Member Briefing March 8, 2023
Global Supply Chains Back to Normal After Rocky Three Years, NY Fed Says
Global supply chains have returned to normal, the Federal Reserve Bank of New York said, almost three years after Covid-19 was declared a pandemic. Actually, supply pressures around the world fell below normal. The February reading in the NY Fed’s Global Supply Chain Pressure Index was -0.26, reaching negative territory for the first time since August 2019. Zero marks the historical average, and changes in either direction mark standard deviations from that trend.
Less shipping congestion, an easing of parts shortages and weaker consumer demand have pulled the indicator lower in seven of the past 10 months, and the latest figure reflected more improvement. “There were significant downward contributions by the majority of the factors, with the largest negative contribution from European area delivery times,” the NY Fed said. The gauge brings together 27 variables that take the temperature of everything from cross-border transportation costs to country-level manufacturing data in the euro area, China, Japan, South Korea, Taiwan, the UK and the US.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Kyiv Vows to Send More Troops into Bakhmut, Seeing Chance to Break Russian Force - Reuters
- Zelensky Vows Justice After Video Appears to Show Ukrainian Soldier’s Execution - CNN
- Ukrainian Military Identifies Unarmed Prisoner Killed in Video - WSJ
- Intelligence Suggests Pro-Ukrainian Group Sabotaged Pipeline: New York Times – The Hill
- As Russia Steps Up Shelling in Kherson, Ukraine Calls on Residents to Evacuate - WSJ
- Ukraine is Building Up its Forces for an Offensive - The Economist
- U.S. Military Eyes Mounting Western Air-to-Air Missiles on Ukrainian MiGs – Politico
- Russia Resorting to 60-Year-Old Battle Tanks – USA Today
- Exiled Artist’s Work Traces Soviet Roots of Ukraine Invasion - VOA
- 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
Fed Chair Jerome Powell Tells Senate That Central Bank Could Return to Faster Rate Hikes
Citing a recent surge in job growth and inflation, Federal Reserve Chair Jerome Powell plans to tell Congress Tuesday the central bank will likely raise its key interest rate higher than anticipated and could resume larger hikes after slowing the pace in recent months. “As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in prepared testimony before the Senate banking committee. The Fed’s preferred yearly inflation measure has slowed from a peak of 7% in June to 5.4% in January, Powell noted. But inflation picked up from 5.3% in December and the monthly increase accelerated sharply.
In January the economy added a blockbuster 517,000 jobs. Consumer spending increased by a robust 1.8%; and inflation picked up more than anticipated. Powell acknowledged Tuesday the turnabout may be a blip. “Some of this reversal likely reflects the unseasonably warm weather in January in much of the country,” he said in the prepared testimony. And he said that “from a broader perspective, inflation has moderated somewhat since the middle of last year.”
Why the Recession Is Always Six Months Away
The next economic downturn has become the most anticipated recession in recent U.S. history. It also keeps getting postponed. Recent strong hiring and consumer spending are the latest evidence that the pandemic and the unprecedented policy measures that followed are interfering with the Federal Reserve’s campaign to tame inflation. Wall Street economists began 2023 broadly anticipating a recession by midyear caused by the weight of the Fed’s rapid interest-rate increases. Some still expect that could happen. Many now think it will take longer to cool the economy and will lead the central bank to raise rates to higher-than-expected levels.
“It’s the ‘Godot’ recession,” said Ray Farris, chief economist at Credit Suisse. Mr. Farris found himself among a small minority of economists last fall who predicted the economy would narrowly skirt a downturn this year. Every six months, economists have predicted a recession six months later, he said. “By the middle of the year, people will still be expecting a recession in six months’ time.”
US COVID – Study: A Quarter of Parents Lied About Their Children’s COVID-19 Status
In a survey of 580 parents with children under the age of 18, about 26 percent reported that they misrepresented or lied about their children’s COVID-19 status, according to a study published Monday in the journal JAMA Network Open. 24 percent of respondents reported not informing someone who spent time with their child that they suspected or knew that their child had COVID-19 and 21% allowed their child to break quarantine. Other behaviors included:
- Stating that their child was older than they were so that they could get vaccinated (9.7 percent of respondents)
- Saying that their child was vaccinated when they were not (10.1 percent)
- Saying their child was not vaccinated when they were (12.2 percent)
- And saying that their child did not need to quarantine when they actually did need to (16.4 percent)
NYS COVID Update – Declining Cases
China Continues to Block Efforts to Determine Covid's Origins, Lawmakers Say
Lawmakers said on Sunday that it remained impossible to determine with any certainty the origins of Covid-19 because of continued obstruction by China’s government. “We have so few facts because the Chinese regime has obfuscated,” Rep. Jim Himes (D-Conn.) said on NBC’s “Meet the Press.”
