Yellen speech on labor market to be Jackson Hole highlight

August 21, 2014

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In the not-too-distant-past, Fed watchers had to divine U.S. central bank strategy from a trickle of information.

No longer. And on Friday, there will be a firehose of Fed speakers for the markets to digest.

Fed Chairwoman Janet Yellen will give her latest views on the health of the labor market at 10 a.m. Eastern on Friday. In previous speeches, Yellen has laid out a dashboard of indicators, including wages and the number of people working part time who want to work full-time, to gauge the health of the labor market.

Economists expect Yellen to note that several indicators of labor market strength, including the unemployment rate are getting better, but stick to her guns that the central bank can be patient before moving to hike interest rates.

On top of Yellen’s latest views,  several regional Fed presidents, including San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart,Charles Plosser of the Philadelphia Fed and St. Louis Fed President James Bullard will be offering their own views on the likely future path of monetary policy. The presidents have already started giving out  interviews with the three cable business channels and more are expected Friday morning before Yellen speaks.

The minutes of the last Fed policy meeting reveal a sharpening debate at the central bank between those who want the central bank to get a move on hiking interest rates and the “core” of the committee including Yellen, who think moving too quickly would be the biggest mistake the central bank could make.

“They took the gloves off and fought it out,” said Robert Brusca, chief economist at FAO Economics.

The focus at Jackson Hole will be the health of the labor market.

Yellen and her allies believe the Fed can help bring people back into the labor market. On the other hand, the hawks tend to agree with Esther George, the president of the Kansas City Fed, who told the Fox Business Network Thursday “other factors” besides Fed policy are headwinds for the labor market and “many of those are beyond the reach of monetary policy to fix.”

Tom Porcelli, chief U.S. economist at RBC Capital Markets, said that Yellen is looking more isolated in her labor market stance. But he said  investors are likely to focus solely on the Fed chairwoman’s remarks and “then try to enjoy one of the last weekends of the summer.”