The Day at a Glance | February 8 2021

The Top

· The United States could reach full employment in 2022 if enough stimulus is carried out: Janet Yellen.

· Economic indicators: Industrial production in Germany stopped growing in December (0% vs 0.3% e.).

Economic environment

Janet Yellen, Secretary to the Treasury in the United States, assured that the labor market runs the risk of stagnating if stimuli is not continued. According to Yellen, without the appropriate aid, the labor market could recover fully until 2025; but full employment could be reached in 2022 if enough fiscal stimuli is implemented in order to counter the virus`s negative effects on the economy. Yellen is concerned about permanent damage occurring to low salary workers and some minorities, which is why she considers approving Biden`s 1.9 trillion dollar stimulus important. Even though the package is not specifically directed towards creating jobs, the spending should create demand for workers. Yellen admitted that inflationary risks are something to be considered, but that the central bank counts on enough necessary tools to contain an acceleration in prices in case it happens; Yellen considers that not carrying out enough spending that would allow the economy to survive the crisis without after-effects holds greater risks. For other economists, like Larry Summers (ex-Secretary to the Treasury), the fiscal package proposed by Biden is too large and risks increasing inflation. Summers`s concern revolves around the idea that inflation would bring higher interest rates in the market, something that could cause important adjustments among stock indexes – which have reached all-time highs amidst an environment of low interest rates. This morning, the 30 year Treasury Bond reached a 2% yield for the first time since February of 2020, which reflects that markets are betting on a faster recovery coupled with inflation. The implementation of new stimulus is accompanied by a persistent rise in oil prices (Brent $60 dpb), which could contribute to an inflationary outlook.