ECONversations. Economic and Policy Briefing Webcast Dave Altig, Research Director November 19, :00 p.m. ET

Transcription

1 ECONversations Economic and Policy Briefing Webcast Dave Altig, Research Director November 9, 4 : p.m. ET Questions for Dave: events@atl.frb.org Technical issues: james.dooley@atl.frb.org

2 Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. FOMC Statement October 8, 4

3 Sources: Bureau of Economic Analysis, Macroeconomic Advisers 3 The numbers don t lie. Annualized Real GDP Growth 3 4 Q Q Q3 Q4 Forecast

4 Household spending is rising moderately and business fixed investment is advancing FOMC Statement October 8, 4

5 5 Household spending is rising moderately and business fixed investment is advancing Nonresiden6al Fixed Investment and Personal Consump6on Year- over- Year Percent Change Nonresidential Fixed Investment Personal Consumption Expenditures

6 while the recovery in the housing sector remains slow. FOMC Statement October 8, 4

7 the recovery in the housing sector remains slow. U.S. Single-Family Home Sales -month moving average, thousands, SAAR 4 7 Existing (right axis): New (left axis): Source: National Association of Realtors, Census Bureau through September 4 7

8 Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. FOMC Statement October 8, 4

9 Source: Bureau of Labor Statistics data through October 4 9 The trend in job growth has been rock solid, and drifting upward. 6 Payroll Employment Changes seasonally adjusted, thousands of jobs 4 - Monthly change -month average

10 Unemployment rate projections have been persistently overly pessimistic. Percent, quarterly average Actual Jun- Interest rates low until mid-3 (Aug) Maturity Extension Program (Sept) Sep- Open-ended MBS purchases ( st shot of QE3) Dashed lines represent midpoint of FOMC Summary of Economic Projections as of the indicated date. Dec-3 Tapering announced Sept-4 5 4Q 4Q 4Q 4Q3 4Q4 4Q5 4Q6 4Q7 Source: U.S. Bureau of Labor Statistics, Federal Reserve Board

11 On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing. FOMC Statement October 8, 4

12 We view broader measures of unemployment as improved, but short of mandate consistent Civilian Unemployment Rate (U-3) vs. Broad Unemployment (U-6) percent, SA Part time for economic reasons Civilian Unemployment Rate: 6 yr ppts ppts Conventional Unemployment Rate (U-3) Source: Bureau of Labor Statistics Note: Figures cited are as of Jan. 7 and Oct. 4

13 The job growth is there Cumulative change in payrolls for select sectors, since June 9 Information Million Financial Activities Construction Health care and social assistance +.75M Manufacturing Retail Trade Temporary help services Leisure and hospitality +.9M +.9M +.68M.5 -.M.5 through Oct. +.7M.5 +.9M M Source: U.S. Bureau of Labor Statistics

14 $4 $3 $ $ $ $4 $3 $ $ $ $4 $3 $ $ $ $4 $3 $ $ $ $4 $3 $ $ $ $4 $3 $ $ $ $4 $3 $ $ $ but where is the wage growth? Average hourly earnings for select sectors, from highest-paying to lowest-paying and adjusted for inflation $4 $3 $ $ $34.8 in Oct. Information $ 9 3 $3.9 in Oct. Financial Activities 9 3 $6.86 in Oct. Construction 9 3 $5.5 in Sep. Health care and social assistance 9 3 Cumulative change in payrolls for select sectors, since June 9 $4.96 in Oct. Manufacturing 9 3 $7.9 in Oct. Retail Trade 9 3 $6.39 in Sep. Temporary help services 9 3 $4.6 in Oct. Leisure and hospitality 9 3 Million +.75M +.9M +.9M +.68M.5 -.M.5 through Oct. +.7M.5 +.9M M Source: U.S. Bureau of Labor Statistics

15 Inflation has continued to run below the Committee's longer-run objective. FOMC Statement October 8, 4

16 Growth rate in the core PCE has been at percent since May PCE Core PCE PCE Price Index year-over-year percent change, monthly (annualized % change) Overall PCE Core PCE September 4.9 August July 4.. June FOMC s inflation objective Sources: Bureau of Economic Analysis through September 4 6

17 Market-based measures of inflation compensation have declined somewhat; survey-based measures of longer-term inflation expectations have remained stable. FOMC Statement October 8, 4

18 Market-based measures of inflation compensation have declined ; survey-based measures have remained stable Year, 5-Year Forward Inflation Expectation Rate percent 3. Inflation Expectations Measures percent, year-ahead Survey of Professional Forecasters 3..5 Atlanta Fed Business Inflation Expectations Source: St. Louis FED through November 5, Sources: Atlanta Fed, Philadelphia Fed SPF through Q3 4, BIE through October 4 8

19 In determining how long to maintain this target range, the Committee will assess progress both realized and expected toward its objectives of maximum employment and percent inflation. FOMC Statement October 8, 4

20 We believe we are still short of the FOMC s mandate. 6 Progress Towards Objectives: U-3 gap versus U-6 gap (Using Core PCE) 5 4 Distance from goal based on U-6 gap 3 Distance from goal based on U-3 gap through October 4 Source: Bureau of Labor Statistics; James Bullard s July 7, 4 speech; authors calculations

21 ECONversations Economic and Policy Briefing Webcast Dave Altig, Research Director November 9, 4 : p.m. ET Questions for Dave: events@atl.frb.org Technical issues: james.dooley@atl.frb.org