Economy at a Glance :: Federal Reserve Bank of Cleveland

Economy at a Glance

Executive Summary

The recent month’s developments seem to indicate that the recovery is on a slightly better footing. While the increase in the unemployment rate from 9.7 to 9.9 percent may at first sight seem discouraging, a further look reveals precisely the contrary. The nonfarm payroll employment numbers …  Executive Summary
The recent month’s developments seem to indicate that the recovery is on a slightly better footing. While the increase in the unemployment rate from 9.7 to 9.9 percent may at first sight seem discouraging, a further look reveals precisely the contrary. The nonfarm payroll employment numbers came in very strong in April, showing an increase of 290,000 (60,000 of which were temporary Census workers). This, combined with an upward revision to the March numbers from 162,000 to 230,000, means that the annualized growth rate in employment rose to 1.3 percent for the year. Why, then, has the unemployment rate increased? Because more than half a million people (635,000 to be exact) decided to reenter the labor force, meaning they are actively looking for jobs. Real GDP increased at a 3.2 percent annualized rate in the first quarter of the year. This increase was fueled by private consumption, which increased 3.6 percent, its largest quarterly growth since the first quarter of 2007, and private investment, which grew at the healthy clip of 14.8 percent. Production sentiment continued strong, with the April ISM’s Production Managers’ Index at levels not seen since 2004. On the negative side, both residential and nonresidential construction weighed negatively on growth. When compared to other recoveries though, the present one remains subdued. This is probably one of the reasons why inflation shows no signs of rebounding. The one-year growth rate in consumer prices, as measured by the PCE index, increased at an annualized rate of 1.1 percent in March, meaning that over the course of the year, prices are up 2.0 percent. But if we exclude the more volatile food and energy components, this measure slipped down 0.1 percentage point in March and now stands at 1.1 percent over the year. In light of these modest inflation numbers and of the slack that still remains in the labor market, the April Federal Open Market Committee meeting concluded without any policy changes being made.  [2010-05-15]  Executive Summary

Monetary Policy   

The April Federal Open Market Committee meeting concluded without any policy changes being made, although the statement did tend to paint a slightly brighter picture. An improvement in the labor market was noted by the FOMC, as well as a minor return to housing construction. Minutes from the March …  Monetary Policy
The April Federal Open Market Committee meeting concluded without any policy changes being made, although the statement did tend to paint a slightly brighter picture. An improvement in the labor market was noted by the FOMC, as well as a minor return to housing construction. Minutes from the March meeting confirmed that committee members are debating the merits of different exit options, including asset sales, Treasury redemptions and economic condition-based timing. The Federal Reserve balance sheet has also seen a gradual decline in reserves following the Treasury’s issuance of $200 billion in Supplemental Finance Program securities.  [2010-05-01]  Monetary Policy
Related materials
Research Topics: All research
Data Update:  All topic updatesFederal Reserve Balance Sheet Federal Reserve Balance Sheet Federal Reserve’s Balance Sheet Federal Reserve Balance Sheet Federal Reserve Balance Sheet
Economic Trends:  Recent Firming in the Federal Funds Market Monetary Policy and an Extended Period of Time
Economic Commentary:  The Foreign Savings Glut: Inordinate Savers or Thriving Traders?

Inflation and Prices   

The Consumer Price Index (CPI) ticked up a slight 0.8 percent (annualized rate) in March, and measures of underlying inflation been relatively subdued. Over a longer time horizon (the past 12 months), the headline CPI is up 2.3 percent, though this largely reflects the path of energy prices. On the …  Inflation and Prices
The Consumer Price Index (CPI) ticked up a slight 0.8 percent (annualized rate) in March, and measures of underlying inflation been relatively subdued. Over a longer time horizon (the past 12 months), the headline CPI is up 2.3 percent, though this largely reflects the path of energy prices. On the other hand, measures of underlying inflation have been slowing. The core CPI is up just 1.1 percent over the period, and the 16 percent trimmed-mean measure has edged up 1.0 percent. Perhaps more striking is that the 12-month growth rate in the median CPI has fallen from a recent high of 3.2 percent in September of 2008 to an all-time low of 0.6 percent (the series goes back to 1968). The longer-term trends in these inflation measures are consistent with a marked disinflation (or a slowing in the rate of price increases) but not a deflationary episode yet. Inflation expectations (from forecasters at least) seem relatively stable.  [2010-05-12]  Inflation and Prices
Related materials
Research Topics: All research
Data Update:  All topic updatesCPI PPI PCE PPI Consumer Price Index The PCE Price Index
Economic Trends:  Survey-Based Measures of Inflation Expectations Prices are Falling, Prices are Falling! Economic Projections from the April FOMC Meeting
Economic Commentary:  Are Some Prices in the CPI More Forward Looking than Others? We Think So.

