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December Payrolls Huge Miss Again, Just 199K Jobs Added, As Unemployment Rate Tumbles

December Payrolls Huge Miss Again, Just 199K Jobs Added, As Unemployment Rate Tumbles

With everyone bulled up on the December jobs print which was expected to more than double the disappointing November print of 210K to 447K with a whisper…

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December Payrolls Huge Miss Again, Just 199K Jobs Added, As Unemployment Rate Tumbles

With everyone bulled up on the December jobs print which was expected to more than double the disappointing November print of 210K to 447K with a whisper of more than 500K, moments ago the BLS reported that in December the US job market deteriorated again, as only 199K jobs were added, a huge miss to expectations, and the lowest number since December 2020.

This was the second consecutive month of big misses in the Establishment Survey relative to expectations:

As expected, the November payrolls data was revised higher, but not nearly as much as some had expected, rising just 39K from 210K to 249K. At the same time, nonfarm payroll employment for October was revised up by 102,000, from +546,000 to +648,000, and the change for November was revised up by 39,000, from +210,000 to +249,000. With these revisions, employment in October and November combined is 141,000 higher than previously reported. Still this does not explain why the current month continues to print disappointly lower than expected.

However, in a carbon copy of last month's schism between the Household and the Establishment survey, in December the former once again showed solid gains, with the number of employed workers rising by a whopping 651K to 155.975MM, and with the number of Unemployed sliding by almost half a million from 6.802MM to 6.319MM, the unemployment number once again slumped sharply, dropping to just 3.9% from 4.2%, and below the consensus estimate of 4.1%, even as Black unemployment gained notably.

Among the major worker groups, the unemployment rates for adult men (3.6 percent), adult women (3.6 percent), and Whites (3.2 percent) declined in December. The jobless rates for teenagers (10.9 percent), Blacks (7.1 percent), Asians (3.8 percent), and Hispanics (4.9 percent) showed little or no change over the month.

As Bloomberg chief economist Carl Riccadonna writes, the biggest news from this report, without doubt, is the fact that the labor market has now arrived at (and surpassed) the Federal Reserve’s estimate of full employment (which the Fed pegs at 4.0%).

“As we are already beyond that level (3.9% reported), this will compel any lingering fence sitters on the FOMC to the view that the threshold for interest rate liftoff has been met -- thereby titling policy makers’ inclination toward March vs. June liftoff.”

Bottom line: just like one month ago, we got a very weak Establishment survey (which traditionally has been far more reliable) and a strong Household survey, i.e., the plunge in the unemployment rate, which we expect Biden will be touting when he addresses the jobs number at 10:45am ET.

The labor force participation rate was unchanged at 61.9 percent in December but remains 1.5 percentage points lower than in February 2020. The employment-population ratio increased by 0.2 percentage point to 59.5 percent in December but is 1.7 percentage points below its February 2020 level. Over the year, these measures have increased by 0.4 percentage point and 2.1 percentage points, respectively

Looking at wage growth, average hourly earnings rose 4.7% (up 0.6% on the month, above the exp. 0.4%), which while down from the upward revised 5.1% Y/Y, was a whopping 0.5% above the 4.2% expected. And while the headline print was weak, the wage growth is clearly good news for workers, and another sign of the tightening labor market:

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.7 hours in December. In manufacturing, the average workweek edged down by 0.1 hour to 40.3 hours, and overtime edged down by 0.1 hour to 3.2 hours. The average workweek for
production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 34.2 hours

Among the unemployed, the number of permanent job losers, at 1.7 million in December, declined by 202,000 over the month and is down by 1.8 million over the year. The number of persons on temporary layoff was little changed at 812,000 in December but is down by 2.3 million over the year. The number of permanent job losers in December is 408,000 higher than in February 2020, while the number on temporary layoff has essentially returned to its February 2020 level.

