Member Briefing March 25, 2024
S&P PMI: US Manufacturing Activity Expands by Most Since June 2022
US manufacturing activity expanded by the most since mid-2022 as production and factory employment growth accelerated along with measures of inflation. The S&P Global flash March factory purchasing managers index edged up 0.3 point to 52.5, marking the third straight month above a level of 50 that indicates expansion. Manufacturing output growth was the strongest since May 2022, driven by improving demand both at home and abroad, while the employment gauge reached an eight-month high.
The group’s composite measure of prices received by manufacturers and service providers rose to an almost one-year high on the back of continued wage growth and higher fuel costs, suggesting stubborn inflation. S&P Global’s measure of prices charged by manufacturers climbed to a more than one-year high, while an index of prices received by service providers rose to the highest since July. “The steep jump in prices from the recent low seen in January hints at unwelcome upward pressure on consumer prices in the coming months,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
Conference Board's Leading Indicators Index Rises for First Time in 2 Years Led By Hours Worked in Manufacturing Component
The Conference Board on Thursday said its Leading Economic Index rose last month for the first time in two years on the strength of hours worked at U.S. factories and the surging stock market, among other factors, but the gauge of future activity still signals some headwinds to growth remain. The business research group's index rose 0.1% in February to 102.8. It was the first increase in the index since February 2022 and comes a month after the organization abandoned its prediction that the economy would fall into a recession.
Digging into the report's components, average weekly hours worked by production workers in the manufacturing sector led the charge by adding 0.18 percentage points (pp) to the LEI in February. The positive contribution corroborates with anecdotal evidence of producers across the country preparing for a ramp up in production once the Fed starts to ease borrowing costs and the recent firming in durable goods orders. Stock prices continued to gain over the month (adding 0.17pp), while loosened financial conditions supported a solid 0.08pp contribution from the Leading Credit Index. The usual negative contributions, the new orders component of the ISM manufacturing index, consumer expectations and the interest rate spread, continued to weigh on the LEI.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel Announces West Bank Land Seizure as Blinken Arrives for Gaza Talks – France 24
- Why Israel Plans to Attack Rafah Despite U.S. Doubts - WSJ
- Rafah Offensive Lays Bare U.S.-Israel Divide – The Dispatch
- Repeated Raids in Gaza Raise Prospect of Endless War - WSJ
- New Gaza Hospital Raid Shows Hamas is Not a Spent Force - BBC
- Russia and China Veto U.S.-Led Cease-Fire Resolution at U.N. - NYT
- Houthi Leader Says There Has Been 'Reckless' American-British Attacks on Yemen – Reuters
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- Russia Arrests 4 Suspects in Moscow Attack as Death Toll Climbs to 133 - NYT
- Moscow Attack: Did Russia Ignore US 'Extremist' Attacks Warning? - BBC
- Putin Links Ukraine to Moscow Massacre Without Evidence – Politico
- Widespread Outages After Russia Attacks Ukrainian Electrical Power Facilities – France 24
- Ukraine’s Battered Army Grapples With Growing Troop Shortage - WSJ
- Ukraine Says Russia Preparing 100,000 Troops, Possibly for Summer Offensive Push – Reuters
- EU Seeks to End Russian Grain Imports With Steep Tariffs - WSJ
- US urges Ukraine to Stop Attacking Russian Oil Refineries, Report Says – 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
Other Headlines
- Niger Orders American Exit - Dispatch
- Americans Evacuate Haiti on U.S.-Chartered Helicopters – CBS
- Foreign Direct Investment in China Continues to Fall - WSJ
- Somali Pirates' Return Adds to Crisis for Global Shipping Companies – Reuters
- Pro-West Diplomat to Meet Ally of Slovakia's Premier in Presidential Runoff – Voice of America
- Report: Falling Fertility Rates Pose Major Challenges for the Global Economy - CNBC
- Japan PM Pledges to Boost Defence, Diplomatic Capabilities to Preserve Peace – Reuters
- Vietnam President Resigns, Indicating Party Power Struggle – Nikkei
- In the Conflict Between the West and Authoritarian Foes, Islamic State Sees All Sides as Targets - WSJ
- At Least 23 Niger Soldiers Killed in Ambush, Defence Ministry Says - Reuters
Policy and Politics
Biden Signs Government Funding Bill
President Joe Biden on Saturday signed into law the $1.2 trillion legislation that completes the funding of federal agencies through the fiscal year, which ends September 30. The House passed the package on Friday, and the Senate passed it early Saturday morning. The bill addresses a slate of critical government operations, including the departments of Defense, Homeland Security, Labor, Health and Human Services, Education, State and the legislative branch.
