Member Briefing May 1, 2024
US Labor Costs Increase More Than Expected in First Quarter
The Q1 reading for the Employment Cost Index (ECI) was yet another data point suggesting that progress on inflation is stalling out. The ECI is the Fed's preferred measure of labor cost growth, and the 1.2% quarter-over-quarter increase was stronger than consensus expectations for a 1.0% gain. An equally high reading one year ago kept the year-over-year gain stuck at 4.2%. Seasonal factors may not quite be fully capturing the wage and benefits dynamics at the start of the year, but otherwise the details were not suggestive of many one-off quirks. Private sector employment costs jumped sequentially, and excluding sometimes volatile incentive paid occupations did nothing to dampen the gain.
On balance, today's ECI reading is yet another data point that suggests the inflation slowdown that began this time last year stalled out in the first quarter of 2024. Signs of faltering labor demand, declining labor market turnover and still solid labor supply suggest that employment costs will decelerate further as the year progresses. But, it will take time to see that in the data, and this is why we think the FOMC will keep rates unchanged through at least the summer.
Home Prices Soar Even Higher in February, Says S&P Case-Shiller
Strong demand and tight supply continue to push home values higher, even though mortgage rates are now moving higher again. Home prices in February jumped 6.4% year over year, another increase after the prior month’s annual gain of 6%, according to the S&P CoreLogic Case-Shiller national home price index released Tuesday. It was the fastest rate of price growth since November 2022. This index records prices on a three-month moving average, so they go back as far as December, when mortgage rates hit their recent lows. There was also a strong expectation then that the Federal Reserve would lower interest rates. That may have driven buyers to jump in.
The 10-city composite rose 8%, up from a 7.4% increase in the previous month. The 20-city composite saw an annual gain of 7.3%, up from a 6.6% advance in January. “The Northeast region, which includes Boston, New York, and Washington, D.C., ranks as the best performing market for over the last half year. As remote work benefitted smaller (and sunnier markets) in the first part of the decade, return to office may be contributing to outperformance in larger metropolitan markets in the Northeast,” according to Luke.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel Prepares to Send Delegation to Cairo for Last-Chance Gaza Cease-Fire Talks - WSJ
- Netanyahu: Israel Will Invade Rafah — Regardless of Hostage Deal – Politico
- US President Holds Separate Calls With Leaders from Qatar, Egypt over Gaza Ceasefire Talks - Reuters
- US Military Ships are Working to Build a Pier for Gaza Aid. It’s Going to Cost at Least $320 Million - AP
- Columbia Turns Up Pressure on Pro-Palestinian Student Protesters - WSJ
- US Says Israeli Army Units Violated Human Rights - BBC
- 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
- NATO Prepares to Face Russia—and Problems of Its Own - WSJ
- German Captain Says He Spied for Russia Over Fear of Nuclear War – Newsweek
- Zelensky: Russia Taking Advantage of Slow Arms Delivery - BBC
- Putin’s Fuel Problem: How Ukraine is Sapping Russia’s Diesel and Gasoline - Politico
- Russian Missile Kills 4, Injures 28, Destroys Academy in Odesa - VOA
- Russia Says it Shot Down six U.S.-Made ATACMS Missiles; Odesa, Kharkiv Hit with Deadly Strikes - CNBC
- How China and Russia are Reportedly Using 'Underground' Channels to Get Around Sanctions – Insider
- 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
- Will the EU Get a War Budget? - Politico
- China's Xi to Visit Europe as Trade Tensions Rise - VOA
- Yen Rebounds After Hitting 34-Year Low of 160 to Dollar - WSJ
- Taiwan Hails U.S.-Japan-Philippines Ties as 'Great Deterrent' to China – Nikkei Asia
- TikTok Ban in EU is ‘Not Excluded,’ von der Leyen Says - Politico
- Meta Hit With Major EU Probe into Disinformation Handling Ahead of European Elections - CNBC
- U.S. Losing Foothold in Northwestern Africa – The Dispatch
- Kenya Floods: What a Deluge Reveals About Nairobi's Vulnerability - BBC
- Chinese Scientist Who First Published COVID Sequence Stages Protest After Being Locked Out of Lab - VOA
- South Doing All the Work in Europe’s Upside-Down Recovery - WSJ
Policy and Politics
Police on Campus at Columbia and UCLA as Protests Disrupt Colleges Nationwide
Dueling protesters faced off overnight on the campus of The University of California, Los Angeles, fighting each other with boards and debris as tensions escalated. Video from RMG News recorded late Tuesday night showed a number of people in masks on the perimeter of the encampment barricades, some throwing metal and wood items while others blocked the debris with plywood and umbrellas. Others were seen brandishing a tennis racket and a skateboard.
