richard w. fisher tppf remarks - dallasfed.org · • port of houston is nation’s busiest...

Richard W. Fisher President and CEO Federal Reserve Bank of Dallas Austin, Texas April 16, 2014

U.S. Economic Dashboard

NOTE: Late November 2013 data (blue) compared with early April 2014 (orange).

9 4 . 9

-1

-0.5

0

0.5

11.5 2 2.5

3

3.5

4

4.5

5

1.3

Trimmed Mean PCE Inflation (%)

-2.5

-2

-1.5

-1

-0.5

0

0.51

1.5 22.5

3

3.5

4

4.5

5

5.5

6

2.6Year-over-year

Real GDP growth

4

4.5

5

5.5

66.5 7 7.5

8

8.5

9

9.5

10

6.7

Unemployment rate (%)

Percent of jobs recovered

33.5

4

4.5

55.5

6 6.5 77.5

8

8.5

9

9.510

3.28

Junk-bond spread (%)

Warning lights

Unemp.jump

Yieldcurve

Oilshock

Enginestall

5

5.5

6

6.5

77.5 8 8.5

9

9.5

10

10.5

11

5.45

High Yield Corp. Debt (%)

!8 2 . 8

30

35

40

45

50

55

60

2007 2008 2009 2010 2011 2012 2013 2014

ISM Manufacturing

Index, 50+ = expansion Expansion average = 54.5 54.4

ISM Nonmanufacturing

Mar. 53.7

53.1

The Manufacturing and Nonmanufacturing ISM Indexes Both Ticked Upward in March

SOURCES: Institute for Supply Management Report on Business monthly publication on manufacturing and nonmanufacturing data.

0

50

100

150

200

250

300

350

400Monthly change, thousands

2010 2011 2012 2013 2014

Mar. 192 188

Latest U.S. Jobs Report Confirms That Weak December and January Gains Were Aberrations

SOURCE: Bureau of Labor Statistics.

6-month moving average

3

4

5

6

7

8

9

10

11

250

300

350

400

450

500

550

600

650

700

2008 2009 2010 2011

Percent 4-week moving average, thousands

Apr. 5 316

Oct. '09 10.0

Initial claims for unemployment insurance

Unemployment rate

6.5% threshold

2012 2013 2014

Mar. 6.7

Initial Claims and Unemployment Rate Move Lower

SOURCE: Bureau of Labor Statistics.

The U.S. Credit Markets Are Awash in Liquidity

• As of March 2014, the Fed’s par holdings of fixed-rate MBS exceeded 30 percent of the outstanding stock of those securities.

• The Fed owns just shy of 24 percent of the stock of Treasury coupon securities.

• Having purchased Treasuries further out on the yield curve, and done so in size, the Fed has driven nominal interest rates across the credit spectrum to lows not seen in over a half century.

• This has allowed U.S. businesses to restructure their balance sheets and creatively manage their earnings.

Corporate Bond Yields and Spreads Remain Low Percent

SOURCES: Moody’s; Bank of America Merrill Lynch; Federal Reserve Bank of Dallas.

5.5 5

7

9

11

13

15

17

19

21

23

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

02468

10

'10 '11 '12 '13 '14

Junk bond / 7-year Treasury spread

Average spread: 1997-2007

Percent

3.2 4.8

Junk bond yield

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2007 2008 2009 2010 2011 2012 2013

Index

S&P 500 Stock Index

Equity Prices Have Soared

SOURCE: Standard & Poor’s. NOTE: S&P close at 676.53 on March 9, 2009.

+175% since March ‘09 low

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013 2014

12-month percent change

“Mandate-consistent level” = 2%

0.9

1.3 Feb 2014

Trimmed-mean PCE

Headline PCE

1.3 April 2013

Inflation Is Still Below 2 Percent

SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

Texas Economic Update

• Texas employment grew 2.5% in 2013. – Added 278,000 jobs

• In 2014, Texas grew 2.9% through February. – Added 54,500 jobs

• Manufacturing lost jobs, but output expanding.

• Construction and energy came in strong.

• Expect 2.8% growth for the year.

Texas’ Employment Growth Bests Nation’s

-2.6

-3.8

0.8

1.6 1.7 1.7 1.3

0.5

-3.5

2.1 2.3

3.4

2.5 2.9

-5

-4

-3

-2

-1

0

1

2

3

4

2005 2007 2009 2011 2013

U.S. Texas

Dec/Dec, SAAR

Year-to-date: Feb/Dec


2.5

5.8 6.1

8.9 9.6

-2.9

8.6 7.7

4.4

0.8

-4

-2

0

2

4

6

8

10

12Thousands of jobs

NOTES: Categories are North American Industry Classification System supersectors. Data seasonally adjusted. SOURCE: Federal Reserve Bank of Dallas.

