Markus Andrews

In 2023, the average 401(k) plan savings rate maintained a record 11.7%, including employee deferrals and company contributions, according to Vanguard.
The company suggests a combined target savings rate of 12% to 15%, depending on income.
However, the right percentage can vary based on your age, goals, timeline and other factors, financial experts say.

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The average 401(k) savings rate — including employee deferrals and company contributions — has maintained historic levels as plan designs make it easier for workers to set money aside.
In 2023, the average combined savings rate was an estimated 11.7%, which matched a record high from 2022, according to Vanguard’s yearly analysis of more than 1,500 qualified plans and nearly 5 million participants.

A separate Fidelity report also found record savings with a combined rate of 14.2% for the first quarter of 2024. That report was based on almost 26,000 corporate plans and nearly 24 million participants.
Vanguard recommends saving 12% to 15% of your earnings, including employer contributions, for retirement every year. Fidelity’s benchmark is 15%.
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“You want to be increasing how much you’re saving by at least 1% every year,” and aim for that combined 12% to 15% benchmark, said Dave Stinnett, Vanguard’s head of strategic retirement consulting.
Nearly 25% of participants deferred more than 10% of earnings in 2023, the analysis found. And 43% of employees increased their savings rate that year, Vanguard reported.

In 2023, an estimated 14% of participants hit the 401(k) deferral limit, which was $22,500 for savers under age 50, Vanguard found. That share of workers who max out plans has been the same since 2020.

401(k) plan designs have boosted savings over time

The average employee deferral rate returned to a record high of 7.4% in 2023 after falling slightly the previous year, the Vanguard report found. Employees deferred an average of 9.4% during the first quarter of 2024, according to Fidelity.
401(k) plan features like automatic enrollment and higher default savings rates have increased employee deferrals over time, Stinnett said.

“They’re coming in at a higher initial savings rate,” he said. “And many of these plans have an automatic increase or step function where people automatically save 1% more every year.” 
Some 60% of 401(k) plans had a default savings rate of 4% or higher in 2023, compared to 35% with that rate one decade ago, Stinnett said.

‘Several factors’ determine retirement-savings target

While financial service companies have identified retirement-savings benchmarks, the right percentage varies based on individual needs, experts say.
“I typically advise a target savings rate of 15%, combining both employee and employer contributions,” but the target can vary based on “several factors,” said certified financial planner Alyson Basso, managing principal of Hayden Wealth Management in Middleton, Massachusetts. 

Each client’s situation is unique, and their savings strategy should reflect their individual needs, goals and circumstances.

Alyson Basso
Managing principal of Hayden Wealth Management

Your age, proximity to retirement, income level, lifestyle expectations and current debt are among the factors used to decide the right percentage, she said.
For example, older clients may need to save more aggressively if they haven’t reached their retirement-savings goals, whereas younger clients may gradually boost deferrals as income grows. However, Generation Z has embraced investing early while Gen X has struggled to catch up.
“Each client’s situation is unique, and their savings strategy should reflect their individual needs, goals and circumstances,” Basso added.

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When couples experience financial stress, they often tend to avoid talking about it, according to new research from Cornell University.
To get the conversation started, it helps to reframe how you think about those issues.

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What successful couples do differently

Couples who say they feel their financial problems are perpetual are more likely to assume they have no solution, according to Cornell’s research.
Partners may feel they have fundamental differences in how they think about money, and therefore it’s not worthwhile to have a conversation where no solution exists, Garbinsky said.

Instead, if the couple views their issues as solvable, and can reflect on times when they previously were able to reach a compromise with their partner, they are likely more willing to talk about money, the research found.
Unfortunately, most couples by default tend to view their financial problems as perpetual, and therefore avoid talking about financial issues, Garbinsky said.

Communication avoidance may also contribute to financial infidelity, where a partner will withhold or hide financial information from their partner. The instinct to hide information may also be a strategy to avoid a fight, Garbinsky said.
Over time, a lack of communication — whether it be simple avoidance or financial infidelity — can harm a relationship.
“If you’re not talking and if you’re hiding things from your partner, it is having negative effects on your relationship quality over time,” Garbinsky said.

