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 2, 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 THE DOMESTIC NONFINANCIAL ECONOMY Page Employment and unemployment in June . ............. 1 Tables Changes in employment . . . . . . . . . . . . . . . . ... 3 4 Hourly earnings index . . . . . . . . . . . . . . . .... . .. THE FINANCIAL ECONOMY Monetary aggregates and bank credit in June . . . . . . . . .. 5 Tables Monetary aggregates .... . . . . . . . . . . . . ... . 6 . 7 . ........... 8 Commercial bank credit and short- and intermediateterm business credit ................. Selected financial market quotations SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Employment and Unemployment in June Nonfarm employment, as measured by the establishment survey, grew 116,000 after a downward-revised increase of 74,000 in May. 1 Employment in the service-producing sector, which only rose about 100,000 in June, has slowed considerably from the pace in the first part of the year. In June, almost half of the job pickup in the service-producing sector occurred at state and local governments, where 46,000 new jobs were added; a pickup of 47,000 in the services industry, and small gains in finance, insurance, and real estate, and retail trade accounted for the balance of the growth. Employment gains in the goods-producing industry were lackluster as manufacturing employment rose only 4,000; outside of manufacturing, construction employment increased 13,000 and mining fell slightly. Employment, as measured by the household survey, fell 190,000, but the labor force dropped nearly half a million. As a result, the civilian unemployment rate declined 0.2 percentage points to 6.1 percent. More than two-thirds of the drop in unemployment was the result of fewer young people than normal entering the labor force as of the early June survey week. The jobless rate for teenagers, a particularly volatile series, dropped almost 2 percentage points. Unemployment also declined among adult women, with their rate edging down 0.2 percentage points to 5.2 percent. The unemploy- ment rate for adult men remained unchanged in June. 1. The downward revision of 60,000 jobs to the May figure was more than accounted for by the service-producing sector which was revised down 68,000. The services industry was revised down 25,000, government 22,000 and retail trade 16,000. -2- Wage rates, as measured by the hourly earnings index for production and nonsupervisory workers, increased 0.2 percent after remaining flat in May. The small pickup in wages was widespread across industries. Over the past 12 months, the hourly earnings index has risen 2.3 percent for the private nonfarm economy and 1.5 percent in manufacturing. -3CHANGES IN EMPLOYMENT 1 (Thousands of employees; based on seasonally adjusted data) 1985 1987 Q1 1986 Q4 1986 1987 Q2 Apr. 1987 May June -- Average monthly changesNonfarm payroll employment 2 Manufacturing Durable Nondurable Construction Trade Finance and services Total government Private nonfarm production workers Manufacturing production workers Total employment 3 Nonagricultural 254 8 0 8 32 57 124 18 153 11 2 9 -8 31 87 22 269 16 -1 17 -13 67 116 61 106 199 94 156 44 83 -7 18 6 19 14 14 29 174 e 174 e 217 210 244 203 296 332 467 461 612 567 -190 -33 213 -30 -22 -8 20 60 130 34 159 -14 -17 152 105 -27 162 182 4 13 31 110 30 1. Average change from final month of preceding period to final month of period indicated. Strike-adjusted data noted. 2. Survey of establishments. 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) 1985 1986 1986 Q4 1987 Q1 1987 Q2 Civilian, 16 years and older 7.2 7.0 6.9 6.7 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 17.8 10.5 5.4 5.3 White Black 6.2 15.1 6.0 14.5 6.8 7.1 Fulltime workers Memo: Total national1 Apr. 1987 May June 6.2 6.3 6.3 6.1 17.9 10.4 5.2 5.1 17.0 10.1 4.8 4.6 17.4 10.1 4.8 4.7 17.7 9.8 4.9 4.7 15.9 10.2 4.7 4.4 6.0 14.1 5.7 14.2 5.3 13.2 5.4 13.0 5.3 13.8 5.2 12.7 6.6 6.5 6.3 5.9 5.9 5.9 5.9 6.9 6.7 6.6 6.1 6.2 6.2 6.0 1. Includes resident Armed Forces as employed. -4- HOURLY EARNINGS INDEX 1 (Percentage change; based on seasonally adjusted data) 2 1986 1986 Q4 1987 Q1 Q2 --Annual rateTotal private nonfarm Manufacturing Durable Nondurable Contract construction Transportation and public utilities Finance, insurance, and real estate Total trade Services Apr. 1987 May June --Monthly rate- 2.3 3.3 2.1 2.6 ,3 .1 .2 1.7 1.3 2.3 2.2 1.4 .9 2.3 6.1 1.5 .3 3.5 -2.7 2.1 2.1 2.1 3.4 .4 .5 .3 .0 -.4 -.1 -.9 .3 .2 .3 .2 .4 2.8 3.6 3.2 4.1 .3 .4 .4 4.4 1.8 3.1 6.3 2.9 4.7 9.7 .7 4.2 .5 2.4 3.3 -.2 .4 .2 .1 .3 .2 -. 