upstate new york regional advisory council meeting … · federal reserve bank of new york 33...

Upstate New York Regional Advisory Council Meeting

Federal Reserve Bank of New York 33 Liberty Street

10F, Paul Volcker Boardroom Tuesday, June 3, 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

Jaison Abel, Senior Economist 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. 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 2014? 3. Has demand for your product or service increased sufficiently

that you plan to increase investment in plant and equipment in 2014?

4. Has your access to credit changed in 2014? 5. Has demand for your products or services or your plans for

employment at your firm been impacted by recent changes in tax policy, legislation or regulations?

6. Did severe weather reduce demand for your product or services earlier this year?

2:00 pm Adjourn

US Macro Overview June 3, 2014

Overview • Key indicators suggest that the US economy continues to operate

below potential. • First quarter growth held down by transitory factors. • Fundamentals underlying consumer spending much improved. • Housing recovery rather tepid to date due to product mix, continued

tight mortgage underwriting standards, and slow household formations.

• Business fixed investment continues to disappoint, but fundamentals improving.

• Unemployment rate down to 6.3% in April due to surprisingly large decline in the labor force participation rate.

• Core inflation appears to have stabilized but at a low level.

2

12

13

14

15

16

17

18

19

20

12

13

14

15

16

17

18

19

20

2000 2002 2004 2006 2008 2010 2012 2014 2016

Potential GDP (CBO)

GDP Trillions of 2009 US$ Trillions of 2009 US$

Source: Bureau of Economic Analysis

2000Q1 to 2007Q4: 2.5% Growth Rate

2009Q2 to 2014Q1: 2.2% Growth Rate

Time Period Potential GDP (CBO)

2000 - 2005 3.0%

2005 – 2010 2.0%

2010 – 2015 1.7%

2015 – 2020 2.25%

3

56

58

60

62

64

66

68

0

2

4

6

8

10

12

2000 2002 2004 2006 2008 2010 2012 2014

Labor Market Indicators

Source: Bureau of Labor Statistics

Unemployment Rate (Left Axis)

Labor Force Participation Rate

(Right Axis)

Percent Percent

Employment to Population

Ratio (Right Axis)

4

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014

PCE Deflator

% Change Over Year % Change Over Year


Total PCE

Core PCE

FOMC Objective

5

0

3

6

9

12

15

0

3

6

9

12

15

1980 1985 1990 1995 2000 2005 2010

Private Employment Cost Indices Year over Year % Change Year over Year % Change


Total Compensation Index

Benefits Index

Wage and Salaries Index

6

500

525

550

575

600

625

650

675

700

0

1

2

3

4

5

6

2000 2002 2004 2006 2008 2010 2012 2014

Disposable Income, Consumption, and Wealth

% Change Over Year Percent

Real Personal Consumption (Left

Axis)

Real Disposable Income

(Left Axis)

Household Net Worth, % of

Disposable Income (Right Axis)

Source: Bureau of Economic Analysis 7

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

1980 1985 1990 1995 2000 2005 2010

Household Financial Obligation Ratio Ratio Ratio

Source: Federal Reserve Board 8

-15

-10

-5

0

5

10

15

20

25

-15

-10

-5

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014

Consumer Debt by Credit Score Quintile % Change – 4 Quarter % Change – 4 Quarter

Source: FRBNY Consumer Credit Panel

1st Quintile

2nd Quintile 3rd Quintile

4th Quintile

5th Quintile

Note: Includes Student Loans 9

0

0.005

0.01

0.015

0.02

0.025

0.03

1968 1974 1980 1986 1992 1998 2004 20100

0.005

0.01

0.015

0.02

0.025

0.03

Housing Starts and Existing Home Sales Per Capita Units Units

Source: BLS, Census Bureau, National Association of Realtors

Housing Starts

Existing Home Sales

.0178 (average over 1968-

2003)

.009 (average over 1968-2003)

10

0

400

800

1200

1600

2000

0

75

150

225

300

375

450

525

2000 2002 2004 2006 2008 2010 2012 2014

Housing Starts Thousands, 3 MMA Thousands, 3 MMA

Source: Census Bureau

Total Multifamily (Left Axis)

1 Unit (Right Axis)

11

-1000

-500

0

500

1000

1500

2000

2006 2007 2008 2009 2010 2011 2012 2013 2014-1000

-500

0

500

1000

1500

2000

Household Formations 2 Year Avg. Change 2 Year Avg. Change


Total

Owner Occupied

Renter Occupied

12

3

4

5

6

7

8

9

10

11

12

13

20

50

80

110

140

170

200

230

2000 2002 2004 2006 2008 2010 2012 2014

Single Family Housing Market Index, January 2000 = 100 Months’ Supply

Source: CoreLogic, National Association of Realtors

CoreLogic House Price Index

(Left Axis)

