Post on 17-Oct-2020
Chad Wilkerson Vice President, Economist, and Oklahoma City Branch Executive
Federal Reserve Bank of Kansas City
www.kansascityfed.org
• The Federal Reserve System was created in 1913 (sponsored by OK Sen. R.L. Owen) and consists of:
• Board of Governors: 7 members appointed by U.S. President
• Federal Reserve Banks: 12 total; semi-independent by design
• Federal Open Market Committee (FOMC): 19 members; 12 voting
• As with most central banks around the world, the Fed’s responsibilities fall within four general areas:
• Monetary policy – control money supply to affect growth and inflation
• Lender of last resort – provide liquidity in times of financial crisis
• Bank regulation – ensure safety and soundness of banks
• Financial services – bank for banks, bank for federal government
History and Structure of the Federal Reserve System
Federal Reserve Districts and Office Locations
• History, staff, and functions
• Branch office opened in 1920; currently have about 35 staff
• Functions include economic research, bank examinations, public outreach
• 2010 branch board of directors
• Steve Agee (chairman), President, Agee Energy, and Professor, OCU, OKC
• Bill Anoatubby, Governor, Chickasaw Nation, Ada
• Jim Dunn, Chairman, Mill Creek Lumber and Supply Co., Tulsa
• Jacque Fiegel, Senior EVP and COO, Coppermark Bank, OKC
• Rose Washington Rentie, Executive Director, TEDC Creative Capital, Tulsa
• Doug Tippens, President and CEO, Bank of Commerce, Yukon
• K. Vasudevan, Chairman, Service and Technology Corp., Bartlesville
The Oklahoma City Branch of the Federal Reserve Bank of Kansas City
The pace of U.S. recovery remains moderate and is expected to stay on track, with inflation remaining low
Oklahoma’s recession and recovery path has been fairly typical for the state, but risks to growth remain
The Economic Outlook
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30
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40
45
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55
60
65
-1000
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0
200
400
600
Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14
Private Employment (left axis)
ISM Manufacturing Index (right axis)
ISM Non-Manufacturing Index (right axis)
Change from previous month, thousands
Source: Institute for Supply Management, Bureau of Labor Statistics
U.S. Private Payroll Employment and Business Indexes
U.S. output continues to grow solidly, but job growth is modest
Index
0%
20%
40%
60%
80%
100%
120%
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Federal government debt
Household debt
No spending cuts or tax increases
U.S. Debt as a Share of GDP
Percent
Sources: Federal Reserve, BEA, CBO
Consumer debt could constrain growth and federal debt is a longer-term concern
Plus extension of current tax rates
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2
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6
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12
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Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14
Portugal Ireland
Spain Greece
Italy
Percentage points
Europe’s sovereign debt problem has also flared up again
Spreads to German Bunds (10-yr)
Source: Federal Reserve Board
Greece (US$305b) 2.6%
Ireland (US$209b) 1.8%
Portugal (US$220b) 1.9%
Spain (US$1381b) 11.8%
Italy (US$1992b) 17.0%
Germany 26.8%
France 21.3%
Others 16.9%
Rescue packages: Greece: 110 billion=US$144 billion Ireland: 67.5 billion=US$88 billion
But European nations most threatened are only a small part of Euro Zone GDP
Shares of Euro Zone GDP
Source: U.S. Bureau of Economic Analysis
Fed policymakers expect continued moderate U.S. GDP recovery
Real Gross Domestic Product
Percent change, year-over-year
Source: U.S. Bureau of Economic Analysis, FOMC
-4
-2
0
2
4
6
8
-4
-2
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8
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Nov. FOMC Forecast Ranges in Yellow
Long Term
Unemployment Rate Seasonally Adjusted
Percent
Source: U.S. Bureau of Labor Statistics, FOMC
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2
4
6
8
10
12
0
2
4
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8
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12
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Nov. FOMC Forecast Ranges in Yellow
But with U.S. unemployment remaining high for some time
Long Term
PCE Inflation Index
Percent change, year-over-year
Source: U.S. Bureau of Economic Analysis, FOMC
0
2
4
6
8
10
12
0
2
4
6
8
10
12
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Nov. FOMC Forecast Ranges in Yellow
Inflation is expected to remain tame in the near term, but will require careful oversight
Long Term
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Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Projection
Trillion dollars
Assets
Liabilities
Currency
Reserves
SFA
Other
Treasury Securities
MBS & Agency Debt Short Term Lending to Financial Firms
Rescue Operations
Targeted Lending Programs
The FOMC’s plans will swell the Fed’s balance sheet further
Federal Reserve Balance Sheet
Source: Federal Reserve Board
Source: U.S. Bureau of Labor Statistics
Average Recession and Recovery Path, 1956-2006 Employment level 4 quarters before and 8 quarters after U.S. jobs peak (R)
Oklahoma typically enters recessions late but exits around the same time as the nation
0.94
0.95
0.96
0.97
0.98
0.99
1.00
1.01
1.02
1.03
1.04
R-4 R-3 R-2 R-1 R R+1 R+2 R+3 R+4 R+5 R+6 R+7 R+8
US
OK
Source: U.S. Bureau of Labor Statistics
Current Recession and Recovery Path Employment level 4 quarters before and 10 quarters after U.S. jobs peak
The current episode, while worse, has largely followed the historical pattern
0.92
0.94
0.96
0.98
1.00
1.02
1.04
Q1:07 Q3:07 Q1:08 Q3:08 Q1:09 Q3:09 Q1:10 Q3:10
US
OK
Percent change year-over-year
Source: Bureau of Labor Statistics
Employment Growth October 2010
Recent solid state job growth has been driven by energy, construction, and services
-4
-2
0
2
4
6
8
10
12
14
16
18
Total Energy Const Educ & Health
Prof & Bus Svcs
Leis & Hosp
Finance Mfg Trade, Transp.
& Utilities
State & Local Govt
Info
U.S.
OK
Index
Source: KCFRB Ag Credit Survey
Oklahoma Agricultural Conditions
Agricultural conditions in the state have also improved after bottoming in 2009
30
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60
70
80
90
100
110
120
130
140
150
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40
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60
70
80
90
100
110
120
130
140
150
2004 2005 2006 2007 2008 2009 2010
Capital Spending
Index
Q4 Expectations
Farm Income
Source: Oklahoma Employment Commission
Unemployment Rate by State October 2010
With Oklahoma’s shorter recession, unemployment remains relatively low
6.9
Percent
Source: FDIC
Noncurrent Loans as a Share of Total Loans Commercial Banks
And Oklahoma banks remain in much better shape than in the nation as a whole
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1.0
2.0
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6.0
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6.0
Q3 2000 Q3 2001 Q3 2002 Q3 2003 Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010
U.S.
OK
Percent
Source: MBA
Foreclosure and Past Due Mortgage Rates
Housing continues to be a risk, but much less so than in the nation
0
2
4
6
8
10
12
Q3:07 Q4:07 Q1:08 Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 Q3:09 Q4:09 Q1:10 Q2:10 Q3:10
OK Foreclosure
U.S. Foreclosure
OK Past Due
U.S. Past Due
$/MMBTU $ per Barrel
Source: Bloomberg
Energy Prices
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30
60
90
120
150
0
3
6
9
12
15
Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
Natural gas (left scale, per MMBTU)
Crude oil (right scale)
Natural gas prices remain the state’s biggest risk, but high oil prices have helped
The U.S. economy is recovering and expected to continue to grow moderately, with low inflation
Oklahoma’s economy is also recovering and remains in much better shape than the nation
Summary