Input Stories

Sales of existing homes fell to their lowest level in 13 years in September, according to Reuters (subscription).

What’s going on: “Existing home sales fell 2.0% last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010, the National Association of Realtors said on Thursday. They are counted at the closing of a contract, and last month’s sales likely reflected contracts signed in August, when the rate on the popular 30-year fixed mortgage vaulted above 7%.”

• Sales fell 1.1% in the South, 4.1% in the Midwest and 5.3% in the West. They rose 4.2% in the Northeast.

Anemic inventory: There was 3.4 months’ worth of unsold existing home inventory for sale in September, a decline of more than 8% from a year ago.

• “A four-to-seven-month supply is viewed as a healthy balance between supply and demand.”

Why it’s happening: Mortgage rates have spiked recently, “mostly because of expectations that the Federal Reserve will keep interest rates higher for longer in response to the economy’s resilience.”

The Biden administration announced broad updates to restrictions on U.S. exports of advanced computing and semiconductor-making equipment to China, according to Reuters (subscription).

What’s going on: “The measures are designed to prevent China from acquiring the cutting-edge chips needed to develop AI technologies such as large language models, which power applications such as ChatGPT but that U.S. officials say also have military uses that present a national security threat.”

• The updated interim final rules announced on Oct. 17 will go into effect Nov. 17 and will “reinforce the October 7, 2022, controls to restrict [China]’s ability to both purchase and manufacture certain high-end chips critical for military advantage,” according to a press release from the Commerce Department’s Bureau of Industry and Security.

Why it matters: “These controls were strategically crafted to address, among other concerns, [China]’s efforts to obtain semiconductor manufacturing equipment essential to producing advanced integrated circuits needed for the next generation of advanced weapon systems” and other technologies that “present U.S. national security concerns,” according to the BIS.

• In an effort to control a wider range of chips, Tuesday’s rules will focus on computing power only and will require companies to notify the U.S. government when they sell chips that come in just under restriction limits.

“Chiplets”: The rules also seek to address “chiplets,” in which small portions of a chip are spliced to make a full chip.

• “Analysts had expressed concern that Chinese firms could use such technology to acquire chiplets that stayed within the legal limits but that could later be assembled in secret into a larger chip that would break the rules,” according to Reuters.

​​​​​​​ The last word: “By imposing stringent license requirements, we ensure that those seeking to obtain powerful advanced chips and chip manufacturing equipment will not use these technologies to undermine U.S. national security,” said Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler.
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The number of new homes being built “showed a substantial rebound” in September, while the number of permits to build declined, according to Markets Insider.

What’s going on: “The Commerce Department said housing starts spiked by 7.0 percent to an annual rate of 1.358 million in September after plunging by 12.5 percent to a revised rate of 1.269 million in August.”

• At the same time, permits—an indicator of future demand for housing—dropped by 4.4% to an annual rate of 1.475 million, following a surge in August.

Less than predicted: Economists had predicted that September housing starts would spike to a rate of 1.380 million from the previous month.

Why it’s important: Mortgage rates have risen to record highs recently, pushed by the Federal Reserve’s still-elevated interest rate target.

• Higher rates have led to a decline in home sales and prices.

Companies’ health care costs are rising steeply, leading finance chiefs to look for alternative ways of attracting and retaining employees, according to The Wall Street Journal (subscription). 

What’s going on: “Health-insurance costs, which are among the largest expenses for many U.S. companies, are projected to rise around 6.5% for 2024, according to consulting firm Mercer.”

• “The surge … may add significantly to costs for employer plans that Mercer said already average more than $14,000 a year per employee. Many companies are expected to take on most of the increases … ”

​​​​​​​ Why it’s happening: In addition to inflation and higher interest rates, rising health care price tags are the result of a combination of higher labor costs in hospitals and elsewhere in the health care system, a rise in elective care (which declined during the global pandemic) and a demand for new drugs.

The response: Finance officers are largely seeking ways to manage the growing costs without “add[ing] pressure to employees’ budgets as health care costs rise,” according to the Journal.

• Whether that will be possible in the longer term will depend mainly on the state of the labor market and how high prices rise.
• Some companies are considering sharing the increased cost burden with employees, while others are pushing preventive care as a way to save money down the road. 

The last word: “Manufacturers feel a deep commitment to providing high-quality health care to their employees despite the increased costs of doing so,” said NAM Director of Domestic Policy Julia Bogue.

