Member Briefing November 1, 2023
Q3 Employment Cost Index Higher - But Labor Cost Growth is Slowing Gradually
The 1.1% rise in the Employment Cost Index in Q3 was a touch stronger than expected but showed labor cost pressures continue to slowly ease on trend. With the ECI still running north of 4%, labor cost growth remains too high to be consistent with the Fed's 2% inflation target. However, with demand and supply for labor gradually coming back into balance, we expect growth in compensation costs to slow further ahead, with the recent moderation enough to keep the Fed from additional rate increases. The ECI is the preferred gauge of labor costs among the FOMC and most economists as it provides a more comprehensive look at compensation growth. The ECI includes public sector workers and benefit costs
Helping to drive the stronger-than-expected ECI print in Q3 was a 1.5% increase for government workers, whose pay growth typically lags the private sector, Private sector compensation rose 1.0% over the quarter, consistent with an annualized rate of 4.1% and on par with the 4.2% annualized increase in average hourly earnings growth for the private sector in Q3. Total benefit costs growth was unchanged in Q3 at 0.9%, which slowed the one-year change to 4.1%.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Opinion - Benjamin Netanyahu: The Battle of Civilization - WSJ
- Israel Attacks Hamas Gunmen Inside Gaza Tunnels - Reuters
- Dozens Killed in Blasts at Gaza’s Largest Refugee Camp - WSJ
- 'We Are Hunting Their Commanders': Israel Says it Killed Key Hamas Leader – USA Today
- Anti-war protestors repeatedly interrupt Senate hearing on Israel – The Hill
- Israeli President Herzog Endorses Macron’s Plan for a Coalition to Fight Hamas – Politico
- FBI Investigating Antisemitic Threats Against Jewish Community at Cornell University – CBS News
- US Colleges Under Pressure to Address Antisemitism on Campuses - Politico
- Reporting on Gaza: 'Sometimes From Behind the Camera I Just Stand and Cry' - BBC
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine’s Allies Plan US Charm Offensive - Politico
- Why Vladimir Putin Is Embracing Germany's Far Right – The Atlantic
- Pompeo: US Must Stand with Ukraine ‘in its Existential Fight for National Survival’ – The Hill
- Putin's Aggression Won't Stop at Ukraine, Sec. Lloyd Austin Warns Senators at Aid Hearing – USA Today
- Russian Oligarch Kuzmichev Detained in France in Laundering, Sanctions Probe – Reuters
- Carlsberg Cuts Ties with 'Stolen' Russian Business - BBC
- Whole Family Shot Dead in Russian-Occupied Ukrainian Town - BBC
- Out of the Frying Pan and Into the Fire: Ukrainian Nationals Trapped in Gaza Need Help – The Hill
- 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
China's Economy Shows Fresh Signs of Slowing As Factory Activity Contracts
China’s economy suffered a setback as surveys showed factory orders shrank and construction activity slowed, reigniting growth concerns just as activity appeared to be stabilizing. China’s official purchasing managers index for the manufacturing sector fell to 49.5 in October from 50.2 in September, the National Bureau of Statistics said Tuesday. A reading above 50 indicates an expansion in activity while a reading below 50 signals a contraction. Gauges of activity in China’s services and construction sectors also weakened, pushing a composite gauge of economywide activity to 50.7—its lowest reading this year.
Manufacturers faced weakening orders from both domestic and overseas customers in October, as the eruption of war between Israel and Hamas cast a new shadow over the global economy. The International Monetary Fund expects global growth to slow to 3% this year, from 3.5% in 2022, as efforts by central banks to rein in inflation with higher interest rates weigh on consumer and business spending.
Eurozone Inflation Falls and Economy Shrinks
The inflation that has been wearing on European consumers fell sharply to 2.9% in October, its lowest in more than two years as fuel prices fell and rapid interest rate hikes from the European Central Bank took hold. But that encouraging news was balanced by official figures showing economic output in the 20 countries that use the euro shrank by 0.1% in the July-September quarter.
Inflation fell from an annual 4.3% in September as fuel prices fell by 11.1% and painful food inflation slowed, to 7.5%. The drop to under 3% is down from the peak of over 10% in October 2022. But growth disappeared as output shrank after months of stagnation near zero. The lower inflation figure follows a rapid series of interest rate hikes by the European Central Bank. Higher central bank rates are the typical medicine against inflation that’s too high. They influence borrowing costs throughout the economy, raising the cost of credit for purchases such as homes or for expanding factories or offices. That reduces the demand for goods and thus restrains price increases. But high rates can also slow growth.
