Member Briefing November 4, 2024
Top Story
ISM: US Manufacturing Activity Drops To Lowest Level Of 2024
October saw the seventh straight month of shrinking activity in the US manufacturing sector, per Institute for Supply Management data. ISM's Purchasing Managers' Index dropped to 46.5%, its lowest point so far this year and the 23rd time it has signaled contraction in the past two years. Of the October PMI’s 10 factoring indexes, seven ended the month in contraction territory. The figure was driven down by declines of 3.6 points in production, 1.8 points in backlog of orders and 0.2 points in supplier deliveries, offset by increases of 6.5 points in prices, 1.0 points in new orders and 0.5 points in employment.
“We're 26 months into a contracting manufacturing environment primarily driven by the new order levels, the demand being non-existent for 26 months, our backlogs at 25 months contracting declines. We don't have an order book anymore. The order book has all been used up," ISM Manufacturing Business Survey Committee chair Tim Fiore said. "The soft landing has allowed us to consume all that excess ordering and excess inventory over the last couple of years. But we're waiting for demand to come back [and] as a result of demand not coming back, we're taking steps on the output side, which is really defined as production and employment and as you can see, that's really the story for the month."
Read More at Modern Distribution Management
U.S. Economy Added Just 12,000 Jobs In October (Mfg Loses 46,000) Impacted By Hurricanes, Boeing Strike
Job creation in October slowed to its weakest pace since late 2020 as the impacts of storms in the Southeast and a significant labor impasse dented hiring plans. Nonfarm payrolls increased by 12,000 for the month, down sharply from September and below the Dow Jones estimate for 100,000, the Bureau of Labor Statistics reported Friday. It was the smallest gain since December 2020. Job growth in August and September was revised down by a cumulative 112K, suggesting that last month's stellar employment report was not as strong as previously believed.
The unemployment rate, however, held at 4.1%, in line with estimates. In the report narrative, the BLS noted that the Boeing strike likely subtracted 44,000 jobs in the manufacturing sector, which lost 46,000 positions overall. Along with that, the report noted the impact of hurricanes Helene and Milton but said “it is not possible to quantify the net effect” of the storms on the jobs total.
PCE Annual Inflation Slows to 2.1% - Core Unchanged at 2.7
Prices in the U.S. rose modestly in September, but not enough to suggest inflation is rekindling or to prevent the Federal Reserve from cutting interest rates. The Fed’s preferred PCE index moved up 0.2% last month, the government said Thursday. That matched the forecast of economists polled by The Wall Street Journal. The increase in inflation in the past 12 months slowed to 2.1% from 2.3%, leaving it just a hair above the Fed’s 2% target.
Yet the closely followed core rate that strips out food and energy rose a somewhat sharper 0.3% to match the biggest increase in six months. The core rate is still a source of concern to the Fed since it's viewed as a better predictor of future inflation trends. The Fed gives more weight to the core rate when deciding the level of U.S. interest rates. The increase in the core rate in the past 12 months was unchanged at 2.7%. Whatever the case, the central bank is widely expected to cut interest rates again next week a few days after the presidential election.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Israel Says Commandos Capture Hezbollah Operative in Rare Raid by Sea - WSJ
- US Says It Is Looking Into Case Of American Jailed In Iran - VOA
- US Envoys In Israel Seek Lebanon Ceasefire As Hamas Rejects Truce Deal – France 24
- Iran Warns It Will Retaliate for Israel’s Attack - WSJ
- Germany Closes 3 Iranian Consulates Following Iran's Execution Of German Iranian National - VOA
- The Middle East’s Deadly Doom Loop - Politico
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Ukraine And Russia: The Latest News – The Guardian
- Russian Drone Attack On Kyiv Damages Buildings, Power Lines, Ukraine Says - Reuters
- US Weighs NATO Ally's Offer To Shoot Down Russian Missiles Over Ukraine - Newsweek
- Russian Disinformation Campaign Creates 'Climate Of Chaos,' Say Experts - VOA
- Zelenskyy To West: Let Us Hit North Korean Troops In Russia - Politico
- American Drone Startup Notches Rare Victory in Ukraine - WSJ
- Zelensky Slams Ukraine Allies' 'Zero Response' to North Korean Troops - 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
Other Headlines
