Member Briefing November 3, 2022

Posted By: Harold King Daily Briefing,

Fed Approves Fourth 0.75-Point Rate Rise, Hints at Smaller But Continuing Hikes Ahead

The Federal Reserve lifted interest rates by 0.75 percentage point to combat inflation and signaled plans to keep raising them, though possibly in smaller increments. Fed Chairman Jerome Powell said the central bank would consider slowing the pace of rate rises to a smaller half-point increment at its next meeting in December, but he said the Fed hadn’t decided to do that. At the same time, he cautioned that the central bank was likely to ultimately raise interest rates to higher levels than policy makers had anticipated in September. Mr. Powell pushed back against concerns that the Fed had raised interest rates too much. “I don’t have any sense that we’ve overtightened or moved too fast,” he said.

The Fed’s rate-setting committee acknowledged Wednesday that it could take time for their rate increases this year to be reflected in the economy, and they indicated they might reduce the size of coming hikes. “In determining the pace of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation.”

Read more at The WSJ


War in Ukraine Headlines


Energy Crisis Chips Away at Europe's Industrial Might

Europe needs its industrial companies to save energy amid soaring costs and shrinking supplies, and they are delivering - demand for natural gas and electricity both fell in the past quarter. The drop is not just because industrial companies are turning down thermostats, they are also shutting down plants that may never reopen.

And while lower energy use helps Europe weather the crisis sparked by Russia's war in Ukraine and Moscow's supply cuts, executives, economists and industry groups warn its industrial base may end up severely weakened if high energy costs persist.  Energy-intensive industries, such as aluminium, fertilisers, and chemicals are at risk of companies permanently shifting production to locations where cheap energy abounds, such as the United States. Euro-zone manufacturing activity this month hit its weakest level since May 2020, signaling Europe was heading for a recession.

Read More at Reuters


Survey: CFOs’ Attitudes Shift to Risk Management Over Growth

Minneapolis-based U.S. Bank first formally surveyed CFOs 16 months before doing so again this fall. Over that time span, surging inflation and interest rates and Russia’s invasion of Ukraine produced a cocktail of negatives that helped 30% of executives tag risk identification and mitigation as a top priority, up from just 18% in 2021. That was tied atop the list with cutting costs and deploying technology inside their finance functions.

The poll included responses from 750 finance leaders working at companies with at least $100 million in sales, with nearly half of them at firms with revenues of more than $1 billion. And while the shift toward the idea of “controlling what you can control” is clear, the survey also shows that executives don’t feel great about their organizations making headway on their biggest risks: Just 15% told U.S. Bank they are “very confident” in their ability to manage talent, digital disruption and inflation worries.

Read more at IndustryWeek


US COVID -Scientists Have Their Eyes on Several ‘Deltacrons’—New COVID Variants With the Potential to Attack the Lungs Like Delta and Spread Like Omicron

Earlier this year, all eyes were on “Deltacron”—a Frankenvirus, of sorts, that combined Delta and Omicron, and potentially the worst traits of both. The initial strain, reported in January, failed to take flight. Reports of additional Delta-Omicron hybrids, in multiple locations across the globe, later emerged, then fizzled. But in the waning days of 2022, the Deltacron phenomenon is back—if it ever left. This time it’s in the form of new COVID variants XBC, XAY, and XAW.

In a worst-case scenario, a Delta-Omicron hybrid could be as deadly as the Delta variant—which killed about 3.4% of those it infected, nearly double the fatality rate of Omicron, according to a 2022 study published in Nature Reviews Immunology. It could also feature the record-setting transmissibility of Omicron.

Read more at Fortune


NY-19: Virtual Congressional Candidate Forum this Friday

On Friday, November 4th, City & State will host Marc Molinaro and Josh Riley, Congressional Candidates for NY District 19, on a webinar sponsored by AARP New York. They will ask the candidates about important issues including social security, Medicare, prescription drug pricing, caregiving and more.