Months Supply (Right Axis)

13

0

2

4

6

8

10

12

14

16

0

2

4

6

8

10

12

14

16

1947 1959 1971 1983 1995 2007

Percent Percent

Source: BEA

Structures

Note: Nominal USD / Nominal USD

Equipment

Intellectual Property

Private Nonresidential

Private Nonresidential Fixed Investment (Percent of GDP)

14

0

1

2

3

4

5

6

0

1

2

3

4

5

6

1948 1956 1964 1972 1980 1988 1996 2004 2012

Real Net Stock of Private Fixed Nonresidential Capital Year/Year % Change Year/Year % Change

Source: BEA Note: Includes structures, equipment, and intellectual property products. 15

-3

-2

-1

0

1

2

3

-3

-2

-1

0

1

2

3

2009 2010 2011 2012 2013 2014

Net Exports of Goods and Services Contribution to GDP Growth Percentage Points Percentage Points

Source: Bureau of Economic Analysis 16

Nominal Goods Exports by Destination Quarterly Index, NSA, 2010 Q1 = 100 Quarterly Index, NSA

100

110

120

130

140

150

160

170

180

100

110

120

130

140

150

160

170

180

2010 2011 2012 2013

Note: SA data are unavailable. This chart uses 4-quarter moving averages

Asia NIE Japan

NAFTA

China

EU15


Share of total good imports in 2013Q4: NAFTA 32.9%; EU15 16.3%; China 9.6%; Asia NIE 8.9%; Japan 4.0%; 17

-10

-8

-6

-4

-2

0

2

4

6

8

10

-10

-8

-6

-4

-2

0

2

4

6

8

10

2000 2002 2004 2006 2008 2010 2012 2014

Real Government Consumption and Gross Investment

% Change - Year to Year % Change - Year to Year


Federal

State & Local

18

-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

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


Core Goods

Core Services

19

TIPS Based Inflation Expectations

Source: Federal Reserve Board

0

0.5

1

1.5

2

2.5

3

3.5

4

0

0.5

1

1.5

2

2.5

3

3.5

4

2006 2007 2008 2009 2010 2011 2012 2013 2014

Percent Percent

Note: Dashed lines represent 2 Standard Deviations from the mean

5-10 Years

May 28: 2.45

2011 – Present Average

2.66

3.07 (+2 SD)

2.26 (-2 SD)

20

-2

0

2

4

6

8

10

-2

0

2

4

6

8

10

1990 1994 1998 2002 2006 2010 2014

Compensation and Inflation % Change over Year % Change over Year

Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Haver Analytics

Compensation Per Hour, Nonfarm Business

Sector

Core PCE

21

Reference Charts

22

-1.0

-0.5

0.0

0.5

1.0

-1.0

-0.5

0.0

0.5

1.0

2000 2002 2004 2006 2008 2010 2012 2014

Private Nonfarm Payroll Employment and Total Hours Worked 3-Month Moving Average of One-Month Change Percent Percent


All Employment

Aggregate Weekly Hours

23

0.012

0.016

0.02

0.024

0.028

0.15

0.2

0.25

0.3

0.35

1997 2000 2003 2006 2009 2012

Job-Finding Rate and Job-to-Job Transitions 12mma, SA


U-to-E (Left Axis)

E-to-E (Right Axis)

24

Job Openings Rate and Hires Rate

2.4

2.8

3.2

3.6

4

4.4

4.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

4.0

4.4

2000 2002 2004 2006 2008 2010 2012

Percent Percent

Hires (Right Axis)

Openings (Left Axis)

25

-1

0

1

2

3

4

5

-1

0

1

2

3

4

5

1991 1994 1997 2000 2003 2006 2009 2012

Long-Term Trends in Productivity, Compensation, and Consumption 5 % Year Change, AR 5 Year % Change, AR

Source: Bureau of Labor Statistics and Bureau of Economic Analysis

Real Output Per Hour

Real Compensation

Per Hour

26

14

16

18

20

22

24

26

14

16

18

20

22

24

26

FY1980 FY1990 FY2000 FY2010 FY2020

Outlays

Receipts

Sources: Bureau of Economic Analysis and Congressional Budget Office

Federal Receipts and Outlays (CBO Current Law Baseline)

Average 1962-2007

19.7%

Average 1962-2007

17.6%

Percent of GDP Percent of GDP

February 2014 CBO Baseline

27

0

20

40

60

80

100

0

20

40

60

80

100

FY1980 FY1990 FY2000 FY2010 FY2020

Sources: Bureau of Economic Analysis and Congressional Budget Office

Federal Debt (CBO Current Law Baseline)

