Member Briefing October 11, 2023
NFIB Small Business Optimism Index Declines Again in September
The NFIB Small Business Optimism Index fell to 90.8 in September from 91.3 in August. Optimism is up a bit from the low of 89 hit in April 2023, however over the past few months, the index has been hovering around levels not experienced since 2012 in the aftermath of the Great Recession. Ongoing pessimism on the part of small firms reflects a long list of challenges which include inflation, labor shortages, higher financing costs and reduced credit access.
Although some of these macroeconomic factors have improved this year, small firms do not appear to be convinced that the road ahead is clear of obstacles. The share of firms expecting the economy to improve over the next six months, which is still near a record low even after turning up in the summer, deteriorated for the second consecutive month in September. The business outlook deteriorated for the second straight month in September. The net percent of respondents expecting the economy to improve over the next six months fell to -43% from -37%. This is the lowest share since May and is an about-face from the more optimistic survey results seen in June and July.
War in Israel Headlines
- Israel and Hamas: The Latest News – CNBC
- 11 Americans Killed In Israel — And More 'Likely' Held Hostage, White House Says - Forbes
- Israel Readies for Ground War in Gaza - WSJ
- Hamas Military Unit Attacks Ashkelon After Setting Deadline for Citizens to Leave - CNBC
- Israel’s Hostage Crisis Deepens With Execution Threat - WSJ
- U.S. And International Airlines Halt Flights To Israel - Forbes
- France's Macron Says Iran Comments Praising Hamas Attack Unacceptable - Politico
- Hamas Militants Behind Israel Attack Raised Millions in Crypto - WSJ
- Israel and the West Reckon With a High-Tech Failure - Politico
- What's the Israel-Palestinian Conflict About? The Origin of Wars Explained - Reuters
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russian Logistics in Southern Ukraine Hampered by Adverse Weather, Ukrainian Defense Official Says - Yahoo
- Zelensky: Russia Wants to Trigger War in Middle East to ‘Undermine World Unity’ – The Hill
- The White House and Lawmakers Weigh Linking Ukraine and Israel Aid - NBC
- U.S. Probe of Russia-Sanctions Busting Focuses on Major Oil Trader - WSJ
- Russia Loses Bid To Regain Seat On UN Human Rights Council - NDTV
- Ukraine's Zelenskiy Hails 'Good News' on Air Defense After Talks in Romania – Reuters
- 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
A Closer Look at Manfuacturing in the BLS Jobs Report
Manufacturing employment rose by 17,000 in September, extending the gain of 11,000 in August and the fastest monthly increase since October 2022. Manufacturing growth has been more sluggish this year, adding just 37,000 workers through the first three quarters of 2023, but more importantly, there were 13,011,000 manufacturing workers in September, the most since November 2008. As such, total manufacturing employment has remained resilient despite a challenging economic environment in the sector.
Moreover, the average hourly earnings of production and nonsupervisory workers in manufacturing rose 0.3% to $26.63 in September, with 5.4% growth over the past 12 months. This continues to point to a solid overall labor market, with wages rising strongly despite signs that manufacturing hiring has softened year to date. In September, the largest increases in manufacturing employment occurred in transportation equipment (up 10,300, including 8,900 for motor vehicles and parts), plastics and rubber products (up 4,500), chemicals (up 2,600), food manufacturing (up 1,900) and paper and paper products (up 1,600).
August Manfuacturing Construction Spending Close to All Time High
Private manufacturing construction rose 1.2% from $195.54 billion in July to $197.95 billion in August. This was just shy of the record high in May, which was $199.73 billion. Private construction in the sector has trended sharply higher since bottoming out at $72.71 billion in September 2000. Over the past 12 months, activity has risen a whopping 65.9%. The data speak to the very sizable investments being made in the manufacturing sector, with firms strongly expanding their capacity in the United States. This should bode well for future growth in manufacturing in the U.S. moving forward.