1 -. 1 .3 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. -5- THE FINANCIAL ECONOMY Monetary Aggregates and Bank Credit in June Latest data indicate that growth in the monetary aggregates during June was weaker than estimates presented in the Greenbook. M1 is now esti- mated to have contracted at a 10 percent annual rate in June, with particular weakness in demand deposits. Estimated growth of M2 in June has been reduced to a 1 percent rate, owing to downward revisions in both M1 and the nontransactions component of M2. Downward revisions to savings deposits, overnight RPs and Eurodollars, and MMDAs more than offset an upward revision in small time deposits. M2 growth from the fourth quarter of 1986 to June is now placed at 4 percent. Slower growth in M2 was the principal contri- butor to a downward revision in M3 growth in June to 6 percent. This change leaves M3 at about the low end of its target range. Bank credit data for June also have been revised downward. Total loans and investments are now estimated to have expanded at an annual rate of 4 percent. The major revisions among components of bank credit include securities holdings, now estimated to have declined at a 2-1/2 percent annual rate last month, and consumer loans, which now appear to have contracted slightly. (Based -6MONETARY AGGREGATES on seasonally adjusted data unless otherwise noted)1 1985:Q4 to 1986:04 ---- 1. 2. 3. M1 M2 M3 15.3 8.9 8.8 01 02Pe 1987 Apr. May July 2, JunePe 1987 Growth from Q4 1986 to June 1987Pe Percentage change at annual rates ---13.1 6.3 6.4 6-1/2 2-1/2 4-1/4 17.7 6.0 5.9 7-3/4 4 5-1/2 4.5 0.6 4.9 Levels in billions of dollars May 1987 Selected components 7.5 10.1 6-1/2 7.7 8.3 6 Demand deposits 11.6 2.5 1/4 18.8 0.0 -25 304.0 6. Other checkable deposits 28.5 29.7 14-1/4 24.9 7.2 -3 252.3 7. M2 minus M12 6.9 3.9 1-1/4 2.0 -0.8 5 14.7 10.9 -23-3/4 -3.2 -20.8 -16 17.3 6.8 6.2 6.0 1-1/4 -1-1/4 1.1 -1.9 -8.5 -6.2 5 4 210.3 900.4 16.0 -4.2 4.3 13.4 -4.9 3.9 1 -4-1/2 5-1/2 2.4 -8.3 5.3 -9.4 -1.3 2.8 0 10 7 543.3 357.1 911.9 12.0 -1.2 14.3 -4.6 10.0 1.2 4.5 1.2 1 12 425.4 486.5 8.3 6.8 5.3 22.6 23 715.6 3.0 2.7 3.4 2.9 9.7 -9.7 9-1/2 18-1/2 -8-1/2 12.0 13.2 15 27.7 -19.1 18.4 2.4 19 8 459.6 310.6 149.0 30.3 28.3 2.7 0.9 14.4 38.1 -11-1/2 55-1/2 10 -25.4 86.2 -47.1 4. Currency 5. 8. 9. 10. 11. 12. 13. 14. 15. 16. 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 MMDAs, NSA Small time deposits M3 minus M24 Large time deposits At commercial banks, net 5 At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA -MEMORANDA: 23. Managed liabilities at commercial banks (24+25) 24. Large time deposits, gross 25. Nondeposit funds 26. Net due to related foreign institutions, NSA 6 Other 27. 9-3/4 1-3/4 11 Average monthly change in 2.0 0.6 1.4 8.4 2.8 5.6 5-1/4 6-1/4 -1 0.6 0.8 4.4 1.2 -2 1 -18.8 190.2 2086.7 73.8 81.8 96.3 89.8 69.9 57.4 billions of dollars -- 2.1 5.7 -3.6 14.2 6.4 7.8 -6 532.1 366.2 165.9 -3.6 0.0 10.1 -2.3 -4 -2 0.5 165.4 1 7 U.S. government deposits at commercial 7 banks 0.4 -1.2 3-1/2 3.0 5.5 2 26.1 1. Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. 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 1987 at rates of 16.0 percent and 7 percent, respectively. At thrift institutions, savings deposits excluding MMDAs increased during May and June 1987 at rates of 17.5 percent and 13 percent, respectively. 4. The non-M2 component of M3 is seasonally adjusted as a whole. 5. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 28. 6. 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. 