Member Briefing May 24, 2023
Debt Ceiling: Guarded Optimism as Talks Focus on Spending Caps
Guarded optimism around negotiations largely hinges on some positive signals around the key issue of government spending. At issue is an increase of about $130 billion in government spending from FY2022 to FY2023 that was approved by Congress late last year. A lead negotiator for House Speaker Kevin McCarthy signaled that Republicans are open to compromise on their proposal to return to the FY2022 levels and then impose a 1% cap on future increases. What the White House has offered is a to freeze federal spending at current FY2023 levels, which Republicans have rejected.
There are other issues beyond spending that are subject to negotiation from the two sides. One is proposed new work requirements from the GOP that would be tied to federal assistance like the Temporary Assistance for Needy Families program. Another is permitting reform to cut red tape for new energy projects. And a key sticking point is a last-minute push from the White House to close certain tax loopholes - especially in the fossil fuel and cryptocurrency sectors - to raise additional revenue. Republicans have repeatedly rejected anything that could be described as a tax increase.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russian Court Extends Evan Gershkovich’s Pretrial Detention by Three Months - WSJ
- Ukraine Says Russia Prevents Black Sea Grain Deal Port Operating – US News
- Russia’s Army is Learning on the Battlefield – The Economist
- Pro-Ukraine Russian Soldiers Storm Border Region, Claim ‘Liberation’ of Villages - Politico
- In Belgorod, Russia, Anti-Putin Militia Mounts Cross-Border Incursion – Washington Post
- Fighting in Russian Border Region Following Incursion Enters Second Day - WSJ
- Russia: Insurgents Defeated After Rare Cross-Border Raid - BBC
- Cannes Red Carpet Protests Include Woman In Ukraine Dress Covered In Fake Blood – Deadline
- Russia Considers Gasoline Export Ban, Sources Say - Reuters
- Ukraine Courts Africa and 'Global South' as Peace Plans Proliferate - Reuters
- Ukraine’s F-16 Training Could Begin in July, Danish Defense Minister Signals - Politico
- Kendall: F-16s Not a ‘Game-Changer’ for Ukraine But ‘Something They Need’ – Air and Space Forces
- Ecstatic Russian TV Compares Seizing Vacant Ukraine City to Liberation of Berlin – USA Today
- 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
Reshoring, Foreign Direct Investment add 101,500 jobs in First Quarter
Reshoring and foreign direct investment (FDI) job announcements for the first quarter are up 11% from last year, according to the Reshoring Initiative 2023 Q1 Data Report.“If the current rate continues new job announcements will reach over 400,000 by year-end. Additionally, the cumulative number of jobs brought back since the manufacturing low in 2010 will reach two million - about 40% of what we lost to offshoring,” according to the report.
Four industries account for 91.4% of all added jobs. As EV battery investments accounted for the most job announcements, electrical equipment continues to be the top industry at 47%; computer & electronics comes in at 22.4%, transportation equipment at 11.2% and chemicals at 10.8%. When ‘Country From’ is reported, most reshoring and FDI jobs are coming from Germany, China, Korea and Japan. The projected top factors for reshoring in 2023 are eco-system synergies, government incentives and proximity to customers/market.
Why Inflation Erupted: Two Top Economists Have the Answer
For two years debate has raged over what caused the highest inflation since the 1980s: government stimulus or pandemic-related disruptions. Now two of the country’s top economists have an answer: It’s both. Pandemic-related supply shocks explain why inflation shot up in 2021. An overheated economy generated by fiscal stimulus and low interest rates explain why it has stayed high ever since. The conclusion: For inflation to fade, the economy has to cool off, which means a weaker labor market.
The study, released by the Brookings Institution, is by Ben Bernanke, former chair of the Federal Reserve, and Olivier Blanchard, former chief economist of the International Monetary Fund. The two conclude that because inflation today reflects a too-hot labor market, the solution is to cool it off. To bring inflation back to the Fed’s target, they estimate unemployment would have to rise above 4.3% from its current 3.4% assuming vacancies remain difficult to fill. But, they say, inflation could drop without a significant increase in unemployment if the ease of hiring returns to pre-pandemic norms.
COVID News - China’s New Covid Wave Set to See 65 Million Cases a Week
China is likely to see its Covid-19 wave peaking at about 65 million infections a week toward the end of June, according to a senior health adviser, while authorities rush to bolster their vaccine arsenal to target the latest omicron variants.
XBB has been fueling a resurgence in cases across China since late April and is expected to result in 40 million infections a week by the end of May, before peaking at 65 million a month later, local media outlet the Paper reported Monday, citing a presentation by respiratory disease specialist Zhong Nanshan at a biotech conference in the southern city of Guangzhou.