Stretching from Ithaca to the Massachusetts border the newly drawn lines may be unfamiliar to voters. Dutchess County Executive Marc Molinaro has been involved in politics since the age of 19 when he was elected mayor of the village of Tivoli. “I have spent every day of my adult life making government work for people. You know, you learn in local government and as a teenage mayor or a long time ago that you've got to leave partisanship at the door, that the people demand government respond to their needs. And I've learned to work with and to bring Republicans and Democrats together,” said Marc Molinaro, (R) 19th Congressional District Candidate. On the other side of the coin is political newcomer, Democrat Josh Riley. The Harvard educated lawyer worked under former congressman Maurice Hinchey as well as Senators Ted Kennedy and Al Franken. “The status quo has not been working. I think too many families and too many communities across upstate New York have been sold out and overlooked by our politicians for a long time…” said Josh Riley, (D) 19th congressional district candidate.

See Event Details


NY-17: DCCC Chair Sean Patrick Maloney, Faces Tough Campaign Back Home

The man tasked with keeping Democrats in power in the U.S. House of Representatives is in the fight for his own political life back home. Rep. Sean Patrick Maloney is at risk of losing his grasp on New York’s 17th Congressional District, located just north of the five boroughs. Maloney is touting policy wins on Capitol Hill, such as getting oil barge anchorages banned on the lower Hudson River. He is also trying to paint Lawler as out of step with the mainstream, including on abortion.

Maloney’s opponent, Republican state Assemblyman Mike Lawler, said he entered this race clear-eyed about the challenge of taking on someone in House leadership. But, he says, he has lived here his whole life.  “I know the people here. I represent many of the people here. I understand the challenges because I live them too — and unfortunately my opponent doesn’t understand them,” he said in an interview. “We need to increase domestic energy production. And that will help bring down costs of both gas prices and home heating costs, as well as the production of goods,” the Republican said.

Read more at State of Politics


A COVID Wave of BQ Infections That Started in New York Has Already Reached California

When it comes to COVID, New York is experiencing a wave of highly transmissible, immune-evasive BQ infections—and it’s the epicenter of a national wave, experts say. BQ variants represented a third of reported New York cases as of Monday—and 15% of cases in California, according to data from GISAID, an international research organization that tracks changes in COVID and the flu virus.

BQ.1.1 is thought to be the most immune-evasive new variant yet—and one that clearly has the ability to surpass still U.S.-dominant BA.5, from which BQ variants evolved. BQ.1.1’s extreme immune evasiveness and transmissibility “sets it up to be the principal driver of the next U.S. wave in the weeks ahead,” Dr. Eric Topol, a professor of molecular medicine at Scripps Research and founder and director of the Scripps Research Translational Institute, tweeted last month. The good news, if there is any, about BQ is that new Omicron boosters will “almost certainly” provide “some” protection against them because they were designed to tackle close relative BA.5

Read more at Fortune


Poll: Republicans Have Gained Support Among Suburban White Women Voters as Election Day Approaches

The poll found that the key voting demographic generally trusts Republicans over Democrats to deal with the economy and inflation, the group’s top issues, more so than just a few months ago. Exactly half of suburban white women report thinking the Republican Party has a better economic plan to “make life easier” for people like them, while just 35 percent think Democrats have the better strategy.  development."

Fifty-five percent of the demographic said Republicans have “a better plan to get inflation under control,” up 10 points from August. Just 24 percent said the same of Democrats, down from 32 percent in August.  About a third — 34 percent — of the group said rising prices were their most motivating issue in getting to the polls, while 28 percent said threats to democracy. Sixteen percent cited the Supreme Court’s decision to overturn the right to abortion in Roe v. Wade. 

Read more at The Hill


New Study Shows Companies Identify Inflation and Supply Chain Disruptions as Top Factors Pressuring Procurement.

A new study has revealed that 32% of procurement teams have “cut corners” with their sourcing criteria to secure supply, as eighty-one percent (81%) of them feel pressured by executives to respond to challenges “more quickly and effectively.” The study “Procurement Under Pressure: Procurement Bends and Adapts - Will it Break?”, sponsored by Ivalua, shows a majority of respondents identify inflation (88%) as well as supply chain disruptions and shortages (82%) as top factors pressuring procurement. Over 170 procurement and supply chain professionals were surveyed.

