The Early Universe and the Future of Humanity/Xi Risks Losing the Middle Class

[from The Institute of Art and Ideas]

The Life and Philosophy of Martin Rees

An Interview with Martin Rees

Astronomer Royal and best-selling science author, Martin Rees pioneering early work led to evidence to contradict the Steady State theory of the universe and confirm the Big Bang. His influence then spread to the wider public—knighted in 1992, elevated to Baron in 2005, then giving the Reith Lectures in 2010. Most recently his attention has turned from the early universe to the future of humanity. In this interview, Lord Rees discusses the ideas and experiences which led to such an illustrious career.

Xi Risks Losing the Middle Class

The zero-COVID strategy has run its course

Kerry Brown | Professor of Chinese Studies and Director of Lau China Institute, King’s College London. He is the co-editor of the Journal of Current Chinese Affairs, and author of Xi: A Study in Power.

China is continuing with its tough zero-COVID policy. But the cracks in the economy and a discontent middle class mean that Xi’s Imperial-like governing style is under challenge, writes Kerry Brown.

China’s zero-COVID strategy operates in Chinese domestic politics a bit like Brexit does in the UK. Despite complaints from business networks and broader society about the negative impact on economic growth and citizens’ freedoms, it’s a policy commitment the government is sticking to no matter what.

Of course, no one voted for the draconian lockdowns implemented across China. And, unlike Brexit, the lockdowns are very much in line with expert advice in the country, rather than running against it. The Chinese Centre for Disease Control and Prevention (CCDC), the main governmental body advising the government over crisis response in this area, said in a weekly update last November that without comprehensive restraints on people’s movement and quarantines on anyone testing positive for the virus, the national health system would soon be overwhelmed with cases, and find itself in the same bind as those in the US or Europe did.

That the words of the experts have been taken so much in earnest is striking for a regime that previously hasn’t been shy to dismiss them. The Xi leadership may be confident in the way it speaks to the outside world, but it seems that it has the same profound wariness in the robustness of the country’s public health as everywhere else. Things have not been helped by clinical trials showing the Chinese vaccines – the only ones accepted in China – are not as effective as foreign ones where the length of protection is in question). On top of this, vaccine take-up by the elderly, the most vulnerable group, has been poor. It is easy to see therefore why the central government might be very cautious. What is harder to understand, however, is why the cautiousness has bordered on obsessiveness.

The Xi way of governing is increasingly almost imperial in style, with broad, high-level policy announcements made in Beijing, sometimes of almost Delphic succinctness.

One scenario is simply about the structures of decision-making in China. This was an issue right from the moment the variant started to appear in late 2019, and local officials in Wuhan stood accused of trying to hush the issue up, delaying reporting to the central authorities till things had already gone on too long. As a result of this, in February 2020 key officials in the city were sacked. But this is unlikely to change the fact that provincial officials are very risk averse under Xi, and that any central direction to manage the pandemic will be interpreted in the purest terms and executed to the letter.

This explains the completeness of the Xian government’s virtual incarceration of its 8 million population after just a few COVID cases at the end of 2021, the first of the more recent lockdowns. It also explains why the traditionally more free-thinking municipal authority of Shanghai and its similarly liberal approach was fiercely knocked back by Beijing last February, to make an example for any other provinces thinking of going their own way. The absolute prohibition on people moving from their homes there, in one of the most dynamic and lively cities of modern China, was perfect proof that if the government could bring about this situation there, it could do it anywhere.

This case study also reveals some important things about the Xi way of governing. It is increasingly almost imperial in style, with broad, high-level policy announcements made in Beijing, sometimes of almost Delphic succinctness, which are then handed down to various levels of government to do as they will. Exactly how and when the discussion amongst Xi and his Politburo colleagues on the best response to COVID happened is unclear. In a world where almost every political system seems to leak incessantly, the Chinese one is unique in maintaining its opacity and secretiveness – no mean achievement in the social media era.

