Roy Webb  - national economic conditions
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The School of Business and Economics at Lynchburg College, in conjunction with the Lynchburg Regional Chamber of Commerce, hosted the spring Economic Outlook Conference on February 1, 2012. Roy Webb, ...

The School of Business and Economics at Lynchburg College, in conjunction with the Lynchburg Regional Chamber of Commerce, hosted the spring Economic Outlook Conference on February 1, 2012. Roy Webb, Senior Economist and Research Advisor with the Richmond Federal Reserve Bank, spoke to an audience of approximately 100 people about national economic conditions.

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Roy Webb  - national economic conditions Roy Webb - national economic conditions Presentation Transcript

  • National Economic ConditionsRoy WebbFebruary 1, 2012
  • Real Per Capita GDP Chained 2005$, Logarithmic scale400003000020000 Trend 2.05%10000 1000 1869 1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009 Source: Census Bureau, Bureau of Economic Analysis, Haver Analytics 2
  • Real Per Capita GDP Chained 2005$, Logarithmic scale400003000020000 Trend 2.05%10000 1000 1869 1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009 Source: Census Bureau, Bureau of Economic Analysis, Haver Analytics 3
  • Real Gross Domestic Product Percent change from previous quarter at annual rate 10 10 8 8 6 6 4 Q4 4 2.8% 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -8 -10 -10 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Source: Bureau of Economic Analysis/Haver Analytics 4
  • Real Residential Investment Billions of Chained 2005$1000 1000 900 900 800 800 700 700 600 600 500 500 400 Q4 400 334 bln. 300 300 200 200 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Source: Bureau of Economic Analysis/Haver Analytics 5
  • Homeowner Vacancy Rate Percent 7.0 7.0 6.5 6.5 6.0 6.0 Q3 5.5 5.8% 5.5 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 1995 1997 1999 2001 2003 2005 2007 2009 2011 Notes: Homeowner Vacancy Rate is (Vacant Year-Round Housing Units for Sale Only + Other Held Off Market Units) divided by (Owner-Occupied Housing Units + Vacant Year-Round Housing Units For Sale Only+ Vacant Year-Round Housing Units Held off Market) multiplied by 100. Source: Census Bureau/Haver Analytics 6
  • House Prices Index, Jan. 00 = 100280 280 Case Schiller260 Composite 10 260 Index240 240220 220200 200180 180160 160140 140120 120 FHFA Purchase Only100 100 Index80 8060 60 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Standard & Poor’s, Federal Housing Finance Agency/Haver Analytics 7
  • Real Personal Consumption Expenditure Index, Peak = 100 120 120 2007:Q4 - 20011:Q4 1973:Q4 - 1977:Q4 115 1980:Q1 - 1984:Q1 115 110 110 105 105 100 100 95 95 90 90 t t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8 t+9 t+10 t+11 t+12 t+13 t+14 t+15 t+16 Note: Quarters after Business Cycle Peak. Recession starts at t. Source: Bureau of Economic Analysis/Haver Analytics 8
  • Household Net Worth Percent of disposable personal income800 800700 700600 600500 500 Q3 496%400 400300 300 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Federal Reserve Board/Haver Analytics 9
  • Sales of Automobiles & Light Trucks Millions of Vehicles 22 22 20 20 18 Autos and Light Trucks 18 16 16 Dec. 14 13.5 mil. 14 12 12 10 Light Trucks 10 8 8 Autos 6 6 4 4 2 2 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bureau of Economic Analysis/Haver Analytics 10
  • Personal Income & Expenditures 12 Month % Change 6 6 4 Real Personal 4 Income 2 2 Real Personal Dec. Consumption Expenditure 0 0 -2 -2 Month over Month % Change -4 Oct. Nov. Dec. -4 Income 0.4 0.1 0.4 Expenditures 0.1 0.1 -0.1 -6 -6 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bureau of Economic Analysis/Haver Analytics 11
  • Real Investment in Equipment & Software Percent change from previous quarter at annual rate 30 30 25 25 20 20 15 15 10 Q4 10 5.2% 5 5 0 0 -5 -5-10 -10-15 -15-20 -20-25 -25-30 -30-35 -35-40 -40 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bureau of Economic Analysis/Haver Analytics 12
  • Core Capital Goods Current $, Billions 75 75 New Orders 70 70 Dec. 65 65 60 Shipments 60 55 55 50 50 45 45 2006 2007 2008 2009 2010 2011 2012 2013 Notes: Core capital goods are nondefense capital goods excluding aircraft. Source: Census Bureau/Haver Analytics 13
  • Nonfarm Payroll Employment Quarterly average of monthly changes, thousands of persons 500 500 400 400 Q4 300 Avg. 300 200 200 100 100 0 0-100 -100-200 -200-300 Monthly Change -300-400 Dec. 200 -400 Nov. 100-500 Oct. 112 -500-600 Sep. 210 -600 Aug. 104-700 -700-800 -800 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bureau of Labor Statistics/Haver Analytics 14
  • Civilian Unemployment Rate Percent11.0 11.010.5 10.510.0 10.0 9.5 9.5 9.0 FOMC Forecast 9.0 Dec. 8.5 8.5% 8.5 8.0 8.0 7.5 7.5 7.0 7.0 6.5 6.5 6.0 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Notes: FOMC forecast is the central tendency for the Q4 levels, from the January 24-25 meeting. Source: Bureau of Labor Statistics, Board of Governors, Haver Analytics 15
  • Average Hourly Earnings 12 Month % Change 5.0 5.0 Monthly % Change 4.5 Dec. 0.2% 4.5 Nov. 0.0% Oct. 0.3% 4.0 Sep. 0.2% 4.0 3.5 3.5 3.0 3.0 2.5 2.5 Dec. 2.1% 2.0 2.0 1.5 1.5 1.0 1.0 2007 2008 2009 2010 2011 2012 2013 Source: Bureau of Labor Statistics/Haver Analytics 16
  • Overall Consumer Expenditure Price Index 12 Month % Change 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 2.5 Dec. 2.5 2.4% 2.0 2.0 1.5 1.5 FOMC Forecast 1.0 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 -1.0 -1.0 -1.5 -1.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Notes: FOMC forecast is the central tendency for Q4/Q4 percent changes, from the January 24-25 meeting. Source: Bureau of Economic Analysis, Board of Governors, Haver Analytics 17
