Member Briefing May 1, 2023
Hochul, NY Lawmakers Reach Tentative Deal on $229 Billion State Budget
Gov. Kathy Hochul and state lawmakers have agreed to a tentative deal on a $229 billion budget that would tweak the state’s bail laws, boost the minimum wage and extend a pandemic-era tax increase on New York’s most profitable companies. Hochul announced the conceptual agreement Thursday night at the state Capitol after Assembly and Senate members had returned home to their districts amid a stalemate in negotiations.
The Governor negotiated with state Assembly and Senate Democratic leaders for weeks on her top two priorities, housing and bail reform. But a final deal was also delayed over issues such as raising the state minimum wage (see details below), expanding charter schools in New York City, and cracking down on illegal cannabis sales. The budget bills haven’t yet been printed. Hochul's announcement came in the evening after lawmakers left Albany and are not expected to return to consider them until this week.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russia Launches Cruise Missiles into Kyiv and Other Cities, Killing at Least 17 People – Fox News
- Russia Digs in as Ukraine Prepares to Attack - Reuters
- Ukraine's Counteroffensive: Goals, Opportunities, Risks – Deutsche Welle
- Ukraine Says it Controls Key Supply Route into Bakhmut – Reuters
- ‘Stop Deceiving the Population’: Russia’s Mercenary Boss Threatens Full-Blown Mutiny – Daily Beast
- Russia Pledges Harsh Response After Polish 'Seizure' of Embassy School in Warsaw- Politico
- U.S. Imposes Sanctions on Russia and Iran for Wrongful Detention and Hostage-Taking of American Citizens - CNBC
- Kyiv Says Counterattack Nearly Ready With 'Iron Fist' - Reuters
- How China Could Save Putin’s War in Ukraine – Foreign Affairs
- Charting Ukraine’s Soaring Exports to the EU – The Economist
- 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
GDP Report Shows Economic Growth Slowed in First Quarter
U.S. gross domestic product, a measure of the value of all the goods and services produced in the country, rose at an inflation- and seasonally-adjusted 1.1% annual rate from January to March, a slowdown from 2.6% growth in the fourth quarter, the Commerce Department said Thursday. Consumers, fueled by an ability to spend from higher incomes and built-up savings, propelled the economy to its third straight quarter of growth. Businesses drew down inventories and pulled back on equipment purchases while housing remained weak, offsetting growth.
Personal-consumption expenditures rose 3.7% in the first quarter as consumers spent more on goods and services. That was the fastest pace since the second quarter of 2021 and up from 1% in the prior quarter, the Commerce Department said. Many economists expect the economy to slow even more as the year progresses, with the possibility of a U.S. recession in the second half of the year as higher rates affect the economy.
U.S. March PCE Price Index Shows High, Though Cooling, Inflation
A measure of inflation closely watched by the Federal Reserve slowed on a monthly basis in March, as the U.S. central bank is widely tipped to raise interest rates by a quarter percentage point at its next policy meeting. The personal consumption expenditure price index moved higher by 0.1% during the month, down from the 0.3% registered in February and estimated by economists. Annually, the number slowed to 4.2% from 5.1%. The stubbornly elevated prices and higher borrowing costs weighed on U.S. consumer spending last month, with inflation-adjusted personal consumption stalling month-on-month after a downwardly revised 0.2% drop in February.
Excluding volatile items like food and energy, the PCE index increased by 0.3% in March, in line with the prior month and meeting economists' projections, according to Commerce Department data on Friday. On a year-on-year basis, the core reading moved down to 4.6% from an upwardly revised mark of 4.7% in February, but topped estimates of 4.5%. The Fed uses the PCE price indexes, which gauge how much consumers are paying for goods and services, for its 2% inflation target.
COVID News – What to Know About XBB.1.16, the 'Arcturus' Variant
XBB.1.16 — dubbed “Arcturus” on social media — is another descendant of omicron. It was first detected in early January and the majority of cases have been seen in India so far. It’s been steadily rising in the U.S. in recent weeks, although it still made up slightly less than 10% of new confirmed Covid cases as of Saturday, according to the Centers for Disease Control and Prevention.
Ali Mokdad, a professor of global health at the University of Washington, said it’s still too early to predict what XBB.1.16 will do. But what he’s seen so far has been reassuring. Mokdad said that XBB.1.16 is gaining ground on the previously dominant strain in the U.S., called XBB.1.5. That increased transmissibility appears to be due to the subvariant’s ability to avoid immune detection in the body. That said XBB.1.16 doesn’t appear to be making people sicker than earlier omicron strains.
NYS COVID Update
The Governor updated COVID data for the week ending April 21.
