● Trump’s Tax Cuts – House Approval, Uncertain Future
Latest Trends in the U.S. Economy: PMI, Unemployment Indicators, Wages, Tax Reform, Amazon News, and Stock Market Overview
This article comprehensively covers essential topics for economic outlook, including: ▲The implications of the May U.S. PMI preliminary increase, indicating rising inflationary pressures; ▲Mixed signals from the labor market unemployment indicators; ▲Stagnation of real wages and consumption forecasts; ▲The impact of the passage of Trump's large-scale tax cut bill; ▲Amazon PillPack's launch of a new healthcare business; and ▲Reactions in the stock and bond markets.
By reading this article, you can understand how Wall Street, economic experts, and the U.S. government are interpreting recent macroeconomic trends, changes in various indicators, and how policy and corporate news are affecting the market.
Notably, key terms such as interest rates, inflation, the labor market, real income, and financial markets are seamlessly integrated!
1. U.S. May PMI Preliminary Increase: Re-igniting Inflation
- The U.S. Composite PMI (Purchasing Managers' Index) preliminary reading for May rose to 52.1, surpassing market expectations.
- PMI above 50 indicates economic expansion, while below 50 signifies contraction. This report shows expansion in both manufacturing and services sectors.
- Input costs are at the highest level since November 2022, raising concerns about increased inflationary pressures.
- Companies are likely to pass on cost burdens to consumers through higher prices.
- Signal for interest rate hikes: Increased consumption and spending → Economic overheating → Increased possibility of Federal Reserve interest rate hikes.
- Some large companies like Amazon have not yet raised prices, but future trends should be closely monitored.
2. Increase in Weekly Unemployment Claims & Continuing Claims: Mixed Signals in the Labor Market
- For the third week of May, initial unemployment claims were 227,000, near a four-week low and around market expectations.
- While the labor market appears stable, continuing unemployment claims rose to 1.903 million, the highest since 2021.
- This indicates that it is taking longer for unemployed individuals to find new jobs.
- As of April, the average duration of unemployment was 10.4 weeks, an increase from March.
- The labor market appears solid on the surface, but beneath the surface, there are mixed signals of gradual slowdown.
3. Wage Stagnation and Consumption Outlook: Real Wage Growth Halted
- U.S. real wages have barely increased in the past year (JPMorgan Chase Institute).
- Wage growth for low-income earners, which surged after COVID-19, has also recently stagnated.
- Inflation offsets the effects of wage increases, raising concerns about reduced consumer spending.
- Policymakers, including the Federal Reserve, continue to grapple with economic policies amidst rising inflation and wage stagnation.
4. Trump’s Tax Cut Bill Passes House: Impact on Debt and Bond Market
- Trump's initiative for large-scale tax cuts and spending bill passed the House by a one-vote margin.
- Tax benefits expanded, including tax exclusion for tip income, deduction for auto loan interest, and benefits for elderly/family households.
- The bill is projected to increase federal debt by $3.8 trillion over the next 10 years.
- While it may socially increase income, there are concerns about fiscal deficits, rising Treasury yields, and credit rating downgrades.
- Increased debt → Higher Treasury rates → Increased private borrowing costs → Negative views highlighted, including potential interest rate hikes and a weaker dollar.
- Expectations for increased corporate performance and consumer spending due to corporate tax cuts; the direction of positive and negative effects needs to be assessed following Senate passage and subsequent evaluations.
5. Amazon PillPack Expands Pharmaceutical Market: Promotes Changes in the Healthcare Industry
- Amazon's online pharmacy service, 'PillPack,' decides to expand into the general pharmaceutical market.
- Expansion to OTC products, along with existing systems such as medication packaging by dosage and 24-hour consultation.
- Up to 80% discounts on medication with a monthly subscription.
- Provides alternatives for U.S. consumers with high medical costs to manage their health.
- The impact is amplified amidst concerns about Trump-style healthcare welfare reductions.
- Expectations for healthcare service innovation; market reactions are being closely watched.
6. Stock and Bond Market Summary: Bearish vs. Rising Interest Rates due to Fiscal Deficit Burden
- As of the close on May 22, S&P500 -0.04%, Dow -1.35pt, Nasdaq +0.28%.
- Passage of 'Trump's Tax Cut Bill' in the House → Treasury yields rise to 5.161%, the highest since October 2023.
- Treasury prices decline (erosion of confidence), long-term fiscal deficit issues re-examined.
- Economists warn of "credit rating downgrades, dollar depreciation, investment contraction," etc.
< Summary >
Rising U.S. May PMI raises inflation concerns; unemployment indicators show mixed signals of a slowing labor market. Recent wage stagnation and the passage of Trump's tax cut bill in the House are raising concerns about fiscal deficits and a surge in Treasury rates. Amazon PillPack's healthcare expansion and other innovative corporate issues, stock market is bearish amidst interest rates and fiscal instability.
It is essential to check U.S. economic indicators, labor market, policy/stock market issues all at once.
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