Emerging Trends in the U.S. and Colorado Economies

Size: px

Start display at page:

Download "Emerging Trends in the U.S. and Colorado Economies"

Blaze Hines
5 years ago
Views:

Bank of Kansas City Denver Branch The views expressed are those of the

1 Emerging Trends in the U.S. and Colorado Economies Sam Chapman Associate Economist Federal Reserve Bank of Kansas City Denver Branch The views expressed are those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2 The Structure of the Federal Reserve System The Federal Reserve System was created by Congress in It is a public-private, decentralized institution consisting of the Board of Governors in Washington, D.C. and 12 regional Reserve Banks. Board of Governors Consists of seven members who are appointed by the President and confirmed by the Senate to serve 14-year terms. There are currently five members of the Board of Governors: Jerome Powell, Michelle Bowman, Richard Clarida, Lael Brainard and Randal Quarles. Regional Federal Reserve Banks There are 12 Regional Reserve Banks, each serving a unique district. These are semiindependent by design. The Reserve Banks are governed by their Board of Directors, and the Directors (excluding Banking Directors) select the President of the Bank. Federal Open Market Committee (FOMC) Comprised of the 7 members of the Board of Governors and the 12 Reserve Bank Presidents (only 5 presidents are voting members on a rotating basis). Charged with conducting monetary policy. 2

3 The Primary Functions of the Federal Reserve System Conduct the Nation s Monetary Policy The Federal Open Market Committee is the group charged with conducting monetary policy within the U.S. The Committee has a statutory mandate from Congress to promote maximum employment, stable prices and moderate long-term interest rates. Provide and Maintain an Effective and Efficient Payments System The Federal Reserve supplies payments services to the public through depository institutions including banks, credit unions and savings and loans. We also serve as a banking and fiscal agent for the United States government. Payment services includes cash processing, processing and clearing checks, transferring funds and issuing, transferring and redeeming U.S. government securities. Supervise and Regulate Banking Operations The Federal Reserve ensures the safety and soundness of banks and ensures that banks provide fair and equitable services to consumers. The Federal Reserve also monitors and promotes the stability of the financial system as a whole. 3

4 Regional Federal Reserve Banks and Branch Locations 4

5 U.S. economic growth accelerated in REAL U.S. GROSS DOMESTIC PRODUCT Percent Change from Previous Quarter at Seasonally Adjusted Annualized Rates 6% 4% High Low 2% 0% -2% -4% -6% Year-over-Year Percent Change -8% -10% '08Q3 '09Q3 '10Q3 '11Q3 '12Q3 '13Q3 '14Q3 '15Q3 '16Q3 '17Q3 '18Q Source: Bureau of Economic Analysis and Federal Open Market Committee (FOMC)/Haver Analytics *Projections as of December FOMC meeting FOMC Central Tendency Projections* 5

6 U.S. economic growth is expected to slow after robust growth in REAL U.S. GROSS DOMESTIC PRODUCT Percent Change Q4-over-Q4, Seasonally Adjusted Annualized Rates 4% Median FOMC projections 3% 2% 1% 0% Source: Bureau of Economic Analysis and Federal Open Market Committee (FOMC)/Haver Analytics *Projections as of December FOMC meeting 6

7 Consumer spending continues to expand at a solid pace. REAL CONSUMPTION SPENDING Seasonally Adjusted, Year-over-Year Percent Change 8% Real Retail Sales 4% 0% -4% Real Personal Consumption Expenditures -8% -12% Nov. '06 Nov. '08 Nov. '10 Nov. '12 Nov. '14 Nov. '16 Nov. '18 Sources: Bureau of Economic Analysis & Haver Analytics 7

8 Business and consumer confidence have increased in recent months. BUSINESS AND CONSUMER SENTIMENT NFIB Small Business Optimism Index, Q1:1986 = Univ. of Michigan Consumer Sentiment, Q1:1966 = Dec. '06 Dec. '09 Dec. '12 Dec. '15 Dec. '18 Source: University of Michigan, National Federation of Independent Business, & Haver Analytics 8

9 Inflation is at the FOMC s two percent target. PERSONAL CONSUMPTION EXPENDITURE PRICE INDEX Percent Change Year-over-Year 4% Headline Inflation FOMC s Target Inflation Rate FOMC* Projections 2% 0% Core Inflation -2% Nov. '09 Nov. '12 Nov. '15 Nov. '18 Source: Bureau of Economic Analysis, Federal Open Market Committee, & Haver Analytics *Projections as of December FOMC meeting; median projections 9

