The economy continues to recover from the first half COVID-19 shock, although the recovery has been uneven and is likely to slow in the absence of fresh fiscal stimulus. The Federal Reserve has done exceedingly well ensuring the economy remains primed with ample liquidity. Perhaps the central bank has done too well, as the sense of urgency by lawmakers to continue to support the consumer appears to be fading. The Chairman of the Federal Reserve, Jerome Powell, seemed to say as much in a September press conference in which he remarked the central bank has “lending power” but not “spending power.” This public nudge of fiscal policymakers is important, as consumers along with small business face a benefits cliff at a time when the economy is beginning to show some early signs of deceleration.
While we trained our eyes to the PMIs, unemployment rates and wage growth in prior quarters in order to forecast the sustainability of growth and durability of consumption in a global expansion, the rapid deterioration of conditions due to a self-inflicted recession in response to a global pandemic has turned our attention to epidemiological data, virological research and development, and mobility data in an attempt to triangulate if and when there might be a path towards a more “normal” environment.