Member Briefing November 26, 2024
Fed's Top Expert On Productivity Sees Case For Optimism
John Fernald, economist emeritus at the San Francisco Fed and a professor at INSEAD in Fountainebleau, France, has long been cautious about extrapolating from short-term trends to conclude that the U.S. is entering a new period of breakout productivity growth like that from 1995 to 2004, which enabled big economic gains without inflation. Some Fed policymakers and analysts have expressed the hope that generative artificial intelligence and other innovations may already be setting the nation up for such a period, which lays the groundwork for improvements in living standards.
Most of Fernald's latest piece in the regional Fed's Economic Letter was consistent with a more skeptical view, detailing how a jump in per-worker output at the start of the COVID-19 pandemic quickly faded and longer-term slower trends reasserted themselves. And yet, they concluded, "there are some reasons for optimism," including recent official data revisions that show faster productivity growth since the pandemic than had been previously estimated. "Much is still uncertain about the productivity effects of emerging technologies like generative artificial intelligence, which will only be revealed over time, as the economy continues to evolve in the aftermath of the pandemic." Productivity growth is now running close to, although slightly higher, than has been typical since 2004, they found.
Global Steel Output Takes an Upward Turn
Global raw-steel production rose 5.0% from September to October, up to 152.1 million metric tons, paced by increased output in the three largest steelmaking countries. The October total is 1.0% than the comparable 2023 result, and it raises the 10-month 2024 output to 1.55 billion metric tons, -1.6% lower than the January-October 2023 result. The October total marks the first month-over-month rise in the global tonnage total since May, as steelmakers have struggled to keep pace with falling demand and seek to stabilize raw-steel prices. The slow demand has been confirmed by World Steel with its recent forecast of global steel consumption pegging the 2024 total at 1.75 billion, which if accurate will mean the third consecutive year of decline for the industry.
The rebound in October is largely the effect of a +5.9% rise in output in China, where the 81.9 million metric tons produced were about 54.0% of the total global output last month. The new result brings China’s year-to-date output to 850.7 million metric tons, +2.9% better than October 2023, but still -3.0% behind the 10-month total for last year. U.S. steel production has remained within a steady range throughout 2024, and fell -1.52% from September to October, and -.2.0% from October 2023. The year-to-date total for U.S. steel output is 66.7 million metric tons, -1.9% from last year’s January-October total.
Read More at American Machinist
The Auto Industry Is Pulling Back On Its ‘Capital Junkie’ Tendencies After Unprecedented Spending On EVs, Self-Driving
After years of spending capital freely on all-electric and autonomous vehicles, automakers are starting to pull back. Automakers from Detroit to Japan and Germany are attempting to lower costs and reduce expenses amid economic concerns, billions of dollars wasted on self-driving vehicles and a prolonged, if not uncertain, return on investment in EVs amid slower-than-expected adoption.
Those issues come in addition to weakening consumer demand, higher commodity costs, and some Wall Street analysts sounding the alarm about global automotive sales and profits peaking, as China’s industry continues to expand. “Western [automakers] are increasingly focusing on capital efficiency, meaning likely lower spending, more collaboration, and restructured EV portfolios to prioritize profits,” Morgan Stanley analyst Adam Jonas said in a September investor note.