NYS COVID Update
The Governor updated COVID data for the week ending May 19.
- Weekly: 25
- Total Reported to CDC: 79,594
- Average Daily Patients in Hospital statewide: 546
- Average Daily Patients in ICU Statewide: 58
7 Day Average Cases per 100K population
- 3 positive cases per 100,00 population, Statewide
- 5 positive cases per 100,00 population, Mid-Hudson
- Read the Press Release (no press release this week)
- Visit the NYS COVID-19 Data Hub
- NYS Vaccination Tracker
Hudson Valley Monthly Unemployment Rate Lowest Ever in March
The April 2023 unemployment rate for the Hudson Valley Region is 2.3 percent. That is down from 2.9 percent in March 2023 and also down from 2.8 percent in April 2022. In April 2023, there were 26,900 unemployed in the region, down from 33,800 in March 2023 and down from 32,900 in April 2022. Year-over-year in April 2023, labor force increased by 8,400 or 0.7 percent, to 1,169,600.
The Hudson Valley Region’s April 2023 unemployment rate (2.3) percent) is tied with the Capital Region for the lowest rate among the 10 labor market regions in New York State. The Hudson Valley’s 2.3 percent is the lowest regional rate on record, regardless of month – dating back to 1990.
New Immigration Data Point To Larger U.S. Workforce Issues
New immigration data show foreign-born workers are a growing proportion of the U.S. labor force. The statistics released by the Department of Labor indicate foreign-born workers continue to play a vital role in the American economy. The data also point to significant U.S. workforce issues in the years ahead.
- In 2022, the foreign born accounted for 18.1% of the U.S. civilian labor force, up from 17.4% in 2021.
- Foreign-born workers’ share of the U.S. labor force rose last year to the highest level in 27 years of records, as labor demand surged and the pandemic faded.
- More foreign-born people joined the labor force than native-born Americans, accounting for more than half of the 3.1 million overall gain last year.
- The unemployment rate for foreign-born persons in the United States was 3.4% in 2022, down from 5.6% in 2021,” according to the Bureau of Labor Statistics.
- The jobless rate of native-born persons declined to 3.7% in 2022 from 5.3% in 2021. Both measures are down considerably from their highs in 2020.
Striking Clarios Workers Overwhelmingly Reject Second UAW-Backed Deal
In a resounding defeat for the United Auto Workers bureaucracy, striking workers at the Clarios auto battery manufacturing plant in Holland, Ohio, overwhelmingly rejected a second UAW-backed concessions contract at a union meeting Monday morning. Although local union officials have not released the official results, several workers have reported to the World Socialist Web Site that they have received reports that the deal was defeated by 75-80 percent of the membership.
The proposal for a three-year contract contained the same 3 percent annual wage increase as the first one. Workers were livid over this insulting offer, given the impact of soaring inflation over the last two years and changes in piece rates by Clarios which have resulted in as much as a $10 an hour pay cut for many workers. UAW officials tried to sell the increased signing bonus—a taxable $3,500 payment, up from $1,500 in the first agreement—as a pay increase, but workers did not buy it.
As Mental Health Crisis Grows, Leave Requests Are on the Rise
In its 11th year, the Littler Annual Employer Survey featured input from 515 in-house lawyers, C-suite executives and HR professionals across the U.S. Among key findings, 65% of respondents report receiving an increase in requests for disability accommodations and leaves of absence related to mental health conditions/issues since the start of 2022. In fact, more employers saw increase requests about mental health than about non-COVID physical health conditions and long COVID.
According to Littler Shareholder Devjani Mishra, some of the mental health accommodation and leave requests “may be based on new conditions that stem from the disruption of the past few years, as so many individuals had their support systems challenged or suffered real losses, including bereavement, during the pandemic.” Mishra adds that others may relate to pre-existing mental health conditions; employees may be becoming less reluctant to raise these issues than in prior years, or may be more aware of the process for seeking an accommodation.
Inflation Hit Americans’ Finances Last Year, Fed Finds
Americans reported a sharp decline in their financial well-being last fall as high inflation eroded earnings and savings, according to a Federal Reserve survey released Monday. The survey, conducted in October 2022, found that rising prices left more families in an economically precarious place, though households continued to benefit from a strong labor market.
The share of adults who reported being worse off financially in 2022 than a year earlier climbed to 35%, the highest on record going back to 2014, when the question was first asked. Overall, 73% of adults said they were either doing OK or living comfortably, down from 78% in 2021 and 75% in 2020. Inflation was the most common financial burden cited by people in the survey, Fed officials said. Some 54% of adults said their budgets had been affected “a lot” by higher prices.
