How the Jackson Hole Conference Became an Economic Obsession

Investors and economists are carefully monitoring the proceedings of this week's event. Why has a distant conference in Wyoming gained such significant importance?

Jeanna Smialek is currently attending the yearly event held by the Federal Reserve Bank of Kansas City in Jackson, Wyoming.

August 24th, 2023, Revised at 8:16 a.m. Eastern Time.

Movie directors have the prestigious Cannes Film Festival as their gathering place. Wealthy magnates have the renowned World Economic Forum in Davos. On the other hand, economists have their own significant event known as Jackson Hole.

This week, the most prestigious economic gathering in the world is happening in the valley situated at the foot of the Teton mountains. The lodge hosting the event is located approximately 34 miles away from Jackson, Wyoming, providing a stunning backdrop.

In this trendy hotel located in a national park, which was generously gifted by a Rockefeller family member, approximately 120 economists gather every August to delve into a carefully selected collection of research papers focused on a theme relevant to policies. You might spot government representatives from various countries staring out of the lobby's expansive windows, hoping to catch a glimpse of a moose, or engaging in lively discussions about the effectiveness of specific inflation models while sipping on refreshing huckleberry cocktails.

This gathering, despite its geeky nature, has captured the attention of financial enthusiasts, scholars, and journalists in Wall Street. The Federal Reserve Bank of Kansas City, the event organizer, appears to have a deep understanding of economic principles: they deliberately limit the number of attendees, increasing the event's exclusivity. However, what makes Jackson Hole even more significant is its tendency to create substantial headlines.

The event that everyone is eagerly awaiting is a talk by the leader of the Federal Reserve. This talk usually occurs on Friday mornings and often provides the central bank with an opportunity to convey their policy intentions. Jerome H. Powell, the current head of the Federal Reserve, has garnered significant attention with every speech he has given at Jackson Hole. As a result, investors are anxiously anticipating his speech this year. Interestingly, this speech is the only part of the private conference that is made available to the general public.

Mr. Powell is scheduled to deliver a speech amidst a time of uncertainty regarding the Federal Reserve's future actions. Although inflation has been decreasing, the economy still maintains a remarkable level of growth. The financial industry is attempting to decipher whether Fed officials believe it is necessary to raise interest rates further in 2022, particularly in September. Up to this point, policymakers have not provided much indication about their intentions. In March 2022, they increased interest rates from close to zero to the range of 5.25 to 5.5 percent, but have not ruled out the possibility of additional adjustments.

Many individuals will closely examine the words uttered by Mr. Powell, but according to Seth Carpenter, a previous economist at the Federal Reserve who currently works at Morgan Stanley, the key aspect to consider is the manner in which he delivers his speech. Carpenter believes that it is highly unlikely that Mr. Powell intends to indicate or pledge any immediate actions in terms of policies.

Despite its current popularity, the Jackson Hole conference, scheduled from Thursday evening until Saturday, hasn't always been the center of attention in Washington and New York. Let's delve into its journey towards the esteemed event it has become.

Formerly Wild West Setting

Jackson used to welcome a completely diverse group of individuals: The city was previously so isolated that it became a popular refuge for criminals.

In 1920, during a time when Jackson had around 300 inhabitants, The New York Times referenced a recent era where it was often assumed that if a significant crime occurred anywhere between the Mississippi River and the Pacific Coast, the likely culprit would either be making their way to Jackson's Hole or would have already arrived.

The isolation of Jackson also resulted in the untouched beauty of the mountains and valleys, making it an ideal location for environmentalists. John D. Rockefeller Jr., a wealthy individual who supports charitable causes, secretly obtained and then gifted a significant amount of land that would later become the Jackson Hole area of Grand Teton National Park. In approximately 1950, he commenced the construction of the Jackson Lake Lodge.

The modern design of the lodge didn't receive much love from the residents at first. The locals even went as far as calling it a "concrete monstrosity" according to The Times in 1955. One of the main criticisms was that Rockefeller's contribution to the park didn't include any luxurious amenities like a golf course or a spa.

However, in 1982, the generous area and expansive views of the site had attracted the attention of the Kansas City Federal Reserve. They were in need of a fresh venue for their annual conference, which had commenced back in 1978.

The Gathering Since 1982

Ranked highly for its appeal, the Jackson Lake Lodge had the added advantage of being in close proximity to exceptional fly fishing, a definite draw for the former Federal Reserve chair, Paul A. Volcker. He accepted the invitation and due to the impressive guest list and the breathtaking surroundings, Jackson Hole swiftly became the annual highlight for the Federal Reserve.

In 1985, The Times reported that nearly 50% of the 137 individuals who were invited this year actually attended, which was quite an impressive turnout.

The conference's dimensions have remained relatively stable: On average, there are around 115 to 120 participants every year, as stated by the Kansas City Fed. However, the rate of participation has notably increased since 1985, although the specific increment was not disclosed by the Federal Reserve branch.

However, the surrounding circumstances have changed.

Teton County, where Jackson resides (currently a thriving town with 11,000 residents) and also encompasses Jackson Hole, now houses more affluent individuals than lawless cowboys. It has transformed into the most unequal location in the United States, evident through significant disparities in wealth and income. The occasion, originally labeled as humble and traditional, now faces difficulties in denying its luxurious surroundings.

The event organized by the Federal Reserve has increasingly gained prestige. Alan Greenspan, who was the Chair of the Fed at the time, gave the initial address at the Jackson Hole conference in 1991, and he continued to do so for 14 consecutive years until his retirement.

Most of the people who replaced him have done the same. Mr. Powell has utilized his public addresses to warn against excessive dependence on difficult-to-measure economic factors, to introduce a completely fresh approach to controlling monetary policy, and to promise that the Federal Reserve would take all necessary actions to control fast-growing inflation.

Interest in Jackson Hole also grew due to the 2008 worldwide economic meltdown, when central banks came to the rescue of the markets and boosted economies, thereby increasing their power. In the subsequent years, uninvited media personnel, financial analysts from Wall Street, and protest groups started to gather in the lodge's reception area during the events. Being a speaker or moderator at a Jackson Hole session gradually became a sign of stardom in the field of economics.

Esther George, the head of the Kansas City Federal Reserve from 2011 to early 2023, held a position of authority as the event gained greater attention. In response to the increased spotlight, she and her team made changes to allocate the recognition to different individuals.

There has been a significant decrease in the number of economists from the banking and finance industry who have been invited to the event since 2014. This is partially due to the increased public scrutiny placed on the Federal Reserve's ties to Wall Street in the aftermath of the financial crisis. The individuals who are selected to attend the event are typically current or former high-ranking economic officials and promising academics. Moreover, there is a growing inclusion of women, individuals from diverse racial backgrounds, and those with differing economic perspectives among the attendees.

In 2012, Ms. George initiated an unstructured social gathering for women in the field of economics. At that time, the number of female economists was so limited that they could easily gather and converse at a compact table, according to her recollection. This prompted her to ponder upon the absence of other perspectives in these gatherings.

The previous year, a multitude of females were present during the joyous period.

However, the Jackson Hole conference might be embarking on a fresh chapter. Ms. George had to step down in 2023 according to Federal Reserve regulations, hence, although she played a role in organizing this conference, she will be handing over responsibility for future events to her replacement, Jeffrey Schmid, a former CEO of Mutual of Omaha Bank and a university administrator. Mr. Schmid officially assumed the position of Kansas City Fed president on Monday and will be making his first appearance as a Fed representative at the upcoming gathering.