Member Briefing September 19. 2024
Fed Slashes Interest Rates By A Half Point
The Federal Reserve voted to lower interest rates by a half percentage point, opting for a bolder start in making its first reduction since 2020. The long-anticipated pivot followed an all-out fight against inflation the central bank launched two years ago. Eleven of 12 Fed voters backed the cut, which will bring the benchmark federal-funds rate to a range between 4.75% and 5%. Quarterly projections released Wednesday showed a narrow majority of officials penciled in cuts that would lower rates by at least a quarter point each at meetings in November and December.
In its policy statement, the Fed said the decision reflected “greater confidence that inflation is moving sustainably toward 2%” and that the central bank “judges that the risks to achieving its employment and inflation goals are roughly in balance.” In their projections, all Fed officials thought the unemployment rate would end the year between 4.2% and 4.5%. In June, most saw the unemployment rate settling around 4.0% at year-end. While some Fed officials had argued in recent weeks the economy wasn’t weak enough to necessitate a half-point cut, others had concluded that labor-market cooling this summer warranted a larger reduction because the Fed was, in effect, catching up for lost time.
Lower Mortgage Rates Improve Builder Outlook As Housing Starts Climb in August
Lower mortgage rates and the anticipation for substantial Fed easing in the coming months appears to be brightening the outlook for residential construction. Housing starts rose 9.6% in August, driven entirely by a surge in single-family building. August’s gain prompted a 3.9% annual increase in overall starts, the first year-over-year improvement since April. As builder confidence brightens in anticipation of higher sales traffic, single-family permits also notched their second sequential uptick.
Meanwhile, the multifamily market is still searching for balance. Although apartment demand has firmed notably this year, it remains below the lofty pace of new development, prompting a trend decline in new multifamily projects. Despite a notable improvement in August, multifamily starts were still down over 30% on a year-to-date basis. A notable upshift in permits also signals the beginning of a potential turnaround in single-family construction. Single-family permits rose for the second consecutive month in August following a five-month string of declines. The 2.8% uptick in permits marked the largest monthly increase in over a year.
Ongoing Worker Shortages Highlight An ‘Urgent Need’ For Upskilling
Despite the labor force participation rate rebounding post-pandemic, a new report finds that worker shortages remain a persistent problem for U.S. employers—and that upskilling may be a key to addressing the challenge. The 2024 Labor Day Report from Littler’s Workplace Policy Institute, the employment law firm’s government relations and public policy arm, delves into 10 key issues that employers face. Leading the pack is the ongoing worker shortage.
About 1.7 million workers are missing from the post-pandemic workforce, the U.S. Chamber of Commerce reports, while data from the Conference Board shows that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed. “We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” says Michael Lotito, Littler shareholder and co-chair of the institute.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Hezbollah Walkie-Talkies Blow Up Across Lebanon in Second Wave of Attacks - WSJ
- US Officials Drafting New Options For Gaza Cease-Fire Deal - Politico
- Hezbollah Pager Attack Details Point to Supply-Chain Infiltration by Israel - WSJ
- Hungarian Company Built Hezbollah’s Exploding Pagers, Taiwanese Firm Says - Politico
- New Details of Hezbollah Exploding Pagers' Supply Chain Emerge - Newsweek
- Germany Has Stopped Approving War Weapons Exports To Israel, Source Says - Reuters
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Ukraine And Russia: The Latest News – The Guardian
- Ukraine's Zelenskiy To Address UN Security Council On Tuesday - Reuters
- Watch Video As Ukraine Wipes Russian Weapons Depot ‘Off The Face Of The Earth’ - Politico
- US Says Zelensky's Victory Plan 'Can Work' - Newsweek
- Does America Want Ukraine to Defeat Russia? It Doesn’t Look That Way. - Politico
- Russian Advance In Kursk 'Stopped', Says Ukraine Military Official – France 24
- Ukrainian Drone Attack Triggers Earthquake-Sized Blast At Arsenal In Russia's Tver Region - 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
Other Headlines
- US Probes Uranium Imports From China To Prevent Circumventing Russian Ban - Reuters
- Who Works For Whom In The New EU Power Structure - Politico
- Asian NATO Proposal By Japan's Ishiba Seen As 'Fantasy' In U.S. – Nikkei Asia
- Jordan's King Abdullah Swears In New Government Led By Technocrat - Reuters
- France's Budgetary Situation Is 'Very Serious', New PM Barnier Says – France 24
- Storm Wreaks Havoc For Children Across Southeast Asia - Axios
- Argentina’s President Milei Presents 2025 Budget, Vowing Austerity And Setting Up A Showdown - AP
- Canada's Trudeau Faces Setback As Party Loses Crucial Montreal Election - Reuters
- Mexico Judicial Overhaul Sparks Concern over Democratic Backsliding – The Dispatch
- Asia's Tech Dreams Meet Green Energy Reality – Nikkei Asia
Policy and Politics
House Rejects GOP Plan To Extend Government Funding, Sending Johnson Back To Drawing Board
The House rejected Speaker Mike Johnson's plan to keep the government funded on Wednesday, with a small group of Republicans joining most Democrats to oppose the measure and sending lawmakers scrambling for a backup plan with less than two weeks until a possible government shutdown. The legislation, which would fund the government through March 28, 2025, fell short by a vote of 202 in favor to 220 opposed. Fourteen Republicans joined all but three Democrats to oppose the bill, which also included a measure aimed at targeting the practice of illegal voting that Democrats view as a nonstarter.