• “The NAM recently released ‘Manufacturers on the Front Lines of Communities: A Deep Commitment to Health Care,’ which details industry-wide health benefits and trends, as well as federal policy proposals that could jeopardize manufacturers’ ability to continue offering health care plans.”

When Carrie Shapiro began her career as an engineering student at the Georgia Institute of Technology, she didn’t expect to work in manufacturing—but the moment she walked into a manufacturing facility near her school for an interview, she was hooked.

“I’ve had so many opportunities in manufacturing that I never wanted to leave,” said Shapiro. “From the very beginning, I was able to keep learning and growing and making better relationships.”

Today, Shapiro serves as the vice president of sourcing execution at Georgia-Pacific—a pulp and paper company—where she guides procurement and uses her expertise in supply chain operations to benefit the company’s 110 facilities. As a leader in the industry, she’s also focused on helping potential creators understand all that manufacturing has to offer.

A changing world: Shapiro’s role has been especially important over the past few years, as the COVID-19 pandemic and its aftermath forced companies to adjust their supply chains and react to shortages in real time. For Shapiro, that process required rethinking risks, using data effectively and focusing on achieving stability before optimization.

• “The mistake that we often make is we try to optimize something that’s not stable,” said Shapiro. “If you’ve got chaos in your supply chain, you have no business trying to optimize it. You have to stabilize first.”

A need for humans: As Shapiro notes, data has become more readily available than ever before, and new tools are helping organizations make smart adjustments in real time. Yet, human decision-making and critical thinking still have a vital role at the center of manufacturing.

• “Tools are great, software is great, tech is great—but it should be an enabler and not a magic wand,” said Shapiro. “You still have to know your process, understand your current state and know your capabilities across the supply chain to make effective decisions. Tools don’t absolve you from doing the real work of continuous improvement.”

Read the full story here.

A planned offshore wind farm whose developers are billing it as the largest in the world has produced electricity for the first time, according to CNBC.  

What’s going on: “Located in the North Sea, over 130 kilometers off England’s northeast coast, the Dogger Bank Wind Farm still has some way to go before it’s fully operational, but the installation and powering up of its first turbine is a major feat in itself. That’s because GE Vernova’s Haliade-X turbines stand 260 meters tall—that’s higher than San Francisco’s Golden Gate Bridge—and have blades measuring 107 meters.”

• Once the installation is complete, the ship will have 277 Haliade-X turbines.

Why it’s a game-changer: “Described by Dogger Bank as the ‘largest offshore jack-up installation vessel ever built,’ in many ways, it’s the pinnacle of an extensive supply chain involving numerous businesses and stakeholders.”

• Thanks to four legs that allow the vessel to lift itself above the water’s surface, the wind farm will be able to operate in depths of up to 80 meters—some 30 meters deeper than fixed-foundation wind farms.

Power producer: Once fully up and running, project developers say the Dogger Bank Wind Farm will have a capacity of 3.6 gigawatts, enough “to power as many as 6 million homes per year.”

• For the sake of comparison, the U.K.’s fully operational Hornsea 2—considered a major wind farm—has a capacity of just over 1.3 GW, according to another CNBC piece.

A complex project: The totality of the undertaking is “huge,” according to one source, and being made more complex “by the use of next-generation turbines and a next-generation installation vessel.”

• Given the immense size of the Haliade-X turbines, “we use a number of specially designed pieces of equipment to transport” them, a GE Offshore Wind spokesperson said.

The NAM’s view:  “Offshore wind can be an important part of an all-of-the-above energy strategy that helps meet energy security and decarbonization goals,” said NAM Vice President of Domestic Policy Brandon Farris. “Manufacturers keep leading the way with investments in the next generation of energy technologies—and the NAM will continue to advocate energy policies that provide manufacturers affordable, reliable energy.”  ​​​​​​​

Industrial production and retail sales both rose in September and exceeded growth expectations, according to MarketWatch and CNBC.

What’s going on: Industrial production increased 0.3% for the month, above the 0.1% gain expected, MarketWatch reports.

• Meanwhile, retail sales rose 0.7% for the month, more than twice the 0.3% rise estimated by Dow Jones, according to CNBC.

The details: In industrial production, “[m]anufacturing rose 0.4% and motor vehicle production rose 0.3%, held down by the ongoing strike against three automakers,” MarketWatch reports.

• For retail, “the biggest increase [was] at miscellaneous store retailers, which saw an increase of 3%. Online sales rose 1.1% while motor vehicle parts and dealers saw a 1% increase and food services and drinking places grew by 0.9%, good for a yearly increase of 9.2%, which led all categories,” according to CNBC.

