Small Business & Agriculture Advisory Council Federal ...€¦ · 10:30am Introductory Remarks...

Small Business & Agriculture Advisory Council

Federal Reserve Bank of New York 33 Liberty Street

10F, Paul Volcker Boardroom Friday, July 18, 2014

AGENDA 10:30am Introductory Remarks

Christine Cumming, First Vice President 10:40am-11:10am The National Economy

Richard Peach, Senior Vice President 11:10am-11:30am Regional Update

Jim Orr, Vice President 11:30am-12:00pm International Update

John Clark, Senior Vice President

12:00pm 12:15pm 12:15pm-1:55pm

Adjourn to NWCR-10F Lunch Round Table Discussion with William Dudley, President Questions for discussion with President Dudley: Your experience and that of your customers and suppliers can give us insight into current economic conditions. 1. Did your firm’s sales volume increase, decrease or stay the

same in the first half of the year? 2. During the second half of the year, do you expect your firms’ sales to increase, decrease, or stay the same? 3. Do you plan to increase investment in your firm (plant &

equipment) during the second half of the year? 4. Has your firm faced any shortage of labor that has limited your

ability to meet demand? 5. Do you plan to increase employment in the second half of the

year? 6. Do you expect input prices to increase during the second half

of the year? Do you expect prices of products/services sold to increase?

7. Over the past six months, how have the terms and conditions for obtaining financing changed (tightened, eased, not changed)?

2:00 pm Adjourn

US Macro Overview July 18, 2014

Overview

• Growth of real GDP over the first half of 2014 has been marked down to essentially zero. • Revised data suggests that underlying growth rate of real consumer spending may be somewhat

lower, and the equilibrium personal saving rate may be somewhat higher. • Several indicators point to stronger growth in the second half of the year.

• At the same time, • Labor market conditions are firming, and the unemployment rate continues to fall faster than

expected. • Core inflation increasing somewhat sooner than expected. • Suggests that the economy's potential growth rate may be lower than we had been assuming.

• The recent increase of inflation coincides with a slowing of productivity growth, leading to faster growth of unit labor costs and a narrowing of profits margins. • This has lead some analysts to conclude that the Fed is “behind the curve”. • However, our research suggests that inflation expectations are the main driver of inflation, and

those expectations remain stable. • If this view of the inflation process is correct, profit margins will come under downward pressure.

Sources of the Slowdown of Growth of Real GDP Percentage Points

Growth Contributions

Percentage Points 2013 H2 2014 H1

Source: Bureau of Economic Analysis

(-0.9) (+0.1) (-0.3) (+0.5) (-1.5) (-1.2)

Hospital Gross Revenues (Accrued)

Quarterly % Change (AR) Quarterly % Change (AR)

Source: Quarterly Services Survey, Bureau of the Census

ACA Effect

Or Just

Noise?

Consumption of Health Care Services Collapsed in 2014Q1

4

Sources of the Slowdown in Growth of Real PCE % Change at Annual Rate % Change at Annual Rate 2013 H2 2014 H1

Source: Bureau of Economic Analysis (11%) (23%) (66%) (17%)

Demand For Labor Firmed in 2014Q2

Private Payroll Employment

Aggregate Hours Worked, Private Sector

6 Month % Change, Annual Rate 6 Month % Change, Annual Rate

Source: Bureau of Labor Statistics 7

Labor Force Participation Rate

Percent Percent

Source: Bureau of Labor Statistics

63.4%

Participation Rate has not increased as expected.

Unemployment

Participation Rate

8

Inflation Breakdown: Core Goods and Core Services Yr/Yr % Change Yr/Yr % Change


Core Goods

Core Services

9

86% of increase in core CPI due to non-energy services, led by airfares, rents, and medical care services.

14% of increase of core CPI due to non-food, non-energy goods, led by apparel and medical care commodities.

Nonfarm Business Sector 16 Quarter % Change, Annualized 16 Quarter % Change, Annualized


Compensation per Hour

Real Output per Hour of All Persons

10

Nonfarm Business Sector 16 Quarter % Change, Annualized 16 Quarter % Change, Annualized


Unit Labor Cost

Implicit Price Deflator

11

TIPS Based Inflation Expectations

Source: Federal Reserve Board

Percent Percent

Note: Dashed lines represent 2 Standard Deviations from the mean

5-10 Years

July 16: 2.50

2011 – Present Average

2.72

3.19 (+2 SD)

2.24 (-2 SD)

12

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20180.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

Actual and Expected Fed Funds Target Percent Percent

Source: Federal Reserve Board

Actual

June 16, 2014

Jul 14, 2014

May 14, 2014

13

Regional Economic Outlook Presentation to the Advisory Council on Small Business and Agriculture

James Orr, Vice President July 18, 2014

The views expressed here are those of the presenter and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System.

Regional Economic Activity Index of Coincident Economic Indicators (CEI)

1 Source: Federal Reserve Bank of New York; Puerto Rico Government Development Bank. Note: The Puerto Rico composite index is based on a different methodology than the indexes produced by the FRBNY.

