Member Briefing March 14, 2023
Average Manufacturing Workweek Fell in February, Hourly Wage Dips Slightly
In February, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents, or 0.2 percent, to $33.09. Over the past 12 months, average hourly earnings have increased by 4.6 percent. In February, average hourly earnings of private-sector production and nonsupervisory employees rose by 13 cents, or 0.5 percent, to $28.42.
The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.5 hours in February. In manufacturing, the average workweek edged down by 0.2 hour to 40.3 hours, and overtime edged down by 0.1 hour to 3.0 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls decreased by 0.2 hour to 33.9 hours.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russian Oil Prices are Climbing — Here’s Why - Marketplace
- Heavy Losses Reported as Battle for Bakhmut Rages - BBC
- China’s Xi to Speak to Zelensky, Meet Next Week With Putin - WSJ
- France Pushes Protectionism in Ukraine Defense Plan – Politico
- Don’t Trust Russia’s Numbers – Foreign Policy
- Ukrainian Soldiers Wrap up Leopard 2A4 Tank Training in Spain - Reuters
- Russian Lawmaker Introduces Bill Pushing Back Conscription Age - Reuters
- Moscow Fumes as Ukraine Considers Changing Russia’s Official Name – The Hill
- ‘Navalny,’ Film About Dissident Fighting Kremlin, Wins Academy Award – Politico
- 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
Goldman Analysts no Longer Expect Fed Rate Hike in March After SVB Failure
Goldman Sachs' analysts on Sunday said they no longer expect the U.S. Federal Reserve to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March, in light of the recent stress in the banking sector. Goldman previously expected a 25-basis-point hike in March. Goldman left unchanged its expectations for 25-basis-point hikes in May, June, and July, but said it saw considerable uncertainty about the rate hike path beyond March.
Goldman analysts said they expected the measures taken by the regulators to provide substantial liquidity to banks facing deposit outflows and to improve confidence among depositors. The bank said it now expected a terminal rate of 5.25%-5.5%.
2-Year Treasury Yield Posts Biggest 3-Day Decline Since Aftermath of 1987 Stock Crash
Investors swarmed into U.S government bonds Monday after the collapse of Silicon Valley Bank and subsequent government backstop of the banking system. The rush sent Treasury yields tumbling. The yield on the 2-year Treasury was last trading at 4.06% down 53 basis points. The yield has fallen 100 basis points, or a full percentage point, since Wednesday, marking the largest three-day decline since Oct. 22, 1987, when the yield fell 117 basis points. That move followed the Oct. 19, 1987 stock market crash.
The yield on the 10-year Treasury was down by just under 20 basis points at 3.498%. Prices jumped and yields fell amid the collapse of Silicon Valley Bank that began last Thursday. Regulators had taken over the bank on Friday after mass withdrawals on Thursday led to a bank run. As fears about contagion across the banking sector spiked, many investors looked to government bonds and other traditionally safer assets.
US COVID – The Winter Surge that Wasn’t, Here are the Numbers
As the third anniversary of the World Health Organization declaring the virus to be a global pandemic passes, it appears that the U.S. has survived its first winter without a massive COVID-19 surge. During the first winter wave, weekly cases peaked at 1,714,256 the week of Jan. 13, 2021, as did weekly deaths at 23,378, according to CDC data. Subsequently, during the second winter wave -- due to the omicron variant -- weekly infections reached their high point of 5,630,736 the week of Jan. 19, 2022, and weekly deaths saw a high of 17,373 the week of Feb. 2, 2022, the data shows.
By comparison, according to the CDC, the highest number of weekly cases seen during the most recent winter wave was 472,601 the week of Dec. 7, 2023 -- the first time the peak has not surpassed 1 million. Meanwhile, weekly deaths peaked at 4,448 the week of Jan. 11, 2023 -- five times lower than the peak during the first winter wave and nearly four times lower than the peak during the second wave.
