Member Briefing March 16, 2022

March 16, 2022

Posted By: Harold King in Daily Briefing,

Invasion of Ukraine Headlines

Empire State Manufacturing Survey: Headline General Business Conditions Index Falls Fifteen Points, Optimism Remains Strong

Manufacturing activity declined in New York State for the first time since mid-2020, according to the March survey. The general business conditions index dropped fifteen points to -11.8. Twenty-four percent of respondents reported that conditions had improved over the month, while 35 percent reported that conditions had worsened. Firms were generally optimistic about the six-month outlook. The index for future business conditions climbed eight points to 36.6. Longer delivery times, higher prices, and increases in employment are all expected in the months ahead, and capital spending plans remained firm.

The new orders index fell to -11.2.
The shipments index moved down to -7.4, pointing to declines in orders and shipments.
The unfilled orders index came in at 13.1.
The delivery times index climbed eleven points to 32.7, pointing to a substantial increase in delivery times.
The index for number of employees dropped nine points to 14.5, pointing to a modest increase in employment levels.
The average workweek index moved down to 3.5, indicating a slightly longer workweek.
The prices paid index edged down three points to 73.8
The prices received index rose two points to a record high of 56.1.

Read the Report at the NY Fed

PPI = 10%

The headline Producer Price Indes was up 10% from a year ago, tying January for the biggest gain ever. The index rose 0.8% in February, slightly lower than the 0.9% Dow Jones estimate. Wholesale gasoline prices surged more than 14%, helping feed the biggest single-month increase for final demand goods prices ever in data going back to 2009.

The data came during the week of Feb. 13, before the Russian invasion of Ukraine. Energy prices surged even more as the war began, and will show up in next month’s report. The numbers come with most other inflation gauges running around 40-year highs, thanks to price increases that have spread beyond volatile gas and grocery prices and across a broad spectrum of consumer goods and services.

Oil Prices Tumble Below $100 on Ukraine Hopes, China Lockdowns

Oil prices tumbled below $100 a barrel on Tuesday, setting prices up to settle at their lowest levels since the initial days of the Russian invasion of Ukraine nearly three weeks ago, as investors reassessed the huge run-up in prices seen in recent weeks. Hopes for a diplomatic solution in Ukraine continued to weigh on oil prices Tuesday, along with COVID-19 lockdowns in China, noted Carsten Fritsch, analyst at Commerzbank, in a note to clients.

West Texas Intermediate crude for April delivery fell $7.86, or 7.6%, to $95.15 a barrel. A settlement around that level would be the lowest since Feb. 25, according to FactSet Research — a day after Russia’s invasion of Ukraine.
May Brent crude the global benchmark, fell $7.68, or 7.2% to $99.22 a barrel, on track for the weakest settlement since Feb. 25.
April natural gas fell 3.4% to $4.502 per million British thermal units.
April gasoline dropped 7.5% to $2.931 a gallon and
April heating -9.06% fell 8.2% to $3.008 a gallon.

US COVID – Title 42

Early in the COVID-19 pandemic, the US CDC issued an order under Title 42 suspending the right of certain asylum seekers to enter the US at any border crossing or port of entry in order to control the situation in congregate settings where noncitizens are processed and held. Children traveling alone were exempted from the order shortly after US President Joe Biden took office in January 2021. Over the weekend, the CDC terminated the order as it relates to unaccompanied minors after determining the “expulsion of unaccompanied noncitizen children is not warranted to protect the public health.”

Pressure is mounting for the Biden administration to end the pandemic-related border restrictions for all noncitizen migrants. Refugees from Ukraine are making their way to the US, and last week US Vice President Kamala Harris committed to taking in more asylum seekers from the country during an overseas trip. The same day, a Ukrainian family was barred from entering the country under Title 42. Although US immigration authorities later allowed the family to enter, the situation highlighted the relevance of the order especially with the availability of COVID-19 diagnostics, vaccines, and therapies. The CDC has the authority to lift the order, which is set to expire in early April.

Read more at the Johns Hopkins Center for Health Security

COVID Cases are Rising as Omicron’s ‘Stealth’ Subvariant Spreads Around the World

COVID cases have increased dramatically in the U.K. in recent weeks, while Germany continues to mark record high daily infections with more than 250,000 new cases a day. Elsewhere, France, Switzerland, Italy and the Netherlands are also seeing COVID infections start to rise again, aided and abetted by the relaxation of coronavirus measures and the spread of a new subvariant of omicron, known as BA.2.

Public health officials and scientists are closely monitoring BA.2, which has been described as a “stealth” variant because it has genetic mutations that could make it harder to distinguish from the delta variant using PCR tests, compared with the original omicron variant. Initial data show that BA.2 is a little more likely to cause infections in household contacts, when compared with BA.1. It’s not believed currently that the BA.2 variant causes more severe illness or carries an increased the risk of being hospitalized, however further research is needed to confirm this.

Federal Government Has Provided More Than $2B to Help Cover COVID-19 Funerals

The Federal Emergency Management Agency (FEMA) on Tuesday announced that over $2 billion in funding has been allotted for funeral costs of about 300,000 American families that lost a loved one since the COVID-19 pandemic began.

