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 February 6, 1987 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 Labor market . . . . . . . . . . . . . Auto sales . . . . . . . . . . .. Tables . .. Changes in employment Selected unemployment rates. . . Hourly earnings index . .. Auto and light-duty truck sales. . . . . .. Foreign car sales . . . . . . . . . . . . . *............. . . . . . . . . . . . e THE FINANCIAL ECONOMY Consumer credit . . . . . . . . . . . . . . . . . . . . Tables . . . . . . . . . . ..... Consumer installment credit . . . . . . . . . . ......... .. Monetary aggregates Commercial bank credit and short- and intermediate* * * ............ term business credit . . . . . . . Selected financial market quotations . . . . . . . . . . .. 1 SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Labor market The household and payroll surveys both reported sizable employment gains in January, and the civilian unemployment rate remained at 6.7 percent. The average workweek rose 0.1 hour and, combined with the employment gains, resulted in an increase of 0.7 percent in the index of aggregate weekly hours of production and nonsupervisory workers on private nonagricultural payrolls. Employment, as measured by the establishment survey, increased nearly 450,000 in January. As has been the case during most of the current cyclical expansion, a large part of payroll growth took place in the service-producing industries. Employment in retail trade, which was unchanged (seasonally adjusted) in December, grew 165,000 last month. Elsewhere in the service- producing sector, employment in the services industries continued to grow, with sizable gains reported for business and health services. Outside of the service-producing sector, the construction industry accounted for the balance of job growth in January, reflecting favorable weather conditions during the survey reference week. Manufacturing employment was essentially unchanged in January as small gains in lumber, printing, and chemical manufacturing were offset by small losses in many other manufacturing industries. As measured by the household survey, employment grew 374,000 in January. This strong employment gain was accompanied by a sizable advance in the 2 labor force, and the civilian unemployment rate remained at 6.7 percent. Adult women accounted for more than half of the increase in the size of the labor force. A substantial labor force increase also occurred among the Hispanic population, where the labor force participation rate has risen almost 2-1/2 percentage points in the past year. Wage rates, as measured by the hourly earnings index for production and nonsupervisory workers, rose 0.1 percent in January after a similar decrease in December. Increases in the index for transportation and public utilities and the services industries were offset by a sharp decline in earnings in the construction industry. Over the past 12 months, this measure of wage change has risen 2.0 percent for the private nonfarm economy and 1.6 percent in manufacturing. Auto sales Sales of new cars fell sharply in January after a tax-related surge in December. Total auto sales declined from a 13.2 million unit rate in December to an 8.3 million unit rate in January. reported for both domestic and foreign makes. Sharp decreases were In addition, sales of light-duty trucks, many of which are for personal use, dropped 25 percent in January to a 3 million unit annual rate. THE FINANCIAL ECONOMY Consumer credit Consumer installment credit outstanding was virtually unchanged in December, after a 6.7 percent rise in November. For 1986 as a whole, outstanding installment credit rose 11.2 percent, off from the 18.0 percent advance in 1985 and the smallest yearly gain since the 4 percent increase in 1982. Revolving credit and "other" lending both declined in