Midday Macro - Bi-weekly Color – 6/3/2022
Overnight and Morning Market Recap:
Price Action and Headlines:
Equities are lower, as a stronger than expected jobs report and solid service sector activity increased Fed tightening expectations for Q4, weighing on more duration sensitive areas with energy the only sector in the green today
Treasuries are lower, with the solid economic data hitting the curve somewhat evenly, keeping it little changed with 10yr yields now back at 3%
WTI is higher, as the announced OPEC+ production increases yesterday underwhelmed while U.S. stockpiles fell more than expected last week, moving prices back to near $120
Narrative Analysis:
Equities are lower, as this week's theme of good (economic data) is bad (for markets) continued today with a stronger than expected jobs report and a generally inline ISM Service-sector PMI reading reversed yesterday's gains with Technology and Consumer Discretionary sectors hit the hardest. Things were already trending lower from overnight highs due to everyone's favorite Twitter buying billionaire commenting on how scared he is of the coming slowdown, echoing a notable banker’s ramblings of a coming hurricane yesterday. Treasuries took their cue from the strong data to drop lower with yields, especially in the front-end, back near recent highs. Oil continues to be well bid with OPEC+ unable to change the tide while inventories of everything energy-related remain problematic, to say the least. Copper is cooling after significant gains yesterday reflected a more optimistic outlook for Chinese growth, being shadowed by other industrial metals, while the Agg complex is generally lower. The dollar continues to recover some of its recent weakness, with the $DXY around 102, while the Yen continues to fall lower as policy path expectations diverge further.
The Russell is outperforming the S&P and Nasdaq with Momentum, Growth, and Low Volatility factors, and Energy, Technology, and Utilities sectors are outperforming.
@KoyfinCharts
S&P optionality strike levels have the Zero-Gamma Level at 4190 while the Call Wall is 4200. Volatility estimates continue to decrease as the S&P consolidates in the 4100-4200 zone. Negative delta trading picks up as the S&P rises above 4150 (towards the 4200 Call Wall) while the Vol trigger is 4100, increasing the likelihood that trading stays within this range. The market is still well hedged, and there has been short vol selling, which is supportive of “risk-on” behavior.
@spotgamma
S&P technical levels have support at 4105, then 4085, and resistance at 4135, then 4165. Not a great day technically as key support levels quickly broke post jobs report, and the 4135 level was unable to be recaptured. A Friday afternoon rally today will be crucial for bulls to regain the narrative as a break/close below 4100 likely leads to the end of the current rally.
@AdamMancini4
Treasuries are lower, with the 10yr yield at 2.96%, higher by around 4.5bps on the session, while the 5s30s curve is little changed, sitting at 17bps
Deeper Dive:
We do not agree with the growing narrative that “bad” economic data is good and what is needed for markets to move higher, given the Fed will reduce its tightening path as demand is destroyed and hence inflation falls. Instead, the most favorable outcome for risk assets is the one with the least amount of earnings growth destruction. In our opinion, this continues to be a cost-push inflationary story, not a demand-pull one. Hence, any developments that improve supply-side shortages/impairments will ultimately reduce inflationary pressures. Simply put, today’s jobs report and ISM Service PMI decreased the likelihood of a hard landing while showing improvements in supply-side (labor) shortages.
The rise in core inflation was primarily driven by a huge mismatch of supply and demand brought on by a massive shock to the supply-side (availability of materials, labor, and logistics) and a tectonic shift in demand preferences for goods due to the effects of the pandemic. However, this is now quickly evolving back to a more normal mix as consumers are changing behavior/preferences towards staples and services over discretionary goods while generally becoming more price-sensitive (especially towards durable goods). Furthermore, the great migration from urban to suburban (which drove housing prices higher) and “the return” (which is driving urban rents higher currently) is significantly cooling as people have a better sense of their work/commuting situations and are responding to negative developments in affordability. As a reminder, the Fed targets core PCE, and this is primarily made up of discretionary goods and shelter, both of which have increasingly cooling demand, as stated.
*Spending on service has recovered to pre-pandemic levels keeping inflationary pressure elevated there while the Durable Goods PCE deflator continues to fall, now negative, a trend likely to continue given changes in demand and growing inventory levels
*Consumer intentions to buy large ticket items continues to fall significantly, reducing the ability of sellers to pass on any continued/new cost increases
At the same time, the supply-side, although still very much impaired, continues to heal/evolve, particularly in regards to labor shortages. Hence, continued increases in hiring are reducing “critical” job openings (not all job openings are the same), reducing the need for firms to raise wages to attract and retain workers. At the same time areas of the economy that over hired are now reducing headcount.
