Financial Players Gather In Jackson Hole For Annual Conference
DAVID GREENE, HOST:
Now, officials from the Fed are gathering again today along with some of their foreign counterparts. They are attending Kansas City Fed's annual symposium in Jackson Hole, Wyoming. For a preview, we turn as we often do to David Wessel of the Brookings Institution and the Wall Street Journal. David, great to talk to you again.
DAVID WESSEL: Good morning.
GREENE: So you've covered the Fed's Jackson Hole conference many times before. It gets a lot of attention - is that just because it's this gorgeous mountain spot?
WESSEL: Yes, that's definitely part of it.
GREENE: (Laughter). OK, good.
WESSEL: It's easier to get people to go to the Grand Tetons in August to say, a ballroom in Manhattan.
GREENE: Yeah, I can imagine.
WESSEL: And the TV cameras just love the backdrop you know, a dull looking Federal Reserve official with the mountains in the background.
WESSEL: It's also very exclusive. You have to be invited. The formal sessions are not live streamed or broadcast, so if you're not in a room you can't know what's going on. And on top of that, the conference has in the past been the venues of some very influential academic papers and importantly, during the financial crisis, Ben Bernanke, then the Fed chairman, used it as a forum to send some pretty important messages about the direction of monetary policy. Now, this year the focus is on the job market. Janet Yellen, the new Fed chair, is going to talk about that tomorrow morning. But there may actually be more attention on what Mario Draghi, the president of the European Central Bank, has to say given the latest round of disappointing economic news from Europe.
GREENE: OK, given that context and given that jobs are big on the economic agenda - what exactly are central bankers focusing on it now?
WESSEL: Well, even the titles of the papers and the academics who are giving them are embargoed until tonight. Somehow this new Fed transparency hasn't quite penetrated the Kansas City Fed yet. But there are a couple of salient issues. There's a lot of debate about how much damage the great recession did to the job market and to workers. How much we're seeing today in youth unemployment, long-term unemployment, idle middle-aged men not even looking for work, sluggish wage increases - all that stuff. How much is a long-term trend and how much can be undone once the world economy heals. As John Ydstie said, for the Fed, the big issue now is how quickly the job market is healing and thus how soon should the Fed begin to move interest rates up. You know, it's been keeping interest rates at zero since December 2008 and the signals are they're going to stay there until the middle of next year.
GREENE: You mention wage increases being sluggish - I mean, even in an economy, that sounds like something the Fed be worried about. Is there anything the Fed can do to actually help in terms of wages?
WESSEL: Well, you're right, the Fed is worried about it. Janet Yellin has talked about it. The Fed tracks wage trends closely in part because they're an important inflation indicator, but they're also a reflection of how close the economy is to full capacity. And also, in a well-functioning economy, wages should be rising particularly when productivity is going up. And the latest government data show average hourly earnings adjusted for inflation have not increased at all in the last year, even though we're told the economy is getting better and other wage measures show similar trends. Now the Fed can't really do anything to get wages up, what it can do is wait to raise interest rates until the job market's healthier and that's what they're debating now - should they wait a while longer? Or some people are getting restless.
GREENE: David, this is the kind of place where I can imagine people you know, enjoying the outdoors, and golfing and having drinks and dinner, but a lot of actually substantive conversation going on at those things?
WESSEL: That's right. The cocktail parties and the hiking and golf - people do talk about stuff. I think what they're going to talk about is how soon will the Fed raise interest rates and are the people who want to raise them sooner getting traction inside the Fed's policy committee. But I'll bet much of the conversation will be about Europe. When the bank of England would raise interest rates - they're going to probably going to move before the Fed. And how sick is the European banking system and what can the European Central Bank do to get their Eurozone economy back on track. They're really having a hard time, and they're suffering a lot from the sanctions imposed on and by Russia in connection to the Ukraine.
GREENE: All right, we've been speaking with David Wessel. He's director of the Hutchins Center at the Brookings Institution and a contributor at the Wall Street Journal. David, thanks as always.
WESSEL: You're welcome.
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