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 III - FOMC July 5, 1985 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 Page THE DOMESTIC NONFINANCIAL ECONOMY Employment situation . . Automobile sales . . . . . . . . . . . . . . . . . . . . . . . . Tables Changes in employment . . . . Selected unemployment rates. . Hourly earnings index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE DOMESTIC FINANCIAL ECONOMY Tables Monetary aggregates . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . Selected financial market quotations . . . . . . . . . . . . . . . SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Employment situation Employment growth moderated in June, and the civilian unemployment rate was unchanged at 7.3 percent--essentially the same rate that has prevailed over the past year. Nonfarm payroll employment rose 80,000 in June, compared to average monthly increases of 260,000 during the first five months of 1985. As in most recent months, the June data showed considerable variation in the pattern of employment change across different sectors. In manufacturing, employment fell an additional 45,000, bringing the cumulative loss in factory jobs since January to 220,000; in June, the largest employment declines were concentrated in machinery and electrical equipment, both of which have suffered substantial losses since the start of the year. In contrast to manufacturing, employment in the service-producing sectors continued to rise in June, though at a slower rate than in earlier months. In particular, employment growth in retail trade was only about half the average pace of the previous five months, and job gains in business services tapered off. The hourly earnings index for production and nonsupervisory workers rose .3 percent in June. Wage rates were little changed in the manufacturing and construction sectors; however, wage growth in the service sector was faster than in other recent months. After some acceleration around the turn of the year, increases in the hourly earnings index slowed during the spring quarter, and the average rate of wage change during the first half of 1985 was only fractionally above the increase for 1984 as a whole. Automobile sales The combined sales rate for domestic and imported cars was about 10-3/4 million units in June, down a half-million units from May's advanced pace. With fewer special financing programs in place during June, sales of domestic models fell to a 7.7 million unit rate, compared to an average rate of 8.5 million units in the first five months of 1985. However, foreign car sales rose further, to around a 3 million unit rate; sales of Japanese models were particularly strong. CHANGES IN EMPLOYMENT¹ (Thousands of employees; based on seasonally adjusted data) 1983 1984 1984 H2 Q1 Q2 1985 Apr. May June -Average monthly changesNonfarm payroll employment 2 Strike adjusted 293 293 327 329 296 299 273 267 185 180 210 183 266 263 80 93 Manufacturing Durable Nondurable Construction Trade Finance and services Total government Private nonfarm production workers Manufacturing production workers 79 61 18 25 85 103 4 52 45 7 29 106 106 17 26 27 -1 21 104 107 25 -26 -17 -9 28 91 150 20 -48 -35 -13 32 79 107 -1 -59 -43 -16 88 50 102 15 -40 -18 -22 14 124 117 25 -45 -44 -1 -6 64 102 -43 260 253 220 182 145 195 157 83 73 33 11 -33 -40 -60 -38 -21 331 338 270 266 147 144 282 290 -250 -175 -174 -240 15 131 -590 -416 Total employment 3 Nonagricultural 1. Average change from final month of preceding period to final month of period indicated. 2. Survey of establishments. Strike-adjusted data noted. 