3 Issues to Watch in NY Budget Negotiations
With just three weeks before that April 1 budget deadline, both the state Senate and Assembly are expected to offer their rebuttals to Gov. Kathy Hochul’s executive budget proposal before the end of the week. Lawmakers, leadership and staff worked on a slightly tighter election year time frame to finalize their one-house proposals, which marked the true start of budget negotiations between the governor and the two legislative bodies.
With supermajorities still in both chambers of the Legislature and a rocky start to the year with the nomination and later rejection of Justice Hector LaSalle as chief judge, negotiations between legislative leaders and the governor are shaping up to be especially tense in the coming weeks. Housing, taxes and charter schools are the top issues to watch during budget negotiations.
DiNapoli Analysis Finds Significant Headwinds Challenge State's Economic Growth and Finances
Despite the State’s economic recovery since the pandemic first hit three years ago, significant headwinds challenge ongoing economic growth and fiscal stability. New York faces prolonged inflation, rising federal interest rates and the end of federal relief aid that was instrumental in balancing the past two budgets, according to a report by State Comptroller DiNapoli on the Executive's proposed 2023-24 State budget totaling $227 billion.
DiNapoli’s assessment identifies several economic, revenue, and spending risks and other concerns related to transparency and oversight. In particular, he raised concerns about some debt proposals and about billions excluded from competitive bidding and oversight requirements
Read more at The Comptroller’s website
US Worries China Will Use Supply Chains as Weapon
The United States worries that China will use its power in global supply chains as an additional weapon to advance its political and military might, a report released Wednesday showed. The "Annual Threat Assessment" issued by the Director of National Intelligence said China is already using its supply chain dominance to force foreign companies and countries to transfer technologies and intellectual property to it.
China hit back against the assessment on Thursday, terming the report "slander" and saying it "confuses black with white." The U.S. intelligence community sees Beijing using its economic power in parallel with military strength to secure regional and global influence. "The government of China is capable of leveraging its dominant positions in key global supply chains in an attempt to accomplish its goals, although probably not without significant cost to itself," the report said.
Xi Jinping confirmed for unprecedented third term as China’s president
By a 2,952-0 vote, the National People’s Congress on Friday officially confirmed Xi Jinping to serve a third five-year term as China’s president—only possible because he abolished the country’s two-term limit for the presidency in 2018. The presidential confirmation is largely ceremonial as Xi’s political power comes from serving as head of the Chinese Communist Party and military, positions he secured at the party congress in October.
There was no indication that members of the National People’s Congress had any option other than to endorse Xi and other officials picked by the Communist Party for other posts. When Xi was named to his first term as president in 2013, NPC members received a ballot with only his name on it and dropped it unchanged into a box. On Friday, reporters were kept at a distance and couldn’t see the four ballots that each delegate deposited into boxes placed around the vast auditorium of the Great Hall of the People.
State Regulators Closed New York-Based Signature Bank,
State regulators closed New York-based Signature Bank on Sunday, the third largest failure in U.S. banking history, two days after authorities shuttered Silicon Valley Bank in a collapse that stranded billions in deposits. The Federal Deposit Insurance Corporation (FDIC) took control of Signature, which had $110.36 billion in assets and $88.59 billion in deposits at the end of last year, according to New York state's Department of Financial Services.
All of the depositors of Signature Bank and Silicon Valley Bank will be made whole, and "no losses will be borne by the taxpayer," the U.S. Treasury Department and other bank regulators said in a joint statement. The FDIC established a "bridge" successor bank on Sunday which will enable customers to access their funds on Monday. Signature Bank's depositors and borrowers will automatically become customers of the bridge bank, the FDIC said. The regulator named former Fifth Third Bancorp Chief Executive Greg Carmichael as CEO of the bridge bank.
Building a Better Domestic PPE Supply Chain
It is time to ensure America is better prepared for the next pandemic. Currently, major American firms such as 3M, Honeywell and Prestige Ameritech have several manufacturing facilities in the United States that can produce N95 respirators, surgical masks and other types of PPE. However, because the demand for PPE is stable in normal times, these firms do not have excess “just in case” capacity to cope with surging demand during rare emergencies. Because of obsolescence, it is too costly for the government to store a high amount of PPE inventory in the Strategic National Stockpile.
