Greenbook/Tealbook

Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. CONFIDENTIAL (FR) CLASS II - FOMC August 20, 1982 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS THE DOMESTIC NONFINANCIAL ECONOMY Employment Costs . . . . . . . . . . . . . . . . . . . . TABLES: S. 2 Employment Cost Index: Wages and Salaries . . . . Selected Measures of Compensation, Productivity, 3 and Costs in the Nonfarm Business Sector . . . . . . THE DOMESTIC FINANCIAL ECONOMY Interest Rate Developments . . . . . . . . . . . . . . Corporate Bond Issuance . . . . . . . . . . . . . . . Budget Developments . . . . . . . . . . . . . . . . . . . . . Effects of 1982 Deficit Reduction Measures . . . . Monetary Aggregates . . . . . . . . . . . . . . . . Commercial Bank Credit and Short- and IntermediateTerm Business Credit . . . . . . . . . . . . . . . . . . . . . Selected Financial Market Quotations . . TABLES: . . . . 4 44 4 SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Employment Costs The rate of increase in employment costs of all private nonfarm workers other than in private households slowed further during the three months ended in June, thus extending the decline in the rate of rise in these costs that began a year earlier. Wage and salary rates of these workers as measured by the comprehensive employment cost index, seasonally adjusted, rose at a 4.8 percent annual rate during the second quarter of this year, following a 7.4 percent rate of increase over the first quarter. A marked slowing has occurred this year in the increase in wages and salaries of union and nonunion workers, of white-collar and blue-collar workers, and of workers in manufacturing, trade, and services industries. The 6.1 percent average annual rate of increase over the first half of this year for all private nonfarm workers is well below the 8-3/4 to 9 percent increases prevailing during 1979, 1980, and 1981. Increases in compensation rates, which include employer costs for employee benefits as well as wages and salaries, also have been more moderate recently, but the slowing in the rate of increase in compensation rates has been somewhat less than in the rate of rise in wage and salary rates. Over the year ended in June, however, the increase in the compensation rate, 7.2 percent, was about the same as the 7.1 percent rise in wage and salary rates; these increases are down from advances over the year ended in June 1981 of 10.3 percent and 9.3 percent, respectively. EMPLOYMENT COST INDEX: WAGES AND SALARIES (Percentage change at annual rates; quarterly changes based on seasonally adjusted data1) 1979 ANN. 1980 ANN. 1981 ANN. 8.7 9.0 8.6 1981 Q1 1982 Q2 H2 7.9 7.4 4.8 6.1 9.7 6.5 6.9 4.9 5.9 9.6 6.7 3.5 7.3 7.0 13.4 7.4 6.6 10.5 8.4 3.0 9.7 4.6 6.8 6.6 8.3 4.9 8.1 11.3 9.1 11.8 8.7 8.8 6.2 7.8 9.3 8.8 8.9 7.1 6.7 7.6 6.4 8.5 5.0 3.7 7.7 6.3 5.1 8.1 8.7 11.1 10.5 7.7 10.3 7.7 8.9 7.7 7.8 7.0 5.5 3.8 6.6 5.3 Q1 Q2 Q3 Q4 8.8 10.5 8.5 8.4 9.4 8.7 9.0 9.6 9.4 7.9 8.5 11.1 7.8 8.7 8.4 7.6 10.6 9.3 10.1 15.1 By Occupational Group White-collar workers Blue-collar workers Service workers 8.6 9.0 7.2 8.7 9.6 8.1 9.1 8.6 8.3 By Bargaining Status Union Nonunion 9.0 8.5 10.9 8.0 9.6 8.5 Total Private Nonfarm By Industry Manufacturing Transportation and public utilities Trade Services 1. Percentage changes are from final month of the preceding period to final month of the period indicated. Quarterly changes are compounded, seasonal adjustment by FRB staff. SELECTED MEASURES OF COMPENSATION, PRODUCTIVITY, AND COSTS IN THE NONFARM BUSINESS SECTOR (Percentage change at annual rates; quarterly changes based on seasonally adjusted data) 1981 1980 1981 Q3 1982 Q4 Q1 Q2 Dec. 1981July 1982 Hourly Earnings Index - production workers1 Total