Member Briefing September 26, 2022
Shutdown? Fight Over Manchin’s Permitting Overhaul Clouds Outlook for Stopgap Funding Bill
Senate Majority Leader Chuck Schumer took the first step to prevent a government shutdown last week by advancing a House bill that will be used as the vehicle for a short-term continuing resolution, known as a CR, that will extend current funding levels until mid-December. The government’s fiscal year expires on Friday. Senate lawmakers are expected to reconvene on Tuesday and could vote on advancing that resolution that evening. The Senate won’t meet Monday in observance of Rosh Hashana.
Mr. Schumer has promised to attach a permitting overhaul bill from Sen. Joe Manchin (D., W.Va.) to the government-funding resolution, a pledge that has drawn opposition from both parties. The funding measure requires 60 votes to advance. Mr. Schumer hasn’t said what he will do if he is unable to secure the votes needed to advance the resolution. The continuing resolution will also need support from House lawmakers. Mr. Manchin demanded the permitting bill be attached to a must-pass bill as a condition of his support for the Democrats’ climate, healthcare and tax proposal. But with that package now signed into law, he has struggled to build support for permitting even with the threat of a looming government shutdown.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – The Guardian
- Ukraine Says Residents Coerced into Russian Annexation Vote, West Condemns 'Sham' - Reuters
- US in Private Talks with Russia Over Nuclear Weapons to Avoid Public ‘Tit for Tat’ – The Hill
- How Russia is Conscripting Men to Fight in Ukraine – The Economist
- U.S. Warns of Catastrophic Consequences if Russia Uses Nuclear Weapons in Ukraine - Reuters
- Zelensky Offers Guarantees for Russian Soldiers Who Surrender – The Hill
- Lavrov Pledges 'full Protection' for Any Territory Annexed by Russia - Reuters
- UN Rights Experts Present Evidence of War Crimes in Ukraine - AP
- West Scrambles to Bridge North-South Divide Aggravated by Ukraine War - Reuters
- US Warns China Against Aiding Russia’s War in Ukraine- The Hill
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
A Global Manufacturing Slowdown Suggests Worse is to Come
In August global manufacturing output shrank relative to the month before, and new orders fell for the second month in a row, according to JPMorgan Chase. As economic woes mount, worse could be ahead, for factories and the broader economy. Manufacturing troubles reflect much bigger shocks. The most serious is the energy-price crunch. Industrial production in the euro zone fell by 2.4% in July against the year before. Firms have had to idle plants in the face of energy costs which render production uneconomical—a cold winter would bring even more pain.
The safe bet is that conditions will get worse before they get better. But how much worse? The World Bank presents three scenarios for next year. The baseline is one consistent with the current consensus outlook for growth, of about 1.5% per person. In a second, “sharp downturn” scenario, growth decelerates to 0.8% per person. The third is one in which significant, synchronous monetary tightening induces a recession, such that global output shrinks by about 0.4% per person.
World’s Central Banks Race to Raise Rates After Fed Increase
In a flurry of central bank meetings from Norway to South Africa, many raised rates by larger-than-expected margins in a day that analysts at ING billed as “Super Thursday.” The Bank of England raised its key interest rate for the seventh consecutive time Thursday. Before the news came out, the British pound briefly touched its lowest point in 37 years against the dollar before recovering some of its losses to reach $1.13.
Even some countries that didn’t move rates—the Bank of Japan left its policy rate at its previous low level—took other action to ease the growing inflation pressure. Switzerland’s central bank joined the stampede toward higher rates by announcing an interest-rate increase that will put its benchmark lending rate above 0% for the first time since 2014, bringing an end to Europe’s last remaining experiment in setting negative interest rates. Sweden’s Riksbank lifted rates by 1 percentage point earlier this week, its largest increase in almost three decades.
US COVID – Downward Trends Continue
The US CDC is reporting 95.6 million cumulative cases of COVID-19 and 1,049,101 deaths. Daily incidence continues to decline, down to 55,332 new cases per day. Daily mortality appears to have plateaued, with an average of 356 deaths per day. Both new hospital admissions and current hospitalizations continue to exhibit downward trends, with decreases of 6.8% and 11.1%, respectively, over the past week. Both trends peaked around the last week of July, similar to trends in daily incidence.
