by Dan Wiener | October 14, 2013 8:41 am
On Wednesday, October 9, President Obama nominated Janet Yellen to succeed Ben Bernanke as Fed chair, which would make her, upon confirmation, the first woman Federal Reserve chair in its 100-year history. Yellen will, of course, not take her seat until January when Ben Bernanke’s term expires, so there’s still plenty of time for the Fed to cogitate over tapering, or not. But given where the government is right now, with its shutdown and arguments over short-term debt ceiling hikes contingent on savings in the budget process, we would be surprised to see tapering begin in 2013 at all. Tapering will, in our opinion, be in Janet Yellen’s court.
While the shutdown continues, it appears there could be some temporary relief headed our way with an extension of the debt ceiling for several weeks. Still, the ideologues are running the show, attempts to kill the Affordable Care Act have morphed into attempts to shanghai the budget, and our dysfunctional government has only gotten more so.
But don’t blame Friday’s big jump in unemployment claims on the shutdown. That’s the work of a new computer system in California that has been gumming up the numbers for a while and may continue to do so a while longer. Without an unemployment report (which is courtesy of the shutdown) we’re a bit in the dark on exactly where the labor markets are, but suffice to say that if corporate managers can regain some confidence that the country isn’t going to default on its promises to pay debts, then the trend in rising employment should continue.
I would say that while the Fed minutes suggest they had still wanted to start tapering before year-end, that is probably off the table for now and, as I said several weeks ago and mentioned again just a minute ago, it may be that tapering gets put off until Janet Yellen is in charge.
Senior Editor Dan Wiener and Editor/Research Director Jeffrey DeMaso publish The Independent Adviser for Vanguard Investors, a monthly newsletter that keeps abreast of recent developments at Vanguard, and the annual FFSA Independent Guide to the Vanguard Funds.
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