FEDERAL RESERVE BANK of NEW YORK - Upstate …...Japan January 2016 1.1 0.5 Sweden February 2015 1.0...
Transcript of FEDERAL RESERVE BANK of NEW YORK - Upstate …...Japan January 2016 1.1 0.5 Sweden February 2015 1.0...
Upstate New York Regional Advisory Board
Federal Reserve Bank of New York 33 Liberty Street
10F, Paul Volcker Boardroom Wednesday, September 7, 2016
AGENDA 10:30am 10:35am
Welcome and Adoption of the UNYRAB Charter, Tony Davis, Director Introductory Remarks, Jack Gutt, EVP
10:40am-11:10am The National Economy, Richard Peach, Senior Vice President 11:10am-11:40am
International Update, Matthew Higgins, Vice President
11:40am-12:00pm
Regional Update, Jaison Abel, Officer
12:00pm 12:15pm 12:15pm-1:55pm
Adjourn to NWC Room-10F Lunch Round Table Discussion with William Dudley, President and Michael Strine, First Vice President Your experience and that of your customers and suppliers can give us insight into current economic conditions.
Questions for discussion with President Dudley:
1. Has your firm experienced an increase in demand in recent
months? 2. Has demand for your product or service increased sufficiently that you increased or plan to increase employment in 2016? 3. Has demand for your product or service increased sufficiently that
you plan to increase investment in plant and equipment in 2016? 4. Has your access to credit changed in 2016? 5. How is the labor market in meeting your needs?
2:00 pm Adjourn
Upstate New York Regional Advisory Board
Federal Reserve Bank of New York 33 Liberty Street New York, NY
Wednesday, September 7, 2016
ATTENDEE LIST
Board Members Aminy Audi CEO & Chairman of the Board L. & J.G. Stickley Scott Bieler President & CEO West Herr Automotive Group Lynn Marie Finn President & CEO Superior Workforce Solutions, Inc. Kenneth M. Franasiak Chairman Calamar Anne Kress President Monroe Community College
Linda MacFarlane President & CEO Community Loan Fund of the Capital Region Martin Mucci President & CEO PayChex, Inc. Robert L. Stevenson President Eastman Machine Company
Federal Reserve Bank of New York
William Dudley Michael Strine Jack Gutt Richard Peach Linda Goldberg Matthew Higgins Anand Marri
President First Vice President EVP, Head of Communications & Outreach Group SVP, Research & Statistics SVP, Integrated Policy Analysis VP, Integrated Policy Analysis VP and Head of Outreach & Education
Jaison Abel Luis Uranga Tony Davis Adrian Franco Chelsea Cruz Angela Sun
Research Officer, Research & Statistics Officer and Chief of Staff, Chief of Staff’s Office Director, Community Engagement, Outreach & Education Director, Economic Education, Outreach & Education Associate, Community Engagement, Outreach & Education Associate, Legal
Global Economic Outlook
Upstate New York Regional Advisory BoardMatthew Higgins, 7 September 2016
The views expressed here are those of the author, and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.
Roadmap
Recent global economic performance and medium-term outlook
Foreign advanced economies’ struggle to escape “lowflation”
The United Kingdom after the Brexit referendum
China’s excess capacity challenge
Canadian economic performance since the global crisis
0
2
4
6
8
10
12
10 11 12 13 14 15 16 17
Global GDP Growth
Percent Q/Q‐4
6.3
1.5
3.5
Emerging ex. China
China
Advanced
Sources: National sources, Boomberg. Dotted lines show market growth forecasts.
3
4
5
6
7
11 12 13 14 15 16
Percent, CY/CY
Evolution of EME Market Growth Forecasts
2014
2013
2015
2012
Sources: Blue Chip Economics, Consensus Economics. Figures are GDP‐weighted averages for 25 EMEs.
20162017
-40
-30
-20
-10
0
10
20
30
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Percent positive or negative*
Citigroup Economic Surprise Indexes
Advanced Economies
Emerging Economies
*Weighted by series’ historical FX impact
40.0
42.5
45.0
47.5
50.0
52.5
55.0
57.5
05 06 07 08 09 10 11 12 13 14 15 16
Diffusion Index
Global Manufacturing PMI
Source: Markit.
