Big economic challenges await Biden and the Fed this fall


Mr Powell said at his press conference last week that “we are a long way from making any further substantial progress towards the maximum employment target”.

“I would like to see strong employment figures,” he added.

In a Friday speech, Lael Brainard, an influential Fed governor, said she wanted to see the economic data for September to assess whether the labor market was strong enough for the Fed to start cutting back. support, suggesting that it would not promote signaling. a beginning of a slowdown until the end of the fall. But his colleague Christopher J. Waller said in an interview with CNBC Monday that he would probably prefer to start withdrawing bond purchases quickly, if the jobs data holds up, perhaps as early as October.

Interest rate hikes – the Fed’s most traditional and powerful tool – remain more distant. Most Fed officials predicted in June that they would not hike the fed funds rate until 2023 at the earliest, as they would like the labor market to return to full force first.

How quickly the economy can achieve this goal is an open question. Employers regularly complain about the improved benefits, but even they have sent mixed messages as to whether these are the main factor keeping work at bay.

“Many contacts were optimistic that labor availability would improve in the fall with the restart of schools and the end of improved unemployment benefits,” the Fed’s qualitative report revealed. ‘Atlanta on economic conditions in June. “However, many people don’t expect the labor supply to improve for six to nine months.”

Peter Ganong, an economist at the University of Chicago, said if the pattern he and his fellow researchers observed in employment data held up, he wouldn’t expect a wave of workers to pick up again. work simply because the additional benefits have expired.

“So far we are seeing small differences in use even when vaccines become available,” he said. Mr. Ganong and his co-authors compared the job search rates of people whose wages were more completely replaced by additional benefits and people whose wages were less completely replaced. They found small and relatively stable differences, even as the economy has reopened.

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