Jackson Hole: How will Yellen address fostering a dynamic global economy? – BBH

The topic at Jackson Hole is fostering a Dynamic World Economy and what could Yellen say that could truly impact expectations for the trajectory of monetary policy that she did not say to Congress in last month's testimony, points out Marc Chandler, Global Head of Currency Strategy at BBH.

Key Quotes

“Yellen has broached two other topics that she may return to as part of the discussion of efforts to boost global growth.  Growth is a function of two things--a quantity (hours worked) and quality (productivity).”

“The opioid epidemic in the US can be seen as part of a larger scourge of sharp rise midlife mortality that is particularly troublesome.  Its underlying cause is not a new disease or infection immune to antibiotics.  It is despair.  It is mental and emotional, but also seems rooted in the America's political economy.”  

“Most of the analysis about the labor market focuses on the rate of unemployment and/or underemployment, and wage growth, or indeed the lack thereof.  Yellen is one of highest placed US officials that have tried incorporating the disturbing SAD epidemic in the US into economic analysis.  It is not only a personal tragedy, but it is also a larger social issue that is having economic and, arguably, political consequences.”

“The participation in the US labor force of 25-54 (traditional but ageist definition of prime working age) in the US is about 79%, which as the Economist recently noted, is lower than in France,  where the unemployment rate is more than twice.   There has been some improvement in the US over the past couple of years.  Research shows this is largely a function of women.”

“There is something important going on in the US labor force, which is a subset of society.  The participation of men 25-34 years old remains near the record low.  There has been no meaningful improvement eight years after the financial crisis and recession ended.  Women of the same age cohort have seen their participation rate recover to 2001 levels.”

“Yellen has spoken about both women participation in the work force and the opioid (SAD) epidemic in the US.     Discussing these issues at Jackson Hole would raise awareness of the importance of these sociological issues on the broader political economy.  Addressing these issues would be an important way to ensure a more dynamic US economy, which in turn would foster a more dynamic world economy.”