Bill Owens: Confounding And Confusing Events 6/28/21
This week, on Thursday morning, Fed Chairman Powell said that inflation will drop back towards it’s longer run goals after transitory supply effects abate, and further indicated that the Fed will keep interest rates low for the moment.
American Airlines this week cancelled hundreds of flights due to a staffing crunch and maintenance issues. It appears that the employee shortage has now hit the airlines which could have a substantial rippling effect, most notably for passengers as flights are cancelled. This is not good news for the airlines, nor for summer travel, and thus, the economy as a whole.
The US announced that it was closing the border until July 21st, after Canada announced it decision last week. There is a call for unilateral action, which as best I can determine would mean that we would allow Canadians in, but Canada may not let Americans in. We still also have not resolved the issue of how you prove that you have been vaccinated, if, in fact, that is going to be one of the conditions of getting into the United States. The logistics surrounding proof of vaccination and the processing of people crossing the border is still unresolved on both sides. This is unfortunate because it has such an enormous impact on border communities on both sides.
One interesting impact that we are seeing from labor shortages, of course, increasing wages, as well as other benefits, including signing bonuses and a general increase in the benefit package. This, obviously, also feeds inflation, and is not likely to be temporary with millions of jobs going unfilled. This may be one of the long-term impacts of Covid-19. Do American workers now have the upper hand in the job market, we will have to wait and see.
The need for rare earth minerals has created a struggle in the US, since we lack companies and/or projects with established records of being able to produce/mine these rare earth minerals. In case you weren’t aware, rare earth minerals include lithium and boron, which are essential for growing technology, such as electric vehicles, satellites and wind turbines. The Senate approved a bill this last month to invest $250 billion to be expended on the development of this technology, which also requires locating those rare earth minerals. Not an easy process under any circumstances.
Freight Waves, which operates out the Offices of the American Shipper is predicting that reshoring as a result of Covid-19 is not likely to occur anytime in the near future. Overseas manufacturing which has now gone on for well over 40 years, is entrenched and the production costs still cannot be met in large measure in North America. This leaves a very slim likelihood that any material change will occur in the location of factories, particularly as it relates to China and the rest of southeast Asia. Political promises of reshoring are simply not realistic, and what we must do is retool the economy to reemploy those who worked in those industries that have gone off shore in ways that will enable them to be productive well-paid workers.
Late this past week Mr. Biden and a bi-partisan group of Senators reached a 1.2 trillion-dollar infrastructure deal. Immediately after that President Biden announced that he would be proceeding with a separate package of legislation that would be at least equal to the 1.2 trillion and likely more for a number of other priorities that he originally included in his infrastructure package. This clearly angered Mr. McConnell and it will be important to see whether or not Republicans are willing to go through with their agreement on infrastructure in light of this recent announcement. In my view, this was a breakthrough to get the 1.2 trillion-dollar infrastructure deal and should not have been compromised in the short term. If four or five months from now Republicans are unwilling to consider the other issues that are important to Democrats, then maybe budget reconciliation could be utilized, but at this time when we have had a breakthrough that has been years incoming, this is a strategic mistake.
Republicans in Michigan issued a report this past week which found no indication of any material voter fraud. This report was scathing in its attacks on those who are pedaling this disinformation and misinformation. It is unfortunate that the Republicans in the House and in the Senate can not bring themselves to reach that same conclusion. Although there has been some dampening of that rhetoric in the last several weeks. Ask Ms. Stefanick and I bet she will still push the “Big Lie”.
Mr. Giuliani has been temporarily disbarred in New York for his activities relative to Mr. Trump and the election yet it appears that Mr. Trump and many of his closest supporters believe that he will somehow be reappointed this summer to be President. There are no cases pending before the Supreme Court nor any other Courts that I am aware of and exactly what the mechanism to “appoint him” is clearly a delusion.
DHS in testimony before Congress indicated that they have grave concerns about the rhetoric concerning the election, election fraud, and the potential for renewed violence after the January 6th insurrection. They specifically blame the extremist groups who are supportive of Mr. Trump for this rhetoric. Again, very troubling but the leaders of the Republican Party in the House and the Senate are silent on this issue if not supportive of spreading this dangerous rhetoric.
The Federal Labor Department reported Thursday that initial unemployment claims for new layoffs moved slightly lower last week to a seasonally adjusted 411,000 from an upwardly advised 418,000 for the prior week. This is an immaterial change and still reflects the fact that people are losing their jobs and unable or potentially unwilling to seek and accept employment.
The baseball sticky substance saga has appeared to impact the performance of at least 1 star – Gerrit Cole of the Yankees as his last 2 starts have been pretty rough. Is this a coincidence or a connection?
It was reported last week that the US economy grew 6.4% in the 1st quarter of 2021. This was up from the 4th quarter of 2020 and portends a strong 2021. An impressive turnaround.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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