Average 2005 – 2008:Q1 = 53.2
Average 2012 – 2015:Q2 = 51.1
50.7Aug.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
12 13 14 15 16
Percent change from year ago
G‐3: Core Consumer Price Inflation
Japan
United States
Euro Area
Sources: BEA, Eurostat, BoJ. U.S. inflation measured using the PCE index.
1.6
0.8
0.5
0
20
40
60
80
100
08 09 10 11 12 13 14 15 16 17
Percent
Central Bank Credit as a Share of GDP
Japan
United States
Euro Area
Sources: BoJ, ECB, Federal Reserve. Projections assume that announced BoJ and ECB asset purchase programs proceed thorough 2017:Q1, in line with explicit official commitments. Both programs, however, are open‐ended. Federal reserve credit is assumed to remain constant at its current level.
AE Core Inflation Performance with Negative Policy Rates
Country Date AdoptedInitial Core
InflationCurrent Core
Inflation
Japan January 2016 1.1 0.5
Sweden February 2015 1.0 1.2
Switzerland December 2014 0.4 -0.4
Denmark September 2014 0.7 1.0
Euro Area June 2014 0.8 0.8
Sources: National sources, OECD. Policy rates are as follows: Japan, marginal current account balances; Sweden, repo rate; Switzerland, 3‐mo. LIBOR target; Denmark, CD rate; Euro Area, deposit rate.
Market Growth Forecast Changes Since Brexit Referendum( percent, calendar-year basis )
2016 2017 2016 2017
Current Forecast 1.6 0.4 1.5 1.3 Top 3 1.8 1.4 1.7 1.6 Bottom 3 1.3 -0.8 1.4 0.9
Change Since Vote -0.2 -1.7 -0.1 -0.4 Top 3 -0.2 -1.0 0.0 -0.3 Bottom 3 -0.3 -2.7 -0.1 -0.7
United Kingdom Euro Area
Source: Blue Chip Economics. Panel includes 22 individual forecasts. Survey periods are early September and early June.
35
40
45
50
55
60
65
-8
-6
-4
-2
0
2
4
6
8
07 08 09 10 11 12 13 14 15 16 17
Percent SAAR
UK GDP Growth and Composite Output PMI
GDP Growth
Composite PMI
Correlation = 0.85
Sources: Markit Economics
July
Aug.
Diffusion Index
Legal Arrangements of Selected Non-EU Countries
Norway Switzerland Turkey Canada
Legal frameworkEuropean Economic
Association
European Free Trade Area + bilateral
agreements Customs UnionFree Trade Agreement
Tarrif-free trade with EU
Contributes to EU budget
Limited restrictions on labor mobility and immigration from EU
Implments most EU legal and regulatory norms
Unrestricted access to EU single market for financial services
EU voting rights
10
15
20
25
30
35
40
45
50
90 92 94 96 98 00 02 04 06 08 10 12 14 16
China and other EMEs: Capital Spending as a Share of GDP
China
Other EMEs
Percent
Source: WEO database, staff forecast for 2016.
60
70
80
90
100
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
China: Capacity Utilization in the Industrial Sector
Percent
Source: CEIC, PBOC
Excess capacity
Normal range
Capacity shortage
73.8%
0
100
200
300
400
500
600
700
800
900
Ch
ina
Japa
n
Indi
a
US
Rus
sia
S. K
ore
a
Ger
ma
ny
Bra
zil
Tur
key
Ukr
ain
e
Italy
Ta
iwa
n
Mex
ico
Ira
n
Fra
nce
Spa
in
Ca
nad
a
UK
Crude Steel Production
Million tons
Source: World Steel Association, data as of 2015
0
20
40
60
80
100
120
-25
-20
-15
-10
-5
0
5
10
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Employed in SOEs (yearly change, rhs)
Employed in SOEs (lhs)
Global financial crisis
SOE restructuring
China: SOE Employment
Persons mn Persons mn
Source: CEIC
90
95
100
105
110
115
08 09 10 12 12 13 14 15 16
Indexes, 2008:Q1 = 100
Advanced Economy Real GDP
Japan
United States
Euro area ex. Germany
Germany
U.S.
Canada
95
100
105
110
115
120
08 09 10 12 12 13 14 15 16
Indexes, 2008:Q1 = 100
Canada: Provincial Employment
Quebec
United States
Manitoba & Sascatchewan
Ontario
Maritime Provinces
Alberta
British Columbia
US Macro Overview September 7, 2016
Overview • Growth of real GDP has slowed sharply over the past year and a half due
primarily to substantial dollar appreciation, weaker global growth, and steep declines in commodity prices.