This legislation is the second part of a two-tiered government funding process. A separate six-bill funding package, which was signed into law earlier this month, included funding for the departments of Agriculture, Commerce, Justice, Veterans Affairs, Energy, Interior, Transportation, Housing and Urban Development, as well as the Food and Drug Administration, military construction and other federal programs.
Hundreds of Thousands of Financial Aid Applications Need to be Fixed After Latest Calculation Error
The U.S. Education Department said it has discovered a calculation error in hundreds of thousands of student financial aid applications sent to colleges this month and will need to reprocess them — a blunder that follows a series of others and threatens further delays to this year’s college applications. A vendor working for the federal government incorrectly calculated a financial aid formula for more than 200,000 students, the department said Friday. The information was sent to colleges to help them prepare financial aid packages but now needs to be recalculated — even as the department works through a backlog of more than 4 million other financial aid applications.
A statement from the Education Department says the problem won’t affect 1.3 million applications that were processed correctly and distributed to colleges this month. Officials said they have fixed the error and it “will not affect future records.” “This is another unforced error that will likely cause more processing delays for students,” said Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators. After so many delays, he added, “Every error adds up and will be felt acutely by every student who is counting on need-based financial aid to make their postsecondary dreams a reality.”
House Advances Resolution to Repeal Independent Contractor Rule
A House committee has advanced a resolution to repeal a contentious Biden administration rule that sets stricter criteria for businesses classifying workers as independent contractors rather than employees. The House Committee on Education and Workforce passed the measure Thursday on a 21-13 vote, paving the way for a full House consideration, Reuters reported. The legislation challenges a Department of Labor rule implemented March 11 that has been met with opposition from various industries that rely on freelance and contract labor.
The DOL rule introduces a comprehensive six-factor test for determining worker status, focusing on elements such as the degree of company control over the worker and the job’s permanence. This approach aims to replace a prior regulation under the Trump administration, which emphasized control and the worker’s profit or loss potential as the primary criteria for classification. But according to opponents, it creates a fog of uncertainty for workers and professionals who want to operate as independent contractors. That was the crux of a lawsuit filed earlier this month by a coalition of associations that included the Financial Services Institute.
Health and Wellness
What’s Next for the Coronavirus?
More than four years into the pandemic, the virus has loosened its hold on most people’s bodies and minds. But a new variant better able to dodge our immune defenses may yet appear, derailing a hard-won return to normalcy. Scientists around the country are watching for the first signs. “We’re not in the acute phases of a pandemic anymore, and I think it’s understandable and probably a good thing” that most people, including scientists, have returned to their prepandemic lives, said Jesse Bloom, an evolutionary biologist at the Fred Hutchinson Cancer Center in Seattle.
Evolutionary biology was once an esoteric pursuit involving humdrum hours staring at a computer screen. The work’s implications for public health were often tenuous. The pandemic changed that. Vaccines can now be made more easily and much faster than before, so “really understanding how viruses evolve has more and more practical utility,” Dr. Bloom said.
NYS COVID Update
The Governor updated COVID data for the week ending March 22nd.
Deaths:
- Weekly: 39
- Total Reported to CDC: 83,057
Hospitalizations:
- Average Daily Patients in Hospital statewide: 698
- Patients in ICU Beds: 74
7 Day Average Cases per 100K population
- 3.3 positive cases per 100,00 population, Statewide
- 4.5 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Early Voting Begins for New York’s Presidential Primary - Gothamist
- Cold Cash Comfort for Democrats in 2024 – The Dispatch
- Special Election for McCarthy Seat Advances 2 Republicans to Runoff – The Hill
- Biden and Trump Ask Voters if They’re ‘Better Off’ Than They Were 4 Years Ago. It’s Complicated - AP
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Payrolls Still Climbing Across Most States, Payrolls in NY Revised Higher
The resilience of the labor market remained on display across most states during February. For the most part, the magnitude of payroll additions is moderating, but the vast majority of states are still experiencing solid employment growth. In total, 43 states registered job gains during the month, up from a count of 35 the month prior. Texas employers added more headcounts than any other state, continuing the trend of strong hiring in the state. Illinois and Michigan bounced back from declines to start the year, and each posted substantial additions.
