Jackson Hole: Fed policy collides with reality in America’s most unequal county

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Central bankers from around the world flocked to Jackson Hole, Wyoming, this week to discuss the policy decisions that will shape the economy for years to come.

But while they talk about inflation and the economy in the abstract, residents of this popular holiday destination feel very much about the reality of their politics. That’s because Jackson Hole is the most economically unequal place in the United States, According to the Economic Policy Institute.

What is happening: The snow hugging the green peaks and valleys of Jackson Hole, Wyoming — where Federal Reserve Chairman Jerome Powell is scheduled to give a highly anticipated speech on Friday — isn’t just stunning. It is also symbolic.

Among the top 1% is in Teton County (where Jackson Hole is located), the average The annual income It is a jaw-dropping $22.5 million. Meanwhile, the median household income in Teton County in 2021 was about $94,000, according to United States Census Bureau.

The annual August symposium of global financial leaders and economic elites would not be possible without the servers, chefs, chauffeurs, hotel staff and event staff who do their work – the same people who feel the hard impact of high inflation, rising interest rates and a weak economy. more.

“If you look at income, Jackson Hole is really a microcosm of the wealth inequality in the country that is exemplified by these dramatic landscapes of the Mountain West,” said Kinan Fikri, director of research at the Economic Innovation Group, a bipartisan political organization. . “It’s ground zero for understanding how inflation affects the budgets of low-income households when they are already under financial stress.”

For the first time in Jackson Hole real estate history, the median price of a single-family home topped $5 million at the end of 2022, double what it was in 2019, when the median price was $2.6 million, according to Semi-annual report of the Viehman Group. In the last quarter of 2022, the median rental price for a home in Teton County was 13.3% higher than in the previous year, and the cost of living was 67% higher than the statewide average, according to a recent report. analysis By the Wyoming Governor’s Office.

When housing costs are so high, Fikri said, any percentage increase in necessities like gas and food severely hurts the local workforce and makes it difficult for them to stay in the area. But if they cannot survive, the local economy, which is largely dependent on tourism and services, will cease to function.

“Workers and consumers need to coexist and be healthy. Inflation and high interest rates complicate this,” Fikri said.

Two audiences: Over the past year, the Fed has been stuck between a rock and a hard place – Main Street is feeling the impact of inflation as consumers struggle to purchase increasingly expensive staples like food, clothing and gas.

But Wall Street does not like to raise interest rates, which can negatively affect profits and stock prices. And in 2022, when the Fed raised interest rates by 4.25 percentage points, the S&P 500 fell about 20%.

The extreme inequality of fortunes in Jackson Hole is an excellent example of this dichotomy.

“Teton County has more income derived from wealth than anywhere else in the United States,” Fikry said. In other words, Wall Street is well represented there.

So what does that mean for Powell as he shares his monetary policy outlook on Friday? “It is important for the chairman of the board to understand the direction behind him,” Fikry said. “It is a province in which many of the inequalities that define the American economy are exaggerated, and an extra dose of awareness and humility would do well for Americans.”

Fikry said Jackson Hole is a unique place to look at the US economy, but you can’t look at it from the point of view of people with vacation homes. You have to look at it from the people’s point of view in restaurant kitchens, too.

August was a depression, but in general the stock market has gone up this year. This is largely because there is one stock without much name recognition outside of the gaming community. Chipmaker Nvidia (NVDA) shares are up more than 222% year-to-date, according to my colleagues Alison Morrow and Crystal Hore.

On Thursday, shares briefly hit an all-time high after very impressive second-quarter earnings.

Although it’s best known for its graphics processors, Nvidia is now almost synonymous with artificial intelligence, after diving successfully into producing the kind of microchips that power this promising technology. Demand has outpaced supply, making Nvidia the hottest stock: it leads the S&P 500 this year by a mile, and is now one of the few companies with a market capitalization of more than $1 trillion.

Investor enthusiasm for AI has also helped boost other technology stocks, but Nvidia is by far the most popular AI stock. The US chipmaker produces the basic building blocks for generative AI (such as ChatGPT and the like).

The Santa Clara, California-based company reported year-over-year sales growth of 101% in the second quarter. Revenue rose from $6.7 billion in the second quarter of last year to $13.5 billion this year. The results were stronger than the $11.2 billion in revenue expected by Wall Street analysts.

Buying a home that will cost you: This is now the most expensive housing market in the US since 1984, reports my colleague Anna Bahney.

At today’s rates, buying a median-priced home would require a monthly principal payment and a $2,440 interest payment for those who make a 20% down payment, according to Black Knight, a mortgage technology and data company.

That means $1,172 more per month in mortgage payments than it was just two years ago, before the Fed raised the benchmark lending rate 11 times in 18 months, Black Knight found. That’s an increase of 92% – and a drain on a growing part of the budgets of households already facing inflation on many fronts.

Currently, 38.6% of median household incomes are required to make the monthly payment for the average home purchase, making housing less expensive since 1984, according to Black Knight.

“To put today’s levels of affordability into perspective, it would take a combination of up to a 28% decline in house prices, a more than 4% drop in 30-year mortgage rates, or up to a 60% growth in Median household income to bring affordability back to the 25-year median, said Andy Walden, vice president of enterprise research and strategy at Black Knight.