The Morning Dispatch: Economy Still Too Hot

Happy Monday! You can check our ears all you want, today’s Morning Dispatch was produced without the aid of any performance-enhancing substances. (Unless you count Dr. Pepper.)

Quick Hits: Today’s Top Stories

• The Bureau of Labor Statistics reported Friday that U.S. employers added about 263,000 jobs in September, dropping the unemployment rate to 3.5 percent from 3.7 percent in August. The labor force participation rate fell 0.1 percentage points—from 62.4 percent to 62.3 percent—but about half a million more Americans are working now than were in February 2020, before the pandemic.

• An explosion on Saturday inflicted significant damage to the Kerch Bridge connecting Russia with the Crimean Peninsula, endangering a crucial resupply route for the Russian military and dealing Russian President Vladimir Putin a considerable symbolic blow. Russia said the explosion was caused by a truck detonating next to a train carrying fuel, but several independent analysts believe it came from under the bridge, either from a boat passing underneath or a series of charges placed in advance. No entity has taken credit for the attack, but several top Ukrainian officials have gleefully shared videos of the incident—which took place on Putin’s 70th birthday—and Putin labeled the explosion an “act of terrorism” carried out by Ukraine’s special services. The bridge is currently operating in a limited capacity, and Russia retaliated with a series of rocket attacks on residential buildings in the Ukrainian city of Zaporizhzhia. Kyiv was also hit with missiles early this morning, the first such shelling of Ukraine’s capital in months.

• The protests sparked by the death of 22-year-old Iranian Mahsa Amini in police custody have continued into their fourth week, with students rallying outside universities over the weekend shouting “death to the dictator!” and Iranian state TV reportedly being hacked briefly to display pro-revolutionary imagery. A Norway-based human rights organization estimated Saturday that at least 185 people have been killed in the protests thus far, including 19 children.

• In response to North Korea’s recent spate of missile tests, the Treasury Department on Friday announced new sanctions targeting two individuals and three entities involved in exporting petroleum to North Korea in support of its weapons programs and military. Undeterred—and frustrated by another round of joint naval exercises near the Korean Peninsula over the weekend by the United States and South Korea—North Korea launched another two short-range ballistic missiles into the sea on Sunday.

• The Commerce Department announced Friday its Bureau of Industry and Security is implementing additional export controls aimed at preventing China’s military from obtaining “certain high-end chips used in military applications.” Under the new rules implemented last week, American chip manufacturers will need to apply for a license from the Commerce Department to export certain products. Chinese Foreign Ministry Spokeswoman Mao Ning complained that the move will “harm Chinese companies’ legitimate rights and interests,” but argued it will hurt American businesses as well by disrupting global supply chains and economic recovery.

• Per the Centers for Disease Control, just 11.5 million Americans—about 4 percent of those eligible—have received an updated COVID-19 booster from Pfizer or Moderna designed to target Omicron. The average number of daily confirmed COVID-19 cases in the United States declined about 23 percent over the past two weeks according to CDC data, while the average number of daily deaths attributed to the virus—a lagging indicator—fell 12 percent. About 20,865 Americans are currently hospitalized with COVID-19, down from approximately 24,678 two weeks ago.

• The Arizona Court of Appeals issued an order on Friday granting a stay of a lower court’s recent ruling that had allowed an abortion law passed more than 100 years ago—which prohibited nearly all abortions not deemed necessary to save the life of the mother—to go into effect. Blocking enforcement of that older law helps mitigate confusion over whether the state’s more recently enacted 15-week ban superseded the more restrictive law. 

• The Uvalde Consolidated Independent School District (UCISD) announced Friday it will suspend all activities of the UCISD Police Department “for a period of time,” placing two top officials on administrative leave and reassigning other officers to “fill other roles in the district.” The district’s superintendent also announced plans to retire. There are currently multiple investigations into the UCISD Police Department’s response to the mass shooting at Robb Elementary in May.

• The Norwegian Nobel Committee announced Friday it had awarded the Nobel Peace Prize to Belarusian human rights advocate Ales Bialiatski, the Russian human rights organization Memorial, and the Ukrainian human rights organization Center for Civil Liberties.

Economy Cooling, but Still Too Hot for the Fed

According to the latest data release from the Bureau of Labor Statistics, U.S. employers added 263,000 jobs in September, led by gains in the leisure, hospitality, healthcare, and manufacturing sectors. Total employment has officially surpassed pre-pandemic levels, with the unemployment rate tying its lowest point—3.5 percent—in more than 50 years. Average hourly earnings are up, with workers taking home 5 percent more money now than this time last year. Great news, right? 

