Member Briefing March 1, 2023
U.S. Goods Trade Deficit Widens in January
The U.S. trade deficit in goods increased moderately in January, with both imports and exports rising solidly. The goods trade deficit widened 2.0% to $91.5 billion, the Commerce Department said on Tuesday. This left the goods trade deficit slightly above the fourth-quarter average.
Goods imports increased 3.4% to $265.3 billion. Motor vehicle imports surged 9.0% while imports of consumer goods jumped 6.4%. There were also increases in imports of food and capital goods. But imports of industrial supplies, which include crude oil, fell as did those of other goods. Exports of goods shot up 4.2% to $173.8 billion, boosted by a 14.8% jump in consumer goods. Motor vehicle exports accelerated 8.2%. Exports of capital goods and food also increased strongly. Shipments of industrial supplies, however, rose moderately and exports of other goods fell.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russia Shoots Down China's Peace Plan for the Ukraine War – Business Insider
- Drones Fly Deep Inside Russia; Putin Orders Border Tightened - AP
- Ukraine’s Forces Endure Increasingly Dire Conditions in Bakhmut, Officials Say – WSJ
- Yellen Visits Ukraine, Underscores US Economic Support - Yahoo
- A View from Crimea, the Russian-Annexed Territory Ukraine is Hoping to Seize Back - NBC
- US Prosecutors Seek Seizure of New York, Florida Properties Owned by Russian Oligarch – The Hill
- Russia Has Nine A-50 Radar Planes. Insurgents Claimed They Sneaked Into A Belarusian Air Base And Blew Up One Of Them – Forbes
- When Will it be Over? And 9 More Questions About Russia, Ukraine and a Year of War - NPR
- Defense Officials Claim There's No Evidence Ukraine is Mishandling US Weapons, Aid – Fox News
- 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
Chips Act I: Chip Makers Will Have to Provide Child-Care Plans to Seek Federal Money
Computer chip companies requesting millions from the federal government to build factories will have to outline a child-care plan for workers, the Commerce Department confirmed Monday. Companies seeking more than $150 million in subsidies — part of what was allocated in the $52 billion Chips Act signed last year — will need to notify the federal government “how they plan to provide child care to their employees and construction workers,” department spokeswoman Caitlin Legacki said in an email to The Washington Post.
Intel, Micron and TSMC are among the chipmakers that have signaled plans to apply for subsidies under the new law, which already have spurred construction. The Commerce Department said more details would be released Tuesday in its funding application documents and in the coming weeks when it publishes examples of the child-care plans. “The requirements are that the child care is affordable, accessible, reliable and high-quality,” Legacki wrote.
Chips Act II: Pentagon to Reap Rewards From $53 Billion Chips Act
The Pentagon will have secure access to leading-edge semiconductors manufactured at facilities receiving funding from the $53 billion Chips Act, Commerce Secretary Gina Raimondo said, ensuring the industry can supply the military with the advanced chips it needs for modern weapons systems. The increased involvement of the military and national security officials comes as intensifying rivalry with China and weaknesses in the supply chain exposed during the pandemic raise concerns among policy makers that the U.S. has become too reliant on imported chips.
The U.S. buys more than 90% of its advanced chips from Taiwan, she said, calling that “a national security vulnerability that is untenable.” “Every single piece of sophisticated military equipment, every drone, every satellite, relies on semiconductor chips,” Ms. Raimondo said.
US COVID – Final State Emergencies Winding Down 3 Years Into Pandemic
California’s coronavirus emergency officially ends Tuesday, nearly three years after Gov. Gavin Newsom issued the nation’s first statewide stay-at-home order. As California’s emergency winds down, such declarations continue in just five other states — including Texas and Illinois — signaling an end to the expanded legal powers of governors to suspend laws in response to the once mysterious disease. The federal government will end its own version May 11.
Illinois’ order will end in May alongside the federal order, while the governors of Rhode Island and Delaware recently extended their coronavirus emergency declarations. In New Mexico, public health officials are weighing whether to extend a COVID-19 health emergency beyond its Friday expiration date. Texas, meanwhile, hasn’t had any major coronavirus restrictions for years, but Republican Gov. Greg Abbott keeps extending his state’s emergency declaration because it gives him the power to stop some of the states’ more liberal cities from imposing their own restrictions, like requiring masks or vaccines.