December--mainly at banks and finance companies. The falloff may reflect substitution of home equity-type loans for more traditional types of consumer lending, which face curtailment of interest deductibility under the Tax Reform Act. (Home equity and second mortgage loans are classified as real estate loans regardless of purpose or means of access.) Automobile credit rose at a 3.5 percent annual rate in December-a bit more rapidly than in November but still well below the pace a few months earlier. Auto sales were up significantly in December as consumers rushed to take advantage of sales tax deductions. However, the fact that many sales occurred late in the month suggests that reported auto credit at finance companies may be up in January. CHANGES IN EMPLOYMENT 1 (Thousands of employees; based on seasonally adjusted data) 1986 1985 1986 Q3 1986 Q4 Nov. 1987 Jan. Dec. --Average monthly changes-Nonfarm payroll employment 2 Strike adjusted Manufacturing Durable Nondurable Construction Trade Finance and services Total government Private nonfarm production workers Manufacturing production workers 230 229 -18 -16 -2 21 65 122 38 199 199 -9 -15 6 18 52 120 25 239 194 -10 -12 2 21 50 107 31 244 242 26 5 21 -4 43 116 50 242 240 38 16 22 -8 49 112 20 225 216 27 4 23 4 -3 156 35 448 457 3 -14 17 142 185 139 -14 159 144 173 166 222 163 356 -18 -4 -6 30 46 31 8 Total employment 3 Nonagricultural 162 182 1 74e 125 132 217 210 240 187 205 259 374 390 1 74e 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. e--Adjusted by Board staff to eliminate distortions caused by the introduction of revised population estimates. SELECTED UNEMPLOYMENT RATES (Percent; based on seasonally adjusted data) 1986 1986 Nov. Dec. 1987 Jan. 1985 1986 Q3 7.2 7.0 6.9 6.9 Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 18.6 11.1 5.3 5.9 18.3 10.7 5.4 5.5 18.1 10.7 5.4 5.4 17.8 10.5 5.4 5.3 White Black 6.2 15.1 6.0 14.5 6.0 14.5 6.0 14.1 6.0 14.2 5.8 13.7 5.9 14.3 6.8 6.6 6.5 6.5 6.6 6.3 6.4 7.1 6.9 6.8 6.7 6.8 6.6 6.6 Civilian, 16 years and older Fulltime workers Memo: Total national1 1. Includes resident Armed Forces as employed. Q4 6.9 6.7 18.2 10.2 5.5 5.5 17.3 10.7 5.2 5.2 6.7 17.7 10.7 5.4 5.1 HOURLY EARNINGS INDEX1 (Percentage change; based on seasonally adjusted data) 1986 1985 1986 Q3 -Annual Total private nonfarm Manufacturing Durable Nondurable Contract construction Transportation and public utilities Finance, insurance, and real estate Total trade Services Q4 rate-- 2 1986 Nov. Dec. 1987 Jan. --Monthly rate-- 3.0 2.1 1.2 2.9 .5 -.1 .1 3.3 3.4 3.1 1.4 1.7 1.5 2.3 1.9 1.2 .5 2.5 .1 1.1 .6 1.9 6.6 .1 .1 .0 .9 .3 .2 .4 .0 -.1 -.1 -.1 -1.1 3.0 1.6 .9 1.6 .2 .0 .3 4.2 2.0 4.1 4.5 1.7 3.0 .5 2.0 1.0 5.8 2.8 4.3 1.8 .5 .8 -.7 -.1 -.5 1.3 -.1 .6 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 ch nges are compounded annual rates. Auto and Light-Duty Truck Sales (s.a.a.r.) (millions of units) -1987Sept. Oct. Nov. Dec. Jan.1 Domestic Foreign 11.807 3.782 6.974 3.276 6.879 3.590 9.125 4.121 5.811 2.464 Total autos 15.589 10.250 10.469 13.246 8.275 4.974 3.375 3.133 Light-duty trucks (domestic) 3.990(r) 2.954 1. The data for the current month are based on preliminary data and include some imported trucks sold by domestic truck dealers. In 1986, these "captive" imports amounted to 83,474 units. P--preliminary R--revised Foreign Car Sales (s.a.a.r.) (million of units) -1987Sept. Oct. Nov. Dec.(r) Jan.(p) Japanese cars 2.738 2.252 2.599 3.003 1.484 European and other cars 1 1.044 1.024 .991 1.118 .980 3.782 3.276 3.590 4.121 2.464 Total 1. Includes Korean cars. P-preliminary R--revised CONSUMER INSTALLMENT CREDIT (Seasonally adjusted) 1 Percent change (at annual rate) 1986 1986 Nov.rJ Dec. I Q4 Q3 Memo: Outstandings Net change (billions of dollars) (billions of dollars) 1985 1986 1986 Dec. Dec.P Dec.P Nov.r Totall 11.8 7.3 6.7 .2 3.28 .11 594.9 535.1 Selected types Auto Revolving All other 24.6 4.1 3.1 9.3 6.0 5.7 2.7 15.0 6.2 3.5 -1.7 -2.2 .55 1.58 1.16 .70 -. 