Lowe's Cuts Annual Forecasts as Home Improvement Demand Falters
Lowe's Cos Inc (LOW.N) cut its annual sales and profit forecasts on Tuesday, joining larger rival Home Depot in highlighting waning demand for home improvement goods with sticky inflation forcing consumers to cut back on discretionary spending. Americans are also prioritizing on travel and leisure activities instead of investing further in their houses as during the pandemic, while a slump in lumber prices and a damp start to the Spring season also squeezed sales. Lowe's forecast cut was smaller than Home Depot's last week, but analysts warned the company could trim its outlook again this year.
Lowe's expects full-year comparable sales to fall between 2% and 4%, compared to its prior outlook of flat to down 2%. In comparison, Home Depot slashed its same-store sales forecast to a 2% to 5% fall from nearly flat sales expected previously. Lowe's projected 2023 adjusted earnings between $13.20 and $13.60 per share, compared with $13.60 to $14.00 estimated previously.
Thruway Authority Poised to Increase Tolls in 2024
We are getting closer and closer to a Thruway toll hike. Monday night is the fourth in a series of public hearings on the Thruway Authority's proposal to raise the amount you pay to drive the superhighway. Tolls would increase by five percent in 2024 and another five percent in 2027. For drivers not using E-Z Pass, tolls would now be 75 percent higher.
The Thruway Authority says it needs to raise tolls to help offset increased costs of materials and maintenance. Turnout at the hearings has not exactly been exceptional -- three people spoke at the hearing in Buffalo, 5 in Syracuse and 7 in Rockland County.
Small Portable Nuclear Reactors Could Power up to 1,000 Households, Here's How They Work
With the world looking for ways to reduce its carbon emissions, nuclear energy is poised to make a comeback. Radiant Industries is building smaller nuclear reactors that could be deployed even in the remotest locations on the planet and cater to energy needs, whether for military or civilian purposes. Radiant's plan for making its powerplant portable is to make a smaller nuclear reactor capable of generating one megawatt of energy, sufficient to power about 1.000 homes.
At the core of the technology are TRISO particles which are the fuel for the reactor. Composed of uranium, oxygen, and carbon, these particles are covered with ceramic and carbon materials and are no larger than a poppy seed. The particles can then be put together as a sphere or large cylinder depending on the reactor design. An important feature of the fuel is its high melting temperature which makes the reactor itself meltdown-proof. In the tests conducted so far, Radiant has taken TRISO particles to temperatures up to 3,000 Fahrenheit (1,648 degrees Celsius) and has not seen any concerning damage. This is higher than the temperature most nuclear reactors will ever reach.
Energy Market Snapshot from Energo
Petroleum: Strong demand and OPEC supply cuts boosted oil prices to start the week. Seasonal gasoline demand is on the rise and is expected to increase aggressively into the upcoming holiday weekend. Refinery activity has seen an increase and it is expected that it will continue to rise to meet increased demand for gasoline and jet fuel. Global air travel has finally returned to pre-pandemic levels this month.
Natural Gas: NYMEX natural gas futures extended their losses on Monday, reversing last week’s short-covering rally. The June 2023 natural gas futures contract tumbled 18.5 cents yesterday and closed at $2.400/dth. Light demand and strong production levels contributed to the downward pressure. NYMEX natural gas futures are trading lower again as of this morning. Friday, May 26this the last day of trading for the June 2023 contract. Market analysts are expecting an injection of approximately 102 Bcf in US natural gas storage inventories for the week ended 5/19/23. A build at this level will further expand the hefty surplus. The EIA will release the weekly storage report on Thursday at 10:30 AM.
Electricity: The New York Independent System Operator Zone G Hudson Valley and Zone J NYC locational marginal prices each slipped about 50cents on the day to the upper $20s/MWh, while off peak prices rose by about 50 cents to $19.75/MWh and $20.25/ MWh, respectively. Forward power markets contract prices declined on ICE, following the direction of natural gas futures.
Help Shape the Future of the U.S. Commercial Service
As we celebrate World Trade Week, the U.S. Commercial Service is seeking feedback from our clients and the business community about how we can modernize and improve the services and support we provide to better serve American businesses.
Your feedback is extremely valuable. As we strive to deliver the highest quality service to all customers, understanding what our clients find most helpful, and where there is room for improvement is critically important to how we plan to innovate and enhance the way we do business. Please take a few minutes by June 23rd to provide your input via a brief form at the link below.