Despite inconsistent retail sales, lower consumer confidence and a rapidly changing job creation landscape, the U.S. economic backdrop remains healthy and should continue to benefit from friendly monetary policy.
The August jobs report was disappointing primarily due to the COVID-19 Delta variant’s impact on leisure and hospitality employment. Yet it sets up a potential goldilocks scenario with the U.S. Federal Reserve on hold longer, and economic reacceleration possible as Delta subsides.
The Fed’s “substantial further progress” barometer for the labor market has not yet been met. This could delay the anticipated tapering of quantitative easing, pushing back the next tightening cycle. When the Fed does begin to renormalize monetary policy away from extraordinary crisis measures finally, its overall stance is expected to remain quite accommodative.