* “Labor market getting less tight. According to NFIB, net compensation plans fell to 25%, the lowest since May 2021. The quits rate is coming off the boil. If people are less tempted to leave their current jobs, it must mean they are increasingly satisfied with what they are getting.” - @RenMacLLC
*The idea that labor markets are becoming less tight is furthered by a decline in hiring plans by small businesses, which should reduce wage pressures.
Although business survey-based and Q1 earnings call commentary has highlighted renewed supply chain pressures from China’s Covid lockdowns and the war in Ukraine, hard data continues to indicate a strong level of production and end sales while growing inventory levels are reducing the likelihood of a repeat of last years restocking scramble into the holidays, something that added significant inflationary pressures.
*This week’s Fed Beige Book saw a continued decline in mentions of shortages by businesses across the country
Furthermore, the continued strong rate of hiring is uncapping production levels, especially in the service sector. This will continue to increase the supply of goods and services, further reducing inflationary pressures. The problem of capped production contributing to inflation due to supply-side shortage has been a theme we have highlighted for the last year, and signs are finally pointing to improvement as firms have noted an improved ability to find “needed skilled workers.” To be fair, material availability and logistics have taken a step back recently, but worries over falling end demand should lead firms to be more price-sensitive than they were this time last year.
Now many other things are going on that are adding inflationary pressures, but we see today’s job report as a positive development, given it reduces supply-side labor shortage driven inflationary pressures (wage-spiral), increases the capacity to produce/supply goods and services while also reducing the odds of a hard landing occurring as aggregate disposable income grows. When coupled with what was seen in today's ISM Service PMI report, which showed cooling in activity and marginally reduced-price pressures, we don’t see this as materially increasing the odds the Fed continues to do subsequential 50bps hikes throughout Q4 (although September is certainly likely). Instead, we see an increase in hiring and reduction in job openings as a positive for future financial conditions given it will allow the Fed to claim victory in reducing demand while also increasing supply (as again labor shortages were/are a big part of the problem). As a result, we continue to target the S&P hitting a 4300 level in the current relief rally despite the increased choppiness/consolidation occurring this week ( especially today).
Econ Data:
Nonfarm Payroll report showed the U.S. economy added 390K jobs in May, verse 436K in April, and above market forecasts of 325K. There was a downward revision of 22K to the prior two months and the three-month average moved to 408K. Notable job gains occurred in the leisure and hospitality (84K) and accommodation (21K) sectors. In contrast, employment in retail trade (-61K) declined, mainly due to job losses in general merchandise stores (-33K). The U3 unemployment rate was unchanged at 3.6% (3.5% in February 2020) while U6 rose to 7.1% from 7.0% (7.0% in February 2020). The participation rate rose 0.1% points to 62.3% (63.4% pre-Covid). Average hourly earnings rose 0.3%, putting year-over-year wage growth to 5.2% in May. The average workweek was 34.6 hours for the third month in a row
Why it Matters: A stronger than expected jobs report, but still the weakest level of monthly gains since April 2021. However, it is clear labor markets remain tight, causing Fed tightening expectations to rise after the report. Although still growing, the “stabilization” in monthly wage growth (at 0.3% for two months) when coupled with the reduced appetite to hire, as seen in business surveys, and lower levels of quits (despite still historically high openings) indicate the peak may be in as far as monthly increases. However, the average earnings of production workers increased 0.6% MoM, and the more comprehensive measure of labor compensation in yesterday’s productivity and cost report indicates an even higher level of compensation is occurring, around 8.1% between Q1 ’21 to Q1’22. Finally, although marginally higher, the participation rate continues to be stuck at a historically low level, skewing the unemployment rate lower than it would be if we were at pre-pandemic EPOP levels. This lower EPOP level continues to be problematic for the Fed, which is having trouble understanding how to properly gauge the tightness of labor markets given the slow return of “missing” workers is counter to what was expected to occur at this point in the recovery.
