economic release calendar

economic release calendar CALENDAR DISPLAY 1 2 Tom Porcelli RBC Capital Markets, LLC Chief U.S. Economist 212.618.7788 tom.porcelli@rbccm.com Jacob Oubina RBC Capital Markets, LLC Senior U.S. Economist 212.618.7795 jacob.oubina@rbccm.com

Flagship Economic Publications Daily Deck: Short and succinct, this is our most timely commentary captured in a handful of charts. RBC Capital Markets, LLC Tom Porcelli Chief US Economist (212) 618-7788 tom.porcelli@rbccm.com RBC Capital Markets, LLC Jacob Oubina Tom Porcelli Senior US Economist (212) 618-7795 jacob.oubina@rbccm.com Michael Cloherty Chief US Economist (212) 618-7788 tom.porcelli@rbccm.com Head of US Rates Strategy (212) 437-2480 michael.cloherty@rbccm.com Jacob Oubina January 9, 2017 Senior US Economist (212) 618-7795 jacob.oubina@rbccm.com January 13, 2017 The Daily Deck Exhibit 1: As we wrote in our Weekly Dashboard, the December employment report had all of the necessary ingredients to keep the Fed moving toward a more hawkish bias near-term. Headline payrolls came in light at first blush, but when we add the +19k in back-month revisions to the 156k Dec outcome, we get a net result right on consensus. The unemployment rate inched higher, but at 4.7% remains below the Fed s target. Wages garnered a great deal of attention with average hourly earnings rising 0.4% and the y/y rate hitting a fresh cycle high of 2.9%. So this report checked off all of the right boxes that will allow the committee to maintain a hiking bias. The degree of this bias will depend on how the inflationary/wage pressures unfold and we think these could surprise to the upside very early in the year. Note that we have been talking a lot about how the forward wage metrics we use continue to flag wage pressure remains in the pipeline. Indeed, our simple wage model (which incorporates metrics like the job leavers rate, comp plans, and income expectations) is now suggesting that ECI wages will be sitting at 3.1% y/y by year-end Weekly Dashboard Ending reinvestment: the new topic du jour Ending reinvestment of the Fed portfolio has become a hot topic recently. Though the Fed messaging on this had changed very little over the last year or so, there has been a marked pickup in the discussion recently. This past week we got a few more members to chime in and it seems the narrative is indeed going through a significant metamorphosis. Kaplan, Harker, and even Bullard mentioned ending reinvestment as something that is likely to be on the agenda for discussion in the not-too-distant future. Bullard s comment was particularly interesting given he is one of two members looking for only one rate hike in 2017. To be sure, Bullard changes his views with reckless abandon (he used to be the high dot not long ago). But it is noteworthy that one of the most ardent doves at present is acknowledging a shift in the Fed balance sheet run-off discussion. Harker (a voter this year) went further than any other recent member on the topic and actually tied the timing of the reinvestment end to when Fed Funds hits 1%. Note this is a number that has been floated in the past as the line in the sand for this process. Our base case is that the Fed ends reinvestment in Q4 of this year. In terms of the impact on Treasuries, we do not believe that the duration shock will ever be massive. A large part of the $426bn of Fed holdings of Treasuries maturing in 2018 would likely be replaced by short duration bills. The burden would likely start shifting out the curve rapidly in 2019 when $346bn of Treasuries mature. And another $220bn of Fed holdings of Treasuries mature in 