Relying on smaller domestic firms that entered the market during the pandemic to fill the gap has not been sustainable financially. To better prepare for the next pandemic, the U.S. government must work with private firms and universities to develop resilient and financially viable PPE supply chains to protect the public and healthcare workers. I propose two suggestions. Reserve Production Capacity and Innovation.
Sikorsky, GE Prototyping Hybrid-Electric Helicopter
Sikorsky Aircraft is preparing an autonomous hybrid-electric vertical-take-off-and-landing (eVTOL) prototype to serve as a flying test-bed for evaluating large aircraft design, new propulsion systems, and control architectures for sustained hover, as well as ranges greater than 500 nautical miles. Insights gained from the flight test program, and assessment of the potential uses for the HEX (hybrid-electric demonstrator) could lead to a series of eVTOL vehicles to carry passengers and payload for military and commercial applications.
Working as a partner with the Lockheed Martin subsidiary will be GE Aerospace, which will supply its CT7 turboshaft engine combined with a 1-MW generator and associated power electronics. The propulsion system design will expand on technology developed with NASA and the U.S. Army to power Sikorsky helicopters. The HEX will be designed and built by Sikorsky’s Innovation team, and then will integrate the company’s established MATRIX flight control system. MATRIX has been tested previously controlling U.S. military helicopters.
Read more at American Machinist
Porsche Offers Glimpses of New EVs Including a Flagship Electric Crossover
Porsche offered glimpses on its future full-electric models -- including a flagship electric crossover positioned above the Cayenne -- as part of its goal of delivering more than 80 percent of its new vehicles as full-electric models in 2030. The crossover will be designed to offer strong performance and automated driving functions with the typical Porsche flyline, the automaker said in a statement on Monday. It will use Volkswagen Group's SSP Sport platform, which Porsche is developing.
Porsche's other upcoming full-electric cars will be: An all-electric Macan crossover available to customers in 2024 as the brand's second battery-electric car after the Taycan sedan. Full-electric versions of the 718 Boxster und Cayman are planned for the middle of the decade, and the Cayenne is poised to receive an full-electric powertrain as early as 2025 or 2026.
Pfizer Agrees to Buy Seagen for $43 Billion
Pfizer Inc. has agreed to pay $43 billion for biotech Seagen Inc. SGEN -0.59%decrease; red down pointing triangle and its pioneering class of targeted cancer drugs. Under the terms, Pfizer would pay $229 a share cash, the drugmaker said Monday. The companies expect the deal to close late this year or early next year. The $43 billion deal total includes debt, a Pfizer spokeswoman said. It is likely to face scrutiny from antitrust regulators, who have stepped up their reviews of healthcare and other deals.
Pfizer has been looking for acquisitions to help it offset losses in sales expected as some top-selling drugs lose patent protection in the next several years. Seagen caught the attention of Pfizer and other big drugmakers because of its novel cancer drugs, known as antibody drug conjugates or ADCs, which are able to target tumors and then hit them with a toxic agent.
G-7 Aims to Build Chip Supply Chain Together, Nikkei Reports
Group of Seven member states will agree to build a supply chain of strategic chip-manufacturing materials together when leaders meet in Japan in May, the Nikkei reported, without saying where it obtained the information. A joint communique from the Hiroshima, Japan summit will include a goal of safely procuring key materials such as chips and rare-earth elements due to the growing risks posed by Russia’s invasion of Ukraine and political tensions between the US and China, the paper reported. G-7 nations will start work on a draft communique this month, Nikkei said.
The US in October announced new restrictions that required export licenses for certain chipmaking machines, and limited US citizens from working in China and other countries that could pose a threat to national security. Washington wants Japan and the Netherlands, home of many key chip supply chain companies, to carry out similar measures.