Member Briefing June 7, 2022

June 7, 2022

Posted By: Harold King in Daily Briefing,

BLS: Labor Productivity Declines the Most Since 1947

Nonfarm business sector labor productivity decreased 7.3 percent in the first quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output decreased 2.3 percent and hours worked increased 5.4 percent. This is the largest decline in quarterly productivity since the third quarter of 1947, when the measure decreased 11.7 percent. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in the nonfarm business sector increased 12.6 percent in the first quarter of 2022, reflecting a 4.4-percent increase in hourly compensation and a 7.3-percent decrease in productivity. Unit labor costs increased 8.2 percent over the last four quarters. This is the largest four-quarter increase in this measure since another 8.2-percent increase in the third quarter of 1982. With the 5.4 percent increase to hours worked in the first quarter of 2022, this marks the first quarter that both the output and hours worked measures have surpassed their levels in the fourth quarter of 2019, the last quarter
not affected by the COVID-19 pandemic.

Invasion of Ukraine Headlines

WSJ-NORC Poll: Inflation, Political Division Put U.S. in a Pessimistic Mood

Americans are deeply pessimistic about the U.S. economy and view the nation as sharply divided over its most important values, according to a new Wall Street Journal-NORC Poll. The findings are from a Journal survey conducted with NORC at the University of Chicago, a nonpartisan research organization that measures social attitudes. The survey found Americans in a sour mood and registering some of the highest levels of economic dissatisfaction in years. The pessimism extended beyond the current economy to include doubts about the nation’s political system, its role as a global leader and its ability to help most people achieve the American dream.

Some 83% of respondents described the state of the economy as poor or not so good. More than one-third, or 35%, said they aren’t satisfied at all with their financial situation. That was the highest level of dissatisfaction since NORC began asking the question every few years starting in 1972 as part of the General Social Survey, though the poll’s 4-point margin of error means that new figures may not differ significantly from prior high and low points.

US Suspends Solar Tariffs, Boosts Production in Clean Energy Push

U.S. President Joe Biden on Monday suspended tariffs for two years on solar panel imports from four countries and invoke a key power to compel domestic manufacture of clean energy technology, the White House said. Duties will be lifted on certain solar parts from Cambodia, Malaysia, Thailand and Vietnam. China is excluded as the Commerce Department investigates whether some Chinese companies are circumventing U.S. customs duties by assembling parts in the four countries.

The moves are aimed at boosting renewable capacity and combating climate change, a priority for the president whose green ambitions have met with mixed success. At the same time, Biden’s administration will invoke the Defense Production Act (DPA) to accelerate production and use the federal government’s purchasing power to increase demand. Solar panel parts, building insulation and efficient heat pumps are all targeted under the DPA.

US COVID – Push for Normalcy Wins Out in COVID Wars

Even as infections rise to levels that are four to five times higher than the same point last year, the push for normalcy is winning out. Experts say it’s not surprising; because of widespread vaccinations and treatments available, many people no longer see the virus as the threat it once was. A year ago, there was widespread optimism as cases were so low that the virus seemed on the verge of being defeated. Yet mitigation measures, namely masks and vaccination requirements, remained in place.

Now, almost all masks or vaccine requirements have been deliberately abandoned or overturned in court. The U.S. is averaging about 100,000 new cases every day, but movie studios are releasing summer blockbusters to packed theaters, families are celebrating weddings, and bars and restaurants are full. Hospitalizations stand at about 3,500 per day and deaths are hovering around 300 per day. They are higher than last summer, but also relatively low compared to the omicron surge in January.

A More Traditional Coronavirus Shot is On the Way

Novavax’s Covid-19 vaccine will face the scrutiny of the Food and Drug Administration’s independent immunization experts this week, a crucial step on the path toward U.S. regulatory authorization two years after the Maryland biotech company received taxpayer funding to develop the shots. Novavax’s shots are based on protein technology used for decades in hepatitis B and HPV vaccines. Novavax believes it can reach people who have not got vaccinated yet, because they would prefer to receive a shot based on technology that has a longer track record, Taylor said.

The committee of vaccine experts will weigh the safety of Novavax’s shots and their effectiveness at preventing Covid during an all-day public meeting on Tuesday. If the committee endorses the vaccine, the FDA will almost certainly give the green light for doses to ship from Novavax’s manufacturing partner the Serum Institute of India to the U.S. The company’s shots have been authorized in 41 countries outside the U.S., including Australia, Canada, and the European Union.

Inflation’s Endgame… It’s Complicated

For economy watchers searching for inflation’s peak amid the economic haze, the latest jobs report offered some hopeful signposts. We’ll get an even clearer look this coming Friday, when the Labor Department releases new consumer price index data for May.

