Number of the Week: 178,000
That’s the number of jobs added in November, giving us an official unemployment rate of 4.6 percent—the lowest level since August 2007. But 226,000 people also left the labor force, so not everyone’s impressed.
November By the Numbers
At the end of each month, we get a big statistical roundup of how the country’s doing. To name a few: Average hourly earnings dropped by 3 cents (after rising 11 cents in October); consumer confidence is up 6.3 points; and household debt has risen 0.5 percent—by $63 billion—from the second quarter of 2016. But it’s still 2.6 percent below its peak of $12.68 trillion in 2008.
So, what? Every month, these numbers move markets, depending on whether they align with expectations—not necessarily because they’re good or bad. Remember, the market does not like surprises.
Bottom line: Everything we heard last week was pretty much on point with what analysts had expected. The overall positive numbers tell us we’re doing alright—which signals to the Fed that we’re ready for a rate increase and sets up a steady economic environment for the new administration. A rate hike is expected this month, so if you have debt with variable interest rates, those may be going up soon.
Some Relief From Student Debt
The Government Accountability Office estimates the U.S. is on track to forgive at least $108 billion worth of student debt in the coming years through its increasingly popular income-based repayment plans. Nice. For anyone who’s got a lot of debt and not a lot of income (and that’s a lot of people), these plans can offer caps on monthly payments and, after 20 to 25 years, forgiveness of remaining balances. Probably not surprising then that enrollment in them has more than tripled over the past three years to 5.3 million borrowers owing about $269 billion.
So, what? This new report highlights how expensive student loan debt is for the nation, as well as individual borrowers. To curtail government costs, the current administration under President Obama has proposed capping how much debt can be forgiven for public-service workers. But in his campaign, Trump proposed more forgiving forgiveness terms, allowing borrowers to stop paying back loans after 15 years, though he’d cap monthly payments at 12.5 (versus 10) percent of their incomes.
Bottom line: If you’re one of the more than 5 million borrowers on an income-based repayment plan—or you’re thinking of signing up—be prepared for some changes on terms.
Brace Yourself: Italy Could Pull a Brexit, Too
It’s not just U.S. elections that affect our economy. In Italy, the people voted this weekend against constitutional changes that Prime Minister Matteo Renzi was confident would improve government efficiency—so confident, he staked his job on it. Now he’s resigning, and Italy may soon say ciao to the European Union.
So, what? Mounting trouble in the Eurozone is bound to have global economic implications. The initial reaction included a dip in Asian stock markets and the euro falling to a 20-month low before bouncing back.
Bottom line: U.S. markets have taken the news in stride, but you might brace yourself for more volatility as Italy plans to elect a new government, possibly in early 2017. The leader of the popular Five Star Movement, which is polling neck-and-neck with Renzi’s party, has vowed to hold another referendum on Italy’s euro membership. Leaving the Eurozone would require more than that, but the possibility may still have an effect on markets.
December 5, 2016