Daily Briefing – 447
IHS Markit Survey: U.S. Business Activity Slows in January Amid Omicron Wave
U.S. business activity grew at its slowest pace in 18 months in January as a winter surge in COVID-19 infections worsened worker shortages at factories, though demand remained strong. The flash composite orders index slipped to a still-high reading of 55.0 from 56.6 in December.
Data firm IHS Markit said on Monday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to a reading of 50.8 this month from 57.0 in December. That was the lowest level since July 2020. A reading above 50 indicates growth in the private sector.
Why Did Almost Nobody See Inflation Coming?
Jason Furman, Professor of the Practice of Economic Policy at the Harvard Kennedy School and a former chair of President Barack Obama’s Council of Economic Advisers, writes that forecasting inflation is a staple of macroeconomic modeling, yet virtually all economists’ predictions for the United States in 2021 were way off the mark. This dismal performance reflected a collective failure to take economic models seriously enough, as well as other analytical shortcomings.
The extraordinary $2.5 trillion in fiscal support for the U.S. economy in 2021, amounting to 11% of GDP, was far larger than any previous fiscal package since World War II. A simple fiscal multiplier would have predicted that average output in the last three quarters of 2021 would be 2-5% above pre-pandemic estimates of potential. To think that a stimulus of this magnitude would not cause inflation…(was) implausible.”
Read more at Project Syndicate
Stocks Rebound After Volatile Trading Day
Stocks clawed back losses on Monday as investors looked ahead to a busy week of corporate earnings results, economic data and a Federal Reserve monetary policy-setting meeting after an already volatile stretch of trading. The CBOE volatility index, or VIX, jumped to as high as about 37.95, reaching its highest level since November 2020.
Expectations for tighter financial conditions out of the Federal Reserve this year have served as one major factor weighing on equity prices, especially for highly valued stocks that had benefited from the easy financial conditions and high liquidity environment the Fed had contributed to since 2020. The Nasdaq Composite ended in slightly positive territory after dropping 4.9% at session lows. And earlier, the S&P 500 was off by more than 10% from its record closing high from Jan. 3 before recouping declines. The Dow recovered losses of more than 1,100 points to end nearly 100 points higher.
Fauci Says He’s Confident Most States Reach Peak of Omicron in Mid-February
Anthony Fauci said Sunday he is “as confident as you can be” that most states in the U.S. will reach a peak in omicron infections over the next several weeks. “You never want to be overconfident when you’re dealing with this virus,” Fauci said “But if you look at the patterns that we’ve seen in South Africa, in the U.K. and in Israel … they have peaked and [are] starting to come down rather sharply.”
Fauci said there are some states, particularly in the South and West, that have seen an increase in omicron infections despite falling infection rates in other areas of the country where vaccination levels are higher. “But if the pattern follows the trend that we are seeing in other places, such as the Northeast, I believe that you will start to see a turnaround throughout the entire country.” He added that despite “varying” levels of vaccination across the country, “ultimately they’re all going to go in the same direction.”
US COVID – Omicron Pressure Eases in Some U.S. States, but Infections Remain High
Pressure has begun to ease on U.S. hospitals hit by the Omicron variant of the coronavirus, while some European governments took steps to reopen activities that were closed during the worst of the wave.
The seven-day average of total people in U.S. hospitals declined for the second consecutive day, reaching 158,788 on Saturday, according to data from the Department of Health and Human Services. The number of new admissions to hospitals across the U.S. was also down.
NYS Vaccine and COVID Update – Cases Per 100k (7-Day Average) Declining in All Regions
Vaccine Stats as of January 24:
One Vaccine Dose
- 87.0% of all New Yorkers – 16,113,489 (plus 6,114 from a day earlier).
- In the Hudson Valley 1,673,535 (plus 495).
Fully Vaccinated
- 73.6% of all New Yorkers – 14,291,817 (plus 4,640).
- In the Hudson Valley – 1,456,917 (plus 705).
Boosters Given
- All New Yorkers – 5,698,448
- In the Hudson Valley – 679,390
The Governor updated COVID data through January 24. There were 133 COVID related deaths for a total reported of 64,872.
Hospitalizations:
- Patients Currently in Hospital statewide: 9,798.
7 Day Average Positivity Rate – Cases per 100K population
- Statewide 10.00% – 119.67 positive cases per 100,00 population
- Mid-Hudson: 10.17% – 103.88 positive cases per 100,00 population
Useful Websites:
New York Officials Push to Turn the Page on Omicron
There are promising signs that New York is past the peak of the omicron wave of COVID-19 cases. The state had more than 30,000 new cases on Jan. 19, down from a peak of more than 90,000 cases on Jan. 8. Deaths, which have lagged behind cases, were over 250 per day in mid-January, still well below the April 2020 peak of about 1,000 deaths per day.
Last week Gov. Kathy Hochul cautioned, “We are not out of the woods yet with this winter surge.” And that is what worries many state leaders and health officials: If New York is still in the woods, then what lurks in the shadows? And is the state prepared for the next phase of the pandemic? “One hard lesson we learned about what happens when there’s a lack of investment is how our health care system crumbled under the stress of the pandemic and that’s why we’re making up for lost time,” she said.
Swiss Franc Rises to Near 7-Year High as Safe-Haven Flows Resume
The Swiss franc rose 0.2% early on Monday as safe-haven inflows driven by concerns over Ukraine pushed the currency to its highest level against the euro in nearly seven years. The franc reached 1.0325 euros, its highest level against the common currency since June 29, 2015. “Given that the Japanese yen is also up, and to some extent gold, it points to an increase in safe-haven demand,” said Maxime Botteron, an economist at Credit Suisse.
