Weekly Talking Points for Financial Advisors (9/4/23)

Read the highlights of this week’s commentary from Helios:

• The latest U.S. jobs data indicated a controlled cooling of the labor market with solid hiring, slower earnings growth, and increased labor participation. The unemployment rate rose 3.8% in August, the highest since February 2022. Employers added 187,000 jobs, showing broad-based growth, though June and July payroll gains were revised lower by 110,000 jobs.
• Inflation-adjusted consumer spending increased by 0.6% in July due to discretionary spending, compared to 0.4% in June. Consumption will likely slow in the coming months, with real disposable income falling nearly 0.2% after being flat in June. Personal savings as a percentage of disposable income dropped to 3.5% in July, down from 4.3% in June.
• Headline Personal Consumption Expenditure (PCE) inflation rose 0.2% month-on-month in July, bringing annual PCE inflation to 3.3%. Monthly core PCE, which excludes volatile food and energy prices and serves as the Federal Reserve’s preferred inflation measure, increased by 0.2%. This led to an annualized inflation rate of 4.2%, up from 4.1% in June.
• The data provide the Fed the chance to pause interest rate hikes this month while reserving the option to increase the federal funds rate in November and/or December.
• U.S. consumer confidence fell to 106.1 in August from 114 in July, marking the largest two-year decline due to concerns about the labor market, rising borrowing costs, and persistent inflation.
• Federal student loan interest started accruing again for 43 million U.S. borrowers in September after a three-year pause, with payments starting again in October. Gen Z and Millennials are expected to be heavily impacted, given their existing credit card debt and financial challenges.
• Student loan payments may not be a risk factor until next October, as the Biden administration is offering a 12-month grace period until September 2024, during which missed payments will not harm credit scores. According to the Federal Reserve, the average monthly payment is $393, with a median monthly payment of $222.