Member Briefing October 30, 2024

Posted By: Harold King Daily Briefing,

Top Story

JOLTs Report: Job Openings Drop To 7.44 Million, August Numbers Revised Lower

The number of job openings on the last business day of September stood at 7.44 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This reading followed the 7.86 million (revised from 8.4 million) recorded in August and came in below the market expectation of 7.99 million. Over the month, hires changed little at 5.6 million. The number of total separations was unchanged at 5.2 million. Within separations, quits (3.1 million) and layoffs and discharges (1.8 million) also changed little.

On net, the JOLTS report demonstrates that despite solid payroll gains in September, demand for labor continues to moderate. The number of job openings per unemployed person, an indicator cited by monetary policymakers when assessing labor market supply and demand imbalances, was unchanged in September at 1.1. Presently, the ratio signals a still-strong labor market with more open positions than unemployed workers even as the measure has nearly halved from its recent peak. Yet, its slip is reflected in workers having become less confident in the prospects of finding work.

Read More at Wells Fargo


Deficit Threat Drives Bond Yields Higher

The prospect of a rising federal budget deficit is fueling a sharp climb in bond yields, with investors betting a challenging fiscal situation will only get worse after the election. Treasury yields, which rise when bond prices fall, jumped Monday after a $69 billion government auction of 2-year notes attracted tepid demand from investors. That marked the latest leg in a weekslong bond-market selloff that began after a run of strong economic data undercut bets on rate cuts from the Federal Reserve.

Most investors expect the budget deficit to remain elevated no matter who wins in next week’s elections, with the cost of spending programs such as Medicare and Social Security climbing faster than federal revenues. The yield on the benchmark 10-year U.S. Treasury note settled Monday at 4.277%, up around 0.26 percentage point since Oct. 16, according to Tradeweb. The 2-year yield has increased a more modest 0.21 percentage point over that period. Estimates of the 10-year term premium have also ticked higher. Deficits typically grab the attention of investors when there is a major shift in the fiscal outlook, as can often happen around an election.

Read More at The WSJ


US Goods Trade Deficit Surges To 2-1/2-Year High On Jump In Imports

The U.S. trade deficit in goods widened to a 2-1/2-year high in September amid a surge in imports, prompting some economists to trim their economic growth estimates for the third quarter. Nonetheless, the jump in imports reported by the Commerce Department on Tuesday was likely a sign of strong domestic demand, with consumer spending expected to have been the main driver of growth last quarter. The goods trade gap increased 14.9% to $108.2 billion last month, the highest level since March 2022, the Commerce Department's Bureau of Economic Analysis said.

Imports of goods rose 3.8% to $282.4 billion, also the highest level in 2-1/2 years, likely as businesses stockpiled goods in anticipation of a dockworkers strike, which was short-lived. They were boosted by a 5.8% surge in imports of consumer goods. Foods imports increased 4.6%.Imports of capital goods rose 3.1%, which should bode well for business spending on equipment. There were also solid increases in imports of industrial supplies, which include petroleum, as well as motor vehicles, engines and parts. Most of the imports ended up as inventories at retailers, which should limit the hit on trade. The economy likely grew at a brisk 3.0% annualized rate last quarter, a Reuters survey of economists showed, matching the second quarter's pace.

Read More at Reuters


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Policy and Politics

Owners Of Ship That Slammed Into Key Bridge Settle With DOJ For $102M

The U.S. Justice Department has reached a settlement with the owners of the cargo ship that crashed into and destroyed the Francis Scott Key Bridge in Baltimore on March 26, according to an Oct. 24 news release. Singapore-based companies Grace Ocean Private Limited and Synergy Marine Private Limited agreed to pay $101.98 million to resolve the civil claim brought by the U.S. government to recoup costs from the bridge’s collapse.

The settlement resolves the U.S.’s claim for civil damages of $103 million under the Rivers and Harbors Act, Oil Pollution Act and general maritime law, per the release. The money will go to the U.S. Treasury and to the budgets of federal agencies directly impacted by the collapse or involved in the response. Although Grace Ocean and Synergy Marine agreed to the settlement, the companies reject liability for the event, said Darrell Wilson, a spokesperson from MTI Network, a London-based public relations firm that represents the firms. “The settlement strictly covers costs related to clearing the channel, which we would have been responsible for in any case, and is not indicative of any liability, which we expressly reject for the incident that led to the collapse of the Francis Scott Key Bridge,” said a statement Wilson shared with Construction Dive.

Read more at Supply Chain Dive


Dry Conditions, Brush Fires Prompt County Execs Issue Burn Ban Orders

Orange County Executive Steven Neuhaus and Putnam County Executive Kevin Byrne have declared burn bans because of the lack of rain resulting in extremely dry conditions leading to brush and forest fires. Because of the severely dry conditions that have caused an increased risk of wildfires, the two executives have declared states of emergency and placed temporary bans on all outdoor burning of all materials. According to the National Weather Service, Westchester and Rockland counties have not seen rain since Oct. 7, one of the longest streaks of dry weather in Lower Hudson Valley history. Monday, Oct. 7, only saw 0.03 inches of rain, while the area typically sees at least three to four inches of rain during the month.