White House Says No Consensus on Covid Origin
The White House said there is no consensus within the Biden administration over the origins of the Covid-19 virus, a day after the disclosure of an Energy Department assessment that the pandemic most likely originated with a leak from a Chinese lab. The Energy Department, which had previously been undecided on the origins of the pandemic, recently joined the Federal Bureau of Investigation in saying the virus likely spread via a mishap at a Chinese laboratory, The Wall Street Journal reported Sunday.
“There is not a consensus right now in the U.S. government about exactly how Covid started,” National Security Council spokesman John Kirby said at a briefing Monday. “We’re just not there yet,” he said. “If we have something that is ready to be briefed to the American people and the Congress, we will do that.” The Energy Department made its judgment based on new intelligence, albeit with “low confidence,” according to the Journal’s reporting. Four other U.S. government agencies, along with a national intelligence panel, still believe the pandemic was likely the result of a natural transmission from an infected animal, while two others are undecided.
Over Half of US Manufacturing Employees Plan to Leave Their Jobs in 2023: Survey
A new survey of factory workers by Epicor reveals that high turnover is likely to remain a major feature of the manufacturing sector through 2023, and that many frontline workers tend to see free time and advanced facilities as top priorities aside from wages. 24% of all respondents said they would seek more PTO in a new employer, and 23% said they would want more flexible hours.
In the online survey of more than 600 manufacturing employees, 56% said they plan to leave their current jobs sometime in 2023. Only 7.6% of respondents said turnover has lessened at their workplace, while 45% and 47.3%, respectively, said turnover was higher than ever or about the same as last year. A slim majority of surveyed employees, 52%, reported that morale at their workplace was high. 25% of those respondents indicated that a “flexible work schedule” was the top reason for high morale, and another 22% said the #1 morale-booster was “more paid time off.”
Goldman Sachs, Bank of America Expect Three More U.S. Rate Hikes this Year
Goldman Sachs and Bank of America said they expect the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market. Producer prices accelerated in January by the biggest margin in seven months, according to data on Thursday, while a Labor Department report showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
"In light of the stronger growth and firmer inflation news, we are adding a 25bp (basis points) rate hike in June to our Fed forecast, for a peak funds rate of 5.25%-5.5%," Goldman Sachs economists led by Jan Hatzius said in a note dated Thursday. Meanwhile, money markets are currently pricing in a terminal rate of 5.3% by July. BofA Global Research also expects a 25bps hike in the Fed's June meeting, pushing the terminal rate up to a 5.25%-5.5% range.
Economist’s Push Recession Forecasts To End of 2023
2023 US recession now expected to start later than predicted. A majority of the nation’s business economists expect a U.S. recession to begin later this year than they had previously forecast, after a series of reports have pointed to a surprisingly resilient economy despite steadily higher interest rates. Fifty-eight percent of 48 economists who responded to a survey by the National Association for Business Economics envision a recession sometime this year, the same proportion who said so in the NABE’s survey in December.
But only a quarter think a recession will have begun by the end of March, just half the proportion who had thought so in December.
Pending Home Sales Jump by Most Since June 2020 as Housing Market Looks to Rebound
Signed contracts to buy existing homes in the U.S. rose in January in the largest monthly increase since June 2020. The National Association of Realtors’ index of pending home sales climbed 8.1% to 82.5 in January, higher from the projected estimate of 1.0% by Bloomberg economists, according to data the group released on Monday. On a yearly basis, however, pending transactions plunged by nearly 24%.
The measure, a leading indicator of the housing market's health, highlights how much the market has reversed this year in the wake of slowing home-price appreciation and higher mortgage rates.“Buyers responded to better affordability from falling mortgage rates in December and January,” NAR chief economist Lawrence Yun said in a statement.
Chancellors Okay With Hochul’s Proposed SUNY and CUNY Budgets, Tuition Increases
The leaders of SUNY and CUNY painted a rosy picture to lawmakers during a legislative budget hearing in Albany of the governor's budget even as 19 campuses report a combined deficit of $160 million and continue to be burdened by years of declining enrollment. Hochul proposed annual SUNY and CUNY tuition increases tied to the Higher Education Price Index or 3% — whichever is lower. Tuition at SUNY's four research institutions in Albany, Binghamton, Buffalo and at Stony Brook would increase an additional 6% above SUNY's base tuition rate each year for the next five years, capping at a 30% increase for in-state students.