The Communist Party is very aware of how relatively small incidents can mount up and then generate overwhelming force. It itself coined the Chinese phrase ‘a single spark can start a prairie fire.’

Rumors of clashes between Xi and his premier Li Keqiang on the effectiveness of the current response remain just that – rumors, with precious little hard evidence to back them up. Who in the current imperial system might dare to speak from the ranks and say that policy must change is unclear. Scientists should deal in hard facts – but we all know that science is susceptible to politicization. Experts in China have to offer their expertise in a highly political context. A declaration that the current approach is not fit for purpose can easily be reinterpreted as an attempt to launch an indirect attack on the core leader. With an important Congress coming up later this year, at which Xi is expected to be appointed for another five years in power, sensitivities are even more intense than normal. It is little wonder that the COVID strategy status quo settled on last year has not shifted.

Things, however, may well change, and change quickly. China is moving into tricky economic territory. The impact of the pandemic on global supply chains, along with the various stresses domestically on the housing market, and productivity, have shrunk expectations for growth. A predicted 6% in the earlier part of the year now looks overly ambitious. There is a real possibility China might experience a recession. At a moment like this, the government, which after all operates as a constant crisis and risk management entity, might do what it does best and prompt rapid, and dramatic, changes.

The handling of COVID-19 might look like further proof that Chinese politics under Xi is repressive and zero-sum. But even in an autocratic state like the current People’s Republic, the pandemic will not leave politics unchanged.

This doesn’t mean that China’s COVID-19 bind gets any easier. Like the country’s serious demographic challenges, with a rapidly aging population, the only thing the government will be picking an argument with is reality as it proceeds into the future. As with Europe and the US, being more liberal about facing COVID-19 will involve accepting some of the harsh consequences – rising fatalities, particularly for the elderly and vulnerable, and health systems put under enormous stress. In such a huge, complex country, and of enormous geopolitically importance, a misstep could easily lead to huge and unwanted consequences, generating discontent and triggering mass protests in a way reminiscent of 1989. The Communist Party is very aware of how relatively small incidents can mount up and then generate overwhelming force. It itself coined the Chinese phrase ‘a single spark can start a prairie fire.’ One such spark – the introduction of Marxism into China in the 1910s – led to its gaining of power three decades later.

The handling of COVID-19 might look like further proof that Chinese politics under Xi is repressive and zero-sum. But I suspect that even in an autocratic state like the current People’s Republic, the pandemic will not leave politics unchanged. In particular, the middle classes in cities like Shanghai have had their patience tested in recent months. This is the key group for Xi, the heart of his new innovative, more self-dependent, higher-quality service sector workers in an urbanized economy. Their support remains crucial if Xi is able to steer China towards the moment when it hopes it will become the world’s largest economy. Policies to try to placate them by addressing imbalances, critical environmental issues and improving public health are likely to only increase. Delivery however will be key.

Faced with a potentially life-threatening infectious disease, the Party can throw out injunctions and claim it has been the victim of bad luck. But an ailing economy and no clear signs of the government knowing how to manage this will prove a toxic mixture for it. Xi and his third term in office will be all about delivery. The question is whether, even with the formidable suite of powers he has, he can do this. Governing China has always been the ultimate political challenge. COVID-19 has made that even harder.

Science-Watching: Proton-Coupled Energy Transfer/Omicron Spike Function

[from Science, First Release Notification for July 21]

Proton-Coupled Energy Transfer in Molecular Triads

Abstract

A photochemical mechanism was experimentally discovered and denoted proton-coupled energy transfer (PCEnT). A series of anthracenephenolpyridine triads formed the local excited anthracene state after light excitation at ca. 400 nm, which led to fluorescence around 550 nm from the phenolpyridine unit. Direct excitation of phenolpyridine would have required light around 330 nm, but the coupled proton transfer within the phenolpyridine unit lowered its excited state energy so that it could accept excitation energy from anthracene. Singlet-singlet energy transfer thus occurred despite the lack of spectral overlap between the anthracene fluorescence and the phenolpyridine absorption. Moreover, theoretical calculations indicated negligible charge transfer between the anthracene and phenolpyridine units. PCEnT was suggested as an elementary reaction of possible relevance to biological systems and future photonic devices.