Global Headlines
Middle East
- Cease-Fire to Halt Israel-Hezbollah Fighting in Lebanon Draws Closer – WSJ
- No 10 Indicates Netanyahu Faces Arrest If He Enters UK - BBC
- Iran's Khamenei Calls For Death Sentence For Israeli Leaders - Reuters
- Truce To Be Monitored By Five Countries Chaired By US, Lebanon Lawmaker Says - Reuters
- Here’s Where Ceasefire Talks In The War Between Israel And Hezbollah Have Been Stuck - AP
- U.A.E. Names Three Uzbek Nationals as Suspects in Rabbi’s Murder - WSJ
- Iran and Russia’s Fragile Partnership – Foreign Affairs
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- NATO And Ukraine To Hold Emergency Talks After Russia’s Attack With New Hypersonic Missile - AP
- Trump ‘Incredibly Concerned’ About Escalation Of Munitions In Russia-Ukraine Conflict, Aide Says - VOA
- NATO in 'Hidden Cyber War' With Russia: UK Minister - Newsweek
- Russia And Ukraine Trade Missile And Drone Strikes -- BBC
- Ukraine Seeking New Air Defense Systems After Latest Russian Strike: Zelensky – Defense Post
- Ukraine Clings to Shrinking Sliver of Russia, Expecting Trump to Push for Peace Talks - WSJ
- Battlefield Intelligence Suggests North Koreans Killed in Ukraine War - Newsweek
- New US Sanctions Will Make It Harder For Russian Banks To Finance War Against Ukraine - VOA
- 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
- Far-Right Candidate Takes Shock Lead In Romania Presidential Election - BBC
- DHL Cargo Plane Crashes In Lithuania—At Least One Dead And Three Injured - Forbes
- In South Korea, Nations Meet In Final Round To Address Global Plastic Crisis - AP
- Taiwan Says Chinese Balloon Detected Near Island – Defense Post
- Map Shows US Navy Carrier Strike Group Arriving in South China Sea - Newsweek
- Top NATO Official Calls On Business Leaders To Prepare For 'Wartime Scenario' - Reuters
- Rohingya Refugees Recruited In Escalating Myanmar War – AP
Policy and Politics
Republicans’ Big Tax Challenge Is Fitting All Their Priorities in One Bill
Republicans are trying to fit as many priorities as possible into one bill early next year, combining tax cuts, spending cuts, energy policy, border security and President-elect Donald Trump’s campaign promises. Engineering the legislation that way can help the party completely sideline Democrats, and it is Republicans’ best chance to quickly exploit unified control of the House, Senate and White House. Strike first, strike hard, no mercy, to borrow an ’80s movie catchphrase.
But balance is key. The path ahead is a political, arithmetical and procedural tightrope. As Republicans squeeze proposals into the tax bill, they must follow the rules of a special process called reconciliation that lets them dodge the Senate’s usual 60-vote filibuster threshold. They also must maintain near-perfect party unity, finding compromises on issues that divide Republicans, including budget deficits, clean-energy subsidies and the state and local tax deduction.
Trump Fires Salvo on North American Trade Pact
Donald Trump’s new tariff pledges send a clear signal that he wants to rewrite the terms of North America’s free-trade pact and follow through with plans to hit China with tariffs, demonstrating to allies and adversaries alike that he is serious about renewing confrontation over a global trading system that he believes costs the U.S. dearly. The major question is whether the threats are a negotiating ploy to wring concessions on trade and other policy priorities from U.S. trading partners, or the start of a sustained campaign to reshape global trade and the American economy.
On his Truth Social social-media platform on Monday, Trump said he would levy tariffs of 25% on imports of all goods from Mexico and Canada, accusing both countries of facilitating illegal immigration and fentanyl abuse in the U.S. The Mexican peso fell 1.4% against the dollar in Asian trading Tuesday, while the Canadian dollar lost 1%. The Chinese yuan shed 0.3% against the greenback in offshore trading. He also promised to levy additional tariffs of 10% on Chinese imports, citing what he says is China’s failure to regulate the chemicals that go into fentanyl. Many Chinese products are already subject to average levies of about 15% after the first phase of the trade war that kicked off in 2018, during Trump’s first term in office.
‘Busiest Thanksgiving Ever’: How The TSA Plans To Handle Record Air Travel
Just as there are good odds the turkey will taste dry, airports and highways are expected to be jam-packed during Thanksgiving week, a holiday period likely to end in another record day for air travel in the United States. The people responsible for keeping security lines, boarding areas and jetliners moving — from the U.S. transportation secretary and airline chiefs on down the line — swear they are prepared for the crowds. Airline passengers might get lucky like they did last year, when relatively few flights were canceled during the holiday week. A repeat will require the weather’s cooperation. And even if skies are blue, a shortage of air traffic controllers could create delays.
The Transportation Security Administration expects to screen 18.3 million people at U.S. airports during the same seven-day stretch. That would be 6% more than during the corresponding days last year but fit a pattern set throughout 2024. The TSA predicts that 3 million people will pass through airport security checkpoints on Sunday; more than that could break the record of 3.01 million set on the Sunday after the July Fourth holiday. Tuesday and Wednesday are expected to be the next-busiest air travel days of Thanksgiving week.
Health and Wellness
How to Have a Healthier, Stress-Free Holiday: 26 Things Experts Do
For as much joy as the holidays bring, they are also a major source of stress. A 2023 survey by the American Psychological Association found nearly 9 in 10 (89%) people are stressed during the holiday season, whether about money, being apart from loved ones, pressure to make the season special or dealing with family conflict. Plus, the majority of respondents in a December 2023 American Heart Association survey neglected their physical health at holiday time by not eating well (69%), not exercising regularly (64%) and not getting enough sleep (56%).
