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U.S. manufacturing activity picked up more than expected in February as COVID-19 infections subsided, though hiring at factories slowed, contributing to keeping supply chains snarled and prices for inputs high, Reuters reported. The Institute for Supply Management (ISM) said yesterday that its index of national factory activity increased to a reading of 58.6 last month from 57.6 in January, which was the lowest since November 2020. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 58.0. Manufacturing is regaining momentum in line with the broader economy after hitting a speed bump as coronavirus infections, driven by the Omicron variant, surged across the country. The ISM survey's forward-looking new orders sub-index increased to 61.7 last month from 57.9 in January, which was the lowest reading since June 2020. Goods spending has surged as the pandemic curbed demand for services like travel. Even if spending reverts back to services as the health situation improves, economists expect demand for goods to remain strong. The survey's measure of factory employment slipped to a reading of 52.9 last month from a 10-month high of 54.5. It had increased for five straight months.

Rising inflation is driving up expenses for many large U.S. pension funds that have promised retirees cost-of-living raises, the Wall Street Journal reported. About half of states link pension benefits for some or all of their retired workers to changes in the consumer-price index, according to the National Association of State Retirement Administrators. With inflation reaching 7% in December, some retirement funds are now looking at increasing pension checks by 3% or more for the first time in a decade. At others, board members or state officials are approving one-time cost-of-living raises. “It’s a hot topic,” said Keith Brainard, the association’s research director. “A cost-of-living adjustment can be an expensive plan provision.” Pension funds are confronting a challenge shared by institutions and household savers alike: Just as expectations for public market investment returns are dimming, everyday costs are going up. This year, many retirement systems will book a loss on cost-of-living adjustments, rather than the annual windfall they have been seeing for years when those inflation-linked increases came in below expectations.

After initially shutting down factories and stores, the pandemic sparked demand for goods as home-bound consumers funneled stimulus money into shopping sprees rather than trips and dining out. But supply snarls continue to hamper producers, Reuters reported. Earlier this week, the world's No.4 carmaker Stellantis told investors that raw materials like metals would remain a problem for the industry this year. But the company said that the semi-conductor shortage, which cost the company about 20% of its planned production last year, peaked in the third quarter. A key question for economists now is to what degree inflation coursing through the economy is becoming a circular force, with higher prices at gas pumps and grocery stores fueling demands from workers for higher wages, adding again to pressure for more price hikes. U.S. consumer prices rose at their fastest annual rate in four decades in January. For now, it remains unclear whether a spiral will be averted, though most Federal Reserve policymakers remain optimistic that inflation will ease as supply chains untangle later this year and into next, although Russia's invasion of Ukraine may complicate the central bank's efforts to rein in inflation this year.

New York, New Jersey and several other U.S. states are delaying repayment of $40 billion in federal pandemic unemployment loans, saddling businesses with higher payroll costs instead, Bloomberg News reported. Ten states that took advances from the federal government when Covid-related job losses soared, including California and Illinois, are now piling up interest of $327.8 million and counting. The delays are burdening businesses and employees with greater unemployment costs that will continue long after the pandemic is over. An influx of stimulus funds and a surge in tax receipts as the economy rebounds are helping pad state budgets. Almost half of all U.S. states have expanded their taxable wage bases since 2020. Roughly $90 billion of states’ Covid aid remains unallocated as of November, according to the Center on Budget and Policy Priorities. But some states say they‘ve used the money on more immediate Covid-related expenses and other priorities. California committed $26 billion in federal stimulus before it had guidance on using the aid to put toward its loan, officials said.

Illinois lawmakers are considering a bipartisan proposal to authorize selling $1 billion of debt to pay for pension buyouts, in a bid to reduce the worst-rated state’s massive unfunded liability for its retirement systems, Bloomberg News reported. A bill introduced in December by state Representative Bob Morgan, a Democrat, would approve borrowing to extend a buyout option for many employees of the state, its universities and school systems. The debt would be on top of a previous authorization from 2018 to issue $1 billion of so-called pension-obligation acceleration debt, most of which has been sold. The pension-buyout program has already cut Illinois’s liability by $1.4 billion, but that still leaves an unfunded obligation of about $130 billion, state data show. A key distinction of the Illinois program is that it reduces liabilities, instead of replacing them with a bond obligation, as traditional municipal pension debt typically does, Kim said. Illinois has sold traditional pension securities, including $10 billion in 2003.

For the first time in two years for many people, the American workplace is transforming into something that resembles pre-pandemic days, the Associated Press reported. Tysons Foods said yesterday that it was ending mask requirements for its vaccinated workers in some facilities. Walmart and Amazon — the nation’s No. 1 and 2 largest private employers respectively — will no longer require fully vaccinated workers to don masks in stores or warehouses unless required under local or state laws. Tech companies like Microsoft and Facebook that had allowed employees to work fully remote are now setting mandatory dates to return to the office after a series of fits and starts. “There has been a sharp decline in COVID-19 cases across the country over the past weeks,” Amazon told workers in a memo. “Along with increasing vaccination rates across the country, this is a positive sign we can return to the path to normal operations.” Microsoft, based in Redmond, Washington, on Monday announced plans to open its West Coast buildings on Feb. 28 with a hybrid mix of working in the office and home. Facebook parent Meta Platforms, which had planned to bring workers back to the office on Jan. 31, will now require them to return — with proof of a booster shot — on March 28.

The unprecedented level of job switching seen last year as the U.S. labor market rebounded from the pandemic gave workers more leverage to ask for better pay and played a role in pushing inflation to its highest level in decades, a new study suggests, Reuters reported. An increase in the share of people who searched for jobs while they were employed helped boost inflation by about 1 percentage point throughout much of last year, according to a paper released on Monday by the Chicago Federal Reserve. That suggests job-switching at times accounted for roughly 20% of the price growth seen in 2021. "Workers' propensity to search for another job is an important driver of inflation," said Leonardo Melosi, a senior economist for the Chicago Fed and a co-author of the report. People who search for new work while they still have a job can end up with higher salaries — and more spending power — after switching jobs or receiving a raise from their current employer, the researchers said. Job switching took off last year as job postings soared and the number of people quitting reached record levels. Nearly 4 million Americans on average quit their jobs each month last year - often in search of better pay or more flexibility.

Public school teachers in Puerto Rico called off a strike Thursday, after the government agreed to increase their base salary, make a new $1,000 a month raise permanent and engage in pension negotiations, Bloomberg News reported. “The commitment they made to us is that they will return to class and leave the streets,” Secretary of State Omar Marrero said after emerging from negotiations with teachers’ groups that have flooded Old San Juan for the last two days. Among the commitments, Governor Pedro Pierluisi agreed to boost teachers’ base salaries from $1,750 to $2,700 a month and build in wage hikes for those who get advanced degrees. On Monday, the government said it would use temporary federal funds to provide a $1,000 a month wage hike to all teachers starting in July. On Thursday, Marrero said that hike will also be made permanent. It’s unclear how the U.S. commonwealth — which is emerging from bankruptcy — will pay for the increases. When asked, Marrero said government payroll is a “top priority” in annual budget negotiations and therefore virtually guaranteed. In November, the federally-appointed board overseeing the island’s finances said the law that increases base salaries had merit but “proposes to spend money the Commonwealth does not have, without corresponding savings or new revenues.” Teachers, firefighters and other public-sector workers began taking to the streets last week demanding higher wages amid soaring consumer prices in the U.S. and the Caribbean island of 3.3 million people.