Applications for unemployment benefits are likely to reach a new pandemic low, showing a healing labor market even as the Covid-19 Delta variant continues to cause uncertainty.

Economists surveyed by The Wall Street Journal estimate that initial jobless claims, a proxy for layoffs, will decline by 10,000 to a seasonally adjusted 365,000 for the week ended Aug. 14. That would be the lowest level since the pandemic took hold in the U.S. in March 2020. The Labor Department will release the latest numbers at 8:30 a.m. ET Thursday.

New jobless claims are down more than 50% since January, but have hovered in a fairly narrow range between 424,000 and 368,000 since late May.

The Delta variant has caused recent increases in new Covid-19 cases and hospitalizations throughout the country. But while that might cause the pace of growth to ease, some economists say the dynamic between Covid-19 and economic activity has evolved over the past year.

“The data...

America likes being exceptional, but too much exceptionalism when it comes to inflation is starting to cause concern. A closer look at the data suggests that investors can keep calm.

On Wednesday, official figures confirmed that the harmonized consumer-price index in the eurozone rose 2.2% in July from a year earlier. This marked an acceleration relative to June, when inflation was 1.9%. But stripping out energy, food, alcohol and tobacco prices to see what is dubbed “core” inflation, the index only rose 0.7%, down from 0.9% the previous month.

What is surprising isn’t inflation being too strong in the eurozone, but rather it being too weak relative to the U.S., where CPI growth reached 5.4% in July, with core inflation at 4.3%.

Officials argue that today’s inflation is only temporarily higher as global prices rebound from the troughs of the pandemic and companies work through supply bottlenecks. Yet, if it is so much higher in the U.S., doesn’t this...

Two former high-level Federal Reserve staff members say in new research the U.S. central bank should raise its inflation target to 3% from its current 2% level to help bolster the job market. “The economy could enjoy a temporary but substantial boom in employment and output as it adjusted to the increase in the target,” David Reifschneider and David Wilcox write in a paper for the Peterson Institute for International Economics. “Model simulations suggest that if the target were lifted to 3 percent, the unemployment rate could average ¾ percentage point or more below its sustainable level during the first 15 years after...

Federal Reserve officials last month indicated they were on track to begin reversing their easy-money policies later this year, despite lingering differences over when exactly to pull back support for an economy growing more rapidly than expected earlier this year.

Minutes of their July 27-28 Fed meeting, released Wednesday, shed light on an emerging consensus to begin scaling back their $120 billion in monthly purchases of Treasury and mortgage securities at any of their three remaining policy meetings this year.

“Most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes said.

The minutes said several officials favored reducing asset purchases in the coming months in order to better position the Fed to potentially raise rates if the economy strengthens further next year, while others thought the Fed...

Federal Reserve Bank of St. Louis leader James Bullard doesn’t expect the surge in Covid-19 cases tied to the Delta variant to derail a robust U.S. economic recovery.

“We do track the pandemic every day. We’re still in a crisis and we do have to, you know, be nimble,” Mr. Bullard said Wednesday in a virtual appearance hosted by MarketWatch. “The most important thing about this is that the economy has clearly adapted to the pandemic situation,” the official said, and that suggests it can weather the current surge.

“You’ve...

Freddie Mac has named Jerry Mauricio as its senior vice president and chief compliance officer, an appointment coming as the mortgage giant looks to become free of government conservatorship after more than 12 years.

McLean, Va.-based Freddie Mac, which backs mortgage loans, was effectively nationalized during the 2008 housing crisis and is facing the latest setback to its quest to exit government control after the Biden administration ousted Mark Calabria as director of the Federal Housing Finance Agency. He had given priority to returning Freddie Mac to private hands. The Biden administration has signaled it isn’t in a hurry to privatize Freddie Mac or Fannie Mae.

U.S. stocks traded mostly lower Wednesday ahead of the release of minutes from the Federal Reserve’s July policy meeting.

The Dow Jones Industrial Average dropped 135 points, or 0.4%, to 35207 shortly after the opening bell. The S&P 500 edged down 0.2% after losing 0.7% on Tuesday in its biggest drop in nearly a month. The Nasdaq Composite wobbled between small gains and losses and was recently up less than 0.1%.

Minutes from the Fed meeting, due at 2 p.m. ET, will offer more indications of when the central bank may begin scaling back easy-money policies that were adopted at the start of the pandemic. Fed officials are nearing consensus on beginning to taper bond purchases in about three months, The Wall Street Journal reported this week. The Fed’s bond-buying program and lower interest rates have helped the stock market power higher, with major indexes notching records earlier this week.

“As long as policy remains reasonably supportive, growth...

If the Federal Reserve’s management of the economy were all that mattered, Chairman Jerome Powell would probably be cruising toward reappointment. His response to the pandemic and focus on full employment have drawn bipartisan praise.