What it means: The retail numbers “indicate that consumers more than kept up with price increases,” CNBC said, though that could change as employment growth is expected to slow.
 

Economists polled by The Wall Street Journal (subscription)—including NAM Chief Economist Chad Moutray—say they now believe that the U.S. will likely avoid a recession.

What’s going on: “In the latest quarterly survey by The Wall Street Journal, business and academic economists lowered the probability of a recession within the next year, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.”

• Economists on average expect gross domestic product to increase 2.2% in Q4 of this year from a year earlier, which is “a sharp upward revision” from the last survey.

Why it’s happening: Playing a role in the revised outlook are declining inflation, an interest rate that the Federal Reserve has held steady at its past two meetings, a robust job market and surprisingly strong recent economic growth.

A “soft landing”: While that growth and job creation are both expected to weaken in the first half of next year, “the latest forecasts suggest confidence in the Fed’s ability to achieve a so-called soft landing, in which inflation falls without a recession.”

• However, recent events—such as the Israel–Hamas war—could alter the accuracy of these predictions, given the potential effect on energy prices.

Our take: “Despite weaknesses in manufacturing demand and production and a multitude of challenges globally, consumers and businesses continue to spend, providing resilience to the U.S. economy,” Moutray told us.

• “Even with recent cooling, the labor market and wage growth remain solid, and firms continue to make investments in the domestic market. While real GDP is likely to slow in the next few quarters following a very strong Q3, the ‘soft landing’ scenario has become more probable in recent months.”

The Justice Department has reached an agreement with the American Civil Liberties Union that would give benefits to thousands of migrant families separated at the border under the previous administration’s policies, according to ABC News.

What’s going on: “Under the proposed agreement, the Justice Department says, new standards would be established to limit migrant family separations in the future. The settlement would prohibit separations unless there are concerns regarding the wellness of the migrant child, national security issues, medical emergencies or in the case of criminal warrants.”

• The deal—on which a federal judge must still sign off—would also cover any medical costs incurred because of the separations.
• If approved, it would stay in effect for six years. 

Why it’s important: “[U]nder the settlement, more than 3,900 children and their families would be eligible for temporary relief from future deportation for up to three years, with a chance to renew. Members of those families would also be granted work authorizations.”

• More than 75% of the originally identified families that were separated have either been reunited or given the information they need to reunite, according to a Biden administration official.
• “The agreement further expands the number of families that will be eligible for humanitarian parole and reunification, meaning that the ACLU and other organizations will be receiving information on separated families that was previously unknown,” according to ABC News.

Previous policy: A policy in place for four months in 2018 “mandated prosecutions for all suspected illegal border crossings, which led to parents being deported while their children stayed in U.S. custody or were placed in foster care.”

The last word: “The NAM has long called for policy that explicitly prohibits the separation of minor children from their parents, which is what we lay out in ‘A Way Forward,’ our immigration-policy document,” said NAM Director of Domestic Policy Julia Bogue.

Logistics companies are increasingly using “flexible workers” to fill open positions, according to The Wall Street Journal (subscription).

What’s going on: More operators, competing with other employers that allow workers to make their own hours, are offering scheduling and shift flexibility.

• They’re using specialized software to do it, one source told the Journal, adding that the practice is one of the ways logistics firms are hiring in the runup to the holiday season.

Why it’s important: This “flexibility in a field known for rigid schedules and grueling workloads is a sign that the practices of app-driven operators are seeping into more traditional workplaces, particularly in a tight market for blue-collar workers.”

Vetted and ready: Not just anyone can fill a warehouse-worker slot, in part “because industrial jobs require specific training and expertise, logistics experts say.”

• To ensure those they bring on are qualified, logistics companies have begun using warehouse-tailored gig-worker apps, in which “[w]orkers set their availability in advance … and go through a background screening process” with the app company.
• Logistics companies often use traditional staffing agencies “particularly for the peak holiday season. But some are looking to fill jobs when they need people in a more targeted way, such as Monday mornings to catch up with e-commerce orders that came in over the weekend.”

A supplement, not replacement: Even companies that plan to stick with full-time employees are seeking ways to use the gig model to their advantage.

• “PepsiCo is testing a platform that allows warehouse workers to easily swap shifts from their smartphones, among other functions, said John Phillips, senior vice president of customer supply chain and global go-to-market.”