For the first time ever, the United Auto Workers union is striking against all Big Three automakers at once, after it failed to clinch a deal on a new contract by the 11:59 p.m. deadline on Thursday. But the UAW strike won’t mean all of the nearly 150,000 union members who work at the three automakers will walk off their jobs en masse. Instead, workers at three Midwest auto plants — a General Motors assembly plant in Wentzville, Missouri, a Stellantis assembly plant in Toledo, Ohio, and part of a Ford plant in Wayne, Mich. — were the first to walk off the job under UAW president Shawn Fain’s “stand up strike” strategy. For now, that means the strike involves just under 13,000 workers — less than 9% of UAW membership at the three companies. But additional locations could follow at a moment’s notice, depending on how bargaining with the companies progresses — a strategy intended to ramp up the pressure on companies by keeping them guessing about how their operations would be disrupted. “This is our generation’s defining moment,” Fain told UAW members at a Facebook Live event on Thursday night. “The money is there, the cause is righteous, the world is watching.” The targeted strikes are a departure from the UAW’s traditional playbook, which has usually involved having all union members at a single company walk off the job at once. The UAW has also opted to negotiate with all three automakers at once, in another departure from its previous methods. Previously, the UAW had picked one automaker to hash out a deal with, focusing its actions on that company until it got a deal — and then pushed the other two of the Big Three members to more or less match that deal. Still, Fain did not rule eventually having all union workers at the Big Three automakers walk off the job at once.  President Biden voiced his support for the UAW on Friday, after saying little in the lead-up to the strike deadline. He said he is dispatching to Detroit acting Labor Secretary Julie Su as well as Gene Sperling, one of his White House economic advisers. “Auto companies have seen record profits, including in the last few years, because of the extraordinary skill and sacrifices of the UAW workers,” Biden said. “Those record profits have not been not been shared fairly, in my view, with those workers.” As the first-ever democratically elected leader of the UAW, Fain, a long-time union member himself, has taken a more confrontational approach to negotiations than his predecessors — including filming himself throwing Big Three automaker proposals in the trash. He has repeatedly doubled down on the union’s key economic demands – including 40% pay raises he says would be in line with CEO wage increases, the restoration of pension and retiree healthcare and cost of living adjustments. “The Big Three can afford to immediately give us our fair share,” Fain told UAW members on Wednesday. Fain has called out previous UAW leaders for cutting deals with the automakers that he says did not favor the union’s 150,000 members who work at these companies. During the 2008 financial crisis, the UAW made major concessions to help auto companies get back on their feet. Workers are still feeling the effects of those concessions to this day — a key dynamic underpinning this year’s negotiations. “We just want the wages that they gave up during the recession of ’08,” said Brandon Bell, who works on the engine line at the Ford plant in Michigan that’s currently on strike. “We’re tired of giving — we want to receive this time.” Bell said he joined the picket line as soon at the strike began at midnight. Under Fain, the UAW has also hinged its demands on the automakers’ profits in recent years, as well as pay disparities between top executives and rank-and-file union members. Collectively, the Big Three automakers have seen their profits soar during the pandemic when factors including parts shortages led to surging car prices, padding the profit margins of companies. In a Facebook Live event on Wednesday night, Fain compared the companies’ profits — up 65% over four years — to autoworkers’ pay, which increased just 6% in that same timeframe. CEO pay has also been a major issue of contention. GM CEO Mary Barra, the highest-paid chief executive among the Big Three, made nearly $29 million in 2022. Securities and Exchange Commission filings show that this is 362 times the median GM employee’s paycheck. In an interview with CNN on Friday morning, just hours after the launch of the strike, Barra responded to concerns about her pay raise far outpacing those of rank-and-file union members by pointing to the profit sharing and healthcare components of GM’s proposal. And in a video to workers on Thursday, Barra highlighted her background as a “second-generation GM employee who grew up in a union family,” mirroring Fain’s personal anecdotes in his address to UAW members earlier this week. “Ensuring the long-term success of our company is not only my job — it’s a responsibility that hits home,” Barra said. All three automakers have budged on their initial wage proposals, from opening bids of 9 or 10% increases to as high as 20% in the most recent offers. The union argues those offers don’t sufficiently account for years of stagnant wages. But the companies say they’ve made genuine attempts to reach agreements. General Motors attempted to head off a strike with a down-to-the-wire offer on Thursday afternoon, a proposal Barra called a “compelling and unprecedented economic package.” “It addresses what you’ve told us is most important to you, in spite of the heated rhetoric from UAW leadership,” Barra said in a statement about GM’s latest offer, which would raise wages by 20% over the length of the contract. The three companies have also put cost of living protections on the table — though the union says these offers wouldn’t provide enough wage protection to keep up with inflation over the next four-and-a-half years. Ford sources told reporters on Thursday that meeting the UAW’s demands in full would completely halt new production due to much higher labor costs. “If we signed up for the UAW’s requests … we would’ve lost $15 billion and gone bankrupt by now,” Ford CEO Jim Farley told CNBC on Thursday. “There’s no way we can be sustainable as a company.” UAW members would still have to ratify any deal struck between union negotiators and one of the automakers, and workers could choose to send their leaders back to the table to push for more. The UAW walkout is the 17th strike in the U.S. involving more than 2,000 workers so far this year, according to data from the Cornell University School of Industrial and Labor Relations. Many other unions have threatened to strike — in some cases resulting in substantial gains for workers. After months of contentious negotiations that led 340,000 UPS workers to the brink of a strike, the Teamsters union in July secured a 48% average total wage increase, over the course of the five-year contract, for existing part-time workers. In August, the Allied Pilots Association, which represents 15,000 American Airlines pilots, successfully pressured the airlines to increase pilots’ pay by more than 46% over four years. But some labor experts say the autoworkers might not have the same leverage as UPS workers and pilots to get that big of a pay raise. The Big Three automakers were once the main choice for many Americans. But today, the market is populated with foreign automakers such as Toyota and Volkswagen, which are not being impacted by strike threats and can continue to produce cars at a steady clip. “They don’t have exceptional leverage because there’s a lot of competition,” said Harry Katz, a professor of collective bargaining at Cornell University, referring to automakers’ ability to shift production to the non-union South or abroad. NN: this is a wage push inflation atomic bomb.

