Member Briefing October 4, 2023
JOLTS – US Job Openings Unexpectedly Grew in August, Quit Rate Declines
The number of job openings at US employers unexpectedly surged in August, a testament to the continued strength of the labor market, according to new data released Tuesday by the Bureau of Labor Statistics. There were an estimated 9.61 million open jobs in August, according to seasonally adjusted data from the BLS’ latest monthly Job Openings and Labor Turnover Survey (JOLTS) report. That’s up from July’s upwardly revised estimate of 8.92 million openings. Other data in the JOLTS report showed:
- Hiring dropped 167,000 to 5.773 million, the lowest level since January 2021. The hires rate fell to 3.7%, the lowest since April 2020, from 3.8% in June.
- Resignations decreased 253,000 to 3.549 million, the lowest level since February 2021. The decline was concentrated in the accommodation and food services industry. There were also decreases in wholesale trade, transportation, warehousing and utilities as well as education and health services, and finance.
- Job openings, a measure of labor demand, were down 338,000 to 8.827 million on the last day of July, the lowest level since March 2021. Economists polled by Reuters had forecast 9.465 million job openings.
- Layoffs and discharges were little changed at 1.555 million.
- The quits rate, viewed as a measure of labor market confidence, fell to 2.3%. That was the lowest reading since January 2021 and was down from 2.4% in June.
- War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- A Soldier’s On-the-Ground View of a Costly Battle to Retake Bakhmut - WSJ
- Russia Says No New Mobilization Planned, Claims 335,000 Entered Military Service This Year Alone - CNBC
- Biden’s Reference to a Deal with McCarthy on Ukraine Funding Creates Confusion - CNN
- Russian Rouble Tumbles Again, Exceeding 100 to the US Dollar – EuroNews
- EU Set to Announce Ukraine Accession Talks by December - Politico
- A Deal to Expedite Grain Exports Has Been Reached Between Ukraine, Poland and Lithuania - AP
- House Braces for Fight Over Ukraine Aid Amid Other Funding Priorities – The Hill
- 'Historic' Meeting of EU Foreign Ministers in Kyiv to Support Ukraine as Allies Show Signs of Strain - EuroNews
- 'They're Just Meat': Russia Deploys Punishment Battalions in Echo of Stalin - 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
Manufacturing and Single-Family Outlays Propel Construction Spending Higher
U.S. construction spending increased in August, lifted by outlays on single- and multi-family housing, though mortgage rates at nearly 23-year highs could slow momentum. The Commerce Department said on Monday that construction spending rose 0.5%. Data for July was revised higher to show construction spending advancing 0.9% instead of 0.7% as previously reported. The increase in spending in August was in line with economists' expectations. A dearth of homes available for sale is fueling new construction, but higher mortgage rates pose a challenge. The rate on the popular 30-year fixed mortgage averaged. 7.31% last week, the highest since December 2000, from 7.19% the prior week, according to data from mortgage finance agency Freddie Mac.
Spending on private non-residential structures like factories climbed 0.3% in August. Spending on manufacturing construction projects shot up 1.2%. Efforts by the Biden administration to bring semiconductor manufacturing back to the United States are boosting factory construction.
Growing Disregard for Trade Rules Shows World is Fragmenting, Puts WTO in Crisis
Nothing illustrates the crisis at the World Trade Organization more than the piling up of unresolved disputes and the growing list of what it terms the "trade concerns" of its members. Since late 2019, after the U.S. blocked the appointment of new judges to the WTO's Appellate Body due to complaints over judicial overreach, 29 cases have been left in limbo, delivering a heavy blow to the dispute settlement system. Those depositing cases include China, Dominican Republic, India, Indonesia, Morocco, Pakistan, South Korea and the United States.
The WTO has warned a "polycrisis" of pandemic, war in Ukraine and inflation is sapping faith in globalisation. The result is a growing disregard for global trading rules among WTO members. Last month it warned that a surge of unilateral measures, if unchecked, would fragment the world economy, stripping 5% of global income. Export curbs averaged 21 per year between 2016 and 2019, but rose to 139 last year. U.S. local content requirements are also set to be raised under the Buy American Act, while the European Union, which still preaches adherence to WTO rules, has subsidies and targets to boost home supply of critical minerals and green production. Keith Rockwell, senior fellow at the Hinrich Foundation, says the WTO is "teetering on the abyss of irrelevance".
COVID Update - Free COVID Tests Start Arriving Today – But They May Look Expired
The United States Postal Service might have a special delivery for you today. The agency started delivering free at-home COVID-19 test kits in mailboxes and at doorsteps Monday. People who ordered their allotment just after the website relaunched last week received tracking information Monday morning alerting them the delivery was on the way. Each package contains four tests plus an information card on the test kits’ expiration dates.
