National and Regional Economic Update

Transcription

1 National and Regional Economic Update Philadelphia Chapter of the Financial Planning Association May 11, 2016 Gary A. Wagner, Ph.D.* FEDERAL RESERVE BANK OF PHILADELPHIA * The views expressed today are my own and not necessarily those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

2 PRESENTATION OUTLINE GDP growth and consumer borrowing trends (8 slides) Employment conditions (9 slides) Labor markets and income growth (5 slides) Inflation and monetary policy (7 slides)

3 GROWTH AND FORECAST FOR U.S. REAL GDP Quarterly (SAAR): 2005:Q1-2017:Q1 Annualized quarterly growth rate (SAAR) 4% 2% 0% 2016:Q1 = 0.5% -2% -4% -6% -8% Date 2016:Q2 2016:Q3 2016:Q4 2017:Q1 Forecast 2.5% 2.3% 2.5% 2.4% Jan 2006 Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 GDP SPF Forecast Source: BEA via Haver Analytics Quarters plotted: 2005:Q1-2017:Q1

4 GDP GROWTH BY SECTOR OVER LAST 4 QUARTERS Black lines indicate historical averages from 1980:Q1 to 2016:Q1 Annualized quarterly growth (SAAR) 6% 5.4% 5.9% 4% 4.1% 2% 2.6% 2.9% 1.7% 0% -2% -4% Real GDP Consumption Investment Exports Imports Government Source: BEA via Haver Analytics Last quarter included: 2016:Q1 Black lines indicate sector averages from 1980:Q1 to 2016:Q1

5 CONSUMPTION GROWTH OVER LAST 4 QUARTERS Black lines indicate historical averages from 1980:Q1 to 2016:Q1 Annualized quarterly growth (SAAR) 8% 6% 5.7% 4% 2% 2.9% 3.3% 2.2% 2.8% 0% -2% Consumption Goods Durable Goods Source: BEA via Haver Analytics Last quarter included: 2016:Q1 Black lines indicate sector averages from 1980:Q1 to 2016:Q1 Non- Durable Goods Services

6 INVESTMENT GROWTH OVER LAST 4 QUARTERS Black lines indicate historical averages from 1980:Q1 to 2016:Q1 Annualized quarterly growth (SAAR) 15% 10% 5% 0% 4.1% 4.0% 0.9% 5.1% 6.2% 2.4% -5% -10% Investment Non- Residential Structures Equipment Intellectual Property Residential Source: BEA via Haver Analytics Last quarter included: 2016:Q1 Black lines indicate sector averages from 1980:Q1 to 2016:Q1

7 TOTAL DEBT BURDEN OF U.S. HOUSEHOLDS Trillions of Dollars 2008:Q1 = $12.67 Trillion 2013:Q Mortgage HELOC Auto Credit Cards Student Loans Other Source: FRB New York Equifax Panel Quarters plotted: 2003:Q1-2015:Q4 Jan 2004 Jan 2006 Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016

8 HOUSEHOLD DEBT-TO-INCOME RATIOS Maximum and most recent values are labeled Share of disposable income (seasonally adjusted) 20% 18.1% 15% Financial Obligations Ratio (FOR) = (debt service + rent + auto leases + others) / (after-tax income) 13.2% 15.4% 10% 10.1% Debt Service Ratio (DSR) = (minimum debt payments) / (after-tax income) 5% 0% Financial Obligations Ratio Debt Service Ratio Jan 1980 Jan 1990 Jan 2000 Jan 2010 Source: Board of Governors via Haver Analytics Quarters plotted: 1980:Q1-2015:Q4

9 STUDENT LOAN BALANCES BY AGE GROUP Billions of Dollars 1,400 1,200 1, Age Group: 236% increase Age Group: 322% increase Age Group: 340% increase Under Shares of Total 5% 12% 18% Shares of Total 2% 9% 14% 33% 33% 32% 0 42% Source: FRB New York Consumer Credit Panel/Equifax

10 STUDENT LOAN BALANCES BY INSTITUTION 2000 versus 2014 Source: Looney and Yannelis (2015)

11 STUDENT LOAN BALANCES BY INSTITUTION 2000 versus 2014 Source: Looney and Yannelis (2015)

12 Employment conditions

13 CHANGE IN MONTHLY U.S. PAYROLL EMPLOYMENT Black lines indicate annual averages (in thousands) Change in payroll employment (thousands, SA) 350 Revision for Feb 2016: jobs Revision for Mar 2016: jobs Apr 2016: Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Source: BLS via Haver Analytics Months plotted: Jan Apr 2016 Black lines indicate annual averages.