Some more details from the report: the number of persons employed part time for economic reasons, at 3.9 million in December, decreased by 337,000 over the month. The over-the-year decline of 2.2 million brings this measure to 461,000 below its February 2020 level. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

The number of persons not in the labor force who currently want a job was little changed at 5.7 million in December. This measure decreased by 1.6 million over the year but is 717,000 higher than in February 2020. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.

The number of workers unable to work due to bad weather was 74K, which is below the historical average for Dec. of 137k.

Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force was essentially unchanged at 1.6 million in December. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, was also essentially unchanged over the month, at 463,000.

Curiously, in December, 3.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic--that is, they did not work at all or worked fewer hours at some point in the 4 weeks preceding the survey due to the pandemic. This measure was down from the level of 3.6 million in November. Among those who reported in December that they were unable to work because of pandemic-related closures or lost business, 15.9 percent received at least some pay from their employer for the hours not worked, little changed from the prior month.

Breaking down job gains by job category:

  • Employment in leisure and hospitality continued to trend up in December (+53,000). Leisure and hospitality has added 2.6 million jobs in 2021, but employment in the industry is down by 1.2 million, or 7.2 percent, since February 2020. Employment in food services and drinking places rose by 43,000 in December but is down by 653,000 since February 2020.
  • Employment in professional and business services continued its upward trend in December (+43,000). Over the month, job gains occurred in computer systems design and related services (+10,000), in architectural and engineering services (+9,000), and in scientific
  • research and development services (+6,000). Employment in professional and business services overall is slightly below (-35,000) its level in February 2020.
  • Manufacturing added 26,000 jobs in December, primarily in durable goods industries. A job gain in machinery (+8,000) reflected the return of workers from a strike. Manufacturing employment is down by 219,000 since February 2020.
  • Construction employment rose by 22,000 in December, following monthly gains averaging 38,000 over the prior 3 months. In December, job gains occurred in nonresidential specialty trade contractors (+13,000) and in heavy and civil engineering construction (+10,000). Construction employment is 88,000 below its February 2020 level.
  • Employment in transportation and warehousing increased by 19,000 in December. Job gains occurred in support activities for transportation (+7,000), in air transportation (+6,000), and in warehousing and storage (+5,000). Employment in couriers and messengers was essentially unchanged. Since February 2020, employment in transportation and warehousing is up by 218,000, reflecting job growth in couriers and messengers (+202,000) and in warehousing and storage (+181,000).
  • Employment in wholesale trade increased by 14,000 in December but is 129,000 lower than in February 2020.
  • Mining employment rose by 7,000 in December. Employment in the industry is down by 81,000 from a peak in January 2019.

So what's going on? Well, blame Covid of course (which no economist could factor into their forecasts apparently): addressing the second consecutive big miss, Bloomberg Intelligence’s chief economist, Carl Riccadonna, said that in thinking about the near-term labor trend, it’s important to consider that through the December employment survey period, the Covid case count was up 50% relative to the relevant November period. In early January, it is already up 440% relative to December, so the Covid drag will be an order of magnitude larger in the January data and could easily push net payrolls into negative territory for the next few months.

CIBC economist Katherine Judge was also quick to latch on the Omicron excuse: “The leisure and hospitality sector was the single largest contributor to the job gains (+53K). However, that won’t last in the months ahead given the spread of omicron. Indeed, we expect continued softness in employment, and particularly hours worked, over the next couple of months.”

In terms of what this report means for markets, SocGen's head of U.S. rates strategy said that the Federal Reserve will probably overlook a miss in headline employment figures to focus on the declining jobless rate and “eye-popping” wage increases: “This is an inflation story and the curve is responding by bear steepening." This view was echoed by Bloomberg editor Chris Anstey who said that "all in all, there’s nothing here to dissuade the Fed from considering a March interest-rate hike" because of course the Fed has to focus on anything that doesn't show the economy is slowing as it is about to hike.

And sure enough, the March "lift off" chorus is singing :“This is a green light for March. The U3 unemployment rate plunged 0.3ppt to 3.9%, 0.4ppt below the Fed’s Q4 2021 estimate and only 0.4ppt above the Fed’s estimate for year end 2022. Average hourly earnings are coming in firm as the labor force participation rate remains flat”, said Neil Dutta of Renaissance Macro.

