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National Economic ConditionsRoy Webb
February 1, 2012
2
Real Per Capita GDP
Source: Census Bureau, Bureau of Economic Analysis, Haver Analytics
10000
20000
30000
40000
Chained 2005$, Logarithmic scale
Trend2.05%
10001869 1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009
3
Real Per Capita GDP
Source: Census Bureau, Bureau of Economic Analysis, Haver Analytics
10000
20000
30000
40000
Chained 2005$, Logarithmic scale
10001869 1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009
Trend2.05%
4
Real Gross Domestic Product
Source: Bureau of Economic Analysis/Haver Analytics
Percent change from previous quarter at annual rate
-10
-8
-6
-4
-2
0
2
4
6
8
10
-10
-8
-6
-4
-2
0
2
4
6
8
10
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Q42.8%
5
Real Residential Investment
Source: Bureau of Economic Analysis/Haver Analytics
200
300
400
500
600
700
800
900
1000
200
300
400
500
600
700
800
900
1000
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Billions of Chained 2005$
Q4334 bln.
6
Homeowner Vacancy Rate
Source: Census Bureau/Haver Analytics
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.
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1995 1997 1999 2001 2003 2005 2007 2009 2011
Percent
Q35.8%
7
House Prices
Source: Standard & Poor’s, Federal Housing Finance Agency/Haver Analytics
Index, Jan. 00 = 100
60
80
100
120
140
160
180
200
220
240
260
280
60
80
100
120
140
160
180
200
220
240
260
280
1995 1997 1999 2001 2003 2005 2007 2009 2011
Case SchillerComposite 10
Index
FHFAPurchase Only
Index
8
Real Personal Consumption Expenditure
Source: Bureau of Economic Analysis/Haver Analytics
90
95
100
105
110
115
120
90
95
100
105
110
115
120
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
2007:Q4 - 20011:Q4
1973:Q4 - 1977:Q4
1980:Q1 - 1984:Q1
Index, Peak = 100
Note: Quarters after Business Cycle Peak. Recession starts at t.
9
Household Net Worth
Source: Federal Reserve Board/Haver Analytics
300
400
500
600
700
800
300
400
500
600
700
800
1995 1997 1999 2001 2003 2005 2007 2009 2011
Percent of disposable personal income
Q3496%
10
2
4
6
8
10
12
14
16
18
20
22
2
4
6
8
10
12
14
16
18
20
22
2006 2007 2008 2009 2010 2011 2012 2013
Autos and Light Trucks
Light Trucks
Autos
Dec.13.5 mil.
Sales of Automobiles & Light TrucksMillions of Vehicles
Source: Bureau of Economic Analysis/Haver Analytics
11
Personal Income & Expenditures
Source: Bureau of Economic Analysis/Haver Analytics
-6
-4
-2
0
2
4
6
-6
-4
-2
0
2
4
6
2006 2007 2008 2009 2010 2011 2012 2013
12 Month % Change
Real Personal Consumption Expenditure
Real Personal Income
Month over Month % Change
Oct. Nov. Dec.Income 0.4 0.1 0.4Expenditures 0.1 0.1 -0.1
Dec.
12
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013
Percent change from previous quarter at annual rate
Q45.2%
Real Investment in Equipment & Software
Source: Bureau of Economic Analysis/Haver Analytics
13
45
50
55
60
65
70
75
45
50
55
60
65
70
75
2006 2007 2008 2009 2010 2011 2012 2013
Current $, Billions
Shipments
Dec.
New Orders
Source: Census Bureau/Haver Analytics
Core Capital Goods
Notes: Core capital goods are nondefense capital goods excluding aircraft.
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
500
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013
14
Quarterly average of monthly changes, thousands of persons
Q4Avg.
Nonfarm Payroll Employment
Source: Bureau of Labor Statistics/Haver Analytics
Dec. 200Nov. 100Oct. 112Sep. 210Aug. 104
Monthly Change
15
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Percent
Dec.8.5%
Civilian Unemployment Rate
Source: Bureau of Labor Statistics, Board of Governors, Haver Analytics
Notes: FOMC forecast is the central tendency for the Q4 levels, from the January 24-25 meeting.
FOMC Forecast
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2007 2008 2009 2010 2011 2012 2013
16
12 Month % Change
Dec.2.1%
Average Hourly Earnings
Source: Bureau of Labor Statistics/Haver Analytics
Dec. 0.2%Nov. 0.0%Oct. 0.3%Sep. 0.2%
Monthly % Change
17
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dec.2.4%
FOMC Forecast
Overall Consumer Expenditure Price Index12 Month % Change
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
18
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dec.1.8%
FOMC Forecast
Core Consumer Expenditure Price Index12 Month % Change
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
19
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Federal Funds Target Rate
Jan. 25
Primary Credit Rate
Discount Rate(discontinued)
Monetary Policy InstrumentsPercent
Source: Board of Governors/Haver Analytics
Federal Funds Rate Target Range
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
6/27/2007 12/31/2008 1/4/2012
20
Federal Reserve System Assets
Source: Board of Governors/Haver Analytics
$, Billions
Miscellaneous: $156Total: $2,270
Treasury Securities:$476
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.
PDCF: $38
Treasury Securities:$1,654
Agency Debt: $101
Agency MBS: $846
AIG & Bear Stearns: $34
Term ABS LendingFacility: $8
Total: $2,965
Miscellaneous: $219
Agency Debt: $20
Miscellaneous: $176Discount Window: $87
AMLF: $24Foreign Currency
Swaps: $553
AIG & Bear Stearns: $114
Term Auction Facility:$450
Commercial PaperFacility (CPFF): $332
Treasury Securities:$790
Total: $899Miscellaneous: $110
Foreign Currency Swaps: $103
21Source: Board of Governors
Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate 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 moderate long-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 policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's 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 for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's 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. These factors 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 Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants' estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC's Summary of Economic Projections. For example, in the most recent projections, FOMC participants' estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding 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 the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.
Federal Reserve Board press release – January 25, 2012
22
Percent of GDP
Federal Revenues
Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics
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.
10
15
20
25
30
35
40
10
15
20
25
30
35
40
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Actual Projected
23
Percent of GDP
Federal Outlays
Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics
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.
10
15
20
25
30
35
40
10
15
20
25
30
35
40
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Actual Projected
24
Percent of GDP
Federal Deficit
Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics
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.
-25
-20
-15
-10
-5
0
5
-25
-20
-15
-10
-5
0
5
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Actual Projected
25
Percent of GDP
Federal Debt Held by Public
Source: CBO’s Long-Term Budget Outlook (revised in June, 2011)/Haver Analytics
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.
0
20
40
60
80
100
120
140
160
180
200
0
20
40
60
80
100
120
140
160
180
200
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Actual Projected
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