Daily Briefing – 342

Post: Jul. 18, 2021

Red-Hot U.S. Economy Expected to Cool

Economists surveyed this month by The Wall Street Journal, on average, estimated that the economy expanded at a 9.1% seasonally adjusted annual rate in the April to June period. That would mark the second-fastest pace since 1983, exceeded only by last summer’s rapid rebound when businesses started to reopen and governments began easing pandemic-related restrictions.

The survey respondents see growth cooling to a 7% pace in the third quarter and drifting down to a 3.3% rate in the second quarter of 2022. They also estimate U.S. gross domestic product surpassed its pre-pandemic levels in the second quarter.

Empire Manufacturing Survey: Activity Surges

Manufacturing activity surged in New York State, according to the July survey. The general business conditions index rose twenty-six points to 43.0, a record high. Half of respondents reported that conditions had improved over the month, while just seven percent reported that conditions had worsened.

The new orders index climbed seventeen points to 33.2.
The shipments index increased thirty points to 43.8.
Unfilled orders rose.
The delivery times index fell ten points from last month’s record high to 20.2,
The index for number of employees increased eight points to 20.6,
The average workweek index held steady at 14.0, pointing to ongoing gains in employment and hours worked.
The prices paid index edged down just slightly to 76.8.
The prices received index climbed six points to 39.4, a new record.
Inventories expanded considerably.

Portman: No IRS “Pay-Fors” in Infrastructure Bill

Republican Sen. Rob Portman (Ohio) on Sunday said the bipartisan infrastructure bill will not include improving IRS enforcement of existing laws as a way to fund the new investments.

“One reason it’s not part of the proposal is that we found out that the Democrats were going to put a proposal into the reconciliation package, which was not just similar to the one we had but with a lot more IRS enforcement,” Portman said. “President Biden to his credit, said that we will not be renegotiating these items in the reconciliation package,” he added. Biden last month announced that he and a group of Republican and Democratic senators reached an infrastructure deal after months of negotiations.

WHO Chief : Push to Discount COVID-19 Lab Leak Theory Was ‘Premature’

WHO Director-General Tedros Adhanom Ghebreyesus has asked China for greater transparency in the search for the coronavirus’s origins. Tedros said the earlier push to rule out the possibility of a lab leak in Wuhan was premature: “I was a lab technician myself, I’m an immunologist, and I have worked in the lab, and lab accidents happen. It’s common.”

In recent months, the idea that the pandemic started somehow in a laboratory – and perhaps involved an engineered virus – has gained traction. China has struck back aggressively, arguing that attempts to link the origins of Covid-19 to a lab were politically motivated and suggesting that the virus might have started abroad. At WHO’s annual meeting of health ministers in the spring, China said that the future search for Covid-19’s origins should continue – in other countries.

NYS Vaccine and COVID Update –

Vaccine Stats as of Sunday morning:

One Vaccine Dose

61.6% of all New Yorkers – 11,841,315 (plus 17,881 from a day earlier)
In the Hudson Valley 1,256,728 (plus 1,928)

Fully Vaccinated

55.9% of all New Yorkers – 10,879,061 are fully vaccinated (Plus 18,417)
In the Hudson Valley – 1,141,520 (plus 1,758) are fully vaccinated.

The Governor updated COVID data through Saturday July 17th. There were 2 COVID related deaths for a total of 43,031.

Hospitalizations:

Patients Currently in Hospital statewide: 352

Seven Day Average Positivity Rate:

Statewide 1.26%
Mid-Hudson: 1.01%

Useful Websites:

US COVID – Cases Are Rising

The US is averaging 26,306 new cases per day, more than double the low of 11,472 on June 20. Superficially, the epi curve over the past several weeks closely resembles the early stages of previous US surges. Daily mortality has increased over the past several days as well, up to 211 deaths per day from a low of 154 on July 11—a 37% increase over the past 4 days.

If this is the beginning of a longer term increasing trend in daily mortality, it would correspond to a lag of 3 weeks behind the trend in daily incidence, which is consistent with trends we have observed over the course of the pandemic. Analysis from the New York Times indicates that all 50 states are exhibiting increasing daily COVID-19 incidence over the past 2 weeks, including 22 (plus Washington, DC and Puerto Rico) that have doubled or more over that period.

Why Do New SARS-CoV-2 Variants Spread More Easily?

VIRUSES, LIKE all organisms, have life-cycles. Theirs are parasitic, beginning when a parent virus infects another creature and hijacks its cells to make copies of itself. This cellular invasion is helped by a protein that studs the surface of the virus, known as the spike. Changes to the spike, driven by genetic changes from mutation, alter the virus’ overall properties, particularly its capacity to spread through populations.

Changes to the shape of spike are not the only way to increase transmissibility. Delta appears to be even more transmissible than Alpha and the other variants. Ravindra Gupta, a molecular virologist at Cambridge University, and his colleagues argue that Delta’s increased transmissibility is down, in part, to a mutation that makes it easier for the protein to be cut up and thus get into cells. That can lead to virus particles which are shorn of the parts which antibodies recognize and ready to fuse with any nearby cell. It can also encourage infected cells to clump together with others.

Hudson Valley Manufacturers add 1,400 Jobs Year on Year

Private sector jobs in the Hudson Valley rose over the year by 72,200, or 10.6 percent, to 754,000 in June 2021. The largest gains were in leisure and hospitality (+28,900). Manufacturing gained 1,400 jobs. Employment in the sector now stands at 41,700.

