After hosting a successful Olympic and Paralympic games, it is now all change for Japan.  After just a year as the country’s prime minister, Yoshihide Suga will be stepping down amid continuing criticism of his handling of the COVID-19 pandemic.

Ahead of the general election, to be held by the end of November, Suga announced that he would not seek re-election in this month’s leadership contest for the Liberal Democratic party.  The news led to the Topix Index hitting a 30-year high, as a new leadership raised expectations of increased stimulus measures to combat the pandemic.

There is no mistaking that sentiment is currently being driven by the virus.  Whereas Japan looks attractive in the short term because of the expectation of new economic stimulus measures, the US is potentially less attractive as previous measures and protections for the economic fallout from COVID-19 are expiring.

It is a double whammy for many Americans today.  Last week saw the end of the eviction moratorium, which prevented landlords from evicting tenants that were receiving rental assistance from the Government or met certain income thresholds.  It is estimated by the Federal Reserve Bank of Philadelphia that the amount of back rent owed has reached $15 billion, while Goldman Sachs predicts some 750,000 evictions by the end of the year.  For context, there were 1 million evictions in 2010, as the tail end of the Global Financial Crisis bit hard.

Today sees the end of increased unemployment benefits for an estimated 7.5 million American workers.  This comes on the heels of a disappointing jobs report from the US, which showed a sharp drop from July’s 1.1 million jobs.  August’s expectation of 733,000 jobs was slashed by two-thirds, with only 235,000 new jobs created and could be an indication of the effect that COVID-19’s Delta variant is having on companies’ hiring plans.

It is hoped by US policymakers that the expiring of generous unemployment benefits will lure the unemployed back into jobs.  There are an additional 5.3 million Americans who are unemployed now, compared to before the pandemic.  These people now face a reduction in personal income or a return to the workforce.  However, it is not that simple a decision.  Health rather than wages has become the most important factor regarding employment, which has been borne out by the individual states that removed unemployment benefits early, not seeing the hoped-for increase in jobs growth.

Why is this important?  One of the dual mandates of the Federal Reserve is maintaining full employment and this has already been reiterated as a key metric for the rising of interest rates.  So, while Jerome Powell hinted at tapering their monetary stimulus measures before the end of the year, he also confirmed that further strides needed to be made in the labour market before that could begin.

The weakening picture of America’s labour market could stall plans to remove the stimulus measures already in place.  Data and the Delta variant are the key measures for when policy actions can commence.

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