You can prioritize mental health by changing your approach to holiday tasks and family conflicts, getting enough sleep and meditating. Focus on physical health without depriving yourself of holiday indulgences by swapping out unhealthy foods with healthy alternatives to save on calories and boost your immunity. As much as possible, try to plan ahead, set boundaries and focus on positive activities.
Read more US News and World Report
Transition 2024
- Trump 2.0 Has A Cabinet And Executive Branch Of Different Positions And Eclectic Personalities - AP
- Special Counsel Moves to Dismiss Election-Interference Charges Against Trump - WSJ
- Republicans Grapple With Controversial Trump Recess Appointment Scheme – The Hill
- Will Tulsi Gabbard Get Confirmed As Trump’s Intel Director? Some GOP Senators Skeptical Of Her Record On Russia And Syria. - Forbes
- Donald Trump Not Signing Transition Documents Sparks Anger From Critics - Newsweek
- Why Donald Trump’s Promise to ‘Defeat Inflation’ Is Harder Than It Sounds - WSJ
- Trump’s National Security Pick: I’m On Same Page As Jake Sullivan About ‘Our Adversaries’ - Politico
- RFK Jr. & Pete Hegseth Cabinet Nomination News: Trump’s Picks Gets High Marks In New Poll - Forbes
- Republicans Optimistic And Relieved, Democrats Afraid And Angry After Election: Gallup – The Hill
- Tracking Trump’s Cabinet Picks – Politico
Industry News
How Trump’s Tariffs on China Changed U.S. Trade, in Charts
China is no longer the main source for U.S. imports. Mexico took its place last year. That seismic shift started in 2018 after President Trump signed into law a round of tariffs on many Chinese imports during his first term. And he has promised to impose another round of tariffs after he returns to the White House in January. Semiconductors, leather bags and laptops were among the top China imports that were most affected by the tariffs. Last year, the value of those Chinese imports was on average 35% less than in 2017.
Tariffs haven’t slowed America’s demand for foreign goods. Many items are just finding new ways into the country. U.S. imports of goods reached $3.1 trillion in 2023, up from $2.3 trillion in 2017, according to an analysis of Census Bureau international trade data.
GlobalFoundries Fined $500K Over Export Violations
The Department of Commerce fined chipmaker GlobalFoundries $500,000 for violating federal export restrictions, according to a Nov. 1 press release. The agency’s Bureau of Industry and Security found that GlobalFoundries shipped $17.1 million worth of semiconductor wafers to SJ Semiconductor, a China-based company on the U.S. entity list, a federal lineup of organizations subject to restrictions due to national security concerns. GlobalFoundries failed to get the necessary BIS licenses to legally ship goods to the company.
BIS stated the chipmaker violated export regulations by allegedly sending 74 separate shipments to SJ Semiconductor between February 2021 and October 2022 without U.S. authorization, according to the release. GlobalFoundries voluntarily disclosed the transactions to BIS on April 8, 2023, and Nov. 30, 2023, and cooperated with the investigation, according to the citation. The company will not appeal the decision, a company spokesperson said in an email to Manufacturing Dive. SJ Semiconductor is an affiliate of China-based Semiconductor Manufacturing International Corp. The BIS placed the two companies and their other related affiliates on the entity list in December 2020 due to the Chinese Communist Party’s national strategy to strengthen its military by 2049, according to the press release.
Read more at Manufacturing Dive
Absolics, Applied Materials, Arizona State University Get Chip Packaging Funds
Absolics, Applied Materials and Arizona State University are set to receive up to $100 million each for semiconductor packaging manufacturing in a slew of new CHIPS and Science Act funding, the Commerce Department announced Thursday. The money will go towards research and development for advanced substrates. The physical platforms allow chips to be assembled together seamlessly and enhance high-performance computing capabilities for artificial intelligence, wireless communication and power electronics.
The government expects that private investment will provide $170 million in addition to the up to $300 million in federal funding, for a total of at least $470 million. Semiconductor packaging advancements have become a key priority for the administration as part of its push to grow the country’s domestic chip industry and unlock more advanced chips to power AI.
Read more at Manufacturing Dive
US LTL Carriers Laying Groundwork For Higher Pricing In 2025
US less-than-truckload (LTL) carriers are laying the groundwork for higher pricing in 2025, well before higher freight volumes hit their docks. Several of the largest LTL carriers in recent weeks have released average general rate increases (GRIs) for 2025 ranging from the mid- to upper single digits. The GRIs are for non-contract business, but they set expectations for contract pricing in 2025.
