The Fed remains committed to raising short-term interest rates at least one more time this year, most likely at the September policy meeting as I will discuss below. The Fed also wants to start reducing its massive $4.5 trillion balance sheet this year, but doing so in the past has almost always led to a recession.
On July 12, credit card giant VISA announced that it will soon offer selected retailers $10,000 to stop accepting cash. No one seemed to pay much attention. The announcement received relatively little coverage in the press. Should it have? Yes!
Nearly one-fifth (19%) of Americans age 70 to 74 were still in the workforce as of the end of June, according to the latest jobs report from the Labor Department on July 7. Some are working because they are healthy and enjoy their work. Most, however, are still working because they haven’t saved nearly enough for retirement.
Both the Congressional Budget Office and the White House Office of Management and Budget announced last week that federal spending will top $4 trillion for the first time ever in fiscal 2017, which began on October 1, 2016 and ends on September 30.
The US Department of Labor told us in June that there were apprx. 6.0 million open (unfilled) jobs in America, a record high. The Labor Department also told us that there are apprx. 6.8 million unemployed Americans who are actively looking for work.
As the father of two Millennials (ages 27 and 25), I pay a great deal of attention to articles and studies on this largest generation of 75.4 million Americans. Given the sheer size of this generation and its vast effect on the economy for decades to come, we should all be paying attention to trends within this massive group.
Most investors understand the implications of the Fed raising (or lowering) interest rates. After lowering short-term interest rates to near zero in late 2008, and keeping them there for eight years, the Fed is now committed to “normalizing” short-term rates by raising the key Fed Funds rate multiple times over the next couple of years.
The Fed policy committee will almost certainly raise the key Fed Funds rate by another 0.25% tomorrow. Minutes from the early May Fed meeting indicate that the Fed sees the 1Q economic weakness as temporary, and the odds for a rate hike tomorrow are above 90%.
Given all the unusual factors attached to the current need to increase the debt ceiling, and the very unhealthy political climate, I could see a lot of turbulence in the markets just ahead. In a worst-case scenario, a debt ceiling crisis could even result in a new recession.
The Federal Reserve Bank of New York reported last week that US household debt reached a new all-time high in the 1Q of this year. The new report also included some troubling internal metrics, not only on the overall household debt levels but also with regard to the level of delinquencies.