US Economic Update: Employment Losses, Policy Responses, Debt & Rates, Inflation Prospects

8 JUN 2020

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist

The research views expressed herein are those of the author and do not necessarily represent the views of CME Group or its affiliates. All examples in this presentation are hypothetical interpretations of situations and are used for explanation purposes only. This report and the information herein should not be considered investment advice or the results of actual market experience.

The speed of the decline in employment due to the pandemic-induced shutdown in the US has been unprecedented.  The policy responses have been immediate and massive from the Federal Government and the Federal Reserve (Fed). The combination of employment losses and policy responses raises many questions about the pace of the recovery, interest rates and debt, consumer price patterns, etc. To examine these issues, we have organized this report on the US economy into five sections. First, we want to simply review the damage to the economy in terms of the impact on employment. Second, we will discuss the fiscal and monetary policy responses. Then, we will discuss some of the implications for labor productivity and the pace of recovery; interaction of massive debt and interest rates; and finally, some scenarios for short and long-term inflation based on the fusion of fiscal and monetary policy, known as Modern Monetary Theory or MMT.

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