*Leisure and Hospitality continue to be the area where the most jobs are being created, given it is still short close to 1.5 million jobs from its pre-pandemic level
*Wage growth looks to have peaked as average hourly earnings grew by 0.3% for the second month in a row, below expectations
The ISM Services PMI fell -1.2 to 57.1 in April from 58.3 in March and below forecasts of 58.5. There was growth in New Orders (54.6 vs. 60.1 in April) and Employment (50.2 vs. 49.5). Business Activity (54.5 vs. 59.1) slowed notably, as did the Backlog of Orders (52 vs. 59.4). Meanwhile, Prices (82.1 vs. 84.6) and Supplier Deliveries (61.3 vs. 65.1) both fell, showing some improvement on the inflationary pressure front. Inventories ( 51 vs. 52.3) and Inventory Sentiment (44.5 vs. 46.7) both decreased, showing some stabilization in the restocking efforts for the service sector side.
Why it Matters: The respondent comments painted a much more dire outlook than the actual index and sub-index readings showed, similar to what was seen in the ISM Manufacturing PMI survey reported earlier in the week. The fall in prices (off record highs last month), reduced supplier deliveries, and slowing employment picture point to reduced inflationary pressures. When coupled with slowing inventory accumulation activity, it is clear that firms are becoming more defensive, but there has yet to be a significant contraction in demand despite capacity again being capped by shortages. Moving forward, it is our opinion that the effects of shortages from Chinese lockdowns and the war in Ukraine will diminish. At the same time, labor availability/continuity continues to improve while end demand cools.
*New Orders, New Exports, and Employment were the only three sub-categories that improved, while there were notable declines in Activity and Backlog of Orders
*Mirroring what was seen in the ISM Manufacturing PMI survey, “selected” respondent's comments were generally more negative than positive, with shortages and longer lead times a reoccurring theme
The Challenger Job Cuts Survey showed companies announced plans to cut 20,712 jobs in May, the lowest reading in three months. It is 15.8% lower than the 24,586 cuts announced in May of 2021. So far this year, employers announced plans to cut 100,694 job cuts, the lowest on record for the first five months of the year. Still, four industries saw more job cuts announced in May than in the previous four months of the year combined: technology (4,044, the highest since December of 2020); fintech (2,059); construction (817); and automotive (2,918). Meanwhile, employers announced 126,083 hiring plans in May, primarily on plans from Ace Hardware to hire 40,000 associates and 7-Eleven, which plans to hire 60,000. So far this year, there were 612,686 hiring announcements, the second-highest January-May hiring total on record.
Why it Matters: After a three-month trend of rising cuts from February to April, cuts fell somewhat in May, showing no material changes in headcount preferences/intentions. “Many technology startups that saw tremendous growth in 2020, particularly in the real estate, financial, and delivery sectors, are beginning to see a slowdown in users, and coupled with inflation and interest rate concerns, are restructuring their workforces to cut costs and shore up capital,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc. “At the same time, inflation and the increase in interest rates are beginning to impact the housing market. Constructions firms announced 817 job cuts in May for a total of 1,150, a 55% increase, the highest monthly total for the sector since October 2020.
*Job cuts are still well below historical average levels, which coincides with the very high level of openings, showing despite weakening sentiment, firms are still reluctant to change behaivor
*Despite the drop in overall job cuts, of the 30 industries Challenger tracks, four saw more job cuts announced in May than in the previous four months of the year combined.
Factory orders rose 0.3% in April, after a downwardly revised 1.8% gain in March and missing the market forecast of a 0.7% rise. Orders slowed in industries producing both durables (0.5% vs. 0.7% in March) and nondurable goods (0.2% vs. 2.9%). Among durable goods, orders increased at a softer pace for primary metals (0.8% vs. 3.3%) and computers & electronic products (0.1% vs. 1.8%) while those for fabricated metal products (-0.1% vs 1.2%) and electrical equipment, appliances, and components (-0.2% vs 2.6%) declined. On the other hand, orders advanced faster for machinery (1% vs. 0.6%) and rebounded for transport equipment (0.7% vs. -0.3%). Shipments rose by 0.2%, cooling from the 2.2% rate seen in March. Inventories rose 0.6% in April, after a 1.4% rise in March.
Why it Matters: New orders and Shipments on aggregate slowed from very high levels in March, as did inventory builds. However, there are still no red flags indicating a slowdown in demand and activity with new orders for machinery purchases and transport equipment accelerating. Unfilled orders have remained somewhat stable this year but are not yet reflecting the renewed supply chain pressures being reported in business survey reports brought on recently by Chinese lockdowns. April’s report will be more subsequential in determining whether manufacturers are really slowing activity, something regional Fed manufacturing surveys and the ISM Manufacturing Survey are increasingly becoming conflicted on.
