Member Briefing November 17, 2022
US Industrial Output Slows in October Amid Falling Oil Output
U.S. industrial production retreated last month amid a drop in oil output and as manufacturing posted only a modest gain, the Federal Reserve reported Wednesday. The disappointing result comes as companies have struggled with surging costs and supply chain snarls, as well as weakening demand amid rising interest rates, that also make the cost of U.S.-made goods more expensive abroad. Industrial capacity slipped to 79.9%.
Total output slipped 0.1%, a weaker-than-expected result that was made worse by downward revisions to the prior month's data showing a modest uptick rather than the big increase initially reported, the data showed. Petroleum production fell 1.9%, as the Fed said "a drop in oil and gas extraction outweighed improvements in oil and gas well drilling and in coal mining." Utilities output fell 1.5%. Output of motor vehicles and parts jumped 2.0%, and electronic equipment and appliances gained almost that much, a sign supplies of key components like computer chips have eased.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Looting, Sabotage Marked Last Days of Russia’s Occupation of Kherson - WSJ
- How NATO's Defense Obligations Could be Triggered by Ukraine Conflict - Reuters
- Joint Chiefs Chairman Downplays Previous Comments About Ukraine-Russia Negotiations - NPR
- Fears of War Spillover Ease After NATO Says Missile on Poland Was Ukrainian Stray - Reuters
- What Happened in Poland Missile Blast? - BBC
- Ukrainian Analysis Identifies Western Supply Chain Behind Iran’s Drones - WSJ
- Most G-20 Leaders Decry War in Ukraine in Blow to Putin - Bloomberg
- Russian Economy Shrinks 4% in Third Quarter - Statistics Agency - Reuters
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Audit: New York Was Rife With UI Fraud During Pandemic
An audit report issued today by the Comptroller’s office shines some overdue light on the state’s (mis)handling of the avalanche of unemployment insurance (UI) claims it received and paid out during the Covid-19 pandemic. It’s the result of an investigation that was reportedly begun way back in May 2021. The state paid out 218 million UI claims totaling over $76.3 billion from April 2020 through March 2021 —a 3,140 percent increase over the prior year — through a legacy mainframe system that uses COBOL and other outdated program languages, and various workarounds to which the agency resorted.
Agency officials, according to the report, could not explain why the federal government’s Benefit Accuracy Measurement statistical sampling program estimated that the fraud rate for New York’s UI program rose from 4.5 percent two years earlier to 17.59 percent during the April 2021 through March 2022 period. The report further found via sampling that DOL incorrectly overpaid many claims and paid claims with traditional UI system funds that should have been paid out using temporary federal CARES Act funds, an error that “can also affect potential assessments on businesses that are taxed to fund the UI program…”
Read more at The Empire Center
Empire Mfg Survey Supplemental Questions – Firms Struggle to Expand Workforces
Supplementary questions in the November 2022 Empire State Manufacturing Survey focused on expected changes in firms’ workforces, factors underlying the changes, and recent trends in wages. Similar but not identical questions were asked in the November 2021 and earlier surveys. On the issue of employment and hiring plans, more businesses said they plan to expand than reduce headcounts over the next year. Among manufacturers expected expansions of 42 percent exceeding planned reductions of 15 percent.
When asked about factors restraining hiring plans, one in four firms indicated that there were no sources of restraint—in both cases, similar to responses from last November’s surveys. For those firms that did indicate some source(s) of restraint, an inability to find workers with required skills was the most widely cited factor —ranked as most important by nearly half of all respondents. Businesses were also asked about how they were changing their wage and salary structures, if at all, to retain existing employees. Nearly 60 percent of respondents indicated that they were raising wages and salaries for most job categories by more than they had in recent years—not substantially different than in last year’s survey. When asked about the use of pay to attract new hires, 55 percent of firms reported that they increased pay for most jobs—down slightly from last year among manufacturers.
U.S. COVID – Flu, RSV, Covid: 6 Ways Employers Can Deal With a Potential Wave of Absences
A triple whammy of the flu, respiratory syncytial virus (RSV) and new Covid variants is already taking hold and forcing some workers to call out sick. The latest numbers from the Centers for Disease Control and Prevention show that respiratory illness activity is high or very high in 22 US states, with the flu being the biggest culprit at the moment.
A recent survey by human resources consulting firm Mercer found that nearly half of large employers surveyed said Covid-related absences alone are a concern. Among them, nearly a third said their operations are or could be affected by the absences due to acute illness, isolation and quarantine. In order to minimize the risk of transmitting viruses at work and reduce employee absences, here are six steps employers can take.
Covid-19 Vaccines Were a Success, but mRNA Still Has a Delivery Problem
While billions of vaccine doses administered during the pandemic have generated reams of data about the safety and effectiveness of mRNA, they haven’t answered one of the field’s biggest questions: How do you send messenger RNA exactly where it needs to go in the body? That’s because, for mRNA-based Covid-19 vaccines like those developed by Pfizer/BioNTech and Moderna, a shot in the arm did the trick. But in cases where mRNA is harnessed for other uses — such as targeting a specific set of tumor cells in a part of the body that’s hard to access — delivery won’t be so straightforward.