COVID Update - Less Than 3% of Eligible Americans Got a Booster Shot in September
From pandemic fatigue to vaccine fatigue — Americans are proving slow to follow the CDC’s advice to get a COVID-19 booster shot this fall. On Sept. 12, the CDC recommended that everyone six months and older should get an updated COVID-19 vaccine to protect against the potentially serious outcomes of the illness as we roll into the winter months. But by the end of September, only 7.6 million people, or less than 3% of eligible Americans, had rolled up their sleeves and received the updated shots, according to Reuters.
Low uptake of the booster shots is concerning for not only the country’s health care leaders, but also for the companies that make the COVID-19 vaccines and the investors who added them to their stock portfolios
NYS COVID Update
The Governor updated COVID data for the week ending October 27th.
Deaths:
- Weekly: 87
- Total Reported to CDC: 80,790
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,308
- Average Daily Patients in ICU Statewide: No Data
7 Day Average Cases per 100K population
- 7.8 positive cases per 100,00 population, Statewide
- 8.4 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
The Politics of Biden’s Vast New AI Order
President Joe Biden’s executive order on artificial intelligence, signed Monday at a White House ceremony, has something to address nearly every concern about the fast-moving technology — cybersecurity, global competition, discrimination and technical oversight of advanced AI systems. Many pages of the order detail how federal agencies can take steps to minimize the real-world problems posed by AI. Among other things, it directs the Department of Labor to drill down on the potential for AI to cause rampant job losses; tasks the Consumer Financial Protection Bureau and Department of Housing and Urban Development to address how AI could worsen discrimination in the banking and housing sectors; and requires the Office of Management and Budget and other agencies to determine how the government can use AI without undermining data privacy.
The White House’s all-of-the-above approach to AI reflects a desire to avoid upsetting different constituencies in the constellation of AI governance — whether that’s progressive voters and organizations key to the Democratic grassroots, or the top tech companies like OpenAI, or hawkish voices like Senate Intelligence Chair Mark Warner (D-Va.) and former Google executive Eric Schmidt.
US Consumer Confidence Fell Again in October
The Conference Board Consumer Confidence Index® declined moderately in October to 102.6, down from an upwardly revised 104.3 in September. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined to 143.1 from 146.2. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell slightly to 75.6 in October, after declining to 76.4 in September. The Expectations index is still below 80—the level that historically signals a recession within the next year. Consumer fears of an impending recession remain elevated, consistent with the short and shallow economic contraction we anticipate for the first half of 2024.
“More than two-thirds of consumers still said recession is ‘somewhat’ or ‘very likely’ in October. The fluctuating soundings likely reflect ongoing uncertainty given mixed buying plans. On a six-month moving average basis, plans to purchase autos and appliances rose while plans to buy homes—in line with rising interest rates—continued to trend downward.” Dana Peterson, Chief Economist at The Conference Board said.
Read more at The Conference Board
Highlights of UAW Deal With General Motors
he United Auto Workers (UAW) reached a tentative agreement with General Motors (GM.N) on Monday, the latest in a series of hard-fought deals with the Detroit Three automakers that will help its members win record pay hikes following six weeks of a coordinated strike. Following are some of the terms highlighted by UAW leaders:
The agreement grants 25% in base wage increases through April 2028 and will cumulatively raise the top wage by 33% compounded with estimated cost-of-living adjustments to over $42 an hour
The starting wage will increase by 70% compounded with estimated cost-of-living adjustments to over $30 an hour
Deal brings two groups into the UAW GM Master Agreement at Ultium Cells and GM Subsystems LLC
GM has agreed to make five payments of $500 to current retirees and surviving spouses
Improves retirement for current retirees, those workers with pensions, and those who have 401(k) plans
Agreement reinstates benefits lost during the Great Recession, including cost-of-living allowances, a three-year wage progression and ends wage tiers in the union
Right to strike over plant closures
Mack Trucks Says UAW Demands Unrealistic, No New Talks Set
Volvo Group-owned Mack Trucks said Thursday the United Auto Workers' contract demands are unrealistic and that no new talks are scheduled after workers went on strike on Oct. 9, following their rejection of a proposed five-year contract. About 73% of the unit's 4,000 workers in Pennsylvania, Florida and Maryland voted against a tentative agreement that included a 19% pay raise that had been endorsed by UAW leaders.
Mack Trucks said the UAW leadership's economic demands "continue to be unrealistic." The UAW did not immediately comment on Thursday.
Workers Are Doing Less Work for the Same Pay
Americans are increasingly getting paid for not doing work. Growth in paid-time off—including family leave, sick leave and vacation—is widening the gap between the number of hours for which workers get paid and the number of hours they are actually on the job. Employers have expanded paid benefits to retain and attract workers in a hot job market. Employees, meanwhile, are using the new benefits as they juggle work, family and health. As of this spring, employers offered 80% of workers paid sick leave, up from 67% a decade ago, according to Labor Department data.