Access the full paper [via institutional access or paid download].

Omicron Spike Function and Neutralizing Activity Elicited by a Comprehensive Panel of Vaccines

Abstract

The SARS-CoV-2 Omicron variant of concern comprises several sublineages with BA.2 and BA.2.12.1 having replaced the previously dominant BA.1, and BA.4 and BA.5 increasing in prevalence worldwide. We show that the large number of Omicron sublineage spike mutations lead to enhanced ACE2 binding, reduced fusogenicity, and severe dampening of plasma neutralizing activity elicited by infection or seven clinical vaccines relative to the ancestral virus. Administration of a homologous or heterologous booster based on the Wuhan-Hu-1 spike sequence markedly increased neutralizing antibody titers and breadth against BA.1, BA.2, BA.2.12.1, and BA.4/5 across all vaccines evaluated. Our data suggest that although Omicron sublineages evade polyclonal neutralizing antibody responses elicited by primary vaccine series, vaccine boosters may provide sufficient protection against Omicron-induced severe disease.

Read the full paper. [Archived PDF]

Coronavirus Update: Fall Boosters Could Have Bits of Omicron

[from ScienceNews Coronavirus Update, by Erin Garcia de Jesús]

For all the coronavirus variants that have thrown pandemic curve balls—including alpha, beta, gamma, deltaCOVID-19 vaccines have stayed the same. That could change this fall.

Yesterday, an advisory committee to the U.S. Food and Drug Administration met to discuss whether vaccine developers should update their jabs to include a portion of the omicron variant—the version of the coronavirus that currently dominates the globe. The verdict: The omicron variant is different enough that it’s time to change the vaccines. Exactly how is up in the air; the FDA still has to weigh in and decide what versions of the coronavirus will be in the shot.

“This doesn’t mean that we are saying that there will be boosters recommended for everyone in the fall,” Amanda Cohn, chief medical officer for vaccine policy at the U.S. Centers for Disease Control and Prevention said at the June 28 advisory meeting. “But my belief is that this gives us the right vaccine for preparation for boosters in the fall.”

The decision to update COVID-19 vaccines didn’t come out of nowhere. In the two-plus years that the coronavirus has been spreading around the world, it has had a few “updates” of its own—mutating some of its proteins that allow the virus to more effectively infect our cells or hide from our immune systems.

Vaccine developers had previously crafted vaccines to tackle the beta variant that was first identified in South Africa in late 2020. Those were scrapped after studies showed that current vaccines remained effective.

The current vaccines gave our immune systems the tools to recognize variants such as beta and alpha, which each had a handful of changes from the original SARS-CoV-2 virus that sparked the pandemic. But the omicron variant is a slipperier foe. Lots more viral mutations combined with our own waning immunity mean that omicron can gain a foothold in the body. And vaccine protection isn’t as good as it once was at fending off COVID-19 symptoms.

The shots still largely protect people from developing severe symptoms, but there has been an uptick in hospitalizations and deaths among older age groups, Heather Scobie, deputy team lead of the CDC’s Surveillance and Analytics Epidemiology Task Force said at the meeting. And while it’s impossible to predict the future, we could be in for a tough fall and winter, epidemiologist Justin Lessler of the University of North Carolina at Chapel Hill said at the meeting. From March 2022 to March 2023, simulations project that deaths from COVID-19 in the United States might number in the tens to hundreds of thousands.

A switch to omicron-containing jabs may give people an extra layer of protection for the upcoming winter. PfizerBioNTech presented data at the meeting showing that updated versions of its mRNA shot gave clinical trial participants a boost of antibodies that recognize omicron. One version included omicron alone, while the other is a twofer, or bivalent, jab that mixes the original formulation with omicron. Moderna’s bivalent shot boosted antibodies too. Novavax, which developed a protein-based vaccine that the FDA is still mulling whether to authorize for emergency use, doesn’t have an omicron-based vaccine yet, though the company said its original shot gives people broad protection, generating antibodies that probably will recognize omicron.

