Transparency may be the rage in central banking these days, but the Federal Reserve Bank of Kansas City still keeps the details of the program for its annual Jackson Hole Symposium close to the vest.
The agenda for this year’s symposium, “Changing Market Structure and Implications for Monetary Policy,” won’t be unveiled until the event’s opening session at 6 p.m., Mountain Time, on Thursday, Aug. 23. (Attendees and media covering the event have early access.) The reason, according to a Kansas City Fed spokesperson, is a history of “deferring to individual participants to determine for themselves when and how they announce their participation in the event.”
Uh-huh. A more credible explanation is that the event has acquired such a cachet over the years, with luminaries from the worlds of central banking, academia, finance and government making the annual pilgrimage to the Grand Tetons, that no list of presenters is needed as an inducement to attend.
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What could be the real reason for treating the papers and participants as top-secret information? Does the agenda provide any insights into the Fed’s thinking, hints as to the next move in interest rates, even some as-yet unexpressed concerns about the state of the U.S. economy?
I decided to use the past as prologue: to examine previous symposium topics to see if they served as a leading, lagging or coincident indicator of the times. Looking at the conference topics since the inception of the Kansas City Fed’s annual symposium in 1978 as an agricultural forum, it is hard to find much tradable information in the topics chosen for the annual gathering.
In 2007, the Jackson Hole Symposium was dedicated to “Housing, Housing Finance and Monetary Policy.” The topic was definitely timely; timely, that is, if one is talking after the fact. Exploring the interaction between monetary policy and housing finance would have been more appropriate when the bubble was in its formative stage instead of during its collapse, which threatened to take the banking system down with it had it not been for government intervention.
The 2009 forum on “Financial Stability and Macroeconomic Policy,” which explored the origins of financial crises and stabilization policies, would have been prescient if held in 2007.
In 1995, the symposium was devoted to “Budget Deficits and Debt: Issues and Options,” focusing on the problems associated with chronic deficits. At the time, the annual deficit was rapidly shrinking. In 1998, the U.S. government ran a budget surplus for the first time in 30 years, with revenues exceeding expenditures annually through 2001.
The topic appears to have been behind the times. Then again, given today’s spiraling deficits, the 1995 symposium could be viewed as a long leading indicator. As it stands today, the “issues” are clear — government revenues are inadequate to keep the promises made to the growing number of retirees — but the “options” are increasingly limited, now that “deficit hawk” has become an endangered species on Capitol Hill.
For its 1998 conference, the Kansas City Fed chose “Income Inequality Issues and Policy Options,” which is what journalists call an “evergreen:” a story that is not time-sensitive and has a long shelf life.
Why pick an evergreen at a time when the developing world was engulfed in a financial and economic crisis? By 1998, what started as the Asian Financial Crisis in 1997 had spread to Russia and Latin America. The choice of a topic for the annual symposium seemed to ignore the pressing issues of the day.
One week after the 1998 Jackson Hole conference, then-Fed Chairman Alan Greenspan challenged the notion that the U.S. could remain “an oasis of prosperity” unaffected by overseas developments.
It could and it did. Greenspan lowered the funds rate by 75 basis points in two months. The Nasdaq COMP, +0.49% was off to the races, soaring 85% in 1999 and another 24% before peaking in March 2000.
Besides, when it comes to policy options for inequality, the Fed’s mandate does not include income redistribution. Delivering maximum employment, stable prices and moderate long-term rates is enough of a challenge for a central bank, thank you very much.
After the trough of the 1990-1991 recession, which was short and shallow,
the unemployment rate continued to rise for the next two years. So in 1994, the Kansas City Fed addressed the so-called “jobless recovery” at its annual symposium on “Reducing Unemployment: Current Issues and Policy Options.”
While the attendees were mulling policy options, the current issues took care of themselves. The civilian unemployment rate, which stood at 6% in August 1994, beat a hasty retreat to a three-decade low of 3.8% in April 2000.
The Fed was looking for a solution to a problem that was already on the mend. Perhaps that’s why, when the recovery from the 2000-2001 recession proved “jobless” as well, the Kansas City Fed took a pass, perhaps realizing that economic growth, not some new-fangled tool, is the best means of reducing unemployment.
Which brings us to this year’s symposium, which “will explore dynamics that have contributed to shifts in productivity growth and inflation,” according to the press release. One area of concern is the “increased market concentration” of large firms that may be reducing competition, depressing wages, lowering productivity and decreasing dynamism.
It is certainly a worthy and seemingly timely topic. But before we can designate this year’s forum as a leading indicator, we must wait to see if the second quarter’s 2.9% jump in nonfarm business productivity is a one-time event or the start of an improved trend and a harbinger of higher wages.