- Weekly: 54
- Total Reported to CDC: 79,467
- Average Daily Patients in Hospital statewide: 684
- Average Daily Patients in ICU Statewide: 82
7 Day Average Cases per 100K population
- 60 positive cases per 100,00 population, Statewide
- 01 positive cases per 100,00 population, Mid-Hudson
First Republic Bank Is Seized, Sold to JPMorgan in Second-Largest U.S. Bank Failure
Regulators seized and struck a deal to sell the bulk of its operations to JPMorgan Chase & Co., heading off a chaotic collapse that threatened to reignite the recent banking crisis. JPMorgan said it will assume all of First Republic’s $92 billion in deposits—insured and uninsured. It is also buying most of the bank’s assets, including about $173 billion in loans and $30 billion in securities.
As part of the agreement, the Federal Deposit Insurance Corp. will share losses with JPMorgan on First Republic’s loans. The agency estimated that its insurance fund would take a hit of $13 billion in the deal. JPMorgan also said it would receive $50 billion in financing from the FDIC. San Francisco-based First Republic, the second-largest bank to fail in U.S. history, lost $100 billion in deposits in a March run following the collapse of fellow Bay Area lender Silicon Valley Bank. It limped along for weeks after a group of America’s biggest banks came to its rescue with a $30 billion deposit.
Budget Agreement Raises Minimum Wage
The hourly minimum wage — currently $15 in New York City, Long Island and Westchester County — is set to increase. And continue increasing, assuming inflation. As part of the budget, lawmakers and Hochul have agreed to increase the minimum wage by 50 cents a year beginning next year until it hits $17. (For areas north of Westchester County, where the minimum wage is currently $14.20, it will bump up by 80 cents next year, then 50 cents a year until it hits $16.)
After that, the wage will be tied to inflation — meaning it will automatically increase in line with the Consumer Price Index, rather than be subject to the whims of state lawmakers.
IRS Data: NYS Taxpayer Outflow Hit a New Net High of 261,785 in 2020-21 (Includes Interactive Map)
The average incomes and the net headcount of New Yorkers moving to other states hit an all-time high during the first full income tax-filing period affected by the COVID-19 pandemic and lockdown, according to 2020-21 migration data released today by the Internal Revenue Service (IRS). New York’s net loss to other states came to 261,785 filers and dependents. More than 90 percent of New York’s net taxpayer outflow to other states was from New York City, Long Island, and five lower Hudson Valley counties (Westchester, Rockland, Orange, Putnam and Dutchess).
The average adjusted gross income of New Yorkers moving to other states reached a new all-time high of $130,054—a 14 percent increase over the previous year’s $114,360. By contrast, the much smaller number of tax filers moving into New York in 2020-21 reported average incomes of $90,337. The average income of all New Yorkers moving to Florida was $223,245—a 64 percent jump from 2019-20.
Europe’s Economy Barely Avoids Recession
Europe’s economy skirted a recession at the start of the year, underlining the continent’s surprising resilience despite Russia’s war on Ukraine, signs of banking strains, and repeated interest-rate increases to combat stubbornly high inflation. The European Union’s statistics agency said the combined economic output of the 20 eurozone countries rose at an annualized rate of 0.3% in the first three months of 2023, after shrinking by 0.2% in the final quarter of last year.
The stronger economic output is in part due to a drop in energy prices from their summer peaks, due to an unusually warm winter and an influx of liquefied-natural gas from the U.S. and elsewhere. This was reflected in a rise in imports from the U.S., which were up a fifth in the first two months of 2023 against a year earlier. Business surveys indicate that the eurozone economy may speed up again in the three months through June as usage of still-expensive energy declines, leaving households with more to spend on other goods and services.
New International Service Coming to Stewart
New York Stewart International Airport at Newburgh has landed its second international flights with nonstop service to the Faroe Islands. Atlantic Airways will operate seasonal weekly service from August 22 through October 4 to Vagar, the sole airport on the Faroe Islands. Atlantic Airways plans to operate weekly outbound flights from Stewart on Wednesdays with return flights to Stewart on Tuesdays. The flights will take about six hours.
Play Airlines operates daily flights to Reykjavik, Iceland from Stewart with connections to dozens of European cities. Allegiant Air operates service to Orlando-Sanford, Punta Gorda and St. Pete-Clearwater in Florida, as well as Myrtle Beach, South Carolina, and Frontier Airlines offers service to Orlando.
U.S. Weekly Jobless Claims Unexpectedly Dip To 230,000
First-time claims for U.S. unemployment benefits unexpectedly declined in the week ended April 22nd, according to a report released by the Labor Department on Thursday. The report said initial jobless claims dipped to 230,000, a decrease of 16,000 from the previous week's revised level of 246,000. Economists had expected jobless claims to inch up to 248,000 from the 245,000 originally reported for the previous week.
The Labor Department said the less volatile four-week moving average also edged down to 236,000, a decrease of 4,000 from the previous week's revised average of 240,000. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also slipped by 3,000 to 1.858 million in the week ended April 15th. The four-week moving average of continuing claims still rose by 10,250 to 1,836,500, reaching the highest level since the week ended December 18, 2021.