18 -. 42 241.8 127.9 225.2 206.5 118.3 210.3 5.7 28.5 11.5 6.8 2.3 11.1 13.5 -5.3 8.8 -4.8 -6.9 12.9 2.87 -.64 .60 -1.03 -.84 .89 257.7 145.4 84.0 240.8 120.1 75.1 6.5 15.1 8.0 15.5 .42 .81 63.6 55.5 3.5 5.8 9.4 -2.0 2.74 -. 60 353.1 328.6 Selected holders1 mercial banks t'nance companies 'Credit unions Savings institutions 2 Memorandum: Total, ex. auto 1. Includes items not shown separately. 2. Savings and loans, mutual savings banks, and federal savings banks. p-pr e liminary. r--revised. MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) to 1986: 04 ---1. 2. 3. 15.3 9.1 8.9 Ml M2 M3 1 1986 HI H2 Nov. Dec. February 1987 Jan.Pe 6, 1987 Growth from 04 1986 to e Jan. 1987P Percentage change at annual rates---11.9 7.5 8.4 17.6 10.3 9.0 21.0 7.1 6.1 28.4 9.7 9.2 9 7 9 18-3/4 8-1/2 Levels in billions of dollars Dec. 1986 Selected components 4. Currency 5. Demand deposits 6. Other checkable deposits 7. M2 minus M12 8. 9. 10. 11. 12. 13. 14. 15. Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, 3 plus MMDAs, NSA Small time deposits Thrift institutions Savings deposits, SA, 3 plus MMIAs, NSA Small time deposits M3 minus M24 Large time deposits 5 At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA 7.0 7.6 6.6 8.6 17 183.5 9.2 13.6 21.3 38.2 -17 307.9 28.5 20.9 32.7 32.7 33.4 232.7 7.1 6.1 7.9 2.4 3.2 2073.6 13.2 2.1 24.1 -20.2 -1.6 75.7 17.2 6.5 19.5 6.5 13.6 6.2 1.2 5.7 2.3 8.2 207.5 895.5 15.9 -4.7 5.1 11.1 1.1 5.9 19.6 -10.4 4.2 16.4 -3.6 1.9 532.7 362.8 898.2 13.0 -0.6 7.6 4.7 17.7 -5.8 17.4 -7.5 10.1 -5.1 16 -6 409.3 488.8 8.1 12.0 3.9 2.1 7.2 15 684.6 2.4 1.6 3.6 6.8 4.6 10.6 -2.1 -1.3 -3.2 -0.3 9.0 -16.1 3.8 10.2 -7.4 444.2 283.4 160.8 31.5 27.3 4.8 34.3 34.0 6.7 24.5 17.6 2.2 -1.4 61.7 25.8 -4.3 -10.3 53.5 84.1 81.1 84.3 7.4 18.6 -12.4 3.5 -- Average monthly change in billions of dollars -MEMORANDA: at commercial Managed liabilities 23. banks (24+25) Large time deposits, gross 24. Nondeposit funds 25. Net due to related foreign 26. institutions, NSA 6 Other 27. 1.8 0.5 1.3 1.1 0.4 0.7 2.5 0.7 1.8 3.8 1.1 2.7 0.5 0.7 0.2 0.5 0.8 1.0 5.5 -2.8 487.3 344.0 143.3 2.8 -2.5 -19.7 163.0 -33 -223 goverment deposits at commercial 23.2 -2 7 -3.3 13.3 0.8 0.2 0.5 banks under memoranda are shown amounts Dollar basis. 1. Semi-annual growth rates are computed on a quarterly average calculated on an end-month-of-quarter basis. 2. Nontransactions M2 is seasonally adjusted as a whole. market deposit accounts (MMDAs), not sea3. Growth rates are for savings deposits, seasonally adjusted, plus money during December 1986 and January 1987 at increased MMDAs excluding Commercial bank savings deposits sonally adjusted. deposits excluding MDAs increased rates of 33.5 percent and 41 percent, respectively. At thrift institutions, savings respectively. percent, 29 and percent 22.0 of rates at 1987 January and 1986 during December 4. The non-M2 component of M3 is seasonally adjusted as a whole. institutions. Net of large-denomination time deposits held by money market mutual funds and thrift funds purchased, securities sold Consists of borrowings from other than commercial banks in the form of federal borrowings from the Federal ler agreements to repurchase, and other liabilities for borrowed money (including estimated. partially are Data items). minor other and RPs loan banks, foreign erve and unaffiliated 7. Consists of Treasury demand deposits and note balances at commercial banks. pe--preliminary estimate 28. U.S. 9 COMMERCLAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data) 1986 02 03 04 Nov. Dec. 1 1987 Jan.p February 6, 1987 Levels in bil. of dollars Januaryp Commercial Bank Credit ------------------ 1. 