Meanwhile at Columbia University in New York City NYPD officers used flash-bang grenades Tuesday night to breach Hamilton Hall, which protesters had barricaded themselves inside, the police department told CNN. The building's doors had been barricaded with chairs, tables and vending machines, and windows had been covered with newspaper, the NYPD said. Columbia University has asked the NYPD to maintain a presence on campus through at least May 17 — two days after the school's commencement — "to maintain order and ensure encampments are not reestablished,” according to a letter sent by university President Minouche Shafik to the NYPD.
EEOC Guidance Addresses Telework, Shields LGBTQ Workers
The U.S. Equal Employment Opportunity Commission on Monday said employers refusing to use transgender workers' preferred pronouns and barring them from using bathrooms that match their gender identity amounts to unlawful workplace harassment under federal anti-discrimination law. The EEOC updated its enforcement guidance on workplace harassment for the first time in 25 years, including to reflect a landmark U.S. Supreme Court ruling that anti-bias laws cover LGBTQ workers, after an earlier attempt stalled during the Trump administration.
The commission in the new guidance also addressed the rise of remote work and said that discriminating against employees based on their decisions to have abortions or use contraception is a form of sex discrimination. The guidance is not legally binding, but lays out a blueprint for how the EEOC will enforce anti-bias laws and can be cited in court to back up legal arguments.
Democratic Leaders Say They’ll Shield Speaker Johnson from Greene Motion to Vacate
House Democratic leaders announced Tuesday that they will protect Speaker Mike Johnson (R-La.) from a potential conservative coup, all but ensuring the Speaker will keep the gavel through the remainder of the term. The proclamation from Minority Leader Hakeem Jeffries (D-N.Y.), Democratic Whip Katherine Clark (D-Mass.) and Caucus Chair Pete Aguilar (D-Calif.) is a remarkable development in the turbulent Speaker saga that’s hobbled the GOP’s governing majority from the earliest days of the 118th Congress — an unprecedented promise by the minority party to prop up an opposing leader for the sake of stabilizing chamber business.
The new backing from Jeffries, Clark and Aguilar means not only that those Democrats have political cover to cross the aisle to rescue Johnson, but the numbers will almost certainly swell, insulating the Speaker from Greene’s ouster effort.
Calls Grow for Lawmakers to Pass Bill to Combat Antisemitism
In a letter, House Democratic Leader Hakeem Jeffries, D-N.Y., urged his counterpart in the chamber’s Republican majority, Speaker Mike Johnson, R-La., to put a bipartisan bill aimed at fighting antisemitism up for a vote. Earlier this month, a bipartisan group of House and Senate lawmakers — Sens. Jacky Rosen, D-Nev., and James Lankford, R-Okla., and Reps. Kathy Manning, D-N.C., Chris Smith, R-N.J., and Brian Fitzpatrick, R-Pa. — introduced the Bipartisan Countering Antisemitism Act, a bill that would establish a National Coordinator to Counter Antisemitism within the White House.
The newly created role would serve as the president’s principal adviser on anti-Jewish hate, coordinating federal efforts to counter antisemitism, chairing an interagency task force on the issue, undertake an annual analysis of antisemitism online and direct federal agencies to submit a report to Congress about their implementation of the U.S. National Strategy to Counter Antisemitism, a first-of-its-kind initiative unveiled by President Joe Biden last year. It would also mandate U.S. security agencies to produce an annual threat assessment about "antisemitic violent extremism” and establish May as “Jewish American Heritage Month."
Read more at New York State of Politics
Health and Wellness
Scientists Restore Brain Cells Impaired by a Rare Genetic Disorder
Scientists have found a way to restore brain cells impaired by a rare and life-threatening genetic disorder called Timothy syndrome. A type of drug known as an antisense oligonucleotide allowed clusters of human neurons to develop normally even though they carried the mutation responsible for Timothy syndrome, a team reports in the journal Nature. The approach may help researchers develop treatments for other genetic conditions, including some that cause schizophrenia, epilepsy, ADHD, and autism spectrum disorder.
"It's immensely exciting because we now have the tools," says Dr. Sergiu Pasca, a professor of psychiatry and behavioral sciences at Stanford University and the study's senior author. But most of these conditions involve multiple genes, not just one — and scientists don't yet know enough about these multiple gene disorders to effectively treat them with antisense oligonucleotides, Zoghbi says.
