Breitbart Business Digest: Yellen Says Debt Ceiling X-Date Is June 1

Yellen Announces the X-Date

Treasury Secretary Janet Yellen said this week that she expects the U.S. government could run out of cash as early as June 1 if the debt limit is not lifted.

That is significantly earlier than most analysts were predicting. Of course, it makes sense for Yellen to take a conservative stance here. It’s far easier to push back the s0-called “x-date” than it would be to pull it forward. Having the Treasury Secretary suddenly and unexpectedly announce that the government had run out of money earlier than anticipated could spark a financial panic.

Realistically, the government probably has a few more weeks of funding than Yellen is letting on. Based on the most recent Treasury projections, analysts at Bank of America say the government will not run out of cash until July 28.

We take Yellen using the earlier date as a positive development because it signals that the administration would like to begin negotiations sooner. The Biden White House appears to be moving away from their earlier insistence on a “clean” debt ceiling bill that would be unacceptable to House Republicans.

Republican Senate Leader Mitch McConnell (R-KY) told reporters that he has accepted President Joe Biden’s invitation and will attend debt ceiling negotiations at the White House next week.

A Booming Jobs Market and Expanding Services Sector

Economic data continues to confound expectations for a downturn. The private payroll figure released by ADP on Wednesday indicated that the economy added nearly 300,000 jobs, twice what forecasters had penciled in. What’s more, we added those jobs despite shrinking manufacturing, business services, and financial services payrolls. Although we’ve been pointing out that the housing market has begun to recover, adding 53,000 construction jobs was much more than expected.

The Institute for Supply Management (ISM) said that there was a slight uptick in the rate of growth in the services sector in April. Fourteen services industries reported growth, and just three reported contraction, which ISM says is good enough to indicate “sustained growth” for the services sector.

“The majority of respondents are mostly positive about business conditions; however, some respondents are wary of potential headwinds associated with inflation and an economic slowdown,” ISM’s Anthony Nieves said.

This certainly does not feel like an economy on the verge of a recession.

One and Done?

As expected, the Federal Reserve hiked its benchmark rate at the conclusion of its most recent policy meeting. The market remains convinced that not only is this the last of the Fed’s hikes but that the Fed will start cutting in a month or two. Fed fund futures currently reflect a less than one percent chance that the federal funds target will end the year at the current level and zero chance that it could go higher.

The only way that makes sense is if you expect the economy will suffer a serious collapse in the next few months — something the labor market and ISM data indicate is unlikely.