10 The unemployment rate has declined steadily over the past nine years and has fallen below most estimates of its longer-run level. U. S. UNEMPLOYMENT RATE Seasonally Adjusted 11% 10% 9% 8% 7% Median of FOMC longer-run projection 6% 5% FOMC Projections 4% 3% '00 '03 '06 '09 '12 '15 '18 Source: Bureau of Labor Statistics and Federal Open Market Committee (FOMC)/Haver Analytics *Projections as of March FOMC meeting; median unemployment rate 10

11 The unemployment rate has declined steadily over the past eight years and has fallen below most estimates of its longer-run level. U. S. UNEMPLOYMENT AND JOB OPENINGS Seasonally Adjusted, Thousands 16,000 14,000 12,000 10,000 Number of Unemployed 8,000 6,000 4,000 Job Openings 2,000 Nov. '00 Nov. '03 Nov. '06 Nov. '09 Nov. '12 Nov. '15 Nov. '18 Source: Bureau of Labor Statistics/Haver Analytics 11

12 In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent. - December 2018 FOMC Statement 6% 5% 4% 3% 2% 1% EFFECTIVE FEDERAL FUNDS RATE FOMC MEDIAN PROJECTIONS: DECEMBER, % Source: Federal Reserve Board 12

13 FEDERAL RESERVE BALANCE SHEET Trillions $5 $4 $3 Short term lending, targeted lending programs, and rescue operations MBS & agency debt Forecast $2 $1 Treasury securities and other assets $ Source: Federal Reserve Board, Haver Analytics, and author s calculations. 13

14 Unemployment rates are below national rates across most of Colorado. UNEMPLOYMENT RATES October 2018, Seasonally Adjusted Unemployment Rate United States (Dec. 18) 3.9% Colorado (Nov. 18) 3.3% Denver (Nov. 18) 3.4% Less than 2% 2 to 3% 3 to 4% 4 to 5% Greater than 5% Source: Bureau of Labor Statistics and Haver Analytics 14

15 Employment has been increasing in Colorado and the nation over the past eight years, with Colorado gains outpacing the nation. PAYROLL EMPLOYMENT GROWTH Index 100 = December, 2008, Seasonally Adjusted Percent Change (April 18) Past 10 Years Past Year U.S. (Dec. 18) 11.4% 1.8% Colorado (Nov. 18) 17.9% 2.6% Denver (Nov. 18) 21.3% 2.2% Denver Colorado United States Apr. '08 Apr. '10 Apr. '12 Apr. '14 Apr. '16 Apr. '18 Source: Bureau of Labor Statistics 15

16 The majority of industries have added jobs over the past year. CHANGE IN PAYROLL EMPLOYMENT, NOVEMBER 2018 Seasonally Adjusted Share Location Quotient 1.1% 16.0% 2.7% 3.2% 4.7% 12.7% 10.1% 5.4% 10.9% 4.0% 9.6% 6.2% 4.0% 6.1% 1.9% 1.4% Natural Resources & Mining Professional & Business Services Information Transportation & Utilities State Government Leisure & Hospitality Retail Trade Manufacturing Health Care & Social Assistance Wholesale Trade Local Government Construction Other Services Financial Activities Federal Government Private Educational Services Percent Change Year-over-Year -2.2% -2.5% 5.1% 4.0% 3.7% 3.5% 3.0% 2.5% 2.5% 2.0% 2.0% 1.4% 1.4% 0.6% 0.2% 14.3% Colorado United States Note: Construction and Mining are lumped together for Denver employment growth under the Construction sector in the chart above. 16

17 Wage growth in Colorado is similar to that of the U.S. as a whole and has been slower than in past expansionary periods. WAGE PER EMPLOYEE Year-over-Year Percent Change, Four-Quarter-Moving-Average 10% 8% Colorado 6% 4% 2% United States 0% Jan. '93 Jan. '98 Jan. '03 Jan. '08 Jan. '13 Jan. '18-2% Note: Gray bars indicate recession, and dotted lines indicate Colorado average growth for each expansionary period shown. Sources: BLS QCEW, NBER & Haver Analytics 17

18 Colorado continues to experience net in-migration, but the pace of growth has slowed over the past year. NET MIGRATION Total 2017 Net Migration as a Percentage of 2017 Population Annual Percent Change 2017 United States 0.3% Colorado 0.8% Denver County 0.7% More than 2% 1% to 2% 0% to 1% -1% to 0% -2% to -1% Less than -2% Source: Census Bureau 18