Wrong!

With inflation firmly cemented as the defining economic concern of our time, the main takeaway from indicators like Friday’s jobs report—or Tuesday’s labor turnover survey, or September’s consumer spending data—is no longer the numbers themselves but the Federal Reserve’s reaction to those numbers. That’s why the Dow and the S&P 500 fell 2.1 and 2.8 percent, respectively, to close out the week. “This was a classic case of good news is bad news,” GW&K Investment Management strategist Bill Sterling told Reuters.

The Fed has been bumping up interest rates at a record clip since the spring, opting for three consecutive 0.75-percentage-point hikes in an effort to slow demand and cool off a red-hot economy. By making it more expensive to borrow money, central bankers hope consumers and businesses alike will start to cut back on their spending—from purchasing cars and homes to investing in workforces and new factories—removing money from circulation and allowing supply to catch up with demand. Only then will our 40-year-high inflation rates start to ebb.

To that end, September’s employment data made clear the Fed’s moves are having their intended effect—but that the job is nowhere near done. The 263,000-new-jobs figure, for example, is down from an average of 475,000 over the preceding four months—but still a strong showing and well above the pre-pandemic norm. September’s 5 percent annual increase in average hourly earnings, meanwhile, is smaller than August’s 5.2 percent and March’s 5.6 percent—but still significantly higher than is typical. The labor force contracting by 57,000—reducing the supply of Americans looking for work—will place upward pressure on wages, as will the number of job openings in the country remaining near record highs.

President Joe Biden touted those data as positives in remarks on Friday at the Volvo Group Powertrain Operations Facility in Hagerstown, Maryland. “Wage growth for workers remains solid, down from the historic high pace months ago but still growing for workers who deserve a raise,” he said, criticizing Republicans for supposedly “rooting for” fewer jobs and lower wages. “We need to bring inflation down without giving up all the historic economic progress that working-class and middle-class people have made. And that’s exactly what we’re seeing.”

But if the Fed moves too fast and tips the economy into recession, it’ll be those working-class and middle-class people who face the consequences first. And Friday’s jobs report certainly sped up the Fed’s timeline: According to CME Group data, investors are putting the odds of a fourth consecutive 75-basis-point hike at nearly 80 percent—up from about 60 percent before last week’s news. 

Some Dispatch Updates

From the hirings of Kevin Williamson and Nick Catoggio to our first-ever regional event, we’ve had a string of exciting announcements to share with you in recent weeks. Unfortunately, today we have to pass along some less fun news: Our post-election “What’s Next?” conference—scheduled for November 10-13 in Naples, Florida, has been canceled due to the fallout from Hurricane Ian.

We learned on Friday that the storm caused significant damage to the power system at the Ritz Carlton’s Beach Resort, rendering it unusable for the foreseeable future and leading the Ritz to shut down the hotel until 2023. Needless to say, we were extremely excited to see many of you next month and are disappointed by the news—but we also want to extend our best wishes to all those in Ian’s wake who are now embarking on the long road to recovery.

To those of you who had already registered for the conference: In addition to the refund of all payments to the Ritz Carlton for your accommodations, you can expect to receive a full refund of your conference registration from us within 7-10 business days.

Luckily, we can balance out that bummer of an update with something more positive. Thanks to the tireless work of our chief operating officer, Justin Fritz, our long-awaited new website launches this week! The bulk of our website and membership platform migration will happen tomorrow, and we expect to be fully live on Wednesday, business as usual. As we’ve mentioned before, our goal is for this process to be as seamless as possible—so seamless you barely notice a difference.

To that end, we want to communicate a few key elements now: 

1. You won’t have to do anything to keep receiving the newsletters you’ve signed up for.

2. Everything about your current account, membership and preferences will be moved to our new platform, with the exception of any passwords specific to Substack, the platform that has hosted our operations for the last three years.

3. To manage your preferences, comment, or view members-only content on the website, you will have to sign in again once via a new email “magic-link” like you did with Substack. (We’ll send a separate email with more details about this on Wednesday.) 

4. Billing for new and existing memberships will pause for about 24 hours starting late Monday evening.

5. If your membership was set to renew or expire early this week, we have extended it by at least seven days.

6. This email and all of our future newsletters will come from our new sending address, hello@thedispatch.com. If you haven’t already received instructions from us on how to make sure The Dispatch keeps showing up in your inbox, please follow them here.