Much of the field is convinced the answer lies with chemical tweaks to lipid nanoparticles, or LNPs, the blubbery balls used to encase mRNA and to shield these fragile molecules from destructive enzymes that would otherwise chop them up before they could be absorbed by cells. LNPs are already great at trafficking to the liver when administered systemically, as explained in a new STAT Report on mRNA, and companies are working on versions that could one day efficiently reach everywhere from bone marrow to the central nervous system.
Senate GOP Reelects McConnell as leader McCarthy’s Path to House Speaker Becomes More Clear
Mitch McConnell was reelected to head the Senate Republican conference on Wednesday, defeating challenger Rick Scott, a fellow member of leadership who chairs the chamber’s GOP campaign arm. Some Senate Republicans had pushed for delaying the leadership elections, but that vote failed, 16-32, on Wednesday morning, paving the way for McConnell’s reelection.
On the Hose side of Capitol Hill Kevin McCarthy has won the House GOP’s speakership nomination, but now his real work begins. McCarthy’s victory over internal critics on Tuesday marked the starting gun for a seven-week marathon. With his majority looking much thinner than many in both parties expected, he will need to persuade almost all of the 36 members who opposed him on Tuesday’s secret ballot to back him for the gavel in the public floor vote on Jan. 3.
U.S. Consumers Show Strength With Jump in Retail Sales
Retail sales rose a seasonally adjusted 1.3% in October compared with September, when they were unchanged, the Commerce Department said Wednesday. Shoppers spent more on increasingly expensive everyday staples such as gasoline and food, but they also shelled out more on discretionary items such as cars, furniture and restaurant meals. Some of the spending was due to purchases of building materials and home furnishings in the aftermath of Hurricane Ian, economists said.
The jump in sales showed households continued to have the resources to increase their spending despite inflation running close to a four-decade high, climbing interest rates and economic uncertainty. Many households built up savings earlier in the pandemic thanks to trillions of dollars in government stimulus, fewer opportunities to spend, and higher wages. Jobs also remain plentiful, despite an increase in layoffs in some sectors such as tech.
Earnings of Note
Lowe’s reported on Wednesday Earnings per share: $3.27 and revenue $23.48 billion vs. $23.13 billion. Revenue was up 3% compared with the same period last year. “We’re not seeing the negative impacts of inflation,” Ellison said in an earlier interview with CNBC on Wednesday, adding instead customers have been spending money to renovate and trade up for better products. Lowe’s now expects full-year earnings of $13.65 to $13.80, up from $13.10 to $13.60. The home improvement retailer also lowered the top end of its revenue outlook to about $97 billion to $98 billion for the full year. The previous top end was $99 billion. - CNBC
Target’s profit fell by around 50% in its fiscal third quarter as it cleared through unwanted inventory and sales slowed heading into the holidays, prompting the company to lower its expectations for retailers’ most important time of year. The retailer’s revenue has grown by about 40% during the Covid pandemic. Earnings per share: $1.54 and revenue was $26.52 billion. Target saw sales decline as families contended with higher prices, making trade-offs between what they need and what they want – a potential warning sign for the holiday shopping season. Target Chief Growth Officer Christina Hennington said customers’ price sensitivity intensified during the last two weeks of October. - CNBC
McKinsey: Global Integration is Here to Stay
In light of the pandemic, Russia’s invasion of Ukraine, and years of rising tensions between the United States and China, some have speculated that the world is already deglobalizing New MGI analysis finds a more nuanced reality. The world remains deeply interconnected, and flows have proved remarkably resilient during the most recent turbulence. Furthermore, no region is self-sufficient. The challenge therefore is to harness the benefits of interconnection while managing the risks and downsides of dependency—particularly where products are concentrated in their places of origin.
Most global flows continued to grow—or even accelerated—in 2020 and 2021. Overall, flows of intangibles, trade, and capital increased, and their relative resilience was essential to navigating the turmoil of the pandemic. Flows of data reached all-time highs and, crucially, enabled remote working and the continued operation of businesses at a time when travel was largely impossible. Trade in manufactured goods enabled regions to retain consumption while navigating disruptions in local production bases. For example, Asian supply chains were able to bridge the drop in output of Western supply chains in 2020. Trade in manufactured goods reached a record high in 2021 despite new disruptions to supply chains even as growing consumer spending placed more demands on them.
UK Inflation Hits 41-Year High
Surging household energy bills and food prices pushed British inflation to a 41-year high, data showed a day before finance minister Jeremy Hunt announces "tough but necessary" tax hikes and spending cuts to control price growth. Consumer prices rose 11.1% in the 12 months to October, the most since October 1981 and a big jump from 10.1% in September, the Office for National Statistics said on Wednesday.
Inflation would have risen to around 13.8% in October had the government not intervened to limit the price of household energy bills to 2,500 pounds ($2,960) a year on average, the ONS said.
