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|The Advocate - March 2018|
The Advocate - march 2018
NWPCA Congresswoman Fly-in:
The Advocate is tailored for NWPCA members and affiliates, and provides the latest information on what’s happening with the public policy issues and meetings that have the potential to impact you - or are impacting the day-to-day tasks and operations of the pallet industry. These government affairs updates strive to "Give you a heads-up, while you're putting the hammer down.”
The U.S. Small Business Administration Office of Advocacy held a roundtable on Small Business Labor Safety (OSHA/MSHA). Representatives from the government, Congress, and small businesses were present to discuss the future of OSHA and MSHA. NWPCA was represented at the meeting. Click to read more.
In the month of February, Congress finally secured a deal to set the spending levels for FY18 and push the cliff of the "debt ceiling" to 2019. Unfortunately, there were additional crisis that arose and distracted Congress so that now we are facing another crunch to authorize spending and keep the government open after the middle of March. In February, the President released his budget and announced additional details about his infrastructure plan. Now, Congress will need to determine how much of the budget they will agree with, all indications are that there is plenty they will disregard as they negotiate among themselves to set the spending levels for FY19. Based on February developments, we anticipate that the big issues which will dominate the legislative calendar in the coming months will be the passage of a spending deal, figuring out what to do about DACA recipients, appropriation negotiations, cutting deals to address mistakes and oversights in the tax package that passed last year, and a determination if some deal can be struck over infrastructure.
The Administration is moving ahead with its plans to expand association health plans to more organizations and small businesses. To that end, the Department of Labor issued a proposed rule. Additionally, the President's budget calls for a $5 million increase to the office that is tasked with overseeing this expansion.
There are also discussions occurring in Congress, spurred by the President's own words, to pass another tax reform package, dubbed "tax reform 2.0". There are mistakes in the recently passed bill and additional provisions that Republicans want to change. This will have to be done in a bipartisan manner and we expect for the Democrats to extract a price for any bill that helps to fix the mistakes that are in the first tax reform package.
Another issue that recently reappeared on our radar is some engagement regarding twin 33’ trailers. There is no indication from the Administration that they have a position one way or the other on this issue. NWPCA has re-engaged with coalition members to advocate for increased trailer lengths, which would reduce fuel usage and address the shortage of truck labor with fewer trips. Read the recent Fuel Line, published by the ATA.
With the change in the Administration, there has been a significant shift at OSHA and what Congress wants for it to focus on. Programs helping companies comply with workplace safety regulations offer the most effective worker protection while not unduly harming businesses, GOP Members stated in a recent subcommittee hearing. Rep. Bradley Byrne, chairman of the House Ed & Workforce Subcommittee on Workforce Protections, and recent recipient of the NWPCA “Champion of the Wood Pallet and Container Industry” award, stated that many companies believe that OSHA means well but that its standards are unworkable in the real world. That is why Byrne believes that OSHA should prioritize initiatives such as the Voluntary Protection Programs, that allows some companies to win exemption from routine safety inspections.
Companies want OSHA to regard employers as partners and to use regulation, enforcement, and compliance assistance with equal measures, according to one of the witnesses in the hearing. For their part, Democrats feel that existing OSHA penalties are too low to deter wrongdoing. Thousands of workers have died on the job since the last committee hearing on the topic, more than two years ago. They feel that increased regulatory rollbacks will allow low-road employers to continue to get away with bad actors. NWPCA continues to monitor these developments and engage as necessary.
Times magazine article on “Why Trump’s Forgotten Man Still Supports Him” including interview with Bill MacCauley of John Rock Inc. Read the article here.
Last week, NWPCA’s Vice President of Advocacy and External Affairs, Patrick Atagi, and CEO, Brent McClendon, met with Travis Krogman, Senior Legislative staff from Congresswoman Kuster’s (New Hampshire-2nd) office. NWPCA was informed through its partner association, the Empire State Forest Products Association, that there is potential for language adverse to the pallet industry to be introduced during Farm Bill discussion. NWPCA learned that there were inquiries made to include language in the 2018 Farm Bill directing the Custom Border Protection (CBP) agency to impose mandatory fines on ‘non-compliant’ wooden pallets. We are concerned that this is a slippery slope to mandatory sentencing, and that ‘non-compliant’ could mean something as innocuous as a smudged ISPM15 stamp. While the ‘risk’ of this language passing is extremely low, we take this seriously. Travis Krogman relayed to us that it would be difficult to support this language without further data from CBP and more supporters of the draft language. Furthermore, 2018 Farm Bill discussions have stalled as House Democrats believe they can win a majority in the mid-term elections in November later this year. NWPCA will continue its advocacy efforts and will be meeting with Congresswoman Rick Nolan (Minnesota-8th) in two weeks. Nolan is a former wood pallet manufacturer and owner.
