Member Briefing March 3, 2022
Invasion of Ukraine Headlines
- Russian Troops in Strategic Black Sea Port City of Kherson – Reuters
- Russia Batters Ukraine’s Kharkiv as Kyiv Offensive Stalls – WSJ
- Maersk to Stop New Russian Shipments, Ford Suspends Russian JV – IndustryWeek
- Food Shortages, Last Goodbyes: Ukrainians Face Their New Reality – WSJ
- Navalny Calls for Protests in Russia, Calls Putin an ‘Obviously Insane Tsar’ – The Hill
- UN: Ukraine Refugees top 677,000 Could Become ‘Europe’s largest Displacement Crisis this Century,’ – AP
- UN General Assembly Resolution Condemns Russia’s Actions in Ukraine – NPR
- Roman Abramovich Will Sell Chelsea FC and Give Money to Ukraine War Victims – CNBC
- ‘Height of Irresponsibility:’ Blinken Slams Putin’s Provocative Rhetoric on Nuclear Weapons – CNBC
- Trump Calls the Russian Invasion ‘a Holocaust,’ Urges Russia to Halt Invasion – The Hill
- Map – Tracking Russia’s Invasion of Ukraine – The Economist
ISM Deeper Dive
U.S. manufacturing activity picked up more than expected in February as COVID-19 infections subsided, though hiring at factories slowed, contributing to keeping supply chains snarled and prices for inputs high.
- The ISM’s index of national factory activity increased to a reading of 58.6 last month from 57.6 in January.
- All of the six largest manufacturing industries – transportation equipment, machinery, computer and electronic, food, chemical, as well as petroleum and coal products reported moderate-to-strong growth.
- The forward-looking new orders sub-index increased to 61.7 last month from 57.9 in January
- Factory employment slipped to a reading of 52.9 last month from a 10-month high of 54.5.
- There were a near record 10.9 million job openings across the U.S. economy at the end of December.
- The survey’s measure of prices paid by manufacturers dipped to a still-high reading of 75.6 from 76.1 January, pointing to sustained inflation pressures.
- The order backlog index dropped 6.4 points in January, February’s reversal suggested that global supply chains remained stressed.
NY GOP Officially Backs Zeldin for Governor in 2022 – Primary Likely
Rep. Lee Zeldin officially won the backing of the state Republican Party at its nominating convention on Tuesday, considered by most a foregone conclusion well before the convention began. But despite the official stance from party officials, the race is far from over as other declared candidates made spirited appeals to party members to support their campaigns.
The Long Island member of Congress went into the convention already considered the presumptive nominee after racking up the support of most of nearly all the county party leaders around the state. He’s the only candidate to have announced a running mate, Alison Esposito, who also received the state GOP’s official designation on Tuesday. Zeldin dominated the final vote with over 85%.
Powell Expects a Quarter-Point Fed Rate Hike This Month – Predicting Soft Landing
Chair Jerome Powell said Wednesday that he supports a traditional quarter-point increase in the Federal Reserve’s benchmark short-term interest rate when the Fed meets later this month, rather than a larger increase that some of its policymakers have proposed. The Fed chair cautioned that the economic consequences of Russia’s invasion of Ukraine, and the resulting sanctions by the U.S. and Europe, are “highly uncertain” and said “it’s too soon to say” how they might affect the Fed’s policies.
The stock market rose in response to Powell’s support of the smaller increase. The S&P 500 jumped 1.7% in mid-day trading. Under questioning by Rep. Roger Williams, a Texas Republican, Powell said he believes the Fed can reduce inflation without tipping the economy into recession. One reason he thinks so, Powell said, is that the economy is strong now, with solid growth and the unemployment rate at a low 4%.
US COVID – Lower Dose Vaccine Less Effective in 5-11 Year-Olds
Data compiled by the New York State Department of Health indicates that the smaller Pfizer-BioNTech SARS-CoV-2 vaccine is less effective at preventing infection and COVID-19-related hospitalization in children ages 5 to 11 years compared with older children ages 12 to 17. The findings, which are not yet peer-reviewed, showed quicker declines in vaccine effectiveness (VE) in the younger cohort.
The authors note that dosing could be a factor in the VE decline, as children ages 5 to 11 receive smaller doses of vaccine. The adult dose, also given to those aged 12 to 17 years, is a 2-dose regimen of 30 µg, while those aged 5 to 11 receive 2 10μg doses in the trial. In clinical trials, children ages 6 months to <5 years are receiving even lower doses of the Pfizer-BioNTech vaccine, 2 or 3 shots of 3μg. The US FDA and the companies recently delayed review of an application for authorization among this group to await trial results of a 3-dose regimen, expected in April, after 2 doses did not produce antibody levels in 2- to 4-year-olds on par with people aged 16 to 25. The Pfizer-BioNTech vaccine is currently the only one authorized in the US for use among children ages 5 to 11.
Biden Unveils New Covid-19 Strategy for Next Phase of Response
The plan underscores the administration’s shifting focus from responding to the pandemic crisis to a new normal that focuses on managing the disease. But the road map, the result of weeks of work with advisers, state leaders and public health experts, relies heavily on Congress approving billions of dollars in new Covid-19 relief funding.
The request includes $17.9 billion for medical countermeasures like antivirals, $4.9 billion for testing capacity and $2.7 billion to combat future variants. It is uncertain whether lawmakers will be on board with a request for billions more dollars to cope with Covid-19 going forward, and some Republican lawmakers have already expressed skepticism over the price tag.