2020, but we think by that point the Fed will need to start buying Treasuries again. Exhibit 2: The reality is that average hourly earnings could already be sitting at north of 3% y/y by the time the Fed s March confab rolls around. This is owing to an important technical factor: the increases in the minimum wage in 19 states. The weighted average wage increase for those states is 7.9% and it will impact a total of 4.3m workers (or 3.5% of the private workforce). This is not small. That factor alone should contribute about 0.3ppts to average hourly earnings in January. And if we further assume we get a more trend-like increase of 0.2% for the remainder of workers, it means AHE could print 0.5% (without assuming a more forceful spillover from the minimum wage increases to other lower-wage employees). That would hold the y/y rate at the current 2.9%. But then if the February report shows only a 0.1% increase in AHE that would put the y/y pace at 3%. Suffice it to say that average hourly earnings running at 3% with an unemployment rate that will probably be flirting with 4.5% at the time all but puts an end to the debate about whether the US has hit full employment. This could make the March FOMC meeting very interesting. The overall decline in the Fed balance sheet will be relatively modest because banks will need massive amounts of reserves for LCR purposes. Once reserves fall to the level consistent with LCR demand, the Fed will start transitioning its portfolio toward an all-treasury book. That means their MBS positions will continue to mature/prepay away, but the Fed will need to start buying Treasuries to offset the reserve drain created by MBS runoff. Additional Treasuries will need to be purchased to offset the reserve drain created by growth in other Fed liabilities like currency in circulation which rises close to $100bn per year. Of course, changes in LCR requirements could lower banks cumulative demand for reserves, which would force the Fed to shrink its portfolio more and the Treasury to boost auction sizes more. But that effect remains highly uncertain. For Required Conflicts Disclosures, please see page 2. All values in USD unless otherwise noted. Priced as of prior trading day's market close, EST (unless otherwise stated). Disseminated: January 9, 2017 16:11ET; Produced: January 9, 2017 16:11ET Weekly Dashboard: Economic and Rates commentary CALENDAR DISPLAY containing our forecasts and various useful reference tables and charts. For a comprehensive look at this topic please see the latest US Interest Rate Focus. 2017 minimum wage increases by state min wage increase (%) % of all impacted workers contribution to m/m change 5.0% 40.4% 2.02% 24.2% 7.7% 1.86% 16.2% 7.8% 1.25% 7.8% 12.0% 0.94% 10.0% 6.8% 0.68% 11.9% 3.3% 0.39% 4.7% 4.4% 0.21% 20.0% 0.9% 0.18% 5.2% 2.8% 0.14% 6.3% 1.3% 0.08% 8.8% 0.7% 0.06% 0.6% 4.4% 0.03% 0.6% 3.7% 0.02% 0.7% 2.3% 0.02% 4.2% 0.2% 0.01% 0.7% 0.9% 0.01% 1.2% 0.3% 0.00% 1.2% 0.2% 0.00% 0.5% 0.1% 0.00% 19-state % change in min wage 7.9% Source: RBC Capital Markets US Economics, WSJ California Arizona Washington New York Massachusetts Colorado Michigan Maine Connecticut Arkansas Hawaii Florida Ohio New Jersey Vermont Missouri Montana South Dakota Alaska Inside: Eco Bullet Points... 2 Eco Indicators and Fedspeak... 3 Economic and Rates Forecasts... 4 Rolling Calendar... 5 This report is priced at 1:00 PM ET on January 13, 2017. For Required Conflicts Disclosures, please see page 6. Disseminated: January 13, 2017 16:46ET; Produced: January 13, 2017 16:46ET 1 2 To subscribe to our research, please e-mail tom.porcelli@rbccm.com or jacob.oubina@rbccm.com