Banking and Financial Markets   

One sign of a healthy recovery is the return of growth in credit markets. Concerns about the fragility of the budding economic recovery have been heightened somewhat by anecdotal evidence that credit availability remains anemic. The most recent data from one of the most important credit channels, …  Banking and Financial Markets
One sign of a healthy recovery is the return of growth in credit markets. Concerns about the fragility of the budding economic recovery have been heightened somewhat by anecdotal evidence that credit availability remains anemic. The most recent data from one of the most important credit channels, commercial bank lending, adds credence to these concerns. Data through the end of the fourth quarter of 2009 show a continued decline in credit facilitated by banks. This picture of retrenchment in bank credit is essentially unchanged when you look measures of lending (total loans or commercial and industrial loans), available credit lines, credit substitutes, and securitized assets. The across-the-board decline in credit extended and credit available from banks suggests that not all of the reduction in bank lending is due to falling demand for credit.  [2010-04-05]  Banking and Financial Markets
Related materials
Research Topics: All research
Economic Trends:  The Credit Crunch in Commercial Loan Syndication The Yield Curve, April 2010 Has the Mortgage Market Run Out of Steam? The Yield Curve, May 2010
Working Paper, FRB:  A Structural Model of Contingent Bank Capital Systemic Risk Analysis Using Forward-Looking Distance-to-Default Series

Growth and Production   

Real GDP increased at a 3.2 percent annualized rate in the first quarter of the year. This increase was mainly fueled by private consumption, which increased 3.6 percent, the largest quarterly growth in this category since the first quarter of 2007, and private investment, which grew at the healthy …  Growth and Production
Real GDP increased at a 3.2 percent annualized rate in the first quarter of the year. This increase was mainly fueled by private consumption, which increased 3.6 percent, the largest quarterly growth in this category since the first quarter of 2007, and private investment, which grew at the healthy clip of 14.8 percent. Government spending and net exports were both a drag on growth. Services and consumer durables drove most of the increases in consumption, while changes in inventories (again) and purchases of equipment and software were responsible for most of the growth in investment. Both residential, as well as nonresidential construction weighed on investment growth. The latter has not increased since the second quarter of 2008, underscoring the harsh reality of commercial real estate. Production sentiment continued strong, with the April ISM’s Production Managers’ Index at levels not seen since 2004 and the nonmanufacturing index stayed constant at its highest since 2008  [2010-05-15]  Growth and Production
Related materials
Research Topics: All research
Data Update:  All topic updatesIndustrial Production Housing Starts Durable Goods Real GDP Construction Spending ISM Manufacturing Factory Orders Industrial Production Housing Starts Durable Goods Real GDP
Economic Trends:  The Recovery So Far

Households and Consumers   

Retail sales in March rose 1.6 percent month-over-month, the largest monthly increase since November of last year. However, the most recent consumer credit data shows that banks are still cutting back on credit card and installment consumer loans. Consumer credit fell $11.5 billion from January to …  Households and Consumers
Retail sales in March rose 1.6 percent month-over-month, the largest monthly increase since November of last year. However, the most recent consumer credit data shows that banks are still cutting back on credit card and installment consumer loans. Consumer credit fell $11.5 billion from January to February, with $9.5 billion of this contraction coming from revolving (credit card and other line of credit) debt. In the same time period, aggregate personal income was flat, and the personal savings rate fell from 3.4 percent to 3.1 percent. The Federal Reserve’s Flow of Funds release confirms that households are in fact paying down their total debt load rather than rolling it over or increasing it. These pay-downs are combination of principal repayments by consumers and charge-offs by banks and credit card trusts, the latter of which have shown flattening or declining charge-off rates in recent months. Even with pay-downs and charge-offs, though, household debt as a percentage of assets is still more than 30 percent higher than the same average in the 1990s, before the housing and credit boom.  [2010-05-01]  Households and Consumers
Related materials
Research Topics: All research
Data Update:  All topic updatesConsumer Sentiment Existing Home Sales New Home Sales Housing Price Indicators Consumer Sentiment Personal Income Consumer Sentiment Existing Home Sales Housing Price Indexes New Home Sales Personal Income Consumer Sentiment
Economic Trends:  Household Finances and a Sustainable Recovery

