Member Briefing November 21, 2023
The Leading Economic Index (LEI) Was Down Again in October
The Leading Economic Index (LEI) is supposed to make it easy to keep tabs on the economy, so why is making sense of it so hard? The composite of multiple leading indicators fell another 0.8% in October and has now declined for 19 consecutive months. Between April 2000 and October 2001, the LEI contracted 12.1%. We've very nearly matched the magnitude of that decline in this cycle. Through today's October numbers, the LEI is down 11.7%.
The sustained warning from the LEI has been at odds with the resilience in broad economic activity, but we remain cautious to wave it all off as an anomaly no matter how fast the economy grew in Q3. The nearby chart that lines up the cycle turning points also reveals some big divergences in the 1990s. When looking at the peak to trough changes, the LEI tends to overshoot the contraction in GDP, yet larger LEI declines are typically met with worse economic contractions. The point being: growth in the LEI and GDP don't always move in step, though the divergence today is clearly larger than most.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Israeli Military Encircles Another Gaza Hospital, Doctors Say - WSJ
- Only ‘Minor’ Obstacles Blocking Israel-Hamas Deal on Hostages: Qatar PM – Politico
- Deadly Strike Hits Northern Gaza Hospital Where Many Were Sheltering - NYT
- Israel Investigates Sexual Violence Committed by Hamas as Part of October 7 Horror - CNN
- Relatives of Gaza Hostages Say Stop Talk of Execution for Hamas Detainees - Reuters
- China Calls for ‘Urgent’ Action on Gaza as Muslim Majority Nations Arrive in Beijing - CNN
- Israel Shifts to Tougher Phase of Its Gaza War - WSJ
- CNN visited the Exposed Tunnel Shaft in the Al-Shifa Hospital Compound. Here’s What We Saw - CNN
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- US Announces New Ukraine Package as Pentagon Chief Visits Kyiv - The Hill
- Kyiv Suffers Second Night of Drone Attacks - CNBC
- Putin Critic Girkin Wants to Stand in Russia Presidential Election - BBC
- Russia Puts Ukrainian Winner of Eurovision Song Contest on Wanted List - AP
- Ukraine Reports Progress Securing Dnieper River Beachheads - AP
- Pentagon Chief Reassures Ukraine About Continued US Aid - Politico
- US, Ukraine Announce Military Industry Conference Next Month – Reuters
- Fox CEO Lachlan Murdoch Meets Zelenskiy in Kyiv in 'Very Important Signal' -Ukraine – Reuters
- Russia's Desperate Scramble To Stave Off Demographic Catastrophe – Newsweek
- 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
The Hidden Hero Fueling Soft-Landing Hopes: A Boost in Supply
Federal Reserve Chair Jerome Powell signaled an important shift this month when he said the central bank didn’t necessarily have to worry about stronger growth feeding through to higher prices. The reason: The U.S. economy’s speed limit, known as potential growth, appears to have temporarily moved up thanks to easing bottlenecks and a boost in the number of people available to work and, possibly, in productivity, or the output that each worker produces.
It underscores why Powell played down fears that a surge in growth to a 4.9% annualized rate in the summer would lead to accelerating price pressures. While growth has likely stepped down in the current quarter, it is still reasonably healthy. Inflation and wage growth have continued to slow. Powell was making a subtle but significant distinction between the economy’s long-run trend growth rate and short-run potential growth. Potential might be higher or lower than the long-run trend depending on the supply of labor and productivity.
Significant Thanksgiving-Week Storm Will Disrupt Travel With Rain, Snow and Severe Storms
Americans are bracing for a cross-country storm during Thanksgiving week, one of the busiest holiday travel weeks of the year. The storm -- which dumped rain and snow in the West this weekend -- is now marching east, bringing damaging winds and potential hail and tornadoes to the South. Jackson, Mississippi; Rolling Fork, Mississippi; and Alexandria, Louisiana, are most likely to get hit by the severe weather Monday afternoon and evening.
The worst of the rain for the Northeast will be overnight Tuesday into Wednesday. Flash flooding is possible along the Interstate 95 corridor, so those driving to reach their Thanksgiving destinations should exercise extreme caution. The worst of the rain will clear out Wednesday morning, though some lingering showers are possible Wednesday afternoon in New England. Snow will begin in northern New England Tuesday afternoon and continue through Wednesday night. Six to 12 inches of snow is forecast for parts of Massachusetts, Vermont, New Hampshire and Maine.
COVID 19 News - COVID Vaccine Injury Lawsuit Surge
The Biden administration is beefing up its legal team to handle a rising number of lawsuits over COVID-19 vaccines. The Justice Department recently posted an online ad on LinkedIn seeking eight trial attorneys to work on cases under the Countermeasures Injury Compensation Program (CICP). This program provides compensation for covered serious injuries or deaths that occur as the result of the administration or use of certain countermeasures regarding government COVID-19 vaccine mandates.