U.S. stocks fall, S&P 500 books another weekly loss amid worries over inflation pressure, auto worker strike

U.S. stocks ended down Friday as investors worried about inflationary pressures ahead of the Federal Reserve’s meeting next week as well as an auto workers strike.

 

• The Dow Jones Industrial Average shed 288.87 points, or 0.8%, to close at 34,618.24.
• The S&P 500 fell 54.78 points, or 1.2%, to finish at 4,450.32.
• The Nasdaq Composite dropped 217.72 points, or 1.6%, to end at 13,708.33.

For the week, the Dow rose 0.1%, while the S&P 500 dipped 0.2% and the technology-heavy Nasdaq declined 0.4%, according to Dow Jones Market Data. The S&P 500 and Nasdaq each booked a back-to-back weekly loss. Inflation worries kept pressure on stocks as Treasury yields edged higher, while investors also expressed concern over the start of an auto worker strike.

“The picture of inflation continues to be difficult,” said Marco Pirondini, head of equities for Amundi U.S., in a phone interview Friday. “The market is starting to understand that the Fed will keep interest rates high for longer.”

The Federal Reserve, which has been tightening monetary policy in a bid to cool the economy and bring down the elevated cost of living in the U.S., will hold a policy meeting next week. Traders are expecting the central bank will keep its benchmark rate at the current target range of 5.25% to 5.5%. The U.S. economy continues to be “fairly strong,” which makes it more difficult to bring down inflation, according to Pirondini. Fresh economic data on Friday came in stronger than anticipated for U.S. industrial output and manufacturing activity in New York state. The Fed said Friday that industrial production in the U.S. rose 0.4% in August. That exceeded the 0.2% gain forecast by economists surveyed by The Wall Street Journal. Meanwhile, the New York Fed released data from its Empire State manufacturing survey on Friday, with the business conditions index climbing to 1.9 this month. Economists polled by The Wall Street Journal had expected a negative reading on manufacturing activity in the state. Investors were also monitoring the start of a strike of the United Auto Workers against the Big Three U.S. automakers, Ford Motor Co. General Motors Co. and Chrysler owner Stellantis From a market perspective, the strike “doesn’t seem to be causing too much trouble if you look at the automakers,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab, in a phone interview Friday. “It’s a nonevent at the moment,” he said, pointing to the rise Friday in shares of GM and Stellantis. But the strike could become more of a problem for markets if it goes on for a long time, he said.

Some analysts worry that the auto workers strike could drive up car prices, adding more fuel to inflationary pressures that have started to re-emerge over the summer while stoking fears about the impact on the broader U.S. economy.