private nonfarm Manufacturing Contract construction Transportation and public utilities Trade Services 9.6 8.4 8.5 7.3 6.5 6.3 10.9 7.7 8.8 8.1 8.7 8.9 7.7 8.8 8.7 9.0 6.7 2.4 9.3 8.8 9.5 8.5 7.1 9.1 6.4 8.0 9.3 7.7 4.3 9.2 7.4 3.8 5.1 5.9 6.3 7.4 1981-Q 4 to 1982-Q2 2 Employment Cost Index, wages and salaries - all persons Total By Occupation: White collar Blue collar Service Workers By Bargaining Status: Union Nonunion 9.0 8.8 8.4 7.9 7.4 4.8 8.7 9.6 8.1 9.1 8.6 8.3 7.8 9.3 8.8 8.9 7.1 6.7 7.6 6.4 8.5 5.0 3.7 7.7 10.9 8.0 9.6 8.5 10.3 7.7 8.9 7.7 7.8 7.0 5.5 3.8 1981-Q4 to 1982-Q2 Labor Productivity and Costs - all persons1 Compensation per hour Output per hour Unit labor costs 10.6 .3 10.2 Year-todate 9.0 -.3 9.3 7.3 -3.5 11.2 10.1 2.6 7.4 1. Changes over periods longer than one quarter are measured from final quarter of preceding period to final quarter of period indicated. Quarterly changes are at compound rates; monthly changes are not compounded. 2. Percent change from final month of preceding period to final month of period indicated. Quarterly changes are compounded; seasonal adjustment by FRB staff. THE DOMESTIC FINANCIAL ECONOMY Interest Rate Developments Interest rates have dropped sharply further between the close on Tuesday and midday Friday. In part, the rally in debt markets was sparked by passage of the tax increase legislation and by speculation that the discount rate would be lowered again soon. However, declines in rates have been particularly large on short-term Treasury bills, as a "flight to quality" developed in response to rumors of potentially large losses by money center banks in connection with the Mexican difficulties. Such concerns were particularly apparent in the CD market, as the spread between rates on Treasury bills and CDs widened appreciably, increased tiering developed for awhile within the CD market, and some money funds reportedly were reducing their CD holdings. Reports also were circu- lating that large nonbank dealers were paying substantially lower rates on RPs than some money center banks. Corporate Bond Issuance The sharp drop in interest rates has brought forth a substantial increase in longer-term corporate note and bond offerings. Leading underwriters have indicated that, given pressures to lengthen the maturity of corporate liabilities, the total for August easily could exceed $5 billion if interest rates remain at their current levels. Budget Developments Both the House and the Senate on August 18 passed the reconciliation bill that reduces outlays for price supports for farm products and other federal spending programs. On August 19, both houses passed the -5- revenue-raising bill which also reduces spending in several entitlement programs. This latter bill also provides for supplemental unemployment compensation benefits in all states, raises the federal unemployment compensation tax and extends the employment tax for medicare to federal employees. The estimates for outlay reductions and revenue increases in these bills are shown in the table that follows. -6EFFECTS OF 1982 DEFICIT REDUCTION MEASURES (- raises the deficit, fiscal years, billions of dollars) FY83-85 Total 1983 1984 1985 3.2 4.7 5.2 -1.0 0.7 0.6 3.6 5.7 7.5 Individual income tax increases and pension provisions 0.5 3.9 3.9 Corporate tax increases and acceleration 5.4 13.3 Life insurance and annuity provisions 1.9 2.1 2.9 Excise tax increases 2.8 4.0 4.7 Employment tax increases 1.9 3.1 3.6 8.6 Compliance and misc. provisions 3.3 8.8 8.6 20.7 Increased revenue from more IRS agents 2.1 2.4 2.4 18.0 37.7 42.7 Outlay Reductions1 Reconciliation Act of 1982 13.1 Tax Equity and Fiscal Responsibility Act (TEFRA) a. b. Unemployment compensation (net) Other outlays 0.3 16.8 Revenue Increases (TEFRA)2 TOTAL REVENUE INCREASES 16.5 8.3 35.2 6.9 11.5 6.9 98.4 1. Estimates by the Congressional Budget Office as reported by the Senate Budget Committee. 