Anand Marri, Vice President. Richard Peach, Senior Vice President. Matthew Higgins, Vice President. Jaison Abel, Research Officer

Transcription

1 Upstate New York Regional Advisory Council Meeting Monroe Community College - Downtown Campus 31 State Street Rochester, NY Tuesday, September, 17 AGENDA 1:3am-1:3am 1:3am-11:am 11:am-11:3am 11:3am-1:pm 1:pm 1:1pm 1:1pm-1:pm Introductory Remarks Anand Marri, Vice President The National Economy Richard Peach, Senior Vice President International Update Matthew Higgins, Vice President Regional Update Jaison Abel, Research Officer Adjourn to High Falls Room B, 3 rd Floor Lunch Round Table Discussion with William Dudley, President 1: pm Adjourn Your experiences can give us insight into current economic conditions. Questions for discussion with President Dudley: Your experience and that of your customers and suppliers can give us insight into current economic conditions. 1. Has your firm experienced an increase in demand in recent months?. Has demand for your product or service increased sufficiently that you increased or plan to increase employment by the end of 17? 3. Has demand for your product or service increased sufficiently that you plan to increase investment in plant and equipment by the end of 17?. Do you anticipate any change in your ability to access credit for the remainder of this year?. How is the labor market in meeting your needs?

2 Upstate New York Regional Advisory Board Monroe Community College - Downtown Campus 31 State Street Rochester, NY Tuesday, September, 17 ATTENDEE LIST Board Members Aminy Audi CEO L. & J.G. Stickley Scott Bieler President & CEO West Herr Automotive Group, Inc. Tim Busch President & CEO Nexstar Broadcasting Group, Inc. Lynne Marie Finn CEO Superior Workforce Solutions, Inc. Bridget-Ann Hart President & CEO KPH Healthcare Services, Inc. Dr. Anne Kress President Monroe Community College Jordan Levy NY Partner Softbank Capital Linda MacFarlane President & CEO Community Loan Fund of the Capital Region Kenneth M. Franasiak Chairman Calamar Larry Kessler Founder & Co-Owner Kessler Group, Inc. Federal Reserve Bank of New York William Dudley Michael Nelson Richard Peach Matthew Higgins Anand Marri Julia Gouny Jaison Abel Tony Davis Chelsea Cruz Betsy Bourassa President SVP, Assistant General Counsel, Legal SVP, Research & Statistics VP, Integrated Policy Analysis VP and Head of Outreach & Education Officer and Deputy Chief of Staff, Executive Office Officer & Economist, Research & Statistics Officer, Community Engagement, Outreach & Education Associate, Community Engagement, Outreach & Education Associate, Media Relations, Communications & Outreach

3 US Macro Overview September, 17

4 Overview The US economy appears to be regaining its footing after suffering a significant shock beginning in mid to late 1. US labor market is showing classic signs of being at or near full employment yet growth of labor compensation remains surprisingly low. Core inflation has slowed since the beginning of 17. Is this a transitory phenomenon or something more fundamental?

5 Growth of Real GDP Four Quarter Percent Change Source: Bureau of Economic Analysis Four Quarter Percent Change Note: Shading shows NBER recessions.

6 1 1 1 Nominal Trade-Weighted Value of US$ and Rig Count Active Oil Rigs 18 Rig Count (left axis) Index Broad Trade-Weighted Exchange Value of US $ (right axis) Source: Federal Reserve Board and Baker Hughes Note: Shading shows NBER recessions.

7 Surveys of Manufacturing Activity Index Level Source: IHS Markit and Institute for Supply Management via Haver Analytics Index Level 9 US 8 7 EU China 8 7 Note: Shading shows NBER recessions.

8 Labor Market Indicators Percent Labor Force Participation Rate (Right Axis) Percent 8 Unemployment Rate (Left Axis) Employment to Population Ratio (Right Axis) Source: Bureau of Labor Statistics via Haver Analytics Note: Shading shows NBER recessions.

9 Employment Cost Index: Private Industry Workers Qtr % Change Qtr % Change Benefits 7 3 Total Compensation 3 1 Wages and Salaries Source: Bureau of Labor Statistics via Haver Analytics 7 Note: Shading shows NBER recessions. 1

10 Labor Costs in the Nonfarm Business Sector Index (1 = 9) Index (1 = 9) Source: BLS; Haver. Note: Shading shows NBER recessions.