3. Survey of households. SELECTED UNEMPLOYMENT RATES (Percent; based on seasonally adjusted data) 1983 1984 1984 H2 Civilian, 16 years and older 9.6 7.5 Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 22.4 14.5 7.8 7.2 White Black Fulltime workers Memo: Total national¹ 1985 Apr. Q1 Q2 7.3 7.3 7.3 7.3 7.3 7.3 18.9 11.4 5.7 6.0 18.5 11.2 5.5 5.9 18.5 11.1 5.4 6.0 18.3 11.3 5.4 6.1 17.7 11.0 5.5 6.0 18.9 11.8 5.0 6.1 18.3 11.2 5.6 6.1 8.4 19.5 6.5 15.9 6.3 15.5 6.3 15.5 6.3 15.0 6.3 15.3 6.2 15.6 6.5 14.0 9.5 7.2 7.1 7.0 6.8 6.9 6.8 6.8 9.5 7.4 7.2 7.2 7.2 7.2 7.2 7.2 1. Includes resident Armed Forces as employed. May June HOURLY EARNINGS INDEX¹ (Percentage change; based on seasonally adjusted data) 2 1983 1984 1984 H2 1985 Q1 Q2 --Annual rate-Total private nonfarm Manufacturing Durable Nondurable Contract construction Transportation and public utilities Finance, insurance and real estate Total trade Services Apr. 1985 May June --Monthly rate-- 4.0 3.1 2.8 3.5 3.1 .2 .1 .3 2.8 2.2 3.9 2.0 3.3 3.1 3.7 1.3 3.1 2.7 3.8 -.1 5.2 5.9 4.0 5.2 3.6 3.5 3.8 1.6 .3 .3 .3 .3 .3 .4 .2 -.4 .1 .0 .1 .1 4.3 2.9 2.5 2.7 2.1 -.2 .0 .3 5.9 4.8 4.8 3.6 2.6 4.0 3.0 2.5 3.9 5.4 1.8 2.1 1.5 2.1 5.2 .2 .1 .2 .2 .0 .1 .4 .1 .7 1. Excludes the effect of interindustry shifts in employment and fluctuations in overtime hours in manufacturing. 2. Changes over periods longer than one quarter are measured from final quarter of preceding period to final quarter of period indicated. Quarterly changes are compounded annual rates. MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted)¹ 1983:Q4 to 1984:Q4 ----1. M1 2. 3. M2 M3 5.2 7.7 10.4 Q1 Q2 Pe 1985 Apr. May July 5, June Pe 1985 Growth from Q4 1984 to e June 1985P Percentage change at annual rates -----10.6 12.0 10.7 5.9 -0.8 0.2 14.0 8.4 7.1 19 14 11 Levels in billions of dollars May 1985 Selected components 4. Currency 7.2 6.3 5. Demand deposits 1.1 7.0 6. Other checkable deposits 7. M2 minus M1² 8. 9. 10. 11. 12. 13. 14. 15. 16. M3 minus M25 Large time deposits 6 At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA - 10.4 10 163.1 9 2.9 15.7 24 255.8 10.5 21.1 16 13.3 15.5 22 157.3 8.6 12.5 4 -2.9 6.7 12 1862.9 -27 -152.2 95.3 -6 63.9 -1 9 -8.8 8.9 -28.6 8.4 21 17 172.1 808.6 3.2 15.0 3.5 9.2 7.1 8.4 64.0 Overnight RPs and Eurodollars, NSA³ General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, 4 plus MMDAs, NSA Small time deposits Thrift institutions Savings deposits, SA, 4 plus MMDAs, NSA Small time deposits 3.0 418.6 389.9 836.3 5.2 11.1 7.3 29.2 -1.8 7.9 -3.6 15.5 17.8 1.7 10 4 1.4 4.8 6.1 9.9 13 3 334.4 501.9 22.1 5.4 4 4.4 2.3 -2 629.6 10.2 15.6 0.8 2.2 -4.0 13.2 -12 -20 2.0 52.2 -59.6 78.5 -51.7 -3.0 68 -23 -38 26.0 16.0 48.8 9.0 2.6 21.0 33.6 45.6 -8.3 31.2 -19.5 2.0 8 17 -15 Average monthly change in billions of dollars 3 428.0 272.0 156.0 63.5 68.8 80.1 - MEMORANDA: 23. Managed liabilities at commercial banks (24+25) 24. 25. 26. 27. 28. Large time deposits, gross Nondeposit funds Net due to related foreign institutions, NSA 7 Other U.S. government deposits at commercial 8 banks -9.2 2.6 -11.8 0.9 0.5 0.5 2.2 -1 0 -3.3 -8.5 5.2 -1.5 6.7 -4 -5 1 442.7 331.0 111.7 3.4 3.3 -4 5 -30.3 142.0 -5 -1.4 8.0 0.2 2 2.8 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. Nontransactions M2 is seasonally adjusted as a whole. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks plus overnight Eurodollar deposits issued by branches of U.S. banks to U.S. nonbank customers, both net of amounts held by money market mutual funds. Excludes retail RPs, which are in the small time deposit component. 4. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (MMDAs), not seasonally adjusted. Commercial bank savings deposits excluding MMDAs increased during May and June 1985 at rates of 8.0 percent and 15 percent respectively. At thrift institutions, savings deposits excluding MMDAs increased during May and June 1985 at rates of 5.0 percent and 9 percent respectively. 5. The non-M2 component of M3 is seasonally adjusted as a whole. 6. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 7. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase, and other liabilities for borrowed money (including borrowings from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits at commercial banks and Treasury note balances. pe-preliminary estimate. COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)¹ 1984 Q4 -- Q1 -- Q2p 1985 Apr. May JuneP July 5, Levels in bil. of dollars JuneP ------ Commercial Bank Credit ------1. Total loans and securities at banks 9.8 10.3 1.8 5.2 3.4 4.7 13.3 10.0 1800.2 5.3 -13.0 20.3 8.8 411.0 10.3 -0.4 -26.1 22.1 3.2 266.6 -5.6 -3.4 16.4 12.1 17.1 19.4 144.4 12.8 11.7 10.6 10.0 11.2 10.4 1389.2 Business loans 7.8 10.2 2.7 1.2 6.0 1.0 483.7 7. Security loans 37.5 16.5 89.0 84.1 82.1 83.2 40.1 8. Real estate loans 12.1 10.9 11.8 12.8 12.0 10.4 397.2 9. Consumer loans 16.1 17.4 14.8 16.5 14.5 13.0 271.6 2. Securities 3. U.S. government 4. Other securities 5. 