The report shows that 52% of respondents are prioritizing business continuity and operational resilience over other objectives, with 46% focusing on customer satisfaction, service, and experience. Given the current market challenges and geopolitical uncertainties, only 7% see ESG outcomes as a priority, which is in stark contrast with strengthening regulatory frameworks and demanding consumer preferences requiring more transparency to combat greenwashing.

Read more at Material Handling & Logistics


World’s Largest Container Shipping Firm Maersk, a Barometer for Global Trade, Warns of ‘Dark Clouds on the Horizon’

Maersk, the world’s largest container shipping firm, on Wednesday posted record profit for the third quarter on the back of high ocean freight rates but noted a slowdown in demand. The Danish giant, widely seen as a barometer for global trade, reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $10.9 billion for the quarter, above consensus analyst projections of $9.8 billion and up around 60% from the same period a year ago.

The company confirmed its full-year guidance for underlying EBITDA of $37 billion and free cash flow above $24 billion. CEO Soren Skou said the “exceptional results” this year were driven by a continued rise in ocean freight rates, but said it was clear that these have peaked and will begin to normalize in the fourth quarter amid falling demand and an easing of supply chain congestion. Skou flagged that earnings in Maersk’s ocean operations will come down in the coming months.

Read more at CNBC


Mortgage Demand Falls Slightly, Mortgage Rates Slip

Mortgage application volume barely moved last week, falling 0.5% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Rates, meanwhile, dropped back a little bit last week, but they’re still near a 22-year high.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 7.06% from 7.16%, with points falling to 0.73 from 0.88 (including the origination fee) for loans with a 20% down payment. That rate was 3.24% the same week one year ago.

Read more at CNBC


Is $1 Million Really Enough to Retire? Higher Earners Are Putting Off Retirement Too

In a new study that is likely to raise eyebrows among some American workers, an investment management company says that even millionaires worry about financial security in retirement, due to the turbulent economic times. “The million-dollar mark may not be as significant as it once was,” the report said.

The report, entitled “The million-dollar question—how much do I need to retire?,” is based on a survey that included 1,617 individuals who have $1 million or more of investable assets. When looking at the answers on retirement security from those with $1 million or more in assets, they found that although 79% said they will be financially secure in retirement, when asked about specifics, those respondents were far less confident.

Read more at BenefitsPro


Priorities Are Shifting Inside HR Departments

According to the Lattice 2023 State of People Strategy Report, priorities are changing for HR professionals. The report, which is based on a survey of 820 HR employees in a range of different industries and countries, finds that, though recruiting was professionals’ #2 priority last year, it dropped to 8th place this year. Instead, greater importance is being placed on retention efforts, with voluntary turnover ranked the most important key performance indicator.

What retention measures are top HR companies putting into place? The report finds a variety of factors that unite successful teams, including investment in programs that employees care about; offering pay transparency; investing in growth opportunities, like coaching; and connecting compensation to performance. Top performing companies also used more data and had more frequent performance reviews than lower-ranking HR companies, the survey shows.

Read more at BenefitsPro


China imposes fresh lockdown around major Apple iPhone plant

China ordered an industrial park that houses an iPhone factory belonging to Foxconn to enter a seven-day lockdown on Wednesday, in a move set to intensify pressure on the Apple supplier as it scrambles to quell worker discontent at the base. The Zhengzhou Airport Economy Zone in central China said it would impose "silent management" measures with immediate effect, including barring all residents from going out and only allowing approved vehicles on roads within that area.

Foxconn, formally Hon Hai Precision Industry Co Ltd, is Apple's biggest iPhone maker, accounting for 70% of iPhone shipments globally. It makes most of the phones at the Zhengzhou plant where it employs about 200,000 people, though it has other smaller production sites in India and south China. The industrial park's notice did not specify how the measures might be applied to Foxconn, but the move could impact the transport of goods in and out of the complex.

Read more at Reuters