Member Briefing November 6, 2023
US Factory Orders Rise 2.8% in September
New orders for U.S.-made goods increased more than expected in September, boosted by strong demand for computers and electronic products among others, but higher borrowing costs remain a challenge for manufacturing. Factory orders jumped 2.8% after rising 1.0% in August, the Commerce Department's Census Bureau said on Thursday. Economists polled by Reuters had forecast orders would increase 2.4%. Orders advanced 0.7% on a year-on-year basis in September.
Orders for computers and electronic products rose a solid 1.0%. Orders of electrical equipment, appliances and components gained 1.0%. Machinery orders increased 0.7%. Civilian aircraft orders rebounded 2.5%, while motor vehicle, parts and trailers orders climbed 0.6%. Shipments of manufactured goods rose 0.4%. Manufactured goods inventories increased 0.2%, while unfilled orders shot up 1.4%. The government also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 0.5% instead of 0.4% as reported in last month's estimate.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- U.S. and Israel Split Over Gaza Goals, Muddying War’s Endgame - WSJ
- Arab Leaders Press Blinken for Gaza Ceasefire After School Blasts – Reuters
- Obama Says, ‘Nobody’s Hands Are Clean’ Amid Israel-Hamas Conflict – The Hill
- Israel’s Quest to Identify Every Victim of Hamas Leaves Scientists Exhausted, Traumatized - WSJ
- Israel Steps Up Arrests in the West Bank in Wake of Hamas Attacks – WSJ
- Mike Johnson Defends House GOP’s Israel Aid Plan – Politico
- In a Worldwide War of Words, Russia, China and Iran Back Hamas - NYT
- Around the World, the Left is Tearing Itself Apart Over Israel - Politico
- The Gaza War Has Deepened Joe Biden’s Iran Nightmare – The Economist
- Israel-Hamas War in Gaza: What is the History of the Conflict? – Reuters
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukrainian Marines Almost Wasted Their First Batch Of French AMX-10RC Scout Vehicles. Now They’re Getting A Second Batch - Forbes
- A Deadly Strike on a Ukrainian Village Was an Inside Job. Who Tipped Off the Russians? - WSJ
- Ukraine Hits Russian Shipyard in Crimea Port, Damages Ship - Reuters
- U.S., European Officials Broach Topic of Peace Negotiations With Ukraine, Sources Say - NBC
- Ukraine’s Commander-in-Chief on the Breakthrough he Needs to Beat Russia – The Economist
- Ukrainians Face Grim Reality of a Prolonged War with Russia Amid Battlefield ‘Stalemate - CNN
- Ukraine Orders Investigation Into Russian Attack on Assault Brigade - Reuters
- 'People are Resisting': Russian Journalist Elena Kostyuchenko on Ukraine, Putin and Being Poisoned – France 24
- 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
Worker Productivity Grew in Q3
Nonfarm labor productivity, which measures output per hour worked, surged in Q3, growing at a 4.7% annualized rate from the second quarter (chart). This gain came on the heels of another strong reading of 3.6% in Q2. Smoothing through the quarterly noise, labor productivity has risen 2.2% over the past year and has grown at an 1.4% average annualized pace since the end of 2019. For context, labor productivity expanded at a 1.5% average annual pace during the 2007-2019 business cycle.
Productivity growth is the key ingredient that drives rising living standards over time. As workers generate more goods and services from the same amount of hours worked, this leads to more aggregate income and higher real wages over the long-run. Furthermore, productivity growth plays an important role in assessing underlying inflation dynamics. Unit labor costs measure how much a business pays its workers to produce one unit of output. If compensation is rising rapidly but so is the output produced by these workers, rapid wage growth may not necessarily be inflationary. But if compensation cost growth is outpacing output growth, this can put upward pressure on inflation, all else equal.
Sharp U.S. Hiring Slowdown Signals Cooling Economy Ahead
Job growth slowed sharply last month, a sign the U.S. economy is cooling this fall after a torrid summer. Employers added 150,000 jobs in October, half the prior month’s gain and the smallest monthly increase since June, the Labor Department said Friday. The unemployment rate rose to 3.9%, up a half-point since April, and wage growth slowed. The report suggests a downshift in the labor market that outperformed expectations most of this year. Job gains in August and September were revised down by 101,000. Average hourly earnings rose 4.1% from a year ago, down from 4.3% in September. Wage gains have been slowing since March 2022, when annual raises were near 6%. The number of Americans working or looking for work fell slightly in October for the first time since April.
