This is one of the most important questions central bankers must ask when they meet for an annual meeting in Jackson Hole, Wyoming this week.
What Happens: The event, usually attended by central bankers from around the world, is becoming a reluctant proposition due to the pandemic. Neither the President of the European Central Bank, Christine Lagarde, nor the Governor of the Bank of England, Andrew Bailey, will be present.
This brings attention directly to the Federal Reserve, which wired last week that it could curb its bond purchases by the end of the year.
At its current pace, the Fed would raise around $ 480 billion in assets between September and December. But there is more and more discussion about whether this is really necessary.
“It’s harder to argue now [that] the Fed needs to continue with these emergency support measures, “Andrew Hunter, US chief economist at Capital Economics, told me.
Retail sales are well above pre-pandemic levels and the U.S. economy created 943,000 jobs in July. Ten million U.S. households will also receive monthly bank deposits by the end of the year – the result of the improved child tax credit that was part of President Joe Biden’s $ 1.9 trillion stimulus package.
On Deck: Most Fed observers agree that news of Jackson Hole bond purchases is unlikely, despite Chairman Jerome Powell’s speech on Friday being watched closely. Instead, they believe the Fed will officially announce its plans to start reducing bond purchases in September, with the shift starting before 2022. (Although the delta variant remains a great unknown.)
The Federal Reserve has launched only two large-scale asset purchase programs in its history – one after the 2008 financial crisis and one in response to the pandemic. That makes it difficult to play out how the financial markets and the real economy will react.
There are some concerns that financial markets may panic. The memory of the “taper tantrum” of 2013 still floats when the Fed’s announcement that it would eventually slow asset purchases sparked a sharp sell-off in the bond market.
“Short-term turbulence is always possible,” said Randall Kroszner, who served as governor of the Federal Reserve between 2006 and 2009.
But this recovery looks very different from the one after the financial crisis, says Michael Skordeles, senior US macro strategist at Truist Advisory Services.
“Things look very strong in many industries,” he said. “That was not the case in 2013.”
Even then, the short-term shock on the markets had hardly any impact on the actual economy, said Kroszner. Even if interest rates rise slightly as the Fed changes course, they should remain very close to historic lows.
The hope is that by pulling out this year, the Fed will be able to pull back gently without causing too much turmoil.
“If you start earlier, you can do it gradually,” said Skordeles.
For employers, it’s vaccine mandates versus labor shortages
In Kevin Smith’s Massachusetts home nursing home, only 52% of his 400 employees were vaccinated. He would like to order them to get the injection, but he says he cannot risk a mass exodus.
“You risk alienating your employees, if not losing them to a competitor,” says Smith, who has headed the family business Best of Care since 2013. “Nobody in our industry can afford that and is so reluctant to give a mandate.”
Step back: employers are faced with a record number of vacancies and not enough candidates. This puts companies in a bind that might otherwise consider requiring vaccinations, writes my CNN business colleague Chris Isidore.
Among unvaccinated workers who were asked what they would do if their employer gave a mandate, 50% said they would leave their jobs, according to a June poll by health care think tank KFF.
The problem: higher vaccination rates are exactly what experts believe we need to fight the pandemic, and there is pressure on employers to play a bigger role.
The Equal Employment Opportunity Commission said employers have the right to impose a vaccination mandate as long as there are exemptions for workers with health problems or legitimate religious objections.
It is not clear how many employers are taking this step. A June survey by the Society of Human Resource Management found that 29% of workers say their employers need vaccines. A Gartner survey from late July found that this is only the case for 9%.
Even in hospitals, most employers do not have to be vaccinated. The American Hospital Association said only 2,100 hospitals, about a third of the country’s total, need vaccines – and many are in places where state laws or regulations require them.
“Employers in an environment with a labor shortage do not want to create employment barriers, let alone a reason for people to go elsewhere,” said Julia Pollak, chief economist at the ZipRecruiter job site.
Monday: Existing US Home Sales; JD.com ( MeritsTuesday: New US Home Sales; )Best buy (, )Nordstrom ( and )Urban Outfitters ( MeritsWednesday: US durable goods orders; )Dick’s sporting goods (, )Foreclosure ( and snowflake receiptsThursday: The Jackson Hole Summit Begins; US initial jobless claims; )Abercrombie & Fitch (, )Coty (, )Dollar general (, )Money tree (, )JM Smucker (, )gap (, HP and )Peloton ( Merits )
Friday: Personal income and expense data in the United States