How to find a ‘middle ground’

To get past a money stalemate in a relationship, it helps to first acknowledge that it’s human, said Jude Boudreaux, a certified financial planner who is a partner and senior financial planner with The Planning Center in New Orleans.
Often people develop a way of approaching money based on their past and what makes them feel most comfortable, said Boudreaux, who is also a member of the CNBC FA Council. For example, growing up without a lot of money may lead someone to want to have a large savings cushion as an adult.
But rarely do savers marry other savers or spenders marry other spenders, Boudreaux said.
To start to unravel financial conflict, it helps to backtrack and talk about the money memories each partner has and how that shapes their feelings about money now, he said.

It also helps to frame possible decisions in a way that helps each partner feel at ease, Boudreaux said. That includes asking questions like, “What are ways that you might feel more comfortable if we were to make these decisions?” and “What would you need to feel heard going into this conversation, and then to be able to feel confidence coming out of it?”
After years of mediating these kinds of conversations for couples, Boudreaux said it’s important to go in with an optimistic approach. While one partner can take steps to be more conservative, the other may agree to be a little more aggressive.
“Often there’s a middle ground,” Boudreaux said.

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Microsoft Chief Technology Officer and Executive Vice President of Artificial Intelligence Kevin Scott speaks at the Microsoft Briefing event at the Seattle Convention Center Summit Building in Seattle, Washington, on May 21, 2024. 
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The debate over when the Federal Reserve will start to lower interest rates, and the persistence of the artificial intelligence frenzy, are the two key factors that have been influencing the U.S. stock market. Meanwhile, concerns about the course of the economy continue to affect investor sentiment.
Against that uncertain backdrop, Wall Street analysts are focused on identifying stocks with solid fundamentals and strong long-term growth prospects. Investors can look at the recommendations of top analysts to gain useful insights before making any investment decision.  

In that climate, here are three stocks favored by the Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Delta Air Lines
We start with Delta Air Lines (DAL), America’s second-largest carrier. DAL reaches more than 290 destinations across six continents via 4,000 daily flights. Following the company’s presentation at the Toronto Corporate Access Day recently held by TD Cowen, analyst Helane Becker reiterated a buy rating on DAL with a price target of $55.
Delta is TD Cowen’s 2024 Best Idea, Becker said, adding, “Delta has a differentiated product in which they continue to invest, but what stands out is their strategic plan.”
Becker believes that management’s focus on DAL’s strategic plan for the past 15 years is delivering the desired results, making the stock attractive. Delta’s stable management team is a key differentiator from its rivals, she said.
Becker highlighted several strengths, including Delta’s extensive network, strategic partnerships with other airlines and operational reliability, reflected in its improved net promoter scores over the past 10 years.  

The analyst also noted Delta’s commentary about continued strength in demand among premium customers (annual income of more than $100,000). Further, the carrier is seeing a solid rebound in corporate travel, with volumes rising by more than double digits on a year-over-year basis. Delta is also strengthening its financial position by continuing to reduce debt.
Becker ranks No. 276 among more than 8,800 analysts tracked by TipRanks. Her ratings have been profitable 63% of the time, delivering an average return of 11.2%. (See Delta Air Lines Stock Charts on TipRanks) 
Microsoft
Our next pick is software giant Microsoft (MSFT). The company, which has invested billions of dollars in ChatGPT creator OpenAI, is viewed as one of the key beneficiaries of the generative AI (artificial intelligence) wave.
Recently, Tigress Financial analyst Ivan Feinseth reiterated a buy rating on MSFT stock and raised his price target to $550 from $475. The analyst believes that Microsoft is “increasingly positioned to lead the AI revolution through the ongoing integration of generative AI functionality throughout its software stack and product portfolio.”
Feinseth noted that Microsoft’s revenue growth of 17% in the fiscal third quarter ended March 31 was driven by the accelerated adoption of the company’s AI-enabled offerings and AI cloud integration. The company’s cloud business delivered robust performance, thanks to the demand for the Azure platform.
Feinseth also highlighted Micrsoft’s growing strength in gaming and efforts to expand into the Metaverse. Notably, MSFT’s gaming business is expected to benefit from the $75 billion Activision Blizzard acquisition and the rollout of the new Xbox gaming console.
Finally, Feinseth mentioned Microsoft’s strong financial position, which supports enhanced shareholder returns and enables investments in the company’s AI ambitions. 
Feinseth ranks No. 242 among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 60% of the time, delivering an average return of 12.2%. (See Microsoft Technical Analysis on TipRanks)  
Zscaler
This week’s third stock is Zscaler (ZS), one of the leading cloud-based cybersecurity players. The company’s Zscaler Zero Trust Exchange platform securely connects users, devices and applications by protecting them from cyberattacks and data loss.
Following the Zenith Live 2024 event, Baird analyst Shrenik Kothari reaffirmed a buy rating on Zscaler stock with a price target of $260. Discussing the key takeaways from the event, the analyst said that Zscaler is trying to capture additional market opportunities by expanding its platform.
In particular, Kothari noted the introduction of the Zscaler Identity Protection feature that capitalizes on advanced machine learning to strengthen identity security across cloud environments. He also mentioned the Cloud Browser Isolation offering that safeguards user devices and the DLP 2.0 solution, which has AI-driven capabilities to ensure the safety of sensitive data.
These new capabilities on Zscaler’s platform have boosted its total addressable market by more than $24 billion to $96 billion. Kothari also emphasized the shift in the company’s go-to-market strategy from a transactional focus to account-centric selling. Under the new sales approach, Zscaler is focusing on adding more customers with an ARR (annual recurring revenue) above $10 million.
“Impressive customer-success stories, particularly in the financial/healthcare/manufacturing sectors, underscore Zscaler’s security-at-scale,” said Kothari.    
Kothari ranks No. 381 among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 66% of the time, delivering an average return of 20.6%. (See Zscaler Financial Statements on TipRanks)  More

