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Member Briefing September 17, 2024

September 17, 2024

Posted By: Harold King in Daily Briefing,

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Empire State Manufacturing Survey: Activity Up for the First Time In a Year

Business activity grew in New York State for the first time in nearly a year, according to firms responding to the September 2024 Empire State Manufacturing Survey. The headline general business conditions index rose sixteen points to 11.5.

The new orders index climbed seventeen points to 9.4, a multi-year high, pointing to a modest increase in orders.
The shipments index rose eighteen points to 17.9, its highest level in about a year and a half.
Unfilled orders were little changed.
The inventories index rose eleven points to 0.0, indicating that inventories were level after declining for the prior two months.
The delivery times index rose to -1.1, suggesting that delivery times were little changed, and the supply availability index came in at -2.1, a sign that supply availability was slightly lower.
The index for number of employees came in at -5.7, pointing to another month of modest employment reductions.
After a steep drop last month, the average workweek index recovered to 2.9, signaling a slight increase in hours worked.
Price indexes were little changed: the prices paid index was 23.2, and the prices received index remained low at 7.4.
The index for future business activity moved up eight points to 30.6, with 45 percent of respondents expecting conditions to improve over the next six months.
However, the capital spending index fell eleven points to -2.1, dipping below zero for the first time since 2020.

Read more at The NY Fed

Fed Enters Tricky Terrain: Rate Cuts in a Decent Economy

The Federal Reserve is poised to start cutting rates on Wednesday, and over time those cuts will ripple their way through the economy. Every rate-cutting cycle is different, and the economy’s response is both long and variable. Milton Friedman, speaking before Congress in 1959, likened changes in Fed policy to “a water tap that you turn on now and that then only starts to run six, nine, 12, 16 months from now.”

What’s more, there isn’t a clear historical template for the current situation. Usually, by the time the Fed starts cutting rates, the economy is already in pretty big trouble. That isn’t the case now. The labor market has cooled but still looks decent, and the economy has been posting solid growth. In fact, it is a better economy than it was even in 1995—arguably the one time the Fed convincingly achieved a so-called soft landing, where inflation comes down but unemployment doesn’t spike.

Read more at The WSJ

Another Big Drop in Machine Tool Orders

Machine tool orders fell sharply from June to July, down -19.3% to $321.7 million in the latest summary by AMT - the Assn. for Manufacturing Technology. While July is a typically a slow period for new orders, AMT’s new U.S. Manufacturing Technology Orders report showed purchasing activity also trailed the July 2023 level by -7.8%, and that with orders totaling $2.53 billion year-to-date, January-July 2024 is -10.5 behind last year’s comparable figure. Adding to the poor results, AMT noted that order cancellations during July were at the highest level since July 2023, and the ratio of cancellations to new orders remained above the historical average in all but two months of this year.

During July, all the regional order volumes reconfirmed the general decline, and in five of the regions those were double-digit percentage drops. Only the North Central-East (-5.0% decrease in orders for metal-cutting machines) managed to contain the June-to-July losses, but the year-to-date declines are all in the double-digit percentages. July order activity by the medical equipment manufacturing segment increased from June to July, but the number of new machines order fell – presumably an effect of demand for higher-value, high-precision products, which may be seen as a long-term growth factor.

Read more at American Machinist

Global Headlines

Middle East

Ukraine

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Policy and Politics

All Eyes On Speaker Johnson For Next Move On Government Funding

All eyes are on Speaker Mike Johnson (R-La.) this week as lawmakers await his next move in the fight over government funding, after Republican resistance foiled his initial strategy for avoiding an end-of-the-month shutdown. Members in both parties and chambers are now waiting for Johnson to announce his next play in the funding process as the Sept. 30 shutdown deadline inches closer. The Speaker has suggested he may make another attempt at passing his partisan stopgap bill this week, which would face heavy headwinds in the House as critics — particularly Democrats and fiscal hawks — dig in on their opposition.

