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Morning Commentary

CONSUMERS REMAIN VERY OPTIMISTIC

By Charles Payne, CEO & Principal Analyst
7/9/2019 9:30 AM

Question of the Week

The U.S. Federal minimum wage was last increased in July 2009 to $7.25. Is it time for Congress to increase it again, and is $15.00 a smart move?


Post your answer below.

The U.S. consumer optimism continues to edge higher, according to the NY Federal Reserve. Confidence revolves around the job market with a record percentage of respondents saying they could find a job if they lost their current one.

The ability to make debt payments continue to improve from last year, especially in lower-income households; 21.34% were in debt last September, to only 13.55% in June. There was a spike in debt for middle-income households to 11.36% from 8.58% in April, which is the only worrisome part of these exhaustive surveys.

It must be noted that the Federal Reserve really cares about inflation expectations and its ability to gauge and game them. As an aside, it’s intriguing that lower-income households see the smallest household income gains, but they also expect the largest spending growth.

One Year Growth Expectations

Under $50,000

$50,000 to $100,000

Over $100,000

Household Income

 

+2.19%

+2.99%

+3.20%

Household Spending

 

+4.11%

+3.17%

+2.91%

Debt Delinquency (not able to make min payment over next three months)

13.55%

11.36%

4.86%

Losing or Leaving Job

15.87%

13.27%

11.50%

Ability to Find Job

62.60%

62.16%

66.37%

Higher Interest on Savings

26.07%

29.01%

30.50%

Inflation Rate

2.69%

2.90%

2.50%

Where’s Inflation?

There is no doubt that consumers felt a lot more confident in June than earlier in the year. Inflation expectations turned higher after declining three consecutive months.

Inflation expectations for a year from now climbed to 2.67% from 2.45%, with the largest increase from lower-income households, 2.69% from 2.20% in May.
 

What’s interesting is that the decline in college and medical inflation growth continues to outpace other commodities, but it’s down huge since the start of the year.

One Year Growth in Inflation Expectations

June

2019

May 2019

January

2019

Gas

4.20%

4.69%

4.34%

Food

4.66

4.67

4.34

Rent

5.35

5.24

5.45

Medical care

7.39

7.95

9.24

College

5.29

5.86

7.72

Gold

2.92

2.72

2.93

Higher Minimum Wage

The Congressional Budget Office (CBO) released its assessment of the impact of higher Federal minimum wage as Congress prepares to vote on the issue. The plan to take minimum wage to $15.00 by 2025 doesn’t have the obvious positive impact touted on Capitol Hill.

The issue is the cost - not just to taxpayers, but to households currently above the poverty line. At $15.00 an hour, a family with an income that’s six times greater than the poverty line would lose $28.4 billion. The total employment at $15.00 also means 1.3 million fewer workers. 

Impact Higher Min Wage

Change Workers

Direct Impact

Potential Impact

Incomes Families in Poverty

Incomes families above Poverty

 

$10.00

Unchanged

1.5 million

1.9 million

+ $430 million

 

-$100 million

 

$12.00

-300,000

5.0 million

6.4 million

+$2.3 billion

 

-$800 million

 

$15.00

-1.3 million

17.0 million

10.3 million

+$7.7 billion

 

-$8.7 billion

 

 

Portfolio Approach

We sent an alert to take profits on another position yesterday. If you are not currently a Hotline subscriber, click here to get started today. 

Communication Services

Consumer Discretionary

Consumer Staples

1

4

1

Energy

Financials

Healthcare

1

2

1

Industrial

Materials

Real Estate

2

3

1

Technology

Utilities

Cash

2

0

2

Today’s Session

The futures are pointing to a triple digit decline on the Dow.  This will be the third down day if it persists.  The market is waiting for data out from Boeing (BA) on June orders and deliveries, which will be out at 11.

On the economic front, according to the NFIB Small Business Optimism Index, America’s small business optimism took a slight dip in June, slipping 1.7 points to 103.3, reversing the gain posted in May, with six components falling, three improving, and one unchanged. The index, however, remains at historic highs.  The Uncertainty Index was up substantially, increasing 7 points to the highest level since March 2017.