2. Total loans and securities at banks Securities 3. U.S. 4. Other securities 5. government securities Total loans 3.9 13.5 9.5 8.9 17.4 22.1 2117.0 4.9 31.9 6.0 7.9 7.0 -5.4 500.2 7.9 28.4 20.4 20.8 16.9 6.2 310.7 0.7 37.3 -14.5 -11.6 -24.2 189.5 3.6 7.8 10.6 9.2 20.7 30.8 1616.7 38.5 38.0 554.0 45.0 38.7 -8.6 6. Business loans 2.0 2.8 19.4 14.5 7. Security loans -62.7 17.9 -64.0 18.2 8. Real estate loans 13.3 13.6 17.1 14.8 24.7 35.3 500.7 9. Consumer loans 6.7 5.6 5.6 5.0 7.7 10.3 315.8 -1.6 9.2 -12.4 5.9 30.1 207.5 10. Other loans -2.2 -83.8 ------ Short- and Intermediate-Term Business Credit 11. Business loans net of bankers acceptances Loans at foreign branches 13. 2.7 19.9 -21.5 9.1 -28.9 0.2 2.9 18.2 -10.3 10.6 -7.0 Sum of lines 11 & 12 14. Commercial paper issued by 3 nonfinancial firms 15. Sums of lines 13 & 14 16. Bankers acceptances: 4, 5 related 17. 1.0 2 U.S. 39.6 -61.4 37.9 548.9 -86.2 15.5 36.3 34.1 564.4 -40.0 -48.6 80.6 23.3 645.8 -1.3 4.0 14.7 11.7 25.4 16.3 3.6 -27.7 -36.1 -37.3 n.a. -0.3 3.9 12.5 9.3 22.3 n.a. 664.0 (Dec) 3.8 -2.5 13.7 24.4 16.4 n.a. 162.9 (Dec) 0.5 2.6 12.7 12.2 21.1 trade Line 15 plus bankers acceptances: U.S. trade related 18. Finance company loans to business 19. Total short- and intermediateterm business credit (sum of lines 17 & 18) 4 31.2 (Dec) 826.8 (Dec) n.a.--not available. p--preliminary 1. Average of Wednesdays foreign-related institutions. for domestically chartered banks and average of current and preceding ends of months for 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. Consists of acceptances that finance U.S. imports, U.S. exports and domestic shipment and storage of goods. III-T-1 SELECTED FINANCIAL MARKET QUOTATIONS 1/ (percent) 1986 1985 1984 1987 Change fr : ,C MPC Dec 16 JUmE Mr.- 8.58 6.90 6.14 6.22 -0.68 10.09 10.67 8.80 6.52 6.57 6.62 5.58 5.58 5.56 5.63 -0.89 5.62 -0.95 5.60 -1.02 0.05 0.04 0.04 11.42 11.35 8.94 9.12 6.87 6.81 6.36 6.08 5.97 -0.90 5.90 -0.91 Large rgotiable CD's 3/ 11.52 1-month 3 nth 11.79 b-~th 12.30 8.89 9.29 9.92 6.88 6.91 6.97 6.28 6.02 5.96 5.99 -0.89 5.97 -O.R -0.29 -0.05 Erodollar deposits 4/ 1-month 3-month 11.89 12.20 8.80 9.50 7.01 7.01 6.36 6.16 6.11 -0.90 6.14 -0.8 -0.25 -0.02 Bank prime rate 13.00 10.50 8.50 7.50 7.50 -1.00 13.49 13. 1. 11.22 12.02 11.97 7.86 8.39 6.50 -1.36 0.06 7.93 6.44 7.12 7.39 11.44 10.25 8.57 7.31 6.98 -1.59 -0.33 Reoently offeed 15.30 13.23 9.70 9.03 8.85 -0.85 -0.18 e mrtgage rates 6/ S&L fed-rate S&L ARM, 1-yr. 14.68 12.31 13.9 11.14 10.76 .65 9.3 7.63 9.12 -1.64 7.58 -1.07 -0.18 -0.05 1986 1986 1987 Peroent change frc: tfarcy Short-ter~ hig-s 11.63 highs Dec 16 Feb 5 hihs rate Federal funds 2/ reasury bills 3/ 3- _ighs th b-nth 1-year 10.77 11.13 9.13 9.2-. Camercial paper 1-ornth 3-month 5.97 -1.00 0.01 Intermediate- and lorg-term rates U.S. Teasury (oonstant mturity) 3-year 10-year 30-year Haiicipal revenue r/ (Bond Buyer index Corporate-A utility 1984 Las 1985 arch Highs lows 7.20 7.47 -0.4 F C Dec 16 Feb 5 1986 highs 0.08 0.08 FOC Dec 16 Stock prioes DowJones Industrial 1086.57 85.13 NYSE Ccposite 187.16 te AIM NASDAQ (C) 225.30 1247.35 1 .57 1 .16 2201.49 12.58 10.02 145.75 12.87 160. 102. 10.45 .1 263.77 314. 222.28 276.18 411.16 353.77 405.70 -1.33 13.70 12.24 19. 14.68 4/ Averages for statement week closest to date shown. closest to date shown. Last observation is the average to date / hursday quotes. 6/ Friday quotes. fbr the maintenanoe period ending February 11, 1987. -- estinate 3/ Secondary aricet. 1/ One-day quotes exoept as noted. 2/ Averages fbr two-week reserve maintenanoe period 

Federal Reserve (1987, February 10). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19870211_part3

@misc{wtfs_greenbook_19870211_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1987},
  month = {Feb},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19870211_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}