That’s because the tests being sent out may be past their originally designated best-by date. But the Food and Drug Administration says these tests aren’t actually expired. You can see if any COVID tests you have are approved for an extended shelf life on the FDA’s website. It’s important to pay attention to tests’ expiration dates because they may break down over time, which risks providing inaccurate results.
New Required Reporting on PFAS Will be Daunting for Manufacturers
A myriad of factors resulted in an announcement by the EPA on Sept. 29 that manufacturers are now required to report on the presence of 1,462 PFAS chemicals in their processes and products. And this reporting will need to go back 12 years. Information related to chemical identity, uses, volumes made and processed, byproducts, environmental and health effects, worker exposure, and disposal needs to be reported. Specifically, these changes are being made to the Toxic Substances Control Act (TSCA) in Section 8 (a) (7) Reporting and Recordkeeping Requirements for PFAS chemicals.
The timeline for manufacturers to comply with this final rule is 18 months, with an additional six months for reports from small businesses that are solely reporting data on importing PFAS contained in products. That timeframe is particularly quick given the very complex nature of PFAS as they are spread out far and wide in most companies’ supply chains and serve a variety of function. The new PFAS regulation is a perfect example of the current complexity of compliance, and perhaps a blueprint for the future. The final ruling covers 1,400 substances, which is around 100 more chemicals than were first discussed in the proposed rule two years ago.
Ford, GM Lay Off More Factory Workers Amid UAW Strike. This Isn’t Ending Soon.
General Motors and Ford Motor, two of the three car makers targeted by United Auto Worker strikes, announced more furloughs for workers at plants that haven’t directly been affected by the action. It’s another sign that the 2023 UAW strike is unique, and that it isn’t ending soon. Ford is laying off 330 workers at plants in Chicago Stamping and Lima, Ohio. GM’s layoffs hit 120 at its Parma, Ohio, metal center and 34 in Marion, Ind. The latest round of about 500 layoffs comes on top of the thousands of workers already on strike.
“These are not lock outs,” Ford said in an emailed statement. “These layoffs are a consequence of the strike at Chicago Assembly Plant, because these two facilities must reduce production of parts that would normally be shipped to Chicago Assembly Plant.” The strike is entering its 19th day and a deal between workers and management doesn’t seem imminent. On Monday, the UAW said it had submitted an offer to GM, but the company didn’t agree to it. The union opened a new round of talks with Chrysler-parent Stellantis STLA –1.08% (STLA).
11-Month High Still Pretty Low – A closer Look at ISM Manufacturing Numbers
Manufacturing activity contracted at the slowest pace in nearly a year according to the September ISM. Recent data signal some relief in the sector, while higher oil prices point to potential upside risk ahead. The overall manufacturing index rose for the third straight month, but at 49.0 in September still signals activity is contracting—even if it's at a slower pace. That said, even though 50 marks the traditional threshold for economic expansion, for manufacturing any reading above 48.7 is typically associated with expansion.
Most of the underlying measures moved in the right direction. However, while labor prospects look to have improved last month, the release noted continued slowdown. Specifically the release referenced, "In September, attrition remained the primary source of head-count reductions, but hiring freezes were more prevalent". When the full Employment Situation report is released on Friday, we expect to see a continued slowdown in hiring. Order backlog slipped further into contraction and prices paid fell by the most of any component, dropping 4.6 points to 43.8. Of the larger industries covered in the ISM, only two were in expansion in September: food, beverage & tobacco products and petroleum & coal products. Yet, higher oil prices tend to bring increased investment and activity to places beyond the petroleum industry.
Rare Earth Elements Are Increasingly Replaceable
Despite the name "rare earth elements," their abundance in the Earth's crust is not necessarily rare. However, their distribution is often scattered and uneven, making their extraction in economically viable quantities challenging. This limited availability leads to higher costs associated with exploration, mining and processing. The extraction and processing of rare earth elements involves complex and costly techniques due to their low concentrations and the need for extensive mining and separation processes. These processes include multiple steps such as crushing, grinding, flotation and chemical treatments, making them intricate and expensive to refine.
Integrated computational materials engineering (ICME) is an approach dating back to the late 1990s that involves physics-based modeling to predict the performance characteristics of alloys and determine the optimal heat treatment and manufacturing processes. Following a recent and ongoing digital transformation in the materials design field, ICME can now be applied much more efficiently and comprehensively. By starting with the properties a material needs to have and working backward, materials engineers can find alternative compositions that reduce or eliminate the need for REEs. Materials scientists can simulate different elemental conditions over a large design space with hundreds of variables.