The compensation may include unreimbursed medical expenses, lost employment income and the survivor death benefit. The CICP, created in 2005, has been used to deal with claims resulting from public health emergencies such as anthrax exposure and the Ebola virus. Adverse side effects to the COVID-19 vaccine are rare, according to the Centers for Disease Control and Prevention, although some have died from them. Myocarditis, among the side effects, is most common in young males.
Oxford Economics: Slow Growth, But No Recession Ahead
Economists Michael Pearce and Matthew Martin of Oxford Economics provide insights into current economic conditions. Here are highlights of their recent research: In our latest forecast, we removed the mild recession from our baseline and now anticipate a prolonged period of below-trend growth. However, the risks of a recession are still elevated, so we will continue our recession monitor series, highlighting potential risks that could tip the economy into recession in the months ahead.
Although we removed the recession from our baseline forecast, we think the risks remain elevated over the next 12 months. A potential government shutdown, if it occurred, would weigh on growth, while uncertainty over the 2024 elections could drag on investment and, therefore, economic growth. Should the conflict in the Middle East broaden severely, the fallout in energy markets has the potential to increase inflationary pressures and shave GDP growth enough to push the economy into a mild recession.
Read more at Material Handling & Logistics
Inside the OpenAI Chaos
OpenAI Was in open revolt on Monday with more than 600 employees signing an open letter threatening to leave unless the board resigns and reinstates Sam Altman as CEO, along with cofounder and former president Greg Brockman. Altman was controversially fired by the board on Friday. “The process through which you terminated Sam Altman and removed Greg Brockman from the board has jeopardized all of this work and undermined our mission and company,” the letter reads. “Your conduct has made it clear you did not have the competence to oversee OpenAI.”
The letter’s release follows an extraordinary, head-spinning weekend in Silicon Valley. OpenAI’s board removed Altman from his position on Friday, claiming “he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.” After blowback from investors, including Microsoft, OpenAI’s board seemed open to having Altman return to lead the company. Altman posted a photo of himself wearing a visitors’ badge at the company’s headquarters on Sunday. But last night, the board told staff that Altman would not be returning to the company. Hours later, Microsoft CEO Satya Nadella announced that Altman and Brockman would be joining the tech giant to head a new advanced AI research unit.
UAW Clinches Record Detroit Deals, Turns to Organizing Tesla, Foreign Automakers
The United Auto Workers (UAW) said Monday that 64% of workers at the Detroit Three automakers voted to ratify new record contracts after a six-week targeted strike, as the union turns its attention to organizing foreign-owned and Tesla auto plants. The votes lock in the UAW's tentative agreements with the automakers through April 2028, which include a 25% increase in base wages and will cumulatively raise the top wage by 33%, compounded with estimated cost-of-living adjustments to over $42 an hour. "Now, we take our strike muscle and our fighting spirit to the rest of the industries we represent, and to millions of non-union workers ready to stand up and fight for a better way of life," Fain said Monday.
The UAW for decades has unsuccessfully sought to organize auto factories operated by foreign automakers. In recent weeks, Hyundai Motor, Toyota Motor and Honda Motor have all announced they would hike U.S. factory wages after the UAW contract. UAW President Shawn Fain was in Washington last week to hold meetings to discuss the union's organizing strategy and is expected to outline more details in the weeks to come.
Amazon Hoping to Train Millions Through Free AI Courses
Amazon hopes to provide two million people with free artificial intelligence (AI) training by 2025 as part of its new “AI Ready” initiative, the e-commerce giant announced on Monday. “Artificial intelligence (AI) is the most transformative technology of our generation,” Amazon said a press release. “If we are going to unlock the full potential of AI to tackle the world’s most challenging problems, we need to make AI education accessible to anyone with a desire to learn.”
The company will offer eight free AI courses, including five courses for developers and technical audiences and three courses for business leaders and nontechnical audiences, according to its press release. Several of the courses focus on generative AI, a form of AI that can produce original content and that has exploded in popularity over the past year following the emergence of the AI-powered chatbot ChatGPT. According to a recent survey conducted by Amazon Web Services (AWS) and Access Partnership, 92 percent of organizations expect to use AI tools within the next five years and 93 percent of employers expect to use generative AI tools within the same time frame.
Boeing Bonanza Leaves Rival Airbus in the Dust at 2023 Dubai Air Show With Three Times More Orders
Aerospace giant Boeing eclipsed its European rival Airbus after four days of deals at the 2023 Dubai Air Show, underlining strong demand for wide-body jets in particular and making a strong comeback after several years of underperformance following major safety scandals. Boeing chalked up 295 aircraft orders in comparison to Airbus’ 86 orders by Day 4 of the Middle East’s largest aviation event, according to company updates and tallies from industry experts. The French manufacturer grappled with publicly aired concerns over the cost and performance of the Rolls-Royce engines on its planes.
Boeing kicked off the first day of the show with a massive order for 90 of its 777 wide-body jets from Dubai’s flagship carrier Emirates Airline at list prices of $52 billion, followed by an $11 billion order from Emirates subsidiary and low-cost carrier FlyDubai for 30 of its first-ever-ordered 787 Boeing Dreamliners. The robust appetite for wide-body jets highlighted both Dubai’s optimistic outlook for long-haul air travel as well as the importance of the Middle East market to the aircraft model’s demand.