6. securities Total loans -----10. Business loans net of bankers acceptances 2 11. Loans at foreign branches 12. Sum of lines 10 & 11 13. Commercial paper issued by 3 nonfinancial firms 14. Sums of lines 12 & 13 15. Bankers acceptances: 5 related4, 16. U.S. 9.4 Short- and Intermediate-Term Business Credit --- 9.3 3.8 3.8 6.5 -46.9 27.7 -25.5 26.1 83.0 6.8 4.8 2.7 7.5 4.1 500.7 33.8 41.6 43.4 14.0 78.2 -6.0 5.1 8.4 -6.5 -5.5 n.a. 12.4 4.4 n.a. 23.2 20.8 14.4 7.3 7.6 1.0 1985 480.5 20.1 12.2 5.2 578.8 3.4 n.a. 35.3 5.4 11.7 n.a. 611.6 (May) n.a. 10.3 n.a. n.a. 141.0 (April) n.a. 6.5 n.a. n.a. 746.7 (April) trade Line 14 plus bankers acceptances: U.S. trade related 17. Finance company loans to business 18. Total short- and intermediateterm business credit (sum of lines 16 & 17) 4 -29.9 (May) n.a.--not available. p-preliminary. 1. Average of Wednesdays for domestically chartered ed banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Average of Wednesdays. 4. Based on average of current and preceding ends of month. 5. Includes acceptances financing U.S. imports, U.S. exports and domestic shipment and storage of goods. 7 SELECTED FINANCIAL MARKET QUOTATIONS¹ (Percent) 1982/1983 Cyclical 1985 1984 FOMC March 26 FOMC June May 21 lows July 3 Change from: 1984 FOMC highs May 21 low Highs Federal funds 2 8.46 11.63 8.57 8.03 7.38 7.76 -3.87 -. 27 Treasury bills 3 3-month 6-month 1-year 7.08 7.62 7.73 10.67 10.77 11.13 8.34 8.80 8.98 7.30 7.43 7.64 6.66 6.81 6.98 7.02 7.07 7.21 -3.65 -3.70 -3.92 -.28 -.36 -.43 Commercial paper 1-month 3-month 8.00 7.97 11.42 11.35 8.63 8.75 7.54 7.56 6.95 7.01 7.51 7.44 -3.91 -3.91 -. 03 -. 12 8.08 8.12 8.20 11.52 11.79 12.30 8.60 8.79 9.35 7.59 7.66 7.84 7.09 7.18 7.30 7.50 7.53 7.60 -4.02 -4.26 -4.70 -.09 -. 13 -.24 8.68 8.71 11.89 12.20 8.78 9.19 7.84 8.01 7.45 7.50 7.56 7.70 -4.33 -4.50 -. 28 -. 31 10.50 13.00 10.50 10.00 9.50 9.50 -3.50 -.50 8.86 9.74 7.65 8.00 6.77 7.12 7.06 7.39 9.39 10.60 10.85 8.73 9.83 10.23 9.06 10.23 10.45 Short-term rates Large negotiable CDs 1-month 3-month 6-month 3 Eurodollar deposits 4 1-month 3-month Bank prime rate futures Treasury bill Sept. 1985 contract Dec. 1985 contract - -.59 -. 61 Intermediate- and long-term rates U.S. Treasury (constant maturity) 3-year 9.33 10-year 10.12 10.27 13.49 13.99 13.94 10.97 11.77 11.72 Municipal revenue (Bond Buyer index) 9.21 11.44 10.245 9.345 9.10 Corporate--A utility Recently offered 11.64 15.30 13.11e 12.02e 12.55 n.a. 1983 14.68 12.31 13.246 10.976 12.946 10.596 1985 FOMC May 21 30-year Home mortgage rates S&L fixed-rate S&L ARM, 1-yr. Highs 1984 Lows Lows Stock prices Dow-Jones Industrial 1287.20 1086.57 1184.96 NYSE Composite 94.60 99.63 85.13 187.16 AMEX Composite 249.03 202.06 NASDAQ (OTC) 328.91 225.30 246.00 1. One-day quotes except as noted. 2. Averages for two-week reserve maintenance period closest to date shown. Last observation is for the maintenance period ending July 3, 1985. 3. Secondary market. -4.43 -3.76 -3.49 -. 33 -. 37 -. 40 9.245 -2.20 -. 10 11.50 11. 5 6p -3.74 -. 46 12.05 9.83 12.156 9.776 July 3 -2.53 -. 79 -2.54 -. 82 Percent change from: 1984 FOMC May 21 lows 1309.70 1326.39 22.1 109.65 111.02 30.4 232.47 231.28 23.6 293.9 297.33 32.0 4. Averages for statement week closest to date shown. 5. One-day quotes for preceding Thursday. 6. One-day quotes for preceding Friday. e--estimated. 

Federal Reserve (1985, July 9). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19850710_part3

@misc{wtfs_greenbook_19850710_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1985},
  month = {Jul},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19850710_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}