Hello. Today we look at economic headwinds to keep an eye on, what to watch in the week ahead, and key research conclusions that emerged from Jackson Hole. Anxious Autumn Federal Reserve Chair Jerome Powell’s Friday presentation on the economic and policy outlook — anticipating inflation to come down in time, allowing the central bank to ease into withdrawing its stimulus, proved so comforting that U.S. stocks hit record highs. But as September looms, this autumn could prove highly disruptive to perceptions of both the U.S. economy and policymaking. Following are some key dynamics to watch: Enduring Disruptions A clutch of Fed district bank presidents who also spoke on Friday — including Cleveland’s Loretta Mester — flagged that business contacts had told them that pandemic- induced disruptions to their operations were going to linger for longer than expected, into 2022 and possibly beyond. One key example is the dynamic Gavekal Research has dubbed “the never-ending chip shortage.” It’s damaged the auto industry in particular, with Toyota’s warning of a 40% output cut for September a potential sign of further announcements. Lasting supply problems in auto and other industries would both restrain growth and keep inflation high. Lasting Jobs Hit? The August employment report on Friday will show the latest estimate for how much lost ground has been made up since the crisis began. But some economists are now starting to think it might be impossible to return to the conditions that prevailed before Covid-19. “Several” Fed officials already in July thought the pre-Covid state of the job market “may not be the right benchmark” to judge when the economy reaches full employment. It’s an argument ex-Treasury Secretary Lawrence Summers agrees with . Keep an eye on weekly claims for unemployment insurance remain high relative to 2019 levels — do they come down in September as schools reopen? Fiscal Jam Besides the run-off in federal help to hard-pressed Americans that Reade Pickert and Olivia Rockeman highlighted last week, the outlook for U.S. fiscal policy is messy. Republicans and Democrats are at loggerheads over raising a statutory ceiling for government debt, with the Treasury only having an uncertain number of weeks before it faces payment defaults on federal obligations. The GOP has refused to back an increase, as a show of opposition to a multi-trillion dollar plan by Democrats to ramp up spending on social programs. The deadlock could also force a partial shutdown of the government, as Democrats have vowed to attach the debt ceiling to a vital stopgap spending bill to keep operations going past the Sept. 30 end of the fiscal year. Meantime, mid-September deadlines loom for congressional committees to finish that social-spending legislation, and detail the tax hikes that would help fund it — a tall order given bickering between Democratic progressives and moderates. Then There’s Delta The “most important thing to be watching” is sentiment levels as the pandemic continues, says Joseph Lupton, a JPMorgan Chase global economist. Wednesday’s PMI surveys on manufacturing and services will illustrate the latest readings on business confidence. “I’m looking at that animal-spirit component as kind of an important gauge” in determining whether a weaker third quarter will be offset by a stronger final quarter, “or whether maybe we just need to lower our sights on the overall recovery.” Read more: These five high-frequency charts show the U.S. economy softening from delta — Chris Anstey Got tips or feedback? Email us at [email protected] The Week Ahead The euro zone saw its fastest inflation since 2012 this month with a reading of 2.7%, according to the median forecast of economists, as supply bottlenecks and loosened lockdowns stoked prices. Meanwhile the strengthening recovery is likely to have pushed unemployment to a full percentage point below its crisis peak of 8.6% seen last year. Those statistics on Tuesday and Wednesday will focus the minds of European Central Bank policy makers who are trying to assess the quality of the rebound from the pandemic and the sustainability of inflation, as they prepare for a significant monetary decision the following Thursday on whether to keep up an elevated pace of stimulus. Elsewhere, gross domestic product reports in Canada, Australia and India, China’s purchasing managers indexes, and a possible interest-rate increase in Chile will all feature among the other big economic reports in the next days. For a full rundown of the week ahead, click here . Today’s Must Reads Hurricane devastation | Hurricane Ida pummeled New Orleans and the Louisiana coast overnight with lashing rain and ferocious gusts, leaving much of the region without electricity and bracing for widespread floods and devastation. New Orleans may be without power and air conditioning for more than three weeks in the wake of the hurricane, the city’s port has halted container terminal and break-bulk operations and U.S. motorists should start bracing for higher costs at the pump . Jobs plan | China’s State Council outlined a new employment plan targeting 55 million urban jobs by 2025, better rights for workers and beefing up training of the labor force. Delta drag | Global goods trade — a strong point of the Covid- era economy — is starting to wither under the supply-chain strains that the Delta variant has wrought. Almost half of the Bloomberg Trade Tracker’s 10 indicators were floating in the “above normal” range as of late July. A month later, just one — Korean exports — remains there. Supply squeeze | Bloomberg’s Ann Koh traces the journey of a container of fertilizer sitting in Shanghai, waiting for a ride to the U.S. Canadian election | Top executives have been dragged into the campaign as the policy debate features business taxation and regulation. Double dip | Australia’s economy may have shrunk slightly in the three months through June, setting up the bad “optics” of a technical recession when combined with the lockdown-induced contraction expected for the current quarter. Need-to-Know Research Jackson Hole is about more than the Fed chief’s keynote speech. It’s also a prestigious stage for presenting new economic research. Among the conclusions of studies this year: Rising income inequality over the past four decades has played a much bigger role in lowering the natural rate of interest in the U.S. than demographic factors like the aging baby boomer population. Policy makers need to look beyond the U.S. unemployment rate to get a reading on its full employment goal as growth in the labor force is likely to take longer. Emerging markets could be significantly hurt next year by a two-speed global economic recovery that sees them lagging behind advanced economies while interest rates rise. Expansionary monetary policy can help smooth an economy’s adjustment to shocks like Covid-19. Here’s the link to the full papers On #EconTwitter A look at the Fed’s tapering history... Read more reactions on Twitter Enjoy reading the New Economy Daily? 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