Below are the economic and market highlights for the week:
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Tariff uncertainty along with seasonal and weather factors had the services industry teetering on the brink of contraction in July. The ISM Services Index slipped to 50.10 last month from 50.80 in June. Numbers above 50 indicate expansion while those below signal contraction. New orders dipped to 50.3 while employment fell to 46.4. Meanwhile, the Prices Paid index pointed to higher prices looming for consumers as it rose 2.40 points to 69.9 – approaching a three-year high. The survey noted 15 of 18 services industries reported an increase in prices paid during the month. As one transportation executive noted, “tariffs are now starting to show up in pricing, and we are seeing increases across the board.”
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Higher tariffs helped narrow the U.S. trade deficit in June as imports of consumer goods fell to their lowest level since September 2020. That pushed the overall trade gap down 16% to $60.2 billion. Among imports, the drop in consumer goods was driven largely by a reduction in pharmaceuticals. Industrial supplies and automotive imports also contributed to the drop, with crude oil and passenger cars fueling the decline.
Stocks Rebound to Score More Record Highs
Market bulls shook off last Friday’s ugly jobs report and retook the reins on this summer’s rally. The S&P 500 and Nasdaq Composite Index rose 2.40% and 3.90%, respectively. The week’s gains helped the Nasdaq score another record high on Friday, its 18th of the year. The Dow Jones Industrial Average trailed the pack but still managed a respectable 1.40% gain. Strong Q2 earnings helped the indices rebound amid a light week for economic data and more White House tariff announcements. The start of the week looked as if August’s choppy trading would continue with the ISM Services index flashing signs of a stalled services industry. However, investors were quick to shake off the report based on companies reporting that outlier items-including seasonal and weather factors in addition to tariff uncertainty-had a negative impact on activity in July. Wall Street consistently took the optimistic view this week even with the White House announcing 100% tariffs on the chip sector and 50% tariffs on India. In the case of chip tariffs, the White House’s willingness to exempt Apple from the higher tariffs in exchange for the company agreeing to invest $600 billion in U.S. manufacturing had Wall Street downright giddy over the playbook for companies going forward and the implications for corporate investment.
With little data on the economic front, markets continued to focus on the odds of a rate cut in September. As of Friday’s close, market watchers were placing the odds for a rate cut at 89.40%. This week’s ISM Services index signaled slowing demand growth along with signs of higher prices. Next week’s July retail sales and CPI reports should give us an additional read on the state of the consumer following last week’s poor employment numbers. If the reports show lower spending and low inflationary pressures, the combination will go a long way to pushing the Fed off the sidelines and help bulls keep the summer rally rolling.
The Week Ahead
Key reports include Retail Sales, CPI, and PPI.
Recent Graduates Face New Financial Lesson
This summer, many new college graduates made the transition from campus life to the working world which means figuring out what it takes to live – hopefully comfortably – on their own. Spoiler alert: it’s a lot.
According to a recent SmartAsset study, it takes a salary of at least $80,829 for a single adult to live comfortably in the most affordable state, West Virginia, and a salary of $120,000 or more to live comfortably in the two most expensive states, Massachusetts and Hawaii. SmartAsset defined “comfortable” using the 50/30/20 budgeting approach where 50% of income is allocated to essentials such as housing and groceries, 30% to discretionary expenses, and 20% to savings and debt repayment. The cost of basic needs in each state was calculated using the Massachusetts Institute of Technology’s Living Wage Calculator.
Below is the 2025 breakdown of the income needed for a single adult to live comfortably on their own in the ten most expensive states and in the ten least expensive states:
TEN MOST EXPENSIVE STATES
1. Massachusetts…..$116,022
2. Hawaii…..$113,693
3. California…..$113,651
4. New York…..$111,738
5. Washington…..$106,496
6. Colorado…..$103,293
7. New Jersey…..$103,002
8. Maryland…..$102,918
9. Oregon…..$101,088
10. Rhode Island…..$100,838
10 LEAST EXPENSIVE STATES
41. Iowa…..$83,366
42. Mississippi…..$82,742
43. Louisiana….$82,451
44. South Dakota…..$81,453
45. Kentucky…..$80,704
46. Ohio…..$80,704
47. North Dakota…..$80,538
48. Oklahoma…..$80,413
49. Arkansas…..$79,456
50. West Virginia…..$78,790
The full list of the amount needed for a single adult to live comfortably in every state is available here. If reading these study results has anyone wondering if the Class of 2025 can afford living alone, the answer is pretty clearly “no.” The National Association of Colleges and Employers (NACE) publishes an annual survey of projected salaries for college grads, and the average starting salary across all majors for the Class of 2025 is just over $68,000 per year. The data does not include bonuses, commissions, fringe benefits, or overtime. Starting salaries range considerably by field of study, and the highest paid workers in engineering and computer science are expected to earn $76,251 to $78,731 per year. Many new grads will find it necessary to get creative with their budgets, whether that means sharing housing with roommates or becoming one of the 40% of Americans who take on side gigs to bring in extra income.
Here’s the breakdown of projected starting pay by major according to NACE:
AVERAGE SALARY BY DISCIPLINE
- Engineering $78,731
- Computer Sciences $76,251
- Math and Sciences $69,709
- Social Sciences $67,316
- Business $65,276
- Agriculture and Natural Resources $63,122
- Communications $60,353
Congratulations to the Class of 2025 for earning their degrees and embarking on their post-college professional careers. A new life lesson begins now: planning for financial stability in adulthood.