Pfizer and Moderna both updated their vaccines using a version of omicron called BA.1, which was the dominant variant in the United States in December and January. But BA.1 has siblings and has already been outcompeted by some of them.

Since omicron first appeared late last year, “we’ve seen a relatively troubling, rapid evolution of SARS-CoV-2,” Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research in Silver Spring, Maryland, said at the advisory meeting.

Now, omicron subvariants BA.2, BA.2.12.1, BA.4 and BA.5 are the dominant versions in the United States and other countries. The CDC estimates that roughly half of new U.S. infections the week ending June 25 were caused by either BA.4 or BA.5. By the time the fall rolls around, yet another new version of omicron—or a different variant entirely—may join their ranks. The big question is which of these subvariants to include in the vaccines to give people the best protection possible.

BA.1, the version already in the updated vaccines, may be the right choice, virologist Kanta Subbarao said at the FDA meeting. An advisory committee to the World Health Organization, which Subbarao chairs, recommended on June 17 that vaccines may need to be tweaked to include omicron, likely BA.1. “We’re not trying to match [what variants] may circulate,” Subbarao said. Instead, the goal is to make sure that the immune system is as prepared as possible to recognize a wide variety of variants, not just specific ones. The hope is that the broader the immune response, the better our bodies will be at fighting the virus off even as it evolves.

The variant that is farthest removed from the original virus is probably the best candidate to accomplish that goal, said Subbarao, who is director of the WHO’s Collaborating Center for Reference and Research on Influenza at the Doherty Institute in Melbourne, Australia. Computational analyses of how antibodies recognize different versions of the coronavirus suggest that BA.1 is probably the original coronavirus variant’s most distant sibling, she said.

Some members of the FDA advisory committee disagreed with choosing BA.1, instead saying that they’d prefer vaccines that include a portion of BA.4 or BA.5. With BA.1 largely gone, it may be better to follow the proverbial hockey puck where it’s going rather than where it’s been, said Bruce Gellin, chief of Global Public Health Strategy with the Rockefeller Foundation in Washington, D.C. Plus, BA.4 and BA.5 are also vastly different from the original variant. Both BA.4 and BA.5 have identical spike proteins, which the virus uses to break into cells and the vaccines use to teach our bodies to recognize an infection. So when it comes to making vaccines, the two are somewhat interchangeable.

There are some real-world data suggesting that current vaccines offer the least amount of protection from BA.4 and BA.5 compared with other omicron subvariants, Marks said. Pfizer also presented data showing results from a test in mice of a bivalent jab with the original coronavirus strain plus BA.4/BA.5. The shot sparked a broad immune response that boosted antibodies against four omicron subvariants. It’s unclear what that means for people.

Not everyone on the FDA advisory committee agreed that an update now is necessary—two members voted against it. Pediatrician Henry Bernstein of Zucker School of Medicine at Hofstra/Northwell in Uniondale, N.Y., noted that the current vaccines are still effective against severe disease and that there aren’t enough data to show that any changes would boost vaccine effectiveness. Pediatric infectious disease specialist Paul Offit of Children’s Hospital of Philadelphia said that he agrees that vaccines should help people broaden their immune responses, but he’s not yet convinced omicron is the right variant for it.

Plenty of other open questions remain too. The FDA could authorize either a vaccine that contains omicron alone or a bivalent shot, although some data hinted that a bivalent dose might spark immunity that could be more durable. Pfizer and Moderna tested their updated shots in adults. It’s unclear what the results mean for kids. Also unknown is whether people who have never been vaccinated against COVID-19 could eventually start with such an omicron-based vaccine instead of the original two doses.

Maybe researchers will get some answers before boosters start in the fall. But health agencies need to make decisions now so vaccine developers have a chance to make the shots in the first place. Unfortunately, we’re always lagging behind the virus, said pediatrician Hayley Gans of Stanford University. “We can’t always wait for the data to catch up.”