The final takeaway from today's report comes from Michael Pierce, an economist at Capital Economics, who effectively said ignore the negative and just focus on the positive: “The key takeaway for the Fed is that, with few signs of a recovery in labor supply, the continued decline in the unemployment rate and surge in wage growth looks set to be sustained over 2022."

Tyler Durden Fri, 01/07/2022 - 08:34

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Missouri Bill Prevents Doctors Being Disciplined If They Prescribe Ivermectin Or Hydroxychloroquine

Missouri Bill Prevents Doctors Being Disciplined If They Prescribe Ivermectin Or Hydroxychloroquine

Authored by Naveen Athrappully via The…

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Missouri Bill Prevents Doctors Being Disciplined If They Prescribe Ivermectin Or Hydroxychloroquine

Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

Missouri lawmakers passed legislation that prevents state licensing boards from disciplining doctors who prescribe ivermectin and hydroxychloroquine.

Missouri Gov. Mike Parson signs a bill in Jefferson City, Mo., on May 24, 2019. (Summer Balentine/AP Photo)

Sponsored by Rep. Brenda Kay Shields (R-Mo.), HB 2149 also bars pharmacists from questioning doctors or disputing patients regarding the usage of such drugs and their efficacy.

With a convincing 130–4 vote in the House, HB 2149 passed both chambers on May 12 and currently heads to the office of Gov. Mike Parson to be potentially signed into law.

The board shall not deny, revoke, or suspend, or otherwise take any disciplinary action against, a certificate of registration or authority, permit, or license required by this chapter for any person due to the lawful dispensing, distributing, or selling of ivermectin tablets or hydroxychloroquine sulfate tablets for human use in accordance with prescriber directions,” reads the draft of the bill (pdf).

It adds, “A pharmacist shall not contact the prescribing physician or the patient to dispute the efficacy of ivermectin tablets or hydroxychloroquine sulfate tablets for human use unless the physician or patient inquires of the pharmacist about the efficacy of ivermectin tablets or hydroxychloroquine sulfate tablets.”

Critics of the bill have noted that the Food and Drug Administration (FDA) has not given approval for usage of the drugs. Ivermectin and hydroxychloroquine have been divisive drugs and politically polarized throughout the pandemic.

“But, nevertheless, the Missouri legislature has chosen to ‘own the libs’ by issuing a gag order against every pharmacist in this state from offering their medical opinion on taking either one of those medications—even if it could kill their patient,” wrote former Democratic nominee Lindsey Simmons in a May 12 Twitter post.

Although 22 countries across the world have approved the use of ivermectin in treating COVID-19, the FDA maintains that the current data show the drug to be ineffective. Large doses can be dangerous, it says.

A recent study published in the International Journal of Infectious Diseases analyzed a national federated database of adults that compared ivermectin with the FDA-approved COVID-19 medication, remdesivir.

After using propensity score matching and adjusting for potential confounders, ivermectin was associated with reduced mortality vs remdesivir,” researchers wrote. “To our knowledge, this is the largest association study of patients with COVID-19, mortality, and ivermectin.”

According to The Associated Press, Missouri state Rep. Patty Lewis, a Democrat, agreed to the bill to satisfy a group of conservatives in the Senate. She added that the bill will not change anything significantly as medical boards do not engage in punishing doctors who prescribe drugs legally.

Tyler Durden Wed, 05/18/2022 - 23:25

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“They Shut Us Down”: Michigan Businesses Sue Whitmer For Losses Due To COVID Lockdowns

"They Shut Us Down": Michigan Businesses Sue Whitmer For Losses Due To COVID Lockdowns

Authored by Steven Kovac via The Epoch Times (emphasis…

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"They Shut Us Down": Michigan Businesses Sue Whitmer For Losses Due To COVID Lockdowns

Authored by Steven Kovac via The Epoch Times (emphasis ours),

A coalition of five bowling alleys and family entertainment centers is suing Michigan’s Gov. Gretchen Whitmer, a Democrat, for losses incurred due to her mandatory COVID-19 shutdowns in 2020.