But the Fed is also a financial regulator, an inherently more political role than monetary policy. Mr. Powell’s shot at another term when this one expires in February is now threatened by progressive Democrats whose priority is a more activist Fed on regulation and other nonmonetary matters.

Mr. Powell almost certainly has enough votes from both parties to be confirmed; the question is whether the holdouts can persuade President Biden to nominate someone else. Last week The Wall Street Journal reported that Mr. Biden’s economic team generally supports giving Mr. Powell a second term, but resistance from Democrats including Sen. Elizabeth Warren (D., Mass.) could lead to his replacement. “Over and over and over he has weakened a...

Good day. Federal Reserve Chairman Jerome Powell told students and teachers Tuesday during a virtual event that the U.S. economy is unlikely to return to how it was before the pandemic, as sectors reorganize themselves, and added that some groups that were hard hit by the pandemic have yet to fully recover. He also said it is not clear what the current Covid surge holds for the economy. Meanwhile, Minneapolis Fed President Neel Kashkari unloaded on cryptocurrencies, saying they “95% fraud, hype, noise and confusion.”

Now on to today’s news and analysis.

The Reserve Bank of New Zealand left its policy rate unchanged at a record low, as an outbreak of the Covid-19 Delta variant upends daily life and threatens to set back the economic recovery.

The central bank on Wednesday said the economy no longer needs the current level of monetary stimulus, but it decided to keep the cash rate at 0.25% for now because of uncertainty stemming from the virus outbreak.

New...

Federal Reserve Chairman Jerome Powell said the coronavirus pandemic has borne down particularly hard on the nation’s students and educators and will change how young people view the world and their place in it.

America’s schoolchildren “have been forced, sooner than most people, to consider what in life is truly important,” Mr. Powell said in the text of a speech prepared for delivery before a gathering of educators and students Tuesday. He didn’t comment on monetary policy or the economic outlook in his prepared remarks.

With the experience gained in the pandemic, “I hope this will cause you to think about how you want to make your mark, knowing that things do change, and sometimes they change quickly,” Mr. Powell said. “This is an extraordinary time, and I believe that it will result in an extraordinary generation,” he added.

Mr. Powell weighed in as he and his colleagues are preparing for a pullback in the support the central bank has been offering...

SYDNEY—As Australia battles to root out Covid-19 clusters that are locking down its major cities and fanning increasing talk of a coming recession, the Reserve Bank of Australia has adopted a more cautious posture that gives it room to change course on policy if things continue to go from bad to worse.

In minutes of its August policy meeting on Tuesday, the RBA moved to signal its growing concern that the Delta strain of the virus represents a new challenge for an economy that is expected to contract sharply in the third quarter,...

Good day. Eric Rosengren, president of the Federal Reserve Bank of Boston, said his outlook for the U.S. economy has improved this year despite the recent Covid-19 outbreaks associated with the Delta variant, and that he expects strong hiring to allow the central bank to soon begin reversing the extremely accommodative monetary policy adopted at the height of the coronavirus pandemic. Meanwhile, Minneapolis Fed leader Neel Kashkari is edging toward supporting a reduction in Fed asset buying. He also said he believes the way the U.S. central bank communicates its policy choices to the world is in need of some reform. 

 Now on to today’s news and analysis.

Spending at U.S. retailers likely fell in July, amid cooling auto purchases and signs of some pullback in consumer demand as Covid-19 cases tied to the Delta variant rose, economists say.

Economists surveyed by The Wall Street Journal estimate the Commerce Department will report Tuesday that retail sales—a measure of purchases at stores, at restaurants and online—fell by 0.3% last month compared with June. Excluding autos—a category where supply-chain issues have limited available inventory—sales are estimated to have risen by 0.2%.

Retail sales rose briskly in June, as shoppers directed spending toward services, such as dining out and traveling, and away from goods. That shift occurred as more Americans became vaccinated and state and local governments eliminated many Covid-19-related restrictions, some of which have now been reimposed with the recent rise in coronavirus cases.

Pooja Sriram, U.S. economist at Barclays, said she expects increased...

Minneapolis Fed leader Neel Kashkari believes the way the U.S. central bank communicates its policy choices to the world is in need of some reform.

In the transcript of an interview with a Bloomberg podcast published Monday, the central banker took aim at two things: The policy statement announcing the outcome of Federal Open Market Committee meetings, and a quarterly chart of interest rate projections commonly referred to as the dot plot.

“I...

Spending at U.S. retailers likely fell in July, amid cooling auto purchases and signs of some pullback in consumer demand as Covid-19 cases tied to the Delta variant rose, economists say.

Economists surveyed by The Wall Street Journal estimate the Commerce Department will report Tuesday that retail sales—a measure of purchases at stores, at restaurants and online—fell by 0.3% last month compared with June. Excluding autos—a category where supply-chain issues have limited available inventory—sales are estimated to have risen by 0.2%.