The voting portion of the legislation, known as the SAVE Act, would require proof of citizenship to register to vote in federal elections. The House passed the measure earlier this year. With the failed vote, Johnson's next move remains unclear. He has repeatedly told reporters that he remained focused on the opening play, and that he wasn't having "alternative conversations." Senate leaders will likely use the failed House vote to get in the driver's seat on government funding, pushing their own stopgap measure to keep the government funded and kickstart negotiations.
In About-Face, Trump Pledges To 'Get SALT Back' After The 2017 Tax Law He Championed Capped It
Ahead of his Wednesday rally on Long Island, Donald Trump is vowing to restore the federal deduction for state and local tax payments, also known as SALT, reversing course on a controversial provision of the 2017 tax law that he pushed through Congress. In a Tuesday afternoon post on social media, Trump pledged to “get SALT back” if returned to the White House.
The 2017 Republican tax law, which he signed and continues to champion, capped the SALT deduction at $10,000 — part of an effort to help pay for tax cuts included in the legislation. The cap disproportionately hurts taxpayers in blue states like New York, where property and state income taxes are relatively high. Several New York Republicans fighting to hold on to those battleground seats, who mounted an unsuccessful bid for SALT reform earlier this year, quickly rallied behind Trump. In a statement, Hudson Valley Rep. Mike Lawler said, "I'm glad to hear that former President Trump has committed to lifting the cap on SALT ... Since taking office, this has been a top priority for me.”
Read more at New York State of Politics
Chinese Export Flood Poses Threat To US
A group of senior U.S. officials is traveling to Beijing this week for a round of high-level meetings intended to underscore Washington’s concerns over a wave of Chinese goods flooding world markets. The planned meetings are the fifth gathering of an economic working group formed by both governments last year to enhance communication at a time of heightened competition between the world’s two largest economies. The group also includes Federal Reserve officials.
At a time of weak demand at home, Beijing has ramped up its manufacturing capacity, and sent excess capacity overseas. The policy choice reflects Chinese leader Xi Jinping’s emphasis on building up an all-encompassing industrial supply chain that can reduce China’s reliance on foreign products but increase the rest of the world’s dependence on China. So far, such a policy has had an effect of squeezing industries around the world, raising the specter of a new global trade war. Many of China’s trading partners, from the U.S., Europe to even some in Asia that are considered relatively friendly to Beijing, are raising tariffs and other trade barriers aimed at fending off cheap Chinese goods.
Health and Wellness
New XEC Variant Arrives In NY, But Older COVID Strains Still Pose Bigger Threat In September
New York reported its first case of the newly discovered COVID-19 variant called XEC sweeping the globe, but the more pressing concern remained the scores of New Yorkers getting infected with currently dominant strains. Parts of upstate, including the Finger Lakes, have reported some of the largest spikes in COVID patients arriving at hospitals and showing up in wastewater testing in September, as the virus spread among kids who headed back to school and workers returning to offices for the fall.
New York was among 12 states in the U.S. to report a case of the XEC strain, according to Scripps Research's Outbreak.info page. But the 23 total cases of XEC uncovered in sequencing nationally over the past 60 days remained a fraction of overall COVID cases, as the currently dominant KP.3.1.1 strain fueled most infections.