2. Estimates by the Joint Committee on Taxation in the Conference Report to accompany H.R. 4961. Note: details do not add to totals due to rounding. MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted)1 1981 1982 Q1 ___Q4 Q2 May June July QIV. '81 to July '82 --Percentage change at annual rates-Money stock measures 1. M1 2 2. (M) 3. M2 4. M3 10.4 9.5 9.8 8.7 3.3 3.6 9.5 10.7 -2.4 0.5 10.7 11.1 -0.3 -0.5 2.9 6.6 8.9 -4.2 9.4 12.5 4.3 7.9 9.3 10.5 9.4 Demand deposits -0.2 -0.5 -5.8 -1.5 -8.8 . Other checkable deposits 27.6 49.5 19.6 -21.7 6.9 -2.7 26.0 8. M2 minus M1 (9+10+11+14) 9.9 9.5 11.5 14.9 8.7 12.5 11.1 -44.1 63.6 -8.4 71.3 8.4 8.4 25.5 Selected components 5. Currency 6. 9. 10. 11. 12. 13. 14. 15. 16. 3 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares,NSA Commercial banks savings deposits small time deposits Thrift institutions savings deposits small time deposits 22. 31.4 9.9 -4.5 15.8 2.4 -3.2 4.5 20.9 17.2 2.0 23.8 6.0 0.6 8.1 8.2 -2.1 19.2 13.9 -21.8 28.5 10.8 -17.7 21.4 27.8 13.5 0.8 19.1 4.9 1.6 6.1 (18+21+22) 11.2 3.3 16.7 12.7 20.5 27.8 13.6 Large time deposits 4 at commercial banks, net at thrift institutions Institutions-only money market mutual fund shares, NSA Term RPs, NSA 3.5 0.2 19.5 8.9 6.1 21.6 19.1 19.9 15.5 16.6 21.4 -4.1 25.0 26.0 20.5 26.3 31.7 2.0 17.2 17.4 16.2 132.8 0.0 -2.5 -29.9 15.2 3.7 49.5 -66.7 32.9 -44.6 106.8 -57.9 23.7 -22.4 M3 minus M2 18. 19. 20. 21. 74.2 10.3 -11.9 20.8 1.5 -11.7 6.6 3.7 --Average monthly change in billions of dollars-MEMORANDA: 23. Managed liabilities at commercial 4 banks (24+25) 5 Large time deposits, gross 24. 5 Nondeposit funds 25. Net due to related foreign 26. 5 institutions, NSA 5 ,6 Other 27. 28. U.S. government deposits at commercial 7 banks 0.8 0.6 2.7 -2.1 6.4 5.8 0.6 5.7 6.7 -1.0 10.8 8.3 2.5 6.2 10.6 -4.4 3.8 4.5 -0.7 -2.1 0.0 0.5 0.1 -1.0 0.0 1.7 0.8 -4.8 0.4 -1.4 0.6 1.9 -2.5 1.7 -5.4 -1.5 1. Quarterly growth rates are computed on a quarterly average basis. Dollar amounts shown under memoranda for quarterly changes are calculated on an end-month-of-quarter basis. 2. M1 seasonally adjusted using alternative model-based procedure applied to weekly data. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks, net of amounts held by money market mutual funds, plus overnight Eurodollar deposits issued by Caribbean branches of U.S. member banks to U.S. nonbank customers. Excludes retail RPs, which are in the small time deposit components. 4. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 5. Adjusted for shifts of assets and liabilities to International Banking Facilities (IBFs) which affected flows from December 1981 to June 1982. 6. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities soldunder agreements to repurchase and other liabilities for borrowed money (including borrowings from the Federal Reserve and unaffiliated foreign banks), loans sold to affiliates, loan RPs and other minor items. Data are partially estimated. 7. Consists of Treasury demand deposits at commercial banks and Treasury note balances. -8COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 1982 1981 Q4 Q1 Q2 May June July QIV '81 to July '82 --Commercial Bank Credit-1. 2. Total loans and investments 2 ,3 at banks Investments 6.4 10.1 7.9 9.0 5.1 6.4 8.7 4.8 5.7 4.7 2.1 1.7 2.4 4.7 3. Treasury securities -7.8 11.5 4.9 -3.1 -5.2 7.3 6.7 4. Other securities 11.2 2.8 4.8 4.6 5.1 0.0 3.7 6.9 11.5 9.0 11.3 6.4 7.6 10.0 9.2 16.8 14.9 19.1 14.5 9.6 15.0 58.6 -18.3 -26.8 -17.2 -64.1 92.3 1.4 5. 