Johnson told reporters Wednesday that his leadership team would take the weekend to “build consensus” on the legislation, and suggested it could come up for a vote this week. Johnson has not signaled how he plans to approach the funding fight when lawmakers return to Washington this week, though he has several options — none of which would be unanimously accepted within the House GOP conference.

Read more at The Hill

Business Coalition Urges Hochul To Veto Climate Change Superfund Act

A coalition of business, energy and labor organizations aligned with the Business Council of New York State (including the Council of Industry) is urging Gov. Kathy Hochul to veto the proposed Climate Change Superfund Act, which would establish regulations seeking to collect roughly $75 billion from companies — some controlled by foreign nations — deemed responsible for greenhouse gas emissions due to their refinement and production of fossil fuels.

The legislation was stripped from the state budget this year but passed by the state Senate in May and the Assembly a month later. It would task the state Department of Environmental Conservation with establishing regulations to identify “responsible parties” and the procedures for collecting payments from those companies after issuing notices of cost recovery demands. Although the state attorney general’s office and Department of Taxation and Finance would be given authority to enforce the payment demands, it’s unclear how that would work, including if the targets are in Russia or other nations at odds with U.S. interests.

Read more at The Albany Times Union

Report Raises Container Crane Alarms

A new report in Washington is raising tough allegations about the security of container cranes made by Chinese manufacturer ZPMC. The giant cranes lining the docks at U.S. seaports have embedded technology that could allow Beijing to covertly gain access to the machines, according to a yearlong congressional investigation. Cellular modems are built into the cranes that could allow access by the Chinese government because of the country’s requirement that companies cooperate with state intelligence agencies. The modems are ostensibly for diagnostic and maintenance purposes, but the probe found cases where cranes came with the devices installed without the knowledge of port authorities and included beyond the scope of contracts with ZPMC.

The allegations of potential espionage through the cargo machinery have raised a furor in the maritime sector, and some shipping and port officials have said the technology behind the cranes is often supplied by Western allies. The congressional report suggests the reality is more complicated. It says ZPMC had shown particular interest in remote access to its cranes on the West Coast. Pushing back on ZPMC’s requests, it said, is “difficult for customers who are looking to get the lowest price or guarantee a robust warranty policy.”

Read more at The AP

Health and Wellness

The Workplace Can Help Curb The Loneliness Epidemic. Here’s How

According to a new Gallup mental health study, one in five workers experience feelings of loneliness, and a recent Cigna poll found that the number of U.S. adults who call themselves lonely has climbed to 58% from 46% in 2018. The average person spends approximately one-third of their life at work, so it’s easy to view the workplace as a catalyst for these feelings of isolation. But what if instead, the workplace can be part of the solution?

How can business leaders make meaningful progress in combating the loneliness epidemic and workplace mental health crisis? Among the possibilities: Establish a people-first leadership mentality. Build opportunities for meaningful connection. Offer accessible mental health benefits. In an increasingly remote and digital workplace, we must maintain the human connections that contribute to a healthier, happier, and more productive workforce.

Read more at Fast Company

NYS COVID Update

The Governor updated COVID data for the week ending August 23^rd.

Deaths:

Weekly: 46
Total Reported to CDC: 83,980

Hospitalizations:

Average Daily Patients in Hospital statewide: 1,048
Patients in ICU Beds: 109

7 Day Average Cases per 100K population

8.4 positive cases per 100,00 population, Statewide
9.8 positive cases per 100,00 population, Mid-Hudson

Useful Websites:

Election 2024

Industry News

Boeing Freezes Hiring, Weighs Furloughs As Strike Enters Fourth Day

Boeing said it is freezing hiring and weighing temporary furloughs in the coming weeks to manage costs as a strike by more than 30,000 Boeing (BA.N), opens new tab workers who build planes in factories on the U.S. west coast stretched into its fourth day on Monday. "I know that these actions will create some uncertainty and concern," Boeing CFO Brian West wrote in a letter to employees shared on Monday. "This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future."