Debate over Covid-19’s origins has political implications, with the latest reports fueling demands in conservative circles for China to be punished in one way or another for unleashing it. More than a million deaths in the United States have been attributed to the coronavirus; the worldwide total is approaching 7 million. National Security Council spokesperson John Kirby said last Monday that the U.S. government still had not reached a consensus on how the pandemic started. President Joe Biden did not address the subject last week.
China Says U.S. Should Change Attitude or Risk Conflict
The United States should change its "distorted" attitude towards China or "conflict and confrontation" will follow, China's foreign minister said on Tuesday, while defending its stance on the war in Ukraine and defending its close ties with Russia. The U.S. had been engaging in suppression and containment of China rather than engaging in fair, rule-based competition, Foreign Minister Qin Gang told a news conference on the sidelines of an annual parliament meeting in Beijing.
"It regards China as its primary rival and the most consequential geopolitical challenge. This is like the first button in the shirt being put wrong." Relations between the two superpowers have been tense for years over a number of issues including Taiwan, trade and more recently the war in Ukraine but they worsened last month after the United States shot down a balloon off the U.S. East Coast that it says was a Chinese spying craft.
China Jan-Feb Trade Slumps Again as Global Demand Falters
China's exports for the January-February period fell, pointing to continued weakness in foreign demand and backing government concerns that a global slowdown will hamper the country's recovery from pandemic-era damage. Imports dropped, too, government data showed on Tuesday, also reflecting weak foreign demand, since the country brings in parts and materials from abroad for many of its exports.
Exports in January and February were 6.8% lower than a year before, after a 9.9% annual fall seen in December. The result was, however, better than the average expectation in a Reuters poll for a fall of 9.4%. Imports were 10.2% weaker, a worse result than in December, when they were 7.5% lower than a year earlier. They greatly missed the poll estimate for a 5.5% drop.
JPMorgan’s Jamie Dimon Says He’s Worried About the War in Ukraine and ‘Our Relationship With China’
“The thing I worry the most about is Ukraine,” the JPMorgan Chase & Co. chief executive officer said Monday on Bloomberg Television. “It’s oil, gas, the leadership of the world, and our relationship with China — that is much more serious than the economic vibrations that we all have to deal with on a day-to-day basis.” The US economy might escape a deep recession, according to Dimon.
In the wide-ranging interview, Dimon also touched on the potential for artificial intelligence. AI “is a technology which is staggering,” the 66-year-old CEO said. “We’re already using it to do risk, fraud, marketing, prospecting — and it’s the tip of the iceberg. To me this is extraordinary.”
New Car Sales Have Slowed Amid Higher Prices and Interest Rates
New car sales slumped in February, according to monthly data from the Bureau of Economic Analysis — down 5% from January. There’s more inventory available now because automakers have pumped up production. But high prices and rising interest rates are eating into sales. A year ago, demand for new cars was high while the supply on dealer lots was really low.
Higher borrowing costs, and rising prices, are a challenge for middle-income consumers, said Morningstar auto analyst David Whiston. “It seems buying a new vehicle is the domain of the wealthy right now,” Whiston said. The average price of a new vehicle is nearly $50,000.
The NLRB’s Latest Decision Restricts the Use of Broad Confidentiality and Nondisparagement Clauses in Severance Agreements
On Feb. 21, 2023, the National Labor Relations Board (NLRB or Board) issued its decision in McLaren Macomb, 372 NLRB No. 58 (2023), where it held that severance agreements with broad confidentiality and/or nondisparagement provisions impermissibly chill and restrain employees’ exercise of rights protected by Section 7 of the National Labor Relations Act (NLRA). The decision applies in both union and non-union workplaces. T
he decision is significant in that it overruled prior Board precedent and signals the Board’s unwillingness to enforce or otherwise accept severance agreements, or key provisions of those agreements, that bind signatory employees’ confidentiality and nondisparagement obligations that the Board considers to be too broad. The Board’s decision would not apply to supervisors, managers, or individuals not otherwise subject to Section 7 of the NLRA.