– Consumer spending continued to be the main engine of growth for the US economy, helped along by falling energy and food prices.
– Housing has lost forward momentum despite quite low mortgage interest rates. – Growth of business fixed investment slowed substantially, due in part to the sharp contraction
in oil and gas drilling activity. – Net exports exerted a substantial drag. – Inventories high relative to sales.
• Nonetheless, the labor market continued to improve over the period and
is now showing classic signs of being at or near full employment.
• Core inflation has edged higher over the past year but remains below the FOMC’s objective.
– Rent inflation continues to edge higher. – Health care price inflation has moved higher. – Core goods prices are declining reflecting past dollar appreciation and excess inventories.
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2000 2002 2004 2006 2008 2010 2012 2014 2016
Growth of Real GDP Four Quarter Percent Change Four Quarter Percent Change
Source: Bureau of Economic Analysis
Note: Shading shows NBER recessions.
1
60
80
100
120
140
0
200
400
600
800
1000
1200
1400
1600
1800
2011 2012 2013 2014 2015
Broad Trade-Weighted Exchange Value of US $ (right axis)
Nominal Trade-Weighted Value of US$ and Rig Count Active Oil Rigs Index
Source: Federal Reserve Board and Baker Hughes
Note: Shading shows NBER recessions.
Rig Count (left axis)
2
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
2012 2013 2014 2015 2016
Aggregate Weekly Hours Worked Y/Y % Change Y/Y % Change
Source: Bureau of Labor Statistics
Note: Shading shows NBER recessions.
Goods-Producing Industries
Private Service-Providing
Industries
3
0
2
4
6
8
10
12
60
65
70
1955
1959
1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
2007
2011
2015
Labor Share of National Income and Unemployment Rate Percent Rate
Source: Bureau of Economic Analysis, Bureau of Labor Statistics Note: Shading shows NBER recessions.
Labor Share of National Income
(Left Axis)
Unemployment Rate
(Right Axis)
4
Personal Saving Rate and Energy Price Index Energy Price Index Personal Saving Rate
Sources: Bureau of Economic Analysis and Bureau of Labor Statistics via Haver Analytics
Personal Saving Rate (left axis)
Energy Price Index (right axis)
12-month Change (left axis) Monthly Change
(right axis)
12-month Percent Change Monthly Percent Change (Annualized) Real Personal Consumption Expenditures
Note: Shading shows NBER recessions. 5
0
2
4
6
8
10
12
400 450 500 550 600 650 700
0
2
4
6
8
10
12
Source: Bureau of Economic Analysis and Federal Reserve Board
Households’ Net Worth as a Percent of Disposable Income
2006Q1 to present
Note: Fitted line is from 1983Q1 to 2005Q4.
Personal Saving Rate and Household Net Worth Personal Saving Rate (Percent) Personal Saving Rate (Percent)
2016Q1 (640, 6.1)
1983Q1 to 2005Q4
2006Q1 (643, 3.8)
6
0
0.2
0.4
0.6
0.8
1
1.2
1.4
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1950 1960 1970 1980 1990 2000 2010
Household Liabilities/Disposable Personal Income Ratio Ratio
Source: Federal Reserve Board
7 Note: Shading shows NBER recessions.
-800
-600
-400
-200
0
200
400
600
800
1000
1200
1400
1600
1800
-1000
-500
0
500
1000
1500
2000
1999 2001 2003 2005 2007 2009 2011 2013 2015
Household Formations 2 Year Avg. Change 2 Year Avg. Change
Source: Bureau of the Census Note: Shading shows NBER recessions.
Total (Left Axis)
Renter (Left Axis)
Owner (Right Axis)
8
60
65
70
1965 1971 1977 1983 1989 1995 2001 2007 2013
60
65
70Percent Percent
Source: Census Bureau 9
Aggregate Homeownership Rate*
*Owner-occupied housing units divided by total occupied housing units.
