General

China’s cyber-spying capabilities are “an epoch-defining threat,” the top U.S. cybersecurity official warned this week, according to CNBC.

What’s going on: Aggressive cyber actions by China are “‘the real threat that we need to be prepared for,’ Cybersecurity and Infrastructure Security Agency Director Jen Easterly said at an appearance Monday at the Aspen Institute in Washington, D.C.”

• Easterly was answering a question about the recent discovery of Chinese cyberattacks on the U.S. military and the private sector, by a group dubbed “Volt Typhoon.”

Why it’s important: The U.S. should expect groups like Volt Typhoon to try to target pipelines and railways, Easterly said, adding, “It’s going to be very, very difficult for us to prevent disruptions from happening.”

The backdrop: Tensions have escalated between China and the U.S., leading to greater concern about attacks.

• “Fending off cyber threats from China and Asia has become a top priority for the U.S. government, which has begun to describe in clearer and blunter terms the links between the Chinese government and myriad hacking groups.”

More than 99% of International Longshore and Warehouse Union Canada workers whose jobs are critical to West Coast port operations voted in favor of a labor strike, according to CNBC.

What’s going on: “The vote, which took place on June 9–June 10, occurred during a 21-day cooling-off period between the British Maritime Employers Association and ILWU Canada. Negotiations with the Federal Maritime Conciliation Service started on March 28. Two mediators appointed by the Canadian government were overseeing the discussions that ran through the end of May.”

• June 24 is the soonest a strike would occur.

In the U.S.: The Canadian development—which threatens the Port of Vancouver, the largest port in Canada—comes as tensions rise in the U.S. between the ILWU and the Pacific Maritime Association, which have been negotiating a labor contract since May 2022.

Why it’s a problem: About 15% of container trade that comes through the Port of Vancouver is destined for or coming from the U.S.

• “Canadian shippers could shift trade to the neighboring Port of Seattle, but the Port of Seattle has been significantly impacted by labor slowdowns and work stoppages which led to its closure on Saturday as the ILWU in the U.S. continues to negotiate with the Pacific Maritime Association for a new contract, with wages and automation proving to be sticking points.”

Why it’s important: The events in Canada are “a significant blow to operations on the West Coast,” ITS Logistics Vice President of Drayage and Intermodal Paul Brashier told the Journal.

• “These ports are vital to Midwest manufacturers and the auto industry, as most transpacific freight enters at these points prior to interlining to rail and going to inland rail ramps in Chicago and other major markets. More significant is that these ports were used as relief valves to avoid ILWU activity.”

Our view: The NAM has been recommending White House intervention in the U.S. labor dispute for many months.

• “[With] the dramatic impact of port closures, your leadership and intervention are needed,” NAM President and CEO Jay Timmons told President Biden last week. “Manufacturers respectfully encourage you to bring the parties back together and reach a final agreement that reopens our West Coast ports and eliminates the threat of additional supply chain disruptions.”

Producer prices dropped more than expected in May, and the annual producer-inflation increase was the smallest in almost two-and-a-half years, Reuters (subscription) reports.

What’s going on: “In the 12 months through May, the [Department of Labor’s Producer Price Index] climbed 1.1%. That was the smallest year-on-year rise since December 2020 and followed a 2.3% increase in April. The annual PPI rate is moderating as last year’s surge drops out of the calculation.”

• Producer prices for final demand goods fell 1.6% in May, owing largely to falling energy costs, after increasing an unrevised 0.2% in April.
• Economists surveyed by Reuters had predicted the PPI would dip 0.1% from April and rise 1.5% year-on-year.

The backdrop: The report comes a day after the Labor Department reported the smallest year-on-year increase in U.S. consumer prices in more than two years.

Why it’s important: Federal Reserve “officials are expected to keep rates unchanged at the end of their two-day meeting, for the first time since March 2022 when the U.S. central bank embarked on its fastest monetary policy tightening campaign in more than 40 years. … [The central bank] was seen leaving the door open to further rate increases given the economy’s resilience, particularly the labor market.”

The U.S. railway system may be a solution to serious energy problems, according to ENERGYWIRE’s E&E News (subscription).

What’s going on: During extreme weather events, “trains could dispatch batteries across the country, preventing blackouts without expensive new energy infrastructure,” according to a new Department of Energy study cited by the news source.

• The fix would be less expensive than constructing either new transmission infrastructure or standalone battery storage for extreme-weather occurrences, researchers found.

Why it’s important: Approximately two-thirds of the U.S. is at risk of blackouts this summer, the North American Electric Reliability Corporation warned recently.

Power by rail: Just one train could carry enough battery storage to supply 50,000 households with energy for 12 hours, researchers found.

• “The reach of the country’s 140,000-mile rail network also makes it attractive from a grid perspective, since it extends into dense population centers and transmission-congested regions. That reach has already prompted DOE to identify rail rights-of-way as potential hot spots for a transmission buildout.”

