‘Dysonance’ confronts Federer with vaccine weight against unemployment

WASHINGTON (Reuters) – In about two weeks, at least 9 million unemployed U.S. residents are at risk of losing the unemployment benefits that helped keep them from the epidemic. Delayed rent, estimated at $ 70 billion among 11 million households, is set to begin to arrive.

This may seem like a big deal, but until September American families had set aside a record amount of money; Bankruptcies outside of large corporations have declined; Credit market investors say they see some signs of severe depression; The upcoming vaccine may urgently boost the wealth of the economy.

When the Federal Reserve meets this week, policymakers need to correct those paradoxical stories as they release new forecasts showing whether they think the economy will experience a double-dip recession or a vaccine-inspired boom.

(Graphic: Virus Explosion, Recovery Plate -)

The unemployment rate has fallen sharply and growth in September was stronger than federal officials had predicted earlier this year. Nevertheless job growth has slowed recently and the record-breaking rise in epidemics has raised concerns that more business strikes and failures could occur.

Meanwhile, early stages such as the ban on evictions for unpaid rent are also expiring, and Mark Sandy, chief economist at Moody’s Analytics, writes that “eviction notices are piling up at sheriffs’ desks, giving Dickensian a vision of what might happen if government aid does not come.”

“Mass discharges from winter dead and raging epidemics are unbearable,” Jandy wrote, adding that the economy is weakening as a result of the vaccine.

QE guidance is coming

This may seem like a recipe for action. Congress is paralyzed for even more federal spending, and most allies expect the central bank to talk a lot at this meeting, but will not do so at all. The central bank expects economic stimulus to increase when only one-fifth of the 43 economists meet on Tuesday and Wednesday, according to a recent Reuters poll.

Policymakers are expected to offer a playbook that prompts them to buy more bonds each month or shake up their buying mix. Importantly, they provide guidelines that could lead to a $ 120 billion per month reduction in currently accumulating assets.

But despite the scattered risks on the ground, some expect the Fed to now expand its “size easing”.

Since interest rates are already zero, bond purchases are the main lever to affect financial conditions, especially the rates that families pay to buy homes and other large ticket items. They are already very low, and some argue that the central bank is unlikely to make more resources, and that they threaten to slow the economy.

Federal officials “have no appetite for immediate change,” wrote Andrew Hunter, a senior U.S. economist on capital economics, whose latest information is “reasonable.”

“Federal bank officials have also been comforted by the news of the latest vaccination to focus on all of the harmful risks near the economy.”

‘Everyday collective deviation’

However, employment growth last month was almost half that expected, with a renewed increase in unemployment demands showing that the pain continues. Only half of the jobs lost at the beginning of the epidemic have been restored.

The position of the central bank is somewhat different from that of the European central bank, which increased the stimulus in light of the recent rise in the corona virus.

In fact the central bank, without any fault of its own, is in fact retreating: US Treasury Secretary Steven Munuchin has ordered the closure of several central bank contagious loan schemes by the end of the year.

For some, this is one reason why the central bank is doing so much more to prevent the risks facing the economy and to boost its promises on inflation.

Ed Al-Husseini, an analyst at Columbia ThreadNeed, said the new structure for raising inflation should follow measures such as the central bank’s August announcement and increased bond buying if investors are to believe what they say.

“Funds are not functioning. The labor market is not in a big place yet … inflation is in a very bad place. So you have a very strong case on paper to act on,” he said. .

The central bank has already promised to keep interest rates close to zero in the coming years, and until inflation remains stable beyond its 2% target for a while – an overshoot to ensure that the target is maintained over time.

But even beyond that, many policymakers have claimed to have content in buying securities where they are now – due to conflicting economic data: Are families being massively taken to the streets? Or run to a nearby bar when the vaccine rolls in and get ready to re-record missed vacations?

“It feels like a cognitive paradox every day,” al-Husseini said. “You see the numbers – 75% of families have lost income – it’s horrible. You look at crime rates, spending patterns, savings, you don’t see a recession.”

“The question next year is when this will become a macro issue,” he said. “It’s a race between financial support and when the labor market recovers with the vaccine.”