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Federal Reserve Bank of Richmond

Federal Reserve Bank of Richmond. Sean Heryet Jasmine Ghazinour. Jeffrey Lacker President Federal Reserve Bank of Richmond. Nationally. Overview Overall economic activity continues to expand Labor markets have softened further Financial Markets remain under stress

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Federal Reserve Bank of Richmond

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  1. Federal Reserve Bank of Richmond Sean Heryet Jasmine Ghazinour

  2. Jeffrey Lacker • President • Federal Reserve Bank of Richmond

  3. Nationally • Overview • Overall economic activity continues to expand • Labor markets have softened further • Financial Markets remain under stress • The CPI continues to rise rapidly

  4. Nationally • Inflation uncertainty remains high • Rising fuel costs place a strain on the US worker… • Recent decision by the FED • Keep target federal funds rate at 2%

  5. 5th District • Unemployment rate remains lower than national average – 4.6% • Labor Market and unemployment claims growing...

  6. FIFTH DISTRICT Fifth District Payroll Employment Performance Labor Market Conditions Year-over-Year Percent Change through April 2008 Government 1.52 Payroll Employment (SA) Period Level (000s) MoM % Change YoY % Change Other Services 2.33 United States - Total April 137,803.0 -0.04 0.17 Leisure and Hospitality 2.18 Fifth District - Total April 13,999.9 -0.01 0.97 Education and Health Services 3.08 April 855.1 -0.62 -1.04 Construction Professional and Business Services 1.78 April 1,236.5 -0.12 -1.93 Manufacturing Financial Activities -0.48 April 2,471.5 -0.24 0.29 Trade, Transportation, and Utilities Information -0.40 April 274.4 -0.07 -0.40 Trade, Transportation, and Utilities 0.29 Information Manufacturing -1.93 April 725.1 0.04 -0.48 Financial Activities Construction -1.04 April 2,005.9 0.19 1.78 Professional and Business Services Fifth District - Total 0.97 April 1,762.3 0.28 3.08 Education and Health Services April 1,336.0 -0.02 2.18 Leisure and Hospitality -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 April 686.1 0.18 2.33 Other Services April 2,602.5 0.11 1.52 Government Fifth District Unemployment Rate Unemployment Rate (SA) Through April 2008 April 08 March 08 April 07 United States 5.0 5.1 4.5 6.5 Fifth District 4.6 4.5 4.1 United States Civilian Labor Force (SA) Fifth District 6.0 Period Level (000s) MoM % Change YoY % Change United States April 153,957 0.11 0.935.5 Fifth District April 14,967 0.14 1.27 5.0 Initial Unemployment Claims (NSA) Period Level MoM % Change YoY % Change 4.5 United States April 1,525,321 7.17 18.05 Fifth District April 136,418 8.33 20.72 4.0 3.5 2003 2004 2005 2006 2007 2008

  7. 5th District • Real Income growing below the national average • House Price index dropping at a rate 11 times the national average. • Existing home sales continue to decline.

  8. JUNE 2008 FIFTH DISTRICT Fifth District Real Personal Income Year-over-Year Percent Change through 4Q:07 Household Conditions 5.0 Real Personal Income (SA) Period Level ($mil) QoQ % Change YoY % Change 4.0 United States 4Q:07 9,970,713 -0.16 2.66 Fifth District 4Q:07 946,783 0.17 2.19 3.0 Non-Business Bankruptcies Period Level QoQ % Change YoY % Change United States 236,982 8.49 26.48 1Q:08 2.0 Fifth District 1Q:08 18,897 9.97 26.06 United States Fifth District 1.0 FIFTH DISTRICT 0.0 Real Estate Conditions Total Private Building Permits Period Level MoM % Change YoY % Change -1.0 United States April 89,524 15.69 -30.09 2003 2004 2005 2006 2007 Fifth District April 12,040 -2.15 -26.80 Fifth District Existing Home Sales Total Private Housing Starts Period Level (000s) MoM % Change YoY % Change Year-over-Year Percent Change through 1Q:08 30.0 United States (SAAR) April 1,008 2.02 -32.21 Fifth District (SAAR) April 140 -1.18 -26.82 20.0 House Price Index (1980=100) Period Level QoQ % Change YoY % Change 10.0 United States 1Q:08 388 -0.23 -0.03 Fifth District 1Q:08 393 -0.14 -0.34 0.0 Existing Home Sales Period Level (000s) QoQ % Change YoY % Change United States (SAAR) 1Q:08 4,950 -0.94 -22.21 -10.0 Fifth District (SAAR) 1Q:08 483 0.00 -25.57 -20.0 -30.0 2003 2004 2005 2006 2007 2008

  9. Justification… • Fear of a wage price spiral • Previous rate decreases have yet to have their full economic impact… • Slowing inflation must be of the highest priority • And just as easing policy aggressively in response to emerging downside risks made sense, withdrawing some of that stimulus as those risks diminish makes eminent sense as well” –Jeffrey Lacker

  10. Recommendation… • Increase the Federal Funds target rate from 2 to 2¼%

  11. Sources… • www.bls.gov • www.richmondfed.org • www.economist.com

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