The BA.5 sublineage continues as the dominant strain in the US, accounting for 84.8% of sequenced specimens. Since last week, however, several other Omicron sublineages show evidence of possible growth advantage over BA.5, including BA.4.6 (10.3%), BF.7 (1.7%), and BA.2.75 (1.3%). The prevalence of BA.4 continues to fall, down to 1.8% the week of September 17
NYS COVID Update
The Governor updated COVID data through September 23rd.
- Daily: 10
- Total Reported to CDC: 74,125
- Patients Currently in Hospital statewide: 2,196
- Patients Currently in ICU Statewide: 223
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 6.61% - 24.11 positive cases per 100,00 population
- Mid-Hudson: 6.06% - 25.34 positive cases per 100,00 population
Moderna Covid-19 Booster Shortage Leads to Fewer Appointments at Pharmacies
Some U.S. pharmacies and other vaccine providers are offering the new Covid-19 booster shot only from Pfizer Inc. and BioNTech SE, after a manufacturing-quality problem at a contract manufacturer caused a shortage of Moderna Inc.’s new booster shot. The supply crunch for Moderna marks an early stumble in the U.S. campaign to roll out updated booster shots to tens of millions of people ahead of a potential surge in Covid-19 cases this fall and winter, as people spend more time indoors.
A Moderna spokesman said the company anticipates resolving constraint issues in the coming days. “We are working closely with the U.S. government to deliver significant amounts of updated, bivalent booster doses as we continue to see high demand in certain areas of the country,” the spokesman said.
U.S. Chamber – MetLife Q3 Small Business Index Falls
This quarter, small businesses’ concern over inflation reached a new high as more brace for an uncertain future according to the latest MetLife & U.S. Chamber of Commerce Small Business Index. This quarter’s score of 62.1 represents the largest drop since the start of the pandemic. Increased pessimism about the broader economic environment and subdued future expectations both contributed to this downward shift. Small businesses also say they are now less confident in both the U.S. economy and their local economic environment and are less comfortable with their current cash flow.
Half of the small businesses (50%) say inflation is the top challenge facing the small business community, a drastic 31-point increase since this time last year. This is the fifth consecutive quarter of increasing concern over inflation. The share of small businesses who say their local economy is in poor health (42%) outweighs the percentage who say it’s in good health (31%) for the first time since Q1 2021.
Optimus Is Coming: Are You Ready For Tesla’s Robot Humanoid Invasion?
Whatever you think of Elon Musk, you can’t deny that his car company Tesla has been the leading force behind the switch to electrification. Now Tesla is hoping to start another revolution. Musk teased a humanoid robot at the last AI Day, and this year, he is expected to show off a working prototype. Originally called the Tesla Bot and now playfully renamed Optimus (after the Transformers Autobots character), the new bipedal being will (potentially) be marching onstage at the next Tesla AI Day on 30th September.
Optimus is expected to be 5 foot 8 inches (1.73m) tall, humanoid in appearance, and 125lbs (57kg) in weight. It will be able to walk at 5mph, not run, so you can easily get away from it. But it will have great carrying capacity, being able to deadlift 150lbs (68kg) and carry 45lbs (20kg). Musk has high hopes for Optimus. He suggests that it could do the cooking, mow lawns and care for the elderly. Nevertheless, he doesn’t see Optimus as replacing human beings, describing the robot as “friendly”. It is intended to do the jobs we don’t want to do.
The New York Fed DSGE Model Economic Forecast—September 2022
The outlook compared to June is slightly more pessimistic in terms of inflation, and broadly unchanged in terms of real activity. This evolution of the projections is the result of two forces. On the one hand, the model sees the underlying state of the real economy as stronger than it did in June. On the other hand, monetary policy is expected to be substantially tighter than in June, not only in absolute terms but also relative to the more elevated real natural rate.
The changed assessment of the underlying strength of the economy has implications for the inflation projections as well. The model attributes the current high inflation less to transitory factors, such as supply disruptions, and more to persistent factors. As a consequence, the model projects that inflation will remain elevated in 2022 at 4.1 percent, up 0.3 percentage points relative to June, and decline only gradually thereafter (to 3.1, 2.6, and 2.4 percent in 2023, 2024, and 2025, respectively—versus projections of 2.5, 2.1, and 2.0 percent in June). Because the Phillips curve is estimated to be flat in the DSGE, tighter monetary policy has a limited effect on the projected course of inflation.
