USA finance and economy: summary 11 July
Headlines | 11 July 2022
- US postage increases have gone into effect
- Elon Musk moves to cancel $44 billion dealto buy Twitter
- BLS announces that 372,000 new jobs were added in June; but unemployment stayed at 3.6%
- Workers across the country may benefit from a minimum wage increase this month
- Dollar surges reaching near parity with Euro for first time in 20 years
- Biden administration announces new programs to help student loan borrowers
- National average gas prices continue to fall now at $4.684 per gallon
Helpful links and Information
- How much can I earn and still get disability benefits?
- July schedule for Social Security benefit payments
- Unemployment benefits:California recovers over $1 billion in fraudulent benefits
Global money markets are taking a turn as the Euro declines in value, coming closer to the value of the the dollar.
The euro has fallen to 20-year low in comparison to the US dollar this week as European nations suffer major economic set-backs.
On Wednesday afternoon the euro was trading as low as $1.0165 in Europe, a clear sign that the currency’s prospects were looking bleak. The price rose slightly, just above the $1.02 mark, on Thursday but the continental currency remains extremely weak.
May exports were $255.9 billion, $3.0 billion more than April exports. May imports were $341.4 billion, $1.9 billion more than April imports.
The May decrease in the goods and services deficit reflected a decrease in the goods deficit of $2.9 billion to $105.0 billion and a decrease in the services surplus of $1.7 billion to $19.4 billion.
Year-to-date, the goods and services deficit increased $126.5 billion, or 38.4 percent, from the same period in 2021. Exports increased $197.1 billion or 19.4 percent. Imports increased $323.6 billion or 24.0 percent.
Inflation is beginning to impact the wallets of many across the country, but seniors, many of whom are on a fixed income, are really struggling to keep up. Twenty-three percent of people over sixty-five reported difficulty covering basic household expenses in May. This is up from sixteen percent during the same period last year.
The Senior Citizens League (SCL) has released the preliminary results of a study showing that many Social Security recipients have lost around forty percent of their purchasing power since 2000. In part, much of this loss stems from inflation currently affecting the market.
Analysis from the White House published last year suggested that the wealthiest 400 billionaire families in America paid an average tax of just 8.2 percent of their income. Your average Joe has a starting tax rate of 10 percent, making billionaires the least taxed group in the country. There are large and unfair differences in the way that income from work is taxed compared to income from assets.
Sen. Manchin has long advocated for proposals that would lower prescription drug costs for seniors and his support for this proposal has never been in question. He’s glad that all 50 Democrats agree... Suggestions that a reconciliation deal is close are false. Senator Manchin still has serious unresolved concerns and there is a lot of work to be done before it’s conceivable that a deal can be reached he can sign onto.
Last chance saloon for reconciliation bill
Schumer and conservative Senator Joe Manchin have made progress on proposals to lower the cost of prescription drugs, extend Medicare’s solvency and raise taxes on some high-income earners. Originally, the reconciliation bill was supposed to cost upwards of $6 trillion and was extremely ambitious.
It has since been whittled down to a husk of a plan, but manchin still refuses to deal with it. After being touted as the premier legislation for the administration, it is at a near fatal risk of ever being voted upon in the Senate.
The Social Security Administration handles benefit payments for four major programs including retirement, disability, survivors and Supplemental Security Income. The agency spreads out payments across the month based what type of benefits a recipient is receiving, when they were born and when they began collecting benefits.
All recipients are required to sign up to receive their benefits via electronic deposit either into a bank account or onto a Direct Express Debit Mastercard. This has the upside that your benefits won’t get lost in the mail and are there on the day they are scheduled to be sent.
When will the California $1,050 inflation relief checks arrive?
The state of California will be sending out one-time payments to the majority of residents in a bid to help them deal with price rises and the high rate of inflation. The first round of the $1,050 checks will be sent out to eligible Californians in October, and will continue with a series of payment rounds until the final payments are disbursed in January 2023.
Upon announcing the $18.1 billion package, California Gov. Gavin Newsom said: “We enacted the most comprehensive economic stimulus program in the nation last year, getting billions in immediate relief to millions of Californians. But many folks are still struggling, especially with high costs due to inflation, so we’re leveraging this historic surplus to get money back into the pockets of Californians."
New CPI report will outline the scale of US' inflation problems
The consumer price index (CPI) report for June is due out on Wednesday and expectations are that it will exceed the 8.6 percent registered in May. Hopes had been that inflation had peaked but on top of the stronger than expected jobs report last week the Federal Reserve may be inclined to double down on its aggressive rate hike strategy, potentially implementing another three-quarters of a percentage increase when policy makers meet at the end of the month.
Inflation and fears of looming recessions in major economies around the world have investors seeking out safe investments to ride out the storm. The knock-on effect is that investing in greenbacks is even more attractive causing the US dollar to surge against other world currencies. The pound recently hit a two-year low against the US dollar and the euro almost fell to parity with the greenback for the first time in twenty years.