There are areas in the U.S. that are considered to be the least difficult places to buy a home, according to a new real estate indicator.
When the counties are sorted by index rank, Iroquois County, Illinois, is the least difficult market to buy a home, according to the NBC News Home Buyer Index. 

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There are areas in the U.S. that are considered to be the least difficult places to buy a home, according to a new real estate indicator.
When the counties are sorted by index rank, Iroquois County, Illinois is the least difficult market to buy a home, according to the NBC News Home Buyer Index. 

The following counties ranked as the least difficult areas when sorted by the four contributing factors:

Cost: Iroquois County, Illinois is the most cost-effective or affordable housing market among measured counties in the U.S.
Competition: Somervell County, Texas is the least competitive housing market of the counties measured in the U.S.
Scarcity: Imperial County, California is the least scarce housing market among measured areas.
Economic Instability: Macon County, Tennessee has the most stable local economy among measured areas.

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The index evaluates cost, competition, scarcity and economic instability.
Cost, the most heavily weighted element, measures how much a home costs relative to household incomes and inflation, as well as expenses like insurance costs, according to NBC News.
Competition looks into the level of demand in an area or how many buyers are on the market for a home.

Scarcity refers to an area’s supply of listed homes for sale and how many more are expected to enter the market in the coming month.
And finally, economic instability considers an area’s market volatility, unemployment levels and interest rates.

The NBC News Home Buyer Index was developed by NBC News alongside housing experts, such as a real estate industry analyst and a bank economist from the Federal Reserve Bank of Atlanta.
On a scale from zero to 100, the index score represents the level of difficulty to buy a home in a U.S. county: The greater the value, the harder it is to buy a home in that area, according to NBC.
But, to compare counties with one another, it is important to consider the index rank as “ranks provide context to the scores,” said Joe Murphy, a data editor at NBC News who co-created the index.
A low index rank — or closer to the value of 1,310, the number of counties measured in this month’s report — suggests the county has better market conditions for potential buyers. In other words, a county with an index rank of number one “is the worst,” Murphy said.

For most Americans, buying — and even maintaining — a home in the U.S. remains costly.
The median sales price of houses sold in the U.S. was $420,800 in the first quarter of 2024, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau via the Federal Reserve.
On top of the high cost, the 30-year fixed rate mortgage in the U.S. is still close to 7%. Borrowing costs are unlikely to significantly change as the Fed held rates steady at its June meeting.
However, if you plan or aspire to own a home, there are ways to prepare, experts say.

