Conoco Phillips Breakfast Blend July 31, Chad Wilkerson

Transcription

1 Conoco Phillips Breakfast Blend July 31, 13 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: 1 total; semi-independent by design Federal Open Market Committee: 19 members; 1 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 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 13 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

6 Q1 GDP numbers have been revised down twice, though housing remains strong Growth in Components of Real GDP, Q1 13 Percent change from the previous period, SAAR st Release nd Release 3rd Release Total GDP Consumer spending Residential investment Business investment Exports Government spending Source: U.S. Bureau of Economic Analysis, Macroeconomic Advisors

7 Q data suggest slower growth, though employment gains have been solid U.S. Private Payroll Employment and Business Indexes Change from previous month, thousands Index Private Employment (left axis) ISM Manufacturing Index (right axis) ISM Non-Manufacturing Index (right axis) Jun- Jun-9 Jun-1 Jun-11 Jun-1 Jun-13 Source: Institute for Supply Management, Bureau of Labor Statistics

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

9 And for inflation to remain at or near its long-term target through 15 Percent change, year-over-year PCE Inflation Index June FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Economic Analysis, FOMC

10 On interest rates, most FOMC participants expect little change until 15 1 Percent Federal Funds Rate Year-end target Long Term June FOMC Forecast Ranges in Yellow (1) (3) (1) Note Number of participants who project the initial increase will occur in the specified year in parenthesis Source: U.S. Bureau of Economic Analysis, FOMC

11 When to begin tapering the rate of increase of the Fed s balance sheet is a hot topic Federal Reserve Balance Sheet Dollars, trillions Assets 3 1 Short term lending, targeted lending programs, and rescue operations Other MBS & agency debt 3 1 Treasury securities Currency -1-1 Reserves - Other - -3 Liabilities Source: Federal Reserve Board

12 Mortgage and Treasury rates have jumped since May but remain below early 11 levels Percent 3-year mortgage rate 1-year Treasury Rate Interest Rates.. Jan- Jul- Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-1 Jul-1 Jan-13 Jul Source: Wall Street Journal, Federal Reserve Board

13 The Oklahoma Economy

14 State GDP growth was similar to the nation in 1, after outpacing in 11 and pre-crisis GDP Growth Percent change, year-over-year U.S. OK Source: Bureau of Economic Analysis

15 Employment in Oklahoma remains above pre-recession levels, driven by OKC Level of Payroll Employment Through June 13 1 Index: Jan-= OKC Metro Oklahoma Non-Metro OK U.S. Tulsa Metro Jan- Jan-9 Jan-1 Jan-11 Jan-1 Jan-13 9 Source: U.S. Bureau of Labor Statistics

16 Energy has been the biggest drag to non-metro Oklahoma job growth this year Metro Employment Growth by Industry Year-to-Date Growth, Annualized Percent OKC Tulsa Non Metro - -1 Total Leisure Prof. & Bus. Services Fed. Govt State & Local Govt. Edc. & Health Finance Constr. TTU Mfg. Energy Source: Bureau of Labor Statistics

17 Rig counts have slipped somewhat but still remain relatively healthy 5 Number of rigs Oklahoma Active Drilling Rig Count Seasonally Adjusted 5 Oil Natural Gas Jul- Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-1 Jul-1 Jan-13 Jul-13 Source: Baker Hughes

18 Although down from peaks, energy remains a huge part of the state economy Energy Share of GDP Percent U.S. OK Source: Bureau of Economic Analysis

19 OK has a higher share of its GDP from energy and government than the nation Industry Share of GDP 1 U.S. Ag Energy Transp. & Utilities Oklahoma Ag Leis. & Hospitality Govt. Constr. Govt. 17% Energy 9% Transp. & Utilities Mfg Leis. & Hospitality Constr. Edc. & Health Edc. & Health Mfg Trade Prof. & Bus. Services Fin. Activities Info. Prof. & Bus. Services Info. Fin. Activities Trade Source: Bureau of Economic Analysis

20 Sequestration is also taking a bite out of growth in several parts of the state Ratio of Federal Government Share of Employment in County vs. Nation 11 Source: U.S. Bureau of Labor Statistics

21 Still, the official unemployment rate is now around 5 percent across most of Oklahoma Unemployment Rates Not Seasonally Adjusted 9 Percent. 7. May-1 7 May U.S. OK OKC Tulsa Rest of State Source: U.S. Bureau of Labor Statistics

22 And most counties remain well below the U.S. jobless rate, including Wash. Co. County Unemployment Rates May 13 Source: OK Employment Security Commission

23 But unemployment can be measured several ways, giving several views of labor markets Alternative Measures of Labor Underutilization Average, from 1Q 13Q1 1 Percent U.S. OK Officially unemployed > 15 weeks Official unemployment rate Plus discouraged and marginally-attached Plus part-time involuntarily Source: U.S. Bureau of Labor Statistics

24 Job growth in Bartlesville has resembled the nation lately after outperforming pre-11 Household Employment Growth Percent change, year-over-year Bartlesville U.S May-3 May- May-5 May- May-7 May- May-9 May-1 May-11 May-1 May-13 Source: U.S. Bureau of Labor Statistics Household Survey

25 The local area s most distinctive industry is energy, which has generally been good Washington County and U.S. Employment Share by Industry 11 Percent of Total Employment Industry Washington County U.S. Location Quotient Natural Resources & Mining Trade, Transportation & Utilities Education & Health Leisure & Hospitality State & Local Government Financial Activities Professional and Business Services Construction.5..5 Information..1.3 Manufacturing Federal Government.5.3. Note - Location quotient is the division of local employment share by national employment share Source: U.S. Bureau of Labor Statistics

26 Conclusions U.S. economic growth has been moderate in 13, driven largely by fiscal policy and uncertainty Oklahoma economic activity has leveled off lately but remains solid, including in Bartlesville