Oil & Gas Extraction and Mining Support

(2.5%)

Financial Activities (6.1%)

Trade, Transp & Utilities (20.1%)

Manufacturing (7.7%)

Educational & Health Services

(13.2%)

Construction (5.5%)

Leisure & Hospitality

(10.2%)

Information (1.8%)

Prof. & Business Services (13.1%)

Government (16.1%)

2014 Employment Growth by Sector

2014 total jobs gained in Texas = 54,500

6.7

5.7

0

2

4

6

8

10

12

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

Percent, SA

U.S.

Texas

Texas’ Unemployment Rate Lower Than Nation’s


Texas Manufacturing and Services Expanding

NOTE: Gray bar indicates Texas recession. SOURCE: Federal Reserve Bank of Dallas.

-40

-30

-20

-10

0

10

20

30

40

2007 2008 2009 2010 2011 2012 2013 2014

TMOS Production Index TSSOS Revenue IndexIndex

Mar-2014

0

20

40

60

80

100

120

140

160

180

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Single-Family Permits

Multifamily Permits

Residential Housing Starts

Index, SA, 5MMA Jan. 2008 = 100

Residential Home Construction Has Picked Up

SOURCES: Census Bureau; Bank of Tokyo-Mitsubishi.

Thriving Ports

• Texas is top exporting state in nation: $280 billion in 2013. – Inland ports handle 46 percent; seaports 54 percent

• Port of Houston is nation’s busiest seaport. – First in vessel calls and foreign tonnage, 2nd in total tonnage – Container tonnage small but rising, up 18 percent in last 5 years – According to the Port of Houston Authority, port operations

directly support more jobs than largest peers

SOURCES: Bureau of Transportation Statistics; WISERTrade; U.S. Maritime Administration; Port of Houston Authority; “Economic Snapshot” April 14, 2014, report by Jon McClure, staff writer, The Dallas Morning News.

Texas Export Growth

SOURCES: Census Bureau; World Institute for Strategic Economic Research; Federal Reserve Bank of Dallas.

+24% since peak

+2%

80

100

120

140

160

180

200

220

240

260

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

U.S. minus Texas

Texas

Index, SA Real Dollars Jan. 2000 = 100

7%

35%

10%

12%

15% 17%

4%

Other

Mexico

Canada

European Union

Asia, excl. China

Latin America, excl.MexicoChina

2013:Q4

0

200

400

600

800

1000

1200

1400

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

Texas Total Petroleum & Coal ProductsIndex, Q1 2000 = 100 Real Dollars, SA

Petroleum Exports Surge

SOURCE: Wisertrade.

-4

-3

-2

-1

0

1

2

3

4

5

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Actual

Dallas Fed

Consensus of Forecasters

Job Growth, Y/Y Percent Change

SOURCES: Western Blue Chip Economic Forecast; Federal Reserve Bank of Dallas.

Dallas Fed Forecasts Continued Growth

Job Growth by Wage Quartile, 2000-12

NOTES: Calculations include workers over age 15 with positive wages and exclude the self-employed. Wage quartiles constructed based on U.S. 2000 wage distribution. SOURCE: Current Population Survey Merged Outgoing Rotation Groups, 2000, 2012.

18.6

10.4

31.0 30.3

9.7

-6.9

0.9

9.9

-10

-5

0

5

10

15

20

25

30

35

Lowest wage quartile Lower-middle wagequartile

Upper-middle wagequartile

Highest wage quartile

Texas U.S. minus Texas

Percent change

Total Nonagricultural Employment Since 1990 in Selected States


90

100

110

120

130

140

150

160

170

1990 1995 2000 2005 2010

Index, January 1990 = 100

+63%

+9%

+26%

Increase since 1990

+23%

+44%

+10%

+5%

California

Florida

Texas

U.S.

New York Illinois

Michigan

50

100

150

200

250

300

350

400

450

1990 1993 1996 1999 2002 2005 2008 2011 2014

Laredo

McAllen-Edinburg-Pharr

Brownsville-Harlingen

El Paso


Texas Metro Business-Cycle Indexes

50

100

150

200

250

300

350

400

450

1990 1993 1996 1999 2002 2005 2008 2011 2014

February 2014

Austin-Round Rock

Houston-Sugar Land-Baytown

Dallas-Plano-Irving MD

San Antonio

Fort Worth-Arlington


NOTE: The Indexes summarize movements in local employment, unemployment, wages and retail sales. SOURCE: Federal Reserve Bank of Dallas.

Summary

• The U.S. economy is picking up following a harsh winter.

• Texas employment growth accelerated in 2014. – 2.9% growth – 55,400 jobs – Expect 2.8% growth for the year.

Richard W. Fisher President and CEO Federal Reserve Bank of Dallas Austin, Texas April 16, 2014

richard w. fisher tppf remarks - dallasfed.org · • port of houston is nation’s busiest...

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