14 RECENT U.S. AND TRI-STATE EMPLOYMENT GROWTH Total payroll employment (seasonally adjusted) Annualized growth rate (seasonally adjusted) 3.7% 3% 2.6% 2% 1.9% 1.9% 1.7% 1.7% 1.9% 1.9% 1.6% 1.6% 1.4% 1% 0% -0.4% US DE NJ PA 12 Months 6 Months 3 Months Source: BLS via Haver Analytics Last month included: US (Apr 2016): States (Mar 2016)

15 EMPLOYMENT EFFECTS OF AN OIL PRICE DROP FRB Dallas, Economic Letter, April 2015 (vol. 10, no. 3) Source: Originally referenced from: The Shale Gas and Tight Oil Boom: U.S. States Economic Gains and Vulnerabilities, by Stephen P.A. Brown and Mine K. Yücel, Council on Foreign Relations, Energy Brief, October 2013.

16 NEAR-TERM OIL PRICE FORECAST (WTI) Monthly price per barrel (grey shading = NYMEX 95% confidence interval) Dollars per barrel (monthly average, seasonally adjusted) $100 $80 $60 $40 $20 $0 WTI Actual EIA Forecast NYMEX Futures Price Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Source: Energy Information Administration Short-Term Energy Outlook, April 2016 Months plotted: Jan 2015 to Jun New York Mercantile Exchange (NYMEX) 95% confidence interval in grey.

17 TRI-STATE METRO AREA EMPLOYMENT GROWTH Year-over-year percentage change (3-month moving average) A = Allentown-Bethlehem-Easton MSA B = Altoona MSA C = Atlantic City-Hammonton MSA D = Bloomsburg-Berwick MSA E = Camden Metro Division F = Chambersburg-Waynesboro MSA G = Dover MSA H = East Stroudsburg MSA I = Erie MSA J = Gettysburg MSA K = Harrisburg-Carlisle MSA L = Johnstown MSA M = Lancaster MSA N = Lebanon MSA O = Montgomery-Bucks-Chester County MD P = Newark Metro Division Q* = New York-New Jersey-White Plains MD R = Ocean City MSA S = Philadelphia-Delaware County MD T = Pittsburgh MSA U = Reading MSA V* = Salisbury MSA W = Scranton-Wilkes-Barre-Hazelton MSA X = State College MSA Y = Trenton MSA Z = Vineland-Bridgeton MSA AA = Williamsport MSA AB* = Wilmington Metro Division AC = York-Hanover MSA AD* = Youngstown-Warren MSA * Also includes counties not shown on map. Source: Calculations from BLS data via Haver Analytics.

18 YOY EMPLOYMENT GROWTH BY SECTOR U.S. AND Philadelphia MSA Total Total Private Mining, Logging & Construction Manufacturing Trade, Trans & Utilities Financial Prof & Bus Services Education & Health Services Leisure & Hospitality Government 0% 1% 2% 3% 4% 5% 6% US Philadelphia MSA Source: Calculations from BLS via Haver Analytics. Last month included: US (Apr 2016); Phil MSA (Mar 2016)

19 TRADE-WEIGHTED U.S. DOLLAR INDEXES (Nominal, not seasonally adjusted) Trade-Weighted Indexes (January 1997 = 100) Broad Major Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: Federal Reserve Board via Haver Analytics Months plotted: Jan Apr 2016

20 THIRD DISTRICT MANUFACTURING BUSINESS OUTLOOK Current and last year's values are labeled Diffusion index (% reporting increase less % reporting decrease) Current Activity Future Activity Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: FRB Philadelphia via Haver Analytics Months plotted: Jan Apr 2016

21 TRI-STATE AREA MANUFACTURING CONCENTRATION Share of area's total employment relative to U.S. (> 1 more concentrated) PA = 111.9% NJ = 70.6% DE = 66.5% A = Allentown-Bethlehem-Easton MSA B = Altoona MSA C = Atlantic City-Hammonton MSA D = Bloomsburg-Berwick MSA E = Camden Metro Division F = Chambersburg-Waynesboro MSA G = Dover MSA H = East Stroudsburg MSA I = Erie MSA J = Gettysburg MSA K = Harrisburg-Carlisle MSA L = Johnstown MSA M = Lancaster MSA N = Lebanon MSA O = Montgomery-Bucks-Chester County MD P = Newark Metro Division Q* = New York-New Jersey-White Plains MD R = Ocean City MSA S = Philadelphia-Delaware County MD T = Pittsburgh MSA U = Reading MSA V* = Salisbury MSA W = Scranton-Wilkes-Barre-Hazelton MSA X = State College MSA Y = Trenton MSA Z = Vineland-Bridgeton MSA AA = Williamsport MSA AB* = Wilmington Metro Division AC = York-Hanover MSA AD* = Youngstown-Warren MSA * Also includes counties not shown on map. Source: Calculations from BLS data via Haver Analytics Calculations are the mean of figures over past 12 months.