All outdoor burning of any material including yard waste, household paper products, bonfires, campfires, warming fires, outdoor fireplaces, outdoor chimneys and any cooking fires and any cooking fires unless authorized by the State Department of Environmental Conservation. Outdoor exceptions include outdoor cooking for food exclusively within a contained gas or charcoal grill; any firefighting training; and any burn operations approved by the DEC.

Read More at Mid-Hudson News


U.S. Finalizes China Tech Investment Ban Targeting AI, Chips

The United States has finalised rules that limit investments in critical technology sectors in China such as artificial intelligence on national security grounds, the Treasury Department has announced. The restrictions will bar US citizens and permanent residents, as well as US-based companies, from engaging in transactions involving technologies including AI, semiconductors and quantum computing, the Treasury said in a statement on Monday.

The curbs, which are due to take effect on January 2, will ensure “US investment is not exploited to advance the development of key technologies by those who may use them to threaten our national security,” said Paul Rosen, the assistant secretary of the Treasury for Investment Security. China’s Ministry of Foreign Affairs slammed Biden’s executive order as an attempt to “engage in anti-globalization and de-sinicization”.

Read more at Bloomberg


Health and Wellness

Scientists Identify Six Novel Genes Linked To Cancer Risk

Scientists at deCODE genetics/Amgen, and their collaborators have discovered six novel genes with rare germline variants that associate with cancer risk. The findings are published today in Nature Genetics under the title "Gene-based burden tests of rare germline variants identify six cancer susceptibility genes." A subset of cancers arises in individuals who are born with rare sequence variants that significantly alter their cancer risk. The discovery of such variants, like those in the BRCA1- and BRCA2 genes, has led to improved early cancer detection and the development of targeted therapies, ultimately reducing the cancer burden and improving prognosis of those carrying these mutations.

In this study, the scientists analyzed three large genetic datasets from individuals of European descent, including 130,991 cancer patients and 733,486 controls. Through a gene-based burden association analysis across 22 different cancer types, they found four novel genes associated with a risk of developing cancer; the pro-apoptotic BIK for prostate cancer, the autophagy involved ATG12 for colorectal cancer, TG for thyroid cancer, and CMTR2 for both lung cancer and cutaneous melanoma.

Read more at Medical Express



Election 2024

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Industry News

Port Labor Talks May Hinge on Presidential Election Results

Negotiators hoping to strike a labor deal at U.S. ports are paying close attention to the election calendar. Unionized dockworkers and employers at U.S. East Coast and Gulf Coast ports set their first bargaining since a recent strike for the period after a presidential election that could scramble the dynamics in negotiations. The bargaining will begin after the Biden administration played a crucial role in getting employers to agree to a 62% wage increase for longshore workers over six years. The two sides have tough negotiations ahead, with automation on the agenda and shipping companies looking to gain productivity improvements to offset higher labor costs.

The sides face a mid-January deadline to reach a full contract agreement and avoid a potential repeat of the walkout that hit ports earlier this month. The current extension of their labor deal expires just days before the inauguration of a new president, which could bring steep changes in labor policy across the U.S. The government has some leverage with ship operators who sit on the employers’ negotiating board, including sway over military contracts and regulatory oversight. And shipping officials believe Republican former President Donald Trump wouldn’t be as forceful in backing the union’s positions.

Read more at The WSJ


Workers Launch Strikes As Germany Frets Over Industrial Future

Thousands of German workers launched nationwide strikes to press for higher wages on Tuesday, compounding woes of companies worried about staying globally competitive as high costs, weak exports and foreign rivals chip away at their strengths. The strikes by unionised workers in the nearly 4-million strong electrical engineering and metal industries hit companies such as Porsche AG, BMW and Mercedes. Also this week, car giant Volkswagen could announce shutting three plants on home soil for the first time in its 87-year history, as well as mass layoffs and 10% wage cuts for workers who keep their jobs.

A worsening business outlook in Europe's largest economy has piled pressure on Chancellor Olaf Scholz's rickety coalition government, which could be on the verge of collapse ahead of federal elections next year as policy cracks widen. Germany has a long history of so-called "warning strikes" during wage negotiations, but they come at a time of employers' deepening concerns about the future. A leading business group said a survey of companies pointed to Germany experiencing another year of economic contraction in 2024 and no prospect of growth next year.

Read more at Reuters


Clean Power Jobs Surge Forward

The 2024 U.S. Energy and Employment Report (USEER) shows that the energy workforce added over 250,000 jobs in 2023 and 56% of those were in clean energy. Employment in wind, solar, nuclear and battery storage industries increased by 4.2% in 2023, up from a rise of 3.9% in 2022, and above the overall 2023 US job growth rate of 2%.Last year, clean energy jobs grew in all 50 states and the District of Columbia. Idaho had the fastest clean energy job growth rate, up 7.7%, followed by Texas at 6%, and New Mexico at 5.9%.

The energy jobs boom has accelerated since the Biden administration signed the Inflation Reduction act in 2022. Construction is also ramping up in many parts of the country, as the energy industry works to meet this growth.