Paid vacation expanded to 77% of the workforce from 74%. And paid family leave, with the most dramatic jump, increased to 27% from 12%. During the same period, the unemployment rate dropped to a half-century low of 3.4% from above 7% a decade ago. As of August, there also were about 3.3 million more job openings than jobless people seeking work, according to Labor Department data. As a result, the paid workweek held steady at 34.5 hours over much of the past decade. The number of hours worked dropped to 32.9 a week in the first half of this year from 33.5 a week a decade ago, according to research from Federal Reserve Bank of Atlanta.
Slide Show: Top 10 OSHA Violations of 2023
If you thought OSHA’s significant increase in hiring more inspectors would result in even more workplace violations, you’re absolutely right. Every single one of the Top 10 categories of workplace safety violations for 2023 saw a dramatic increase in total numbers. OSHA publicizes this list every year with the goal of helping employers determine what areas in their workplaces they should focus on to improve safety
There were no new categories on the Top 10 list this year; all were repeat offenders, although the order in which they appear shifted slightly in a couple instances. Holding onto the top spot, for the 13th year in a row, is fall protection—general requirements. In fact, the incidence of falls from heights is so pervasive in workplaces (particularly construction sites) that there are two categories in the Top 10 devoted to fall protection violations: fall protection—training requirements came in at # 8 on the list. You can see the full list in the accompanying slideshow.
Toyota to Invest $8 Billion More in North Carolina EV Battery Plant
Toyota Motor said on Tuesday it would invest $8 billion more and add about 3,000 jobs at its electric-vehicle battery manufacturing plant in North Carolina, boosting the Japanese automaker's push to electrify its lineup. The company, which plans to have electrified options for its models available by 2025, said the latest move will bring its total investment in the plant to about $13.9 billion and jobs to more than 5,000.
Toyota's North Carolina facility is set to begin operations in 2025 and will be the company's first automotive battery plant globally. It will have six battery production lines, four supporting hybrid vehicles such as the Prius, and two additional lines to support battery electric vehicles.
Headwinds Slow Intermodal in Q3
Total intermodal volumes fell 7.1% year-over-year in the third quarter of 2023, according to the Intermodal Association of North America. While domestic container originations grew 1.6%, loadings of international containers contracted 13.2 %, and trailers continued to fall, this time 23.3%. “The picture improved for domestic containers, but slower demand for goods, still high inventories, and a competitive freight environment continued to check intermodal volumes in the third quarter,” said Joni Casey, CEO of IANA, in a statement. “We are starting to see signs though, for a turnaround next year.”
All but two of the seven highest-density trade corridors, which collectively handled more than 60% of total volume, were down in the third quarter. Total IMC volume fell 28.7% year-over-year in Q3, with intermodal down 12.1% and highway traffic down 36.7%.
Read more at Material Handling & Logistics
Canada's Unifor Union, St. Lawrence Seaway Reach Tentative Deal, Ending Strike
The union representing St. Lawrence Seaway workers in eastern Canada said it reached a tentative labor agreement on Sunday, ending a week-long strike that shut down a key North American trade route linked to the Atlantic Ocean. The Unifor union, representing some 360 workers, said it agreed to a deal with the St. Lawrence Seaway Management Corp (Seaway) that would cover engineering, maintenance, and other worker groups in Ontario and Quebec provinces.
The strike started on Oct. 22 after contract talks with Seaway broke down, but the parties resumed negotiations on Friday as concerns grew about the impact of the seaway shutdown on the economy. The St. Lawrence Seaway links the Great Lakes to the Atlantic Ocean and is managed by the Canadian not-for-profit Seaway Corp along with the U.S. Great Lakes St. Lawrence Seaway Development Corporation. The walkout affected about 150 vessels over the one-week period and impeded the movement of grains and other commodities.
Tepid Texas Manufacturing Recovery Continues
Growth in Texas factory activity continued in October, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, posted a second positive reading after four months in negative territory. It edged down to 5.2, a reading that signals a modest pace of output expansion.
Other measures of manufacturing activity showed mixed signals this month. The new orders index remained negative and slipped four points to -8.8. The capacity utilization index posted a second consecutive positive reading, coming in at 5.4, while the shipments index remained near zero. Perceptions of broader business conditions continued to worsen in October. The general business activity and company outlook indexes remained largely unchanged at -19.2 and -17.1, respectively, having now spent a year and a half in negative territory. The outlook uncertainty index remained elevated but retreated from 27.0 to 20.2.