Company and union negotiators are due to resume talks over a labor contract Today. Union leaders will meet with federal mediators and Boeing to restart labor negotiations on Tuesday, the IAM said in a post, opens new tab on its X social media feed on Saturday. Jon Holden, the lead union negotiator, said on Saturday that workers wanted Boeing to increase its wage offer and reinstate a defined-benefit pension that was taken away a decade ago in return for keeping plane production in Washington State.

Read more at Reuters

Chinese EVs Still Cheaper Than Teslas In U.S. After Tariff Hike

The United States and the European Union are all but set to impose steep tariffs on imported Chinese electric vehicles. The US government on Friday locked in higher tariffs on Chinese imports — including an eye-watering 100% levy on electric vehicles — which will come into effect by the end of the month. That was a day after the European Commission rejected a last ditch effort by Chinese EV-makers to avoid the bloc’s planned tariffs by setting ‘minimum import prices’.

Both the US and EU argue that Chinese state subsidies are funding the country’s EV firms, allowing them to make EVs far cheaper than their Western rivals and leading to industrial overcapacity. The onslaught of such cheap Chinese vehicles is distorting markets and posing an existential crisis to Western carmakers, Washington and Brussels have said. China, meanwhile, claims that the excess capacity argument is ‘groundless’ and that its dominance of clean technologies like EVs is the result of innovation and an early investment in related supply chains. Beijing has also accused the US of implementing tariffs on China-made EVs — despite importing very few them — to drive international policy.

Read more at Asia Financial

Consumers Have a Debt Problem: Not Enough of the Right Kind

Too much debt can certainly be a problem for consumers. So can too little. The Federal Reserve’s next interest-rate decision could be a fateful one for many consumers and in turn for debates about the health of the American spender. Consumers have increasingly been turning to one of the more expensive forms of borrowing—credit cards—in part because other kinds of credit and sources of cash have been harder to come by. Cutting rates could unlock other avenues for borrowing and give consumers a crucial relief valve.

The value of adding more debt might seem odd coming when headline numbers have supercharged worries about the recent rise in delinquency rates. Consumer debt hit $17 trillion for the first time last year, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit. But behind that headline trend there is a lot to consider. For one, consumer-debt trends adjusted for inflation look different. On that basis, total household debt—including mortgages—has grown just 3% since the last quarter of 2019, according to Fed figures adjusted for inflation by WalletHub, which provides tools and information for personal finance. Inflation-adjusted debt has touched the highest levels since 2009 in recent quarters, but it is still over a trillion shy of the 2008 peak.

Read more at The WSJ

TikTok Ban Heard In Court—Here’s What To Know

The U.S. Court of Appeals for the D.C. Circuit will hear arguments Monday morning in TikTok’s lawsuit challenging the constitutionality of the Protecting Americans From Foreign Adversary Controlled Applications Act, which gave TikTok 270 days to divest from China-based parent company ByteDance or else be banned from app stores. The law is set to ban TikTok by January 19 unless a court strikes down the legislation before then, with TikTok arguing that banning the app is a violation of its First Amendment rights. The hearing Monday included multiple lawsuits over the ban, including the litigation brought by TikTok itself and another brought by several TikTok creators.

The federal government argued to the court that ByteDance’s Chinese ownership “creates a national-security threat of immense depth and scale,” though much of the government’s specific intelligence for why there’s a national security threat was redacted in its brief and will not be made public. While the law allows TikTok to remain legal in the U.S. if it divests from ByteDance, the company said in its brief to the court that is “not possible technologically, commercially, or legally—especially within the Act’s arbitrary 270-day timeline.” If TikTok did separate from ByteDance, the company argued, “TikTok in the United States would still be reduced to a shell of its former self, stripped of the innovative and expressive technology that tailors content to each user.”

Read more at Forbes

Consumer Sentiment Climbs To 4-Month High As Inflation Eases. But Americans Still Pessimistic.