80

90

100

110

120

2007 2008 2009 2010 2011 2012 2013 2014

New Jersey

New York City

New York State

Puerto Rico

May

Apr

Index (December 2007 = 100)

Shading indicates NBER recession

Apr08 Mar08

Nov05

Jan08

Nov09

Oct09 Nov10

Current Economic Conditions FRBNY Business Surveys, Current Conditions

Source: Federal Reserve Bank of New York. 2

-60

-40

-20

0

20

40

60

2007 2008 2009 2010 2011 2012 2013 2014

Empire State Manufacturing Survey

Business Leaders Survey

Jul


Diffusion Index

Total Employment Seasonally Adjusted Index

Source: Bureau of Labor Statistics and Moody’s Economy.com. 3

88

92

96

100

104

108

2007 2008 2009 2010 2011 2012 2013 2014


Index (December 2007 = 100) Dashed Line Indicates U.S. Employment Trough (February 2010)

Jun

May

Puerto Rico

New York State

New Jersey

United States



88

92

96

100

104

108

2007 2008 2009 2010 2011 2012 2013 2014



Jun

May

New York City

Northern New Jersey

Upstate Metros

United States



88

92

96

100

104

108

2007 2008 2009 2010 2011 2012 2013 2014



Jun

May

Fairfield

Hudson Valley

Long Island

United States



80

90

100

110

120

130

2007 2008 2009 2010 2011 2012 2013 2014

Dashed Line Indicates U.S. Employment Trough (February 2010)

Nevada

North Dakota

Florida

New York City

United States New York

New Jersey

Jun

May



Status of Jobs Recovery Share of Lost Jobs Gained Back During Local Recovery

7

Source: Bureau of Labor Statistics and Moody’s Economy.com. Note: Putnam and Bergen are the Putnam-Rockland-Westchester and Bergen-Hudson-Passaic Special BLS Areas.

Newark

Glens Falls

Elmira Binghamton

Putnam Fair- field

Edison

Kingston

Buffalo

Rochester Syracuse

Utica

Albany

Ithaca

NYC Puerto Rico

Recovered All Lost Jobs Recovered At Least 75 percent of Lost Jobs Recovered Less Than 75 percent of Lost Jobs No Recovery

US = 105 percent

Job Growth by Sector Year-Over-Year Percent Change, May 2014


United States

New York State

New York City

New Jersey

3.5 2.5 2.7 1.1 3.4 2.8 3.0 -6.6 2.8 1.9 2.5 -0.5 2.4 1.8

1.3 2.2

2.3 0.6 0.7 -0.3

2.0 1.8 3.8 2.8 1.7 2.0 3.3 0.3 0.9 -1.7

-0.1 -0.1

0.6 -0.5 0.5 -2.4 0.4 -0.3 -0.4 0.3

-1.8 -0.5 0.0 -3.7

1.7 1.1 1.9 0.1

Professional & Business Services Construction

Leisure & Hospitality Transportation & Utilities

Wholesale Trade

Retail Trade Education & Health Services

Manufacturing

Financial Activities State & Local Government

Information

Total

Job Growth by Sector Year-Over-Year Percent Change, May 2014


Puerto Rico

5.1 1.4 5.1 3.5 5.2 2.4 0.7 5.2 0.0 2.5

0.5 0.8 0.6 1.8

-0.7 -0.9

-1.4 -0.8 -3.3 -1.9 2.1 -2.2

0.4 0.8

Connecticut

Professional & Business Services Construction

Leisure & Hospitality Transportation & Utilities

Wholesale Trade

Retail Trade Education & Health Services

Manufacturing

Financial Activities State & Local Government

Information

Total

Sectors Driving Regional Job Growth Change in Employment Over Past Year (As of April 2014)


-16,000

-12,000

-8,000

-4,000

0

4,000

-3,000

0

3,000

6,000

9,000

12,000

-10,000

0

10,000

20,000

30,000

40,000

-5,000

0

5,000

10,000

15,000

20,000

Downstate NY

Northern NJ

Upstate NY

Puerto Rico

Health & Education Services Professional & Business Services

Leisure & Hospitality

Government

State and Local Government Seasonally Adjusted Index

Source: Bureau of Labor Statistics and Moody’s Economy.com.

11

95

96

97

98

99

100

101

102

2007 2008 2009 2010 2011 2012 2013 2014

United States

New York State

New Jersey

Jun

May


Note: Dotted line smoothes fluctuations due to summer jobs programs.


