OSU Economic Outlook Conference December 4, Chad Wilkerson

Transcription

1 OSU Economic Outlook Conference December 4, 213 Chad Wilkerson Vice President, Economist, and Oklahoma City Branch Executive Federal Reserve Bank of Kansas City

2 Overview of the Federal Reserve System The Fed consists of three main entities: Board of Governors: 7 members appointed by U.S. President Federal Reserve Banks: 12 total; semi-independent by design Federal Open Market Committee: 19 members; 12 voting As with most central banks, the Fed s primary responsibilities fall within four general areas: Lender of last resort provide liquidity in times of crisis Monetary policy promote full employment and low inflation Bank regulation ensure safety and soundness of banks Financial services bank for banks, bank for federal govt.

3 Federal Reserve Districts and Office Locations

4 The Oklahoma City Branch of the Federal Reserve Bank of Kansas City Functions 4 staff Economic research and outreach for U.S. monetary policy purposes Examinations and inspections of Oklahoma financial institutions Economic and financial education outreach to teachers and citizens Community development outreach to low and moderate income areas 213 board of directors Jim Dunn (chair), Chairman, Mill Creek Lumber & Supply, Tulsa Paula Bryant-Ellis, COO, BOK Financial Mortgage Group, Tulsa Linda Capps, Vice Chairman, Citizen Potawatomi Nation, Shawnee Michael Coffman, CEO, Panhandle Oil & Gas, Inc., Oklahoma City Pete Delaney, Chairman & CEO, OGE Energy Corp., Oklahoma City Doug Tippens, President & CEO, Bank of Commerce, Yukon K. Vasudevan, Chairman, Service & Technology Corp., Bartlesville

5 The U.S. Economy and Monetary Policy

6 At mid-year, GDP was growing at about its long-term trend, but differed by sector Growth in Components of Real GDP 25 Percent change from the previous period, SAAR 2 15 Q1 213 Q2 213 Q Total GDP Consumer spending Residential investment Business investment Exports Government spending Source: U.S. Bureau of Economic Analysis

7 Recent data suggest solid U.S. growth continued, with steady employment gains U.S. Private Payroll Employment and Business Indexes 6 Change from previous month, thousands Index Private Employment (left axis) ISM Manufacturing Index (right axis) ISM Non-Manufacturing Index (right axis) Nov-8 Nov-9 Nov-1 Nov-11 Nov-12 Nov-13 Source: Institute for Supply Management, Bureau of Labor Statistics

8 Still, the share of the population employed has not risen, as participation has dropped Source: Bureau of Labor Statistics

9 Both incomes and spending were growing solidly heading into the holiday season Real Disposable Personal Income vs. Personal Consumption Expenditures Seasonally Adjusted 13 $Billions, chained (29) PCE DPI Sep-8 Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Source: Bureau of Economic Analysis

10 For the most part, U.S. industries growing the last 2 years are also growing this year 1 Percent U.S. Employment Growth by Industry average 213 YTD (annualized) Total Nonfarm Prof. & Bus. Svcs. Nat. Res. Constr. & Mining Leis. & Hosp. Trade Educ. & Hlth. Finance State & Local Govt. Info. Mfg. Transp. & Util. Fed. Govt. Source: Bureau of Labor Statistics

11 National rig counts have slipped somewhat but still remain relatively high U.S. Active Drilling Rig Count Seasonally Adjusted 25 Number of rigs 25 Oil 2 Natural Gas Nov-8 May-9 Nov-9 May-1 Nov-1 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 Source: Baker Hughes

12 In its latest projections, the FOMC expected unemployment to continue to improve Unemployment Rate Seasonally Adjusted 12 Percent 12 1 Sept. FOMC Forecast Ranges in Yellow Long Term Sources: U.S. Bureau of Labor Statistics, FOMC

13 Inflation was expected to remain at or near its long-term target through Percent change, year-over-year PCE Inflation Index Sept. FOMC Forecast Ranges in Yellow Long Term Sources: U.S. Bureau of Labor Statistics, FOMC

14 On interest rates, most FOMC participants expect little change until Percent Federal Funds Rate Year-end target Long Term 8 6 Sept FOMC Forecast Ranges in Yellow 6 4 (12 (2) 4 2 (3) Note Number of participants who project the initial increase will occur in the specified year in parenthesis Sources: Federal Reserve Board, FOMC

15 The Fed s balance sheet has continued to grow Federal Reserve Balance Sheet 4 Dollars, trillions Assets Short term lending, targeted lending programs, and rescue operations Other MBS & agency debt Treasury securities Currency Reserves Other Liabilities Source: Federal Reserve Board

16 The Regional Economy

17 Job growth varies across the nation, but generally lags in the Tenth Fed District Employment Growth, Year-over-Year (percent) October U.S. = 1.7 Source: U.S. Bureau of Labor Statistics

18 The government shutdown had measurable negative impacts in several District states Federal Shutdown Economic Growth Reduction Q4 213 Source: Wells Fargo Securities, Pew Center

19 Most District industries grew similarly to the nation but some, including energy, lagged 6 Percent change year-over-year Employment Growth by Industry October U.S. Tenth District -4-6 Total Nonfarm Constr. Leis. & Hosp. Prof. & Bus. Svcs. Finance Trade Educ. & Hlth. Mfg. State & Local Govt. Transp. & Util. Nat. Res. & Mining Info. Fed. Govt. Source: Bureau of Labor Statistics

20 Still, unemployment throughout the Tenth Fed District is lower than in the nation Unemployment Rates (percent) October U.S. = 7.3 Source: U.S. Bureau of Labor Statistics

21 As in the nation, regional manufacturing activity improved in recent months 65 Index Manufacturing Composite Indexes Month-over-month, Seasonally Adjusted KC Fed ISM Nov-8 Nov-9 Nov-1 Nov-11 Nov-12 Nov-13 Source: FRB Kansas City

22 And expectations for future regional factory activity remain relatively solid 5 Diffusion Index Manufacturing 6-Month Ahead Indexes Seasonally Adjusted Production Capital Spending Employment Nov-8 Nov-9 Nov-1 Nov-11 Nov-12 Nov-13 Source: ISM, Federal Reserve Banks

23 Drought conditions have improved markedly since last year, generally helping our region U.S. Drought Monitor, October 212 U.S. Drought Monitor, October 213 Source: USDA

24 But with lower crop prices, expectations for farm income and spending have eased Tenth District Agricultural Conditions 18 Index Index Capital Spending Q4 Expectations Farm Income Source: KCFRB Ag Credit Survey

25 Meanwhile, year-over-year growth in regional farmland values remained in double digits Tenth District Non-Irrigated Cropland Values Percent Change, Year-over-year 4 Percent 4 35 Q Q2 213 Q District MO KS Mtn States (CO, NM, WY) NE OK Source: FRBKC Agricultural Credit Survey

26 Summary Recent U.S. economic growth has been solid with low inflation, but policy uncertainty remains a concern Regional economic activity has been slightly weaker than the nation, due in part to federal government and energy