%1

Michigan manufacturers have yet to find the light at the end of the snarled supply chain, and some are running out of time. Gissing North America LLC is the latest casualty of the inflation and production volatility that has defined the automotive industry over the past two years, Crain's Detroit Business reported. As the first metro Detroit-based supplier to file for bankruptcy in recent years, it could be a harbinger of other small- and midsize suppliers caving to financial pressures. "I think you're starting to see the compression happening. Consumer confidence is declining," said Van Conway, CEO of Birmingham, Mich.-based turnaround firm Van Conway & Partners. "It's somewhat unanimous across the board dealing with these middle-market lenders that they think a storm is coming." Bankruptcy lawyers and restructuring specialists have been forecasting that storm for months. While there has been some restructuring and distressed M&A, there have been few bankruptcies. The fallout from the semiconductor shortage and other supply chain problems has been nothing close to what many had feared. Some clients are just now starting to see success in renegotiating contract terms to spread inflated costs of materials, labor and transportation more evenly between supplier and customer, he said, but the financial pinch remains sharp on suppliers. Read more. (Subscription required.) 

Full case information. 

Scandinavian airline SAS said on Saturday it entered into an agreement with Apollo Global Management to raise $700 million of fresh financing it needs to see it through bankruptcy, Reuters reported. The airline filed for bankruptcy protection in the United States in early July to help cut debt after the collapse of wage talks between the airline and its pilots, triggering a 15-day strike that added to travel chaos across Europe. SAS said in a statement it expects to complete the chapter 11 restructuring process in nine to 12 months. The airline anticipates receiving court approval for its $700 million financing by the end of September. SAS chief executive Anko van der Werff has said the strike accelerated its decision to file for chapter 11 status. The airline has said the industrial action had cost it more than $145 million, affecting 380,000 passengers in the peak summer travel season, and might jeopardize the firm's ability to secure additional financing. SAS grounded some 3,700 flights during the strike, saying last week its number of passengers fell 32% in July from June and capacity by 23%. Swedish, Danish and Norwegian pilot union members, who voted to adopt a collective bargaining agreement reached with SAS last month, say they will not resume their strike. SAS, which was already loss-making before the pandemic due to rising competition from low-cost carriers, had said it needed to slash costs further and raise more capital to survive. While the Swedish government has rejected the plea for more cash, Denmark says it might inject fresh funds if SAS also finds support from private-sector investors.

U.S. productivity slumped for a second-straight quarter as the economy shrank, driving another surge in labor costs that risks keeping inflation elevated and further complicates the Federal Reserve’s efforts to tame price increases, Bloomberg News reported. Productivity, or nonfarm business employee output per hour, decreased at a 4.6% annual rate in the second quarter after falling at a 7.4% pace in the previous three months, Labor Department figures showed yesterday. That marked the weakest back-to-back readings in data back to 1947. On a year-over-year basis, output per hour fell by the most on record. With the drop in productivity, unit labor costs jumped at a 10.8% rate in the second quarter from the prior three months. The increase from a year earlier was the biggest since 1982. Labor costs are the biggest expense for many businesses, so firms often adopt new technologies and upgrade equipment to make their workers more productive, helping blunt the inflationary impact of higher wages. However, labor costs are outstripping the central bank’s inflation goal by nearly five times on an annual basis, suggesting sustained upward pressure on consumer prices and ultimately making the Fed’s inflation fight more difficult.

A legal advocacy group for students filed a federal petition urging the agency that oversees the National Health Service Corps to change its rules to address the penalties facing healthcare workers who involuntarily violate contracts they signed to ease their student debt, the Wall Street Journal reported. The National Student Legal Defense Network, a nonprofit founded by former Education Department officials focused on addressing problems in the higher-education system, filed a 71-page petition on Monday, part of a formal process that allows individuals or entities to push a federal agency to change its rules. The group has previously been successful in some efforts to change federal rules on behalf of student borrowers. The network turned its sights on the Service Corps after a Wall Street Journal investigation in February found that job disruptions caused by the pandemic have put more clinicians — who through the Service Corps pledge to work in places with too few medical providers in exchange for help repaying their student loans — in violation of their contracts. That leaves many of them facing penalties many times the amount of aid they received. Among the changes the petition seeks is a rule that would automatically waive the penalties for healthcare workers who were terminated by their clinics through no fault of their own — for example, due to pandemic-related cuts — and who were unable to find a similar replacement within an hour of their home. The program’s penalties are written in law, meaning only Congress can change them. But agencies have leeway in developing regulations on how to implement the law, a process known as rule-making. In the case of the 1987 bill that created the loan repayment program, Congress granted the health secretary authority over how to determine whether someone is eligible for a waiver, which would permanently excuse a participant from their obligations.

U.S. employers added a booming 528,000 jobs in July as the labor market now has recovered all 22 million jobs lost in the COVID-19 pandemic and continued to defy soaring inflation, rising interest rates and a slowing economy, USA Today reported. The unemployment rate fell from 3.6% to 3.5%, matching a 50-year low reached just before the pandemic began in early 2020, the Labor Department said Friday. July's payroll increases were broad-based. Leisure and hospitality, which includes restaurants and bars, the sector hit hardest by COVID-19, led the job gains with 96,000. Professional and business services added 89,000 jobs; health care, 70,000; construction, 32,000; manufacturing, 30,000; and retail, 22,000 jobs. Federal, state and local governments added 57,000 jobs. The employment recovery, however, masks divergent narratives for the public and private sectors. While businesses recouped all jobs lost in June and are now 629,000 positions above the pre-COVID-19 level, government is still nearly 600,000 jobs below that benchmark. That’s mostly because state and local governments haven’t been able to provide the pay increases, remote work options and flexible hours offered by the private sector since the pandemic began in spring 2020. In addition to July's robust payroll gains, average hourly earnings rose 15 cents to $32.27, pushing the annual increase from 5.1% to 5.2% and threatening to intensify inflation pressures.

American employers posted fewer job openings in June as the economy contends with raging inflation and rising interest rates, the Associated Press reported. Job openings fell to a still-high 10.7 million in June from 11.3 million in May, the Labor Department said yesterday. In its monthly Job Openings and Labor Turnover Survey, the Labor Department said that the number of Americans quitting their jobs fell slightly in June while layoffs fell. The job market has been resilient so far this year: Employers have added an average of 457,000 jobs a month in 2022; and unemployment is near a 50-year low. That is one reason many economists believe the economy is not yet in a recession even though gross domestic product, the broadest measure of economic output, has contracted for two quarters in a row — one rule of thumb for the onset of a downturn.