Friday, August 22, 2014

"In Rainy Jackson Hole, Yellen Ponders Labor Market Mojo"

There are signs that the current up move is not strong enough to take and hold the 2000 level on the S&P 500.
What may be required is a trip back to ~1900 or so to flush out any remaining weak hands/hot money. This could begin as soon as Monday, meaning lightening positions ahead of the weekend--something we are usually loathe to babble about on the blog--may be the better-safe-than-sorry tactic.

I'm writing about this on this particular post because Jackson Hole may be a catalyst, or at least be perceived to be by the explainers.
From the Wall Street Journal's Real Time Economics blog:
It has been 20 years since central bankers focused on labor market issues at the Federal Reserve’s annual economic symposium at Jackson Hole, Wyoming, a point Esther George, the host and President of the Federal Reserve Bank of Kansas City, noted Thursday as she kicked off the conference on a cold and rainy evening in the mountains.

The dilemma back then was structural unemployment, particularly in Europe. Then-Fed Chairman Alan Greenspan opened the two-day conference with a brief review of the academic papers being presented by the likes of Paul Krugman, then a professor at the Massachusetts Institute of Technology, and James Heckman of the University of Chicago, both future Nobel Prize winners.

It is worth remembering that Fed chairmen don’t always deliver big policy addresses at Jackson Hole. Investors have become accustomed to such addresses in the past few years of economic crisis, but it isn’t mandatory.

Mr. Greenspan was brief and academic. But he did include this warning: Central bankers should be wary about using low interest rates as medicine for structural labor market problems not responsive to monetary policy. “Any tendency to seek a bit of macro policy relief by pushing the outer limits of monetary policy risks longer term financial instability,” he warned, hauntingly.

This year’s Jackson Hole papers delve into whether labor markets have lost their dynamism. The challenge for central bankers in the room is deciding how much more they’re prepared to do about it.
-By Jon Hilsenrath
Also at RTE:
5 Things To Watch When Mario Draghi Speaks in Jackson Hole