Election 2024
- Biden Makes Play for Florida — Trump’s New Home State – The Hill
- Voters Don't Like Biden's Economy — But Why? – FiveThirtyEight
- 10 Senate Races to Watch in 2024 - NYT
- RFK, Jr Reveals Path to Presidency as Biden, Trump Campaigns Target Race 'Spoiler' – Fox News
- 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
China Hints at Rate Cuts, Property-Market Support as it Warns of Rising Uncertainties
China signaled a new campaign to revive its flagging economy, hinting at lowering borrowing costs and propping up the property market while announcing plans to convene a long-deferred policy meeting, whose delay had fueled unease about Beijing’s economic management. At a Tuesday meeting, the Communist Party’s elite Politburo warned of “significantly rising external uncertainties,” an apparent reference to global geopolitical and economic frictions. It said it would gather the party’s top 370 or so officials for a plenary meeting, or plenum, in July to discuss economic development and reforms.
In a statement issued after Tuesday’s meeting and carried by the state-run Xinhua News Agency, the 24-member Politburo pledged to issue ultra-long-term special treasury bonds and local government special-purpose bonds more quickly and called for them to be put into use as soon as possible to provide a fiscal boost to the economy. The Politburo also said the government could use interest rates and bank-reserve requirement ratios to slash financing costs and offer more support to the economy. On real estate, leaders said the government would study new measures to “digest existing homes” while optimizing incremental housing amid a prolonged property downturn.
Samsung’s Net Profit Quadruples as Chip Business Rebounds on AI Demand
Samsung Electronics’ net profit more than quadrupled in the first quarter, beating Wall Street expectations, as its flagship semiconductor business swung to profit on higher memory-chip prices amid the artificial-intelligence boom. The upbeat earnings from the world’s largest manufacturer of memory chips and smartphones offer the latest sign that the global technology industry is pulling itself out of a prolonged slump.
Net profit soared to 6.755 trillion won, equivalent to $4.91 billion, from 1.575 trillion won a year earlier, the company said Tuesday. Revenue for the quarter rose 13% year over year to 71.916 trillion won and operating profit increased 10-fold to 6.606 trillion won, largely in line with the company’s preliminary estimates. The company’s chip-making business posted 1.910 trillion won in operating profit after four straight quarters of losses, driven by rising prices and brisk demand for powerful computing chips.Samsung said demand for high-bandwidth memory chips that power AI systems is expected to remain strong through the second half of 2024.
Removal of the Dali Takes Centre Stage in this Week’s Salvage Operations in Baltimore
The 35-foot channel that opened last week at the site of the Key Bridge collapse is now shut down again so crews can remove more debris from the Patapsco River and move the Dali container ship. Scott Cowan, head of the International Longshoremen’s union in Baltimore, said that’s likely a good scenario. “There’s some folks who are going to be out of work still, continuously,” Cowen said. “I think it’s a better thing that they close it back down and they do what they have to do so that hopefully on the 10th they can reopen it.”
Cowen said 95% of union workers are not working, but a few cargo ships have made their way to the Port of Baltimore to deliver cars and other items. He said the additional work to clear the channel will only help in the long-term. “They’ve made good progress and they are ahead of schedule from what I see,” Cowen said.
U.S. Grocers Are Resetting Their Supply Chains as the Supermarkets and their Customers Adjust to Inflation
Harking back to the days before supermarkets, Americans are dividing their food shopping among more stores to save money. Consumers bought groceries from an average of 20.7 different retailers between March 2023 and February 2024 according to data firm Numerator, up 23% from the same months between 2019 and 2020. In addition to visiting more stores, shoppers are also traveling to cheaper ZIP Codes to shop and pursuing loyalty programs and promotions in greater numbers, retail analysts say.
Treasure-hunt grocery shopping is the latest example of consumers changing their behavior in response to the higher of prices in our lives, from the homes we live in to the daycares where we send our kids. Now, with groceries taking up the highest percentage of household budgets in 30 years, more shoppers are driving all over town in pursuit of deals.
What's the UAW's Next Priority: VW Contract or More Organizing?
While not exactly a surprise, the UAW’s recent win at Volkswagen’s Chattanooga plant still represents a watershed moment in the U.S. automotive industry. Why? It was not just the UAW’s first victory at a major foreign automaker, but also its first success in the historically union-resistant South. Moreover, an overwhelming 73% of employees voted in favor of unionization, at the same plant where the UAW had failed twice before, and despite strong opposition from local officials. Remarkably, Volkswagen decided to stay neutral this time, even allowing voter education sessions inside the plant itself.
