since late May. Notably, the current 7-day average is 248, the lowest level since July 13, 2021.
Both new hospital admissions (+1.5% over the past week) and current hospitalizations (+1.1%) continue to increase, although they appear to have stabilized over the past week. Considering tl plateau in daily incidence, it is possible that hospitalizations could also remain elevated, rather than peaking and then declining. Community transmission in the US continues to be driven by the BA.2.12.1 sub-lineage of Omicron (56%).
Vaccine Rollout for Young Kids
President Biden visited a vaccine clinic in Washington, DC, on June 21 to mark the rollout of the last major phase of vaccinations in the nation,. In his remarks, President Biden said the availability of vaccines for the youngest children marks a “monumental step forward” and provides “some peace of mind” for parents who have been waiting 18 months since the first vaccines were authorized for adults. There are about 19 million children aged 6 months to 5 years in the US.
The Biden administration has said 10 million doses are available for distribution to states and healthcare providers, but only 2.5 million doses of the Pfizer-BioNTech vaccine and 1.3 million doses of the Moderna vaccine have been ordered to date. It remains unclear how many parents will vaccinate their young kids. Only 29% of 5-11 year-olds are fully vaccinated, while 59% of those aged 12-17 years are fully vaccinated. Some parents already are facing challenges securing an appointment to get their children vaccinated, despite a federal operational plan released and implemented earlier this month. While neighborhood pharmacies and pharmaceutical chains are included in this phase of the vaccination campaign, many are expecting families to go to primary care physicians and pediatricians because of trust, familiarity, and relationships that may not exist at the pharmacy. Additionally, some parents are weighing the differences between the 2-dose Moderna and 3-dose Pfizer-BioNTech vaccines for children.
Primary Elections for Governor, Other Offices Across New York Tomorrow, June 28th
The first of two primaries for New York is tomorrow, June 28th. New York voters are facing multiple elections this year thanks to a confusing and drawn-out redistricting process that flipped the Empire State’s election calendar on its head. The first primary is for Assembly and statewide offices — including races for governor, lieutenant governor, attorney general, comptroller, and U.S. Senate.
The second primary for NY State Senate and US congressional candidates will be held August 23rd. A special election to select who will represent the 19th US Congressional District will be held August 23rd. The election pits Ulster County Executive Pat Ryan against Dutchess County Executive Marcus Molinaro. the winner will serve the remainder of 2022.
U.S. Labor Market Remains Tight
The number of Americans filing new claims for unemployment benefits edged down last week as labor market conditions remained tight, though a slowdown is emerging amid high inflation and rising interest rates. Despite the second straight weekly decline reported by the Labor Department on Thursday, claims are hovering near a five-month high. There have been job cuts in sectors like technology and housing amid fears of a recession as the Federal Reserve aggressively tightens monetary policy to quell price pressures.
Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 229,000 for the week ended June 18. Economists polled by Reuters had forecast 227,000 applications for the latest week. Claims have been treading water since tumbling to more than a 53-year low of 166,000 in March.
U.S. Supreme Court Overturns Roe and Casey: What This Decision Means for Employers
Council Associate Member Jackson Lewis write that the Court’s ruling may affect employee benefit plans. Corporate management and directors should plan for changes and be aware of policies and fiduciary responsibilities. This can include preparing for public and employee reactions (for and against), legislative and law enforcement threats, social media posts, and other employee demonstrations. Pressure from a variety of groups to take a corporate public opinion also may occur.
Whether changes to leave policies, employee benefits, travel reimbursement, or handling accommodation requests, employers considering policies or benefit offerings in response to Dobbs must carefully review and consider federal and state laws, including state abortion-related legislation to evaluate the risk of potential liability.
Power Outages Are on the Rise in the US
Utility companies across the country are preparing for potential power-disrupting events later this year. In an analysis published by the Energy Information Administration (EIA), 2020 was the worst year for blackouts in the US, with residents averaging over eight hours without electricity, over twice the duration in 2013, when the EIA started collecting this data. The causes of the blackouts are a combination of severe weather events, aging power infrastructure, vegetation patterns, and increasing electricity demand.
An analysis from the Associated Press (AP) found that “Outages tied to severe weather rose from about 50 annually nationwide in the early 2000s to more than 100 annually on average over the past five years,” and “forty states are experiencing longer outages.” In 2021, the US was hit with 20 extreme weather events resulting in 688 deaths and $145 billion in social and economic costs according to the National Oceanic and Atmospheric Administration (NOAA). These extreme weather events were considered once-in-a-hundred-year events and not worth the capital investment to safeguard the electrical grid against, but now with such occurrences on the rise, people are reconsidering.
