Falling Gas Prices, Student Debt Forgiveness Hearing, and Covid Hospitalizations
Economic News/Policy:
December 4: Economy Week Ahead: U.S. Trade and Supplier Prices in Focus
Monday: S&P Global and the Institute for Supply Management released November surveys of services-industry purchasing managers. S&P Global’s initial November services index reflected a faster decline in activity than in October, mostly due to weakened demand.
The Commerce Department releases October figures on factory orders, shipments, and inventories. Orders for manufactured goods increased in 11 of the past 12 months through September.
Tuesday: The Commerce Department reports the U.S. trade deficit in October. The trade gap in goods and services widened for the first time in six months in September, the product of lower exports due to a strong dollar and higher imports.
Wednesday: The Bank of Canada announces its latest monetary-policy decision, after delivering a smaller-than-expected half-percentage-point increase at its previous meeting. The central bank said higher rates were weighing on consumption and economic growth.
Thursday: The Labor Department reports the number of worker filings for unemployment benefits in the week ended Dec. 3. Initial jobless claims, a proxy for layoffs, have edged higher from the record lows reached in the spring, but have remained below 250,000 since early August.
China’s National Bureau of Statistics releases November figures on consumer inflation and producer prices. Prices charged by Chinese companies at the factory gate fell 1.3% in October compared with a year earlier, the country’s first year-over-year decline in producer-price inflation since December 2020.
Friday: The Labor Department releases its November producer-price index, which measures prices that suppliers charge businesses and other customers. The index rose 8% in October from a year before, an easing from September’s revised 8.4% increase, and sharply slower than the record 11.7% rise in March.
The University of Michigan releases its preliminary consumer-sentiment index for December. The index’s final reading for November showed sentiment at its lowest level in four months as consumers dealt with high inflation and rising interest rates.
December 2: Economy adds 263K jobs in November, unemployment holds steady at 3.7 percent
The U.S. economy gained 263,000 jobs in November and the unemployment rate held even at 3.7 percent, according to data released Friday by the Labor Department. Job growth in November beat the expectations of economists, who projected the U.S. to gain roughly 200,000 jobs last month, according to consensus projections.
The unemployment rate remained just 0.2 percentage points above its pre-pandemic level as the job market continued to push through high inflation and rising interest rates to grow at a sturdy clip.
The U.S. had added an average of 392,000 jobs per month since the start of the year despite high inflation, lagging labor force participation, and Federal Reserve rate hikes meant to cool off historically strong job gains.
While job growth has slowed from the torrid gains seen in 2021, the U.S. is still adding far more jobs per month in 2022 than it did in the economic boom years leading up to the COVID-19 recession in March 2020.
The November jobs report is another sign of resilience for the U.S. economy, which has defied expectations and keeps growing at a solid pace. Average hourly earnings shot up 0.6 percent in November and were up 5.1 percent over the past 12 months, accelerating after appearing to slow earlier this year.
Energy and Environmental Policy/News:
December 4: No OPEC+ oil shakeup as Russian price cap stirs uncertainty
The Saudi-led OPEC oil cartel and allied producers including Russia did not change their targets for shipping oil to the global economy amid uncertainty about the impact of new Western sanctions against Russia that could take significant amounts of oil off the market.
The decision at a meeting of oil ministers Sunday comes a day ahead of the planned start of two measures aimed at hitting Russia's oil earnings in response to its invasion of Ukraine. Those are a European Union boycott of most Russian oil and a price cap of $60 per barrel on Russian exports imposed by the EU and the Group of Seven democracies.
An OPEC+ statement Sunday pushed back against criticism of that October decision in view of the recent weakness in oil prices, saying the cut had been "Recognized in retrospect by the market participants to have been the necessary and the right course of action towards stabilizing global oil markets."
While the U.S., European and other allies seek to punish Russia for the war in Ukraine, they also want to prevent a sudden loss of Russian crude that could send oil and gasoline prices back up. That is why the G-7 price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold.
The cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle.
"If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that's from OPEC or not," said Jacques Rousseau, managing director at Clearview Energy Partners.
November 30: U.S. gas prices plunge toward $3 a gallon as demand drops worldwide
The cost of gasoline is falling so fast that it is beginning to put real money back in the pockets of drivers, defying earlier projections and offering an unexpected gift for the holidays.
Filling up is now as cheap as it was in February, just before Russia's invasion of Ukraine touched off a global energy crisis. AAA reported the average nationwide price of a gallon of regular Wednesday was $3.50, and gas price tracking company GasBuddy projected it could drop below $3 by Christmas. All of that relief probably helped drive robust shopping over Thanksgiving weekend.
Even as the plunge in prices at the pump helps fuel a national holiday shopping spree, it is a reflection of the financial strain consumers and businesses are confronting worldwide. Prices are going down because demand for oil and gas is falling as countries brace for recession, coronavirus outbreaks in China threaten major financial disruption, and drivers cut back on gas-guzzling as they try to save money to cover skyrocketing mortgage payments and stock market losses.
The Biden administration is probably pressuring Saudi Arabia, which dominates OPEC Plus, not to cut its output. But the administration’s lack of influence over such things was clear the last time OPEC Plus met, in October, when the group snubbed Washington’s request that it boost output, instead cutting it by 2 million barrels per day.
The administration last week eased sanctions on Venezuela as part of a bid to get oil flowing from that country again. But it will be many months before Venezuelan petroleum is shipped, and only marginal amounts will be available initially.