Election 2024
- Can Sherrod Brown Still Win in Ohio? - WSJ
- Dems’ Senate Hopes Are Increasingly Running Through A Single State. And It’s Not Looking Great. - Politico
- 5 Takeaways From Trump’s Town Hall With Sarah Huckabee Sanders – The Hill
- Harris Refuses To Veer Off Script In Her Second High-Profile Interview - Politico
- New HarrisX/Forbes Poll: Harris Won Debate—But It Largely Hasn’t Changed Voters’ Minds - Forbes
- Attorney General Promises Exhaustive Probe of Apparent Trump Assassination Attempt - WSJ
- New York Republicans’ Early-Voting Push Mirrors National Effort To Reverse A Democratic Edge This Fall – Politico NY
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Real Clear Politics Electoral Map
- Latest Polls - FiveThirtyEight
Industry News
US Steel CEO Confident Nippon Steel Deal Will Close 'On Its Merits'
U.S. Steel CEO David Burritt said on Tuesday he was confident Nippon Steel's $14.9 billion bid for his company would "close on its merits," despite political opposition and concerns raised in a national security review. Burritt, speaking at the Detroit Economic Club, described the review process as "very robust" but added, "we trust the process, we respect the process. We're very confident it's going to go through," he said, referring to the deal. "Our strategy before this happened was 'better, not bigger.' With Nippon, it's 'better and bigger.'"
The remarks show U.S. Steel is seeking to project confidence after CFIUS, which has been reviewing the deal, appeared poised to block it as recently as Aug. 31. On that date, CFIUS sent the companies a 17-page letter exclusively reported by Reuters alleging the transaction posed a risk to national security by threatening the steel supply chain for critical U.S. industries. The companies countered in a 100-page letter, also exclusively reported by Reuters, that the deal would enhance U.S. national security by allowing a company from an allied nation to make a much-needed investment in a struggling U.S. company in a critical sector.
Biden Won't Block Potential Strike At East Coast Ports, Administration Official Says
President Joe Biden does not intend to invoke a federal law to prevent a port strike on the East Coast and Gulf of Mexico if dockworkers fail to secure a new labor contract by an Oct. 1 deadline, an administration official said on Tuesday. The International Longshoremen's Association, negotiating on behalf of workers at three dozen U.S. ports from Maine to Texas that handle about half of the nation's ocean imports, warned again on Tuesday that its members are prepared to stop work in two weeks.
U.S. presidents can intervene in labor disputes that threaten national security or safety by imposing an 80-day cooling-off period under the federal Taft-Hartley Act, forcing workers back on the job while negotiations continue. The National Retail Federation on Tuesday led a group of 177 trade associations representing retailers like Walmart (WMT.N), opens new tab, manufacturers, farmers, automakers and truckers in calling on Biden to help reach a resolution.
The Impact of a Port Strike Will be Widespread
If workers at East and Gulf Coast ports strike on Oct. 1, manufacturing supply chains throughout the U.S. will be thrown into disarray. To illustrate the extent of the potential damage, the NAM has created an interactive map of ports that will be affected, featuring useful metrics like their total export value. Here are some key data points about the volume of goods that these ports handle:
More than 68% of all containerized exports and more than 56% of containerized imports flow through East and Gulf Coast ports, representing an average daily trade value of more than $2.1 billion.
They handle more than 91% of containerized imports and 69% of containerized exports of pharmaceutical products.
They also process more than 76% of containerized vehicle exports and more than 54% of containerized vehicle imports.
For air and spacecraft, more than 77% of containerized exports and more than 51% of containerized imports go through these ports.
On Sept. 17, the NAM and 177 partner associations once again called on the Biden administration to step in, saying, “[It] is imperative that the administration engage with the parties to quickly negotiate a new deal or agree to continue negotiations while keeping the ports open and cargo flowing. A strike at this point in time would have a devastating impact on the economy, especially as inflation is on the downward trend.”
UAW Clashes With Jeep Maker Stellantis, Threatening Strike
The United Auto Workers is once again taking aim at the Jeep maker, Stellantis after threatening to go on strike at the company’s U.S. factories over delays in reopening an idled plant in Illinois and other points of contention. UAW President Shawn Fain, talking to members Tuesday evening, said the union was taking the next steps to prepare for a work stoppage, including a completion of the grievance process and having some UAW locals take strike-authorization votes. While those votes don’t lead to immediate action, they indicate members’ support for a walkout.
