Richard W. Fisher President and CEO Federal Reserve Bank of Dallas Austin, Texas April 16, 2014
U.S. Economic Dashboard 4.5 4 5 3.5 5.5 6 6.5 7 7.5 8 3 7 3.28 Junk-bond spread (%) 7.5 8 8.5 10 8.5 9 9.5 9-0.5-1 -1.5-2 0 0.5 1 1.5 2 2.6 Year-over-year Real GDP growth 2.5 3 3.5 4 4.5 5 5.5 0.5 0-0.5 1 1.5 2 2.5 1.3 3-1 5 Trimmed Mean PCE Inflation (%) 6 6.5 7 7.5 8 3.5 4 4.5 6.5 6 5.5 5 5.45! High Yield Corp. Debt (%) 11 9.5 10 10.5-2.5 Percent of jobs recovered Engine stall 9 4. 9 8 2. 8 Warning lights Unemp. jump Yield curve Oil shock 6 5.5 5 4.5 4 6.7 Unemployment rate (%) 10 8.5 9 9.5 NOTE: Late November 2013 data (blue) compared with early April 2014 (orange).
The Manufacturing and Nonmanufacturing ISM Indexes Both Ticked Upward in March Index, 50+ = expansion Expansion average = 54.5 54.4 60 ISM Nonmanufacturing 55 50 45 ISM Manufacturing Mar. 53.7 53.1 40 35 30 2007 2008 2009 2010 2011 2012 2013 2014 SOURCES: Institute for Supply Management Report on Business monthly publication on manufacturing and nonmanufacturing data.
Latest U.S. Jobs Report Confirms That Weak December and January Gains Were Aberrations Monthly change, thousands 400 350 300 6-month moving average 250 200 Mar. 192 188 150 100 50 0 2010 2011 2012 2013 2014 SOURCE: Bureau of Labor Statistics.
Initial Claims and Unemployment Rate Move Lower 4-week moving average, thousands 700 Oct. '09 10.0 650 600 Unemployment rate Percent 11 10 9 550 8 500 450 400 Mar. 6.7 6.5% threshold 7 6 350 300 Initial claims for unemployment insurance Apr. 5 316 5 4 250 2008 2009 2010 2011 SOURCE: Bureau of Labor Statistics. 2012 2013 2014 3
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.
Corporate Bond Yields and Spreads Remain Low Percent 23 21 19 17 15 Percent Junk bond / 7-year Treasury spread 10 8 6 4 2 Average spread: 1997-2007 0 '10 '11 '12 '13 '14 4.8 3.2 13 Junk bond yield 11 9 7 5 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 5.5 SOURCES: Moody s; Bank of America Merrill Lynch; Federal Reserve Bank of Dallas.
Equity Prices Have Soared Index 2,000 1,800 S&P 500 Stock Index 1,600 1,400 1,200 1,000 800 600 2007 2008 2009 2010 2011 2012 2013 SOURCE: Standard & Poor s. NOTE: S&P close at 676.53 on March 9, 2009. +175% since March 09 low
12-month percent change 3.5 Inflation Is Still Below 2 Percent 3.0 Headline PCE 2.5 2.0 1.5 1.0 Trimmed-mean PCE April 2013 1.3 Mandate-consistent level = 2% Feb 2014 1.3 0.9 0.5 0.0 2010 2011 2012 2013 2014 SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
Texas Economic Update Texas employment grew 2.5% in 2013. 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.
Texas Employment Growth Bests Nation s Dec/Dec, SAAR 4 3 2 1 0.5 U.S. Texas 3.4 2.1 2.3 2.5 1.6 1.7 1.7 0.8 1.3 2.9 0-1 -2 Year-to-date: Feb/Dec -3-2.6-4 -3.5-3.8-5 2005 2007 2009 2011 2013 SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
2014 Employment Growth by Sector Thousands of jobs 12 2014 total jobs gained in Texas = 54,500 10 8 6 4 2 2.5 5.8 6.1 8.9 9.6 8.6 7.7 4.4 0.8 0-2 -4 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.
12 Texas Unemployment Rate Lower Than Nation s Percent, SA 10 8 U.S. 6 Texas 6.7 5.7 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
Texas Manufacturing and Services Expanding Index 40 TMOS Production Index TSSOS Revenue Index 30 20 Mar-2014 10 0-10 -20-30 -40 2007 2008 2009 2010 2011 2012 2013 2014 NOTE: Gray bar indicates Texas recession. SOURCE: Federal Reserve Bank of Dallas.
200 Residential Home Construction Has Picked Up Index, SA, 5MMA Jan. 2008 = 100 180 160 Multifamily Permits 140 120 100 Residential Housing Starts 80 60 Single-Family Permits 40 20 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 SOURCES: Census Bureau; Bank of Tokyo-Mitsubishi.
Thriving Ports Texas is top exporting state in nation: $280 billion in 2013. 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.
Texas Export Growth Index, SA Real Dollars Jan. 2000 = 100 260 240 220 Other Mexico Canada European Union 12% 15% 17% 4% 7% Texas 200 180 160 140 Asia, excl. China Latin America, excl. Mexico China 10% 2013:Q4 35% +24% since peak +2% 120 100 80 U.S. minus Texas 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 SOURCES: Census Bureau; World Institute for Strategic Economic Research; Federal Reserve Bank of Dallas.
Petroleum Exports Surge Index, Q1 2000 = 100 Real Dollars, SA 1400 Texas Total Petroleum & Coal Products 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 SOURCE: Wisertrade.
Dallas Fed Forecasts Continued Growth Job Growth, Y/Y Percent Change 5 4 Actual Dallas Fed Consensus of Forecasters 3 2 1 0-1 -2-3 -4 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 SOURCES: Western Blue Chip Economic Forecast; Federal Reserve Bank of Dallas.
Percent change 35 Texas 30 25 Job Growth by Wage Quartile, 2000-12 U.S. minus Texas 31.0 30.3 20 18.6 15 10 9.7 10.4 9.9 5 0-5 -10 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. 2000 wage distribution. SOURCE: Current Population Survey Merged Outgoing Rotation Groups, 2000, 2012. 0.9 Upper-middle wage quartile Highest wage quartile
Total Nonagricultural Employment Since 1990 in Selected States Index, January 1990 = 100 170 160 Texas Increase since 1990 +63% 150 140 130 Florida +44% U.S. California +26% +23% 120 110 100 Illinois New York Michigan +10% +9% +5% 90 1990 1995 2000 2005 2010 SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
Texas Metro Business-Cycle Indexes February 2014 Index, January 1990 = 100 Index, January 1990 = 100 450 450 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 300 250 200 150 100 50 1990 1993 1996 1999 2002 2005 2008 2011 2014 250 200 150 100 50 1990 1993 1996 1999 2002 2005 2008 2011 2014 NOTE: The Indexes summarize movements in local employment, unemployment, wages and retail sales. SOURCE: Federal Reserve Bank of Dallas.
Summary The U.S. economy is picking up following a harsh winter. Texas employment growth accelerated in 2014. 2.9% growth 55,400 jobs Expect 2.8% growth for the year.
Richard W. Fisher President and CEO Federal Reserve Bank of Dallas Austin, Texas April 16, 2014