Report: Supply Chain Cybersecurity a Major Challenge
The security firm polled 2100 C-level execs with responsibility for supply chain and cyber risk management from companies with 1000+ employees to compile its study, The State of Supply Chain Defense: Annual Global Insights Report 2022. It found the top challenges listed by respondents were: Awareness internally that third-party suppliers are part of their cybersecurity posture, Meeting regulatory requirements and ensuring third-party cybersecurity compliance, Working with third-party suppliers to improve their posture.
Although 53% of organizations audited or reported on supplier security more than twice annually, 40% still rely on suppliers to ensure security levels are sufficient. That means they have no way of knowing if an issue arises with a supplier. Worse, 42% admitted that if they do discover an issue in their supply chain and inform their supplier, they cannot verify that the issue was resolved.
Keys to a Resilient Supply Chain
Richard Howells, an SAP supply chain expert, says, “If companies have not addressed the increased risk across their supply chains at the start of the pandemic, they will again be seeing shortages of materials and products. The need is for resilient supply chains that address topics such as identifying alternate sourcing strategies to reduce dependencies on individual suppliers in low-cost regions.” He outlines four important challenges that supply chain companies must address. These include: Logistics disruptions, Over Reliance on Third Parties, Inventory Optimization Failures and Lack of Data Visibility.
While it is easy to idealize how supply chains worked before the pandemic, the truth is that they could never return to their pre-2020 state. Disruptions from many global and local causes will continue to threaten supply chains and keep them under continued pressure. Businesses must transform supply chains now with forward-looking strategies, solutions and tools to be always ready for market changes and disruptions of any kind.
Read more at Industrial Distribution
American Workers are Bummed Out
Half of American workers wouldn’t recommend their job or employer to someone they care about, like their own kid. More than 4 in 10 wouldn’t wish their job on their worst enemy. That’s according to a new survey by payroll and human resources firm UKG. You can see how Americans compare to workers in other countries here. The upshot is that workers are not happy right now.
“Folks are really burnt out at this moment. One of the stats was 45% don’t want to work anymore, period,” said Chris Mullen, executive director of the UKG Workforce Institute. With co-workers leaving for new jobs and careers or to spend more time with family, remaining workers often feel underappreciated and overworked. “Folks really want to have an enjoyable experience,” Mullen said.
OSHA Implementing Measures to Reduce Food Processing Worker Injury Rate
Citing injury rates among the more than 90,000 food production workers in Illinois and Ohio significantly higher than other manufacturing workers, the U.S. Department of Labor has stepped up its outreach and enforcement efforts to reduce workplace hazards and better protect workers in these states. On Oct. 3, 2022, the department's Occupational Safety and Health Administration began the initial outreach phase of Local Emphasis Program focused on more than 1,400 manufacturing facilities in Illinois and Ohio where year-round and seasonal workers manufacture and process confectionery, animal, fruit and vegetable-based products.
Once OSHA completes the three-month outreach effort, the program empowers the agency to schedule and inspect select food industry employers in Illinois and Ohio whose injury rates exceed the state average among all manufacturers. In April 2022, OSHA established a similar program in Wisconsin.
Ford Begins Building its First New Auto Plant in 53 Years. Not Everyone is Happy
Change is certainly coming to Stanton, about 45 miles northeast of Memphis. Ford and South Korea’s SK On broke ground in September on the sprawling, six-square mile manufacturing complex that is due to begin building electric F-Series pickup trucks and the batteries that power them in three years. Known as BlueOval City, the $5.6 billion compound will eventually teem with nearly 6,000 workers and spit out about 350,000 plug-in trucks per year from Ford’s first all-new automotive assembly plant in more than a half century.
BlueOval City is a linchpin in CEO Jim Farley’s $50 billion plan to build 2 million battery-powered automobiles a year by the end of 2026. But the project has rattled Michigan officials who fear that Ford’s center of gravity is shifting south. Rural Tennessee offered Ford plentiful land, potentially lower labor costs than the Midwest and $2.4 billion in state government incentives, equal to about $414,000 for each job at BlueOval City, according to a Bloomberg investigation. The company also plans two SK battery plants in Kentucky and a research center in Atlanta.
Artemis I Mission Starts Smoothly With NASA’s Historic Moon Launch
NASA’s Artemis I mission took a big step forward in the early morning hours Wednesday with a historic rocket launch that set the Orion spacecraft speeding toward a lunar orbit. The mission is part of NASA’s Artemis program, which aims to create a sustained human presence on the moon and push on to deeper-space operations. No one has touched down on the lunar surface since 1972.
Now, Orion will face a series of tests in the coming weeks as it moves toward and around an orbit that will take it around 40,000 miles beyond the moon, before it races back to Earth. At different stages during the flight, expected to run about 26 days, Orion will face radiation exposure, use solar arrays to generate power from the sun and test communications systems, while its propulsion system conducts maneuvers, according to Mike Sarafin, the NASA Artemis mission manager.