Regional Economics   

The Fourth District’s unemployment rate decreased 0.5 percentage point to 10.2 percent for the month of January. Unemployment rates across Fourth District counties ranged from 7.1 percent (Greene County, Pennsylvania) to 21.2 percent (Magoffin County, Kentucky), with the median county …  Regional Economics
The Fourth District’s unemployment rate decreased 0.5 percentage point to 10.2 percent for the month of January. Unemployment rates across Fourth District counties ranged from 7.1 percent (Greene County, Pennsylvania) to 21.2 percent (Magoffin County, Kentucky), with the median county unemployment rate at 11.3 percent. Statewide unemployment rates were Ohio at 10.8 percent, Kentucky at 10.7 percent, Pennsylvania at 8.8 percent, and West Virginia at 9.3 percent. Homeowner vacancy in the Fourth District is higher than it was before the housing boom and bust, but it is currently level or falling in most regions of our district. Rental vacancy too is down in five of seven district MSAs we looked at and two of the four states. Overall this suggests that our housing stock and prices are partway through an adjustment to the new economic conditions. Our continued attention will be warranted until vacancy returns to historical norms, or the market dictates that the new, higher levels of vacancy are the norm for our region.  [2010-04-06]  Regional Economics
Related materials
Research Topics: All research
Economic Trends:  Homeowner and Rental Vacancy Trends in the Fourth District

Labor Markets, Unemployment, and Wages   

The national employment numbers released on May 7, 2010, reveal that while the unemployment rate increased from 9.7 percent in March to 9.9 percent in April, the employment-to-population ratio also increased from 58.6 percent in March to 58.8 percent as well. The most recent Metropolitan Statistical …  Labor Markets, Unemployment, and Wages
The national employment numbers released on May 7, 2010, reveal that while the unemployment rate increased from 9.7 percent in March to 9.9 percent in April, the employment-to-population ratio also increased from 58.6 percent in March to 58.8 percent as well. The most recent Metropolitan Statistical Area (MSA) employment numbers show wide variation in unemployment rates across labor markets in the U.S. While old industrial MSAs such as Cleveland had higher than average unemployment in 2006, these MSAs now have average or below average unemployment rates. Meanwhile, some MSAs that had very low unemployment during the construction boom now have extremely high unemployment rates, such as Riverside Riverside-San Bernardino-Ontario. This re-ordering of MSAs with respect to unemployment rates appears to have been driven mostly by changes in the number of unemployed workers rather than changes in the size of the labor force.  [2010-05-15]  Labor Markets, Unemployment, and Wages
Related materials
Research Topics: All research
Data Update:  All topic updatesThe Employment Situation Fourth District Employment Conditions Fourth District Employment Conditions Productivity and Costs The Employment Situation
Economic Trends:  Hours and Labor Market Slack Some Popular Locales Now Facing Gloomier Labor Market Economic Projections from the April FOMC Meeting

International Markets and Foreign Exchange   

Global imbalances—current-account surpluses and deficit—are not necessarily bad things since they ultimately reflect welfare improving decisions about consumption and production around the world. To be sure, current-account deficits cannot indefinitely outrun countries’ abilities …  International Markets and Foreign Exchange
Global imbalances—current-account surpluses and deficit—are not necessarily bad things since they ultimately reflect welfare improving decisions about consumption and production around the world. To be sure, current-account deficits cannot indefinitely outrun countries’ abilities to finance them, but reversals, so far, have not presented large developed countries with serious adjustment problems. Current-account imbalances may only be a problem when governments interfere with the natural adjustment process by limiting financial outflow or the appreciation of their real exchange rates.  [2010-05-01]  International Markets and Foreign Exchange
Related materials
Research Topics: All research
Data Update:  All topic updatesInternational Trade Import Prices International Trade Import and Export Prices
Economic Trends:  Global Imbalances
Economic Commentary:  The Foreign Savings Glut: Inordinate Savers or Thriving Traders?