Member Briefing September 26, 2023
Why America Has a Long-Term Labor Crisis, in Six Charts
The U.S. economy has been running, improbably, with an unemployment rate under 4% for nearly two years. That isn’t just a holdover from pandemic bottlenecks, when employers let millions of people go and then struggled to find workers when demand roared back, economists and business leaders say. It is a storm that has been brewing for decades, flaring up most recently in the form of worker strikes at automakers and airlines. Labor shortages are turning into a long-term labor crisis that could push wages and turnover higher.
Work experts have warned for years that the combination of baby boomer retirements, low birthrates, shifting immigration policies and changing worker preferences is leaving U.S. employers with too few workers to fill job openings. While the labor market is softening, none of those factors are expected to change dramatically in the coming years. Total employment will grow about 0.3% a year until 2032, the Labor Department recently projected, much slower than the 1.2% rate over the past decade, largely because of population constraints. That will contribute to slower growth in gross domestic product, the agency said.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russia’s Invasion Triggers Baby Bust in Ukraine - WSJ
- Russia Plans to Increase Spending by More than 25% Next Year – Financial Times
- Ukraine Claims Commander of Russia’s Black Sea Fleet Was Killed in Sevastopol Attack - CNN
- Ukraine Must Surrender or 'Cease to Exist,' Russian Official Says: Live Updates - USA Today
- Standing Ovation for a Ukrainian Who Fought With the Nazis Sparks Anger and an Apology in Canada - NBC
- Ukraine is Building an Advanced Army of Drones. For Now, Pilots Improvise With Duct Tape and Bombs - AP
- Ukraine War Map Shows Zelensky Gains as Putin Allegedly Delivers Ultimatum - Newsweek
- Deal ‘With the Devil’: Meet the Cubans Who’ve Joined Russia’s War on Ukraine - Politico
- 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
House Looks to Advance Four Spending Bills
The House this week will hold a vote on advancing four spending bills — a move that will not help avert an end-of-the-month shutdown, but one that GOP leaders see as part of a strategy to send a conservative stopgap bill to the Senate. The chamber is expected to vote on a rule, which governs debate on legislation, for four spending bills Tuesday, legislation that funds the Department of Defense; Department of Homeland Security; Department of State and foreign operations; and the Department of Agriculture, rural development and Food and Drug Administration.
House GOP leaders are hoping that the movement of individual spending measures will help appease conservatives — who have called for the consideration of single-subject appropriations measures — and in turn make them more open to a stopgap bill. House GOP leaders unveiled a GOP-crafted continuing resolution last week that would keep the government funded until Oct. 31, decrease spending to fiscal 2022 levels, include the bulk of the House GOP’s marquee border bill and create a commission on the national debt to examine mandatory and discretionary spending.
Senate to Move on Stopgap Bill to Avert a Shutdown
As House Republicans remain in chaos, the Senate this week will move to consider a stopgap bill to avert a shutdown at the end of the month. The chamber is slated to vote on the motion to invoke cloture on the motion to proceed to the House-passed bill to reauthorize the Federal Aviation Administration (FAA), legislation that could serve as the legislative vehicle to pass a continuing resolution.
Schumer teed up the vote last week, saying, “We must work in a bipartisan fashion to keep our government open, avoid a shutdown, and avoid inflicting unnecessary pain on the American people. This action will give the Senate the option to do just that,” he added in remarks on the Senate floor. If the Senate does pass a bipartisan stopgap bill and sends it to the House, it could spell trouble for McCarthy, who faces pressure from his right flank to oppose a continuing resolution and, if he has to swallow one, make sure it includes spending cuts and conservative policy riders.
COVID Update - COVID Vaccine Rollout Snarled by Insurance Denials, Canceled Appointments
Some consumers trying to get updated versions of the COVID-19 vaccine this week have encountered red tape, canceled appointments and delays getting private insurance to cover the shots. The major snarl comes amid a systemic shift, as the federal government no longer pays for or distributes all COVID-19 vaccinations. Public and private-sector health insurance providers must pay the full cost of the shot plus an administrative fee. Uninsured patients can still get free shots through a federal government program
Millions of doses of the updated vaccines from Pfizer-BioNTech and Moderna have been shipped to pharmacies and clinics since the Centers for Disease Control and Prevention approved new versions. The agency has recommended that everyone older than 6 months get updated shots, which target more recent variants of the virus that causes COVID-19. While chain pharmacies busily give customers their shots, it's been stressful for many people looking to get vaccinated. Dozens have turned to social media to share stories about insurer roadblocks, delays in appointments or out-of-network denials.