2 ,3 Total loans 2 3 6. Business loans , 7. Security loans 8. Real estate loans 7.3 7.8 6.6 6.5 7.3 .8 6.8 9. Consumer loans 4.1 2.8 3.0 3.2 2.6 5.7 3.7 --Short- and Intermediate-Term Business Credit-10. 11. Total short- and intermediateterm business credit (sum of lines 14, 15 and 16) Business loans net of bankers acceptances 3 13.8 15.2 13.1 18.5 10.6 n.a. n.a. 9.3 16.5 15.8 19.9 18.0 11.0 15.5 Commercial paper issued by non5 financial firms 21.3 30.0 16.8 33.1 2.0 38.2 27.7 13. Sum of line 11 & 12 10.8 18.2 15.9 21.7 15.9 14.9 17.0 14. Line 13 plus loans at foreign 6 branches 14.0 18.5 15.7 23.1 13.6 14.9 17.4 7.6 1.0 1.5 -1.5 10.5 n.a. n.a. 20.9 11.7 10.2 11.7 -6.6 n.a. n.a. 12. 15. 16. Finance company loans to business 7 7 Total bankers acceptances outstanding 1. Average of Wednesdays for domestically chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans include outstanding amounts of loans reported as sold outright to a bank's own foreign branches, unconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and unconsolidated nonbank subsidiaries of the holding company. 3. Adjusted for shifts of assets and liabilities to International Banking Facilities (IBFs) which affected flows from December 1981 to June 1982. 4. Growth of bank credit from the FOMC's December-January base through July 1982, not adjusted for shifts of assets from domestic offices to IBFs, was at an annual rate of 7.8 percent. Adjusted for such shifts after January, growth over this period was 8.6 percent. 5. Average of Wednesdays. 6. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 7. Based on average of current and preceding ends of month. n.a.--not available. SELECTED FINANCIAL MARKET QUOTATIONS1 (Percent) Feb. Highs 1982 FOMC July 1 Aug. 19 1981 Highs Change from: Feb. FOMC July 1 Highs Short-term rates Federal funds 2 20.06 15.61 14.81 10.11 -5.50 -4.70 Treasury bills 3-month 6-month 1-year 17.01 15.93 15.21 14.57 13.55 12.55 12.90 12.72 7.52 8.77 9.39 -7.05 -5.59 -4.16 -5.03 -4.13 -3.33 Commercial paper 1-month 3-month 18.63 18.29 15.73 15.61 14.61 14.61 8.56 9.13 -7.17 -6.48 -6.05 -5.48 18.90 19.01 14.87 -5.73 -5.61 15.29 9.14 9.55 10.55 -6.80 -6.59 18.50 15.94 16.14 16.18 -5.63 -4.74 19.80 19.56 16.36 16.53 15.66 16.28 10.80 11.58 -5.56 -4.95 -4.86 21.50 17.00 16.50 14.00 -3.00 -2.50 14.46 14.20 14.18 14.02 12.84 8.90 10.89 -5.28 -3.13 -3.94 13.03 U.S. Treasury (constant maturity) 16.59 3-year 15.84 10-year 15.20 30-year 15.16 14.95 14.80 14.68 14.40 13.90 11.91 12.47 12.31 -3.25 -2.48 -2.49 -2.77 -1.93 -1.59 Municipal (Bond Buyer) 13.30 13.44 12.58 10.82 -2.62 -1.76 Corporate--Aaa utility Recently offered 17.72 16.34 16.00 e 1410 p -2.24 18.63 1981 17.66 16.735 1982 16.445 -.29 -1.22 Percent change from: FOMC 1981 July 1 Highs Large negotiable CDs 3 1-month 3-month 6-month Eurodollar deposits 2 1-month 3-month Bank prime rate Treasury bill futures Sept. 1982 contract Mar. 1983 contract 14.36 15.16 -4.70 -2.14 Intermediate- and longterm rates S&L fixed-rate mortgage commitment Highs Stock Prices 1,024.05 Dow-Jones Industrial 79.14 NYSE Composite 380.36 AMEX Composite 223.47 NASDAQ (OTC) 1. One-day quotes except as noted. 2. Averages for statement week closest to date 3. Secondary market. FOMC July 1 Aug. 19 -1.90 +4.4 -18,1 838.57 +.1 -20.9 62.57 -.2 -34.6 248.94 -3.3 -26.2 164.92 4. One-day quotes for preceding Thursday. shown. 5. One-day quotes for preceding Friday. p--preliminary. e--estimated. 803.27 62.51 249.40 170.60 

Federal Reserve (1982, August 23). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19820824_part2

@misc{wtfs_greenbook_19820824_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1982},
  month = {Aug},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19820824_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}