Inside the Fierce Debate Over Clean Hydrogen, With $100 Billion in Federal Subsidies on the Line
In August, the White House passed a historic piece of legislation with $369 billion in spending to address climate change. One of the most significant tax credits in that historic law was a tax credit to make hydrogen in climate-conscious ways. The impact of the tax credit on emissions reductions depends on how federal agencies implement it. And, as with most things in accounting, the devil lies in the details.
Hydrogen is currently used for many purposes, including making ammonia-based fertilizer, which the world depends on for growing crops, and for refining crude oil into useful petroleum products. But it’s also likened to a “Swiss Army Knife of decarbonization,” because it could be used as a power source in industries that are particularly hard to wean off fossil fuels, like airplanes and heavy shipping. On one side of the debate, some energy providers say that making the rules too strict could kill the clean hydrogen industry before it ever gets off the ground.
A New Nuclear Reactor in the U.S. Starts Up. It’s the First in Nearly Seven Years
On Monday, Georgia Power announced that the Vogtle nuclear reactor unit 3 has started a nuclear reaction inside the nuclear reactor. Technically, this is called “initial criticality” and is when the nuclear fission process has started splitting atoms, generating heat. Vogtle’s Unit 3 reactor will be fully in service in May or June, Georgia Power said.
The last time a nuclear reactor reached the same milestone was almost seven years ago in May 2016 when the Tennessee Valley Authority started splitting atoms at the Watts Bar Unit 2 reactor in Tennessee, according to the Nuclear Regulatory Commission. Including the newly turned-on Vogtle Unit 3 reactor, there are currently 93 nuclear reactors operating in the United States and collectively, they generate 20 percent of the electricity in the United States.
DoD Orders Over 500 F135 Engines in $8B Deal
The U.S. Dept. of Defense placed a contract with Pratt & Whitney that could be worth more than $8 billion for up to 518 F135 afterburning turbofan jet engines, to power Lots 15-17 of the F-35 Lightning II Joint Strike Fighter aircraft. Officially, the value of the order is $5.2 billion for 278 engines for Lot 15 and 16 engines, according to the Pentagon’s F-35 Joint Program Office. The F-35 is a single-engine, Stealth-enabled aircraft deployed for ground attack and combat.
The engine order follows a $30-billion agreement that DoD and Lockheed Martin reached at the end of 2022 for production and delivery of up to 398 new F-35s – covering Lots 15 and 16, plus an option for Lot 17 – for the U.S. Air Force, Navy, and Marine Corps, plus defense forces in more than a dozen allied nations. Pratt & Whitney’s order assigns responsibilities for program management, engineering support, production support, and tooling to the engine manufacturer.
EU Delays Vote on Fossil Fuel Car Ban as Germany Holds Out
The European Union on Friday delayed a vote to ban sales of new petrol or diesel-engine cars from 2035, after Germany made a last-minute push on the use of synthetic fuels. Ministers from the EU's 27 member states were expected to nod through the legislation at a routine meeting on Tuesday, after the European Parliament gave its approval last month. But a spokesman for Sweden, which holds the rotating EU presidency, said EU ambassadors had decided to push back the vote to a later meeting and would "revert to the issue in due time".
Economic powerhouse Germany, which boasts one of the world's biggest car manufacturing industries, said it wants further assurances from Brussels that synthetic fuels could still be used in engines after 2035. Coming so late in the day, Berlin's objections were viewed as highly unusual since EU member states had already signed off on the ban last year. "We have always made it clear that the European Commission should present a proposal on how synthetic fuels could be used in combustion engines after 2035," Germany's transport minister, Volker Wissing said.
Amid Gas Stove Debate, Manufacturers Hope the Induction Market Will Heat Up
Earlier this year, natural gas cooking became a flashpoint in the culture wars. And while the Biden administration isn’t trying to take away your gas stove, it is looking to nudge the transition by launching a federal rebate for the purchase of electric appliances and possibly strengthening efficiency standards for newly manufactured gas stoves. Meanwhile, cities like Seattle, LA and New York have moved to ban natural gas appliance hookups in new construction.
Some manufacturers are hoping these new restrictions will come with a silver lining: a new market for induction stoves and cooktops, which use a copper coil and electromagnetism to heat pots and pans rather than relying on indirect radiation. “Induction is really heating up,” so to speak, said Jill Notini with the Association of Home Appliance Manufacturers. Induction — which has been around since the 1970s — makes up just a 5% sliver of the overall electric cooking market. Still, manufacturers are ramping up production and investing in consumer education about the technology, she said.