A survey by the University of Michigan showed consumer sentiment falling in September for a second month in row. The survey also showed Americans think inflation will average 3.1% in the next year, down from expectations for 3.5% in the prior month and the lowest reading in two and a half years. Meanwhile, rising Treasury yields have weighed on U.S. equities in recent weeks. The yield on the 10-year Treasury note climbed 3.2 basis points on Friday to 4.321%, according to Dow Jones Market Data. “Tech tends to be a pretty sensitive sector for interest rates,” said Frederick. NN: this is a major trade. Selling the NASDAQ100 at these levels is the equivalent of us buying oil at $70 a barrel. I regard this high tech AI bubble trade as a potential big time money maker.

 

Macro Conditions Are Still Too Strong for the FOMC to Stop Its Rate Hikes

Forbes: The headline 12-month inflation rate increased in August from 3.2% to 3.7%, according to this morning’s Consumer Price Index, but the more important core inflation (which excludes food and energy prices) showed a widely anticipated decline from 4.7% to 4.3%. Investors are generally taking this as a reassuring sign that the Fed is finished raising interest rates to fight inflation. In fact, the market-implied probability that the Federal Open Market Committee (FOMC) will raise rates again at next week’s meeting sank from 8% yesterday to just 3% today, according to the CME FedWatch Tool. That’s whistling past the graveyard. The Fed’s fight is not merely against inflation—it’s against inflationary pressures. Fed Chair Jerome H. Powell could hardly have made that point more clearly than in his August 25 Jackson Hole speech, which began with the strong statement “It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so” and ended with the equally strong statement “We will keep at it until the job is done.” Memo to investors: the Fed is not gaslighting you! Let’s review the evidence on inflationary pressures. First, the labor market still shows a severe imbalance between the demand for and the supply of workers. There are lots of ways to see this, including the unemployment rate (still well below its noncyclical or “natural” rate) and the number of job openings (still around 50% more than the number of workers looking for a job), but perhaps the most important is simply the upward pressure on wages. The Wage Growth Tracker published by the Federal Reserve Bank of Atlanta, for example, shows that growth in the median wage averaged 5.3% during June-August. Sure, that’s down from 6.7% a year earlier, but it still represents tremendous upward pressure on overall inflation. Similarly, aggregate demand and supply in the overall economy still haven’t come back into balance. A good example is the retail inventory-to-sales ratio. Retailers need to keep enough stock so they don’t miss out when customers come in looking to buy, and too low a ratio indicates that supplies are not keeping up with demand. The inventory to sales ratio went dramatically negative when supply chains crashed early in the COVID pandemic, reaching a low point of 1.1, which was 39 percentage points below its long-term median. Since then it has recovered only about halfway and remains 19 percentage points below its long-term median. In other words, the demand/supply imbalance remains significantly worse than its pre-pandemic record of -15 back in 2012. Turning to inflation itself, the Fed considers more than just the overall rate of price increase. One useful measure is the breadth of inflation (also called inflation dispersion), which reflects either the proportion of goods for which prices are increasing or the proportion of total spending on goods for which prices are increasing. Breadth of inflation is important because it reflects whether the broad economy—rather than just certain narrow but important sectors—is subject to inflation pressures. Breadth of inflation has actually become a piece of good news, with the fraction-of-items measure having fallen all the way to its long-term median. (The fraction-of-spending measure remains above its long-term median, almost entirely because measured inflation for housing—the single largest segment of consumer spending—remains very high at 5.7%. That is a misleading artifact of the way housing prices are measured; actual inflation in housing costs has essentially come down to the target 2% range, if not even lower.)  The final piece that contributes to ongoing inflationary pressures is expectations. If consumers and business expect inflation to remain high, then the decisions they make will tend to produce higher inflation. The median year-ahead expected inflation has come down dramatically from its high of 6.8% just over a year ago—but, at 3.6% according to the Survey of Consumer Expectations from the Federal Reserve Bank of New York, it’s still in the higher-than-acceptable range that risks pushing actual inflation up. Yes, the battle against inflation is tilting in the right direction—but we’ve seen that before. In 1974, when President Gerald Ford enlisted Americans in a fight to “Whip Inflation Now,” it worked. The year-over-year inflation rate declined sharply from 12.2% in November of that year to just 5.0% (still a high figure) in December 1976. But Federal government leaders failed to keep up the fight—and inflation surged again until it reached a stupendous 14.6% in March 1980. The idea that our time’s inflation rate has declined all the way to 3.7% (headline) or 4.3% (core) is absolutely encouraging. But when Chair Powell says, as in his Jackson Hole speech, “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” we would do best to remember the threat he and the other FOMC participants are trying to banish. Inflation can return with the power to inflict more pain. It’s too soon to stop raising rates. NN: It is important you understand .and that the big trade is the imminent  stock market crash. IN part driven by our last trade a 50% increase in energy prices. And the fact that the markets are in denial. Their will be no soft landing, But a old fashioned full blown depression. Driven by the fact that inflation is a raging forest fire. The FED, kicking and screaming along the way, will be forced to institute double digit FED FUNDS rates

