Member Briefing March 29, 2023

Posted By: Harold King Daily Briefing,

Economists Expect US Recession, Above-Target Inflation This Year

The United States will likely enter a recession this year and face high inflation well into 2024, a majority of economists predicted in their response to a semiannual survey. More than two-thirds of respondents to the National Association for Business Economics (NABE) Policy Survey also see inflation remaining above 4% at the end of this year. The survey summarized the responses of 217 NABE members and was conducted between March 2 and March 10, the organization said in a statement.

Amid the gloomy economic forecast, there was also some good news, with just 5% of respondents believing the U.S. is currently in the midst of a recession, "far fewer" than the 19% in its previous economic survey, the NABE president Julia Coronado said in a statement. Economists also slightly raised the chances of the Fed achieving a so-called "soft landing" -- bringing down inflation while avoiding a recession -- from 27% in August to 30% in March this year.

Read more at The Business Recorder

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Reshoring, Foreign Direct Investment Job Announcements Set New Record in 2022

Reshoring and foreign direct investment (FDI) job announcements for 2022 reached a new record of 364,000, a 53% increase from the previous year, according to the Reshoring Initiative’s 2022 Data Report. “We publish this data quarterly to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” said Harry Moser, founder and president of the Reshoring Initiative.

“U.S. investments in chips and EV batteries accounted for 53% of 2022 job announcements,” according to the report. “Electric vehicle batteries were the most active product to be reshored/FDI’d in 2022.” The top driving factors for the trend were reported as government incentives, skilled workforce and supply chain interruption risk. Together, the South and the Midwest account for 76% of jobs, with Ohio, Georgia, Tennessee and North Carolina appearing in the top five. However, New York boasts the highest number of job announcements for 2022 at 12%, a large jump from last year’s report where the state ranked 10.

Read more at IndustryWeek

US Consumer Confidence Increased Slightly in March

The Conference Board Consumer Confidence Index increased slightly in March to 104.2 (1985=100), up from 103.4 in February. The Present Situation Index—based on consumers' assessment of current business and labor market conditions—decreased to 151.1 (1985=100) from 153.0 last month. The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions—ticked up to 73.0 (1985=100) from 70.4 in February. However, for 12 of the last 13 months the Expectations Index has been below 80, the level which often signals a recession within the next year.

In a special question this month, the Consumer Confidence Survey asked about consumers' spending plans on services over the next six months. The results reveal that consumers plan to spend less on highly discretionary categories such as playing the lottery, visiting amusement parks, going to the movies, personal lodging, and dining.

Read more at PR Wire

COVID News – WHO Chief: Pandemic Accord Will Not Impede Sovereignty

Criticisms and claims that a developing global pandemic accord would empower the World Health Organization to overrule the national emergency laws of any country in the event of another pandemic are false, says WHO Director-General Dr. Tedros Adhanom Ghebreyesus. The agreement would be "a critical step in ensuring that we do not repeat the mistakes of the COVID-19 response, including in sharing life-saving vaccines, provision of information, and development of local capacities," says Precious Matsoso, co-chair of the body negotiating the agreement.

The Intergovernmental Negotiating Body (INB) which is drafting and negotiating the hoped for WHO agreement, is due to meet again early next month, with a view to producing a first draft.

Read more at India Blooms

Global Economy May Be in a ‘Lost Decade,’ World Bank Warns

After three decades of mostly fast-paced growth, the global economy may finally be in for a big slowdown. A number of economic risks, including an aging global workforce and declining private sector investment, are converging to limit economic growth. Left unattended, these threats could reverse decades of efforts to reduce poverty and fast-track development, while setting the stage for a “lost decade.”

That’s the warning of a new report released by the World Bank on Monday that finds almost every factor that fueled global economic growth and poverty reduction since the 1990s could disappear by the end of this decade. Global GDP growth could shrink to 2.2% annually between now and 2030, a decline of a third from the 3.5% average rate from 2000 to 2010 and a source of potential economic stagnation for years to come. The report referred to potential GDP growth as an economy’s “speed limit”: how much growth policymakers can realistically target without risking excess inflation.