The June 2021 over-the-year job gains continued to reflect the reopening of the economy as more pandemic-related restrictions around businesses are lifted. Year-over-year, the region’s leisure and hospitality sector grew the fastest, up 52.9 percent or 28,900 jobs. While the region’s leisure and hospitality sector has regained a large portion of the jobs lost, it remains 19,200, or 18.7 percent below the pre-pandemic levels of June 2019.

Read the Labor Market Profile (Hudson Valley)

New Weekly Jobless Claims Reached a Pandemic-Era Low 360,000

New weekly jobless claims fell to the lowest level since March 2020, closing back in on pre-pandemic levels as the rate of new joblessness slowed further.

Initial jobless claims, week ended July 10: 360,000 vs. 350,000 expected and a revised 386,000 during prior week.
Continuing claims, week ended July 3: 3.241 million vs. 3.300 million expected and a revised 3.367 million during prior week.

Continuing jobless claims also improved to the lowest level since March 2020.

US Chamber Q2 Small Business Index: Less than Half of Small Business Owners Can Find Workers

Last week, the U.S. Chamber and MetLife released the Q2 2021 Small Business Index. The Q2 index in particular focused on how the worker shortage and lack of active recruitment are having effects on small business workflow.

Among other insights, the Q2 Small Business Index finds that:

48% of small businesses with 5-19 employees say it was hard to find enough candidates to fill open positions;
Additionally, 44% of these sized businesses said it was hard to find candidates with the needed experience and 41% of them said it was hard to find workers with the right skills, and;
26% of businesses plan to find new ways to advertise or to increase pay (24%), while 22% of small businesses plan to offer more flexible working hours and 21% planning to offer a hybrid or remote work environment.

Can You Screen for Marijuana? It’s Complicated

Marijuana is legal in some capacity—either recreationally or medically—in all but three states. Some jurisdictions have completely decriminalized it, some allow only medical use, and some localities, like New York City, have rules forbidding companies from testing for it for hiring purposes.

As companies prepare to navigate the changing marijuana landscape, they need to think of it in two ways. First is the regulatory perspective, where you look at what’s required under the law. And the other side of the coin is almost a philosophical angle where companies should be thinking, “What kind of employer do I want to be? What kind of workplace do I want to provide? What should I do from an ethical perspective?”

OPEC Agrees to Boost Oil Supply Amid Price Surge

OPEC said it will add 400,000 barrels each month by the end of the year and agreed to new production adjustments amounting to 1.63 million more barrels per day that will begin in May 2022. The group also agreed to extend an existing pact from April 2022 to the end of 2022, according to Reuters.

OPEC reportedly agreed with member countries including the United Arab Emirates, Saudi Arabia, Russia, Kuwait, and Iraq on new output quotas. The UAE, for example, will see its baseline production rise from 3.168 million to 3.5 million barrels per day in May of 2022.

Intel in talks to buy GlobalFoundries

Intel Corp is in talks to buy semiconductor manufacturer GlobalFoundries Inc for about $30 billion, the Wall Street Journal reported on Thursday, citing people familiar with the matter.

Intel, one of the last companies in the semiconductor industry that both designs and manufactures its own chips, said earlier this year it would expand its advanced chip manufacturing capacity by spending as much as $20 billion to invest in factories in the U.S. Any deal would likely not include the Fishkill plant which is in the process of being sold to ON Semiconductor. The plant in Malta likely would be included.

Samsung Considers 2nd Chip Facility in Texas

Samsung Electronics has filed for tax breaks in a second Texas jurisdiction for its proposed chip plant in Texas worth $17 billion in investment and up to 1,800 jobs. The latest incentives filing, in the Taylor Independent School District in Williamson County, projects construction beginning in the first quarter of 2022 and production starting before 2025.

Samsung reiterated in its filing that it is also looking at alternative sites in the United States including Arizona and New York, as well as in South Korea. Should an investment be made, Samsung plans to break ground by the first quarter of next year with production due to start by end-2024.

CohnReznick Manufacturing M&A Report Shows Increasing Activity

Council of Industry Associate Member Cohn Reznick Report that the Manufacturing and Distribution sector experienced healthy deal flow in Q2 2021, a period in which deals inched closer to prior years, due to the rebound taking place across most industries as COVID-19 vaccination efforts gain momentum and business activity picks back up. By the end of June, deal-making in the Manufacturing and Distribution sector began to look more like the first half of 2019. We’re not quite there yet, but we’re getting close.

As B2B and B2C demand continues to rise, the Manufacturing and Distribution sector has been trying to manage supply chain shortages, transportation challenges, and labor constraints, among other changes, and there may be some delay in transactions closing as these challenges are managed. While Q3 may be slower for transactions to close, we expect a massive push in Q4 to get deals closed in advance of any capital gains tax increase.

Global Inflation: Don’t Panic, But Keep a Watchful Eye

In January an inhabitant of a midwestern city—Cleveland, say—could buy a three-year-old Toyota Camry for about $18,000 and fill up its 60 litre petrol tank for about $28. By May, the car would have cost them 22% more and the 16 gallons of gas 27% more. As the American economy has risen from its pandemic slumber, the prices of durable goods and commodities have soared. The fact that prices—and in particular commodity prices—fell during the spring of 2020 meant that what are known as “base effects” would drive headline inflation up this summer.

A sustained rebound in inflation, however, would be bad news for two reasons. First, inflation hurts. Life-satisfaction surveys carried out in the 1970s and 1980s found a one-percentage-point rise in inflation reduced average happiness about as much as a 0.6-percentage-point rise in the unemployment rate. If it catches workers by surprise it erodes their wages, hurting the lowest paid the most; if it catches central banks by surprise they may have to slow the economy, or even engineer a recession, to put the beast back in its cage.

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