Concerns about the security situation on Ukraine’s border with Russia as well as the possibility of a snap election in Italy were driving investors’ demand for the franc, analysts said. “Additionally, I can fully understand that some investors are getting more nervous about the developments in Ukraine which is then leading to a stronger CHF as well.” Botteron added.
Manufacturers Will Bear the Brunt of the US Digital Skills Shortage
The global economy is becoming increasingly digitalized, with analysts at research firm IDC estimating 60% of global GDP will be digitalized (meaning largely impacted by the introduction of digital tools) by year-end 2022. Unfortunately, domestic and international digital skill assessments show America increasingly faltering and lagging global competitors.
America’s 12.4 million such “tech-workers” (according to industry association CompTIA) certainly excel here and power America’s tech leaders like Amazon, Apple, Google, Intel, Microsoft and others.
Where concern lies regards the American workforce’s facility with using digital tools in occupations in traditional industries (manufacturing, retail, healthcare, etc.). In manufacturing, this could pertain to workers’ ability, for instance, to interpret the output of AI-based systems; or to use automated reality/virtual reality (AR/VR) tools to repair an automobile or jet engine; or on a more basic level just interpret spreadsheets or use databases.
Workers Are Having Their Moment. How Long Can It Last?
It’s a good time to be an American worker. Wages are climbing higher, and they’re expected to stay that way for years. Employees can quit a job and likely find better pay elsewhere. Many companies are boosting salaries as they scramble to fill open positions. Today, just about anyone who wants a job now can get one, especially in manufacturing, mining and wholesale trade.
Strong wage growth could persist for years. Economists expect average hourly earnings to be up 4.9% from a year earlier in June before cooling slightly by the end of this year. They expect wage increases of roughly 4% for most of the next two years, up from about 3% in 2019.
Read more and see lots of interesting charts at the WSJ
Labor Department and NLRB Launch Joint Effort to Make Independent Contractors Union Members
At the beginning of January 2022, the Department of Labor (DOL) and National Labor Relations Board (NLRB) signed a memorandum of understanding (MOU) to share information, collaborate and coordinate on investigations of potential violations of federal labor and employment laws in regard to worker misclassification, dealing with both independent contractor status and joint-employment relationships.
This could turn out to be an ominous development for employers, according to attorneys William E. Collins Jr. and Maggie (Hanrahan) Santen of the Ogletree Deakins law firm. “Companies that use independent contractors or alternative workplace arrangements may want to consider monitoring these developments and auditing their own worker classifications to minimize the ever-growing risks in this area, to the extent possible,” they say.
Read more at Material Handling & Logistics
GM Renovating Lockport NY Factory so it Can Make Electric Motor Parts
General Motors says it will spend about $154 million to revamp an aging factory near Buffalo, New York, so it can make a key part for electric vehicle motors. The automaker says it will add about 230 jobs at the factory in Lockport, about 30 miles (48 kilometers) northeast of Buffalo, to build stator modules, the part that creates a magnetic field to turn the motor. The part will go into motors for new electric trucks and SUVs.
Currently the Lockport plant has about 1,500 workers who make radiators, condensers, heater cores, oil coolers and other parts for internal combustion engines in trucks and SUVs. The new positions would be filled between 2023 and 2026, the company said in a statement.
China’s Olympics Aim to Keep COVID at Bay with Armpit Sensors, Robots and More
Noodles will be served by a robot — just one of the many ways that China is aiming to keep the Olympics free of COVID-19 as an estimated 13,000 international athletes and journalists descend on Beijing, China’s capital, for the Winter Olympic Games that start on Feb. 4. The global surge in omicron cases has also put authorities on edge. In nearby Tianjin – a 20-minute high-speed train ride away from Beijing – authorities tested all 14 million residents after a few dozen omicron infections were discovered.
Hosting the Olympics presents a massive challenge for China, where for the last two years, authorities have implemented some of the most rigorous COVID-prevention policies in the world. The country has closed its borders to nearly all travelers and locked down cities over just a handful of infections.
The James Webb Space Telescope Glides to its Deep-Space Parking Spot
A firing of thrusters on Monday gently moved the James Webb Space Telescope into its orbit around L2, a point 1.5m kilometres up where the gravitational pulls of Earth and the sun are equal. The largest telescope ever put into space, the Webb, a NASA project, was launched at Christmas. All has gone well. In operations described as robotic origami, ground controllers have unfolded the five layers of a tennis-court-sized heat shield and the 18 segments of the telescope’s main mirror.
But the Webb is not quite ready to collect data on exoplanets and the Big Bang. A “cryocooler” with helium must first chill an infrared sensor to 6.7° Kelvin, nearly the temperature at which molecular motion stops. And the mirror’s sections have yet to be aligned to function as if they were a single piece 6.5 metres across. Actuators under the gold-plated beryllium segments will make adjustments measured in billionths of a metre. Expect the first images early this summer.
Do Vaccine Mandates Actually Work? The Canadian and European Experiences Suggest they Do – But at a Cost
Do vaccine mandates work? A new study by economists at Simon Fraser University in British Columbia suggests they do. In the week after the announcement of a vaccine requirement to enter bars, gyms and restaurants in Canadian provinces, the researchers found that first-dose vaccinations increased by 42% over the previous week and by 71% over two weeks. They estimated that 287,000 more people were vaccinated within six weeks as a result. They also found rises in vaccination rates once mandates were announced in France, Germany and Italy in the summer of 2021.
Despite such evidence, arguments over compulsory covid-19 vaccination are raging across Europe. Austria is in the vanguard, having made vaccination obligatory for adults from February. Others may soon follow. Rich countries are now diverging on restrictions. Some are doubling down and proposing more punitive mandates. Quebec now has plans to introduce a “health contribution fee”. In America, left without a federal mandate, the vaccine-refusal problem may grow more entrenched.