Read more at YahooFinance

Hudson Valley Unemployment Rate Falls to 3.3 Percent, Labor Force Rises Slightly  

The February 2023 unemployment rate for the Hudson Valley Region was 3.3 percent.  That is down from 3.5 percent in January 2023 and down from 3.8 percent in February 2022.  In February 2023, there were 38,000 unemployed in the region, down from 40,200 in January 2023 and down from 43,500 in February 2022.  Year-over-year in February 2023, labor force increased by 2,600 or 0.2 percent, to 1,156,300.

Rockland had the lowest rate at 3.0 percent in February.  Followed by Putnam at 3.2 percent and Dutchess and Westchester at 3.3 percent. Orange checked in at 3.4 percent and Ulster at 3.5 percent. Sullivan had the highest at 3.6 percent. 

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McMahon: New York Remains Below Pre-Pandemic Jobs Peak

Measured on a seasonally adjusted basis, private employment in New York State as of February was still 104,000 jobs short of its February 2020 pre-pandemic peak (-1.2 percent), while the total U.S. private jobs count was up nearly 4.8 million jobs (+2.4 percent). If the Empire State had matched the nationwide trend during this period, it would have 320,000 more private-sector jobs.

Private job counts as of February exceeded pre-pandemic levels in 36 states, including neighboring New Jersey (+3.3 percent), Pennsylvania (+0.7 percent), and Massachusetts (+0.1 percent). Only six states, all smaller than New York, have experienced weaker employment recoveries since early 2020. By contrast, private sector employment has grown much faster in New York’s large peer states: Florida (+8.2 percent), Texas (+ 7.8 percent), and even California (+2.5 percent).

Read more at the Empire Center

Advocates Push for 2 Linked Climate Bills to Be in State Budget

New York leaders in Albany are close to an agreement on a first-in-the-nation ban on gas and fossil fuel hook-ups in new construction. The ban would likely start in 2025 or 2026, though that’s still being debated. The legislation will likely include exemptions for restaurants and back-up generators. Business leaders and Republicans have come out against the “All-Electric Building Act." There are also some upstate Democrats who are on the fence.

While both proposals are similar, the timeline for the legislature’s version of the “all-electric building act," sponsored by Brian Kavanagh and Emily Gallagher (S562A/ A920A), is somewhat more aggressive than the governor’s. It would prohibit “infrastructure, building systems, or equipment used for the combustion of fossil fuels in new construction statewide no later than December 31, 2023 if the building is less than seven stories and July 1, 2027 if the building is seven stories or more."

Read more at Spectrum News

NLRB’s General Counsel Issues Guidance Memorandum on Severance Agreements in Light of McLaren Decision

In the McLaren decision, the NLRB reasoned that offering employees a severance agreement with overly broad confidentiality or non-disparagement provision constitutes a restriction on an employee’s ability to exercise their “Section 7” rights under the National Labor Relations Act (NLRA). Although the decision left most with the impression that broad confidentiality and non-disclosure provisions were, at minimum, strongly disfavored by the Board, the NLRB left many questions unanswered.

Jennifer Abruzzo, the NLRB’s General Counsel, issued a memorandum published on March 22, 2023 that provides her broad and aggressive interpretation of the McLaren decision (Memorandum GC 23-05). The memorandum provides answers, in the General Counsel’s view, to questions such as whether McLaren has retroactive effect on agreements already containing such confidentiality and non-disparagement provisions, and, whether the non-disparagement and confidentiality clauses are wholly unlawful for use in employee severance agreements. An overview of the General Counsel’s most pertinent points in the memorandum is provided below.

What's Ahead for Aluminum Prices with US Tariffs on Russia?

In 2018 when the U.S. sanctioned United Co. Rusal, a major Russian aluminum producer, in response to Russian aggressions, including meddling in U.S. elections. The punishment, which froze the bulk of the company’s exports, jolted the aluminum market and sent aluminum prices soaring. With that in mind, aluminum buyers and sellers were anxious about 2023.