Michigan Gov. Gretchen Whitmer listens to Democratic presidential candidate Sen. Kirsten Gillibrand (D-N.Y.) in Clawson, Mich., on March 18, 2019. (Paul Sancya/AP)

Michigan Dept. of Health and Human Services director Robert Gordon is also a defendant in the case.

The plaintiffs allege that the shutdowns imposed by Whitmer and Gordon were a “taking” of their businesses without just compensation in violation of both the state and the U.S. Constitution.

The case has been winding its way through the federal courts since January 2021.

Fred Kautz runs the lane oiler at Kautz Shore Lanes in Lexington, Mich., on May 13, 2022. (Steven Kovac/The Epoch Times)

The coalition lost the first round of the legal battle when the U.S. District Court for the Western District of Michigan ruled against it.

Oral arguments were recently held before a three-judge panel of the US Court of Appeals Sixth Circuit.

Plaintiff’s chief counsel David Kallman told The Epoch Times after the appeals court hearing, “The oral arguments from both sides were vigorous. The judges asked a lot of questions. It was the kind of proceeding that makes you proud to be a lawyer.

“Even the defense acknowledges that we are presenting ‘novel’ arguments.

“Michigan is the only state in the nation where a governor’s public health emergency powers were overturned as unconstitutional.

“If we lose in the court of appeals, we will take this case to the U.S. Supreme Court.”

Scott Bennett, executive director of the Independent Bowling and Entertainment Centers Association, told The Epoch Times,

“The governor’s actions were devastating to our industry.

“Things went from ‘two weeks to slow the spread’ to indefinite shutdowns.”

Bennett said that the forced closures were not based on solid scientific proof that bowling alleys and family entertainment centers would spread the virus any more than the Walmart stores or the GM plants that were allowed to remain open.

“They were allowed to operate with hundreds and even thousands of people in them but we had to shut down. We feel our industry was unfairly singled-out.

“We cannot stand for a repeat of such arbitrary treatment and don’t want the people of Michigan to forget what was done to them.”

With the recent uptick in COVID cases and the approaching mid-term elections, Bennett said his members that survived the 2020 shutdowns feel like it can happen all over again.

“It’s like operating day-to-day with a hammer held over your head. The uncertainty is altering business plans. The value of our businesses is dropping through the floor,” Bennett said.

Brian and Mindy Hill work the counter at their bowling alley in Imlay City, Mich. on May 13, 2022. (Steven Kovac/Epoch Times)

Fred Kautz, the proprietor of Kautz’s Shore Lanes in Lexington, Michigan, started working in the family business when he was 13.

The business has 12 bowling lanes, a bar, an arcade, a restaurant, and living quarters upstairs.

“We’ve owned this place for 42 years. For me and my family, it’s more than a place to work. It’s a way of life. And it has become an institution in our community—a real gathering place,” said Kautz.

He said he is still smarting from what happened after Whitmer’s executive actions were ruled unconstitutional by the Michigan Supreme Court in the fall of 2020.

“We got a little reprieve. We thought we were in the clear until she came back with another round of forced closures, this time under the authority of the Michigan Department of Public Health.

The first 30 days knocked us right on our butts. But we were willing to cooperate, to do our part. We were all scared and we did not want to see harm come to anybody.

We lost a lot of money at the time. We are coming back slowly, but our overall revenue is still down 20 percent from pre-pandemic days. That’s hard to make up.

“In the spring of 2020, I tried to do what was recommended and go along. Never again!

“If my Dad was still alive, he’d have never closed at all,” said Kautz.

Brian and Mindy Hill, owners of I.C. Strikes, a 16-lane bowling alley, bar, and snack bar in Imlay City said their business was hit hard by the shutdowns.

Brian was the town barber for 25 years, before purchasing the bowling alley where he learned to bowl as a child.