Bloomberg to Spend $85 Million Against U.S. Plastic, Petrochem Buildout
Former New York City Mayor Michael Bloomberg launched an $85 million campaign to block the planned construction of plastic and petrochemical plants across the U.S. on Wednesday, modeled on his decade-long effort to shutter coal plants. At least 90 petrochemical and plastics projects have been proposed over the last decade, including 42 major construction projects
Bloomberg, the billionaire businessman who currently serves as a United Nations special envoy on climate ambition, said his philanthropic organization's Beyond Petrochemicals campaign will "turbocharge" efforts by local communities in places like Louisiana's Cancer Alley, Texas, and Appalachia to block the permitting and construction of heavy emitting plants.
Jobless Claims Rise Slightly, Remain at Low Levels
The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy's health, suggested that job growth remained solid this month. Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 17, the Labor Department said on Thursday. Data for the prior week was revised to show 5,000 fewer applications filed than previously reported. Economists polled by Reuters had forecast 218,000 applications for the latest week.
Unadjusted claims rose 19,385 to a still-low 171,562 last week. There was a surge in applications in Michigan and notable increases in California, Georgia, Massachusetts and New York. Only Indiana reported a significant decrease in filings.
FedEx Hikes Package Rates, Details Cost Cutting as Demand Weakens Globally
FedEx on Thursday announced rate hikes and detailed its cost-cutting efforts after the shipping giant warned last week that its fiscal first quarter results were hit by weakening global demand. Thursday, the company said that its Express, Ground and Home Delivery rates will increase by an average of 6.9%. Its FedEx Freight rates will increase by an average of 6.9%-7.9%, the company said.
It also said it believes it will save between $1.5 billion and $1.7 billion by parking planes and reducing flights. The closure of certain locations, the suspension of some Sunday operations, and other expense actions will save FedEx Ground between $350 million and $500 million, according to the company.
Health Care Spending for Mental Health Disorders Increased Between 2013 and 2020
Overall spending on mental health services increased from 6.8% to 8.2% between 2013 and 2020, according to a new study published by the Employee Benefit Research Institute (EBRI). Here are five key findings from EBRI’s research:
- The percentage of the population under the age of 65 with employment-based health coverage diagnosed with a mental health disorder increased from 14.2% in 2013 to 18.5% in 2020.
- The percentage of enrollees using outpatient services increased from 12% to 16%, a 33% increase.
- Among enrollees with a mental health diagnosis, average annual spending on mental health care services increased from $1,987 to $2,380 between 2013 and 2020 — an average of 3% per year.
- Spending on outpatient mental health services increased 37%, while spending on prescription drugs for mental health disorders fell 15%.
- Outpatient mental health care services accounted for two-thirds of total spending in 2020, up from just over one-half in 2013.
Toyota Cuts its Production Plan by 100,000 in October as Chip Shortages Continue
Despite efforts to ramp up output over the summer, the world’s biggest automaker said persistent supply chain troubles will force it to cut its global production plan by 100,000 units in October and by 50,000 in November. The automaker, struggling to recoup lost volume, said just last month that it wanted to manufacture 900,000 vehicles a month from September to November. But now, it sees output at 800,000 in October and averaging only 850,000 from October through December.
Despite the setback, Toyota said in its warning on Thursday that it was sticking to its plan to produce out 9.7 million Toyota and Lexus brand vehicles in the current fiscal year ending in March.
Pandemic Unemployment Benefits Fraud May Top $45 billion, Federal Watchdog Says
Some $45.6 billion in pandemic unemployment benefits may have been fraudulently paid to criminals between March 2020 and April 2022, the US Department of Labor's Office of the Inspector General said in a memorandum on Thursday. It's the latest report to identify widespread schemes to steal money from a variety of federal relief programs. The updated figure is a big jump from the $16 billion in potentially fraudulent unemployment payments that the office cited in a June 2021 alert, which looked at claims from March through October of 2020.
Since then, there were increases in payments tied to Social Security numbers of people who filed in multiple states, who were deceased and who used suspicious email accounts in their claims -- all deemed high-risk areas. The office said in Thursday's memorandum that it could not update payments tied to Social Security numbers of federal prisoners figure because of a lack of new data from the Federal Bureau of Prisons, which declined to provide it because of the burden the request would create on the bureau's resources and technological platform, the inspector general's office said.