Court Tosses $223.8 Million Verdict Against J&J in Talc Cancer Case
A New Jersey appeals court on Tuesday threw out a $223.8 million verdict against Johnson & Johnson (JNJ.N) in a trial over four plaintiffs' claims that they developed cancer from being exposed to the company's talc powder products. The Superior Court of New Jersey, Appellate Division found that a lower court judge should not have allowed some of the scientific expert testimony the plaintiffs presented to jurors in the case.
The jury in the case had ordered the company to pay $37.2 million in compensatory damages and $750 million in punitive damages, though the amount was automatically reduced to $186.5 million under state law. J&J's win comes after the company in July failed for a second time to move tens of thousands of claims over talc into bankruptcy court, where it hoped to resolve them through a proposed $8.9 billion settlement.
10 and 30 Year US Treasury Yield Hits 16 Year High - Why that is Worrying
The 10-year Treasury yield, which serves as a benchmark for mortgage rates and as an investor confidence barometer, on Tuesday surged to its highest level since 2007. The 10-year Treasury yield was last up about 8 basis points to 4.758%. The 30-year Treasury yield rose as high 4.874%, also the highest since 2007. The 2-year Treasury yield, which is sensitive to expectations around where the Federal Reserve will set its own key borrowing rate, increased slightly to 5.129%.
Rising yields come even though U.S. lawmakers were able to avoid a government shutdown as they passed a last-minute spending bill on Saturday night. That has bought them time to finish the necessary government funding legislation. A shutdown could have negatively affected the U.S. credit rating as well as the country’s economy. The jump in rates has rekindled talk about market “bond vigilantes,” a term coined by economist Ed Yardeni to describe the impact when fixed income investors leave the market because of worries over U.S. debt. Persistently high fiscal deficits are one factor in the rising costs of borrowing. Public debt has risen past $32.3 trillion this year. Debt has risen to nearly 120% of total gross domestic product.
Federal Agencies Seek to Streamline 'Hodgepodge' of Cyber Reporting Rules
The Department of Homeland Security wants Congress and federal agencies to help it streamline 52 different cyber reporting requirements to protect critical infrastructure and ease regulatory burdens on hacking victims. On Sept. 19, 2023, it released a 107-page report that it hopes will serve as a road map to smooth that process. More than 30 federal agencies and departments, including the Nuclear Regulatory Commission, Comptroller of the Currency and U.S. Secret Service, have met since June 2022 to hammer out how to reduce regulatory overlap as the federal government grapples with the messy state of cyber reporting rules. They are among members of the Cybersecurity Incident Reporting Council, which was set up as part of a new cyber reporting law passed last year and developed the report recommendations.
The report maps out the existing byzantine set of rules. Among the report’s eight recommendations is a new model form to standardize reporting breaches, which Silvers said any agency could potentially adopt and share. It also suggests making clearer reporting definitions and timelines and creating a single web portal to report an incident.
“Polar Silk Road” - China Is Gaining Long-Coveted Role in Arctic, as Russia Yields
China’s goal of becoming a major player in the Arctic has long been frustrated by its neighbor Russia, which has closely protected its dominant role in the region. Faced with economic isolation over its invasion of Ukraine, Russia is turning to China for help developing the Arctic as Western energy companies are trying to pull out of Russian projects. The newfound cooperation is most evident in surging shipments of crude through the Northern Sea Route, which traverses the Arctic from northwestern Russia to the Bering Strait.
The volume, while still small compared with what is carried via southern routes, has shot up in recent weeks. Russia asserts the right to regulate transit on the route. It says the demand has driven it to permit larger tankers without so-called ice classification—stronger hulls and other reinforcements to sail the ice-filled waters—raising fears of spills in the remote region. The first of two larger tankers arrived at a Chinese port in recent days, each carrying more than one million barrels of oil.
Supreme Court To Hear ADA Compliance Case
When Deborah Laufer tried to plan a road trip after her multiple sclerosis diagnosis, she struggled to find information online about which hotels could accommodate her wheelchair. At times, she slept in her car after arriving at a hotel to find she could not access the property. Laufer’s frustration navigating online reservations for personal travel inspired her to pursue test cases on behalf of the broader disabled community. She surfed the web to see which hotels included accessibility information required by law, and filed hundreds of disability discrimination lawsuits against hotels she never planned to visit. Her lawyers and disability rights advocates say the work of testers such as Laufer, now before the Supreme Court, is necessary to enforce the Americans With Disabilities Act.
Lawyers for the hotels Laufer has sued disagree, saying that unlike the in-person work of civil rights advocates in decades past, Laufer was never directly interacting with the property owners she claimed were violating Justice Department rules implementing the ADA. The question for the justices, who will hear oral arguments Wednesday, is whether Laufer’s type of online testing gives her standing — or the right to sue in federal court — if she does not intend to visit the properties she investigated.
Read more at The Washington Post