Old Dominion Freight Line set the base with a 4.9% GRI announced Monday that will take effect Dec. 2. FedEx Freight earlier announced a 5.9% GRI effective Jan. 6, while TForce Freight, the former UPS Freight, raised its rates as well.
Read more at Journal of Commerce
Saab Details Plans For Michigan Weapons Factory
Grayling residents got their first detailed look at a weapons factory planned near town within the next few years. The Swedish Defense company Saab announced the $75 million plant earlier this year and has held four total meetings with stakeholders in the area. The area is home to the Camp Grayling Joint Maneuver Training Center, the largest National Guard training facility in the United States, spanning 147,000 acres of training land throughout Crawford County and 113 square miles of restricted air space.
The new facility will be used for final assembly on Saab’s AT4 product line. They’re shoulder mounted weapons with softball-sized rounds designed to break through heavily-armored objects. More than one million AT4s have been produced and are used by over 15 countries, according to Saab’s website.
Read more at Interlochen Public Radio
Nestlé CEO Laurent Freixe Bets Big On Innovation With Multi-Billion Sales Goal
When you’re a $105bn business, two percentage points of sales growth is a big deal. But that’s what Nestlé CEO Laurent Freixe has shaved off the mid-term outlook for the world’s largest food company. Investors knew it was coming. However, it was the size of the downgrade that had been awaited as Freixe chose his first capital markets day as CEO to steer investors to a 4%-plus guide in organic growth.
As Nestlé has started to rein in pricing during the so-called “normalisation” phase, Freixe outlined solutions to a business performance that has been “below our potential” in 2024. “[Within] the framework of achieving efficiency to generate the fuel for growth, we can invest in our key brands and in our key growth platforms. This drives category growth and market-share gains, leading to sustainable and profitable growth, which in turn brings the benefits of scale and value creation. Less is more – focusing on our top brands, on our top SKUs, on our big bets and our most impactful investments. These are all embedded in our plans.”
Commerce Department To Reduce Intel's Funding On Semiconductors
he Biden administration plans on reducing part of Intel's $8.5 billion in federal funding for computer chip plants around the country, according to three people familiar with the grant who spoke on the condition of anonymity to discuss private conversations. The reduction is largely a byproduct of the $3 billion that Intel is also receiving to provide computer chips to the military. President Joe Biden announced the agreement to provide Intel with up to $8.5 billion in direct funding and $11 billion in loans in March.
The changes to Intel’s funding are not related to the company’s financial record or milestones, the people familiar with the grant told The Associated Press. In August, the chipmaker announced that it would cut 15% of its workforce — about 15,000 jobs — in an attempt to turn its business around to compete with more successful rivals like Nvidia and AMD. Unlike some of its rivals, Intel manufactures chips in addition to designing them.
Formula 1 Expands Grid To Add General Motors' Cadillac Brand And New American Team For 2026 Season
Formula 1 on Monday at last said it will expand its grid in 2026 to make room for an American team that is partnered with General Motors. “As the pinnacle of motorsports, F1 demands boundary-pushing innovation and excellence. It’s an honor for General Motors and Cadillac to join the world’s premier racing series, and we’re committed to competing with passion and integrity to elevate the sport for race fans around the world," GM President Mark Reuss said. "This is a global stage for us to demonstrate GM’s engineering expertise and technology leadership at an entirely new level.”
The approval ends years of wrangling that launched a U.S. Justice Department investigation into why Colorado-based Liberty Media, the commercial rights holder of F1, would not approve the team initially started by Michael Andretti. Andretti in September stepped aside from leading his namesake organization, so the 11th team will be called Cadillac F1 and be run by new Andretti Global majority owners Dan Towriss and Mark Walter. The team will use Ferrari engines its first two years until GM has a Cadillac engine built for competition in time for the 2028 season.
Survey: Most American Workers Satisfied With Employer-Provided Health Coverage
A new nationwide poll finds that a strong majority of Americans receiving health care coverage through work — about 180 million people — are satisfied with their current employer-provided plans (75%) and prefer to get their coverage through an employer rather than through the federal or state government (74%). The survey of 1,000 workers with employer-provided coverage, conducted by AHIP, also found that their satisfaction with employer-provided coverage is driven by comprehensive coverage (49%), affordability (48%), and choice of providers (45%) their plans provide.
Additionally, 71% of respondents report that the quality of their current employer-provided health plan is high, and 76% say their coverage would protect them from most of their medical costs if they had a major medical emergency. A majority of respondents also claim the health coverage their job provides had a positive impact on their decision to accept their current job (61%) — and it is even more impactful in their decision to stay at their current job (80%).