Not every state experienced a pick-up in hiring during February. Employment levels contracted in seven states during the month, notably in New Jersey, California and Florida. The Sunshine State's pull back was noteworthy given it was only the second time since April 2020 that the state experienced a monthly decline in employment. The slip in California payrolls comes on the heels of considerable downward revisions to state employment levels during 2023, intimating that labor market conditions in the nation's largest state economy were a bit weaker last year than first reported. The Golden State was one of 28 states where revisions brought employment payrolls lower, and several states, such as New York, saw payrolls revised higher.
Immigration is Boosting the U.S. Economy and has Been ‘Really Underestimated,’ Says JPMorgan Research Head
The recent surge in immigration into the U.S. is helping to bolster the economy despite a raft of global challenges, according to Joyce Chang, chair of global research at JPMorgan. The U.S. Federal Reserve on Wednesday raised its U.S. GDP growth projection to 2.1% for 2024, up from 1.4% in its December outlook, as the economy continues to display resilience despite high interest rates as the central bank seeks to manage inflation levels.
“We are still seeing the phenomena around the globe that services inflation is still well above where it was before the pandemic, so we’re looking at 3% for core CPI, but I think one thing that was really underestimated in the U.S. was the immigration story,” Chang told CNBC’s “Squawk Box Europe” on Thursday. “The U.S. population is almost 6 million higher than it was two years ago or so, and so that has accounted for a lot of the increase in consumption, when you see the very low unemployment numbers as well.”
Boeing Takes Slow Approach to Ensure Certainty
Boeing’s top finance official reported that the ongoing review of its manufacturing processes and performance will continue for an undetermined period and financial goals will remain unmet. Speaking to an audience of investors and analysts, CFO Brian West said the Boeing’s targets for revenue, production, and aircraft deliveries will not be met for the foreseeable future as it overhauls the 737 MAX assembly operations at the Renton, Wash., plant.
Boeing is operating under increased scrutiny by the Federal Aviation Administration, which has installed inspectors at the Renton location in the effort to identify the causes of the January 5 incident aboard an Alaska Airlines 737 MAX 9. The OEM has an extensive backlog of orders for the twin-engine narrow-body 737 MAX, and has long sought to escalate its completion rate to as many as 57 jets/month. While the FAA has authorized a rate of 38 jets/month, West made it clear that the current rate of activity is less than that – by choice.
Read more at American Machinist
Patient of Elon Musk’s Neuralink Shows Off New Life With Implant
Noland Arbaugh, a 29-year-old diving-accident victim and quadriplegic from Arizona, gave his most extensive account yet of his experience as the first person to receive Neuralink’s brain-computer implant. Arbaugh spoke glowingly about his experience—and cracked jokes—during a nearly hourlong video posted to X on Friday, which showed him speaking to Neuralink employees during a visit to the company’s headquarters a few weeks ago. He talked about everything from playing videogames using only his thoughts to what advice he would give future patients.
Arbaugh said he was surprised how fast Neuralink moved, saying it took about five months from when he applied to when he got the surgery. “Brain surgery was easy,” he quipped. “I was expecting a much longer recovery time, and they kicked me out of the hospital like a day later.” The presentation showed video clips of Arbaugh from the month after his surgery. One clip, for example, showed him and his dad playing “Mario Kart.”
Incentives Expected to Drive US New Vehicles Up in March, Report Shows
U.S. new vehicle sales are expected to rise 12.1% in March, fueled by strong demand and vehicle availability, according to a joint report by industry consultants J.D. Power and GlobalData on Thursday. While demand for personal transport has remained resilient, inventory levels have been rising as supply chain issues faced by automakers normalize. That coupled with intense competition has led manufacturers and dealers to offer bigger discounts, marking a shift to a pre-pandemic trend of higher volumes and lower margins.
"While the sales and expenditure performance are impressive, it is coming at the expense of reduced retailer and manufacturer profitability as inventories of unsold vehicles rise and competitive pressures intensify," said Thomas King, president of the data and analytics division at J.D. Power. "The bias is shifting from low sales volumes, high prices and profits to higher sales volumes, lower prices," King said.