The unemployment rate rose last month above 3.8%. If sustained, a hiring pullback is likely to bring the Federal Reserve’s historic interest-rate increases to an end by providing stronger evidence that higher borrowing costs have slowed the economy. The report could also mollify concerns that brisk consumer spending this summer would lead hiring or wages to reaccelerate.
COVID Update – Pandemic has Caused ‘Collective Trauma’ Among US Adults, New Poll Says
The American Psychological Association (APA), headquartered in Washington, D.C., has released the results of Stress in America 2023, its nationwide survey that polled more than 3,185 U.S. adults about their physical and mental well-being. Adults between the ages of 35 and 44 reported the highest spike in chronic health conditions since the pandemic, rising from 48% in 2019 to 58% in 2023, according to an APA press release. That age group also saw the biggest increase in mental heath illnesses, led by anxiety and depression, rising from 31% in 2019 to 45% in 2023. Even so, adults between 18 and 34 years old still had the highest rate of mental illness, at 50% in 2023.
"Although we appear to be back to normal since the COVID-19 pandemic, Americans are experiencing greater levels of stress and reporting higher levels of physical and mental health challenges," said Arthur C. Evans Jr., PhD, APA’s chief executive officer, in a statement to Fox News Digital. He added, "The survey shows that the nation continues to experience psychological distress post-COVID. The loss of more than one million Americans and massive disruptions in our workplaces, schools and the broader culture have taken their toll on the mental health of many."
NYS COVID Update
The Governor updated COVID data for the week ending November 3rd.
Deaths:
- Weekly: 72
- Total Reported to CDC: 80,862
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,169
- Average Daily Patients in ICU Statewide: No Data
7 Day Average Cases per 100K population
- 7.3 positive cases per 100,00 population, Statewide
- 7.7 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
NYS “Quick Start” Budget Process Begins With Comptrollers Estimates of Revenue and Spending
State Comptroller DiNapoli released a report detailing estimates of State revenue and spending for the current and next two State fiscal years. This report is part of the “Quick Start” budget process established in State Finance Law to promote timely analysis and discussion of the State’s economic condition and the State Budget. The Office of the State Comptroller (OSC) estimates that the State’s tax revenues in All Funds will decline by 8.4 percent, or $9.4 billion, in SFY 2023-24 from the previous year.
Tax revenues are then projected to increase in SFY 2024-25 by 2.7 percent, with continued growth of 3.2 percent in SFY 2025-26. OSC’s comparisons to the Division of the Budget’s (DOB) projections in this report are based on DOB’s projections from the Mid-Year Update to the FY 2024 Enacted Budget Financial Plan (“Mid-Year Update”) issued October 30, 2023. OSC’s projections for All Funds tax receipts are $322 million higher than estimates from DOB for SFY 2023-24, $384 million lower in SFY 2024- 25 and $330 million lower in SFY 2025-26. Projections for total All Funds receipts, which include tax receipts, miscellaneous receipts and federal grants, are similarly lower.
Read more at at the Comptroller’s website
NYS Has Never Removed Special Paid Sick Time Provisions for COVID, Businesses are Paying Out Millions
The long tail of COVID is still dogging businesses, especially in New York state. We’ve all seen stories about how post-COVID, employers are scrambling to fill vacancies and keep employees on board. But in New York, business operators have an additional challenge. The Empire State, unlike others, continues to maintain a pandemic-era law that essentially mandates an additional minimum of five days of paid sick leave a year specifically for COVID cases. That’s on top of the five paid sick day mandate that was put in place in 2020, just as the pandemic was reaching its zenith.
Frank Kerbein, director of the Center for Human Resources at the Business Council of New York State, said a large nonprofit health care organization in the Buffalo area has paid out more than $1 million worth of COVID sick time since 2020. These costs haven’t gone unnoticed. “We are now three years past it,” said Assemblyman John McDonald, a Cohoes Democrat, who in addition to serving as an assemblyman, has operated a family-owned drug store. “From my perspective it’s time,” he said. McDonald pointed out that when COVID-19 first erupted, there was no vaccine, and no good way to treat the virus. The AFL-CIO, New York’s umbrella organization for labor unions, opposes the plan to even study the issue.