Contribution to Decline by Age of Household Head: Under 35: 23.7% 35 to 44: 35.4% 45 to 54: 29.1% 55 to 64: 11.7% 65 plus: -0.9%
Single Family Housing Market
3
4
5
6
7
8
9
10
11
12
13
-20
-15
-10
-5
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014 2016
12 Month % Change Months
Source: CoreLogic, National Association of Realtors, via Haver Analytics Note: Shading shows NBER recessions.
Single Family House Price Index
(Left Axis)
Months’ Supply
(Right Axis)
“Normal” Range for Months’ Supply
10
0
0.005
0.01
0.015
0.02
0.025
0.03
0
0.005
0.01
0.015
0.02
0.025
0.03
1968 1978 1988 1998 2008
Housing Starts and Existing Homes Sales Per Capita Units Units
Source: BLS, Census Bureau, NAR
Note: Shading shows NBER recessions.
Housing Starts
Existing Home Sales
.0178 (average over 1968-2003)
.009 (average over 1968-2003)
11
500
550
600
650
700
750
800
500
550
600
650
700
750
800
1999 2001 2003 2005 2007 2009 2011 2013 2015
Credit Score at Mortgage Origination: All First Mortgages Credit Score Credit Score
Source: FRBNY / Consumer Credit Panel
Note: Shading shows NBER recessions.
Median
10th Percentile
25th Percentile
About 35 – 40 Million People
12
-20
-15
-10
-5
0
5
10
15
-20
-15
-10
-5
0
5
10
15
2000 2002 2004 2006 2008 2010 2012 2014 2016
Real Business Fixed Investment 4Q % Change 4Q % Change
Source: Bureau of Economic Analysis
Note: Shading shows NBER recessions.
13
-8
-6
-4
-2
0
2
4
6
8
10
-8
-6
-4
-2
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012 2014 2016
Real Government Consumption and Gross Investment 4 Quarter % Change 4 Quarter % Change
Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
Federal (Left Axis)
State & Local (Right Axis)
14
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012 2014 2016
12 Month % Change 12 Month % Change
Source: Bureau of Economic Analysis, via Haver Analytics Note: Shading shows NBER recessions.
Total PCE
Core PCE
FOMC Objective
PCE Deflator
15
-3
-2
-1
0
1
2
3
4
5
-3
-2
-1
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012 2014 2016
CPI Inflation: Core Goods and Core Services 12 Month % Change 12 Month % Change
Source: Bureau of Labor Statistics
Note: Shading shows NBER recessions.
Core Goods
Core Services
Total Core CPI
16
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
2000 2002 2004 2006 2008 2010 2012 2014 2016
Rental Vacancy Rate and Rent of Primary Residence Percent 12 Month % Change
Source: Census Bureau, BLS Note: Shading shows NBER recessions.
Rental Vacancy Rate
(Left Axis)
Rent of Primary Residence (Right Axis)
17
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Personal Consumption Expenditures: Health Care Price Index 12 Month % Change 12 Month % Change
Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
17% of total PCE deflator 19% of core PCE deflator
18
Reference Charts
19
Impact of Brexit on US Forecast
• Slightly higher path for exchange value of US dollar.
• Somewhat weaker foreign growth. • Somewhat weaker business fixed investment. • Total estimated impact is to reduce growth of
real GDP over the period from 2016Q3 through 2017Q2 by 0.1 percentage point.
20
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
1947 1957 1967 1977 1987 1997 2007
Corporate Profits Corporate Profits/National Income Corporate Profits/National Income
Source: Bureau of Economic Analysis
Note: Shading shows NBER recessions.
21
Change2014Q2-
Q2-2014 Q2-2016 2016Q2
TOTAL CORPORATE PROFITS 14.4 12.6 -1.8 DOMESTIC INDUSTRIES 11.8 10.1 -1.7 FINANCIAL 3.2 2.8 -0.4 NONFINANCIAL 8.6 7.3 -1.3 REST OF WORLD 2.7 2.5 -0.2 RECEIPTS FROM 4.6 4.2 -0.4 PAYMENTS TO 1.9 1.7 -0.2
Source: Bureau of Economic Analysis
CORPORATE PROFITS BY SOURCE(PERCENT OF NATIONAL INCOME)
22
Regional Economic Conditions Jaison R. Abel, Research Officer
Upstate New York Regional Advisory Board Meeting – September 7, 2016
The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.
Overview of Regional Conditions
• Job growth has continued in most parts of the District, though the August regional business surveys point to a decline in activity.