Here are three things to do

If you want to be a homeowner, but remain on the sidelines, “getting financially prepared is one of the most important things people can do” before buying a home, said Danielle Hale, chief economist at Realtor.com.
“Spend more time getting your finances in really good shape,” said Jacob Channel, a senior economist at LendingTree. “It’s very important, especially when you’re making a six-figure purchase, to really take your time.”
Here are three things to consider:
1. Boost your credit score: Take a moment to pay down debt and increase your credit score, said Channel.
Your credit score helps measure how creditworthy you are as a borrower, said Hale. You could potentially qualify for a home purchase with a minimum credit score of 500, depending on the lender, according to Experian. But having a higher score can help you achieve better terms on the mortgage, said Hale.
“Doing what you can to improve your credit score will raise your odds of getting a lower mortgage rate,” Hale said.
2. Seek pre-approval from lenders: “It’s worth it to start the process earlier rather than later so that there aren’t as many surprises,” said Hale, especially for buyers who’ve never bought a home before.
Rate lock policies will depend on the lender. In some cases, a lender will let you lock in a mortgage rate after they pre-approve you, Channel said.

But generally, a pre-approval is not enough to guarantee an interest rate, said Hale, “because you cannot lock in a mortgage rate until you have a full mortgage application.”
“And you can’t do a full mortgage application until you have a specific property that you want to buy,” she said.
Once a buyer makes an offer on a property and officially kicks off the application process, it’s possible the lender can lock in a mortgage rate if you ask, said Hale. Depending on the lender, the mortgage rate will be locked in for a period spanning from 30 to 60 days, which is “enough time for the closing process to happen,” said Hale.
Ask your lender about what the rate-lock period is and ask what stage in the process the mortgage rate gets locked, said Hale. 
3. Intentionally budget and save: “The thing people should be doing is budgeting and saving,” said Channel. The more time you give yourself to saving money for expenses like the down payment and closing costs, he said, “the better off you’ll likely be.”
When someone becomes a homeowner, “they’re going to have a higher monthly payment than what they had before,” said Hale. Therefore, while you prepare for homeownership, consider setting aside an extra payment, she suggested.
It would help build up savings for a down payment or an emergency fund, and “give an idea of how comfortable that housing payment” truly is, said Hale.
“It’s better to be a renter who can afford your rental unit than it is to be a homeowner who can’t afford your house,” Channel said. More

The “no-spend” pledge is one of the latest money-saving trends to go viral on TikTok.
But like any quick fix, such a challenge could be hard to sustain over time.
Ultimately, there is no shortcut to practicing good money habits, most experts say.

TikTok is chock-full of tips for building wealth.
The latest money-saving trend taking over is the “no-spend month,” which encourages TikTok users to cut out all non-essential purchases for a set period.

But, in this case, even the best intentions can backfire.
Here is what you should know before swearing off unnecessary spending.

The no-spend rules

The “no-spend” challenge can last for a week, a month or even a full year. Some consider it akin to a detox or fast, which can help break the habit of overspending. Any funds that would otherwise be spent on new clothes or dining out can be put toward a long-term financial goal.
On its face, “the no-buy challenge is as much pragmatic as it is symbolic,” according to Gregory Stoller, a professor at Boston University’s Questrom School of Business. “Why purchase non-essential products that you don’t need to begin with?”
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Consumers often track their daily progress and try to rack up as many consecutive no-spend days as possible.
“The gamification can be kind of fun,” Ted Rossman, senior industry analyst at Bankrate, recently told CNBC.

‘No spend’ pledges can be hard to sustain

Like any quick fix, such a challenge could be hard to sustain over time.
“The potential complication with the no-buy challenge is to what extent people are willing to honor their commitment,” Stoller said.
Just as Americans often fail to uphold their New Year’s resolutions, it’s even easier to break a no-buy promise with a simple click, he added.
“And in most cases, you don’t even need to make the extra effort of opening a laptop if your phone is in your pocket,” Stoller said.
And then there is the risk of splurging even more on impulsive purchases, a phenomenon also known as revenge spending or even “doom spending.”

Alternatives to the no-buy pledge

Most financial experts say there is no shortcut to practicing good money habits.
Rather than hop on the latest extreme fad, “it comes back to setting a budget and setting expectations,” Rossman said.
“No hack can teach you self-control, mindful spending or how to keep your balance low,” Paul Hoffman, a data analyst at BestBrokers, who wrote a recent report on harmful FinTok trends, also said.