WANG Huiyao: To Save Global Trade, Start Small

[from the Center for China and Globalization]

by WANG Huiyao (王辉耀), Founder of the Center for China and Globalization

The global economy is being rocked by war, sanctions and spiraling commodity prices—not to mention the ongoing strain of the pandemic, geopolitical tensions and climate change. These compounding risks present a serious challenge to the system of open trade that the World Trade Organization was designed to uphold. But it also offers a chance for the beleaguered organization, which is holding its first ministerial conference since 2017, to prove its continuing relevance.

The WTO has traditionally focused on combating protectionism—measures designed to insulate producers from international competition. Now, though, the biggest threats to free trade come from policies meant to safeguard national security and protect citizens from risks, such as those related to health, the environment or digital spaces.

Former WTO Director-General Pascal Lamy has called this growing use of export controls, cybersecurity laws, investment blacklists, reshoring incentives and the like “precautionism.” It’s been on the rise since the start of the pandemic, when many countries moved to restrict exports of medical supplies and other essentials. COVID-19 has also raised concerns about the vulnerability of supply chains, particularly those dependent on geopolitical rivals.

The world’s two biggest trading nations, the United States and China, have both engaged in precautionism. The U.S. is actively pursuing a policy of “friend-shoring”—shifting trade flows from potentially hostile countries to friendlier ones. China’s “dual circulation” strategy aims in part to reduce dependence on foreign imports, especially technology, while its government has long imposed limits on data flows in and out of the country.

With Russia’s invasion of Ukraine, the momentum toward friend-shoring has grown. Meanwhile, food shortages and surging prices have triggered another round of precautionary measures: Since the war began, 63 countries have imposed a more than 100 export restrictions on fertilizer and foodstuffs.

While the impulse driving such policies is understandable, the trend could cause great harm if allowed to run unchecked. It will increase inflation and depress global growth, especially if it involves costly redeployment of supply chains away from efficient producers such as China. A recent WTO study estimated that decoupling the global economy into “Western” and “Eastern” blocs would wipe out nearly 5% in output, the equivalent of $4 trillion.

As a recent study by the International Monetary Fund points out, the way to make global value chains more resilient is to diversify, not dismantle them. Turning away from open trade will only make states more vulnerable to economic shocks such as war, disease or crop failures.

The WTO is an obvious vehicle to rally collective action on these issues. However, like other global institutions, it has been weakened by years of deadlock. At this week’s meeting, countries should start to build positive momentum with some small but symbolically significant breakthroughs to show the WTO can still mobilize joint action.

Given current threats to food security, at the very least members should agree not to restrict exports of foodstuffs purchased for the World Food Programme. A step further would be a joint statement calling on members to keep trade in food and agricultural products open and avoid imposing unjustified export restrictions. There should also be closer coordination to smooth supply chains and clogged logistics channels.

Another low-hanging fruit is finally securing a  waiver covering intellectual property rights for COVID-19-related products. This proposal has languished for over 18 months but has now been redrafted to address concerns from the U.S. and European Union. Signing it would go some way to expanding global access to vaccines, which are still sorely needed in many parts of the world.

Beyond this week, the WTO secretariat and members need to develop a work program to reform the organization. This should include developing a framework to ensure that if states do take precautionary measures, they do so in a transparent, rules-based manner that does not slide into more harmful forms of protectionism.

Reviving the WTO’s defunct dispute settlement mechanism is a clear priority. Twenty-five members have agreed to an interim arrangement that would function in a similar way. More members should join this agreement, ideally including the U.S., and start negotiating the full restoration of a binding mechanism. They should also set clear criteria for carveouts for legitimate precautionary measures related to national security, healthcare and environmental issues.

No one should expect big breakthroughs in Geneva. But practical agreements on immediate priorities such food security and vaccines would at least help to reassert the WTO’s relevance and show that the world’s trading partners are not simply going to give up on multilateralism. At this dangerous moment, even small victories are welcome.