NFIB President and CEO Juanita D. Duggan, stated, “Last month, small business owners curbed spending, sales expectations and profits both fell, and the outlook for expansion dampened. When you add difficulty finding qualified workers and harmful state level laws and regulations, you’re left with a volatile mix where uncertainty has increased to levels not seen in more than two years,” said 

Let’s see what the latest Job Openings and Labor Turnover Survey (JOLTS) report, due out at 10, indicates. 


Comments
Charles, thank you so much for being the FACTS based news, FBN. Can you please POST or investigate the AIRBUS severe DANGEROUS situation, they have wings that are cracked, and alerts are being sent out to inspect, and fill the cracks in Airbus aircraft wings& joints. DOES that NOT sound important? Since EVERYTHING about Boeing is over hyped by shorts and airbus EU OFFICIALS. Thank you Charles PAYNE investigate, reply, or talk about on your show TODAY. FBN. Thank you president Trump. Life is great, INVEST long. We have 7.5 million jobs, and only about 6million people needing them, so please get more tradesmen, apprenticeships for these dirty fingernail worker's jobs s po me starting at $70,000 a year and full BENEFITS, and retirement BENEFITS, journeyman tradesmen getting over $100,00+& Full BENEFITS and retirement BENEFITS.

Ed on 7/9/2019 9:36:59 AM
Federal minimum wage is a foolish law which should be removed, not increased. It dies no good. For well run businesses, the wages are higher just to get good workers (notable exception of handicapped workers who are employed as charity and social responsibility). For badly run businesses, they pay poorly and operate marginally. Minimum wage laws exceed the proper range of responsibility of the federal government. They encourage black market businesses that pay no taxes. Encouraging those businesses and then ignoring enforcement breeds common contempt for the law and breaks down the moral fabric of society. Senseless meddling like this not only fails to help society, it actually results in great harm.

Bob G on 7/9/2019 9:55:22 AM
PS to my last comment. I own a small business in SW Missouri, a poor part of the country. This business has $25/hr as its standard base wage, because I believe $50K before taxes is what a productive person should earn. But that is to be decided betwixt God, employer, and employee without fascist government interference. Fascism is the mallet of liberals and always results in ultimate loss for everyone involved. Mussolini and his German buddy were of that ilk.

Bob G on 7/9/2019 10:04:41 AM
Increasing to $15/hour will drive further AI, ML, and Robotic alternatives to labor.

Boyle Patrick J. on 7/9/2019 10:28:03 AM
Maybe bring up the minimum wage to $9.00. But no more. And as for inflation, if the powers that be think it's not happening, they're in a world far from the realities of life for working class folks. Just take a walk down the aisles of any grocery store and you'd see that inflation is very real and it's hitting hardest for the people that can afford it the least

Jim Hubbard on 7/9/2019 10:48:52 AM
I just wish these "do-gooders" would take Microeconomics! Sounds good to mandate higher minimum wages, but they don't understand the impact that has on businesses. People will be fired and prices will go up. How does that "do-good" for anyone? We need a more highly educated congress. Throw the stupid ones the door.

Leelee Clement Doughty on 7/9/2019 12:22:28 PM
Minimum wage should be market-driven. I cannot believe that the wage should be the same in Portland, ME, and Portland, OR. Actually, it should be a two-tier offering...one for teens in their first job, and another for those with some experience. Most businesses I've owned or been associated with never paid the minimum because we could not attract quality help...so we paid the market wage.

James Deffke on 7/9/2019 12:56:41 PM
No

Lloyd Keahey7 on 7/9/2019 1:12:14 PM
HELL NO!!! I own some Dry cleaners I do not have the profit margin to cover that. Jobs would be lost my business would go under. The same for almost every small business that relies on untrained and entree level lower wage workers to staff their businesses. Minimum wage is a starting point for people entering the work force. Its not meant to be where a person stays and waits for the Gov. to step in a artificially raise the rate. vote pandering that's all it is!

Rob Sheehan on 7/9/2019 2:29:43 PM
No!!!!!

Scott Mace on 7/9/2019 10:00:22 PM
 

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