‘GOOD VIBRATIONS’ - FDIC...‘GOOD VIBRATIONS’ March 20, 2018 2 2018 Interagency Accounting...
Transcript of ‘GOOD VIBRATIONS’ - FDIC...‘GOOD VIBRATIONS’ March 20, 2018 2 2018 Interagency Accounting...
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‘GOOD VIBRATIONS’
March 20, 2018
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2018 Interagency Accounting Conference, Arlington, VirginiaMarch 20, 2018
From ‘Secular Stagnation’ (Really?)
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Real U.S. GDP growth (percent change from the previous year)
Sources: Haver Analytics; U.S. Department of Commerce; NBER Macroeconomic database; Ray Fair. Updated through 2017 Q4.
Despite Slow Growth …
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Unemployment (percent of the labor force)
Sources: Haver Analytics; U.S. Department of Labor. Updated through November 2017.
… We’re Back On Our Feet
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Working-age population (% oya) and labor force (annualized % ch from seven years earlier)
Sources: Haver Analytics; Census. Updated through January 2018.
Demographics Slows Our Speed Limit
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Initial applications for unemployment benefits (thousands, weekly)
Sources: Haver Analytics; U.S. Department of Labor. Updated through March 3, 2018.
No One Knows the Economy Better Than This
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Initial applications for unemployment benefits (weekly, percent of the labor force)
Sources: Haver Analytics; U.S. Department of Labor. Updated through March 3, 2018.
Claims Are At Historical Percentage Lows
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Claimants (number) Initial applications for unemployment benefits (thousands, weekly)
Sources: Haver Analytics; U.S. Department of Labor. Updated through February 24, 2018 (claimants) and March 3, 2018 (claims).
Claims and Claimants
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To ‘Overheating’ Worries (Chill)
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Less monetary support, dearer energy; but …
Global revival;
Diminished energy drags;
Regulatory reform (?);
Hurricane recovery (+½ percentage point boost in 2018);
Tax reform and relief (½ to 1½ percentage point boost) ;
Equity wealth gains (1 to 2 percentage points boost).
Stimulus In the Pipeline …
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Real GDP and aggregate hours worked (percent change from 12 months earlier)
Sources: Haver Analytics; Macroeconomic Advisers. Updated through December 2017 (GDP) and January 2018 (hours).
… Will Lift Growth for a While
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1) Can we handle it?
2) Can we hold high ground?
3) What about the fiscal outlook?
Three Questions
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Selected chain PCE inflation measures (percent change from 12 months earlier)
Sources: Haver Analytics; NBER‐designated recession bars; U.S. Department of Commerce. Updated through December 2017.
Is Overheating a Risk?
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Labor force participation for selected cohorts (percent of the respective population)
Sources: Haver Analytics; U.S. Department of Labor. Updated through January 2018.
Some Unemployment Isn’t Visible
Implied number of dropouts compared with 2007 participation rates:
403,000
532,000
623,000
642,000
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Labor force participation for 20- to 45-year olds (percent of the respective population)
Sources: Haver Analytics; U.S. Department of Labor. Updated through January 2018.
Some Unemployment Isn’t Visible
Implied number of dropouts compared with 2007 participation rates:
1,466,000
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Unemployment (percent of the labor force)
Sources: Haver Analytics; U.S. Department of Labor. Updated through January 2018.
So, 4.1 Percent Isn’t the Whole Story
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Labor force participation for selected cohorts (percent of the respective population)
Sources: Haver Analytics; U.S. Department of Labor. Updated through 2016.
Immigration Is a Safety Valve for the U.S.
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Employment and the labor force (percent change from 12 months earlier)
Sources: Haver Analytics; U.S. Department of Labor. Updated through January 2018.
Why Else Would Job Growth Be So Strong?
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Average hourly earnings (percent change from 12 months earlier)
Sources: Haver Analytics; U.S. Department of Labor. Updated through January 2018.
Why Are Wage Trends So Tame?
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Real GDP per hour ($ per hour) (annualized percent change)
Sources: Haver Analytics; U.S. Department of Labor; U.S. Department of Commerce. Updated through 2017 Q4.
Productivity Is the Key
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1) Can we handle it?
2) Can we hold high ground?
3) What about the fiscal outlook?
Three Questions
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Unemployment (percent of the labor force)
Sources: Haver Analytics; U.S. Department of Labor. Updated through January 2018.
History Books Have a Sober Story to Tell
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P-E ratio of the Wilshire 5000
Sources: Haver Analytics; U.S. Department of Commerce; Federal Reserve Board. Updated through 2017 Q2.
“Longevity” Is a Big Issue
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1) Can we handle it?
2) Can we hold high ground?
3) What about the fiscal outlook?
Three Questions
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U.S federal deficit ($ billions) (percent of GDP)
Sources: Haver Analytics; U.S. Department of Commerce; NBER Macroeconomic database. Updated through November 2017.
What CBO Sees Isn’t What We Saw
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Real U.S. GDP growth (percent change from four quarters earlier)
Sources: Haver Analytics; U.S. Department of Commerce; NBER Macroeconomic database. Updated through 2017 Q3.
Promises Reflect a Century of 3.5% Growth
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Long-term revenue and spending projections (percent of GDP)
Sources: Haver Analytics; Congressional Budget Office. Updated through 2016.
2% Growth Doesn’t Work …
Actual Projected
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Long-term revenue and spending projections (percent of GDP)
Sources: Haver Analytics; Congressional Budget Office. Updated through 2016.
… 3% Growth Does …
Actual Projected
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Long-term revenue and spending projections (percent of GDP)
Sources: Haver Analytics; Congressional Budget Office. Updated through 2016.
… 3.5% Even Better
Actual Projected
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Appendix 1. The Fed’s Long Goodbye
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Core PCE inflation (% ch from 12 months earlier) Unemployment (% of the labor force)
Sources: Haver Analytics; U.S. Department of Commerce; U.S. Department of Labor. Updated through January 2018 (inflation) and January 2018 (unemployment).
With the Economy Back Home …
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CPI and core CPI (percent change from 12 months earlier)
Sources: Haver Analytics; U.S. Department of Commerce. Updated through January 2018
And Inflation Working It’s Way to 2%
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Nominal federal funds rate and core inflation (percent)
Sources: Haver Analytics; U.S. Department of Commerce; Federal Reserve Board. Updated through September 2017 (inflation) and November 10, 2017 (federal funds rate).
The Fed’s End Game … 1% Over Inflation …
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Federal Reserve liabilities (billions of dollars)
Sources: Haver Analytics; Federal Reserve Board. Updated through February 28, 2018.
Balance Sheet Normalization …
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Excess reserves (billions of dollars)
Sources: Haver Analytics; Federal Reserve Board. Updated through November 8, 2017.
… Means Draining Excess Reserves
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Components of the 5 x 5 nominal Treasury yield (percent)
Sources: Haver Analytics; Federal Reserve Board. Updated through November 10, 2017.
Uncertain Implications for Bonds
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CONTACT:James E. GlassmanTelephone: (212) 270‐0778 [email protected]
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