Economy Watching: Philadelphia Fed

from the Federal Reserve Bank of Philadelphia:

Fed President Patrick Harker Says It Will “Soon” Be Time to Taper Asset Purchases

Philadelphia Fed President Patrick Harker told a virtual audience at the Prosperity Caucus in Washington, D.C., that the asset purchases once necessary during the acute phase of the COVID-19 pandemic are no longer effective as a tool for supporting the economy. He also said the U.S. economy created millions of jobs in recent months, but “we just can’t fill them.”

Economic Outlook: Growth Despite Constraints

Good evening! Thanks so much for having me. I understand that when this group meets in person there is usually pizza involved — so I intend to collect on that debt next time we do this in the flesh.

I plan to offer a few remarks about the state of the national economy and the path of Federal Reserve policy. Then we can move to our Q&A, which I’m really looking forward to.

But before I do that, I need to give you the standard Fed disclaimer: The views I express today are my own and do not necessarily reflect those of anyone else on the Federal Open Market Committee (FOMC) or in the Federal Reserve System.

Fed Structure

I know this group encompasses a very diverse crowd — we have everyone from House staffers to Senate staffers here. So, just in case anyone doesn’t know, I want to begin by giving you a very brief explanation of what, exactly, a regional Federal Reserve Bank is. Our nation’s central bank, after all, is quite unusual — unique, even — in its design.

The configuration of the Federal Reserve System — a central bank with a decentralized structure — owes its existence to the 1913 Federal Reserve Act. It is something of a testament to old-fashioned American compromise and reflects the unique demands of the United States and our economy.

The System consists of a Board of Governors, which sits in Washington, and 12 regional Banks around the country.

The Board seats seven governors, including the Chair. Each regional Bank has its own president and board of directors, which is made up of business, banking, and community leaders from the area. Fundamentally, this provides the Fed with a perspective — within each District — of the sectors and issues that make the region tick. Mine is the Third District, which encompasses eastern Pennsylvania, South Jersey, and the state of Delaware. We’re the smallest District geographically, but I like to think we punch above our weight.

The FOMC, which is responsible for monetary policy, is composed of the Fed’s governors and regional Bank presidents. Regional Bank presidents don’t always get to vote. Most of us rotate into a voting position every three years, but the governors always vote, as does the president of the New York Fed. New York, owing to the presence of Wall Street, enjoys something of a “first among equals” status within the System.

While the rest of us don’t always vote, we do always represent our Districts and play a part in the discussion. If you were at a normal FOMC meeting, you probably wouldn’t be able to tell a voting member until the end of the meeting when it’s time to raise hands. Everybody contributes.

The Fed’s decentralized nature is, in my view, a unique strength. We’re making national policy, but we’re doing it for an enormous country, and the averages of economic data can obscure realities on the ground. Conditions look very different in Philadelphia, Dover, or Washington than they do in Dallas, Salt Lake City, or Honolulu. This System gives a voice to a range of localities and sectors. It also allows us to focus on regional issues within each Bank’s District.

The United States has a unique set of needs. It’s easy to forget that we’re an outlier because we’re such a massive country: Only Russia and Canada are bigger geographically, only China and India have larger populations, and no one country has a bigger economy, at least for now. And that economy is vast, spreading across sectors and natural resources in a way that is not typical of other nations.

So, it makes sense that we have a System that feeds back information from around the country.

The State of the Economy

And what that information is telling us is that, for the past 18 months, the economy has moved in tandem with the waxing and waning of the COVID-19 pandemic. During periods when case rates and hospitalizations have declined, the economy has surged as American consumers have voted with their wallets. When COVID-19 risks abate, more Americans dine out at restaurants, check in to hotels, and fill up airplanes. Those are important categories of spending in a country where consumption makes up about 70 percent of total economic activity. In the second quarter of this year, for instance, GDP grew at a very healthy annualized rate of around 6.7 percent as case rates plummeted.