House Approves Resolution to Undo Biden Solar Tariff Freeze, Senate Likely to Follow Suit
The House on Friday approved a Congressional Review Act resolution to resume tariffs on solar power imports suspended by the Biden administration. The measure, H.J. Res. 39, was approved 221-202, with 12 Democrats joining most Republicans to vote in favor of the resolution and eight Republicans opposing it. Rep. Bill Posey (R-Fla.) sponsored it. The suspended tariffs apply to imports from Cambodia, Malaysia, Thailand and Vietnam, which together comprise about 80 percent of domestic panel supplies. The Congressional Review Act allows Congress to overturn a federal rule with a simple majority in both chambers.
Despite the Democratic Senate majority, the resolution is likely to clear the upper chamber as well. Sens. Joe Manchin (D-W.V.) and Sherrod Brown (D-Ohio), and Sen. Ron Wyden (D-Ore.), will back the resolution. The White House has already vowed to veto the resolution, arguing the tariff suspension is vital to allow the U.S. to build up renewable energy infrastructure for the transition away from fossil fuels.
Bosch Plans to Buy TSI Semiconductors in California
German-based technology company Bosch is looking to Roseville as their next base of operation to begin production of semiconductor chips, according to the tech company. In a press release from Bosch on Wednesday, they announced the planned acquisition of computer ship manufacturer TSI Semiconductors, which is based in Roseville, California. “With a workforce of 250, the company is a foundry for application-specific integrated circuits,” Bosch wrote about TSI Semiconductors.
The large technology company is planning to invest $1.5 billion into the Roseville facility over the coming years and is planning to have its first chips by 2026. “The full scope of the planned investment will be heavily dependent on federal funding opportunities available via the CHIPS and Science Act as well as economic development opportunities within the State of California,” Bosch continued.
Eurozone Economic Sentiment Ticks Up Only Slightly in April
Confidence among businesses and consumers in the eurozone rebounded only marginally in April, suggesting slowing momentum of an economic revival in the bloc as cost-of-living pressures weigh. The eurozone’s economic sentiment indicator—an aggregate measure of business and consumer confidence—increased to 99.3 in April from an downwardly revised 99.2 in March, data from the European Commission showed Thursday.
It marks the fourth month of general stagnation in sentiment, reflecting a slowdown in economic momentum after an upswing in confidence as the energy-price shock proved less severe than initially expected. It reflects subdued expectations that the eurozone economy grew slightly by 0.1% in real terms in the first quarter, according to staff macroeconomic projections in March from the European Central Bank. However, a more sustained revival, of 0.3%, is expected in the second, according to the ECB.
Musk Meets With Schumer as Senate Looks Into AI
Elon Musk slipped into Washington Wednesday for talks with lawmakers about artificial intelligence. The chief executive officer of SpaceX, Tesla Inc. and Twitter Inc., later tweeted about the meetings, suggesting that regulation of AI may be appropriate. “That which affects safety of the public has, over time, become regulated to ensure that companies do not cut corners,” he wrote. “AI has great power to do good and evil. Better the former.” Senate Majority Leader Chuck Schumer, a New York Democrat, has been considering legislation to regulate artificial intelligence.
Artificial intelligence has been a focus of research for years, from Silicon Valley to the Pentagon and globally. The November debut of OpenAI’s chatbot ChatGPT, however, sent competitors rushing to release their own versions — and critics warning that the products risk regurgitating inaccurate and harmful results, and could lead to the development of AI systems that could not be easily controlled.
U.S. May Accelerate $19B in Arms Sales to Taiwan
The House committee dedicated to countering China is preparing bipartisan proposals for the fiscal 2024 defense authorization bill that would accelerate U.S. munitions production and arms transfers to Taiwan, its chairman told Defense News in an exclusive interview. The committee is drawing on lessons learned from the Taiwan tabletop wargame it held last week as it drafts its proposals, which aim to ramp up production of high-priority munitions, help clear the $19 billion arms sale backlog to Taipei and bolster Pentagon cybersecurity cooperation with the island nation.
“We’re hoping to get consensus on a series of proposals that the committee can endorse that would be tailor-made for insertion into this year’s [National Defense Authorization Act],” Rep. Mike Gallagher, R-Wis., said Thursday. He’s also using his position as a subcommittee chairman on the Armed Services Committee to introduce those Taiwan recommendations as amendments when the House marks up the FY24 NDAA in early June.
Trans-Pacific Shipping Prices Rebound
The cost of shipping goods by ocean from Asia to the U.S. is turning upward as container lines try to reverse a monthslong slide in rates ahead of the busy importing season. The average spot market price to ship a 40-foot container from Asia to the U.S. West Coast jumped 34%, or $425, over the past two weeks to $1,659, according to Norway-based transport data firm Xeneta.
The rate is still below the average price of $9,203 a year ago, but it suggests a rapid decline in pricing that began midway through 2022 as supply-chain snarls eased and retailers reined back restocking efforts may have bottomed out. The spot-market increases appear to be adding some urgency to importers’ preparations for the fall. Many companies have been delaying signing contracts for shipping later this year amid uncertainty over economic conditions and the prospects that rates could keep declining.