Most drivers are paying little attention to the broader dynamics of the global oil market. But even they are taking a cautious approach, despite maybe splurging on holiday gifts.
Data collected by AAA suggests they are sticking with the conservation-minded driving habits embraced when gas soared past $5 a gallon, lumping more errands into single car trips, driving at slower speeds, and only partially filling their gas tanks. Prices may have plunged, but drivers are not taking their foot off the brake.
Student Loan Forgiveness:
December 1: Supreme Court to Hear Student Debt Forgiveness Case
The Supreme Court agreed on Thursday to decide whether the Biden administration had overstepped its authority with its plan to wipe out billions of dollars in student debt.
The justices put the case on an unusually fast track, saying they would hear arguments in February. In the meantime, though, they left in place an injunction blocking the program. The court’s brief order gave no reasons and did not note any dissents.
The court acted after the Justice Department filed an emergency application asking the justices to lift the injunction, which had been issued by the U.S. Court of Appeals for the Eighth Circuit, in St. Louis, at the request of six Republican-led states.
The program, which forgives up to $20,000 in debt for millions of federal borrowers, has set off a flurry of legal battles, but the one filed by the six states — Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina — may represent the most serious threat. The states have said that Mr. Biden’s proposal exceeds his executive authority and would deprive them of future tax revenue.
The states lost the first round in their suit before Judge Henry E. Autrey of the Federal District Court in St. Louis, who was appointed by President George W. Bush. “While plaintiffs present important and significant challenges to the debt relief plan,” Judge Autrey wrote, “the current plaintiffs are unable to proceed to the resolution of these challenges.”
A three-judge panel of the Eighth Circuit blocked that ruling. Two of its three members — Judges Ralph R. Erickson and Leonard S. Grasz — were appointed by Mr. Trump. The third, Judge Bobby E. Shepherd, was appointed by Mr. Bush.
ICYMI:
December 4: Covid Hospitalizations Increasing After An Autumn Lull
Covid hospitalizations last week reached their highest level in three months, with more than 35,000 patients being treated, according to Washington Post data tracking. National hospitalizations had stagnated throughout the fall but started rising in the days leading up to Thanksgiving. All but a few states reported per capita increases in the past week.
Public health authorities are concerned that the increase in the number of covid patients will worsen the strain on hospitals already under pressure from the effects of two other viral ailments, influenza, and respiratory syncytial virus, widely known as RSV.
Nearly 20,000 Americans were hospitalized with influenza during Thanksgiving week, the most for that week in more than a decade and almost double the previous week’s count.
Carmela Coyle, the president, and chief executive of the California Hospital Association, said the public should still be concerned about the ability of hospitals to deliver care even if there are fewer coronavirus patients this winter compared with earlier in the pandemic. A healthcare workforce shortage has left hospitals understaffed, and hospitals are financially strapped nearly three years into the pandemic, she said.
“Covid for hospitals was like a flood,” Coyle said. “And while the floodwaters may have receded if you look at the last two winters compared to where we are now, the damage is still here.”
December 1: With Senate Vote, Congress Moves to Avert Rail Strike
The Senate on Thursday voted overwhelmingly to impose a labor agreement between rail companies and their workers who have been locked in a stubborn stalemate, moving with uncommon speed to avert a potential holiday season rail strike that would jeopardize shipping across the country.
Passage of the measure cleared it to be signed by President Biden, who just days ago made a personal appeal for Congress to act to impose a labor agreement that his administration helped negotiate earlier this year but that had failed to resolve the dispute. He was expected to sign the bill quickly, racing to stave off any economic fallout that could come from a work stoppage in the coming days.
It was the first time since the 1990s that Congress has used its power under the Constitution’s commerce clause, which allows it to regulate interstate commerce, to intervene in a national rail labor dispute to head off a strike. The step was a remarkable one for Mr. Biden, who vowed to be “the most pro-union president you’ve ever seen,” and for Democrats in control of Congress, who count organized labor among their most loyal constituencies.
For Fun:
December 6: After a lunar flyby, NASA’s Orion spacecraft is set to splash down on Sunday
The Orion spacecraft swung by the Moon on Monday, flying to within 130 km of that world's surface as it set course for a return to Earth this weekend. After successfully completing the maneuver, NASA's mission management team gave the "Go" to send recovery teams out into the Pacific Ocean, where Orion is due to splash down on Sunday, during the middle of the day.
By getting into an orbit around the Moon, and back out of it again during its deep space mission, Orion has now completed four main propulsive burns. This completes a big test of the spacecraft and its propulsive service module, which was built by the European Space Agency. Although a boilerplate version of Orion made a flight in 2014, it did so without a service module.
As part of this Artemis I mission, NASA is now three weeks into a 25.5-day test flight of the Orion spacecraft. Orion has met most of its main objectives to date, with only the entry, descent, and splashdown part of its mission ahead of it.
So far, Orion's test flight has gone remarkably well. Typically, with new spacecraft, there are issues with thrusters, navigation, onboard avionics, and more. However, Orion has had no major issues. The only real troubleshooting involved a problem with the power systems on the vehicle.
The issue has occurred with four "Latching current limiters" that help route power to propulsion and heating systems on Orion.
"We're not exactly sure on the root cause of the problem, but teams are doing tests on the ground," said Debbie Korth, the Orion Program deputy manager, during a briefing on Monday evening at Johnson Space Center in Houston.