Reactions to Hochul’s Agency Budget Freeze
In a Thursday memo, the New York state budget director told agency commissioners that budget requests for the next fiscal year should not exceed what they received for the current year. Empire Center for Public Policy says the administration is making a responsible decision. Research Director Ken Girardin said a spending rate that has nearly doubled over the last three years compared to the prior decade and overly optimistic tax revenue projections appear to have put the state in a hole. “There's about a $10 billion difference between revenues and expenses,” Girardin said. The budget office revised its projections in June to reflect the gap.
However, the left-leaning Fiscal Policy Institute points out there have been relatively strong tax receipts since. "We think that those projections of future budget gaps are really driven by one month of bad tax receipts and that the fiscal picture has been steadily improving since those projections were turned out," Executive Director Nathan Gusdorf said. Both organizations agree it is currently a time of economic growth, but a recession could be in the near future. While Empire Center says that's the reason not to use reserves, FPI argues it's important for spending growth to keep pace with overall economic growth during times of uncertainty and advocates for a wait and see approach.
Ford: 'Significant Gaps' Remain in UAW Labor Contract Talks
Ford Motor said on Sunday that despite progress in some areas, it still has "significant gaps to close" on key economic issues before it can reach a new labor agreement with the United Auto Workers union. The "issues are interconnected and must work within an overall agreement that supports our mutual success," it said in a late evening statement after talks over the weekend. The UAW, which on Friday cited "real progress" in talks with the No. 2 U.S. automaker, did not immediately comment.
UAW President Shawn Fain said Friday that Ford had improved its contract offer, including boosting profit sharing and agreeing to let workers strike over plant closures but said the union still had serious issues to resolve. The Detroit Three automakers have proposed 20% raises over 4-1/2 years, while the UAW is seeking 40% along with 32-hour-work weeks, the return of defined benefit pensions and to eliminate wage gaps separating newer and older employees.
Business Gloom in Germany
Germany’s Ifo institute, an economic-research outfit, released its latest survey of business confidence (the Business Climate Index) on Monday. The state of mind of the country’s bosses did not provide much cheer, as the index fell for the fifth consecutive month, albeit only slightly. German business leaders are mired in pessimism following a series of gloomy statistics on the state of the economy. Principally, they are concerned about an IMF forecast that it will probably be the only major economy to shrink this year.
Moreover, energy prices remain high, the government is cutting cumbersome red tape only slowly and selectively, the cold winter months are looming and the war in Ukraine is unlikely to end any time soon. Many companies cannot find skilled staff, or indeed any staff. But at least businesses are still hiring; order books remain full and unemployment remains low. None of that, however, is enough to lift the mood of general malaise.
Existing-Home Sales Decreased 0.7% in August
Existing-home sales moved lower in August, according to the National Association of REALTORS®. Among the four major U.S. regions, sales improved in the Midwest, were unchanged in the Northeast, and slipped in the South and West. All four regions recorded year-over-year sales declines. Total existing-home sales1 – completed transactions that include single-family homes, townhomes, condominiums and co-ops – slid 0.7% from July to a seasonally adjusted annual rate of 4.04 million in August. Year-over-year, sales fell 15.3% (down from 4.77 million in August 2022).
The median existing-home sales price climbed 3.9% from one year ago to $407,100 – the third consecutive month the median sales price surpassed $400,000. The inventory of unsold existing homes dipped 0.9% from the prior month to 1.1 million at the end of August, or the equivalent of 3.3 months' supply at the current monthly sales pace.
Ford’s Canadian Auto Workers Back Labor Deal With 15% Wage Bump
The union representing Ford Motor’s F 1.89%increase; green up pointing triangle auto-factory workers in Canada said Sunday that it secured double-digit wage increases and improved pensions in its labor pact with the automaker. Unifor, which represents about 5,600 Ford workers across facilities in Canada, outlined terms of the deal it reached last week with the U.S. automaker.