At the same time, total private nonresidential construction spending increased 0.3% in August, with activity rising 19.7% over the past 12 months. In August, total private construction spending rose 0.5%, with private residential construction up 0.6% for the month. Private single-family and multifamily construction rose 1.7% and 0.6% in August, respectively. On a year-over-year basis, total private construction has risen 5.6% since August 2022, but with private residential activity down 3.1%. Private single-family residential construction has declined 10.6% over the past 12 months.
COVID Update - Updated Novavax Vaccine Shipped to Distributors, Available This Week
Vaccine maker Novavax Inc on Monday said it has shipped millions of doses its updated COVID-19 shots to distributors after receiving the go-ahead from U.S. regulators. The U.S. Food and Drug Administration authorized the updated vaccine last week for emergency use in individuals aged 12 years and older, but batches of the shots needed additional clearance from the FDA before they could be released. Novavax said it expects the shots to be available at U.S. pharmacies this week.
The Maryland-based company, whose protein-based shot uses a technology employed for decades to combat diseases, missed out on the pandemic vaccine windfall enjoyed by mRNA rivals due to manufacturing issues that delayed filing for approval when COVID was raging.
Speaker Race Has No Clear Favorite as GOP Tensions Rise
The race for the Speakership is wide open as House Republicans head into a high-stakes stretch this week. The House GOP conference Tuesday heard from its two declared candidates for Speaker: Majority Leader Steve Scalise (R-La.) and Judiciary Committee Chairman Jim Jordan (R-Ohio). Neither Jordan nor Scalise seemed to have a lock on the closed-door conference vote planned for Wednesday — leaving the House GOP without a clear path through the Speaker conundrum.
Few Republicans expect the process of choosing a new leader of the fractured conference — in the narrow House majority — to be a simple task, and many are uneasily eyeing a Nov. 17 government funding deadline. The war in Israel — which has killed at least 1,500 people, including 11 Americans — has greatly added to the pressure on lawmakers to install a new Speaker.
UAW Strike Update: GM, Stellantis, Ford All Lay Off More Workers
More Ford, General Motors, and Stellantis employees were told not to report to work this week as the UAW strike continues. Ford said 71 Livonia Transmission Plant employees were laid off, effective Monday. Meanwhile, Stellantis has laid off 520 people at the Trenton Engine Complex in Michigan and 50 at the Kokomo Casting plant in Indiana. GM has also laid off 200 more workers.
An economic assessment of the strike against automakers by Anderson Economic Group finds the labor dispute has cost the industry $5.5 billion. That includes $579 million in lost wages for workers and $2.6 billion in losses for automakers.
Treasury Yields Fall as Investors Seek Safe Havens Amid Israel-Hamas Conflict
U.S. Treasury yields fell on Tuesday as trading resumed after Columbus Day, with investors pouring into government bonds as they weighed the potential geopolitical and economic impact of the Israel-Hamas war. The 2-year Treasury yield was down by about 11 basis points to 4.961%. The 10-year Treasury yield was last more than 13 basis points lower at 4.651%. Yields and prices move in opposite directions. One basis point equals 0.01%.
Concerns about the implications of the Israel-Hamas conflict continued on Tuesday, leading investors towards Treasury yields, which are traditionally seen as safer investments. Yield prices have declined as a result. Elsewhere, Federal Reserve officials on Monday gave hints about the outlook for interest rates. The odds of another rate hike from the Federal Reserve in November is falling, according to the CME FedWatch Tool.
Shipping Rates are Sinking
Daily market prices to move cargo from Asia to the U.S. and Europe in September were down as much as 90% from early 2022, extending a downturn that began in the second half of last year. The steep decline is leading carriers to cancel sailings in bigger numbers during a period when operators and their customers are usually rushing to push goods through supply chains.
Capacity cuts helped pump up rates a bit in August, but prices have faded more recently and more cancellations are planned this month following China’s Golden Week holiday. There is little relief on the horizon. Wholesale inventories have been ticking down in recent months but are well above prepandemic levels, a sign that goods orders may remain depressed for some time.
