US Economy News Today: Will Biden Talk About the Cost of Living at the State of the Union?

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Welcome to Investopedia’s economics live blog, where we’ll explain what the day’s news says about the state of the U.S. economy and how that’s likely to affect your finances. Here we will compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you.

Today, Federal Reserve Chair Jerome Powell is speaking to the Senate after reiterating his “no rush” message yesterday. We also received data from all corners of the economy, including on trade, productivity and jobs.

Mortgage Rates Tick Lower, Spurring Bump in Applications

MARCH 07, 2024 01:05 PM EST

Mortgage rates ticked lower this week to stay below the 7% level after inching in that direction over the past few weeks.

The Freddie Mac mortgage survey showed that the 30-year fixed-rate mortgage rate dipped to 6.88%.1 While it’s a dip from last week’s rate, mortgages are still higher than the 6.73% rate from this time last year.

The slight dip in mortgage rates helped drive more potential homeowners to apply last week, Freddie Mac officials said.

“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” said Sam Khater, Freddie Mac chief economist.

Wednesday, the Mortgage Bankers Association (MBA) reported a 9.7% increase in homebuyer activity.2

“Of note, purchase volume—particularly for FHA loans—was up strongly, again showing how sensitive the first-time homebuyer segment is to relatively small changes in the direction of rates,” said MBA Chief Economist Mike Fratantoni.

-Terry Lane

What Economic Topics Will the President Address in His State of the Union?

MARCH 07, 2024 12:28 PM EST

Tonight the president will address the nation in his State of the Union address and many will be watching for the economic topics he discusses.

According to Pew Research, strengthening the economy is a top policy priority for almost three-quarters of Americans.3 Economists expect that will drive President Joe Biden to talk about the policies he’s put in place around student loans, prescription drug prices and the semiconductor industry.

Experts at the Brookings Institute today wrote that Biden could also touch on union and consumer rights as well as the cost of living.4

Read more here about what economics talk to expect from the president tonight.

Senators Grill Fed Chair Powell On Interest Rates

MARCH 07, 2024 11:19 AM EST

Federal Chair Jerome Powell continued his report to Congress Thursday.5

The report, which began in the House of Representatives Wednesday, continued on Thursday when Powell sat down before the Senate Banking Committee and took questions from senators from both parties.

Committee chair Sherrod Brown, a Democrat from Ohio, urged Powell to cut the Fed’s benchmark interest rate sooner rather than later. The Fed has held the fed funds rate at a 23-year high since July to push down inflation, at the risk of causing layoffs.

“You’ve acknowledged the Fed likely waited too long to raise rates when prices shot up in 2021,” Brown said. “We can’t make that mistake again, Mr. Chair, at the expense of workers. If the Fed waits until unemployment starts increasing it may be too late to cut rates in time to save American jobs.”

Powell, repeating earlier statements, noted the labor market has stayed resilient in the face of high interest rates, and said the Fed would likely cut rates this year as long as inflation continues its downward trajectory. The Fed is widely expected to hold the rate steady at its next meeting in March and wait until June to reduce it.

Read more about Powell’s senate testimony here.

This blog post has been updated to include a link to an article.

Minor Revisions Don’t Impact Healthy Fourth Quarter Labor Productivity Reading

MARCH 07, 2024 10:56 AM EST

Last month’s indications of a healthy labor force in the 2023 fourth quarter were mostly on point, with revisions to the Labor Department’s data showing labor productivity remained at the initial projection of 3.2%.6

There were downward revisions of unit labor costs to 0.4%, down 10 basis points from the early February projections, as well as hourly compensation and hours worked.

The initial release of the Bureau of Labor Statistics data showed that the economic indicator had stabilized after some pandemic-related distortions and that the results indicated that economic growth remained strong.

-Terry Lane

ECB Holds Interest Rates at Record Highs, Lowers Inflation Forecasts 

MARCH 07, 2024 10:00 AM EST

The European Central Bank kept interest rates unchanged at record highs Thursday, even as it lowered its inflation forecasts.

Like the Federal Reserve, which has signaled it’s in no rush to raise interest rates, the ECB kept rates unchanged as it waits for inflation to reach its 2% target—noting that wages remain hot.7

“Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages,” the ECB said in a statement, noting “restrictive financing conditions” and past rate hikes are weighing on demand and bringing down inflation.

The ECB said Thursday it would hold its key deposit rate at 4%, and future rate decisions would be made, it said, “in light of the incoming economic and financial data.”

It said it had revised its projection for 2024 lower to reflect a lower contribution from energy prices. It said it expects inflation this year to be 2.3%, lower than its previous forecast of 2.7%. It projected inflation to average 2.0% in 2025 and 1.9% in 2026.

Europe’s economy was particularly hit by high energy prices from Russia’s invasion of Ukraine and rising interest rates last year, while the U.S. has grown faster than economists had expected.

The ECB today lowered its growth projection for the eurozone to 0.6% for the year from its 0.8% estimate previously, noting it expects economic activity “to remain subdued in the near term.”

Growth will pick up to 1.5% in 2025, and 1.6% in 2026, the central bank forecast, “supported initially by consumption and later also by investment.”

-Nisha Gopalan

Jobless Claims Meet Expectations, Come in Even with Last Week

MARCH 07, 2024 09:34 AM EST

Economists hit the mark with their predictions for initial jobless claims in January.

The Labor Department reported 217,000 workers applying for unemployment insurance for the week ending March 2.8 After adjusting last week’s data slightly higher, the report showed that the number of initial claims was unchanged this week. The four-week moving average, which helps to show the larger trend on initial jobless claims, dropped slightly from last week to 212,250.

The weekly jobless claims come in after yesterday’s private sector job report showed job creation and wages advanced in February. Tomorrow, the Bureau of Labor Statistics will issue the government’s monthly payroll report for February, where economists will get more data on wages and unemployment, key indicators for the Federal Reserve as it monitors inflation.

-Terry Lane

The Trade Deficit Is Growing Again

MARCH 07, 2024 09:26 AM EST

The U.S. imported $67.4 billion more in goods and services than it exported in January as the trade deficit grew by $3.3 billion from December.9

It was the fourth time in five months that the trade deficit expanded, as deficits grew with Japan, Taiwan, Vietnam, Canada, and other trading partners.

The U.S. imported more cars, computers, and semiconductors while cutting back on oil and cell phones. On the other side of the equation, it shipped out more cars while decreasing oil exports.

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