*The monthly changes in New Orders are beginning to become a little volatile but remain generally positive
Policy Talk:
St. Louis Fed President James Bullard gave a presentation titled "The First Steps toward Disinflation" virtually to the Economic Club of Memphis. He compared the current inflationary environment to that of the 1970s. He is worried that inflation expectations are becoming "unmoored," which could possibly lead to a new regime of higher inflation and volatility in economic performance. He highlighted the difference in expected inflation and actual inflation, as seen in TIPS-based derived inflation measures below Core PCE, may lead to expected inflation eventually rising. We found this a little strange given the better predictive power the market has had verse economists. He discussed how pre-pandemic rate levels were a good proxy for where things should settle once inflation falls. He sees the current higher than pre-pandemic interest rate levels as proof of credible forward guidance, but the Fed must still follow through. He concludes his remarks by highlighting the strength in the labor market and the likelihood of continued economic growth in the coming quarters. Bullard noted that the Fed has a “good plan for now” in terms of more half-point rate hikes in future meetings and pushed back on the idea of taking a pause in the fall. He did remark that the tightening in financial conditions has done a lot of the work already for the Fed, which we saw as a risk asset positive comment.
"The fact that market interest rates have moved above their pre-pandemic benchmarks while the policy rate has not can be read as an illustration of the effect of credible forward guidance… The Fed still has to follow through to ratify the forward guidance previously given, but the effects on the economy and on inflation are already taking hold."
New York Fed President John Williams gave prepared remarks on the digital transformation of money and payments at a Columbia SIPA Monetary Policy Workshop. He highlighted that innovation is always occurring, but people are generally still doing the same thing. He used this general mantra to identify central bank digital currencies and stablecoins that are fully backed by safe assets as things that have the potential to be a new way to hold money and make payments, but the end goal is the same and as a result the role of the Federal Reserve has not structurally changed. He highlighted that work is being done, as highlighted in things like the Report on Stablecoin, to incorporate these new technologies but generally concluded by asking more questions on what the future holds than any concrete plans to incorporate crypto/blockchain into the day-to-day operations of the Fed. NY Fed SOMA Portfolio Manager and soon-to-be Dallas Fed President Lorie Logan also gave remarks at the SIPA conference, elaborating on William’s remarks and concluding by saying that digital assets have the potential to change the two-tier monetary system, but it is still unclear how things will evolve, calling for a broad engagement with various experts “so that payments experts, monetary policy practitioners, financial stability and supervision colleagues explore and understand important intersections.”
“It’s important to remember that even as the technology changes, the role of the central bank has not. It is and will always be to supply money and liquidity to bring stability to the economy and financial system.”
“A decade ago, paper currency totaled $1.1 trillion and bank reserves $1.5 trillion. But since then, we've seen a dramatic change in the makeup of the liability side of our balance sheet. Today, in addition to $2.3 trillion of currency and $3.3 trillion of bank reserves, there are $2 trillion in overnight reverse repos, representing funding from nonbank sources such as money market funds.”
Richmond Fed President Thomas Barkin and San Francisco Fed President Mary Daly both gave interviews to financial media outlets this week. Speaking on Fox Business, President Barkin said he agreed with the plan laid out by Powell regarding tightening policy. He noted a high dispersion in the neutral rate (150bps) among committee members, so it was hard to say where that is exactly or whether the Fed would ultimately need to raise rates above it. Instead, he focuses more on real rates, particularly the five-year part of the curve, which he sees as moving further into positive territory. Overall he pushed back on recession fears, saying inflation is certainly weighing on activity, but consumer spending remained solid, and businesses continued to invest. President Daly spoke on CNBC, giving her views on the economy and policy. She believes it is appropriate to raise rates quickly, which means 50bps a “couple” of times in the coming meetings to reach the neutral rate, which she sees at 2.5%. Then the Fed should be able to reassess given the uncertainty that exists. She believes the data going into Q4 will confirm whether inflation is meaningfully falling and where the economy stands, as she expects a slowing by then. She highlighted the uncertainty that the lockdowns in China and war in Ukraine have had on forecasting. Finally, she generally believes that supply and demand are not yet realigned to more normal levels, but this may occur before the Fed needs to overshoot the neutral level and restrictively tighten policy, which will be more apparent towards the Q4.
