Chad Wilkerson. Vice President, Economist, and Oklahoma City Branch Executive Federal Reserve Bank of Kansas City

Transcription

1 Chad Wilkerson Vice President, Economist, and Oklahoma City Branch Executive Federal Reserve Bank of Kansas City

2 History and Structure of the Federal Reserve System The Federal Reserve System was created in 1913 (sponsored by OK Sen. R.L. Owen) and consists of: Board of Governors: 7 members appointed by U.S. President Federal Reserve Banks: 1 total; semi-independent by design Federal Open Market Committee (FOMC): 19 members; 1 voting As with most central banks around the world, the Fed s responsibilities fall within four general areas: Monetary policy control money supply to affect growth and inflation Lender of last resort provide liquidity in times of financial crisis Bank regulation ensure safety and soundness of banks Financial services bank for banks, bank for federal government

3 Federal Reserve Districts and Office Locations

4 The Oklahoma City Branch of the Federal Reserve Bank of Kansas City History, staff, and functions Branch office opened in 19; currently have about 35 staff Functions include economic research, bank examinations, public outreach 1 branch board of directors Steve Agee (chairman), President, Agee Energy, and Professor, OCU, OKC Bill Anoatubby, Governor, Chickasaw Nation, Ada Jim Dunn, Chairman, Mill Creek Lumber and Supply Co., Tulsa Jacque Fiegel, Senior EVP and COO, Coppermark Bank, OKC Rose Washington Rentie, Executive Director, TEDC Creative Capital, Tulsa Doug Tippens, President and CEO, Bank of Commerce, Yukon K. Vasudevan, Chairman, Service and Technology Corp., Bartlesville

5 The Economic Outlook The pace of U.S. recovery remains moderate and is expected to stay on track, with inflation remaining low Oklahoma s recession and recovery path has been fairly typical for the state, but risks to growth remain

6 U.S. output continues to grow solidly, but job growth is modest U.S. Private Payroll Employment and Business Indexes 6 Change from previous month, thousands Index Private Employment (left axis) 4-6 ISM Manufacturing Index (right axis) 35-8 ISM Non-Manufacturing Index (right axis) 3-1 Nov-9 Nov-1 Nov-11 Nov-1 Nov-13 Nov-14 5 Source: Institute for Supply Management, Bureau of Labor Statistics

7 Consumer debt could constrain growth and federal debt is a longer-term concern U.S. Debt as a Share of GDP 1% 1% Percent Federal government debt Plus extension of current tax rates Household debt 8% 6% 4% % No spending cuts or tax increases % Sources: Federal Reserve, BEA, CBO

8 Europe s sovereign debt problem has also flared up again Spreads to German Bunds (1-yr) 1 Percentage points 1 Portugal Ireland 1 Spain Italy Greece Jan-1 Apr-1 Jul-1 Oct-1 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Source: Federal Reserve Board

9 But European nations most threatened are only a small part of Euro Zone GDP Shares of Euro Zone GDP Greece (US$35b).6% Ireland (US$9b) 1.8% Portugal (US$b) 1.9% Others 16.9% Spain (US$1381b) 11.8% France 1.3% Italy (US$199b) 17.% Germany 6.8% Rescue packages: Greece: 11 billion=us$144 billion Ireland: 67.5 billion=us$88 billion Source: U.S. Bureau of Economic Analysis

10 Fed policymakers expect continued moderate U.S. GDP recovery 8 Percent change, year-over-year Real Gross Domestic Product 8 6 Nov. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Economic Analysis, FOMC

11 But with U.S. unemployment remaining high for some time Percent Unemployment Rate Seasonally Adjusted Nov. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Labor Statistics, FOMC

12 Inflation is expected to remain tame in the near term, but will require careful oversight PCE Inflation Index 1 Percent change, year-over-year Nov. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Economic Analysis, FOMC

13 The FOMC s plans will swell the Fed s balance sheet further Federal Reserve Balance Sheet 3 Trillion dollars Assets Rescue Operations Projection 3 Targeted Lending Programs Short Term Lending to Financial Firms MBS & Agency Debt 1 1 Treasury Securities Currency -1-1 Reserves - SFA - Liabilities Other -3 Jan-1 Jul-1 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15-3 Source: Federal Reserve Board

14 Oklahoma typically enters recessions late but exits around the same time as the nation 1.4 Average Recession and Recovery Path, Employment level 4 quarters before and 8 quarters after U.S. jobs peak (R) US OK R-4 R-3 R- R-1 R R+1 R+ R+3 R+4 R+5 R+6 R+7 R+8 Source: U.S. Bureau of Labor Statistics

15 The current episode, while worse, has largely followed the historical pattern Current Recession and Recovery Path Employment level 4 quarters before and 1 quarters after U.S. jobs peak US OK.9 Q1:7 Q3:7 Q1:8 Q3:8 Q1:9 Q3:9 Q1:1 Q3:1 Source: U.S. Bureau of Labor Statistics

16 Recent solid state job growth has been driven by energy, construction, and services Employment Growth October 1 18 Percent change year-over-year U.S. OK Total Energy Const Educ & Health Prof & Bus Svcs Leis & Hosp Finance Mfg Trade, Transp. & Utilities State & Local Govt Info Source: Bureau of Labor Statistics

17 Agricultural conditions in the state have also improved after bottoming in 9 Oklahoma Agricultural Conditions 15 Index Index Farm Income Q4 Expectations Capital Spending Source: KCFRB Ag Credit Survey

18 With Oklahoma s shorter recession, unemployment remains relatively low Unemployment Rate by State October Source: Oklahoma Employment Commission

19 And Oklahoma banks remain in much better shape than in the nation as a whole Noncurrent Loans as a Share of Total Loans Commercial Banks 6. Percent U.S.. 1. OK 1.. Q3 Q3 1 Q3 Q3 3 Q3 4 Q3 5 Q3 6 Q3 7 Q3 8 Q3 9 Q3 1. Source: FDIC

20 Housing continues to be a risk, but much less so than in the nation Foreclosure and Past Due Mortgage Rates Percent OK Foreclosure U.S. Foreclosure OK Past Due U.S. Past Due 6 4 Q3:7 Q4:7 Q1:8 Q:8 Q3:8 Q4:8 Q1:9 Q:9 Q3:9 Q4:9 Q1:1 Q:1 Q3:1 Source: MBA

21 Natural gas prices remain the state s biggest risk, but high oil prices have helped Energy Prices 15 $/MMBTU $ per Barrel Crude oil (right scale) Natural gas (left scale, per MMBTU) 3 Nov-9 Nov-1 Nov-11 Nov-1 Nov-13 Nov-14 Nov-15 Source: Bloomberg

22 Summary The U.S. economy is recovering and expected to continue to grow moderately, with low inflation Oklahoma s economy is also recovering and remains in much better shape than the nation