Fed's Jackson Hole Symposium in Focus
Fed's Jackson Hole Symposium in Focus.
Initial Jobless Claims for last week are out this morning — it is Thursday, after all — and results are in the ballpark of what analysts were expecting. A headline of 353K was slightly above the 350K consensus, up slightly from the previous week’s slightly upwardly revised 349K, which is the new post-Covid low weekly new claims read. At 353K, this is the second-lowest number since the pandemic; a month ago we were still around 400K new claims.
Continuing Claims came in at 2.862 million, which is its own post-Covid low after the upward revision to the previous week, 2.865 million. Still, this is a sizable drop from where we were in mid-late July, when we were still around 3-3.3 million longer-term jobless claims per week. Remember, Continuing Claims are reported for one week prior to Initial Claims. So we may have another step down from here next week.
Jobless claims — and nonfarm payroll reports at the start of each month — had been the weaker of the dual mandate of the Fed. While inflation swept past 2% without much resistance in the past few months, employment was proving to be somewhat of a laggard. So when it came time for the Fed to make decisions on monetary policy, Chairman Powell has looked past inflation to focus on the aspect of full employment.
We also see the first revision to Q2 Gross Domestic Product (GDP) this morning, with numbers moving moderately in either direction, depending on the metric. Headline Q2 GDP is now 6.6% — 10 basis points higher than the initial read. Ex-food and energy (aka the ”core” read) came in at 6.1% — also higher than the first installation by 0.1% — which is reported the highest it’s been since 1983.
In any case, no one looking at current GDP data today is going to be troubled by an underperforming market. We had seen, going back to the post-bailout period in the Obama administration following the mortgage-backed financial crisis, that growth and inflation were difficult to come by, and even more difficult to sustain. This is one reason Powell & Co., upon the economy being seized by the Covid pandemic last year, acted aggressively and decisively, and have kept their foot on the gas.
Have we at last seen enough data on both inflation and employment to expect a tipping point of sorts at the Jackson Hole Symposium tomorrow? Powell is scheduled to address the virtual gathering — and the entire investing community, as a result — and analysts will be paying close attention to whether the Fed is now open to tapering asset purchases to backstop economic growth.
St. Louis Fed President James Bullard appeared on CNBC this morning, mincing no words about what he’d like to see happen. Bullard said he’d “like to get the taper… finished by Q1 2022… and see if inflation has moderated [by then].” Based on the minutes from the latest Fed meeting, he is not alone in his thinking. But will Powell finally demonstrate he is coming around? That’s why Jackson Hole is such a big deal this year.
Pre-market indexes are trading mixed, flipping the growth we’ve seen this week in the S&P 500 and the tech-heavy Nasdaq. It would appear some rotation back into the Dow blue-chips is occurring this morning: the Dow is +50 points at this hour, while the S&P is -5 and the Nasdaq is -40 points. Both the S&P and Nasdaq are riding four-day winning streaks and continuing record closing highs. The Dow is currently within 1% of record highs of its own.
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