Last week was marked by more volatility in equities, with financial markets processing both technology news and trade actions. With that said, the Federal Reserve noted continued strength in the underlying economy, particularly in labor markets, in the statement accompanying its March 20–21 Federal Open Market Committee (FOMC) meeting. According to the latest economic projections, participants expect faster growth moving forward, especially after passage of tax reform and continued signs of strength in the global economy. In December, the Federal Reserve forecasted 2.5, 2.1 and 2.0 percent growth for 2018, 2019 and 2020, respectively. That outlook for real GDP growth has risen to 2.7, 2.4 and 2.0 percent in the latest survey. The FOMC also anticipates that the unemployment rate will fall to 3.8 percent in 2018 and 3.6 percent in 2019. The December projections called for 3.9 percent in both years.
As expected, the FOMC ended its March 20–21 meeting by hiking short-term rates by 25 basis points. This was the first FOMC meeting Jay Powell chaired, and the Federal Reserve is likely to increase the federal funds rate at least two (and maybe three) more times in 2018. Participants’ economic projections were consistent with two more rate hikes this year, with the midpoint of the federal funds rate rising from 1.625 percent now to 2.1 percent by the end of the year. It is worth noting that the Federal Reserve’s current outlook for the next two years is more aggressive than it was in December. Respondents now see the federal funds rate increasing to 2.9 percent and 3.4 percent by year’s end in 2019 and 2020, respectively, up from 2.7 percent and 3.1 percent three months ago. As always, the actual pace of rate hikes will hinge on incoming data.
Data on manufacturing activity also continued to be encouraging. The IHS Markit Flash U.S. Manufacturing PMI rose to 55.7 in March, the best reading in three years. One of the key drivers of that higher headline number was employment, with hiring continuing to expand strongly amid tightness in the overall labor market. In addition, manufacturers felt very optimistic about future output, with that index rising to the highest point since February 2015. On the downside, raw material prices picked up in the latest survey, with costs expanding at rates not seen since September 2011. In a similar way, manufacturers in the Kansas City Federal Reserve Bank’s district also noted strong expansions in its March survey, with the employment index rising to a new all-time high in the survey’s 17-year history. The average workweek also widened to the best reading in seven years. This mirrored other regional sentiment surveys, which have found mostly optimistic assessments about both current and future growth, but with accelerating input costs.
Moreover, new durable goods orders rebounded, up 3.1 percent in February after falling 3.5 percent in January. Much of that volatility stemmed from shifts in aircraft and parts sales, which can have large swings from month to month. Stronger motor vehicles and parts orders (up 1.6 percent) also buoyed the increase in February, and with solid gains in aircraft and automobiles, transportation equipment orders jumped 7.1 percent for the month. New durable goods orders have trended strongly higher across the past 12 months, soaring 6.9 percent since February 2017. One of the more important measures in this release is new orders for core capital goods (or nondefense capital goods excluding aircraft), which can often be seen as a proxy for capital spending in the U.S. economy. In February, new orders for core capital goods increased 1.8 percent, but like the headline number above, the year-over-year pace was a very healthy 8.0 percent.
Consumer spending has been a bright spot in the economy, and preliminary data from the University of Michigan’s confidence measure jumped to the highest level since January 2004. However, retail sales were weaker than desired in January, starting the new year off on a disappointing note. With that in mind, upcoming reports this week on personal income and spending data will be watched closely for signs that Americans are once again opening their pocketbooks. Even with some easing in January, personal spending has risen by a healthy 4.5 percent year-over-year. Other highlights this week include updates on manufacturing surveys from the Dallas and Richmond Federal Reserve Banks and data for consumer sentiment, the second revision for real GDP growth, international trade in goods and the Chicago Federal Reserve’s National Activity Index.
Mark your calendars for two full days, June 19th and 20th, for the NWPCA Congressional Fly-in. This year we will be partnering again with the National Association of Manufacturers (NAM) and will have senior Presidential Administration Officials speaking to registered participants. While this is serious work, it is also an opportunity to take in the experience of Washington, DC and see first-hand what you see on the news. This is also an opportunity to weigh-in with Members of Congress, Federal officials, and senior Administration officials of your concerns. As always, we will prepare you for Hill visits and you can jump-in to the conversation or sit-back and listen-and-learn from those who influence your business. What are they thinking and doing, and how do you best prepare. Leaders in the wooden pallet and container industry know the advantage of first-hand information, and so should you. We had record registration last year and encourage new attendees to take advantage of this important networking opportunity. We will be staying again at the Washington Court Hotel, literally just steps from the United States Capitol. Details and registration to follow in mid-April.