Retail sales rose briskly in June, as shoppers directed spending toward services, such as dining out and traveling, and away from goods. That shift occurred as more Americans became vaccinated and state and local governments eliminated many Covid-19-related restrictions, some of which have now been reimposed with the recent rise in coronavirus cases.

Pooja Sriram, U.S. economist at Barclays, said she expects increased...

A surge in U.S. productivity rates over the course of the coronavirus pandemic may prove ephemeral, according to a new paper from the Federal Reserve Bank of San Francisco, released Monday. “Growth accounting indicates that the major sources of the recent productivity strength are cyclical and are unlikely to be sustained,” economists John Fernald, Huiyu Li and Mitchell Ochse wrote in the paper. They noted that one of the bigger forces that has increased productivity will be removed as lower skilled workers return to work.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said his outlook for the U.S. economy has improved this year despite the recent Covid-19 outbreaks associated with the Delta variant, and he expects strong hiring to allow the central bank to soon begin reversing the extremely accommodative monetary policy adopted at the height of the coronavirus pandemic.

The Fed could be in a position to start reducing its $120 billion in monthly asset purchases this fall and, if strong economic growth continues, the Fed might be able to end those purchases toward the middle of 2022, Mr. Rosengren said in an interview on Thursday, August 12.

Here is a partial transcript of the interview, lightly edited for clarity and length.

NICK TIMIRAOS, The Wall Street Journal: Can you walk me through how your outlook for the economy and for policy changed since March of this year?

ERIC ROSENGREN, Boston Fed: So it’s changed in a couple of ways. One, we’ve...

Some big banks are evaluating if the reference rate that is backed by regulators as the best replacement for the scandal-plagued London interbank offered rate is the only option for companies, or if they should offer other rates.

Many large U.S. financial institutions are providing the Secured Overnight Financing Rate, or SOFR, to corporate borrowers as part of the transition away from Libor.

Good day. A recent run of strong hiring reports have strengthened the case for the Fed to announce at its September meeting its intentions to start tapering its $120 billion a month in asset purchases. The Fed wound down its previous bond-buying program gradually, reducing its purchases over 10 months. But in December 2013, when it announced that it would soon start that process, the economy was weaker, with higher unemployment and low inflation. On the agenda this week, U.S. retail sales figures and minutes from the Fed's July policy meeting.

 Now on to today’s news and analysis.

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Federal Reserve officials are nearing agreement to begin scaling back their easy money policies in about three months if the economic recovery continues, with some pushing to end their asset-purchase program by the middle of next year.

In recent interviews and public statements, several have advocated for this timetable, which would enable them to raise interest rates sooner than currently anticipated if the economy makes rapid progress toward their goals.

The central bank last December said it would continue the current pace of bond purchases until officials concluded they had achieved “substantial further progress” toward their goals of 2% average inflation and robust employment.

Officials at their July 27-28 meeting deliberated on two important questions: when to start paring their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities, and how quickly to reduce, or taper, them. The Fed is set to release on...

China’s economic activity likely slowed further in July because of fading base effects and extreme weather conditions that hindered the country’s service sector. Economists polled by The Wall Street Journal expect the country’s retail sales to increase 11.4% from a year earlier, compared with a 12.1% gain in June. Industrial output in July likely rose 7.8% on year, decelerating from 8.3% in June. China’s nonrural fixed-asset investment—a measure that captures investment in factories, railroads and new homes—also likely retreated although the government has aimed to boost infrastructure investment.

Small-business confidence dropped in August to its lowest level since early spring, as the rise in Covid-19 cases due to the highly transmissible Delta variant put a damper on expectations and turned entrepreneurs more cautious.

Thirty-nine percent of small-business owners expect economic conditions in the U.S. to improve in the next 12 months, down from 50% in July and 67% in March, according to a survey of more than 560 small businesses for The Wall Street Journal by Vistage Worldwide Inc., a business coaching and peer advisory firm.

The measure is one part of a broader confidence index that also tracks metrics such as small-business owners’ outlook for their companies and their investment and hiring plans. That overall figure remains positive, but fell to its lowest level since March.

At Wizard Studios, an event production company with 25 employees, bookings jumped in May after the Centers for Disease Control and Prevention lifted mask mandates. The...

The second monthly payment of child tax credits reached the households of nearly 61 million children, the Treasury Department said. That is a 2.7% increase from July, indicating that new sign-ups are outpacing taxpayers’ decisions to opt out of the regular payments.

Friday’s payments of up to $300 per child totaled $15.4 billion, and they come as Democrats try to build political momentum to extend the expanded tax credit beyond its scheduled Dec. 31 expiration.

The March coronavirus-relief law expanded the credit in several ways. It raised the amount from $2,000 per child to $3,000 for children ages six to 17 and to $3,600 for those under six. The credit is also fully refundable, which means that low-income families can get the full amounts. And it is delivered in the middle of every month instead of as part of the annual tax refund, creating something approaching a universal child allowance.

A Census Bureau survey released this week found that...