“We took over in December 2018. We’d saved up money to buy this place and make some upgrades. When COVID hit, we were forced to close down. It took all the money we saved for improvements just to survive,” said Brian.

The Hills said they never thought they’d see the day when their own government could do something like that to them.

Mary Bacon, assistant manager of Jump City, a family recreation center, cleans an arcade machine in Imlay City, Mich., on May 13, 2022. (Steven Kovac/The Epoch Times)

They shut us down. They took away our livelihood with no end date in sight. Then they wanted to loan us money. Think about that. They first put us in a situation where we had zero income to pay our previous debt. And then they wanted to loan us more money.

“Lots of small business people lost their businesses but kept their debt. It ruined them,” said Brian.

The Hills did apply for and receive a Small Business Administration loan at 3.25 percent interest for 30 years, and they participated in the Paycheck Protection Program which helped their business survive.

Up the road from the Hill’s bowling alley is Jump City, a large indoor recreation center offering an array of bouncy houses and arcade games for children.

Assistant manager Mary Bacon told The Epoch Times, “We lost a lot of business. We were forced to close for 15 months and had to make our payments with no income.”

Bacon remembers the morning of March 16, 2020, when many area businesses were gearing up for big St. Patrick’s Day celebrations.

“By afternoon everybody had to close. All that food went to waste.

“The shutdown was supposed to be for a couple of weeks. Nobody foresaw it would drag on for a year and three months.

“Oh, they said we could open again, but they so severely restricted the number of customers that we lost all of our big birthday parties. With so few kids allowed in, we couldn’t operate. We were losing too much money.”

Bacon said people are coming back to the center but are still scared, even though the games and bouncy houses are continuously cleaned and sanitized.

Navaeh Smalstig, 8, climbs out of a bouncy house at Jump City in Imlay City, Mich., on May 13, 2022. (Steven Kovac/The Epoch Times)

Before the pandemic, Danny Brown owned a roller rink in Grand Blanc and Owasso, two south-central Michigan towns.

“The lockdowns forced us to sell the Owasso rink for less than half of what we paid for it. We will be trying to make up our loss for years to come.”

Brown, who is a plaintiff in the lawsuit, told The Epoch Times, “To keep going I had to decide to triple our debt. Since the shutdown, I am three-quarters of a million dollars deeper in debt.

“Small businesses put everything on the line. All of our personal and family money. I am personally responsible for our debt. If I die my children will have to pay it.”

Brown said Michigan’s government acted without a real understanding and regarded the state’s small businesses as “nonessential throwaways.”

“One of the reasons we filed suit is to push the government to think differently,” he said.

According to Brown, family entertainment centers like skating rinks, bowling alleys, arcades, pool halls, miniature golf, and go-cart tracks have been nearly wiped out.

“A few years ago, there were 3,500 roller skating rinks in the United States. Now there are 700. There were five rinks in Genesee County, now there are two.” he said.

Brown attributes the decrease to years of ongoing government mandates and interference that led up to the COVID-19 lockdowns.

“They took, they stole our businesses!” he said.

Donn Slimmen, another plaintiff in the case, owns Spartan West Bowling in the west Michigan resort town of Ludington.

“The lockdown just about killed us. It was 14 to 15 months of agony. Our bank payments and utility bills didn’t stop. We went from being two to three months behind to more months behind.

“We entered into survival mode. We ate a lot of pork and beans and hotdogs. We’re still trying to work ourselves out of the hole. By the end of this summer, we might be solvent again.

“We were lucky to survive. We are still hanging on by threads,” said Slimmen.

Along with 16 bowling lanes, Slimmen operates a full-service restaurant.

It’s never come back. Pre-pandemic, we’d serve 200 customers at an ordinary Friday fish fry. Now our best night is 100.

“Our restaurant went from a thriving seated-guest business to a take-out operation grossing only two to three percent of the seated sales.

“We were spending $400 to take in proceeds of $100.