China Quietly Plans a Pivot From ‘Zero COVID’
China’s aggressive “zero COVID” strategy has served it remarkably well. The country has reported fewer than 154,000 cases and 5200 deaths from COVID-19 so far, a tiny fraction of the figures in the United States. But as the highly transmissible Omicron variant seeps into the country and the social and economic costs of the zero COVID policy mount, Chinese researchers are examining options for coexisting with the virus, as the rest of the world is doing. Some think that shift may soon begin. It will be a momentous decision, and the country is sure to proceed cautiously.
China’s zero COVID policy has relied on mass testing, contact tracing, isolating the infected, restrictions on international and domestic travel, and lockdowns of entire cities. The system has helped China stamp out every outbreak so far, including several of the Omicron variant since mid-January. But outbreaks are becoming more frequent and widespread.
State Senate Passes Sexual Harassment Bills
Senate Democrats passed a series of bills related to sexual harassment Tuesday, re-upping legislation that failed to get additional traction in Albany last year. The votes come as part of a yearslong push to advance anti-sexual-harassment measures, an issue that gained new attention last summer when Andrew Cuomo was forced to resign as governor after being accused of sexual harassment.
The package includes a slate of proposals that will prohibit the retaliatory release of employees’ personnel files, ban settlement agreements from prohibiting future employment with the employer, lengthen the time individuals can file unlawful discrimination claims and ensure that state employees are included in the state human rights law, among other measures.
ECB Dilemma: Eurozone Inflation Climbs to Fresh High
The European Union’s statistics agency Wednesday said consumer prices were 5.8% higher in February than a year earlier, an acceleration from the 5.1% rate of inflation recorded in January. It was the fourth straight month in which the inflation rate hit a record high, and probably not the last.
As they prepared their plans for 2022, policy makers at the ECB had been counting on a decline in energy prices—as demand for winter heating fuels eased toward the end of this month—to help reverse the rise in the eurozone’s inflation rate and bring it back to its 2% target by the end of this year.
Disinflation Policies – With a Flat Phillips Curve
NY Fed Researchers yesterday analyzed the drivers of the surge in inflation over the course of 2021 through the lens of the New York Fed DSGE model. Today they use the model to study how alternative monetary policy strategies might contribute to bringing inflation back down to 2 percent.
Their main finding is that there is no monetary silver bullet. Due to a flat Phillips curve—a well–documented feature of the economic environment of the last three decades—monetary policy can only achieve faster disinflation at a considerable cost in terms of forgone economic activity. This is true regardless of the systematic approach followed by the central bank in the model to pursue its objective.
Labor Dispute 1 – Union Accuses Starbucks of Violating Labor Law
Starbucks Workers United has filed 21 unfair labor practice charges against Starbucks with the National Labor Relations Board, accusing the coffee chain of surveillance of workers in its stores and interfering with union elections. The union claims Starbucks has repeatedly violated federal labor law, at stores in Buffalo and around the country, as the Seattle-based company pushes back against workers’ efforts to unionize those stores.
Reggie Borges, a Starbucks spokesman, said in response to the unfair labor practice charges: “Claims of anti-union activity are categorically false.” Meanwhile, contract talks are under way between Starbucks Workers United members at the Elmwood Avenue store and the company, and are set to begin soon for workers at a Genesee Street store in Cheektowaga, said Michelle Eisen, a union organizer.
Labor Dispute 2 – MLB Cancels 2022 Opening Day
Major League Baseball commissioner Rob Manfred on Tuesday announced he has canceled Opening Day and the first two series of the 2022 season, as the league’s lockout lurched into March with no new collective bargaining agreement – which could result in the first regular season games lost to a labor dispute since 1995.
The announcement comes 90 days after the previous CBA expired at midnight on Dec. 1, when MLB imposed a lockout of players and weeks of infrequent, haphazard and often brief and rancorous negotiations commenced.
Ford to Split into Separate EV and Internal-Combustion Units
Ford Motor Co. announced Wednesday it would split into two new internal business units, Ford Model E and Ford Blue. The first will take over all of Ford’s existing electric vehicle operations, while Ford Blue will become the home of Ford’s new and old gasoline-powered vehicles. According to company executives, the move is meant to make both new branches of Ford operate “with the focus and speed of a startup.”
Both independent units will operate like different companies under the Ford Motor Co. umbrella. Ford Model E will be led by Ford Motor Co. president Jim Farley, while Ford Blue will be lead by Kumar Galhotra, currently president of Ford’s Americas and International Markets Group. Both companies will be served by other Ford groups like the company’s financing service.
Manchin Proposes Dramatically Smaller Version of Build Back Better
Sen. Joe Manchin (D-W.Va.), who torpedoed President Biden’s Build Back Better agenda at the end of last year, on Wednesday laid out a dramatically scaled down version that he says he could vote for under the special budget reconciliation process. The West Virginia senator clarified he hasn’t made any formal counterproposal to the White House but is sketching the outlines of a proposal that he could support along with the rest of the Senate Democratic Caucus.
Manchin said he could support a reconciliation package that reforms the tax code and lowers the cost of prescription drugs if the money raised is split between spending on new climate change proposals and deficit reduction and fighting inflation.
Oil Tops $110 With Russian Supplies Struggling for Buyers
Oil extended its relentless rally above $110 a barrel before an OPEC+ meeting as the severity of disruption to Russian supplies showed signs of growing. Futures in London and New York both jumped above the threshold intraday, with West Texas Intermediate hitting the highest since 2013. The market’s structure has moved into super-backwardation, indicating extreme scarcity, while prices have also surged through major option strikes, exacerbating price swings.
Russia’s flagship Urals crude oil was offered for sale at a record discount but got no bidders, the latest indication that trading of oil from the country’s western ports is grinding to a halt. Consultant Energy Aspects said about 70% of Russian crude trade is currently frozen amid banking sanctions, spiking freight rates and wider political risks.