UAW’s Victorious Shawn Fain Eyes Expanding Ranks to Nonunionized Carmakers
A fight between union leader Shawn Fain and billionaire Elon Musk would be epic. But Fain, the factory worker who rose to the top of the United Auto Workers, has to first persuade the hourly employees at Tesla that his fight is worth taking up. The prospect of the UAW trying to organize the world’s most valuable automaker and other nonunionized carmakers in the U.S. follows the union’s winning record contracts with General Motors, Ford Motor and Chrysler-parent Stellantis last month.
At companies such as Tesla, Toyota, Honda, Volkswagen or Nissan, he would be counting on workers to stick out their necks in tussles with companies that hold a lot of power to squash such efforts—and, in some cases, a history of vigorously fighting back. On the heels of the UAW deals, for example, Toyota announced this week that most of its U.S. factory workers would get a 9% pay increase, bringing their pay closer in line to unionized rivals’ hourly rates.
The Squeeze at the Panama Canal is Getting Tighter
Panama Canal officials will cut available slots for ship transits by half this winter as extreme drought leaves the man-made waterway lacking enough water. The changes come after Panama Canal experienced its driest October on record, continuing a monthslong spell of warmer temperatures and low rainfall. Officials have already restricted traffic on the waterway, which handles around 7% of global seaborne trade. The canal administration said daily reservation slots will be cut to 25 this month, 22 in December, 20 in January and 18 in February. Last month the canal had 32 daily transits. The waterway can normally handle an average of 40 transits a day.
Rainfall levels are down by about a third this year compared with last year, reducing the water level of Gatun Lake, the artificial reservoir that feeds the canal’s locks, to unprecedented low levels. The lake is necessary for ship transits and supplies fresh water to half of the country’s population, or about two million people. Authorities say about 98 vessels are waiting to cross at both sides of the canal, which connects the Pacific and Atlantic oceans.The canal opened to traffic in 1914.
IRS Announces 401(k) Contribution Limits for 2024
The Internal Revenue Service announced last week that it will increase the individual 401(k) contribution limit to $23,000 from a limit of $22,500 in 2023, in line with expectations. At 2.22%, the increase is smaller than last year’s record-breaking increase of 9.8%. The increase applies to participants in 401(k), 403(b) and most 457 plans as well as the federal government’s Thrift Savings Plan.
The IRA also increased the limit on contributions to individual retirement accounts by $500 to $7,000 for 2024 but held the IRA catch-up contribution limit for individuals over age 50 to $1,000. Similarly, the 401(k), 403(b) and 457 catch-up contribution limit for employees over 50 remains unchanged at $7,500. The amount individuals can contribute to SIMPLE retirement accounts increases to $16,000 from $15,500. The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2024.
Offshore Wind Industry Hit by Soaring Costs, Threatening Projects
The cancellation of two large offshore wind projects in New Jersey is the latest in a series of setbacks for the nascent U.S. offshore wind industry, jeopardizing the Biden administration’s goals of powering 10 million homes from towering ocean-based turbines by 2030 and establishing a carbon-free electric grid five years later. The Danish wind energy developer Ørsted said this week it’s scrapping its Ocean Wind I and II projects off southern New Jersey due to problems with supply chains, higher interest rates and a failure to obtain the amount of tax credits the company wanted. Together, the projects were supposed to deliver over 2.2 gigawatts of power.
The news comes after developers in New England canceled power contacts for three projects that would have provided another 3.2 gigawatts of wind power to Massachusetts and Connecticut. They said their projects were no longer financially feasible. In total, the cancellations equate to nearly one-fifth of President Joe Biden’s goal of 30 gigawatts of offshore wind power by 2030. Meanwhile NYSERDA is considering re-opening the RFP for the offshore wind farm near Long Island.
Bank of England Leaves Interest Rates at 15-Year High
The Bank of England on Thursday left interest rates unchanged, but said monetary policy will likely need to stay tight for an “extended period of time.” The Monetary Policy Committee voted 6-3 in favor of keeping the main bank rate at 5.25%, with three members preferring another 25 basis point hike to 5.5%. “The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for an extended period of time. Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures,” the MPC said in its Thursday statement.