Simple, Cost-Effective Steps Can Prepare Your Warehouse for Peak Demand Periods.
Three factors are putting manufacturers on notice this holiday season. First, warehouse space utilization has climbed to 86.3% (Prologis Research), coincidentally above the 85% benchmark experts say will tip warehouse operations from effective space utilization into congestion risk territory. Second, the 2023 Holiday Retail Survey shows that 33% of total holiday spending will occur in the last two weeks of November, with 66% of all consumers planning to shop during Thanksgiving week, taking advantage of Black Friday and Cyber Monday. While taking advantage of holiday promotions is by no means a recent phenomenon, inflation will drive earlier spending through the 2023 holiday season when compared to previous years.
Finally, the same 2023 Holiday Retail Survey predicts spending to reach $1,652 per consumer, up 14% from 2022 and exceeding pre-pandemic holiday spending (2019 and before) for the first time. Considering these three factors, manufacturers (particularly in the nondurable sector) should prepare for increased volumes within a shorter window, accentuating the effect of peak demand season. The following steps are intended to help you maximize sales without sacrificing supply chain efficiencies and customer service levels.
Read more at Material Handling & Logistics
Cruise CEO Vogt Resigns at GM's Troubled Self-Driving Car Unit
Cruise CEO and co-founder Kyle Vogt has resigned from his role at the autonomous vehicle venture owned by General Motors, according to a company statement sent to CNBC on Sunday. Mo Elshenawy, who previously served as executive vice president of engineering at Cruise, will now serve as president and CTO for Cruise, the company said. Vogt confirmed his resignation Sunday night in a social media post on X, formerly known as Twitter. He did not give a reason for the resignation, and said he plans “to spend time with my family and explore some new ideas.”
The company issued a voluntary recall affecting 950 of its robotaxis, and suspended all vehicle operations on public roads following a series of incidents that sparked criticism from first responders, labor activists and local elected officials, especially in San Francisco. In one serious incident in October, the human driver of another vehicle struck a pedestrian in San Francisco at night, tossing her into the path of a Cruise self-driving car, which then drove over and dragged her.
The Entrepreneurs Tapping Into An Evolving Maker Economy
The maker economy is thriving. From arts and crafts products sold on Etsy through to inventors and using crowdfunding platforms to connect with potential buyers, makers play an important role in today’s economy as designers, manufacturers, employers and taxpayers. And as the tech sector evolves, the ability to produce prototypes and small runs of physical objects may also play an increasing role in the development of technologies that combine software with physical equipment.
The question is, of course, where does all this work actually get done? That’s a problem that Arnaud Nichols, Al Parra and Vinny Nanray have set out to address. As co-founders of Bloqs, they have created a co-working space for craftsmen and designers. Operating rather like software-oriented workspaces - with open plan design to encourage collaboration - and styled as an "open access factory," it offers access to a wide range of tools on a pay-as-you-needs basis. When I spoke to Parra and Nichols earlier this week, I was keen to get their take on the maker economy and their own role in encouraging domestic design and manufacturing on a small scale.
US Probes Hyundai, Kia Recall Into 6.4 Million Vehicles Over Fire Risks
U.S. auto safety regulators said Monday they had opened a probe into 16 separate recalls issued by Hyundai and Kia covering 6.4 million vehicles relating to brake fluid leaks that could result in fires. The Korean automakers have issued a string of recalls since 2016 for antilock braking system and Hydraulic Electronic Control Units (HECU) issues manufactured by the same parts supplier and fires.
In September, the Korean automakers recalled a combined 3.37 million vehicles in the United States due to the risk of engine fires, telling owners to park outside and away from structures until repairs are complete. The automakers said internal brake fluid leaks can cause an electrical short that could lead to a fire. In September, Hyundai said it has reports of 21 fires and 21 other thermal incidents since 2017, while Kia has reports of at least 10 confirmed fires and melting incidents. Kia said the Hydraulic Electronic Control Unit (HECU) in the vehicles may experience an electrical short as a result of brake fluid leaks. H
The Geminids Meteor Shower: One Of This Year’s ‘Most Intense’ Showers Has Returned
The Geminids meteor shower—which NASA calls one of the “best and most reliable” yearly meteor showers—returned on Sunday and is slated to run through December 24, with a peak in three weeks, though no equipment is required to see it. The shower peaks between December 13 and December 14, but it may still be visible beforehand with the proper observing conditions, NASA reports.
The shower is best viewed during the night before dawn, and because it usually starts earlier than other showers, between 9 p.m. and 10 p.m., it’s considered one of the best for young viewers, according to NASA. A dark, open sky away from city or street lights is ideal, and the best viewing position is laying flat on the back with feet facing the south—binoculars and telescopes typically aren’t needed. Though it will be visible everywhere in the night sky, from Earth’s perspective, the Geminids meteor shower appears to originate from the direction of the Gemini constellation, which is northeast of the Orion constellation, according to Space.