- Moldovans Head To Polls In Major Test For EU Future - Politico
- Bank of Japan Holds Policy Steady Amid Political Uncertainty – Wells Fargo
- China Threatens To Pull Ahead Of US In Quantum Tech – Defense One
- Scholz Summons Top Ministers Over Rival Plans To Fix Germany's Economy - Reuters
- China Faces a Dilemma With North Korean Troops Pouring Into Russia - WSJ
- US Flies Long-Range Bomber In Drill With South Korea, Japan - Politico
- Brazil Surprised By Venezuela's 'Offensive Tone' As Diplomatic Row Escalates - Reuters
- Argentina's Milei Fires Foreign Minister Over Vote To End US Embargo On Cuba – France 24
- Trapped In Cars And Garages: Why Valencia Floods Proved So Deadly - BBC
Policy and Politics
Court Split In Starbucks' Latest Challenge To NLRB Enforcement Powers
A U.S. appeals court on Thursday seemed divided over Starbucks' claims that the National Labor Relations Board lacks the power to order employers to reimburse workers for expenses they incur as a result of being illegally fired. A three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati heard arguments in an appeal by Starbucks of a board ruling, that said the company fired a barista at a Michigan store because of her union activities, a claim the coffee chain is facing and has denied. A number of other companies including Amazon, Elon Musk's SpaceX, Macy's, and casino operator NP Red Rock are challenging the board's ability to order expanded remedies in pending cases. Starbucks and those companies, among others, also claim that the NLRB's structure and in-house enforcement proceedings are unconstitutional.
The court appearance presented another opportunity for Starbucks to take aim at the NLRB’s 2022 Thryv Inc. doctrine, which expanded the type of measures available to the board to remedy unfair labor practice charges. Thursday’s arguments largely revolved around remedies in the case, despite the fact that Starbucks isn’t contending any individual measures imposed upon it. Last month, the company urged the Third Circuit to toss another NLRB ruling over its expanded remedies. Sarah Harris, representing Starbucks, asserted that the potential remedies Thryv calls for stretch outside the scope of the NLRB’s authority.
Albany NanoTech Wins 'Flagship' $825M Federal Chip Research Funds
Last week the Department of Commerce and Natcast, the operator of the National Semiconductor Technology Center (NSTC), announced the expected location for the first CHIPS for America research and development (R&D) flagship facility. The CHIPS for America Extreme Ultraviolet (EUV) Accelerator, an NSTC facility (EUV Accelerator), is expected to operate within NY CREATES’ Albany NanoTech Complex in Albany, New York, supported by a proposed federal investment of an estimated $825 million. The EUV Accelerator will focus on advancing state of the art EUV technology and the R&D that relies on it.
EUV Lithography is essential for manufacturing smaller, faster, and more efficient microchips. As the semiconductor industry pushes the limits of Moore’s Law, EUV lithography has emerged as a critical technology to enable the high-volume production of transistors beyond 7nm, previously unattainable. As the NSTC develops capabilities and programs, access to EUV lithography R&D is essential to meet its three primary goals 1) extend U.S. technology leadership, 2) reduce the time and cost to prototype, and 3) build and sustain a semiconductor workforce ecosystem.
Read More at The Commerce Department
Defense A Key Driver Of State Economies
The Defense Spending by State for 2023 study – conducted between March and September 2024 – looked at prime and sub-award contract data, grant prime and sub-grant awards, and defense personnel and payroll figures. The Lone Star State topped the list of 10 states – with $71.6 billion, followed by Virginia at $68.5 billion, California at $60.8 billion, Florida at $32.3 billion, and Maryland rounding out the top five at $27.8 billion. The remaining top 10 included: Connecticut $25.3 billion, Pennsylvania $21.8 billion, Arizona $17.0 billion, Massachusetts $16.8 billion, and Washington $15.5 billion.
Total defense spending for all 50 states and the District of Columbia was $609.2 billion, and nearly 59% of that spending went to those top 10 states – or $357.2 billion. The Pentagon also announced the top 10 recipients of defense contracts for FY23, with Lockheed Martin topping the list at $61.4 billion, followed by RTX Corporation at $24.1 billion, General Dynamics at $22.9 billion, Boeing at $20.1 billion, and Northrop Grumman at $16.3 billion. Huntington Ingalls $10.5 billion, Humana $7.8 billion, L3Harris Technologies $7.5 billion, BAE Systems $7 billion, and Cencora $4.4 billion rounded out the top ten.
