USA finance and payments news summary | 20 June 2022
Headlines: 20 June 2022
- Democrats introduce bill to shore up Social Security, increase benefits by $200 per month.
- Experts, including Fed Chairmen Jerome Powell, expect further interest rate increases in 2022.
- The price of one Bitcoin is hovering around $20,000 on Monday.
- The price of an average gallon of gas in the US stays just below $5 to start the week.
- Fed outlines reasons for 0.75 percentage point hike for interest rates - why have they increased rates?
- Wall Street has worst week since March 2020, S&P 500 entered bear market territory.
- Elon Musk faces $258bn lawsuits for alleged Dogecoin "pyramid scheme"
- 'Shrinkflation' reduces product sizes for consumers
Helpful links & Information
- When will theSocial Security COLA for 2023 be announced?
- Gas prices in US: which countries have the most expensive gasoline?
- When will President Biden make a decision over student loan forgiveness
- Do I have to pay taxes on Social Security benefits? How much?
- 30-year fixed-rate mortgage interest rates hit 5.78%, the highest level since late 2008. When will home loan rates fall?
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The US enjoys a certain notoriety for employer reluctance to lavish paid leave on workers, and there is no statutory minimum for paid public holidays or paid vacation laid out under federal or state law. According to the US Bureau of Labor Statistics, around 77% of private employers do provide paid leave, both during public holidays and for vacations.
However, this is generally doled out on an incremental scale, with 10 days after one year of employment, 14 days after five years, 17 days after 10 years and 20 days after 20 years a fairly standard rule of thumb. On average, American workers get eight days of paid leave for public holidays.
What has the reaction been to the unionisation?
I am proud of them. Workers have a right to determine under what condition they are going to work or not work.
Congratulations to Apple workers in Towson, Maryland on becoming the first Apple store in the United States to form a union! What we are seeing right now is a historic uprising of working class Americans telling the corporate elite that they have to end their greed.
First unionised Apple store in US
More than 100 workers in Towson near Baltimore "overwhelmingly voted to join the International Association of Machinists and Aerospace Workers," the union said on its website on Saturday.
This marked the first unionised Apple store in the US and follows a recent wave of trade union organisation in the US. Recently, companies like Amazon and Starbucks have seen their workers organise for the first time.
Apple has so far refused to comment.
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Property taxes are used to fund essential services like the fire and police departments, water systems and schools, among other things. So, no matter where you live, if you own a home you will have to pay property taxes.
However, property taxes are calculated differently depending on where you live with home values and rates being set at the local level. Both of these factors can drastically change how much you have to pay the tax collector.
A sunset for cryptocurrency?
There was this irrational exuberance [around cryptocurrency]. They did similar things leading up to the 2008 crisis: aggressively market these products, promise returns that were unreasonable, ignore the risks, and would dismiss any critics as folk who just didn’t get it.
We believe the recent turmoil only underscores the urgent need for regulatory frameworks that mitigate the risks that digital assets pose
Cryptocurrency continues its 2022 struggles
On Monday, the price of bitcoin traded at $20,097, more than 70 percent below its November peak of around $69,000. Another leading cryptocurrency, Ethereum, was worth around $4,800 at its peak in November; it is now worth less than $1,000.
What is a serious danger for investors is the damage done to some of the pillars of the industry, such as tethercoins.
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Earlier this week the Federal Reserve made a major play to combat the sky-high rate of inflation that is pushing up prices and causing headaches for consumers.
It was announced that the Fed would be raising benchmark interest rates three-quarters of a percentage point, the single most aggressive interest rate hike since 1994.
Oil prices hold steady under $110 per barrel
The price of oil ended the week down for the first time in five on Friday, dropping from just over $120 per barrel to under $110. The adjustment last week was a delayed reaction to concerns about the global economy slowing down as the Federal Reserve and other central banks move to rein in high inflation.
On Monday prices remain stable but analysts expect the depressed price to be short-lived. Tight oil supplies should keep the price from falling further, and most likely they will go back to the $120 mark.
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Yellen says with "skill and luck" US can avoid a recession
Inflation is running at its fastest clip in over forty years hitting 8.6 percent in May, its highest since December 1981. In response, the Federal Reserve did something it hasn't done since 1994, raising interest rates three quarters of a percent.
This blunt tool to bring rising prices under control could also create a recession as borrowing costs rise causing businesses and households to spend less. Speaking to George Stephanopoulos on "This Week" Treasury Secretary Janet Yellen said she expects the economy to slow "
"It's natural now that we expect a transition to steady and stable growth, but I don't think a recession is at all inevitable," she said
"Clearly, inflation is unacceptably high," Yellen added. "It's President Biden's top priority to bring it down. And Chair Powell has said that his goal is to bring inflation down while maintaining a strong labor market. That's going to take skill and luck, but I believe it's possible."
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Americans have been battered by rising prices at the pump, in the supermarket and for those buying a home, mortgage rates that have rocketed at the same time housing prices continue to surge. Despite a brief dip in mortgage rates, the 30-year fixed-rate surged more than half a percentage point last week, the largest one-week increase in Freddie Mac’s survey since 1987.
So when can homebuyers expect the interest on home loans to come down?
The Federal Reserve is attempting to slam the handbrake on the rapidly growing United States economy by introducing a substantial interest rate hike. The raise of three-quarters of a percentage point is the largest since 1994, taking the benchmark rates to between 1.5% and 1.75%.
The move was announced by Fed Chair Jerome Powell on Wednesday, as part of a concerted effort to tackle inflation. The logic behind the decision is that high interest rates make borrowing less attractive and saving more profitable. It is hoped that this will cool the economy and bring down inflation.
Economist warns of fragility of baby formula industry as shortage continues
The baby formula shortage began in the summer of 2021, but quickly accelerated when Abbott, which holds about 40 percent of the domestic market, was forced to close its plant in Sturgis, Michigan after two infants died when they consumed formula contaminated with Cronobacter sakazakii bacterium.
Just four companies supply around 90 percent of baby formula in the US. Scott Lincicome, director of general economics at the Cato Institute, a libertarian non-profit research firm says that he has never "seen an industry this fragile."
“It is about a textbook case of what happens when you put walls around the country and block all the imports, and then have a government contractor as a monopsonist in the market… it's a perfect storm for problems,” Lincicome said.
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Cronobacter sakazakii, the bacterium behind the baby formula recall
Less well-known than other food-borne pathogens like E. coli or Salmonella, Cronobacter sakazakii the bacterium behind the baby formula recall, can wreak havoc in vulnerable populations like newborns or people with compromised immune systems. It has a mortality rate of between 50 and 80 percent for newborns that become infected.
After two infants died due to consuming baby formula contaminated with the bacterium, the country's largest supplier of baby formula Abbott was forced to closed a plant in Michigan that produced the baby formula and implement a recall.
Supplies of baby formula had been dwindling prior, but the with the factory's closing and recall the shortage became a national crisis where the out-of-stock level reached 74 percent at the beginning of June.
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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.
US Economy continues to feel impacts of covid-19 in the labor market
The Bureau of Labor Statistics has released a new blog detailing the progress the US economy has made since the covid-19 pandemic began. While the recovery has been strong there are still impacts on the labor market being felt.
Although the unemployment rate has fallen below the levels seen before the pandemic, labor force participation is still down compared to 2019 figures. By the end of 2021, around 155 million people were working. This is still down from the 158 million that were working in 2019. As it relates to unemployment, there were still 900,000 more people who were looking for a job and could not find one, compared to 2019.
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Initital unemployment claims drop by 3,000 to 229,000
Last week the US Department of Labor reported that for the week endind on June 11, 229,000 initial unemployment claims were made. Intital cliams have crept up in recent weeks but the most recent reported a decrease of 3,000.