Read more at Engie


Pentagon Runs Low on Air-Defense Missiles as Demand Surges

The U.S. is running low on some types of air-defense missiles, raising questions about the Pentagon’s readiness to respond to the continuing wars in the Middle East and Europe and a potential conflict in the Pacific. Interceptors are fast becoming the most sought-after ordnance during the widening crisis in the Middle East, as Israel and other U.S. allies face an increasing threat from missiles and drones fired by Iran and the militias it supports. Standard Missiles, which are usually ship-launched and come in various types, are among the most common interceptors the U.S. has used to defend Israeli territory from Iranian missile attacks, and are critical for stopping Houthi attacks on Western ships in the Red Sea. The U.S. has launched more than 100 Standard Missiles since Hamas’s October 2023 attack on Israel, the U.S. officials said.

Increasing production of weapons has proved difficult for the Pentagon, since it often requires that companies open new production lines, expand facilities and hire additional workers. Companies are often reluctant to invest in that expansion without knowing that the Pentagon is committing to buying at increased levels over the long term.

Read more at The WSJ


Deteriorating Office Loans Stress US Regional Banks' CRE Portfolios

U.S. regional banks continue to grapple with pressures in their office loan books as remote work stays prevalent, but rate cuts may provide some relief by easing the strain on other commercial real estate (CRE) segments, analysts said. Nearly a dozen mid-sized and regional U.S. banks reported higher non-performing loans (NPLs) — debt where borrowers missed scheduled payments — in their CRE portfolios in the third quarter compared with a year earlier, a Reuters analysis of earnings reports showed.

A looming "maturity wall" could complicate matters further. When loans mature, borrowers must either refinance or repay the remaining balance in full. Failure to do so could lead to defaults and strain banks' balance sheets. Roughly $950 billion of CRE mortgages are expected to mature in 2024, of which 10% are tied to office properties, according to estimates from S&P Global Market Intelligence. Banks may extend loan terms to delay recognizing the impairment, but such "extend-and-pretend" strategies pose risks to the broader financial system, according to a paper released last week by the Federal Reserve Bank of New York.

Read more at Reuters


Rare Good News for Boeing LATAM Places Big Dreamliner Order

Boeing reported some welcome news regarding aircraft orders, with LATAM Airlines Group buying 10 new 787-9 Dreamliners and booking options for five more 787 as part of the fleet expansion plan for the regional carrier. LATAM is one of the largest airline groups in South America, with domestic service in Brazil, Chile, Colombia, Ecuador, and Peru, and international routes throughout Latin America and to Europe, the U.S., the Caribbean, Oceania, and Africa.

Neither Boeing nor the customer reported the value of the new orders nor the delivery schedule. Based on list prices, the new purchase could be worth more than $3.7 billion if all the options are exercised. The 787 Dreamliner is a long-range aircraft with carrying capacity for 210 to 330 passengers and developed to achieve greater fuel-efficiency for long-range service (7,565 nautical miles / 14,010km.) Boeing claims that the 787 consumes 25% less fuel and creates 25% fewer emissions than the aircraft they replace. At the present time LATAM operates 37 Dreamliners, including both 787-8 and 787-9 models. It ordered five 787 Dreamliners less than one year ago. Counting the latest order, LATAM is on track to have 52 787 Dreamliners in service by 2030.

Read more at American Machinst


3M Puts R&D At The Forefront In New Budget Priorities

3M plans to shift its capital spending within its operating budget to fund upgrades for research and development facilities, part of an effort to rapidly scale products from lab to manufacturing, CEO Bill Brown said in an Oct. 22 Q3 earnings call. The chemical titan will move about 100 people within its R&D team to focus on new product development, including employees who are no longer working on PFAS-related projects as the company exits the segment, Brown said.

3M will also hire 50 engineers in Q4 to prioritize focus areas such as specialty materials and films for the automotive, aerospace, electronics and semiconductor markets. About a decade ago, 3M at one point created over 1,000 new products, Brown said in the Q2 call. Now, it takes a year or so for the chemical maker to develop and commercialize launch a new product, Brown said in the Q3 call. The CEO is aiming to turn that around.

Read more at Manufacturing Dive


At JFK, Preparations Under Way For ‘Super Plane Tug’

In the United States, an airplane taking off from an airport needs to move itself from the terminal gate to its assigned takeoff runway. But that doesn’t have to be the case. At some airports in India, and soon in Amsterdam, a remote-controlled tug tows planes to and from runways without the plane expending expensive and powerful jet fuel just to move a few hundred feet on the ground.

That could also happen for the first time in this country at John F. Kennedy International Airport (JFK), where the Port Authority of New York and New Jersey is working with Delta Airlines to gain federal approval to test a semi-autonomous plane tug that would be connected to a narrow-body Boeing or Airbus plane and remotely controlled by the plane’s pilot. For several months, the Port Authority and Delta have trained staff to use a TaxiBot, short for taxiing robot, to help reduce the use of jet fuel and its accompanying carbon emissions to pull planes to and from runways.

Read more at The American Journal of Transportation