“We’re preparing to take actions on Stellantis to enforce our contract and make this company keep the promise they made to the American people,” Fain said in a live video address. Tensions with the company continue to escalate less than a year after the signing of a new labor deal that ended a six-week strike. In recent weeks, the union has accused Stellantis of trying to shift some SUV production outside the U.S. and criticized Chief Executive Carlos Tavares over reductions in factory jobs. It also alleges that the company has failed to live up to commitments made in the 2023 contract agreement.
Musk Threatens To Sue FAA For “Regulatory Overreach” After SpaceX Fines
On Tuesday, the Federal Aviation Administration levied proposed fines of hundreds of thousands of dollars against SpaceX for violations related to rocket launches last year. Soon after, Elon Musk, the billionaire CEO of the commercial rocket and satellite company, threatened legal action to fight the citations. The fines are related to unapproved plans used during two SpaceX rocket launches last year. The first incident, from last May at Florida’s Cape Canaveral, was over a revised communications plan, in which SpaceX added an unauthorized new launch control room and removed a readiness poll from its procedures. Two months later, SpaceX used an unapproved rocket propellant facility as its fuel supplier at a launch at the Kennedy Space Center, the FAA alleged.
“Safety drives everything we do at the FAA, including a legal responsibility for the safety oversight of companies with commercial space transportation licenses,” FAA Chief Counsel Marc Nichols said in a statement about the proposed fines. Earlier this month, SpaceX published a lengthy blog post criticizing the FAA for licensing the date of the company’s next Starship launch for late November, while SpaceX said it’s been ready since early August. “Unfortunately, we continue to be stuck in a reality where it takes longer to do the government paperwork to license a rocket launch than it does to design and build the actual hardware,” the company wrote.
Fedex Unveils 5.9% Rate Increase, Surcharge Hikes For 2025
FedEx’s package and freight shipping rates will increase by an average of 5.9% on Jan. 6, 2025, the delivery giant announced last week. The move affects standard list rates for U.S. deliveries, as well as exports from and imports into the country. Ground Economy, Ground Multiweight, International Premium, International Priority DirectDistribution, Freight Priority and Freight Economy rates are among the services that will also see prices increase.
FedEx is raising many of the fees it applies to certain packages, as well. This includes higher charges for residential deliveries, deliveries to certain ZIP codes and packages that require additional handling. FedEx’s two-day air services will see higher rate increases than average, Adi Karamcheti, consultant for professional services at Shipware, said in an emailed analysis of the changes. Some shippers may try to avoid the price hike by going with ground delivery instead, but ground services will see a greater increase for longer-distance deliveries.
Read more at Supply Chain Dive
US Sues Ship Firms For $100m Over Baltimore Bridge Crash
The US government has filed a $100m lawsuit against the owner and operator of a cargo ship that crashed into and destroyed a Baltimore bridge. Justice Department officials said the companies, Synergy and Grace Ocean, were "well aware" of the issues with the Dali before it lost power and crashed into the Francis Key Scott bridge on 26 March, leading to the deaths of six people. The government said it cost more than $100m to clear the estimated 3,000 to 4,000 tonnes of debris caused by the crash and enable the Port of Baltimore to reopen.
The Justice Department's lawsuit, filed in district court in Maryland, alleges that the ship's electrical and mechanical systems were improperly maintained and that the crash was "entirely avoidable". A preliminary National Transportation Safety Board report found that the Dali had lost electrical power four times in less than 12 hours before colliding with the bridge. Grace Ocean filed a motion earlier this year in a federal court to limit its legal liability.
Amazon Increases Average Pay For Warehouse Workers And Adds Free Prime Membership Perk
Amazon announced Wednesday it is raising wages for its hourly warehouse workers and adding a new employee perk that will give them a Prime subscription at no extra cost. Beginning this month, Amazon’s average starting pay for front-line employees in the U.S. will be bumped to an average of more than $22 an hour, up from roughly $20.50 an hour, the company said. Amazon said it is also making its Prime subscription service a part of employees’ benefit package beginning “early next year.” The service, which costs $140 a year, gives members access to speedy shipping and video streaming, among other perks.
Last week, Amazon also hiked wages for its contracted delivery drivers to roughly $22 an hour as part of a $2.1 billion investment this year into its third-party logistics program. The wage hikes come as Amazon is preparing to enter the peak holiday shopping season, a period when retailers typically see a flurry of online shopping. Amazon said Tuesday it plans to host a second Prime Day-like deal bonanza on Oct. 8-9, the third year it has held the discount event.