WASHINGTON (Reuters) -The U.S. Energy Department has talked to oil producers and refiners to ensure stable fuel supplies at a time of rising gasoline prices, Jared Bernstein, head of the White House Council of Economic Advisers, said on Wednesday. Rising gasoline prices were largely behind the largest increase in U.S. consumer prices in 14 months in August. “The Energy Department is in touch with producers and refiners to resolve any issues and to try to ensure stable supply,” Bernstein told reporters on Wednesday. Officials from President Joe Biden’s administration reached out last week to oil industry companies to assess inventory levels and learn of any planned shutdowns of refineries, after Saudi Arabia and Russia extended voluntary oil output cuts to the end of the year, a U.S. refining source involved in the talks told Reuters. “The White House wants to make sure everyone is focused here on potentialities for systemic disruptions that could create a supply problem,” said the source, who is not authorized to speak publicly about internal discussions. Gasoline prices jumped 10.6% in August after climbing 0.2% in July, accounting for more than half the increase in the Consumer Price Index. They peaked at $3.984 per gallon in the third week of August, according to data from the U.S. Energy Information Administration, up from $3.676 per gallon during the same period in July. Gasoline prices are expected to rise further in some regions during US refinery maintenance this autumn, especially given the additional impact of Saudi Arabia’s extended production cuts on crude oil prices. The Energy Department did not immediately respond to requests for comment. The American Petroleum Institute, the top U.S. oil lobby group, said the Biden administration has “taken every opportunity to restrict production both now and in the future.”

“This administration has delayed a 5-year program for offshore exploration, stymied infrastructure development, removed millions of acres from leasing in the Gulf of Mexico, and revoked leases in Alaska, all while pushing costly and ineffective policies designed to limit consumer choice. It doesn’t have to be this way,” the group said in a statement.

Last summer, Biden officials held a series of talks with U.S. refiners as inflation was crushing consumers and gas prices hit historic highs. The White House at the time floated ideas like curbing fuel exports and forcing the restart of idle refineries, but those ideas have not been resurrected yet, the source said. Biden authorized large withdrawals from the nation’s Strategic Petroleum Reserve to combat high prices, leaving it at its lowest level in decades. Tapping it again this year would be a risky move. The SPR currently holds about 350 million barrels. The Biden administration has only begun refilling it sporadically and last month pulled back an offer to buy back a batch as oil prices were rising due to the Saudi output cut. NN: They are not going ti sit back and do nothing as oil shoots higher. This is how election are lost. The most watched prices by consumers is gasoline. I have seen them intervene over and over again to cap oil rallies.

Crude oil prices ticked lower today after the Energy Information Administration reported an inventory build of 4 million barrels for the week to September 8. This compared with a draw of 6.3 million barrels for the previous week, which in turn followed another massive inventory decline of 10.6 million barrels for the week before that.

EIA: US crude inventories up by 4 million barrels

The Biden administration informed Congress on Monday that it has taken concrete steps to carry out a prisoner exchange with Iran, issuing a waiver that will give Tehran access to $6 billion in Iranian oil revenue that had been blocked by U.S. sanctions, according to a State Department document sent to Congress and obtained by NBC News. Secretary of State Antony Blinken last week issued a sweeping waiver to international banks allowing the transfer of $6 billion in frozen Iranian funds from South Korea to Qatar without the threat of U.S. sanctions, according to the State Department report notifying Congress of its decision. Iran will then be permitted to use the funds to buy food, medicine or other humanitarian items allowed under U.S. economic sanctions.  In addition, the administration told lawmakers it would free five Iranian nationals under detention in the U.S. in exchange for five Americans held in Iran, according to the document. The move is the latest sign that the prisoner exchange is moving ahead. “This remains a sensitive and ongoing process,” she said. “We have kept Congress extensively informed from the outset of this process — long before today — and we will continue to do so, including with additional already scheduled briefings this week.”

OPEC+ is in a good position to keep oil at around $85 per barrel, according to a new report from Skandinaviska Enskilda Banken AB (SEB), which was sent to Rigzone earlier this week. “We expect OPEC+ to be in solid control of the global oil market over the next couple of years as U.S. shale oil production slows to a trickle,” SEB analysts Bjarne Schieldrop, the company’s Chief Commodities Analyst, and Ole R. Hvalbye, noted in the report.

“An oil price of $85-90 per barrel should be a good balancing point for consumers and producers,” the analysts added.