11 Growth of Real Unit Labor Costs versus Unemployment Rate Growth of Real Unit Labor Costs in Nonfarm Business Sector (Q % Chg, Annualized) Source: BLS; Haver. 17Q Unemployment Rate (%) 9 Note: Shading shows NBER recessions.

12 Trillions of 9 US$ GDP Time Period Potential GDP Growth 7.7% % 1 1.7% Trillions of 9 US$ 19 Potential GDP Q1 to 7Q:.% Growth Rate 9Q to 17Q:.1% Growth Rate Source: Bureau of Economic Analysis, Congressional Budget Office via Haver Analytics 1 Note: Shading shows NBER recessions.

13 Measure of Underlying PCE Price Inflation 1 Month % Change 1 Month % Change 3 FOMC Objective for Headline PCE Inflation Core PCE Source: Bureau of Economic Analysis via Haver Analytics - 11 Note: Shading shows NBER recessions.

14 CPI Inflation: Core Goods and Core Services 1 Month % Change 1 Month % Change 3 Core Services CPI 3 1 Total Core CPI Core Goods CPI Source: Bureau of Labor Statistics via Haver Analytics -3 1 Note: Shading shows NBER recessions.

15 Owner s Equivalent Rent % Change % Change month Annualized OER Year to Year OER Source: Bureau of Labor Statistics via Haver Analytics - 13 Note: Shading shows NBER recessions.

16 CPI-U: Wireless Telephone Services % Change % Change Month (Left Axis) 3 Month Annualized (Right Axis) Source: Bureau of Labor Statistics via Haver Analytics -3 1 Note: Shading shows NBER recessions.

17 CPI-U: Prescription Drugs % Change % Change Month (Left Axis) 3 Month Annualized (Right Axis) Source: Bureau of Labor Statistics via Haver Analytics Note: Shading shows NBER recessions.

18 Core Goods CPI and Nonpetroleum Import Price Index % Change Year to Year % Change Year to Year Core Goods 8 3 CPI (Left Axis) Import Price Index: - Nonpetroleum Imports, -3 1 Month Lead - - (Right Axis) Source: Bureau of Labor Statistics via Haver Analytics 1 Note: Shading shows NBER recessions.

19 Michigan Inflation Expectations to 1 Years Percent 7 th Percentile Percent 3 Median th Percentile Source: University of Michigan Note: Shading shows NBER recessions.

20 Actual and Expected Fed Funds Target Percent September 19, 17 Percent Actual September, Source: Federal Reserve Board 18

21 Reference Charts

22 Saving and Investment Balance Percent of GDP Households and Institutions -8 Current Account -1 Net Government -1 Saving Source: Bureau of Economic Analysis via Haver Analytics Domestic Business Percent of GDP Note: Shading shows NBER recessions.

23 Global Economic Outlook Upstate New York Regional Advisory Board Matthew Higgins, September 17 The views expressed here are those of the author, and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Roadmap Update on the global economic and industrial cycle Ongoing struggle to meet inflation objectives in the advanced economies Economic performance and risks in Canada Chinese financial sector reform update 1

24 Global GDP Growth and Composite PMI Percent SAAR GDP Growth Composite PMI Sources: Eurostat, Markit Economics Correlation =.83 Diffusion Index Jul./Aug Citigroup Economic Surprise Indexes Percent positive or negative* Emerging Economies Advanced Economies *Weighted by series historical FX impact

25 Evolution of Global Market Growth Forecasts Percent, CY/CY Sources: Blue Chip Economics, Consensus Economics. Figures are GDPweighted averages for five AEs (with the euro area country as one) and EMEs Global Manufacturing PMI 7. Diffusion Index.. Average 8:Q1 = 3.7 Average 1 1:Q3 = Aug Source: Markit Economics

26 Global Industrial Production and Export Growth Percent SAAR, rolling 3-mo. basis Percent SAAR, rolling 3-mo. basis Industrial Production Exports July. July Source: CPB World Trade Monitor Global Industrial Production and Trade Volume Growth % annual compound growth rates Production Trade Production Trade 199:Q1 8:Q1 11:Q1 17:Q Source: CPB World Trade Monitor.