Fed Vice-Chair Lael Brainard also spoke on CNBC this Thursday regarding her views on policy and the economy. She sees a mixed message in the recent economic data, with some indication of cooling while things like Retail Sales continue to be strong, concluding it's too early to tell if there is a sustained cooling of demand. She is aligned with the current plan (of subsequential 50bp rate hikes for a “couple” meetings) till it is evident inflation is falling. She is looking for a better balance in the labor market, meaning she wants to see the number of openings fall. She believes the economy still has good momentum and strong business and household balance sheets mean that a slowdown, not a recession is the likely outcome. Finally, she would not comment on whether she believed inflation has peaked, saying instead she is looking for sequential drops in the core PCE rate to decide whether the path of rates needs to rise above neutral. In conclusion, her comments indicate she would be open to a 25 bp rate hike in September if inflation, labor markets, and overall demand weaken.
“From where I sit today, market pricing for 50 basis points, potentially in June and July, from the data we have in hand today, seems like a reasonable path… Right now, it’s very hard to see the case for a pause. We’ve still got a lot of work to do to get inflation down to our 2% target.”
“If we don’t see the kind of deceleration in monthly inflation prints, if we don’t see some of that really hot demand starting to cool a little bit, then it might well be appropriate to have another meeting where we proceed at the same pace. If we see a deceleration in the monthly prints, it might make sense to be proceeding at a slightly slower pace.”
Technicals and Charts:
Four Key Macro House Charts:
Growth/Value Ratio: Value is higher on the day and the week. Large-Cap Value is the best performing size/factor on the day
Chinese Iron Ore Future Price: Iron Ore futures are higher on the day and week as optimism grows regarding the impact of more supportive policies on demand while Beijing announced plans to increase domestic production of iron ore and reduce reliance on imports
5yr-30yr Treasury Spread: The curve is little changed on the day and flatter on the week, with today's positive economic data hitting the curve relatively evenly
EUR/JPY FX Cross: The Euro is higher on the day and the week despite as the yen continues to be under pressure due to expectation the BoJ is nowhere near tightening policy
Other Charts:
The markets look oversold in comparison to previous Fed hiking cycles
There is a mixed “forecasting” message from how Semis, Small-Caps, and Transport sectors/size-factor are performing relative to the overall market, confirming the still high level of uncertainty to where markets are going.
Flows into equity funds were negative in May and slightly positive in April.
Economic data in the U.S. is increasingly coming in below economist expectations, with the index now approaching levels seen at the pandemic's beginning.
Crack spreads continue to rise, showing just how tight refinery capacity currently is given the level of demand
There is still no stabilization in distillates and jet fuel inventories, adding urgency to the refiner’s production
Excess demand is no longer the primary reason for supply-chain stresses, with the war in Ukraine and Covid Lockdowns significantly more impactful
Lockdowns in China continue to ease, with Level 0 now close to 30%, while there are no Level 3 or 4 lockdowns anymore
Levels of unemployment, already trending up, took a notable turn higher due to this year’s lockdowns. High levels of youth unemployment tend to lead to increased social unrest, something the CCP is very wary of.
EM Central Banks continue to be much further along with their policy tightening schedules than developed ones, potentially leading EM risk assets to outperform in the coming years.
Article by Macro Themes:
Medium-term Themes:
China Macroprudential and Political Loosening:
Green Push: Beijing Plans Subsidies for EV Buyers to Boost Covid-hit Economy - Bloomberg
Beijing will offer subsidies to consumers who buy new energy vehicles to replace older cars registered in the city more than one year ago and purchase a new energy vehicle by the end of 2022 will receive a subsidy of as much as 10,000 yuan ($1,499), according to a plan issued by the municipal government Thursday. The measures follow moves by the central government to halve the purchase tax on some low-emission passenger vehicles and implement tax reductions for cars of 60 billion yuan. Beijing is also offering rent relief for small businesses using state-owned properties and subsidizing restaurant expenses incurred due to the ban on in-door dining.
Why it Matters:
On Monday, China’s cabinet introduced 33 policies to support businesses and consumer spending to help economic activity recover. Now individual municipalities are increasingly offering their own initiatives, encouraged by Xi to get creative in restating the stalled economy. This should unlock the competitive spirit of supporting regional economies seen in the past, as ministers compete to beat growth targets. We expect monetary policy to continue to be eased as well as demand for loans recovers from both consumers and private businesses seeing increasing government support.