IBM CEO: Washington Should Hold Tech Firms Accountable for AI
Washington should hold companies that develop AI — and those that use it improperly — liable for harms caused by the technology, IBM CEO Arvind Krishna said in an interview.With AI regulation a hot topic in Washington, his position puts IBM — among the largest tech firms and a longtime Washington player — at odds with others in the industry who are pushing for a light regulatory touch.
“Two thousand years of economic history have shown us that if you are legally liable for what you create, it tends to create a lot more accountability,” he said in an interview with POLITICO Tech. Krishna argues that AI should not follow the example of social media, where sweeping legal protections established at the dawn of the internet continue to inoculate companies from legal liability. Instead, he said, AI companies will be more likely to create safer systems that abide by existing laws, such as copyright and intellectual property, if violators could find themselves in court.
Former Walmart CEO: Consumers Starting to Buckle for First Time in a Decade
As three of the nation’s biggest retailers kick off a key sales week, former Walmart U.S. CEO Bill Simon warns consumers are starting to buckle for the first time in a decade. He’s blaming a list of headwinds weighing on consumers including inflation, higher interest rates, federal budget wrangling, polarized politics and student loan repayments — and now new global tensions connected to violence in Israel.
“That sort of pileup wears on the consumer and makes them wary,” the former Walmart U.S. CEO told CNBC’s “Fast Money” on Monday. “For the first time in a long time, there’s a reason for the consumer to pause.” The timing comes as Amazon begins its two-day Prime Big Deal Days sale on Tuesday. Walmart and Target are trying to compete with their own sales events to get an early jump on the holiday- shopping season.
Boeing’s 737 MAX Output Falls to Lowest Level in Two Years
Deliveries of 737 MAX jets to customers fell in September to the lowest level in more than two years. Meanwhile, production of the more than $100 million jet—which accounts for the bulk of its output—is running at about half the company’s target. The company’s operations have been disrupted this year by a series of snafus at one of Boeing’s key suppliers. On Tuesday, Boeing said it delivered 15 new 737 jets to the world’s airlines in September, the smallest number since shipping out 11 in May of 2021.
In August, Boeing discovered the manufacturing defect in the rear of 737 fuselages supplied by Spirit AeroSystems. Fixing the issue requires inspecting and correcting misdrilled fastener holes in a key structural part. Last week, Spirit replaced its chief executive. Boeing executives have said that deliveries would slow but that they still expected to meet their targets for the full year. Boeing said earlier this year it was moving to complete an average of 38 new 737s a month. It made 22 in September, according to data from Aero Analysis Partners/AIR, a research firm.
Hochul Signs Law on Intellectual Property Provisions in Employment Agreements
On Sept. 15, 2023, New York State Gov. Kathy Hochul signed an amendment to a New York Labor Law that would invalidate certain intellectual property provisions in employment agreements, effective immediately. Under this amendment, Section 203-f, any provision in an employment agreement that requires employees to assign the rights to inventions to their employer will now be unenforceable if the invention was developed by the employee using the employee’s own property and time.
Employers should be aware of two important exceptions in Section 203-f that limit its reach and provide additional safeguards to companies. Specifically, employment agreement provisions requiring an employee to assign their rights to an invention will not apply to inventions that: (A) relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (B) result from any work performed by the employee for the employer.
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US Army Awards $1.5B to Boost Global Production of Artillery Rounds
The U.S. Army said it awarded $1.5 billion in contracts to nine companies in the U.S., Canada, India and Poland to boost global production of 155mm artillery rounds.Over the last two weeks in September, the service finalized a flurry of contracts that “resourced each major component, material or required production process to maintain momentum for the goal of 80,000 projectiles per month by the fourth quarter of fiscal 2025,” it said in an Oct. 6 statement.
Army officials have recently stated that 155mm artillery munition production will increase to 28,000 per month in October, which is double what the Army was producing at the start of the year. The plan is to build roughly 60,000 a month in FY24, reaching 80,000 by FY25. By FY26, the plan is to build 100,000 a month. The Army has sent more than 2 million 155mm rounds to Ukraine as that country fights off the Russian invasion which began in February 2022 ,and is working to replenish its stockpile.