Since the committee’s last projections in October, inflation has weakened to 6.7% but remains well above the central bank’s 2% target. Meanwhile, economic activity has softened considerably and the labor market has shown signs of loosening. Bank of England Governor Andrew Bailey said Thursday that despite the progress on inflation, “there is absolutely no room for complacency” and that it is “still too high.”
Ozempic Sales Up 58% As Drugmaker Novo Nordisk Nets Record Profits
Danish pharmaceutical giant Novo Nordisk reported the most robust quarterly profits and sales in its history Thursday, as Europe’s largest public company rides the surge in popularity of its weight loss and diabetes drugs to blockbuster results. Novo Nordisk primarily produces diabetes medications, including the injectable GLP-1 semaglutide drugs Wegovy and Ozempic, which have become particularly popular in the U.S. recently for their efficacy in promoting weight loss.
Ozempic and Wegovy brought in $4.8 billion of sales during the third quarter, and the drugs account for 52% of Novo Nordisk’s $23.6 billion of total revenue through 2023’s first nine months, up from a 36% share during the same period last year. Overall, Novo Nordisk reported $8.4 billion of total revenue and $3.2 billion of net income during the third quarter, topping respective analyst estimates of $8.2 billion and $3.1 billion, according to FactSet.
Apple Beats Estimates For Quarterly Profit, Sales Even As Annual Profits Slide
Apple beat projections for its top and bottom line performance during the three-month period ending September 30, as its $89.5 billion in total revenue and $1.47 earnings per share were above consensus analyst estimates of $89.3 billion and $1.39 respectively, according to FactSet. The company reported $67.2 billion of product sales ($67.9 billion forecasted), including $43.8 billion of iPhone sales ($43.8 billion forecasted), and $22.3 billion of revenues in its highly profitable services unit ($21.4 billion forecasted).
Though Apple’s quarterly sales were down nearly 6% year-over-year, thanks in part to a 34% decline in Macbook computer sales, its net income grew 11% annually to $23 billion. Apple said Thursday that it will pay quarterly dividends of $0.24 per share, in line with analyst estimates of $0.24, its same payout in the previous two quarters Apple declined to share specific financial guidance for 2023’s final quarter, as is typical, but analysts project $123.1 billion in sales during the period and $32.4 billion of net income, both of which would be the second-highest top and bottom line performances in Apple’s history, trailing only 2021’s last quarter
EV Transition, Cost Pressures Pose Risks for Auto Parts Suppliers
As the United Auto Workers (UAW) strike recedes into suppliers’ rearview mirror, auto-industry analysts are issuing a sobering picture for the outlook of both parts manufacturers and the makers of molds and tooling. Experts say plastic parts manufacturers need to work with OEMs to be sure there’s a place for them as the industry transitions from internal-combustion-engine (ICE) vehicles to electric vehicles (EVs).
“… you need to start talking to your customers above you, regarding what the anticipated volumes are going to be in the coming weeks and how fast things are going to ramp [up] — is to take time and say, ‘Hey, let’s sit down and talk about the EV in general, and how much of our mutual business is dependent on that,’ ”said Terry Onica, a supply chain expert and the director for automotive business for QAD, which offers manufacturing enterprise resource planning software. The UAW strike represents the latest disruption to hit the volatile auto industry. But it won’t be the last.
Read more at Plastics Manufacturing and Machining
DOD’s new AI and Data Strategy Gives Industry a Challenge: Share
The Pentagon’s new data, analytics, and AI adoption strategy focuses on data shareability, with the aim of better enabling all-domain command and control. But the biggest challenge, DOD’s chief digital and AI officer said, will be getting tech companies to work together instead of keeping their data to themselves. “How do we get our industrial partners to work with us in a way where they help us build out this open standard data layer and the data that they provide isn't locked up in a silo? That's going to be our biggest challenge,” Craig Martell told reporters last week.
The strategy conceives of a new way for the Defense Department to produce and handle its data. “To improve DOD data quality across the enterprise, the department will develop and implement a decentralized network among data providers and users,” as opposed to allow it to be centralized in a single office or allow different service components or combatant commands to hold onto whatever data they feel is theirs.