Kansas City's Fed President on What Everyone Will Be Talking About at Jackson Hole

Episode Summary

Executive Summary: The episode previews Jackson Hole 2025 with Kansas City Fed President Jeff Schmid, centering on labor markets in transition, demographics, AI, and monetary policy. Schmid argues rates are modestly restrictive, the labor market remains balanced, and AI plus reskilling will reshape jobs more than trigger an immediate productivity boom. He also defends Fed independence and discusses liquidity, QT, and the modernization of the discount window.

Main Topics: Jackson Hole 2025 theme and planning (Priority: 5/5): The hosts and Schmid discuss how the Kansas City Fed chooses Jackson Hole themes and why this year’s focus—labor markets, demographics, productivity, and macro policy—is timely. Demographics, immigration, and labor supply (Priority: 5/5): Schmid emphasizes aging populations, fertility declines, migration, and changing immigration policy as major forces reshaping labor force growth in the U.S. and abroad. AI, productivity, and reskilling (Priority: 5/5): The conversation explores whether AI will meaningfully boost productivity and how firms and workers may need to reskill as technology changes job content. Current labor-market conditions and growth outlook (Priority: 4/5): Schmid says recent labor data reflect uncertainty, hiring caution, and policy shifts, but he sees a gradual rebalancing rather than a recessionary break. Policy rates, restrictiveness, and the neutral rate (Priority: 5/5): He describes current interest rates as modestly restrictive, not overly tight, and says the Fed is operating more surgically than during crisis periods. Fed independence and dissent (Priority: 4/5): The discussion examines whether political pressure could lift term premiums and why dissent is uncommon at the FOMC, with Schmid defending the institutional design of the Fed. QT, reserves, discount window, and payments modernization (Priority: 4/5): Schmid says the system still has abundant reserves, but the Fed is working to modernize the discount window and adapt to instant payments and FedNow.

Key Arguments: Jackson Hole works well because the setting encourages candid, creative policy discussion among top economists and central bankers. Demographics are a global macro issue: aging, fertility decline, and migration affect labor supply and where production can occur. AI is likely to improve productivity first in low-value or repetitive tasks, then more broadly as firms learn how to integrate it. Measured productivity may lag visible technological progress because adoption is slow and firms need time to find practical uses. Recent labor softness may have been amplified by policy uncertainty and immigration changes that led firms to slow hiring and spend more cautiously. The labor market remains in balance enough that unemployment has not risen sharply, suggesting rebalancing rather than collapse. Current policy rates are modestly restrictive, and the Fed is acting more surgically now than during the 2008 or 2020 crisis environments. Long-term rates reflect multiple forces including inflation expectations, debt supply/demand, and term premiums; the Fed can influence but not fully control them. Fed independence is crucial because it keeps the central bank focused on stable prices and full employment rather than politics. Reserve scarcity is not yet the central issue; the Fed is focusing on abundant reserves, discount window reform, and modern payment infrastructure.

Data Points: Jackson Hole symposium age: 48th year - Schmid notes the conference has been held for 48 years. Jackson Hole 2025 paper presentations: 4 papers - Schmid says the event will feature four papers released on Friday and Saturday. Kansas City Fed district size: 7 states - Schmid describes the 10th District footprint. Kansas City Fed district population: 20 million people - Schmid describes the 10th District footprint. Current policy rate change: 100 basis points lower than a year ago - Schmid says the Fed has already reduced the policy rate by 100 bps over the prior year. Fed balance sheet duration: a little over 8 years - Schmid compares the Fed’s balance sheet duration with Treasury duration. Treasury duration: about 4 to 5 years - Schmid uses this to explain balance-sheet influence on long rates. Fed meeting attendance: 18 other really committed and bright people - Schmid describes the FOMC decision-making table. Jackson Hole attendees: 150 people - Schmid says the symposium brings together roughly 150 experts. Bloomberg Stock Movers length: 5 minutes or less - Promo for Bloomberg’s short-form stock report. Bloomberg News Now length: 5-minute audio report - Promo for Bloomberg’s on-demand news product. Bloomberg newsroom size: 3,000 journalists and analysts - Used in multiple promos to describe reporting reach.

Pivotal Quotes: "“Labor markets in transition, demographics, productivity, and macroeconomic policy.”" — Tracy Alloway / Joe Weisenthal: The announced Jackson Hole 2025 conference theme. "“I would call them modestly restrictive. They’re not overly restrictive.”" — Jeff Schmid: Schmid’s assessment of the current stance of interest rates. "“The Fed is not the train. The Fed is actually the rails.”" — Jeff Schmid: Schmid explains the Fed’s role in maintaining stable prices and full employment.

Implications: Listeners should expect Jackson Hole to focus on how demographics, AI, and policy uncertainty are reshaping labor markets and monetary policy. Schmid’s view suggests the Fed is leaning cautious, not alarmed, while preparing for slower growth, gradual productivity change, and a more modern financial system.