Health and Wellness
Do I Have COVID, The Flu Or Something Else? 2024 Symptoms And Testing To Know
As the weather changes, we can start feeling under the weather too — but while each illness has a typical set of symptoms, it's important to understand you can't diagnose on your own, Dr. Céline Gounder, CBS News medical contributor and editor-at-large for public health at KFF Health News, said on "CBS Mornings" Wednesday. "If you come in with some symptoms of cough or sore throat or runny nose, whatever it is, I can't tell you if that's a cold, if it's walking pneumonia, if it's COVID or the flu. You do need to test," she said. The good news? Tests are available.
"Since the pandemic, we now have tests that cover all the most common viral and bacterial respiratory infections, making it easy to test for all with one swab," Gounder said. Determining your exact illness through testing also helps decide on the best course of treatment. "We have specific treatments for influenza (Tamiflu, Xofluza), COVID (Paxlovid), 'walking pneumonia' (azithromycin), and other infections, and testing helps guide that treatment," she added.
Read more and view the symptoms at CBS News
NYS COVID Update
The Governor updated COVID data for the week ending November 4th.
Deaths:
- Weekly: 21
- Total Reported to CDC: 84,355
Hospitalizations:
- Average Daily Patients in Hospital statewide: 534
- Patients in ICU Beds: 70
7 Day Average Cases per 100K population
- 2.8 positive cases per 100,00 population, Statewide
- 3.3 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Pennsylvania Has Already Become Ground Zero for Election-Fraud Claims - WSJ
- Outside Groups Have So Far Spent $146 Million On Congressional Races In New York - Gothamist
- House Speaker Rallies GOP; Gets First Apple Cider Donuts – Mid-Hudson News
- From Slavery to Trophy Hunting: 6 Surprising Issues Americans Will Vote On - Newsweek
- Path To 270: The States Harris And Trump Need To Win - BBC
- Jitters In Europe Ahead Of US Elections - VOA
- U.S. Officials Blame Russia for Viral Video Alleging Election Voter Fraud in Georgia - WSJ
- Pittsburgh Is Now the Center of the Political Universe - WSJ
- Devices Used in Ballot Box Arsons Had 'Free Gaza' Messages: Report - Newsweek
- Real Clear Politics General Election Polls
- Real Clear Politics Electoral Map
- Latest Polls - FiveThirtyEight
Industry News
Third Time a Charm? Boeing Machinists To Vote On New Contract Offer Today
The Boeing Machinists union leadership has received another contract offer in a bid to end the ongoing strike, which enters its eighth week Friday. The union announced the proposal Thursday afternoon and recommended members approve the deal. The 33,000 striking Machinists union members will vote on the proposal Monday. “It is time for our Members to lock in these gains and confidently declare victory,” the union wrote. “We believe asking members to stay on strike longer wouldn’t be right as we have achieved so much success.”
The offer includes a 38% general wage increase over the next four years, which compounds to roughly 43% over the life of the agreement, the union said in a statement Thursday. Wages would increase 13% in the first year, then 9%, 9% and 7% in subsequent years. The latest proposal includes a $12,000 ratification bonus. That $12,000 is a combination of the $7,000 ratification bonus and the $5,000 lump sum contribution to the 401(k) plan that Boeing had offered in its prior contract proposal. This time, members can choose how to split the $12,000 between their paycheck and 401(k) plan, the union said. It does not restore the pension plan, something that many union members have said in recent weeks is a top priority.
Read more at The Seattle Times
China's Factory Activity Expands For The First Time Since April
China’s official purchasing managers’ index for October came in at 50.1, in expansionary territory for the first time since April, according to National Bureau of Statistics data released Thursday. September’s reading was 49.8. The last time the PMI was above the 50-point line that determines contraction from activity was in April, with a reading of 50.4. “I expect the economic momentum to improve moderately in Q4 as monetary and fiscal policies [loosen],” Zhiwei Zhang, president and chief economist, at Pinpoint Asset Management, said in a note.
China’s parliament standing committee is scheduled to meet next week, and is widely expected to release details on fiscal stimulus after the gathering ends on Nov. 8.The sub-index for production came in at 52 for October, while that of new orders was 50. Raw materials inventory ticked up to 48.2, still in contraction territory, along with employment at 48.4, which was mildly better than the prior month. The employment portion of the non-manufacturing PMI climbed by 1.1 percentage points to 45.8.
