Greenbook/Tealbook

Prefatory Note The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. Content last modified 02/07/2013. Class III FOMC - Internal (FR) May 4, 2007 CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System Contents The Domestic Nonfinancial Economy ........................................................ 1 Labor Market Developments ...........................................................1 Tables Changes in Employment ..................................................................2 Selected Unemployment and Labor Force Participation Rates .......3 Charts Changes in Private Payroll Employment .........................................2 Aggregate Hours and Workweek of Production or Nonsupervisory Workers ...........................................................2 Labor Force Participation Rate and Unemployment Rate ...............3 Job Losers Unemployed Less than 5 weeks ....................................3 Unemployed Due to Job Loss ..........................................................3 Labor Market Indicators ..................................................................4 The Domestic Financial Economy .............................................................. 1 Tables Commercial Bank Credit .................................................................5 Selected Financial Market Quotations .............................................6 Supplemental Notes The Domestic Nonfinancial Economy Labor Market Developments The employment report for April provides further evidence that labor market demand has moderated over the past several months. Private nonfarm payrolls rose 63,000 last month from February and March levels that were slightly lower than originally estimated. The three-month moving average of the change in private payrolls was 92,000 in April, down from 181,000 in the three months ending in January. The construction industry shed 11,000 jobs in April, with sectors associated with both residential and nonresidential construction posting small losses. Manufacturing employment fell 19,000 last month, similar to declines in recent months, with about half the decrease occurring among motor vehicle and parts manufacturers. Retailers eliminated 26,000 jobs last month primarily as a result of cutbacks at general merchandise stores, which had seen large gains in March. Employment also declined, on balance, in the financial activities industry—with at least half the loss occurring in real estate credit. Most other industries added jobs in line with their recent trends in April, while health-care providers added an above-average number of jobs. Average weekly hours of production or nonsupervisory workers ticked down 0.1 hour to 33.8 hours in April. The aggregate hours of production or nonsupervisory workers declined 0.4 percent last month, partially unwinding the outsized increase in March. After incorporating the revised information on hours worked in the first quarter, we now estimate that productivity in the nonfarm business sector rose at an annual rate of close to 2 percent last quarter. Average hourly earnings of production or nonsupervisory workers on private nonfarm payrolls rose 0.2 percent in April following a slightly larger increase in March. For the twelve months ending in April, average hourly earnings rose 3.7 percent, compared with an increase of 3.8 percent over the previous twelve months. In the household survey, the unemployment rate edged up to 4.5 percent last month—in the middle of the narrow range it has occupied since September. The labor force participation rate dipped to 66.0 percent. The Domestic Financial Economy (Tables attached) -1- Changes in Employment (Thousands of employees; seasonally adjusted) 2006 Measure and sector 2006 Q3 2007 Q4 Q1 Feb. Average monthly change Nonfarm payroll employment (establishment survey) Private Natural resources and mining Manufacturing Construction Wholesale trade Retail trade Transportation and utilities Information Financial activities Professional and business services Temporary help services Nonbusiness services1 Total government Total employment (household survey) Memo: Aggregate hours of private production workers (percent change)2 Average workweek (hours)3 Manufacturing (hours) