Debt Ceiling Suspended
President Biden has signed a bipartisan bill suspending the U.S. debt ceiling until 2025 and introducing various fiscal measures, while his student loan forgiveness plan awaits a Supreme Court ruling.
⭐️ Check This Out
- Guess the real estate investors finally realized they can't defy gravity, with a historic 48.6% plunge in home purchases for Q1 2023.
- The lure of the great outdoors has finally triumphed over the buzz of the power drill, leading to a slowdown in home renovations.
- U.S. house prices experienced a moderate rise of 4.3% year over year, despite an emerging trend of declining prices in many western states.
- The economy added 339,000 new jobs, beating the 190,000 prediction by a mile, while the unemployment rate rose up to 3.75%. Wait, what?
📊 Market Update
The recent Employment report had some interesting numbers. The economy added 339,000 jobs in May, far more than the predicted 180,000. Sectors like professional services, health care, and leisure saw quite a bit of this growth. On the flip side, the unemployment rate ticked up from 3.4% to 3.7% – the highest we've seen since October 2022.
Although it seems unusual to have job growth and unemployment both increase, it's not uncommon. These numbers come from different data sets – the job growth number comes from companies. At the same time, the unemployment rate is derived from a survey of individuals. This rise in unemployment could reflect people choosing to look for better opportunities and leaving their jobs voluntarily, so they might not stay unemployed for long. We'll want to keep an eye on these numbers in the future to see what trend emerges.
Average hourly earnings, a key indicator of wage growth, increased 0.3% from April, matching what experts had predicted. Year-on-year, they were up by 4.3%, slightly lower than the 4.4% annual increase we saw last month. Monitoring wage growth is essential to Fed officials, as it can signal future inflation.
There's also some division amongst investors on whether the Fed will increase the federal funds rate by another 25 basis points in their next meeting on June 14. As of today, the CME predicts nearly an 80% chance of a pause.
Debt Ceiling Suspended
Big news coming from Washington, D.C. After weeks of negotiations, President Biden signed a bipartisan bill suspending the U.S. debt ceiling until January 1, 2025. This is a massive relief as it dodges the possibility of the U.S. government defaulting on its debt for the first time in history.
The Fiscal Responsibility Act of 2023 (H.R. 3746) made it through the House of Representatives and the Senate last week following an agreement between Biden and Speaker Kevin McCarthy. The bill was critical to preventing the government from running out of money to pay its bills, which the Department of the Treasury had warned could have happened as soon as June 5.
Votes were decisive, with the Republican-led House approving the bill 314 to 117 and the Democrat-led Senate voting 63 to 36 in favor. Biden stated that a failure to pass this bill would have been catastrophic, potentially destroying the nation's credit rating and making loans significantly more expensive.
The agreement means the $31.4 trillion public debt limit won't be a problem until after the 2024 presidential election. There are a few other provisions in the law, too: it calls for rescuing unspent money from previous appropriations, imposes further cuts to domestic spending, caps increases in military spending in fiscal 2024 at 3%, and accelerates specific energy and infrastructure projects.
One thing it doesn't do is extend the freeze on federal student loan payments beyond its current August 29 expiration date. However, we're still waiting to hear from the Supreme Court about Biden's plan to forgive up to $20,000 in student loan debt for eligible borrowers. Despite a Senate-approved House resolution to repeal this plan, Biden has pledged to veto it if it comes to his desk.
🗓️ Economic Calendar
Thursday
- Initial Jobless Claims - measures the number of individuals who filed for unemployment insurance for the first time during the past week.