Michael Hershfield, founder and CEO of Accrue Savings, recommends creating a budget that aligns with your overall financial goals, income and expenses and then keeping track of your spending and your budgeting plan so you can make adjustments as needed.
“By moderating, rather than going cold turkey, you will set yourself for long-term financial health,” Hershfield said.
Ultimately, consumers should focus on “intentional spending by making purchases with a clear purpose in mind that aligns with your personal financial situation and goals,” Hershfield said, rather than following any purchasing advice on social media. 
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Company: Autodesk (ADSK)

Business: Autodesk engages in three-dimensional (3D) design, engineering and entertainment technology solutions. Its product offerings are focused on the following categories: Architecture, Engineering and Construction, AutoCAD and AutoCAD LT, Manufacturing, and Media and Entertainment. Its products include AutoCAD Civil 3D, Building Connected, Autodesk Build, Revit, Computer-Aided Manufacturing Solutions, Fusion 360, ShotGrid and 3ds Max. Autodesk’s product development and manufacturing software provides manufacturers in automotive, transportation, industrial machinery, consumer products and building product industries with comprehensive digital design, engineering, manufacturing and production solutions. It also offers Wonder Studio, which is a cloud-based 3D animation and VFX solution.
Stock Market Value: $52.2B ($242.31 per share)

Stock chart icon

Autodesk shares’ 2024 performance

Activist: Starboard Value

Percentage Ownership:  approximately 1% (more than $500 million position)
Average Cost: n/a
Activist Commentary: Starboard is a very successful activist investor and has extensive experience helping companies focus on operational efficiency and margin improvement. The firm has taken a total of 150 activist campaigns in their history and has an average return of 24.83% versus 12.99% for the Russell 2000 over the same period. Starboard has had an even better track record in the information technology sector. In 53 prior engagements, it has a return of 36.43% versus 18.82% for the Russell 2000 over the same period.

What’s happening

On June 17, Starboard sent a letter to Autodesk’s shareholders announcing that it is filing a lawsuit to compel the company to delay its 2024 annual meeting, scheduled for July 16, and to reopen the director nomination window. This follows Autodesk’s delayed disclosure of an internal investigation into reporting irregularities that Starboard says may have misled and possibly disenfranchised shareholders. The Delaware Chancery Court ruled against Starboard on June 20, but the activist still thinks that Autodesk requires board enhancement, as well as improved growth and profitability through operational performance, capital allocation policies and investor communications.

Behind the scenes

Autodesk is a global leader in design, engineering and entertainment software solutions. About 75% of revenue is generated from Architecture, Engineering, and Construction (AEC) solutions. These are application areas in which Autodesk is the No. 1 or No. 2 player — where it generates significant recurring revenue and maintains pricing power. Its remaining revenue comes from its growing manufacturing applications (20%) and legacy applications in entertainment like movies and TV (5%).

