Richard W. Fisher. President and CEO Federal Reserve Bank of Dallas. Austin, Texas April 16, 2014

Transcription

1 Richard W. Fisher President and CEO Federal Reserve Bank of Dallas Austin, Texas April 16, 2014

2 U.S. Economic Dashboard Junk-bond spread (%) Year-over-year Real GDP growth Trimmed Mean PCE Inflation (%) ! High Yield Corp. Debt (%) Percent of jobs recovered Engine stall Warning lights Unemp. jump Yield curve Oil shock Unemployment rate (%) NOTE: Late November 2013 data (blue) compared with early April 2014 (orange).

3 The Manufacturing and Nonmanufacturing ISM Indexes Both Ticked Upward in March Index, 50+ = expansion Expansion average = ISM Nonmanufacturing ISM Manufacturing Mar SOURCES: Institute for Supply Management Report on Business monthly publication on manufacturing and nonmanufacturing data.

4 Latest U.S. Jobs Report Confirms That Weak December and January Gains Were Aberrations Monthly change, thousands month moving average Mar SOURCE: Bureau of Labor Statistics.

5 Initial Claims and Unemployment Rate Move Lower 4-week moving average, thousands 700 Oct. ' Unemployment rate Percent Mar % threshold Initial claims for unemployment insurance Apr SOURCE: Bureau of Labor Statistics

6 The U.S. Credit Markets Are Awash in Liquidity As of March 2014, the Fed s par holdings of fixed-rate MBS exceeded 30 percent of the outstanding stock of those securities. The Fed owns just shy of 24 percent of the stock of Treasury coupon securities. Having purchased Treasuries further out on the yield curve, and done so in size, the Fed has driven nominal interest rates across the credit spectrum to lows not seen in over a half century. This has allowed U.S. businesses to restructure their balance sheets and creatively manage their earnings.

7 Corporate Bond Yields and Spreads Remain Low Percent Percent Junk bond / 7-year Treasury spread Average spread: '10 '11 '12 '13 ' Junk bond yield '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 ' SOURCES: Moody s; Bank of America Merrill Lynch; Federal Reserve Bank of Dallas.

8 Equity Prices Have Soared Index 2,000 1,800 S&P 500 Stock Index 1,600 1,400 1,200 1, SOURCE: Standard & Poor s. NOTE: S&P close at on March 9, % since March 09 low

9 12-month percent change 3.5 Inflation Is Still Below 2 Percent 3.0 Headline PCE Trimmed-mean PCE April Mandate-consistent level = 2% Feb SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

10 Texas Economic Update Texas employment grew 2.5% in Added 278,000 jobs In 2014, Texas grew 2.9% through February. Added 54,500 jobs Manufacturing lost jobs, but output expanding. Construction and energy came in strong. Expect 2.8% growth for the year.

11 Texas Employment Growth Bests Nation s Dec/Dec, SAAR U.S. Texas Year-to-date: Feb/Dec SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

12 2014 Employment Growth by Sector Thousands of jobs total jobs gained in Texas = 54, Trade, Transp & Utilities (20.1%) Government (16.1%) Educational & Health Services (13.2%) Prof. & Business Services (13.1%) Leisure & Hospitality (10.2%) -2.9 Manufacturing (7.7%) Financial Activities (6.1%) Construction (5.5%) Oil & Gas Extraction and Mining Support (2.5%) Information (1.8%) NOTES: Categories are North American Industry Classification System supersectors. Data seasonally adjusted. SOURCE: Federal Reserve Bank of Dallas.

13 12 Texas Unemployment Rate Lower Than Nation s Percent, SA 10 8 U.S. 6 Texas SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

14 Texas Manufacturing and Services Expanding Index 40 TMOS Production Index TSSOS Revenue Index Mar NOTE: Gray bar indicates Texas recession. SOURCE: Federal Reserve Bank of Dallas.

15 200 Residential Home Construction Has Picked Up Index, SA, 5MMA Jan = Multifamily Permits Residential Housing Starts Single-Family Permits SOURCES: Census Bureau; Bank of Tokyo-Mitsubishi.

16 Thriving Ports Texas is top exporting state in nation: $280 billion in Inland ports handle 46 percent; seaports 54 percent Port of Houston is nation s busiest seaport. First in vessel calls and foreign tonnage, 2 nd in total tonnage Container tonnage small but rising, up 18 percent in last 5 years According to the Port of Houston Authority, port operations directly support more jobs than largest peers SOURCES: Bureau of Transportation Statistics; WISERTrade; U.S. Maritime Administration; Port of Houston Authority; Economic Snapshot April 14, 2014, report by Jon McClure, staff writer, The Dallas Morning News.

17 Texas Export Growth Index, SA Real Dollars Jan = Other Mexico Canada European Union 12% 15% 17% 4% 7% Texas Asia, excl. China Latin America, excl. Mexico China 10% 2013:Q4 35% +24% since peak +2% U.S. minus Texas SOURCES: Census Bureau; World Institute for Strategic Economic Research; Federal Reserve Bank of Dallas.

18 Petroleum Exports Surge Index, Q = 100 Real Dollars, SA 1400 Texas Total Petroleum & Coal Products SOURCE: Wisertrade.

19 Dallas Fed Forecasts Continued Growth Job Growth, Y/Y Percent Change 5 4 Actual Dallas Fed Consensus of Forecasters SOURCES: Western Blue Chip Economic Forecast; Federal Reserve Bank of Dallas.

20 Percent change 35 Texas Job Growth by Wage Quartile, U.S. minus Texas Lowest wage quartile -6.9 Lower-middle wage quartile NOTES: Calculations include workers over age 15 with positive wages and exclude the self-employed. Wage quartiles constructed based on U.S wage distribution. SOURCE: Current Population Survey Merged Outgoing Rotation Groups, 2000, Upper-middle wage quartile Highest wage quartile

21 Total Nonagricultural Employment Since 1990 in Selected States Index, January 1990 = Texas Increase since % Florida +44% U.S. California +26% +23% Illinois New York Michigan +10% +9% +5% SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

22 Texas Metro Business-Cycle Indexes February 2014 Index, January 1990 = 100 Index, January 1990 = Austin-Round Rock Laredo 400 Houston-Sugar Land-Baytown 400 McAllen-Edinburg-Pharr Dallas-Plano-Irving MD Brownsville-Harlingen 350 San Antonio 350 El Paso 300 Fort Worth-Arlington NOTE: The Indexes summarize movements in local employment, unemployment, wages and retail sales. SOURCE: Federal Reserve Bank of Dallas.

23 Summary The U.S. economy is picking up following a harsh winter. Texas employment growth accelerated in % growth 55,400 jobs Expect 2.8% growth for the year.

24 Richard W. Fisher President and CEO Federal Reserve Bank of Dallas Austin, Texas April 16, 2014