US financial news summary | 25 May 2023
Headlines | Thursday, 25 May 2023
- The median selling price of homes sold in the US fell to $420,800 in April, the lowest level recorded in the last year.
- Experts remain divided over whether the Fed will announce another rate hike in June.
- The day the US could default on its debts, otherwise known as Day X, could come as soon as 1 June
- The impact of a default could present greater challenges for some states over others.
- Can President Bidenuse the Fourteenth Amendment to increase the debt limit?
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Strong consumer spending puts Fed in tough spot
Consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.
The growth picture was further brightened by other data from the Commerce Department on Friday showing a surprise rebound last month in orders of manufactured non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans.
The reports added to labor market resilience, a rebound in factory production and a pickup in business activity in suggesting the economy was experiencing a spring revival after hitting a speed bump in the first quarter. They also increased the chances that the central bank would hike rates in June.
(REUTERS)
IMF says US interest rates likely need to remain higher
The International Monetary Fund said US interest rates will likely need to remain higher for longer to tame inflation, and Washington needs to tighten fiscal policy to bring down its federal debt.
The IMF said in a statement issued after its review of US policies that the economy has proved resilient in the face of tighter monetary and fiscal policy, but this means that inflation has been more persistent than anticipated.
The fund's review included a full-year growth forecast of 1.7% for 2023, slightly above its 1.6% estimate in April, and lower output of 1.2% on a fourth-quarter comparison basis.
It forecast the federal funds rate peaking this year at 5.4% - above the nominal 5.25% Fed rate - easing to 4.9% in 2024.
(REUTERS)
Treasury says there is enough money until June 5
The Treasury Department has announced that the government has enough money to last until June 5, buying some time to resolve the current standoff regarding raising the debt ceiling.
Treasury Secretary Janet Yellen had previously said that government reserves were likely to run out by June 1. The latest announcement gives the White House and Congress a few more days to hammer out an agreement on increasing the debt ceiling, and pushes back a potential debt default.
Walmart is the biggest retailer in the world, raking in more than $600 billion in sales in the last 12 months.
The company’s profits are on the rise, but so are the incidents of retail theft. Theft has been higher than what it has been historically: they are suffering losses not just through shoplifting, but also through organized retail crime, where criminals methodically steal small or expensive items.
Here is a list of the most commonly stolen items at the giant retailer
The US ranks number one in the world when it comes to consumer spending, with the country’s consumer market making up almost 29% of global spending. With all the money that is being shelled out, there comes the very real possibility of complaining about what has been paid for.
According to the Consumer Federation of America, there has been a lot to complain about. The organization dealt with almost 600,000 complaints last year filed with various city, county, and state consumer agencies across the country.
Here is the list of the top ten complaint categories in the US.
Walmart tries to catch up to Amazon
Walmart is the number one employer in the world, and has stores which are within 10 miles of 90% of Americans.
However, when it comes to e-commerce, they are way behind Amazon, which has cornered 39.5% of the market share, compared to their 7%. Under new leadership, Walmart is trying to close this gap.
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The US has various economic assistance programs with the aim of providing relief to people with limited resources. Among these is the Supplemental Nutrition Assistance Program.
Although SNAP is a federal program, the payments are administered by the state government.
The amount one can receive varies, depending on the person and their economic situation. Also, since the programs are state-run, requirements can also be different depending on the state.
In the case of Florida, payment is based on monthly income and expenses.
Every year, millions of senior high school students confront major decisions about what to do after graduation. One option for those who don’t want to invest too many years in acquiring a college diploma is to go for an associate degree.
Fed lending to banks lowest since crisis began in March
Federal Reserve emergency lending to banks fell in the latest week to its lowest level since the banking sector ran into trouble in March.
Lending to banks via the central bank’s discount window, its main tool to provide liquidity to deposit taking banks, hit $4.2 billion on Wednesday, from $9 billion on May 17, according to Fed data.
Loans given through three programs stood at $288.7 billion, versus $304.5 billion on May 17. The total size of the Fed’s balance sheet hit $8.486 trillion, from $8.507 trillion last week.
(REUTERS)
Housing values across the US soared over the past two years. As homebuyers look for a new residence they can look to these cities for a better deal.
The economy of the United States could be facing a crisis very soon if the White House and Congress fail to agree on raising the debt ceiling.
The ceiling refers to the limit of money that the federal government can borrow. While the Biden administration seeks to increase funding, lawmakers- mostly Republicans- refuse to do so unless spending is cut. The last time the ceiling was raised was in December 2021, increasing the total budget to $31.4 trillion.
According to Treasury Secretary Janet Yellen, the federal government may no longer be able to meet its financial responsibilities as of June 1, and would therefore face a default. This would affect a broad range of payments from the military to civil servants, as well as those receiving Social Security.
Weekly average 30-year fixed mortgage rate nears 6.6%
The weekly average 30-year fixed mortgage rate rose again this week jumping from 6.39% to 6.57% for the week ending on Thursday 25 May. The cost of borrowing to buy a new residence is tracking interest rates in the bond market as worries mount about the impending debt ceiling being breached.
The Social Security Administration continues to send monthly benefits to retired workers in 2023. The SSA is also responsible for sending Supplemental Security Income benefits, disability and survivor benefits.
While debt ceiling negotiations continue between Democrats and Republicans, the consequences for a debt default are still serious. An immediate impact of the US government failing to increase the debt ceiling would be a recession, plunging household spending and rapidly increasing unemployment.
There would be another impact too, for Americans loaded with debt. People would be struck by increased interest rates as the cost of government borrowing increases as credit ratings fall. Investors would demand higher returns to compensate for the increased risk.