With 90%+ gross margins and 35% operating margins, Autodesk is a leader in AEC software. The company’s gross margins are best in class, a reflection of its value add and pricing power. Further, its operating margins are not much worse than those of its peers at first blush. However, Starboard correctly does not judge the company’s operating margins on the mean of its peer set, but by the potential embodied in its gross margins and market position. Autodesk currently spends approximately 28% of its revenue on sales and marketing versus 23% for peers, and 9% on general and administrative expenses compared to 5% to 7% for peers. In other words, operating expenses as a percent of revenue is roughly 1,000 basis points higher than peers. Moreover, the company’s FY2023 operating margins of 36% missed its own target of 38%, which was adjusted downward from an original target of 40% despite front-loading revenue through multiyear contracts. This engagement had great potential to be an excellent amicable and constructive activist campaign for Starboard. The firm has had great experience working with companies just like Autodesk from a board level to improve margins and create tremendous shareholder value. That would have been a great plan here and would have likely meant adding only two or three directors to the board.
But the cooperative, constructive scenario was seemingly dashed on April 1, when Autodesk publicly notified shareholders that its annual report would be submitted late following information being delivered to the audit committee, which resulted in the launch of an investigation regarding the company’s free cash flow and non-GAAP operating margin practices. Ultimately, the committee found that despite signaling to investors that it would be shifting its enterprise customers toward annual billing, Autodesk had recently pursued multi-year upfront contracts at levels that even exceeded their historical use, helping the company meet its FY23 free cash flow goal.
To make matters worse, the company informed the U.S. Securities and Exchange Commission of these issues by early March, but it withheld the information from investors until after the closure of its nomination window, preventing a potential activist director nomination this year. Despite this, Starboard said it reached out privately to offer to work with Autodesk to improve the board, but the company declined. So, Starboard requested that Autodesk reopen the nomination window so that shareholders could make a fully informed decision following the recent disclosures, given the fact pattern. The company rejected that offer. Starboard filed a lawsuit in the Delaware Court of Chancery to compel Autodesk to delay its 2024 annual meeting set for July 16 and to reopen its nomination window, which closed on March 23. The court rejected Starboard’s claim on June 20.
While the findings of the investigation alone are worrisome, there are two things in our mind that could elevate it from an acute accounting issue to a much more serious governance issue. First, while Autodesk reports free cash flow as a key operational metric, it was also a factor in executive compensation. Second, how the board and management responded to this investigation might be an even bigger problem. Here, the board seemed to determine that Deborah Clifford could no longer remain as CFO. What happened next did not exactly inspire a strong feeling of board oversight and accountability: Instead of firing her, Autodesk appointed Clifford to the role of chief strategy officer. While the first issue reflects on management and its lack of alignment with shareholders, the second issue goes directly to the board’s ability to oversee management and hold them accountable.
It is incontrovertible that these developments at Autodesk will require governance changes. The level of change that is necessary will not depend on the company’s acts, but rather the level of involvement. Starboard does not know yet whether this situation can be rectified with a few board seats or a total board and management overhaul, but that will become clearer as more facts as to accountability come out. From our perspective, the company’s response with respect to penalizing management and notifying and working with shareholders does not bode well for the “minor change” scenario. The governance issue is paramount here and must be addressed before Starboard can make any real economic changes directly enhancing shareholder value.
Once that is resolved, a reconstituted board and management team to the extent necessary can focus on improving operating margins and trading multiples. Improving margins by 1,000 basis points by itself could greatly increase shareholder value, but applying a bigger multiple to that will have an exponential effect. Presently, Autodesk trades at an EV/CY2025E earnings before interest, taxes, depreciation and amortization multiple of 19.4x versus some peers above 30x and a peer average of 23.5x. A good argument can be made that a market leader like Autodesk should trade at a higher-than-average multiple, but just getting to the peer average would be very meaningful for shareholders. This happens when shareholders have more confidence in the governance of the company – when the board offers more transparency, oversight and accountability – and when management hits its targets as opposed to missing and lowering them.
Whether that happens will depend on several things. Starboard’s loss in the Delaware Court takes the quick scenario off of the table. While there is a proposal on the proxy this year that would allow 25% of shareholders to call a special meeting, even if that is approved, the company can drag its feet on implementation so it would not really be useful prior to the next annual meeting. This might come down to how hard the board wants to dig in and how convincing Starboard and other shareholders can be. Otherwise, it will have to wait until 2025. The good news is that Starboard is an activist with the patience and conviction to wait until 2025. If it comes to that, the company’s chances of winning would go down dramatically.
One final note: This is not the first time Autodesk has been engaged by an activist. Sachem Head had an activist campaign here between November 2015 and June 2017, and ultimately settled for three board seats and the appointment of a new CEO, Andrew Anagnost, who is currently at Autodesk’s helm. It should be noted that one of the director designees pursuant to Sachem Head’s agreement was Rick Hill, who has a very interesting relationship with Starboard. He was the chairman of Tessera when Starboard waged a proxy fight there. At the time, he fought the firm tooth and nail and was its most vocal opponent. Starboard ultimately replaced a majority of the board with Hill staying on and eventually becoming the firm’s biggest supporter. Since then, he has served as its director designee at both Marvell Technology and Symantec. He no longer serves on the board of Autodesk, but he could certainly be an informal advisor to Starboard – or a cautionary tale for Autodesk.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

The U.S. Department of Education may extend the eligibility of a popular student loan forgiveness program to early childhood educators.
The agency announced that it was issuing a request for information on potentially broadening the Public Service Loan Forgiveness program to include workers in early childhood education settings, many of whom receive low wages.

Lourdes Balduque | Moment | Getty Images

The U.S. Department of Education may extend the eligibility of a popular student loan forgiveness program to early childhood educators.
The agency on Thursday announced that it was issuing a request for information on potentially broadening the Public Service Loan Forgiveness program to include workers in early childhood education settings, many of whom report low wages.