Under the COVID-19 Funeral Assistance program, up to $9,000 in funeral expenses are covered per person. On average, about $6,500 has been given to families per death, the agency stated, according to The AP. The agency also announced on Tuesday that it is set to launch a paid ad campaign in four states that have had high rates of COVID-related deaths but low requests for funeral reimbursement. Those states include New York, Pennsylvania, Texas and California.

McMahon: Post-Pandemic Jobs Recovery, NY Still Trails 48 States

The latest annual “benchmarking” of preliminary statistics provided a nice bump-up to the Empire State’s seasonally adjusted count of private-sector jobs, excluding the self-employed and farm payrolls, as noted here last week.

But even with that adjustment, as of January only Hawaii remained further below its February 2020 employment level. As shown on the rollover map below, the only state to fall even within a percentage point of New York’s decline was tiny, atypical Vermont. All of New York’s other neighboring states were much further along on the road to recovery—with New Jersey in the strongest position, down just 2.2 percent from the pre-pandemic level.

OFCCP Releases New Compensation Directive

Hot off the press on Equal Pay Day (the day that symbolizes how far into the year women must work to earn what men earned in the previous year) OFCCP has released a new compensation directive. Directive 2022-01: Pay Equity Audits does little to set out how contractors should be looking at their pay systems and instead focuses on OFCCP’s review of, and right to request, the analysis.

The Directive explains, that in addition to following Directive 2018-05, “OFCCP will also look broadly at a contractor’s workforce (across job titles, levels, roles, positions, and functions) to identify patterns of segregation by race, ethnicity, and gender, which may result from assignment, placement, or upgrading/promotion barriers that drive pay disparities. Where possible, OFCCP will use regression and other systemic analyses to look for disparities in patterns of assignment or in salary paid across similar functions and positions.”

DOJ Names Chief Prosecutor for Pandemic Fraud Task Force

The Justice Department announced on Thursday that it was tapping Associate Deputy Attorney General Kevin Chambers to lead the department’s pandemic fraud efforts.

Attorney General Merrick Garland announced the multi-agency task force last May. The task force has already moved forward with multiple cases and investigations, looking into fraud with the Paycheck Protection Program, the Economic Injury Disaster Loan Program, unemployment insurance programs and other Covid health care-related fraud, the news release said.

Companies, Such as 3M, Are Moving Employees to More Critical Roles, as Automation Takes Over Certain Job Functions

High rates of retirement combined with a small pool of workers — will not change going forward, notes Jeff Burnstein, president of A3 (Association for Advancing Automation) “These factors will make it even more difficult to have a trained workforce that can help companies compete in the future,” he says. “So, automation is playing a key role in filling the gaps by moving people from doing tasks that they don’t want to do or shouldn’t be doing into needed roles.”

Employers are getting the message and in 2021, factories and other industrial users ordered 39,708 robots, which represents a 28% increase from 2020, according to data from A3. The previous annual record for robot orders was set in 2017 – when North American companies ordered 34,904 robots valued at $1.9 billion.

CO2 Emissions Reach Record Level

Global energy-related carbon emissions in 2021 reached a record level, according to the International Energy Agency. Coal accounted for over 40% of the overall growth in global CO2 emissions in 2021, reaching an all-time high of 15.3 billion tonnes. CO2 emissions from natural gas rebounded well above their 2019 levels to 7.5 billion tonnes. At 10.7 billion tonnes, CO2 emissions from oil remained significantly below pre-pandemic levels because of the limited recovery in global transport activity in 2021, mainly in the aviation sector.

Operating coal power plants in the US was considerably less costly versus of gas plants for the majority of 2021. Gas-to-coal switching pushed up global CO2 emissions from the US and Europe where competition between gas and coal power plants is tightest.

“Windfall Profits Tax” Act Threatens Energy Producers

Coming shortly after new sanctions targeting Russian energy imports, the “Big Oil Windfall Profits Tax Act” would levy a new quarterly tax on large oil companies. This proposed excise tax would apply to every barrel of oil produced by large companies and would be equal to 50% of the difference between the current price of oil and the average price per barrel from 2015 to 2019. The revenue from this proposal would fund a new tax credit that would be paid to individuals on a quarterly basis.

The bill would raise taxes on oil companies and other energy producers harming their ability to do vital work and raising costs further in an essential industry. A version of this proposal was signed into law by President Jimmy Carter and was repealed in 1988. Analysts found this tax increased America’s reliance on foreign oil and ultimately did not raise the revenues suggested by its proponents.

How Frontier’s Merger With Spirit Will Impact the Agenda of the ‘World’s Greenest Airline’

Frontier proudly hails itself as the most carbon-efficient way to travel on boarding passes and in its messaging around its bare-bones service. One such example from the checkout page: “Keep carbon emissions low by keeping your bag weight in check. Checked bags over 40 pounds cost extra.”

But keeping the costs low are the key driving force for Frontier and Spirit Airlines, its ultra-low-cost competitor. On Feb. 7, the two airlines announced a $6.6 billion merger that is expected to close in the second half of this year, subject to regulatory review. Frontier shareholders will hold a majority stake in the combined company, whose name, logo, and branding have yet to be disclosed. What is clear is that while sustainability is an added benefit of the ultra-low-cost model, both airlines are placing greater emphasis on it as the industry faces greater scrutiny by customers and shareholders about its environmental impact.