  • Core Consumer Expenditure Price Index 12 Month % Change 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 2.5 FOMC Forecast 2.5 Dec. 2.0 1.8% 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0-0.5 -0.5-1.0 -1.0-1.5 -1.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Notes: FOMC forecast is the central tendency for Q4/Q4 percent changes, from the January 24-25 meeting. Core PCE Price Index includes expenditures on food services. Source: Bureau of Economic Analysis, Board of Governors, Haver Analytics 18
  • Monetary Policy Instruments Percent 7.0 7.0 6.5 6.5 Federal Funds Target Rate 6.0 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 Primary Credit Rate 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 Discount Rate Jan. 25 1.0 (discontinued) Federal Funds Rate 0.5 Target Range 0.5 0.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Board of Governors/Haver Analytics 19
  • Federal Reserve System Assets AIG & Bear $, Billions Total: $2,965 Stearns: $34 3000 Term ABS Lending Facility: $8 2800 Miscellaneous: $219 Foreign Currency 2600 Swaps: $103 2400 Total: $2,270 Miscellaneous: $156 2200 Commercial Paper Agency MBS: $846 Facility (CPFF): $332 2000 PDCF: $38 1800 Term Auction Facility: Agency Debt: $101 1600 $450 1400 AIG & Bear Stearns: $114 1200 Foreign Currency 1000 Total: $899 Swaps: $553 AMLF: $24 Miscellaneous: $110 800 Treasury Securities: Discount Window: $87 $1,654 600 Miscellaneous: $176 Agency Debt: $20 400 Treasury Securities: $790 Treasury Securities: 200 $476 0 6/27/2007 12/31/2008 1/4/2012 Notes: PDCF is the Primary Dealer Credit Facility. AMLF is the Money Market Liquidity Facility. Discount Window Lending is than $1 billion as of 6/2/2010. Source: Board of Governors/Haver Analytics 20
  • Federal Reserve Board press release – January 25, 2012Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the followingprinciples regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments asappropriate at its annual organizational meeting each January.The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderatelong-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy,and enhances transparency and accountability, which are essential in a democratic society.Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policyactions tend to influence economic activity and prices with a lag. Therefore, the Committees policy decisions reflect its longer-run goals, its medium-termoutlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committees goals.The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal forinflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personalconsumption expenditures, is most consistent over the longer run with the Federal Reserves statutory mandate. Communicating this inflationgoal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interestrates and enhancing the Committees ability to promote maximum employment in the face of significant economic disturbances.The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. Thesefactors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment;rather, the Committees policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments arenecessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information aboutCommittee participants estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMCsSummary of Economic Projections. For example, in the most recent projections, FOMC participants estimates of the longer-run normal rate ofunemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than thecorresponding interval several years earlier.In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from theCommittees assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committeejudges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviationsand the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. Source: Board of Governors 21
  • Federal Revenues Percent of GDP 40 40 Actual Projected 35 35 30 30 25 25 20 20 15 15 10 10 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Notes: Projections are CBOs “Alternative Fiscal Scenario,” which incorporates several changes to the current law that are widely expected to occur or would modify some provisions that might be difficult to sustain for a long period. Horizontal dashed line indicates 1960-2008 average annual federal revenues. Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics 22
  • Federal Outlays Percent of GDP 40 40 Actual Projected 35 35 30 30 25 25 20 20 15 15 10 10 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Notes: Projections are CBOs “Alternative Fiscal Scenario,” which incorporates several changes to the current law that are widely expected to occur or would modify some provisions that might be difficult to sustain for a long period. Horizontal dashed line indicates 1960-2008 average annual federal outlays. Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics 23
  • Federal Deficit Percent of GDP 5 5 Actual Projected 0 0 -5 -5 -10 -10 -15 -15 -20 -20 -25 -25 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Notes: Projections are CBOs “Alternative Fiscal Scenario,” which incorporates several changes to the current law that are widely expected to occur or would modify some provisions that might be difficult to sustain for a long period. Horizontal dashed line indicates 1960-2008 average federal deficit. Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics 24
  • Federal Debt Held by Public Percent of GDP 200 200 Actual Projected 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Notes: Projections are CBOs “Alternative Fiscal Scenario,” which incorporates several changes to the current law that are widely expected to occur or would modify some provisions that might be difficult to sustain for a long period. Horizontal dashed line indicates 1960-2008 average annual debt held by public. Projections are expected to be greater than 200% in 2037 and later. Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics 25