You’ll hear more from us about logging in, managing your membership, and taking advantage of the new website in the coming days. But in the meantime, please feel free to leave any questions in the comments section here and we’ll do our best to answer them.

Worth Your Time

• In a deeply reported piece for the New York Times, chief Africa correspondent Declan Walsh reveals Ethiopia’s civil war is entering its “most alarming phase yet” after secret peace talks brokered by American diplomats last month failed to stop the bloodshed. “Reliable information about the last six weeks of fighting is hard to obtain. But interviews with Western and Tigrayan officials—as well as video footage, satellite images and witness accounts gathered over the region’s few working phone lines—offered a keyhole view of a metastasizing conflict that is exacting a high cost on civilians,” he writes. “Ethiopian drone strikes hit a kindergarten in August, killing several children, and a U.N. food truck in late September. An airstrike on Tuesday in Adi Da’ero, near the border with Eritrea, hit a center for refugees, killing at least 50 people, said two humanitarian officials in the area who spoke on the condition of anonymity for their safety. After an earlier strike on the same town, video footage showed the lifeless body of a woman being pulled from smoking rubble. ‘The fighting is intense, and the casualties are immense,’ Gen. Tsadkan Gebretensae, a former chief of the Ethiopian military, now a strategist for the Tigrayans, said in a phone interview. A spokeswoman for [Ethiopian Prime Minister Abiy Ahmed] and spokesmen for the Ethiopian government and military did not respond to requests for comment. The government has denied it strikes civilian targets.”

• In their new book on the history of American presidential transitions, David Marchick, Alexander Tippett, and A.J. Wilson report on a Trump team transition official who did the right thing. “History will judge the roles of those close to Trump, and when it does, Chris [Liddell] should be applauded for staying,” Marchick writes in an excerpt published by Washington Monthly. “He tried to create order amid chaos and pushed for the faithful implementation of the Presidential Transition Act. He was the direct liaison with the Biden team once the formal transition began. As chaotic and dangerous as the roughly 75 days between the election and the inauguration were, I shudder to think what would have happened had Chris not been there. There is no guarantee, however, that there will always be a Chris Liddell in the White House. To protect the democratic process, Congress must reform the rules governing presidential transitions.”

Presented Without Comment 

Also Presented Without Comment 

Toeing the Company Line

• On the latest episode of Good Faith, David and Curtis are joined by Yale economist Jams Choi for a discussion about navigating personal finances as a Christian. And on this weekend’s Ruminant, Jonah waxes poetic on Ben Sasse’s departure from the Senate, current tensions within the Never Trump wing of conservative politics, and Republican and Democratic efforts to irrationally undermine electoral institutions.

• Congressional Democrats are ready to retaliate against Saudi Arabia after last week’s OPEC news, but is there anything they can do? Check out Friday’s Uphill (🔒) for the latest proposals—and whether they’ll go anywhere.

• “The government can’t be run like a business—or an engineering project—because it isn’t one,” Jonah writes in Friday’s G-File. “I want most government agencies to behave like enterprise associations and, as I keep saying, people would trust the government to be more ambitious if it wasn’t so crappy at doing the stuff it’s supposed to do. But a free society requires that the people at the top offer their first loyalty to the concept of civil association.”

• What can we learn from Russia’s stumbles in Ukraine? That Christian nationalism is a “blueprint for corruption, brutality, and oppression,” David writes in Sunday’s French Press. “The health of the church is not rooted in the authority of the state,” he argues. “The failures of Putin’s brutal Christian nationalism serve as a terrible reminder that the cannonade contradicts the spirit of the cross, and that only sacrificial love can truly redeem a land that is lost.”

• On the site over the weekend, Peter Meilaender writes about growing up a baseball fan in Cleveland, Ethan McGuire reviews a new Western movie starring Christoph Waltz and Rachel Brosnahan, and Charlotte Lawson reports from Warsaw on Poland’s recent uptick in military spending. “Last year Poland spent around 2.3 percent of gross domestic product on defense, the third largest share of any NATO ally,” she notes. Now, “Polish leaders now speak of hitting 5 percent in the coming years.”

• And on the site today, Nick Catoggio games out Russia’s nuclear calculus, Kevin Williamson writes about opportunity costs and the impossibility of central planning, and Chris Stirewalt laments the Senate’s likely upcoming loss of Sen. Ben Sasse, who looks likely to become the next president of the University of Florida.

Let Us Know

One of the main reasons we decided to leave Substack to build our own operating platform is the ability to build out community offerings (in the medium and longer term) for our members. Are you excited for the switch or nervous about the changes?