“The politicians and bureaucrats don’t understand. They never cleaned a toilet seat or climbed into a bowling machine to fix it,” said Slimmen.

Slimmen blames Gov.Gretchen Whitmer for the plight of his community and the state.

“You didn’t see Republican governors closing businesses. Their states did so much better.

“Drive through downtown Ludington or Muskegon and look at all the boarded-up storefronts. So many places are out of business. Michigan is in terrible shape,” Slimmen said.

The Tomassoni family has been in the bowling business for 84 years in the western Upper Peninsula town of Iron Mountain, Michigan.

We had to close bowling and our banquet facility a total of 161 days in two different periods of time in 2020. After the second shutdown, we could operate at 25 percent occupancy and only during restricted hours. No wedding receptions, no special events. It was a disaster.

“It ripped my heart out. I am so bitter towards my government,” said owner Pete Tomassoni.

Tomassoni’s business suffered further because of its proximity to Wisconsin which is only minutes away.

“Wisconsin closed for just 30 days. For the most part, they were wide open. That really hurt us.

“Our governor was picking and choosing which of our state’s businesses could operate. To force a business to close with no notice and without proven science is straight out wrong.

“I think that she came down so hard on small business because we, by and large, lean to the right.

“The state dangled the threat of yanking business licenses to keep people in line.

“Some of our businesses tried to defy the state and stayed open

Tyler Durden Wed, 05/18/2022 - 21:25

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Diesel Costs Deliver Body Blow To Trucking Industry, Impacting Broader Economy

Diesel Costs Deliver Body Blow To Trucking Industry, Impacting Broader Economy

By Noi Mahoney of Freightwaves

With diesel prices remaining…

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Diesel Costs Deliver Body Blow To Trucking Industry, Impacting Broader Economy

By Noi Mahoney of Freightwaves

With diesel prices remaining elevated — forcing significant costs onto shippers and trucking companies — the impact of fuel costs on inflation could put a dent in consumer spending, according to experts.

Diesel pump prices averaged $5.61 a gallon nationwide, 51% higher than diesel prices across the country in January

Economist Anirban Basu said the elevated price of diesel fuel damages the near-term U.S. economic outlook and “renders the chance of recession in 2023 much greater.”

“These high diesel prices mean that despite the Federal Reserve’s early stage efforts to curb inflationary pressures, for now, inflationary pressures will run rampant through the economy,” Basu, CEO of Baltimore-based Sage Policy Group, told FreightWaves. 

Earlier this month, the Federal Reserve announced a half-percentage-point increase in interest rates, the largest hike in over two decades. The U.S. inflation rate is at 8.3%, near 40-year highs.

Basu said consumer spending remains strong, even with elevated diesel prices, but that could change as shippers and trucking companies eventually must pass higher fuel costs on to the public. 

“One of the things we’ve been seeing in the U.S., particularly on the East Coast, is that diesel fuel inventories have been shrinking, which suggests that despite all this inflationary pressure, there’s still a lot of consumer activity, still lots of trucks on the road and the supply is unable to keep up with demand,” Basu said. “The higher price of diesel fuel will become embedded in the cost of everything consumers purchase.” 

Prices of fresh produce rising

Jordan DeWart, a managing director at RedWood Mexico, based in Laredo, Texas, said the types of consumer goods that could be immediately affected by higher diesel prices include fresh produce. Redwood Mexico is part of Chicago-based Redwood Logistics.

“With produce, that’s typically more in the spot rate business, and any of those smaller trucking companies are going to be heavily impacted by fuel costs,” DeWart said.

The U.S. imported more than $15 billion in fresh produce from Mexico in 2021, including avocados, tomatoes, grapes, bell peppers and strawberries, according to the U.S. Department of Agriculture.

“Everything coming northbound from Mexico through Laredo, the rates have been very sustained, but fuel prices keep going up, presumably with any differences being absorbed by the trucking companies in the spot market,” DeWart said. “When we talk to asset-based truckers, especially the smaller companies, they’re really feeling the pinch.”