Initial unemployment claims tick up, long-term claims drop
The US Labor Department released unemployment insurance claims data for the week ending 20 May which showed a slight increase of 4,000 in the number of first-time claims rising to 229,000. Economists polled by Reuters had predicted the number to be 245,000.
Data for the previous two weeks was revised down sharply as fraudulent applications from Massachusetts were stripped out. In early May the Massachusetts Department of Unemployment Assistance sounded the alarm that it was "experiencing an increase in fraudulent claim activities” from people attempting to gain access to current UI accounts as well as individuals using stolen personal data to fraudulently obtain unemployment benefits.
Strength in the US labor market was further indicated by a reduction of over 48,000 continuing UI claims suggesting another month of strong employment gains and a lower jobless rate. Jobs growth data for May is due out on Friday 2 June. The Federal Reserve will be watching the incoming economic data closely as they weigh whether to implement another interest rate hike or not at their next meeting 13 and 14 June.
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Tax season in the United States came to an end in April, but many taxpayers are still waiting for their refund. What could be the cause of the delay?
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Tens of thousands of clients of Maxim Healthcare Services are about to receive a payment of up to $5,000 in compensation for a data breach. The private medical personnel company based in Columbia, Maryland; agreed to pay 2020 data breach claims filed in a class action lawsuit by residents of the state of California.
Here's who will be eligible and how to make a claim.
Millions of student debt holders are awaiting the decision of the US Supreme Court to rule on the legitimacy of President Joe Biden’s debt cancellation. But not all student loans will be eligible if the Justices decide in favor of the White House.
There are two methods of applying for student loans; federal and private.There are a lot of differences that are important to consider when applying for either, as well as for those who have graduated and are claiming debt forgiveness.
What does the 14th amendment of the constitution say about the debt ceiling?
A growing number of officials on Capitol Hill believe that the president has the power to use the Fourteenth Amendment of the US Constitution to avert a debt default. However, this move is not without its legal skeptics who point to the spending powers the legal document extends to Congress over the executive branch.
During a press conference hosted by Senator Bernie Sanders (VT-I) on the status of the negotiations, Senator John Fetterman (PA-D) described the ongoing talks as “a sad charade” and urged President Biden to consider using the Fourteenth Amendment to avert an economic crisis.
Backlash against Bud Light and its parent company Anheuser-Busch continues after an attempt to widen its appeal put it at the center of the culture wars. The firestorm that erupted and boycott of the brand have left Anheuser-Busch sales in smoldering ashes. The company’s stock value has also taken a blow and two of the executives that were behind the attempt to widen Bud Light’s appeal have been put on leave.
Federal Reserve Governor doesn’t see rate hiking finish just yet
The Federal Open Market Committee (FOMC) is set to meet again 13 and 14 June where the US central bank policymakers where decide on the future of interest rate hikes. The US economy while slowing continues to show resilience even after more than a year of rate hikes at the fastest rate in forty years.
On whether they will tighten the fiscal screws further or not Federal Reserve Governor Christopher Waller on Wednesday said that remains to be seen. But the rate hikes won’t likely be stopping in his view. “Prudent risk management would suggest skipping a hike at the June meeting but leaning toward hiking in July based on the incoming inflation data," he said.
He expressed concerns about the tight labor market that is still adding more jobs than expected and where there are roughly 1.6 jobs for every person unemployed. The jobs situation has in turn put upward pressure on wages that are rising too fast to be consistent with stable prices. Inflation is currrently more than double the Fed's 2% target.
“Whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks," said Waller.
Meta slashes more jobs in final round of layoffs
Meta, owner of Facebook, slashed jobs across its business and operations unit as it carried out its last batch of a three-part round of layoffs, part of a plan announced in March to eliminate 10,000 roles.
Dozens of employees working in teams such as marketing, site security, enterprise engineering, program management, content strategy and corporate communications took to LinkedIn to announce that they were laid off.
The social media giant also cut employees from its units focused on privacy and integrity, according to the LinkedIn posts.
Meta earlier this year became the first Big Tech company to announce a second round of mass layoffs, after showing more than 11,000 employees the door in the fall. The cuts brought the company's headcount down to where it stood as of about mid-2021, following a hiring spree that doubled its workforce since 2020.
(REUTERS)
Companies are talking less about a recession
Executives at S&P 500 companies are talking about recessions less after looking at earnings for the third straight quarter, per FactSet. S&P Global’s flash US composite PMI showed US economic output reached a 13-month high in May. Even the consumer slowdown teased by some companies doesn’t appear widespread quite yet.
“The economy is still on sound ground, with consumers willing to spend and businesses continuing to hire and invest despite fears that a recession is around the corner,” says Oxford Economics Lead US Economist Oren Klachkin.
"Consumers- the main engine of the US economy- will keep spending so long as incomes continue to rise."
Although there are still signs of a slowing economy, the larger numbers aren’t flashing warning signs. The economy grew 1.1 % in the first quarter, retail sales increased in April, the labor market is still robust, and even inflation, which remains historically high, grew at its slowest pace in two years in the most recent month.
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Although the pandemic has reached manageable levels, inflation continues to be high and many families continue to have difficulties with putting food on the table. This has prompted some states to offer their own help in the absence of a fourth federal stimulus check.
This report tells about six states with aid projects for 2023.
Hello and welcome to AS USA's live blog on finance and economic news.
To the dismay of many progressive Democrats, the White House seems to have placed itself in a situation where social spending cuts must be made to raise the debt ceiling. Some members of the caucus, particularly leaders in the Senate, have continued to call on President Biden to use the Fourteenth Amendment to override Republicans. As talks between Congressional Republicans and the White House continue, we will bring you the latest.