Average hourly earnings for private sector workers rose 0.3 percent for the second consecutive month, bringing the annual increase to 5.2 percent, down from 5.5 percent in April and 5.6 percent in March. Schwartz also noted that several major companies announced hiring freezes in recent weeks. Those factors would all be welcome developments for the Federal Reserve and could work in its favor as the central bank tries to suss out how far and fast to raise interest rates.

Beijing, Shanghai Reopening Speed Up: China Lockdown Tracker

China’s worst Covid-19 outbreak is ending, with cases continuing to fall, all major cities loosening restrictions and daily life mostly returning to normal.

Infections are trending down nationwide, thanks to the ebbing outbreaks in Shanghai and Beijing. Of China’s top 50 cities by economic size, none currently have widespread restrictions in place. Tianjin hasn’t reported any local cases for the past 3 days and most public transport has resumed, while Beijing is resuming dine-in services and reopening parks and entertainment venues.

Read and see the lockdown tracker at Bloomberg

Supreme Court Rejects Forced Arbitration for Southwest Airlines Baggage Workers

The Supreme Court on Monday ruled unanimously that airline baggage handlers can’t be compelled to resolve employment disputes through individual private arbitration, bucking a trend of recent decisions making it easier for employers to avoid class-action lawsuits brought by workers. Writing for the court, Justice Clarence Thomas said baggage handlers expressly are exempted from the Federal Arbitration Act, a 1925 law that allows employers to make it a condition of employment that workers agree to mandatory arbitration of workplace disputes.

The scope of the carve-out, known as the “transportation workers exemption,” has been frequently litigated in recent years. It is an important issue for many businesses because it determines their exposure to class-action lawsuits for employer misconduct, which if settled or successful can result in significant damages. Employers frequently prefer to require employees to bring claims individually through private arbitration.

Productive? New York Lawmakers Approved More Than 1,000 Bills

State lawmakers in New York concluded the six-month legislative session last week after passing more than 1,000 bills in both chambers of the Legislature — a rate of production that easily surpasses the last 25 years in Albany. The New York Public Interest Research Group recorded the tally, finding the Democratic-controlled chambers are once again more likely to approve companion bills that stand a chance of becoming law since the party took control of the state Senate in 2019

The analysis from the group found the Legislature approved 1,007 bills in the last six months that are “same as” — bills that were given approval by both chambers and can be sent to Gov. Kathy Hochul for consideration. It’s the highest number of bills to be approved in both chambers over a period dating back to 1995. And it easily breaks the 2021 record of 892 bills passing during that time.

Hudson Valley Community Colleges Team Up for Cannabis Workforce Grant

Community colleges in the Hudson Valley are teaming up to develop job training as the cannabis industry continues to emerge in New York.

SUNY Sullivan President Jay Quaintance said the colleges will be sharing a grant for that purpose. “We signed off on a grant with the other community colleges in the Hudson Valley, which would be a workforce training grant – about $3 million – for the consortium of colleges to provide workforce development for that emergency industry as that continues to potentially grow and we see how it grows,” he said.

The Robust Rise of Reshoring

Reshoring and foreign direct investment (FDI) job announcements hit a record 261,000 in 2021, according to the Reshoring Initiative’s 2021 Data Report. According to the report data, reshoring exceeded FDI by 100%—a change from 2014 through 2019, when FDI exceeded reshoring—and the number of companies reporting reshoring and FDI projects set another record of over 1,800 companies. Texas and Tennessee led in the number of jobs announced, further securing the South as the U.S. region scoring the most reshoring and FDI jobs compared to the Midwest, West and Northeast. From 2010 to 2021, the South has accounted for more than half of the total reshoring and FDI jobs at 56%.

Government incentives, skilled workforce availability/training and under-utilized capacity accounted for the top positive domestic factors that have attracted companies to the United States while supply chain interruption, green considerations and quality/rework/warranty issues were the top negative factors.

Nickel Market Meltdown Sparks $456 Million Lawsuit Against the London Metal Exchange

The suit was filed Elliott Investment Management against the LME and its clearing house in the English High Court on June 1. “The LME management is of the view that the claim is without merit and the LME will contest it vigorously,” it said in the statement. The move by the activist investor ratchets up pressure against the LME, which has been widely criticized for its decision to halt trading and cancel bets. The LME is also facing a review by UK regulators after it undid billions of dollars of transactions and halted trading for over a week. The nickel market has been stuck in an extended limbo of low liquidity and volatility since the crisis.

Elliott’s lawsuit is challenging the decision to cancel trades, claiming it was “unlawful on public law grounds and/or constituted a violation of their human rights,” according to the statement. The statement didn’t elaborate what trades Elliott had executed or the impact of the cancellation. The claimants were Elliott Associates, LP and Elliott International, LP.