27 G-3: Core Consumer Price Inflation.. Percent change from year ago United States Euro Area Japan Sources: BEA, Eurostat, BoJ. U.S. inflation measured using the PCE index Advanced Economy CPI Inflation Percent change from year ago. 1. Core Headline July Sources: national statistical agencies, OECD. Series are GDP-weighted averages for U.S., euro area, Japan, United Kingdom, Canada, Australia, New Zealand, Denmark, Norway, Sweden and Switzerland.

28 1 Advanced Economy Unemployment Rates Percent Current NAIRU estimate* 1 SPA ITL FRA SWE CAN OECD AUS NTH US UK SWT GER JAP Sources: National sources, OECD. * NAIRU estimates from CBO for the U.S., the European Commission for euro area countries, the BoJ for Japan, the BoE for the UK, and from OECD elsewhere. Euro Area: NAIRU Estimates Over Time 1. Percent Estimates for Estimates for Source: OECD Economic Outlook database, various editions.

29 Central Bank Credit as a Share of GDP 1 Percent 8 Japan Euro Area United States Sources: BoJ, ECB, Federal Reserve. Central Bank and Consensus Inflation Forecasts Percent United States 1/ Central Bank Consensus Euro Area / Central Bank Consensus Japan 3/ Central Bank Consensus / Central bank figures reflect FOMC members' median projection for core PCE inflation on a Q/Q basis, from September. Consenus forecast is from Survey of Professional Forecasters, on a similar basis from August. / Central bank figures reflect mean staff forecast for calendar year CPI inflation, from September. Consensus forecast is from Survey of Professional Forecasters, on a similar basis from July. 3/ Central bank figures reflect median policy board members' projection for CPI inflation ex. fresh food, on a fiscal year basis from July. Consensus forecast is from Bloomberg, on a calendar-year basis from September. 7

30 Canada: Real GDP Growth Percent SAAR and Q/Q- Q/Q- SAAR Source: Statistics Canada Canada and U.S.: Real House Prices Indexes, = Sources: Teranet/National Bank of Canada, Statistics Canada, S&P CoreLogic Case-Shiller, Bureau of Labor Statistics. 8

31 9 8 Credit to Private Nonfinancial Sector ( % GDP ) Percent Percent 8 7 Advanced China Other EMEs Sources: BIS, IMF. China: Total Asset Growth by Bank Type Percent, y/y Percent, y/y Joint stock banks City commercial Large banks Source: CBRC 9

32 3 1 1 China: Net New Credit RMB, tn Additional shadow credit -1% Official shadow credit Municipal bonds Corp bonds Bank credit E Source: CEIC China: Credit Impulse and Nominal GDP Growth % 1% 1% Change in percent of GDP Nominal GDP Percent change Credit impulse (3 quarters forward) 1% 18% 1% % 1% % 9% -% % -1% Estimate for end-17 3% -1% Source: CEIC. Change in new aggregate credit is as a share of GDP % 1

33 Regional Economic Conditions Jaison R. Abel, Research Officer Upstate New York Regional Advisory Board Meeting September, 17 The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.

34 Overview Over the past year, the pace of job growth has slowed to a crawl in upstate New York. Western New York has been especially weak, with steep declines in manufacturing, business services, and retail weighing on overall job growth. Focusing on wage inequality, the New York-Northern New Jersey region is home to some of the most unequal and least unequal metros in the country. FEDERAL RESERVE BANK OF NEW YORK 1

35 Regional Employment Trends Indexes of Total Employment, August Index (Jan13=1) 19 Downstate NY 1 United States 13 Upstate NY Source: U.S. Bureau of Labor Statistics and Moody s Economy.com; data are early benchmarked by FRBNY staff.