And, of course, the opposite occurs during periods when the virus spikes. When the Delta variant of COVID-19 erupted, fomenting the country’s fourth major wave of the pandemic, things started moving sideways. Consumer confidence tanked, and large industries like hospitality and leisure stagnated at best. So for this quarter, we can expect growth to come in at an annualized rate of around 3 percent, a sharp slowdown from earlier this year. 

But there are reasons to be sanguine that the country’s recovery from this wave of COVID-19 may prove more durable than in the past and that we can avoid a fifth wave. And that is because more than half of the country is fully vaccinated. Getting more shots into arms will save lives and aid the recovery by reducing the size and severity of future spikes. The Delta variant has also concentrated minds: It seems to have not only persuaded more Americans to get shots on their own, but it also pushed more corporations and institutions to mandate their employees to get vaccinated. That is cause for optimism.

Filling me with less optimism is the persistent constraints the economy is operating under.

The COVID-19 pandemic has revealed how fragile many of our supply chains are. We’re now experiencing shortages of crucial parts like computer chips, which has hobbled not only the production of cars and trucks, but also comparatively smaller durable goods like home appliances. My recent experience attempting to purchase a printer — there were essentially none at my local electronics store — testifies to that. And good luck trying to find a new washing machine or dishwasher.

These supply chain constraints are rippling through the entire economy. Manufacturers in our region have reported having to curtail production because of difficulties securing raw materials. We’re also seeing low inventory of everything from shoes to backpacks to even chicken wings, which is a particularly troubling development as the NFL season is picking up. Unfortunately, there are indications that these constraints could persist for a couple of more years.

There’s another input lacking in supply as well, further constraining the economy: labor. It isn’t true, as was widely reported, that the economy only created 194,000 jobs in September. In reality, the U.S. economy has created many millions of jobs in recent months — we just can’t fill them. Indeed, job openings are at record highs, hitting nearly 10.5 million at the end of August. Simultaneously, more people are quitting their jobs, and the rate at which open positions are being filled is continuing to slow.

It seems that a combination of factors — trouble accessing childcare or eldercare, lingering fears about the virus, the rise in equities and home values spurring people to retire, and perhaps a general revaluation of life choices — is persuading a lot of Americans to stay on the sidelines even as the economy has reopened. And notably, the elimination of extra federal unemployment benefits has not — at least not yet — appeared to nudge people back into the workforce. I do expect that will change eventually and especially as other forbearance programs run out.

So, where does all of this leave us? For 2021, I would expect GDP growth to come in around 5.5 percent, which is a downward revision from before Delta took hold. Growth will then moderate to about 3.5 percent in 2022, and 2.5 percent in 2023. Inflation, meanwhile, should come in around 4 percent for 2021, though I do see upside risk here. After that, our modal forecast — that is, the average of all of our forecasts — calls for inflation of a bit over 2 percent for 2022 and right at 2 percent in 2023.

Fed Policy

In terms of monetary policy, I am in the camp that believes it will soon be time to begin slowly and methodically — frankly, boringly — taper our $120 billion in monthly purchases of Treasury bills and mortgage-backed securities. This comes down to the efficacy of these purchases as a tool.

They were necessary to keep markets functioning during the acute phase of the crisis. But to the extent that we are still dealing with a labor force issue, the problem lies on the supply side, not with demand. You can’t go into a restaurant or drive down a commercial strip without noticing a sea of “Help Wanted” signs. Asset purchases aren’t doing much — or anything — to ameliorate that.

After we taper our asset purchases, we can begin to think about raising the federal funds rate. But I wouldn’t expect any hikes to interest rates until late next year or early 2023, unless the inflation picture changes dramatically.

Conclusion

Given the strong headwinds facing the economy, it is a testament to its underlying strength that growth continues at a relatively robust pace. That is a tribute, as always, to the ingenuity and tenacity of our people, especially in the face of huge challenges.

Thank you very much again for having me. And now let’s move on to questions.