Expectations are that the European common currency will fall behind the US dollar in August. That’s good news for those who plan to travel across the pond this summer, if they can find a reasonably priced flight. The price of airfare has jumped a whopping 38 percent from last year on the back of strong demand and high crude prices.
The Child Tax Credit in 2022 will return to the conditions offered by the IRS before the American Rescue Plan expanded it. The amount of the credit is smaller, and eligibility is more restricted than last year under the rules which were established through the 2017 Tax Cuts and Jobs Act (TCJA). These changes will be in effect through the 2025 fiscal year, if no action is taken by Congress to modify the credit before then.
A big change that helped many families last year, instead of receiving monthly installments on the credit as they did from July to December in 2021, the money will be distributed in the form of a single tax credit which will either reduce the size of the recipient’s tax bill or increase their tax refund.
Inflation is a global phenomenon as post-covid recovery continues
There has been much talk of the issue of inflation in the United States, the pressures that have pushed up prices for consumers and threaten to destabilise the economic recovery from the pandemic. However the US is far from the only country feeling the consequences and the vast majority of developed nations are facing similar trends.
On one hand, the inflation is a unavoidable consequence of the rapid economic growth recorded in the past 12 months. However the speed of the growth appears to be unsustainable and is making essentials unaffordable for the most vulnerable households in the US.
Gas price continues to fall
President Biden faced huge pressure in recent months to address the rapidly rising price of gasoline in the United States, a factor that was hurting Americans financially and threatened to cost the Democrats in the November midterms. However a variety of factors, some planned and some outside of the White House's control, have brought the cost down and brought relief for motorists.
On Monday, 11 July the average price of a gallon of gasoline in the US is $4.678, according to AAA.
What is the current price of Bitcoin in dollars?
Bitcoin, like many cryptocurrencies, has had a tough 2022 after making near-constant growth during the first two years of the pandemic. Many are explaining the substantial price decrease as a simple readjustment after huge increases but the downward trends have certainly spooked some investors.
As it stands, Bitcoin is trading for roughly $20,500. This represents a huge fall compared to its peak of well over $60,000 in November 2021, but there are hopes among investors that the market may now have bottomed out and more growth is on the way.
"We saw 375,000 jobs in the past month. While we understand what the American public is going through at this time, that is a good sign. That is a good sign for the economy.
And we also saw that unemployment rate is — it remains at 3.6.
And in — also, in those numbers, we saw that we are — we have created — we are back to the pre-pandemic job numbers when it comes to the private sector, which is incredibly important. And we’ve added jobs. We saw 1 million jobs added in this past quarter.
All of those things are very important as we talk about moving this historic economic recovery into tran- — into a transition so that we can really truly deal with inflation."
Russian invasion heightens food insecurity concerns
The globe is facing the worst food crisis in a decade which has been exacerbated by countries restricting the export of food and fertilizer in an effort to stabilize prices at home. However, the actions have had the opposite effect with the price of wheat 34 percent more expensive since the beginning of Russia's invasion of Ukraine.
One seventh of that price rise can be linked to the 22 that imposed restrictions on their wheat exports. Studies looking at the last food crisis from 2008 to 2012 showed that if restrictions had not be put in place, prices on average would have decreased by 13 percent.
Why are gas prices starting to fall in the US?
The price of gaosline has been a major cause of concern in recent months after inflationary pressures, combined with the sanctions on Russia-produced oil, sent the price of motor fuels soaring. After reaching record highs last months the average price of gasoline has steadily fallen and there are hopes that the worst could now be over for consumers. But what caused the decline? NBC’s Erin McLaughlin explains...
Why did Larry Summer say the US needs higher unemployment?
The Federal Reserve is struggling to get rising prices under control by aggressively raising interest rates. When policymakers at the central bank meet in late of July they are expected to implement another rate hike, with talk of a three-quarters of a percent jump for a second time in a row.
Although Chair Jerome Powell has said that the Fed doesn't want to push the US economy into recession, that it would be the lesser of two evils. Former treasury secretary Larry Summers however thinks that only with mass unemployment can the rate of inflation be brought back to the two percent target level.
Doing some back of the envelope calculations, he estimates that unemployment will need to go above five percent for five years or ten percent for one year. That would mean around 10 million people thrown out of work.
Housing market cool-down will aid first-time buyers
Housing prices began skyrocketing during the covid-19 pandemic and have kept going up through this year with an average increase of 18.5 percent, around five times what they would rise in a normal year.
Experts, though they do see the market cooling, don't foresee the bust that caused the Great Recession. Prices increases tapering off could be good news for those trying to get a foot on the ladder to home ownership, however they will still have to contend with rising interest rates making their mortgage costlier.
Mortgage rates continue to fall
Mortgage rates have done an about turn after hitting levels not seen since 2008. Peaking at 5.81 percent for the week ending on 23 June they have pulled back half a percentage point over the course of the past two weeks. Fears of a looming recession have cooled a red-hot housing market which have seen prices rise from between 32 to 39 percent since covid-19 caused disruptions reverberating through markets still today.
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