36 Job Growth in Upstate New York 1-1 vs % % U.S. Utica 1% Upstate Rochester Albany Buffalo Syracuse Glens Falls % Ithaca -1% Binghamton Elmira 1-1 Annual Rate 1-17 Annual Rate Watertown -% Source: U.S. Bureau of Labor Statistics and Moody s Economy.com; data are early benchmarked by FRBNY staff. 3

37 Regional Wage Inequality Wage inequality has increased among all workers since the early 198s. Some places are much more unequal than others, even within our own region. The most unequal places tend to be large metros with strong wage growth for those at the top of the wage distribution. FEDERAL RESERVE BANK OF NEW YORK

38 Annual Wages in the United States Full-Time Workers, Constant 1 Dollars $1 Thousands $1 9 th Percentile $8 $ $ 9/1 Ratio = 3.9 9/1 Ratio =.1 9/1 Ratio =.3 $ 1 th Percentile $ Source: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Bureau of Economic Analysis, PCE Price Index. Note: Full-time workers are those aged 1 to working at least 3 hours per week and weeks per year.

39 Real Wage Growth in the United States Percent Change 8% Percent Change by Percentile % +7% % +% % % th 1 th 1 th th th 3 th 3 th th th th th th th 7 th 7 th 8 th 8 th 9 th 9 th Median Source: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Bureau of Economic Analysis, PCE Price Index.

40 What s Driving Wage Inequality? Technological change and globalization have changed the pattern of demand for workers. Strong demand for skilled workers has resulted in larger wage gains for workers toward the top of the wage distribution. Demand for lesser skilled workers has been weaker, stifling wage growth for workers at the middle and bottom of the wage distribution. Other contributing factors include the decline in unions and the falling real value of the minimum wage. FEDERAL RESERVE BANK OF NEW YORK 7

41 The Geography of Wage Inequality Ratio for U.S. Metropolitan Areas Most Unequal Least Unequal >7-7 - < Sources: U.S. Census Bureau, Decennial Census (198) and American Community Survey (1). 8

42 Wage Inequality in the Region Ratios for nd District Metro Areas 1 Note: The NYC-NNJ metro includes New York City, Long Island, parts of the Northern Suburbs, and much of Northern NJ U.S. = Fairfield NYC-NNJ Ithaca Rochester Binghamton Syracuse Albany Glens Falls Buffalo Utica Sources: U.S. Census Bureau, Decennial Census (198) and American Community Survey (1). 9

43 Why Are Some Places More Unequal? Differences in Local Demand for Workers Demand for skilled workers has been particularly strong in some metros leading to outsized wage gains for those at the top. Decline in demand for lesser skilled workers has been geographically concentrated, stifling wage growth for workers toward the middle and bottom of the wage distribution. Agglomeration Economies Productivity benefits from clustering together in cities have been particularly strong for skilled workers located in large metros. Migration Skilled workers are increasingly moving to large metros that offer urban amenities and higher wages. FEDERAL RESERVE BANK OF NEW YORK 1

44 Larger Metros Now Tend to Be More Unequal than Smaller Metros Ratio ,, 1,,,, 1,, Population Sources: U.S. Census Bureau, Decennial Census (198) and American Community Survey (1). 11

45 Real Wage Growth in U.S. Metros Percent Change by Percentile Percent Change 1% 1% 1% San Francisco NYC-NNJ 7% United States % % % Detroit Youngstown -% th 1 th 1 th th th 3 th 3 th th th th th th th 7 th 7 th 8 th 8 th 9 th 9 th Sources: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Census Bureau, Decennial Census (198); American Community Survey (1); U.S. Bureau of Economic Analysis, PCE Price Index. 1

46 Real Wage Growth in Upstate New York Percent Change 1% Percent Change by Percentile 1% 1% 7% United States Albany % % Binghamton Rochester % -% th 1 th 1 th th th 3 th 3 th th th th th th th 7 th 7 th 8 th 8 th 9 th 9 th Sources: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Census Bureau, Decennial Census (198); American Community Survey (1); U.S. Bureau of Economic Analysis, PCE Price Index. 13

47 Summary Wage inequality has increased in nearly every metro since the early 198s, though it has increased much more in some places than others. The most unequal places tend to be large metros with strong demand for skill, agglomeration economies, and appeal for skilled workers (e.g., NYC-NNJ Metro). The least unequal places tend to have lackluster wage growth across the board, due in large part to weak demand (e.g., most metros in upstate New York). FEDERAL RESERVE BANK OF NEW YORK 1