How Could Oil Price and Policy Rate Hikes Affect the Near-Term Inflation Outlook?
The authors from the NY Fed combine the demand and supply oil price decomposition from the New York Fed’s Oil Price Dynamics Report with yield curve data to quantify the likely path of inflation in the United States and the euro area over the next twelve months. Since the start of the year, oil prices have risen sharply owing to worsening expectations regarding global oil supply. We’ve also had an acceleration of inflation in the United States and the euro area, as well as a sharp steepening of the expected paths of policy rates in both economies.
These factors, combined with the potential for a slowdown in growth, have made the inflation outlook quite uncertain. Despite payback for the inflationary impact of current negative oil supply shocks during the second half of 2022 and the disinflationary effects of tighter monetary policy, by the second quarter of 2023 inflation rates will likely remain elevated.
Met Life Small Business Index Reaches Pandemic-Era High, But Inflation Concerns Grow
The U.S. Chamber and MetLife’s latest Small Business Index revealed that inflation is the top problem for small business owners, and two in three have raised prices to cope. This quarter’s Small Business Index score is 64.1, the highest score since the start of the pandemic. This score is consistent with last quarter’s score of 63.0.
- 85% of small business owners are concerned about the impact of inflation, up from 75% last quarter.
- 37% of small businesses have increased flexible work options to retain workers during the ‘Great Resignation.’
- 61% of small business owners say their business is in good health.
Regeneron Breaks Ground On 1.8 Billion Investments at Tarrytown Campus
The groundbreaking for Regeneron’s previously announced $1.8 billion research, preclinical manufacturing and support facilities at the company’s Westchester County campus in Tarrytown was held Wednesday. The biotechnology company that invents and manufactures life-transforming medicines for people with serious diseases, committed to creating at least 1,000 new full-time, high-skill jobs in the Mid-Hudson Region over the next five years.
To encourage Regeneron’s continued expansion in New York State, Empire State Development is supporting the project with up to $100 million in performance-based Excelsior Jobs Program tax credits, consistent with the company’s hiring goals. The Council of Industry is teaming with Empire State Development to present an information session for other Hudson Valley Manufacturers on the CFA process and economic development incentives.
Boeing Problems Shift from Demand to Supply, CEO Says
Boeing Co. chief executive revealed that the manufacture of commercial and defense aircraft will continue to struggle with supply-chain irregularities for another year or more, or through most of 2023. “The shift from demand to, now, supply issues… is remarkable, the speed with which it happened… and will probably stay that way in my view almost to the end of next year,” Calhoun said, according to reports from the Bloomberg Qatar Economic Forum.
Calhoun added the “the biggest restraint of all for that mid-tier set of suppliers and sub-tier set of suppliers is labor availability.” The Boeing 737 MAX narrow-body jet program returned to production in 2021 after a 19-month grounding and investigation, and it has resumed some success in landing new orders from airlines planning fleet replacements. However, shortages of some parts and sub-systems have been reported for that program, for which Boeing as a large order backlog.
The new 777X has been delayed several times and now is expected in 2025.
Top Security Tips for Remote Workers
Working from home is becoming popular, primarily because of the flexibility this setup offers. However, one of the biggest concerns for remote workers is how to stay safe and secure while working online.
Here are some cybersecurity tips from Hudson Valley IT Services that can help you stay protected while working from home.
The Climate Crisis and Invasion of Ukraine are Transforming the Politics of Nuclear Power
The White Mesa mill in southern Utah is still converting uranium ore into yellowcake, a condensed powder. For decades the facility has seemed a relic of the region’s boom times. But two things have conspired to breathe new life into America’s uranium industry. First, climate concern has begun to change the politics around nuclear power, which does not emit carbon. Roughly 20% of the power produced by American utilities comes from nuclear, making it the country’s largest source of clean energy. Proponents of nuclear power argue that its steady, baseload power will be needed to keep the lights on when the sun doesn’t shine or wind doesn’t blow. There are signs that this argument is catching on. California is considering delaying the closure of its last nuclear plant, which is the state’s largest single source of electricity.
Second, Russia’s war in Ukraine has many countries squirming over their reliance on Russian energy. According to the Energy Information Administration, a government agency, 14% of America’s uranium imports in 2021 came from Russia (and a further 43% from Kazakhstan and Uzbekistan). Russia is the only commercial supplier of the type of uranium needed to fuel new reactor designs, which aim to reduce costs and safety concerns.