19 Months supply of homes remains very low in Denver compared to the United States as a whole. MONTHS SUPPLY OFHOMES Seasonally Adjusted United States 8 16 year averages Denver 0 Nov. '03 Nov. '06 Nov. '09 Nov. '12 Nov. '15 Nov. '18 Note: Dotted lines are historical averages from November 2002 to November Sources: Coldwell Banker, Denver Metro Association of Realtors, Census Bureau and Haver Analytics 19

20 Residential construction activity has been increasing for eight years, led by strong gains in multifamily building. RESIDENTIAL PERMITS Year-to-Date Through November, Seasonally Adjusted 60,000 50,000 40,000 Colorado Multifamily Single Family 36,000 30,000 24,000 Denver Multifamily Single Family 30,000 18,000 20,000 12,000 10,000 6, Source: Census Bureau/Haver Analytics 20

21 Low inventories have led to strong home price appreciation in recent years in Colorado and Denver. HOME PRICES Seasonally Adjusted, Index 100 = Q1: Denver Colorado United States 75 Note: United States and Colorado price indices are for purchase-only transactions, whereas Fort Collins includes re-financing and purchase transactions. Source: Federal Housing Finance Agency 21

22 Tourism activity has been strong in Colorado over the past few years. HOTEL OCCUPANCY RATES Colorado HOTEL ROOM RATES Colorado, 1999 Dollars 90% $180 80% $170 70% 60% 50% 40% 30% 10-Year Avg Year Average Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 71.1% 70.7% 65.5% YTD Averages $160 $150 $140 $130 $120 $110 $100 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec $156.4 $154.4 $133.6 YTD Averages Source: Colorado Hotel and Lodging Association 22

23 Manufacturing activity improved throughout 2017 and 2018, although is showing recent weakness. MANUFACTURING ACTIVITY Diffusion Index, Seasonally Adjusted, Month-over-Month Expanding Contracting Kansas City 51.7 District Dec U.S Dec Dec. '08 Dec. '10 Dec. '12 Dec. '14 Dec. '16 Dec. '18 Source: Kansas City Federal Reserve Bank, ISM, & Haver Analytics 23

24 Colorado exporting activity rebounded modestly in 2017, and is up so far through $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 COLORADO EXPORTS BY TRADING PARTNER Billions '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 Source: WISERTrade and Census Bureau YEAR-TO-DATE OCTOBER 2018 Year-over-Year Percent Change Total Trade 5.4% SHARE All Other % Japan Mexico Canada China Eurozone '17 '18 Year-to-Date October 24

25 Oil prices remain low. OIL PRICES (WEST TEXAS INTERMEDIATE) $/ Barrel $140 $120 $100 $80 Futures $60 $40 $20 $0 May. '08 May. '10 May. '12 May. '14 May. '16 May. '18 May. '20 Source: Bloomberg Energy Services 25

26 Oil prices are expected to remain above $55 over the next two years which is above profitable prices for most District firms. ENERGY SURVEY SPECIAL QUESTION Q3:2018 $80 $60 $40 $20 $0 $55 $71 Profitable Price Price expected in 6 months Oil (WTI) $72 Price expected in 1 year $73 Price expected in 2 years $8 $79 $3.23 $7 Price expected in 5 years $6 $5 $4 $3 $2 $1 $0 Profitable Price Natural Gas (Henry Hub) $2.89 $2.92 Price expected in 6 months Price expected in 1 year $3.10 Price expected in 2 years $3.42 Price expected in 5 years Note: Blue bars represent range for survey respondents. Numbers above bars indicate average of the range (the black line in the middle of the blue bars). Source: Kansas City Federal Reserve Bank Energy Survey 26

27 Oil production has reached record levels in Colorado despite a low-price environment. CRUDE OIL PRODUCTION Millions of Barrels, Monthly, Seasonally Adjusted U.S United States CO Colorado Oct. '08 Oct. '10 Oct. '12 Oct. '14 Oct. '16 Oct. '18 Source: Energy Information Administration and Haver Analytics 27

28 Farm income is projected to decline in 2018, as commodity prices remain low. U.S. REAL NET FARM INCOME Billion Dollars (Constant 2016 Dollars) $140 $120 $100 $80 $60 $40 $20 $ * *Projection for 2018 Sources: USDA 28

29 For additional information on the regional economy:

Emerging Trends in the U.S. and Colorado Economies

Emerging Trends in the U.S. and Colorado Economies Alison Felix Economist and Branch Executive Federal Reserve Bank of Kansas City Denver Branch The views expressed are those of the presenter and do not