• New York City remains on a strong growth trajectory, while job growth in upstate NY and northern NJ has been slower. Puerto Rico continues to lose jobs.
• Middle-wage jobs have finally started to return, though to different degrees across the region.
FEDERAL RESERVE BANK OF NEW YORK 1
Current Economic Conditions FRBNY Regional Business Surveys
Source: Federal Reserve Bank of New York. 2
-60
-40
-20
0
20
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Business Leaders Survey
(Service Sector)
Empire State Manufacturing
Survey
Aug
Diffusion Index
Shading indicates NBER recession
Regional Employment Trends Indexes of Total Employment, Seasonally Adjusted
Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com; data are early benchmarked by FRBNY staff. 3
82
88
94
100
106
112
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Downstate NY
United States
Upstate NY
Puerto Rico
Northern NJ
+1.5%
+1.7%
+0.3%
+1.3%
-1.8%
Y-O-Y
Jul
Index (Dec2007=100)
Shading indicates NBER recession
Recent Job Growth in the Region Percent Change in Total Employment, 2015 to 2016 (May-July)
Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com; data are early benchmarked by FRBNY staff. 4
1.8% 1.7%
1.4%
0.8% 0.8%
0.5% 0.1% 0.0%
-0.2%
-1.0%
-2%
-1%
0%
1%
2%
Albany
Utica
Syracuse
Binghamton
New York City
Kingston
Dutchess-Putnam
Buffalo
Rochester
Long Island
United States
Job Categories Based on 2015 Median Wages, United States
Source: U.S. Bureau of Labor Statistics (Occupational Employment Statistics).
Management Computer & Math
Legal Engineering
Business & Finance Healthcare Practitioners
Sciences
Education Arts & Entertainment Installation & Repair
Construction Social Services
Protective Services Administrative Support
Production Transportation
Healthcare Support Sales
Building Maintenance Personal Care
Farming Food Preparation
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
50% 20% 30% Higher Wage Middle Wage Lower Wage
5
Job Gains in the United States Net Change in Total Employment, Thousands
2,104
1,205
2,184
0
500
1,000
1,500
2,000
2,500
1,470
2,261
1,577
2010 to 2013 2013 to 2015
Higher Wage
Higher Wage
Lower Wage
Middle Wage
Middle Wage
Lower Wage
6 Source: U.S. Bureau of Labor Statistics (Occupational Employment Statistics).
Middle-Wage Jobs Returning in the U.S.
• Growth in traditional blue collar jobs:
Construction [+400,000]
Production [+300,000]
Transportation [+500,000]
Installation & Repair [+250,000]
• Education jobs growing again as local government fiscal pressures have subsided. [+150,000]
• Rebound in Administrative Support jobs. [+400,000]
FEDERAL RESERVE BANK OF NEW YORK 7
Job Gains and Losses in the Region Net Change in Total Employment, Thousands
8
Higher Middle Lower
Higher Middle Lower
130
179 157
35 23 27
-90
0
90
180
-45
0
45
90
Higher Middle Lower
Higher Middle Lower
102
18
144
27 7 17
Downstate NY: 2013-2015
New Jersey: 2013-2015
Downstate NY: 2010-2013
New Jersey: 2010-2013
Source: U.S. Bureau of Labor Statistics (Occupational Employment Statistics).
Job Gains and Losses in the Region Net Change in Total Employment, Thousands
-30
0
30
60
-40
-20
0
20
Upstate NY: 2010-2013
Puerto Rico: 2010-2013
Higher Middle
Lower
Higher Middle
Lower
15
-25
22
2
-29
14
Higher Middle Lower
Higher Middle Lower
Upstate NY: 2013-2015
Puerto Rico: 2013-2015
12 5 19
4
-39
-2
9 Source: U.S. Bureau of Labor Statistics (Occupational Employment Statistics).
Middle-Wage Job Gains Weak in Some Areas
Upstate NY Limited bounce back in Education and Construction jobs
coupled with ongoing declines in Administrative Support and Production jobs.
New Jersey Steep losses in Administrative Support and Production jobs.
Puerto Rico Broad-based declines in middle-wage jobs, with large job losses
tied to the island’s weak public sector (Education, Protection) along with an acceleration in Construction job losses.
FEDERAL RESERVE BANK OF NEW YORK 10