Consumer sentiment rose to a four-month high in September, just ahead of the U.S. presidential election, as expectations about future inflation fell to the lowest level since 2020. Yet Americans are still “guarded” in their views about the economy. The first of two readings this month in the consumer sentiment index crept up to 69.0 this month from 67.9 in August, the University of Michigan said Friday.

A gauge that measures what consumers think about the current state of the economy rose to 62.9 in September from a 19-month low in August. The gauge was as high as 82.5 a year and a half ago. A measurement of expectations for the next six months edged up to 73.0 from 72.1 in the prior month. It’s also well below post- and pre-pandemic highs, however.

Read more at The University of Michigan

J&J Gets $260M Talc Verdict Overturned In Oregon, New Trial Ordered

An Oregon judge has overturned a $260 million verdict against Johnson & Johnson in a lawsuit brought by a woman who said she got mesothelioma, a deadly cancer linked to asbestos exposure, from inhaling the company's talc powder, the company said on Monday. Judge Katharine von ter Stegge of the 4th Judicial District Circuit Court in Portland, Oregon, granted J&J's motion to toss the verdict and hold a new trial in the case at a hearing late on Friday, according to a spokesperson for the company. Von ter Stegge is expected to issue an opinion explaining her order in the coming days.

Erik Haas, J&J's worldwide vice president of litigation, said the original verdict was "the direct result of numerous egregious errors committed by the plaintiff's lawyers" and had "no basis in the law or science." Friday's decision comes as J&J is preparing to have a subsidiary file bankruptcy in order to settle the ovarian and other gynecological cancer lawsuits for about $9 billion. The company has said it has secured support for the deal from well over 75% of claimants, the legal threshold for a judge to approve the kind of bankruptcy settlement J&J has proposed. But just how much is this driving supermarket inflation? Data tells a messier story.

Read more at Reuters

What Are the Real Causes of Inflation

From February 2020 to this July, grocery prices grew a cumulative 25.6%. That's higher than overall inflation, which was 21.6% during that same period. "We have no other choice — we have to buy groceries," says Ariane Navarro, who lives in Houston. "That's a basic need. And so [companies] use that to kind of take advantage and keep raising prices." It's a widespread sentiment — and a popular political refrain ahead of the presidential election, as Vice President Harris pledges to crack down on "price gouging" on Day 1.

Researchers at two Federal Reserve Banks — those based in Kansas City and New York — say pay for workers in food manufacturing and retail rose a bit faster than pay for workers in many other occupations. A report from the Federal Reserve Bank of Kansas City noted that processed food, which requires more labor, accounted for the vast majority of price hikes. And "even though profit margins for grocery stores have gone up," NEmpire Stew York Federal Reserve researcher Thomas Klitgaard wrote in a July report, "the increase appears to be only a small contributor to the rise in food prices relative to the increase in their operating costs."

Read more at NPR

Wages, Adjusted For Inflation, Are Falling For New Hires

After adjusting for inflation, average wages for new hires fell 1.5% over the 12 months ending in July – from $23.85 an hour to $23.51– the largest such decline in a decade, according to an analysis of Labor Department figures by the W.E. Upjohn Institute for Employment Research. After adjusting for inflation, average wages for new hires fell 1.5% over the 12 months ending in July – from $23.85 an hour to $23.51– the largest such decline in a decade, according to an analysis of Labor Department figures by the W.E. Upjohn Institute for Employment Research.

When the economy is accelerating, pay increases for new hires tend to outstrip those of existing employees as companies rapidly add positions and compete for a limited pool of job candidates, says Brad Hershbein, a senior economist at the Upjohn Institute. As job openings multiply, workers switch positions more frequently, further pressuring firms to fill openings and ratchet up wages. “When the economy slows,” as it’s doing now, “that flips,” Hershbein said. Businesses still provide solid raises to existing staffers so they don’t lose them but there’s far less urgency to pay up to attract new workers, he said.

Read more at Yahoo Finance

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