They received some clarity at the end of February when the White House announced that the U.S. will impose 200% tariffs on Russian aluminum. The 200% duty also will apply to aluminum imports from elsewhere that include Russian aluminum. While tariffs usually lead to higher prices, the impact of this latest action against Russian aluminum will be muted on prices because of a confluence of factors, according to our commodity specialists. First off, the tariffs were not as punitive as other measures that the White House was considering, including a total ban on Russian aluminum imports and renewed sanctions on Rusal. The tariffs are unlikely to tighten aluminum supplies in the U.S., as users have lessened their reliance on Russian aluminum since 2017.

Read more at IndustryWeek

The Paper-Thin Steel Needed to Power Electric Cars Is in Short Supply

Large U.S. steelmakers are ramping up production of a hard-to-make, paper-thin steel to capture a fast-growing market for a material critical to powering electric vehicles.Cleveland-Cliffs Inc. and U.S. Steel Corp. are jockeying with a small group of foreign-based steelmakers that produce electrical steel, used to convert electricity into mechanical power for motors in products that include washing machines, air conditioners, power tools and more recently, electric vehicles.

Such electrical steel, which accounts for about 1% of all the steel produced annually in the world, already is in short supply for electric vehicles, executives said. Companies expect demand to accelerate faster than production as EV volumes expand in the coming years. Supply chains for making battery-powered electric vehicles have become a flashpoint for the U.S. auto industry as production pivots away from internal-combustion engines.

Read more at The WSJ

Alibaba to Overhaul China's Biggest Tech Conglomerate Into 6 Units

Alibaba Group Holding will overhaul its sprawling US$257 billion empire, as China’s largest technology conglomerate undertakes its biggest corporate restructuring since its establishment more than two decades ago in Jack Ma’s Hangzhou apartment. The company will reorganise its businesses into six independently run entities: Cloud Intelligence Group, e-commerce under Taobao-Tmall, Cainiao’s smart logistics operations, Local Services group, Global Digital Business Group, and the Digital Media and Entertainment Group, according to a letter to employees on Tuesday.

Each of the business units will have to face the test of market forces individually, and find their own path to compete, including the possibility of seeking their own fundraising avenues through initial public offerings (IPOs), said Alibaba, owner of the South China Morning Post. The business units will separately set up their own boards of directors. The objectives of the overhaul are to streamline the management and shorten the decision-making process to help reignite its entrepreneurial spirit, according to the plan.

Read more at The South China Morning Post

The Jobs Most Exposed to ChatGPT

Accountants are among the professionals whose careers are most exposed to the capabilities of generative artificial intelligence, according to a new study. The researchers found that at least half of accounting tasks could be completed much faster with the technology. The same was true for mathematicians, interpreters, writers and nearly 20% of the U.S. workforce, according to the study by researchers at the University of Pennsylvania and OpenAI, the company that makes the popular AI tool ChatGPT.

The researchers, who published their working paper online this month, examined occupations’ exposure to the new technology, which is powered by software called large language models that can analyze and generate text. They analyzed the share of a job’s tasks where GPTs—generative pre-trained transformers—and software that incorporates them can reduce the time it takes to complete a task by at least 50%. Research has found that state-of-the-art GPTs excel in tasks such as translation, classification, creative writing and generating computer code.

Read more at the WSJ

US Regulator Cites 'Terrible' Risk Management for Silicon Valley Bank Failure

A top U.S. regulator told a Senate panel on Tuesday that Silicon Valley Bank did a "terrible" job of managing risk before its collapse, fending off criticism from lawmakers who blamed bank watchdogs for missing warning signs. In the first congressional hearing into the sudden collapse of two U.S. regional lenders and the ensuing chaos in markets, both Democratic and Republican lawmakers pressed the Federal Reserve's top banking regulator on whether the central bank should have been more aggressive in its oversight of SVB.

Michael Barr, the Fed's vice chairman for supervision, criticized SVB for going months without a chief risk officer and how it modeled interest rate risk, which he said "was not at all aligned with reality." Fed supervisors had flagged such issues with bank management, but they went unaddressed, he added.

Read more Reuters