Longer-term Themes:
National Security Assets in a Multipolar World:
Food Security: 'Food nationalism' worries rise after India, Malaysia export bans – NikkeiAsia
Soaring global food prices have prompted some Asian countries to halt exports of certain products to protect domestic consumers, raising fears of still higher inflation among their trade partners. More broadly, experts see an imminent risk of "food nationalism" spreading to more countries and products. India, the world’s second-largest producer of sugar cane, is limiting exports of that commodity. Likewise, Malaysia curbed chicken exports to address a domestic supply shortage and stabilize prices. Indonesia also halted exports of palm oil in April, although it lifted the ban in May.
Why it Matters:
The moves by India and Malaysia come as global food inflation accelerates. The FAO's benchmark Food Price Index, which covers meat, dairy, cereals, vegetable oils and sugar, hit 158.5 in April, up 30% from a year earlier. The rise is largely attributed to supply and logistics disruptions caused by the Ukraine war and the COVID-19 pandemic. Looking ahead, export bans by large producers with massive stockpiles, such as Russia and China, could become weapons in a broader geopolitical battle. The bottom line is as long as prices keep rising, protectionist measures are likely to ripple across more countries and food categories
Electrification and Digitalization Policy:
VPN Work Around: ExpressVPN logs out, rejects government demand – Economic Times
Virtual private network provider ExpressVPN has shut down its physical servers in India, rejecting the data storage demands made in the new cyber security directives issued in April by India’s Computer Emergency Response Team (CERT-In). However, the VPN provider registered in the British Virgin Islands has assured that users will still be able to connect to servers that provide Indian IP addresses through virtual servers based in Singapore and the UK, while users in India can be “confident that their online traffic is not being logged or stored, and that it’s not being monitored by their government”.
Why it Matters:
India has more than 270 million VPN users, who use them to access company networks securely, remain anonymous, access geo-restricted content, stay safe on public Wi-Fi networks and get around internet restrictions, among other things.The CERT-In directives mandate VPN companies, among others, to mandatorily maintain basic information about customers and subscribers, including names, IPs allotted, email addresses, the purpose of hiring the services, and more. The directive from Indian Computer Emergency Response Team (CERT-In), India’s top cybersecurity agency, is set to take effect at the end of June. Obviously, there is a conflict brewing between Indian VPN users and the government, something worth watching given the likelihood this will be a common battle across the globe moving forward.
ESG Monetary and Fiscal Policy Expansion:
Please Build: Biden Administration to Cut Costs for Wind and Solar Energy Projects -NYT
On Wednesday, the Biden administration said it would cut in half the amount it charges companies to build wind and solar projects on federal lands. Wind and solar developers have long said that lease rates and fees for projects on federal lands were too high to attract investors. In a report to Congress in April, the Interior Department said it was on track to approve 48 wind, solar and geothermal energy projects with the capacity to produce an estimated 31,827 megawatts of electricity, enough to power roughly 9.5 million homes, by the end of the fiscal 2025 budget cycle.
Why it Matters:
The decision comes as the Biden administration also seeks to raise the royalty fees it charges oil and gas companies to drill on federal land and in federal waters. Last month, the administration canceled three oil and gas lease sales in the Gulf of Mexico and off the coast of Alaska, prompting Republican lawmakers to criticize the new renewable energy policies as harmful to energy-producing states. The reduction in fees and rental rates also comes at a challenging time for the solar industry. A Commerce Department investigation into whether Chinese companies are circumventing U.S. tariffs by moving components for solar panels through four Southeast Asian countries has held up hundreds of new solar projects across the country.
Corinthian: $5.8 Billion in Loans Will Be Forgiven for Corinthian Colleges Students - NYT
In its largest student loan forgiveness action ever, the Education Department said on Wednesday that it would wipe out $5.8 billion owed by 560K borrowers who attended Corinthian Colleges, one of the nation’s biggest for-profit college chains before it collapsed in 2015. The debt cancellation will be automatic, meaning former Corinthian students will not have to apply to have their debts canceled.
Why it Matters:
President Biden faces intense pressure from student borrowers and progressive lawmakers to take executive action to broadly cancel federal student loan debts. Mr. Biden, who promised during his campaign to knock $10,000 off the loans of “everybody in this generation,” said in April that he was “considering dealing with some debt reduction,” but White House officials said no final decision had yet been made. As an interim step, his administration has significantly expanded the government’s use of relief programs aimed at a variety of borrowers, including public service workers, those who are permanently disabled and people who were defrauded by colleges.
Current Macro Theme Summaries:
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