7. Consists of Treasury demand deposits and note balances at commercial banks. pe--preliminary estimate -7COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT 1 (Percentage changes at annual rates, based on seasonally adjusted data) 1986 Q4 Q1 ------- 1. 2. Total loans and securities at banks U.S. 4. Other securities 5. goverment securities Business loans 7. Security loans 8. Real estate loans 9. Consumer loans 10. 2 11.9 7.4 6.0 2.4 5.3 7.5 11.2 20.2 5.7 3.8 5.7 16.3 -10.5 317.3 -14.5 -2.8 7.8 10.4 2.4 10.3 199.3 9.1 8.4 8.6 13.3 6.3 6.1 1651.2 18.5 7.6 4.2 4.8 4.1 3.5 557.4 -39.3 -3.1 36.6 166.1 -44.0 -5.7 41.8 16.3 17.9 19.1 16.1 19.6 20.7 536.9 5.3 2.1 1.3 3.8 0.4 -0.4 315.1 -20.5 0.0 0.6 15.6 -1.1 --- 11. Business loans net of bankers acceptances 3 12. Loans at foreign branches 13. Sum of lines 11 & 12 14. Commercial paper issued by nonfinancial firms 15. Sums of lines 13 & 14 16. Bankers acceptances: related4 ,5 17. 3.9 2167.7 -2.5 516.6 -11.9 200.0 - Short- and Intermediate-Term Business Credit - 18.8 8.1 -27.3 -2.4 -19.6 17.2 7.9 2.8 -19.1 -13.0 17.6 12.3 3.3 3.4 3.1 551.5 -22.8 15.4 1.1 2.5 567.1 28.6 -16.2 80.5 647.6 -71.4 - 5.3 4.6 9.0 4.5 0.2 2.5 n.a. 33.9 11.0 n.a. 33.1 (May) 10.8 5.1 n.a. 10.4 4.8 n.a. 680.7 (May) 11.2 14.7 n.a. 16.8 n.a. n.a. 180.8 (Apr) 10.9 7.0 n.a. 11.7 n.a. n.a. 858.8 (Apr) U.S. trade -16.9 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) Commercial Bank Credit ------------ 7.8 2 Other loans JuneP 7.0 Total loans 6. May 1987 Levels in bil. of dollars JuneP 8.4 Securities 3. Q2P 1987 Apr. July 2, 4 n.a.--not available. p--preliminary. 1. Average of Wednesdays. 2. June growth rates for real estate and consumer loans are adjusted for series breaks caused by earlier reporting errors for home equity loans. 3. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 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. -8SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) Change from: FOMC FOMC Mar. 31 May 19 June highs Oct. lows FOMC Mar. 31 1987 FOMC May 19 Federal funds 2 6.90 5.75 6.11 6.78 6.70 .59 -.08 Treasury bills 3 3-month 6-month 1-year 6.52 6.57 6.62 5.04 5.05 5.25 5.61 5.74 5.78 5.78 6.27 6.80 5.64 5.81 6.22 .03 .07 .44 -.14 -.46 -.58 Commercial paper 1-month 3-month 6.87 6.81 5.64 5.60 6.39 6.31 6.95 7.07 6.80 6.86 .41 .55 -.15 -.21 Large negotiable CDs 3 1-month 3-month 6-month 6.88 6.91 6.97 5.59 5.57 5.57 6.30 6.30 6.31 6.97 7.15 7.41 6.80 6.87 7.03 .50 .57 .72 -. 17 -.28 -.38 Eurodollar deposits 4 1-month 3-month 7.01 7.01 5.79 5.79 6.38 6.36 6.81 7.10 7.01 7.08 .63 .72 .20 -.02 Bank prime rate 8.50 7.50 7.50 8.25 8.25 .75 U.S. Treasury (constant maturity) 3-year 6.41 7.86 10-year 8.39 7.28 30-year 7.93 7.53 6.79 7.51 7.81 8.27 8.89 9.06 7.72 8.36 8.49 .93 .85 .68 -. 55 -.53 -.57 Municipal revenue 5 (Bond Buyer index) 8.57 7.30 7.11 8.20 8.16 1.05 -.04 Corporate--A utility Recently offered 9.70 9.32 9.05 10.26e 10.Ole .96 -. 25 10.76 8.65 9.89 7.98 9.07 7.53 1.28 .35 -.13 .01 1986 Jul. 1 Short-term rates Intermediate- and long-term rates Home mortgage rates 6 S&L fixed-rate S&L ARM, 1-yr. 1986 Highs Stock prices 1955.57 Dow-Jones Industrial 145.75 NYSE Composite 285.19 AMEX Composite NASDAQ (OTC) 411.16 1. One-day quotes except as noted. March highs 10.48 10.35 7.87 7.88 1987 FOMC Jul. 1 May 19 Percent change from: FOMC March May 19 highs 8.49 1.57 2409.76 2221.28 7.97 157.93 170.52 -.33 3.95 -.41 337.91 325.07 408.15 424.46 -3.45 4.00 4. Averages for statement week closest to date shown. 2. Averages for two-week reserve maintenance period 5. One-day quotes for preceding Thursday. closest to date shown. Last observation is the 6. One-day quotes for preceding Friday. average for the maintenance period ending e--estimate July 1, 1987. 3. Secondary market. 2372.59 171.08 339.31 439.64 

Federal Reserve (1987, July 6). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19870707_part1

@misc{wtfs_greenbook_19870707_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1987},
  month = {Jul},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19870707_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}