2017 FOMC Matrix Dove n Brainard (Gov) - Bullard (St. Louis) n Evans (Chicago) n Kashkari (Minneapolis) n Tarullo (Gov) n Dudley (NY) + Williams (San Fran.) n Fischer (Vice Chair) n Kaplan (Dallas) + Lockhart* (Atlanta) n Powell (Gov) Conform n Harker (Philly) n Yellen (Chair) Dissent FOMC Statement FOMC Minutes Feb 1 Feb 22 Mar 15* Apr 5 May 3 May 24 Jun 14* Jul 5 Jul 26 Aug 16 Sep 20* Oct 11 Nov 1 Nov 22 Dec 13* Jan 3, 2018 * 14:00 Statement and Summary of Economic Projections, followed by 14:30 Chair press conference + Rosengren (Boston) + Mester (Cleveland) - George (Kansas City) CALENDARAllDISPLAY dates and times are tentative and subject to change. + Lacker* (Richmond) Hawk Note there are currently 2 vacant Governor seats *these members are leaving the Fed in 2017. Lockhart on 2/28 and Lacker on 10/1 Source: RBC Capital Markets US Economics n Voter + Non-voter alternate - Non-voter 1 2

January 2017 02 03 05 06 NEW YEAR S DAY US Markets Closed 09 15:00 Consumer Credit 10 16 04 14:00 FOMC Meeting Minutes 08:15 ADP Employment 10:00 Factory Orders 11 12 13 10:00 JOLTS 08:30 PPI MARTIN LUTHER KING DAY 17 08:30 Empire Manufacturing 18 US Markets Closed 08:30 CPI 14:00 Fed Beige Book 23 24 10:00 Existing Home Sales 25 26 19 08:30 Housing Starts 08:30 Philly Fed 10:00 New Home Sales 20 27 PRESIDENTIAL INAUGURATION 08:30 GDP (4Q A) 30 08:30 Personal Income & Spending 31 08:30 Employment Cost Index 10:00 Consumer Confidence

February 2017 06 07 13 14 20 10:00 JOLTS 15:00 Consumer Credit 01 08:15 ADP Employment 14:00 FOMC Statement 15 08:30 PPI 08:30 CPI 08:30 Empire Manufacturing PRESIDENT S DAY 21 22 US Markets Closed 10:00 Existing Home Sales 14:00 FOMC Meeting Minutes 02 03 08:30 Productivity 10:00 Factory Orders 08 09 10 16 08:30 Housing Starts 08:30 Philly Fed 17 23 24 10:00 New Home Sales 27 28 08:30 GDP (4Q S) 10:00 Consumer Confidence

March 2017 06 10:00 Factory Orders 07 13 14 01 14:00 Fed Beige Book 08 15:00 Consumer Credit 08:15 ADP Employment 08:30 Productivity 15 08:30 PPI 08:30 CPI 08:30 Empire Manufacturing 14:00 FOMC Statement & Econ Projections 14:30 Fed Chair Press Conf 20 21 08:30 Current Account 22 02 03 09 16 10 08:30 Housing Starts 08:30 Philly Fed 10:00 JOLTS 17 23 24 10:00 Existing Home Sales 10:00 New Home Sales 27 28 10:00 Consumer Confidence 29 30 31 08:30 GDP (4Q T)

April 2017 03 04 06 07 10 11 17 08:30 Empire Manufacturing 18 05 10:00 Factory Orders 08:15 ADP Employment 14:00 FOMC Meeting Minutes 12 13 10:00 JOLTS 08:30 PPI US Bond Market Early Close 14 15:00 Consumer Credit GOOD FRIDAY Markets Closed 08:30 CPI 08:30 Housing Starts 19 20 21 10:00 Existing Home Sales 14:00 Fed Beige Book 08:30 Philly Fed 24 25 10:00 New Home Sales 26 27 10:00 Consumer Confidence 28 08:30 GDP (1Q A) 08:30 Employment Cost Index

May 2017 01 02 03 04 05 08 09 15 08:30 Empire Manufacturing 16 08:15 ADP Employment 14:00 FOMC Statement 08:30 Productivity 10:00 Factory Orders 15:00 Consumer Credit 10 11 12 08:30 CPI 10:00 JOLTS 08:30 PPI 08:30 Housing Starts 17 18 19 08:30 Philly Fed 22 23 10:00 New Home Sales 24 10:00 Existing Home Sales 14:00 FOMC Meeting Minutes 25 26 08:30 GDP (1Q S) US Bond Market Early Close 29 MEMORIAL DAY US Markets Closed 30 31 10:00 Consumer Confidence 14:00 Fed Beige Book

June 2017 05 01 08:15 ADP Employment 08:30 Productivity 10:00 Factory Orders 06 10:00 JOLTS 07 08 09 15:00 Consumer Credit 12 13 14 08:30 PPI 08:30 CPI 14:00 FOMC Statement & Econ Projections 14:30 Fed Chair Press Conf 19 20 08:30 Current Account 21 15 08:30 Empire Manufacturing 08:30 Philly Fed 02 16 08:30 Housing Starts 22 23 10:00 New Home Sales 10:00 Existing Home Sales 26 27 10:00 Consumer Confidence 28 29 30 08:30 GDP (1Q T)