What happens next is not yet clear. The unexpectedly large margin of victory in Chattanooga certainly provides additional momentum for the UAW’s next unionization drive that is already underway at two Mercedes plants in Alabama. However, its long-term impact on the U.S. auto industry, economy, regional and national politics will be a function of a more complex set of moves and countermoves by the UAW, automakers, and other stakeholders. After the Mercedes vote, Fain and the UAW will have to decide which of two distinct, but intertwined, “games” to prioritize: pursue further unionization and maintain the current momentum (the Dominos Game) or try to reach an initial contract at Volkswagen to demonstrate the value of unionization to still skeptical non-union workers (the Contract Game).
All New U.S. Cars Must Carry Automatic Brakes by 2029
The National Highway Traffic Safety Administration unveiled the final version of the new regulation on Monday and called it the most significant safety rule in the past two decades. It's designed to prevent many rear-end and pedestrian collisions and reduce the roughly 40,000 traffic deaths that happen each year. It's the U.S. government's first attempt to regulate automated driving functions and is likely to help curb some of the problems that have surfaced with driver-assist and fully automated driving systems.
Although about 90% of new vehicles have the automatic braking standard now under a voluntary agreement with automakers, at present there are no performance requirements, so some systems are may not be that effective. The new regulations set standards for vehicles to automatically stop and avoid hitting other vehicles or pedestrians, even at night. The regulation, which will require additional engineering to bolster software and possibly add hardware such as radar, won't go into effect for more than five years. That will give automakers time to bolster their systems during the normal model update cycle, NHTSA said.
NASA Works to Set Tech Development Priorities
NASA is seeking public input on how to prioritize nearly 200 topics in space technology to improve how it invests limited funding on them. The agency has released a list of 187 “technology shortfalls,” or topics where current technology requires additional development to meet NASA’s future needs. The shortfalls are in 20 areas ranging from space transportation and life support to power and thermal management.
Through a website, the agency is inviting people to review the listed technologies and rate their importance through May 13. NASA will use that input to help prioritize those technologies for future investment to bridge the shortfalls. This is part of an effort by the agency’s Space Technology Mission Directorate (STMD) to provide a more rigorous approach to how it supports technology development. “NASA has gotten into a battle rhythm with our stakeholders where we are setting our priorities more in the space of the activities that we’re engaging in and not, initially, about the problem space: the problems that we are solving,” said Kurt “Spuds” Vogel, NASA associate administrator for space technology, at an April 23 meeting of the Lunar Surface Innovation Consortium.
3M Earnings Top Estimates, ‘Resetting’ Its Dividend
3M’s quarterly earnings topped Wall Street estimates—a positive—but what the company said about its dividend should get most of the attention. Results included numbers for the recently spun off 3M healthcare business, Solventum. At 3M, net income and free cash flow usually match. That implies 2024 free cash flow, after the Solventum spin, of roughly $4 billion. “We’re resetting the dividend post-spin,” 3M CEO Mike Roman told Barron’s. The company will target about 40% of its free cash flow as annual dividends. Doing the math, 40% of that total is about $1.6 billion, or roughly $2.85 a share, while 3M paid per share dividends of $6.01 over the past four quarters.
Reset or cut, investors have been bracing for a change. The company has been dealing with legal liabilities related to water pollution and potentially faulty earplugs sold to the military for years. In 2023, the size of the problems came into focus with two settlements totaling some $18 billion. That’s cash that can’t be used for dividends. “These have been the two most significant litigation matters…in front of us,” said Roman. “We will continue to manage our litigation matters going forward, but really good to have those two milestones complete.” For the first quarter, 3M reported adjusted earnings per share of $2.39 from sales of $7.7 billion. Wall Street was looking profit of $2.10 a share and revenue of $7.6 billion. A year ago, 3M reported adjusted EPS of $1.97 from sales of $7.7 billion.
OSHA Releases 2023 Workplace Injury, Illness Data
OSHA has unveiled comprehensive workplace injury and illness statistics for 2023. This release marks the inaugural dataset under the newly established Improve Tracking of Workplace Injuries and Illnesses regulation that took effect in July of last year. According to a recent release, the data includes detailed reports from over 375,000 establishments, which includes OSHA Form 300A Summary of Work-Related Injuries and Illnesses. The data set also includes detailed accounts of individual injuries and illnesses for companies with 100 or more employees within high-risk industries.
In addition, OSHA has posted partial data from more than 850,000 OSHA Form 300 Log of Work-Related Injuries and Illnesses and Form 301 Injury and Illness Incident Report records. The agency said that providing access to injury and illness data will help identify unsafe conditions and workplace hazards that may cause occupational injuries and illnesses. Industry groups have criticized the detailed release of data saying, in part, it is a thinly disguised attempt to help union organizing efforts.