Why patience is the greatest economic virtue this year

What's going to happen with the economy? As Bloomberg's Joe Weisenthal argues, it seems participants in the U.S. debt market are pessimistic after the latest communications from the Federal Reserve, given that investors piled into 30-year U.S. government debt afterwards. Comments from Fed chair Jerome Powell and others seem to suggest that the central bank is already worrying about inflation more than jobs, and so investors are beginning to suspect they will strangle the economy long before any boom gets going.

It's an important lesson in the best virtue an economic policymaker can cultivate in this peculiar time: patience.

Let's briefly survey some of the biggest economic developments and pressures taking shape at the moment. On the one hand, it seems like the labor market is getting genuinely tight, and the biggest boom in over 20 years just might be gaining steam. Hirings have been quite strong relative to the post-2008 period, and many employers are hiking wages to entice new workers. Balance sheets are strong, and consumer spending is basically back to its pre-pandemic trend. Growth is predicted to be very strong overall this year. Prices of some goods and services — like lumber, copper, grain, used cars, and computer chips — did spike dramatically, but many of these spikes have already started to pass. (International shipping, however, seems to be badly tangled, and it may be well into next year before normal conditions are reached.)

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On the other hand, as Neil Irwin argues at The New York Times, much of the stimulus from the American Rescue Plan is already fading out. Almost everyone has already gotten their $1,400 checks, the small business loan program is wrapping up, and half the states are cutting off the supplement to unemployment benefits two months early — which will be a major hit to overall spending and demand. Maybe ARP money won't be enough to kick America into a real economic high gear, and we'll end up right back in the post-2008 pit of stagnation. Or maybe, as I noted above, the Fed will garrote the economy before full employment is reached, just like it did in 2015.

There are also questions within the labor market. There are many more job openings relative to job seekers than we saw in the post-2008 recovery at this level of unemployment, suggesting that many people are either quitting work entirely to spend time with family, trying to change careers or jobs (perhaps to continue working from home, which has proved popular among many), or are getting more education, or retiring early. The 2019 economy was reasonably strong, but had a big share of exploitative, low-paying jobs. Many of the "front line workers" who were much praised during the pandemic but received little in the form of concrete benefits might be sick and tired of being treated like dirt and want something better. What will happen with these folks is entirely unclear.

Finally, there is a big question mark about the pandemic. The contagious "Delta" variant is spreading across the country, and for a variety of reasons (poverty, poor health infrastructure, anti-vaccine paranoia, and so on) many conservative states seem to be stuck at about 30-40 percent vaccination. It's possible we could continue to see brushfire outbreaks of COVID-19 (as Britain is suffering at the moment) for the next several years in those regions, which might slow down economic recovery.

It's of course possible to weigh all these factors (as well as others I've left out) and come to some prediction about what the next few years hold, but you might as well make a sheet with a list of outcomes and throw a dart. The conflicting indicators suggest that the path of wisdom for the next year is to remain patient and see what happens. A global pandemic like this has never happened in the age of modern service-based economies and high-speed communication and transportation. Nobody knows for sure what is going to happen.

This will probably be difficult for policymakers and economic commentators. For more than a decade after 2008, we all got used to warp-speed takes on the latest economic data that followed a few well-worn tropes (wages too low, profits too high, growth too slow, not enough jobs). I must admit I've been guilty of using those same frames with this very different economic situation. But at bottom, I am sure about only one thing about the 2021 economy: I will be surprised by some kind of economic data.

Of course, that doesn't mean policymakers should try to somehow step back from managing the economy. Not only is that impossible (they have to make some kind of choice), as I have previously argued, the pandemic is a golden opportunity to try to undo some of the damage of the last 40 years of neoliberal disasters. As J.W. Mason and Mike Konczal write at The New York Times, "Manage the boom, don't fight it." Inflation is a risk, but an even larger one would be letting unemployment fester.

Luckily, Powell echoed this sentiment at his most recent press conference. "This is an extraordinarily unusual time … we really don't have a template or any experience of a situation like this," he said. Let's hope he keeps that perspective as pressures mount on him to crush the working class.