However … While mobile battery storage looks promising, it needs further exploration on a larger scale, one source told E&E News.

As demand for raw materials escalates, mining companies in the U.S. are struggling to find enough workers to keep up, reports The Wall Street Journal (subscription).

What’s happening: The U.S. is advancing its green-energy transition while also developing new domestic sources of minerals to decrease reliance on China.

Workforce shortage: “The overall industry’s seasonally adjusted head count shrank by nearly 39% since 1990 … according to the Bureau of Labor Statistics.”

• While colleges and universities—not to mention companies themselves—are working to fill the gap, they are not turning out new workers fast enough.
• “‘The problem is that talent isn’t lying around waiting to be paid more—there just isn’t enough of it,’ said Andrea Brickey, an associate professor of mining engineering and management at the South Dakota School of Mines & Technology.”

Get help: If you are searching for ways to attract or upskill workers, the Manufacturing Institute (the NAM’s 501(c)3 workforce development and education affiliate) has you covered. It can also help you start preparing now for manufacturing’s biggest opportunity to reach young people and prospective workers: MFG Day.

The yearly rate of inflation slowed in May to less than half of what it was at its peak last year, but it’s still far higher than the Federal Reserve’s goal, according to The Wall Street Journal (subscription).

What’s going on: Consumer prices increased 4% in May from a year earlier, marking the 11th straight month of slowdowns.

• On a monthly basis, consumer prices rose 0.1% in May, following a 0.4% increase in April.
• Core consumer prices—which exclude food and energy and are considered a better predictor of future inflation—rose 5.3% year-over-year in May, owing partly to increasing rent costs.

The good: “The U.S. economy has maintained momentum this year, staving off predictions of recession. The job market remains robust, and consumers have boosted their spending, though one measure shows economic output is falling. A possible credit crunch following the March collapse of a few regional banks could crimp the economy.”

The not so good: “While inflation has cooled significantly, higher prices for many goods and services are weighing on household spending decisions.”
 
What’s coming: The Fed meets today and tomorrow to determine its next steps for interest rates, which it has raised aggressively in the past year—though it probably will not raise them again this week, according to NAM Chief Economist Chad Moutray.

• The Fed “is likely to make no changes to the federal funds rate this week, but with inflation remaining more stubborn than preferred, it could hike short-term rates by 25 basis points at either or both of its July 25–26 and Sept. 19–20 meetings before hitting the pause button on rate changes,” he said.

As job growth has risen in industries that don’t require college degrees, high school graduates are increasingly going directly into the workforce, according to The Wall Street Journal (subscription).

The big number: “The college enrollment rate for recent U.S. high school graduates, ages 16 to 24, has declined to 62% last year from 66.2% in 2019.”

• At the same time, the unemployment rate for teenage workers fell to a 70-year low of 9.2% last month.

What’s happening: High school graduates are turning toward jobs that offer competitive wages, particularly in industries like manufacturing, without requiring a pricy degree beforehand.

• For example, machinists earn $23.32 an hour, above the national median wage of $22.26 an hour.
• “If you can get [a job] without a B.A. and with decent wage growth, why go get a B.A.?” as ZipRecruiter Chief Economist Julia Pollak put it.

Demand for training: Meanwhile, more young people are pursuing other forms of job training.

• “The number of apprentices has increased by more than 50%.”
• The changing economy has led to wider acceptance of forgoing college, as employers’ interest in hiring high school graduates has grown, according to Steve Boden, a supervisor at Maryland’s Montgomery County Public Schools.

What we’re doing: The Manufacturing Institute, the NAM’s 501(c)3 workforce development and education affiliate, has been training students so they can enter rewarding career paths that do not require degrees.

• FAME, founded by Toyota in 2010 and currently operated by the MI, is a work/study career pathway program that provides education, training and certifications for the Advanced Manufacturing Technician occupational track.
• If you are interested in understanding the FAME model of skills or what it takes to join or start a chapter, sign up for an informational session here.​​​​​​​​​​​​​​

The number of ships waiting to dock at the ports of Los Angeles and Long Beach is growing as labor slowdowns continue, according to CNBC.

What’s going on: “On Wednesday, six vessels were delayed at the Port of Los Angeles, while two vessels at the Port of Long Beach were at anchor on arrival—unable to interface with the port operations, according to a vessel update announced by the Marine Exchange of Southern California Vessel Traffic Service, Los Angeles and Long Beach.”

• The backlogs are the result of a long-simmering labor dispute between the International Longshore and Warehouse Union and the Pacific Maritime Association—dockworkers and their employer, respectively.
• Earlier this week, the largest terminal operator at the Port of Long Beach closed for day and night shifts, following a weekend when many longshore workers did not show up for work. Scattered labor activity has resulted in operational disruptions at ports across the coast since last Friday.

