The most powerful man on the US economy is not the Secretary of the Treasury, of the Chairman of the Commerce Department. Not even the President of the United States. The most influential "hands on" man of the US economy is the Chairman of the Federal Reserve, Jerome Powell.
He, a calm and thoughtful man, spoke today, in an electronic "multi participant" speech as well as a "give and take" question and answer period, online, allowing a vast range of questions...which he answered with calm knowledge and power. The first part of his comments were easy, a summary of the economy and "how it looks" from his perspective. And that perspective is deep, because he sees some of the most detailed reports from banks and regions throughout the nation.
He reminded us that Americans are being vaccinated at a rate of one million per day. He commented that our nation is striving for "herd immunity" when a large enough percentage of Americans are immune as to turn the tide of new Covid cases. But then he went beyond the trite or "obvious" when he said:
"No one knows how effective the vaccines will be against the virus, or how effective it will be for the economy." A calm but brutal touch of honesty from this brilliant man.
He gave a different perspective on the economy which the participants may not have expected.
And the questions brought out this comment from the Fed Chair. "The economy is not as disastrous or generally bad. Some sectors of the economy of doing very well. We see 9 or 10 million out of work, especially in fields such as hotels, entertainment, restaurants, bars, small business, travel and particularly airlines." Then he paused, and said, it will take a long time, perhaps years for those people to find jobs, many will have to be retrained." Then, he provided the insights we didn't expect: "But the economy has been much more resilient than we expected. Even with the recent waves of new cases, the basic economy, of goods, services, manufacturing, an production, did very well, in some sectors even improved."
Then he again surprised us, with his one two punch:
1. The housing market has surged, strong sales and higher prices. "Because many people thinking they would have to work and stay in their homes, wanted bigger homes".
2.. But then he again surprised us with: "But that surge in home prices and sales will level off, and I believe that boom will soon be over."
He echoed what BootheGlobalPerspectives has been saying that:
"Virtual communication, and remote location including home and 'away from the office' work will expand and continue into the future. Because it is economically feasible." That is the obvious observation, but then the second layer came out, that "New concepts of how we do business, new uses for skyscrapers and central office buildings will be coming along, changing the way America does business in yet other ways." But with Jerome Powell, he always goes another step of depth in thinking, exemplified by his comment:
"This all implies that we are going to have to educate and retrain our work force. Many of those 9 or 10 million will need financial help, to live, to survive, to retrain and to have incentives to go into the new "America workplace".
While he lauded the growth and prosperity of the Goods and Services sectors, he then when pressed for a projection of "How long will it be before we see recovery?" He avoided the answer that economists and politicians prefer not to speak now. Because it suggests that it could take years, several years before we see an economy strong enough to put all Americans back to work. He refused to give a "date" but said, "We will wait for the data to come in, however long it may take." He then said something many have forgotten. It is the law, in the charter of the Federal Reserve Bank, to strive for maximum economic growth. Then Chairman Powell broadened perspectives again when he said:
"We by law are required to see that all are employed to the maximum extent possible." He made it clear that the goal includes not only those who have been laid off or hurt by the Corona Virus. But it includes red and yellow black and white. Women, men, ethic minorities.
A new study by economists puts a new spin on this U.S. Economy
The coronavirus pandemic has killed more than 416,000 Americans and recently pulled the U.S. economic recovery into reverse. Some states have shut down again to get a handle on surging caseloads. And critics have blamed those states’ governors, typically Democrats, for job losses.
But pandemic-related economic research shows the shutdowns aren’t killing jobs; the virus is. People making private and personal health decisions.
New federal data offers comprehensive snapshot of a year marred by staggering job losses, waves of small-business closures and mounting inequality
People were staying home and not shopping or spending more because of their perception of personal risk, (not strictly because of Governor mandated "Shut Downs") according to new national statistical studies. In the 4th quarter of 2020 the U.S. Economy shrank by 3.5 percent, the worst since the Second World War. In the third quarter, the economy was buoyed by a rebound of sales of automobiles and household goods such as furniture, and in renovations and supplies for home offices. Consumer spending — which accounts for more than two-thirds of U.S. economic activity — used to be driven by an ever-growing demand for services, including leisure and hospitality, and restaurants and bars. But as the pandemic warped tried-and-true shopping habits, economists watched consumers move their spending from services to goods. Purchases of computers, home office equipment and fire pits quickly overtook those of hotel rooms and movie tickets.
In the first outbreaks last spring, people stayed home to avoid contracting the deadly novel coronavirus, regardless of what their governor said.
In a less professional study, we at BootheGlobalPerspectives have visited states from Nevada, to Indiana personally. The observations are subjective but informative. In town after town, city after city, we observed massive businesses that have closed, gone bankrupt or simply have 'gone away'. Old established businesses, new smaller businesses. Large and small, big franchise chains, and small locally owned retail stores. Theaters, shopping malls, corner stores, historically popular cafes, but also professional offices, dentists, doctor offices, CPA's, law offices. When inquiring, the answer is "Our people are staying home out of risk concerns", or "Consumers are simply fearful of this virus". A few blamed it on their local politicians or their Governor, but the real reasons were personal decisions by people concerned about their health.
Note the statistical chart below:
But now the good news. Fed Chairman Jerome Powell with firm confidence said:
"Our job as a Federal Reserve Bank is to stimulate an economy that will benefit an expansion of jobs for all people to the maximum extent possible. "
Words well said, with the authority of the Federal Reserve System.
We at BootheGlobalPerspectives.com, and our sister appraisal and environmental companies: https://www.benboothe.com watch the words of the Fed Chairman carefully, because his thinking sets the tone of banking, how much money is available, interest rates, and the liquidity or expansion of an economy or the slow down of economic activity. Policies like those he espouses, can impact property values, liquidity, and economic growth. We are encouraged with his insights and policy vision. We are also impressed with the depth, steady calmness, and broad thinking of Jerome Powell, Chairman of the Federal Reserve Board. He gives business leaders confidence that slow and steady growth is ahead for the US Economy.