22 Labor market conditions and household income growth

23 U.S. UNEMPLOYMENT RATE Monthly, seasonally adjusted (most recent and last year's values labeled) Percent (seasonally adjusted) 16% 12% 10.9 % 9.8 % 8% 5.5 % 4% 5.0 % 0% U3 U6 Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: BLS via Haver Analytics Months plotted: Jan 2000 to Mar 2016 Dotted lines indicate average from

24 LABOR MARKET CONDITIONS INDEX VARIABLES Estimated by the Federal Reserve Bank of Kansas City Unemployment rate (U3) Hires rate Broad unemployment rate (U6) Percent of firms planning to increase employment (NFIB) Unemployment forecast (Blue Chip) Average hourly earnings Job flows from U to E Initial claims Quits rate Private nonfarm payroll employment Employment-population ratio Aggregate weekly hours Working part-time for economic reasons Temporary help employment Job leavers Expected job availability (U of Michigan) Job availability index (Conference Board) Labor force participation rate Unemployed 27 or more weeks Manufacturing employment index (ISM) Percent of firms with positions not able to fill right now (NFIB) Announced job cuts (Challenger-Gray-Christmas) Job losers Expected job availability (Conference Board) Source: FRB Kansas City For more information see

25 LABOR MARKET CONDITIONS INDEX Monthly, seasonally adjusted (most recent and last year's values labeled) Relative to long-run trend (> 0 above historical trend) 2 Above Zero Conditions Are Better Than Historical Norms Below Zero Conditions Are Worse Than Historical Norms Source: FRB Kansas City Months plotted: Jan 1992 to Mar 2016 Jan 1995 Jan 2000 Jan 2005 Jan 2010 Jan 2015

26 FRB ATLANTA WAGE TRACKER From the Current Population Survey (3-month moving average) Year-over-year percentage change 4% 3.5 % 3.2 % 2% 0% Overall Prime Age (25-54) Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: FRB Atlanta via Haver Analytics Months plotted: Jan 2000 to Mar 2016

27 REAL MEDIAN HOUSEHOLD INCOME GROWTH, State Labels Are Rankings Out of 50 (1 = highest % increase; 50 = lowest % increase) Source: Calculations using Census Bureau data.

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29 Inflation & Monetary Policy

30 U.S. PCE INFLATION Year-over-year (seasonally adjusted) Year-over-year percent change (seasonally adjusted) 6% 4% 2% 2.0 % 1.7 % 1.0 % 0% -2% PCE PCE Core FOMC Target Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: BEA via Haver Analytics Months plotted: Jan Feb 2016

31 U.S. PCE INFLATION Year-over-year (seasonally adjusted) Year-over-year percent change (seasonally adjusted) 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 2.0 % 1.7 % 1.0 % % PCE PCE Core Energy Goods & Services FOMC Target Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: BEA via Haver Analytics Months plotted: Jan Feb 2016

32 Basis Point Increase WHAT HAS HAPPENDED IN PAST TIGHTENING CYCLES? Pace = 50 basis points every 3 months Number of Months From Start of Tightening Cycle Average Last 3 Cycles

33 DOT PLOT COMPARISON December 2015 vs March 2016 Percent Dec 2015 Projections Mar 2016 Projections Source: FOMC Projections, December 2015 and March 2016

34 MARKET-IMPLIED PROBABILITY OF A RATE HIKE Using Federal Funds Rate Futures Contract Prices (as of April 25, 2016) 100% 90% 80% 70% 60% 50% 40% 30% 20% 63.52% 51.72% 47.38% 34.87% 23.04% 10% 0% 1/1/2016 1/27/2016 2/22/2016 3/17/2016 4/12/2016 June Rate Hike July Rate Hike September Rate Hike November Rate Hike Dec. Rate Hike Source: Bloomberg

35 SUMMARY Overall, national outlook remains solid Private forecasters expect a slight uptick in growth in 2016 Consumer spending remains solid and household balance sheets are relatively healthy Oil price boost is projected to continue until mid-2017 With labor markets firming, I am looking for wages and household income growth to accelerate in 2016 Inflation remains the key for future interest rate decisions

36 Questions? Gary A. Wagner, Ph.D. Request a Fed Speaker: Follow us on Twitter Like us

37 YEAR-OVER-YEAR STATE HOME PRICE GROWTH Core Logic Index, 3-month moving average (nominal) Source: Calculations from Core Logic Last month included: Feb 2016

38 TRI-STATE AREA HOME PRICE GROWTH Year-over-year, Core Logic index (3-month moving average) Source: Calculations from Core Logic data. Last month included: Feb 2016