The Canadian union said 54% of its Ford members voted in favor of the new three-year contract, ratifying the agreement. Workers would receive a 15% general wage increase over the three-year contract—including a 10% bump in the first year, plus cost-of-living adjustments, Unifor said, calling it the largest negotiated wage increase in the union’s history. Ford’s contract talks in Canada have been running parallel to its negotiations with the United Auto Workers in the U.S.
Washington Add Most Manfuacturing Jobs of States in August
Washington created the most net new manufacturing jobs in August, adding 2,800 workers. Other states with notable employment growth for the month included Georgia (up 2,700), Texas (up 2,600), Florida (up 1,400), California (up 1,300) and Pennsylvania (up 1,300). At the same time, Texas (up 31,200) reported the greatest growth in manufacturing employment over the past 12 months. Other states with significant year-over-year gains included Florida (up 13,100), Kentucky (up 9,000), Washington (up 6,000), Ohio (up 3,500) and Louisiana (up 3,100).
In August, the U.S. unemployment rate rose from 3.5% to 3.8% as more Americans reentered the labor force. At 1.7%, Maryland had the lowest unemployment rate nationally, followed closely by New Hampshire (1.8%), Vermont (1.8%), North Dakota (1.9%) and South Dakota (1.9%). At the other end of the spectrum, Nevada had the highest unemployment rate in the country at 5.4%. Other areas with elevated rates included the District of Columbia (5.0%), California (4.6%) and New Jersey (4.2%).
JPMorgan’s Energy Guru Warns Oil Prices are Headed to $100 Per Barrel
Oil production cuts by Russia and the Organization of the Petroleum Exporting Countries (OPEC) have helped push Brent crude prices up some 10% over the past month to roughly $93 per barrel. Christyan Malek, JPMorgan’s head of EMEA energy equity research, fears it’s just the beginning of an era of higher prices. “Put your seatbelts on. It’s going to be a very volatile supercycle,” the energy guru told Bloomberg Friday when discussing what to expect next for the oil market. Although a major psychological milestone, $100 oil isn't what it used to be because of inflation. A barrel that today costs $100 is the equivalent, in real dollars, to a $71 barrel in 2010 and a $56 barrel in 2000.
Malek, like a growing number of his peers on Wall Street, believes that a lack of investment in new oil production, coupled with production cuts from OPEC and other top oil producers, will lead to higher crude prices for years to come. “The flow of capital into new oil supply is just not what it was like in the last 30 years,” he said. “So what that’s doing is driving the long-term price, the back end of the curve, up to $80, or north of $80. We think it probably normalizes around $100.”
US Finalizes Rules to Prevent China from Benefiting From $52 Billion in Chips Funding
The U.S. Commerce Department on Friday is issuing final rules to prevent semiconductor manufacturing subsidies from being used by China and other countries deemed to pose American national security concerns. The regulation is the final hurdle before the Biden administration can begin awarding $39 billion in subsidies for semiconductor production. The landmark "Chips and Science" law provides $52.7 billion for U.S. semiconductor production, research and workforce development.
The regulation prohibits funding recipients from significantly expanding semiconductor manufacturing capacity in foreign countries of concern for 10 years. It also restricts recipients from some joint research or technology licensing efforts with foreign entities of concern but allows for international standards, patent licensing, and utilizing foundry and packaging services. The final rules prohibit material expansion of semiconductor manufacturing capacity for leading-edge and advanced facilities in foreign countries of concern for 10 years. It also clarifies wafer production is included within semiconductor manufacturing.
$98M Awarded for Lockheed to Revamp F-35 Maintenance, Improve Supply Chain Efficiency
The U.S. Department of Defense extended a $98-million contract to Lockheed Martin for the F-35 fighter aircraft manufacturer to develop and propose “production engineering” changes that would increase the performance life of F-35 aircraft parts. The DoD announcement does not specify a delivery date for any changes to be introduced or completed. The DoD award followed one day after the U.S. government’s General Accounting Office issued a report blaming the F-35 supply program for failing to provide sufficient spare parts and technical data, poor maintenance training of military personnel, and an inadequate network of F-35 repair depots.
According to the GAO, F-35 maintenance and repair problems that cannot be handled by military maintenance units cost the U.S. government billions of dollars annually, and that cost has impeded the military depots from establishing their own effective MRO capabilities for the F-35. Lockheed’s new contract also calls for it to develop and deliver “retrofit engineering release reports, investigations and subcontractor support for investigations and qualifications” that will contribute to increasing F-35 components’ service life.