Jackson Hole: More Than Just Jay Powell’s Speech
There was much more to Jackson Hole than Chair Jay Powell’s remarks. In my talk last week, I noted that our model of the Fed Funds rate stood at 3.65%, which is 70 basis points lower than the actual level of 4.35%. I also said the Fed was successfully achieving a “soft landing,” with employment growing at 1%, below the median employment growth since 2004 of 1.6%.
However, as I listened to Powell speak, I sensed concern in his tone when he stated:
“The July employment report released earlier this month slowed to an average pace of only 35,000 jobs per month over the past three months, down from 168,000 per month during 2024. This slowdown is much larger than assessed just a month ago.”
My interpretation? Powell may be worried that the “soft landing” could turn into a hard landing. This suggests a 25 basis point rate cut at the next Fed meeting on 17–18 September, bringing the Fed Funds rate to 4.1%. Even then, the rate would remain 45 basis points higher than our model estimate of 3.65%, meaning policy would still be modestly restrictive.
Dire Demography?
Jackson Hole wasn’t just about monetary policy—it was also a strategy meeting with several thought-provoking presentations. Two notable speakers following Powell’s address were Claudia Goldin, Professor at Harvard, and Chad Janis of Stanford Graduate Business School. Both delivered sobering insights on demographic trends in developed economies.
Claudia Goldin spoke on “The Downside of Fertility.” She highlighted that birth rates in the developed world are now generally below replacement level:
- France, US, UK: Below 2
- Italy & Spain: Dangerously low at below 1.5
- Korea: Below 1
Goldin also noted that the age of first marriage in the US is now seven years later than in the 1960s, reducing childbearing years.
Following her, Chad Janis discussed the implications of these trends. He contrasted two futures:
- “Expanding Cosmos” – A world with a replacement rate of 2.2 children per family, leading to:
- Growing population
- More researchers
- Rising living standards
- Exponential growth in both population and prosperity
- “Empty Planet” – A world with a replacement rate of 1.9 children per family, resulting in:
- Negative population growth
- Declining number of researchers
- Economic stagnation
- Ultimately, the end of humanity
What Does This Mean?
These discussions underscore a serious challenge: demographic decline could reshape economies and societies. Perhaps, if we want to “save the world,” the solution is simple—relax and start having a lot more fun!