In the report, the analysts stated that OECD commercial oil inventories are up 111 million barrels over the past year but added that U.S. strategic petroleum reserves over the same period have declined “by almost the same amount – 95 million barrels”. “The global oil market has thus been nearly balanced over the past year with no real increase in OECD inventories when the decline in U.S. SPR is considered,” the analysts said in the report. The analysts also highlighted in the report that Saudi Arabia produced 10.5 million barrels per day in April “but then rapidly drew it down to only 9.0 million barrels per day in July to September”. “This did wonders for the oil price, which has shot back up to around $85 per barrel,” the analysts stated in the report. “This [is] exactly where we think Saudi Arabia wants to keep it if it can. It yields sufficient income while it is not so high that it stirs too much political kickback from its customers,” they added. “The current deep cuts by Saudi Arabia – in which Russia will participate with a 0.3 million barrel per day cut in September – are probably way too deep if the IEA is correct in its calculations. It estimates that the need for oil from OPEC is 30 million barrels per day in Q3/23 and 29.8 million barrels per day in Q4/23,” they continued.The analysts noted in the report that Saudi Arabia would need to produce closer to 11 million barrels per day for OPEC to reach this level and not the 9.0 million barrels per day it is producing now.

“We think Saudi Arabia will add supply in Q4/23 to prevent the oil market overheating,” the analysts said in the report.

The analysts also highlighted in the report that the IEA estimates that the world will need OPEC to produce 29 million barrels per day in 2024. “That is down 0.3 million barrels per day from 2023 as non-OPEC supply is projected to grow faster than global demand,” the analysts said. “If the non-Saudi producers within OPEC produce the same in 2024 as they so far have done in 2023, then the need for oil from Saudi Arabia in 2024 will be 10.3 million barrels per day. That is more than what it looks like Saudi Arabia will produce this year and more than its average production during 2015-19 of 10.1 million barrels per day,” they added. “So Saudi Arabia looks set to be perfectly fine in 2024 with good control of the market with ability to both lift and reduce production and keep the oil price just where it wants it to be. And with Saudi production now below Russia’s, it won’t have to do all the heavy lifting itself,” the analysts went on to state. If “painful cuts” are needed in 2024, then Russia will join in with deliberate cuts, according to the analysts. The SEB analysts noted in the report that U.S. shale oil production has been steadily cooling since early December “with drilling rig count falling even at a WTI price of $80 per barrel”. “This change in behavior has handed a lot of market power back to OPEC that it and Saudi Arabia are currently exercising and will continue to exercise in the coming years,” the analysts said in the report.

“The biggest risk to Saudi Arabia’s control of the situation would probably be a sudden revival of lost production by OPEC laggards like Venezuela, Iran, Nigeria, Angola, and Libya,” they added.

The total U.S. rig count currently stands at 631, according to Baker Hughes’ latest rotary rig count, which was released on September 1. This count is down 129 rigs year on year, the count showed, highlighting that the U.S. has cut 84 oil rigs and 48 gas rigs, and added three miscellaneous rigs, compared to this time last year. In its latest short term energy outlook (STEO), which was released last month, the U.S. Energy Information Administration (EIA) projected that U.S. crude oil supply would come in at 12.76 million barrels per day this year and 13.09 million barrels per day in 2024. Production from the Lower 48 states, excluding the Gulf of Mexico (GOM) was projected in the STEO to be 10.52 million barrels per day in 2023 and 10.81 million barrels per day in 2024. Brent rose from a close of $72.26 per barrel on June 27 to a close of $87.55 per barrel on August 9, before dropping to a close of $83.36 per barrel on August 24. The commodity rose to close at $90.04 per barrel on September 5. At the time of writing, the price of Brent crude oil is trading at $89.28 per barrel. The EIA projects in its August STEO that the Brent spot price will average $82.62 per barrel this year and $86.48 per barrel next year. In a report sent to Rigzone last week, Standard Chartered predicted that the ICE Brent price would average $91 per barrel this year and $98 per barrel next year.

In a separate report posted on SEB’s website on August 29, Schieldrop noted that SEB’s view is that Saudi Arabia will not risk driving crude oil prices to $100-110 per barrel or higher through deliberate cuts “as this will lead to elevated political storm from the U.S. and maybe also from China”.

“We think that Saudi Arabia is utterly happy with the current oil price of $85 per barrel and want to keep it at that level. Getting it exactly right is of course tricky, but they do have the capacity to at least get it ballpark right,” he added in that report. NN: They got oil in the sweat spot. $85 WTI is a number everyone can live with. If they push things to far a lot of new barrel will come into the market…… And a political shit storm… Which they don’t need right now. They have made their point.