Gross Federal Debt

Debt Held by the Public

Intergovernmental Accounts

Fed Holdings

Percent of GDP Percent of GDP

February 2014 CBO Baseline

28

1003

-8

-6

-4

-2

0

2

4

1962 1968 1974 1980 1986 1992 1998 2004 2010-8

-6

-4

-2

0

2

4

Source: Congressional Budget Office

Stance of Fiscal Policy

Percent of Potential GDP Change in Full Employment Budget Balance as a Percent of Potential GDP

Percent of Potential GDP

29

0

10

20

30

40

50

60

2000 2002 2004 2006 2008 2010 2012 20140

10

20

30

40

50

60

Transition of Mortgage Accounts from 30-60 Days Late Percent Percent

Source: FRBNY Consumer Credit Panel

To Current

To 90+ Days Late

30

-10

-5

0

5

10

15

20

-10

-5

0

5

10

15

20

2000 2002 2004 2006 2008 2010 2012 2014

Loans and Leases in Bank Credit Yr/Yr % Change Yr/Yr % Change

Source: Federal Reserve Board

Small Banks

Large Banks

All Domestically Chartered Banks

Note: “Large Banks” include the 25 largest domestically chartered banks, ranked by assets (about 2/3 of the total). 31

Economic Conditions in Upstate New York Jaison R. Abel, Senior Economist

Upstate New York Regional Advisory Board Meeting; New York, NY; June 3, 2014

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

• Though the Great Recession was less severe in upstate New York, the region’s recovery now lags that of the nation and downstate New York.

• The region’s housing markets have continued to experience modest home price appreciation.

• Looking forward, a growing backlog of foreclosures and weak consumer confidence present headwinds for the region.

FEDERAL RESERVE BANK OF NEW YORK 1

Current Economic Conditions FRBNY Business Surveys, Current Conditions

Source: Federal Reserve Bank of New York.

-60

-40

-20

0

20

40

2007 2008 2009 2010 2011 2012 2013 2014

May

Empire State Manufacturing Survey

Business Leaders Survey

Diffusion Index

Shading indicates NBER recession

2

Regional Employment Trends Total Employment, Seasonally Adjusted

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

91

94

97

100

103

106

2007 2008 2009 2010 2011 2012 2013 2014

Upstate NY

United States

Downstate NY Apr

+1.7%

+0.0%

+1.2%

Apr YOY % Change


Index (December 2007 = 100)

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

Recovered All Lost Jobs Recovered 3/4 of Lost Jobs Recovered Less Than 3/4 of Lost Jobs No Recovery

Glens Falls

Elmira Binghamton

Putnam

Kingston

Buffalo

Rochester Syracuse

Utica

Albany

Ithaca

NYC

United States: 99 percent Upstate NY: 54 percent


Recession Employment Dynamics Past Three Cycles

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

92

96

100

104

108

112

Jul90 Jan91 Jul91 Jan92 Jul92 Jan93 Jul93 Jan94 Jul94 Jan95 Jul95 Jan96 Jul96

92

96

100

104

108

112

Mar01 Sep01 Mar02 Sep02 Mar03 Sep03 Mar04 Sep04 Mar05 Sep05 Mar06 Sep06 Mar07

92

96

100

104

108

112

Dec07 Jun08 Dec08 Jun09 Dec09 Jun10 Dec10 Jun11 Dec11 Jun12 Dec12 Jun13 Dec13

United States

United States

United States

Upstate NY

Upstate NY

Upstate NY Apr

1990-1991 Recession

2001 Recession

2007-2009 Recession

Index (Onset of Recession = 100)


5

Changing Structure of the Upstate Economy Shares of Total Employment


0%

5%

10%

15%

20%

25%

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

Manufacturing Education & Health Services

Professional & Business Services

21%

12%

9%

18%

14%

8%

Dec11

Regional Home Prices CoreLogic Single-Family Home Price Index, Seasonally Adjusted

Source: CoreLogic Home Price Index (including distressed sales); Aggregation and seasonal adjustment by FRBNY staff.

60

70

80

90

100

110

Mar06 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14

New York State

Upstate NY

Mar

United States


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

Percent Change Dec11-Mar14

+6.1%

+16.4%

+25.7%

7

Household Debt Total Household Debt Per Capita, 2014 Constant Dollars

Source: FRBNY Consumer Credit Panel/Equifax, Bureau of Labor Statistics CPI, and Moody’s Economy.com.

8

$0

$20

$40

$60

$80

$100

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

United States

New York State

Upstate NY

California

Nevada

Q1

Shading indicates NBER recessions

Thousands

Backlog of Foreclosures in the Region Share of Mortgages in Foreclosure

Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS). 9

0%

1%

2%

3%

4%

5%

6%

7%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

New York State

Upstate NY

Feb

United States


Regional Consumer Confidence Overall Consumer Confidence

Source: Sienna Research Institute, University of Michigan.

45

60

75

90

105

2006 2007 2008 2009 2010 2011 2012 2013 2014

United States

Upstate NY

Apr

Index Value


10

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