“Early childhood educators help young children learn, grow, and thrive,” said U.S. Under Secretary of Education James Kvaal in a statement.
“But they are often poorly compensated, and student debt is a problem,” Kvaal added. “If these educators can access Public Service Loan Forgiveness, we can help our youngest children, their families, and their communities.”
The PSLF program, signed into law by President George W. Bush in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of on-time payments. Including early childhood educators would likely expand the reach of the program to at least some for-profit employers.
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The change could make more than 450,000 additional workers eligible for the debt relief if they have student loans, the Education Department said.

The benefit would likely be retroactive in effect, said higher education expert Mark Kantrowitz.
That means some workers may be able to get their debt cleared before 10 years, depending on how long they’ve been in the line of work.
The Education Department is inviting researchers, academics, policy experts, administrators and other individuals familiar with early childhood educators to provide comments on how it may determine people’s eligibility and implement the change. The comment period will close on July 22.

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The unemployment rate rose to 4% last month for the first time since January 2022.
While economists say they aren’t worried, they are keeping an eye on unemployment insurance claims and any news of layoffs that could indicate a recession.
New college graduates and people seeking entry-level jobs might have more trouble finding a job as the number of people aged 20 to 24 entering the workforce jumped in May.

People walk past a restaurant, with a hiring sign outside, in Washington, D.C., on Oct. 5, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images

The unemployment rate, which has remained low for two years, has been inching higher in the first half of the year, according to data from the Bureau of Labor Statistics.
For the first time since January 2022, the unemployment rate ticked to 4.0% last month, up from 3.9% in April. It was as low as 3.4% in April 2023.

Even though the employment rate has reached the highest it has been in a couple of years, 4% is still historically low, experts point out.
Economists say people shouldn’t be too concerned because both the number of jobs and the size of the labor force are growing. And while the year kicked off with layoffs from big names such as Google and Amazon, the trend hasn’t caught on in the broader labor market, experts said.
May’s unemployment rate was impacted heavily by people, particularly those who are between 20 and 24 years old, entering and reentering the workforce, according to Moody’s Analytics head labor economist Marisa DiNatale.
With school out for the summer, it’s typical to see a boost in teenagers, college students and recent graduates beginning their job search. 
“It’s a very volatile age group,” DiNatale said. “People are finding it more difficult to find a job when they graduate from college, but there is no evidence that there are some sort of massive layoffs going on in the economy.”

Payrolls soar, ‘no real indicator for a recession’

Meanwhile, another factor boosting confidence for economists is job growth. Nonfarm payrolls grew by 272,000 in May, BLS data shows, outperforming the Dow Jones consensus estimate of 190,000.
In addition to workforce and payroll growth, a high labor force participation among prime-age workers is reassuring, according to Stephen Juneau, U.S. economist at Bank of America. The percentage of people between 25 and 54 participating in the workforce is 83.6%. That’s the highest it has been in at least 20 years according to BLS data.
“When you look at the aggregate labor market data, there’s no real indicator for a recession,” Juneau said.
While economists say they aren’t concerned about a 4% unemployment rate on its own, they are paying attention to how fast the rate is rising. 
One way to measure this is through the “Sahm Rule,” named after economist Claudia Sahm.
The rule compares the average unemployment rate for the past three months with the lowest reported rate in the past year. If the three-month average is half a percentage point higher than the yearly low, then the unemployment rate is rising fast enough to signal the start of a recession.
Following the May jobs report, the Sahm Rule stood at 0.37. This means the unemployment rate would have to stay at 4% or higher for the next couple of reports to bring the three-month average 0.5% above the yearly low, which in this case is 3.5%.
“The Sahm Rule is a contemporary indicator that we’re in a recession,” Juneau said, “We’re not worried it’s going to cross that 0.5% next month.”

When to worry

Moody’s DiNatale said she is keeping an eye on unemployment insurance claims, which are historically low. For the week ending June 15, the BLS reported that 238,000 Americans applied for unemployment benefits. 
“If they go near or above 260,000, then it’s usually time to worry. We’re nowhere near that,” DiNatale said. “What would be more worrying is if employers were actually laying people off. We’re looking for big, sharp movements.”
As for the number of jobs added in future reports, Juneau said he wouldn’t be concerned unless it dropped below 100,000.
“Outright job losses, they can kind of come out of nowhere and the labor market tends to snowball,” Juneau said. “We don’t expect that in the next labor report, but there’s always that risk.”

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