Softer Labor Market Translating to Easing Compensation Costs
The cooler state of the jobs market is taking the heat out of compensation growth. The Employment Cost Index (ECI) grew 0.8% in the third quarter, bringing the year-over-year rate to 3.9%. That still leaves compensation costs rising faster than the high-water mark of the past cycle. However, accounting for productivity growth, which has trended higher this cycle, the ECI's current run rate looks consistent with the Fed's inflation goal, as productivity gains allow businesses to raise compensation faster than prices. On an annualized basis, employment costs rose 3.2% in the third quarter, pointing to a further slowdown ahead in the year-over-year rate.
The ECI is the Fed's preferred gauge of labor costs since it controls for compositional shifts in the economy's jobs and is broader in scope than other measures. The ECI includes benefit costs in addition to wages & salaries; it also reflects compensation changes for public sector workers along with private sector workers. Thus, the latest ECI print is likely to boost policymakers' confidence that wages are not re-accelerating after average hourly earnings growth strengthened to a 4.0% annualized rate in Q3. Other measures also point to an ongoing slide in labor costs, including the Atlanta Fed's Wage Growth Tracker and the share of small businesses raising compensation both slipping last quarter to levels last seen in 2021.
Cox Automotive: Vehicle Pricing Fell Year-Over-Year In Q3
New vehicle prices were stable in Q3, with higher vehicle supply contributing to downward price pressure, according to a recent Cox Automotive analysis of Kelley Blue Book September data. The average new vehicle transaction price was $48,397 in September, slightly higher than in August but down 0.4% when compared to September 2023. Aggressive incentive packages helped drive sales, as dealerships faced elevated inventories. The average incentive package in September accounted for 7.3% of a new vehicle’s transaction price — 2.5 percentage points higher than in September 2023 when the average incentive package was 4.8% of the selling price.
Cox reported that average prices have also been subdued by sales of smaller and more affordable vehicles in 2024. For example, the Toyota Corolla, which is the 11th best-selling car in the U.S., had an average transaction price of $25,535, just over half of the average new vehicle transaction price. Cox also noted that two of the top five best-selling vehicles—the Toyota RAV 4 and Honda CR-V—often sell below $40,000. Cox noted that the Mitsubishi Mirage is the only new vehicle selling for less than $20,000. Average prices of electric vehicles also fell 0.9% year-over-year to $56,351 in September.
Trucking Companies Projecting Higher Prices
Big truckers say they may be turning the corner on the sector’s weak pricing. Both less-than-truckload operator XPO and truckload heavyweight Werner Enterprises are projecting higher rates in the coming months as supply and demand balance on the road shifts. XPO has already been benefiting from the relatively strong price discipline among LTL carriers with a 13% gain in net profit in the third quarter to $95 million that was boosted by improving yields. Daily tonnage and shipment counts have been falling, and the tonnage decline accelerated in October, but XPO’s LTL revenue increased 5% over last year’s third quarter.
LTL carriers are getting the benefit of business that’s dispersed across the sector from the demise of Yellow last year, but companies including XPO, Old Dominion Freight Line and Saia are holding the line on pricing and say they will continue to do that. The truckload business has deeper price problems, with spot rates and contract rates both down this year. Still, Werner CEO Derek Leathers says capacity is getting tighter and the carrier is looking for prices and freight volumes to turn upward to close out the year.
UPS Cuts Daily Volume Capacity By 1M In Efficiency Push
UPS has reduced its network’s daily volume capacity by about 1 million packages so far this year, CEO Carol Tomé said on a Q3 earnings call last week. The capacity reduction is the result of 45 operational closures, including nine full buildings that were shut down under the delivery giant’s “Network of the Future” plan, according to Tomé. The closures contributed to an 8% improvement in parcels per workforce hour. “While 8% might not seem like a big number, that translated into an efficiency gain of 11 million hours,” UPS EVP and CFO Brian Dykes said on the call.
UPS’ longer-term plan is to close around 200 U.S. facilities while more than tripling the number of automated buildings in its network, Nando Cesarone, EVP and president U.S. at UPS, said during the company’s March investor and analyst conference. Other major parcel carriers are also adjusting their networks to trim operating costs. FedEx continues to advance its “Network 2.0” initiative to combine its historically separate ground and express networks. The U.S. Postal Service plans to consolidate dropoff and pickup activities at rural post offices far away from its top processing plants.