July 2017 03 04 05 06 07 US Bond Market Early Close 10 15:00 Consumer Credit 11 17 08:30 Empire Manufacturing 18 INDEPENDENCE DAY Markets Closed 10:00 Factory Orders 14:00 FOMC Meeting Minutes 08:15 ADP Employment 12 13 14 08:30 CPI 10:00 JOLTS 14:00 Fed Beige Book 08:30 PPI 19 20 21 08:30 Housing Starts 08:30 Philly Fed 24 10:00 Existing Home Sales 25 10:00 Consumer Confidence 26 10:00 New Home Sales 14:00 FOMC Statement 27 28 08:30 GDP (2Q A) 08:30 Employment Cost Index 31

August 2017 01 02 04 07 15:00 Consumer Credit 08 14 15 03 08:15 ADP Employment 10:00 Factory Orders 09 10 11 08:30 CPI 10:00 JOLTS 08:30 Productivity 08:30 PPI 08:30 Empire Manufacturing 16 21 22 23 17 14:00 FOMC Meeting Minutes 08:30 Philly Fed 18 24 25 10:00 New Home Sales 10:00 Existing Home Sales 28 29 10:00 Consumer Confidence 30 08:15 ADP Employment 08:30 GDP (2Q S) 31

September 2017 04 LABOR DAY 05 10:00 Factory Orders 06 US Markets Closed 14:00 Fed Beige Book 11 12 18 19 08:30 Current Account 08:30 Housing Starts 25 26 07 01 08 15:00 Consumer Credit 08:30 Productivity 13 14 15 10:00 JOLTS 08:30 PPI 08:30 CPI 08:30 Empire Manufacturing 20 10:00 Existing Home Sales 14:00 FOMC Statement & Econ Projections 14:30 Fed Chair Press Conf 10:00 New Home Sales 27 10:00 Consumer Confidence 21 28 22 08:30 Philly Fed 08:30 GDP (2Q T) 29

October 2017 02 09 03 04 08:15 ADP Employment COLUMBUS DAY 10 11 US Markets Closed 10:00 JOLTS 14:00 FOMC Meeting Minutes 16 08:30 Empire Manufacturing 17 18 23 24 25 08:30 Housing Starts 14:00 Fed Beige Book 10:00 New Home Sales 05 12 19 26 10:00 Factory Orders 06 15:00 Consumer Credit 13 08:30 CPI 08:30 PPI 20 10:00 Existing Home Sales 08:30 Philly Fed 27 08:30 GDP (3Q A) 30 31 08:30 Employment Cost Index

November 2017 06 07 13 14 01 08:15 ADP Employment 14:00 FOMC Statement 02 03 08:30 Productivity 10:00 Factory Orders 10:00 JOLTS 08 09 10 15:00 Consumer Credit 15 08:30 PPI 08:30 CPI 08:30 Empire Manufacturing 20 21 10:00 Existing Home Sales 22 14:00 FOMC Meeting Minutes 16 23 08:30 Philly Fed THANKSGIVING DAY Markets Closed 17 24 08:30 Housing Starts US Markets Early Close 27 10:00 New Home Sales 28 10:00 Consumer Confidence 29 08:30 GDP (3Q S) 14:00 Fed Beige Book 30

December 2017 04 10:00 Factory Orders 05 11 10:00 JOLTS 12 18 19 06 08:15 ADP Employment 08:30 Productivity 13 08:30 PPI 08:30 CPI 14:00 FOMC Statement & Econ Projections 14:30 Fed Chair Press Conf 07 14 01 08 15:00 Consumer Credit 08:30 Current Account 20 21 08:30 Housing Starts 10:00 Existing Home Sales 08:30 Philly Fed 08:30 GDP (3Q T) 15 22 08:30 Empire Manufacturing 10:00 New Home Sales US Bond Market Early Close 25 CHRISTMAS 26 27 US Markets Closed 10:00 Consumer Confidence 28 29 US Bond Market Early Close

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