"How will a tuition increase help reverse the trend of declining enrollment and bring students back to SUNY and to CUNY ... particularly looking at during times of inflation?" asked Sen. Toby Ann Stavisky, who chairs the Higher Education Committee. SUNY Chancellor John King said adequate academic programs, mental health services and other student supports require that funding.
Tesla Pauses Rollout of Driving-Assist Software
Tesla Inc. has temporarily stopped rolling out its $15,000 driver-assistance system until it addresses issues that led the automaker to recall almost 363,000 vehicles. The pause affects customers who have opted in for Full Self-Driving Beta — a support feature for drivers who are responsible for operating their car at all times — but have not yet received a software update containing the feature, according to Tesla's website. The support page relates to the recall the company announced earlier this month.
The feature known as FSD Beta may allow Tesla vehicles to exceed speed limits or travel in unlawful or unpredictable ways that increase crash risk, the National Highway Traffic Safety Administration said on Feb. 16. The agency cited examples including traveling straight through an intersection while in a turn-only lane, entering stop sign-controlled intersections without coming to a complete stop, and proceeding into intersections during a steady-yellow traffic signal without caution.
Target Q4 Earnings Beat Estimates, CEO Strikes a Cautious Tone as Consumer Spending Shifts
Target (TGT) posted fiscal fourth-quarter earnings results before market open on Tuesday that beat estimates as consumer spending shifts away from discretionary categories. The Minneapolis-based retailer saw same-store sales increase by 0.7%, higher than Wall Street estimates of -1.74%. Similar to Walmart's (WMT) latest quarterly results, consumer spending at Target seemed to shift to essentials like food and away from categories like electronics, home, and apparel.
Target reported, revenue of $31.40 billion versus $30.46 billion expected, adjusted earnings per share of $1.89 versus $1.48 expected, same-store sales were 0.7% versus -1.74% expected, and brick & mortar same-store sales were up 1.9% versus -2.80% expected.
America Is Trying to Electrify. There Aren’t Enough Electricians.
Electricians, the essential workers in the transition to renewable energy, are in increasingly short supply. They are needed to install the electric-car chargers, heat pumps and other gear deemed essential to address climate change. Electricians say they are booked several months out and struggling to find enough workers to keep up with demand. Many are raising wages and prices and worried that they won’t be able to keep up as government climate incentives kick in.
Industry analysts say it will be difficult to meet demand, particularly because more electricians retire every year than are replaced, and many retired during the coronavirus pandemic. The median age of electricians is over 40 years old, in line with the broader workforce. But nearly 30% of union electricians are between ages 50 and 70 and close to retirement, up from 22% in 2005, according to the National Electrical Contractors Association. The average annual electrician salary rose from roughly $50,000 to about $60,000 from 2018 to 2022, an increase roughly in line with the national average, according to the BLS.
Global Miners Gear Up for Energy Transition With Deals and Investments
Global miners are spending billions of dollars on deals and raising budgets for new projects in a bet on the energy transition, changing course from a decadelong focus on shareholder payouts. BHP Group Ltd., the world’s biggest miner by market value, is close to completing its biggest acquisition since 2011 with copper-and-gold miner OZ Minerals Ltd. Two months ago, Rio Tinto PLC bought out minority shareholders in Canada-listed Turquoise Hill Resources in a $3.1 billion deal to get more exposure to a giant copper deposit in Mongolia.
The pivot partly reflects expectations within the mining industry that existing operations aren’t producing enough copper, nickel and other commodities vital to the energy transition, including a rapid take-up of electric vehicles. It also highlights that big miners are too reliant on industrial commodities such as iron ore and coal, which are highly profitable but won’t experience the same increase in demand as the world decarbonizes.
As Americans Work From Home, Europeans and Asians Head Back to the Office
Americans have embraced remote work and turned their backs on offices with greater regularity than their counterparts overseas. U.S. office occupancy stands at 40% to 60% of prepandemic levels, varying within that range by month and by city. That compares with a 70%-to-90% rate in Europe and the Middle East, according to JLL, a property-services firm that manages 4.6 billion square feet of real estate globally.
Return to office was even more common in Asia, JLL said, where rates ranged from 80% to 110%—meaning that in some cities more people are in the office nowadays than before the pandemic. Bigger homes, longer commutes and a tighter labor market help explain why Americans spend less time in the office than Europeans and Asians, workplace consultants say.