Financial Activities Employment Seasonally Adjusted


200

225

250

275

300

325

350

375

400

350

375

400

425

450

475

500

525

550

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Thousands – New York City Thousands – New Jersey

May

Shading indicates NBER recessions

New York City

(left scale)

New Jersey (right scale)

Financial Activities Employment May 2014

NYC 439,250 NJ 249,100

Sep01

NYC Technology Employment 2009Q4 to 2013Q4

Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

13

14,766 +35%

10,719 +217%

13,322 +62%

13,766 +27%

10,756 +37%

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

Computer Systems Design

Internet Pub & Web Search

Portals

Motion Picture & Video

Production

Advertising, PR & Related

Services

Management & Technical

Consulting Srvcs

Total Private-Sector Job Growth Over This Period = +352,000 Jobs or +12%

NYC Technology Average Wages 2013

Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

14

$120,502

$165,107

$106,227

$121,514

$144,023

$0

$50,000

$100,000

$150,000

$200,000

Computer Systems Design

Internet Pub & Web Search

Portals

Motion Picture & Video

Production

Advertising, PR & Related

Services

Management & Technical

Consulting Srvcs

Total Private-Sector (ex Finance) Average Wages = $65,000

Unemployment Rates in the Nation Seasonally Adjusted, May 2014

15 Source: Bureau of Labor Statistics and Moody’s Economy.com.

5.3% or Less 5.3% to 7.3% 7.3% or More

U.S. Rate in May = 6.3% (6.1% in June)

Home Prices CoreLogic Home Price Index, Seasonally Adjusted

16 Source: CoreLogic Home Price Index (including distressed sales); Seasonally adjusted by FRBNY staff. Note: ‘NYC Metro’ refers to the ‘New York-White Plains-Wayne NY-NJ Metro Division.’

NYC Metro

Upstate NY

New York State

United States

40

50

60

70

80

90

100

110

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Dec11 Shading indicates NBER recessions

Index (U.S. Peak of March 2006 = 100)

May

Home Prices CoreLogic Home Price Index, Seasonally Adjusted

17 Source: CoreLogic Home Price Index (including distressed sales); Seasonally adjusted by FRBNY staff. Note: ‘NYC Metro’ refers to the ‘New York-White Plains-Wayne NY-NJ Metro Division.’

Fairfield County

New Jersey

40

50

60

70

80

90

100

110

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Dec11 Shading indicates NBER recessions

Index (U.S. Peak of March 2006 = 100)

May

United States

Backlog of Foreclosures Share of Mortgages in Foreclosure

18 Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS).

0%

2%

4%

6%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Downstate NY

United States

Northern NJ

Upstate NY Mar

Downstate New York includes Ulster, Dutchess, Orange, and all New York counties to the south. Upstate New York

includes all metropolitan counties to the north. Northern New Jersey includes Ocean, Monmouth, Middlesex,

Somerset, Hunterdon and all counties to the north.


Household Debt Total Debt Balance Per Capita

Source: FRBNY Consumer Credit Panel/Equifax.

19

$0

$20

$40

$60

$80

$100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Q1

New York State

United States

Nevada

California

Texas

New Jersey

Thousands


Office Vacancy Rates Overall Vacancy Rates

20 Source: Cushman & Wakefield.

0%

5%

10%

15%

20%

25%

2000 2002 2004 2006 2008 2010 2012 2014


Q1

Northern NJ

NYC Midtown

NYC Downtown

Central NJ

Office Vacancy Rates Overall Vacancy Rates

21 Source: Cushman & Wakefield.

0%

5%

10%

15%

20%

25%

2000 2002 2004 2006 2008 2010 2012 2014


Q1 Fairfield County

Long Island

Job Polarization

Occupations by Skill Categories Based on 2010 Median Occupational Wage, United States

Source: U.S. Bureau of the Census and FRBNY Calculations.

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Legal Computer/Math Engineers/Architects Management Social Scientists

Scientists Finance Business Operation Health Practitioners

Protective Services Installation/Repair Teachers Arts/Entertainment Construction Precision Production Community Service

Admin Support Machine Operators Sales Transportation

Health Support Bldg Maintenance Farming Personal Care Food Prep

High Skill

Upper Middle

Lower Middle

Low Skill

25% 21% 38% 16% Employment Share

23

Job Growth by Skill Category Change in Jobs: 1980-2010, Our Region

Source: U.S. Bureau of the Census and Current Issues in Economics and Finance, “Job Polarization and Rising Inequality in the Nation and the New York-Northern New Jersey Region.”

-20%

0%

20%

40%

60%

80%

100%

120%

101%

46%

20%

91%

60%

38%

-7%

92%

United States Downstate NY High Skill

Upper Middle

Lower Middle

Low Skill

Note: Downstate NY includes all counties in New York State to the south of and including Dutchess and Orange counties.

24

Unemployment Rates in the Region Seasonally Adjusted, May 2014


0%

2%

4%

6%

8%

10%

12%

14%

16%

New

Jersey

New York

City New York State United

States

Connecticut

Puerto Rico

6.3% 6.1% June

6.7%

7.9%

6.8% 6.9%

13.8%

Unemployment Rates in the Nation Seasonally Adjusted, May 2014


5.3% or Less 5.3% to 7.3% 7.3% or More

U.S. Rate in May = 6.3% (6.1% in June)

Small Business & Agriculture Advisory Council Federal ...€¦ · 10:30am Introductory Remarks...

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Transcript of Small Business & Agriculture Advisory Council Federal ...€¦ · 10:30am Introductory Remarks...