States with the highest number of new claims for the week ending on 4 June, were Florida (+2,098), Georgia (+2,060), Pennsylvania (+1,134), Missouri (+1,053), and Illinois (+827). On the other hand, the greatest decreases were tracked in Michigan (-2,131), Mississippi (-1,723), New York (-631), Oklahoma (-598), and New Jersey (-440).
Read the full report.
Inflation not seen in four decades is taking a bite out of American household finances. None feel this more acutely than those who receive Social Security benefits. The shortfall, however, is not new and has been growing over several decades.
At the same time though, if nothing is done in Congress, Social Security beneficiaries could see their monthly payments cut thirteen years from now. A proposal by Democrats would address the issue for the recipients of Social Security benefits with a $200 monthly boost, while shoring up the program for the next 75 years.
Chipmakers have new headache, Russian export restrictions on rare gases
Chipmakers have been struggling to recover from pandemic-era supply chain bottlenecks that have reduced the global stocks of semiconductors needed for range of consumer products. The shortfall has been acutely felt by car manufacturers.
Semiconductors, which account for the largest share of South Korean exports, were beginning to be affected in the Asian nation after truckers went on strike for eight days. Last week, the government agreed to extend a special minimum wage system to resume cargo shipments.
The lastest problem for the industry now comes from export restrictions imposed by Russian on rare gases including neon, argon and helium to "unfriendly" countries needed to made semiconductors. South Korean manufacturers keep a three month stockpile of the inert, or "noble" gases, so initially supplies won't be disrupted.
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For months the prospect of a gas rebate card has been mooted in Washington to provide financial relief for households struggling to afford the rising cost of motor fuel. Last week the average price of gasoline reached $5 per gallon for the first time in the United States and experts predict it could rise far higher.
So with the high price of gasoline is causing major issues for motorists,will the White House send out pre-paid fuel cards to help struggling Americans?
As time passes, needs can change from where you live, how you get around to what you eat. The healthcare coverage you have is no different. Once a year, during the nine weeks of Open Enrollment for Medicare all those who are signed up can make changes to their plan for healthcare and prescription drugs for the next year.
Here's everything you need to know about applying for the financial support this year...
Businesses are passes on higher costs from inflation through extra swipe fees
Inflation in the US hit a new high in May clocking in at 8.6 percent, the highest since Decmeber 1981. The Federal Reserve has shifted its stance, moving much more aggressively to tame rising prices.
However, in the meantime, businesses are trying to pass on on the added cost to them from supply chain bottlenecks, increased credit card transaction fees and higher wages through additional fees when customers pay.
The surcharges allow them to offset the hit to their bottomline while not raising prices, so to speak, but they add further financial shock to Americans already struggling to make ends meet. The average US household is forking out $311 per month due to rising prices.
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Investors cash in on cyrptocurrency woes to the tune of nearly $4 billion
Cryptocurrencies have taken a shellacking, the two biggest, Bitcoin and Ethereum, have lost over 50 percent of their value this year. The digital coins woes have been a lucrative trade for short-sellers who have cashed in $3.8 billion in profits as of 14 June.
They are betting against companies such as Coinbase, a cryptocurrency exchange platform, and Microstrategy, the largest corporate holder of bitcoin.
However, those looking to join in the short-sellers party may be too late. although the downturn is expceted to continue, the size will be difficult to match and it is becoming more expensive to borrow for the trades.
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Still haven't filed a 2021 tax return? IRS wants you to get it in ASAP to avoid penalties
The majority of taxpayers managed to file their 2021 tax returns on time, but there were a fair number of filers who still need to turn in their tax declaration. The IRS advises to get your tax filing in as soon as possible, not only to receive your tax refund but to avoid any potential late penalties.
That is especially true for taxpayers that have an outstanding bill with Uncle Sam. Even if you file on time or requested a six-month extension, interest and penalties start to accrue from the tax deadline, which was 18 April in 2022.
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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 Social Security Administration will announce next year’s COLA in October, and the amount will be applied to benefits beginning in January 2023. Based on current inflation trends, the SCL has estimated that next year’s COLA could reach 8.3 percent, surpassing the historic 5.9 percent increase announced last year.
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