Apple vs US Antitrust Lawsuit: Everything We Know So Far on the DOJ’s iPhone Case
The U.S. Department of Justice announced Thursday that it filed a lawsuit accusing the company of behaving like a monopoly in locking in iPhone customers and limiting competitors building hardware and software. The lawsuit, which comes on the heels of significant antitrust cases against Apple outside the U.S., is a wide-ranging and complicated affair, but we’re covering the ins and outs of the DOJ’s case, the industry’s response and all the ongoing implications for companies and customers.
Apple issued an extensive series of rebuttals to the DOJ’s claims Thursday. The core of Apple’s argument is that regulators are selectively picking metrics that make Apple’s strength in the smartphone market seem more dominant than it actually is, in their view. And in regulating the behaviors that the DOJ claims are monopolistic, Apple’s competitive advantage in the market would be diminished and iPhone customers negatively impacted in the process. “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect,” Apple said in a statement.
BAE, Rolls-Royce Key Players in AUKUS Sub Initiative
Australia said Thursday it would spend billions on docks, shipyards and factories at home and in Britain for nuclear-powered submarines under the AUKUS security pact, and named Britain's BAE Systems to help build the boats. The AUKUS agreement among Australia, Britain and the United States will see Australia buy up to five nuclear submarines from Washington in the early 2030s before jointly building and operating a new class, SSN-AUKUS, with Britain, roughly a decade later.
The pact, which will see Australia become the seventh nation to operate nuclear-powered submarines, will stress shipyards in Britain and the United States that are already beset by delays and cost overruns. To help alleviate the strain, Australia will give Britain 2.4 billion pounds ($3.1 billion) toward design work on the conventionally armed SSN-AUKUS and expanding a Rolls-Royce plant that builds nuclear reactors for submarines. Australia has already agreed to invest $3 billion in U.S. shipyards, which build the Virginia-class nuclear submarines it will be sold early next decade amid concerns that a backlog of orders could jeopardize the deal.
New Report Pegs Cost of Electrifying U.S. Commercial Truck Fleet at $1 Trillion
Full electrification of the U.S. commercial truck fleet would require nearly $1 trillion in infrastructure investment alone, according to a new report from Roland Berger released today by the Clean Freight Coalition. The study forecasts a realistic infrastructure buildout for the electrification of medium- and heavy-duty commercial vehicles, exposing what the CFC calls a massive investment gap as state and federal policymakers mandate increased adoption rates of battery-electric commercial vehicles. Among the report’s findings:
- Preparing today’s commercial vehicle fleet for electrification would require the commercial vehicle industry to invest upwards of $620 billion in charging infrastructure alone, including chargers, site infrastructure and electric service upgrades.
- Utilities would need to invest $370 billion to upgrade their grid networks to meet the demands of just commercial vehicles.
- This nearly $1 trillion expenditure does not account for the cost of new battery-electric trucks, which according to market research can be two to three times more expensive than their diesel-powered equivalents. For example, a diesel Class 8 truck costs roughly $180,000, while a comparable battery-electric truck costs over $400,000.
Read more at The American Journal of Transportation
Gas – Not Renewables – Fills Gap in Power Generation from Indian Point Shuttering
When New York’s deteriorating and unloved Indian Point nuclear plant finally shuttered in 2021, its demise was met with delight from environmentalists who had long demanded it be scrapped. But there has been a sting in the tail – since the closure, New York’s greenhouse gas emissions have gone up. Castigated for its impact upon the surrounding environment and feared for its potential to unleash disaster close to the heart of New York City, Indian Point nevertheless supplied a large chunk of the state’s carbon-free electricity.
Since the plant’s closure, it has been gas, rather then clean energy such as solar and wind, that has filled the void, leaving New York City in the embarrassing situation of seeing its planet-heating emissions jump in recent years to the point its power grid is now dirtier than Texas’s, as well as the US average. “From a climate change point of view it’s been a real step backwards and made it harder for New York City to decarbonize its electricity supply than it could’ve been,” said Ben Furnas, a climate and energy policy expert at Cornell University. “This has been a cautionary tale that has left New York in a really challenging spot.”