The background: The ILWU and PMA have been negotiating terms of a work contract for more than a year, and dockworkers have been operating without a contract since last July.

Why it’s important: “Data from MarineTraffic shows that vessel problems are shifting from isolated to more pervasive. Over the past 2½ months, average wait times at anchorage in LA were between a half-day to 1½ days, with service time averaging of two to five days. ‘This indicates we’ve broken past the ‘normal’ and are back into a stressed maritime supply chain,’ said Capt. Adil Ashiq, head of North America for MarineTraffic.”

• The disruptions—which come as peak inventory-building season begins for shippers—could ultimately contribute to the kind of container congestion seen during the global pandemic.

Pushing for White House weigh-in: On Wednesday, NAM President and CEO Jay Timmons urged President Biden to intervene in the negotiations and cited an economic study that found even a brief, localized port closure could cost the U.S. economy nearly $500 million a day.

• “This ongoing work stoppage will exacerbate inflation and lead to dramatic economic consequences across all industrial and consumer product sectors,” wrote Timmons. “Your leadership and intervention are needed.”

Two-thirds of the U.S. is at risk of energy shortfalls this summer—and that share is only going to grow “[u]nless reliability and resilience are appropriately prioritized,” the North American Electric Reliability Corporation warned the Senate at a recent hearing, according to CBS Austin.

What’s going on: In most of the country, “there is the potential of running low on resources including electricity,” CBS reports. “The causes include an overwhelmed electric grid, the slowing use of fossil fuels like coal and natural gas to balance the use of the grid and new regulations like a lengthy permitting process that makes developing new energy take too long.”

• The NERC recently released its 2023 Summer Reliability Assessment, in which it details how, in the current push toward greater use of renewables, “the pace of change is overtaking the reliability needs of the [transmission grid] system,” NERC President and CEO James Robb told the Senate Energy and Natural Resources Committee last week.

​​​​​​​ Why it’s important: “The hearing comes as more and more Americans are expected to rely on electricity, even being rewarded by switching to electric cars,” according to CBS. “‘When electricity is unreliable, the potential consequences are catastrophic, including loss of human life,’ said Sen. Joe Manchin, D-W.Va., the committee chairperson.”

What can be done: NERC suggests a multipronged plan to shore up grid reliability. This includes:

• Better management of the “pace of change” to mix in more renewables and continued use of traditional energy;
• More natural gas infrastructure to make the grid more resilient; and
• Increased investment in energy storage technologies “and/or hydrogen production and delivery systems.”

​​​​​​​The last word: “Manufacturers rely on access to reliable and affordable energy to power their operations—so if the grid is unreliable, not only will manufacturers suffer, but American families will suffer, too,” said NAM Vice President of Energy and Resources Policy Brandon Farris.

• “The NAM supports an all-of-the-above energy approach that includes renewables, natural gas, nuclear, clean hydrogen and others, as well as efforts to shore up grid reliability.”
• “We must also continue to work on permitting reform to ensure we can build new energy projects in a timely manner and get them connected to a stable grid.”

Manufacturers are becoming increasingly concerned about the unprecedented number of unbalanced, unworkable regulations being handed down by federal agencies, according to the NAM’s Q2 2023 Manufacturers’ Outlook Survey.

• Sixty-five percent reported that if regulatory burdens were reduced, they would purchase more equipment; more than 46% said they would pay their workers more.
• Over sixty-three percent said they spend more than 2,000 hours complying with federal regulations.

Also notable: Other key conclusions from the quarterly analysis, which was conducted from May 18 to June 1, 2023, include:

• Sixty-seven percent of manufacturers reported being positive about their company’s outlook, a decrease of more than 11% since Q1 (74.7%) and the lowest in nearly three years.
• Seventy-five percent of manufacturers polled said comprehensive permitting reform would help their businesses, allowing them to hire more employees, expand their operations and/or boost wages.

Persistent challenges: As they have in the past three surveys, manufacturers this quarter again cited attracting top talent as their number-one workforce challenge (74.4%).

• The next biggest hurdles reported were a weaker U.S. economy (55.7%), rising health care or insurance costs (53.1%), an unfavorable business climate (52.1%), increased raw materials costs (50.8%) and supply chain challenges (44.9%).

The last word: “Congress and the administration have taken bold steps to support manufacturing in the United States,” NAM President and CEO Jay Timmons said.

• “But the positive effects of tax reform, the Bipartisan Infrastructure Law and the CHIPS and Science Act are being undermined by the growing regulatory burden. The unrelenting barrage of regulations threatens to undermine manufacturers’ competitiveness. If the administration’s regulatory onslaught continues, its manufacturing agenda will fail. Unfortunately, we are seeing the signs of exactly that happening.”