It’s not only cross-border operators feeling the pinch. Growers and shippers in Texas’ Rio Grande Valley are also suffering because of increased fuel costs, said Dante Galeazzi, president of the Texas International Produce Association (TIPA).

“Our growers, shippers, importers, distributors … basically our entire supply chain has been and continues to be impacted by rising fuel costs,” Galeazzi told FreightWaves. “Between one-third to one-half of the costs for fresh produce is the logistics; you can see how quickly increases in that expense category can impact the base price.”

The Rio Grande Valley is the epicenter of the Lone Star State’s fresh produce industry, stretching across the southeastern tip of Texas along the U.S.-Mexico border. More than 35 types of fruits and vegetables are grown in the valley, which contributes more than $1 billion to the state economy annually.

“More concerning is that this wave of fuel increases is in line with the statistic that our industry is paying anywhere from 70% to 150% more year-over-year for OTR shipping,” Galeazzi said. 

TIPA, which is based in Mission, Texas, represents growers, domestic shippers, import shippers, specialty shippers, distributors and material and service providers. 

Right now, Rio Grande Valley growers and shippers are absorbing higher input costs instead of passing them on to consumers, but that could soon change, Galeazzi said.

“While the fresh fruit and vegetable industry continues to experience rising input costs across the board (seed, agrochemicals, labor, fuel, packaging, etc.), we have yet to experience sufficient upstream returns associated with those expense increases,” Galeazzi said. “Our industry is citing an 18% to 22% anecdotal increase to overhead costs. Meanwhile food inflation for fresh produce is hovering around 7%. That means the costs are slowly being felt by consumers, but it’s not yet at a commensurate level with input expenses.”

Diesel fuel prices at all time highs

The cost of diesel continues to soar across the country. Diesel pump prices averaged $5.61 a gallon nationwide, according to weekly data from the Energy Information Administration (EIA). That’s 51% higher than diesel prices nationwide in January. 

California averaged the highest fuel prices across the U.S., at $6 per gallon of gas and $6.56 per gallon for diesel, according to AAA. Diesel prices are also at an all-time high of $6.41 in New York.

The higher prices of diesel fuel and gasoline are being caused by a combination of factors, including surging demand and reduced refining capacity, along with the disruption to global markets caused by COVID-19, the current lockdown in China and the ongoing Russia-Ukraine conflict, said Rory Johnston, a managing director at Toronto-based research firm Price Street.

“The overarching oil market is feeling much tighter because of the Russian-Ukraine situation,” Johnston, also writer of the newsletter Commodity Context, told FreightWaves. “What we’ve seen is a larger immediate impact from the loss of Russian refined products; in addition to exporting millions and millions of barrels a day of crude oil, Russia also exported a lot of refined products, most notably middle distillates, like gasoline or diesel.”

Several refineries on the East Coast — including facilities in Newfoundland and Labrador, Canada — scaled back during the early days of the pandemic, which has hurt diesel capacity, Johnston said.

“There was also a refinery in Philadelphia that exploded just prior to the COVID-19 period starting,” Johnston said. “There’s not enough refining capacity on the global level, and particularly in the West right now and particularly in the northeastern U.S.”

He said he doesn’t foresee any relief from increasing diesel prices over the next few months or more.

“Things are going to be really tight for at least the next year, barring any kind of economic recession and some kind of demand slowdown materially,” Johnston said. 

DeWart said trucking companies that don’t have a fuel surcharge component or contract in place and are depending on spot rates could be in big trouble over the next several months as diesel prices either keep rising or stay higher than average. 

“Their fuel costs keep going up, but they’re really not able to negotiate higher rates right now with a really tight spot market,” DeWart said. “It’s really impacting small trucking companies, anyone that decided to kind of play the spot market, rather than being locked in contracted rates. They’re really feeling the pain right now.”

DeWart said for trucking companies, it’s critical to get some type of fuel reimbursement program in place “just to protect themselves in case the cost of fuel goes even higher.”

Tyler Durden Wed, 05/18/2022 - 19:25

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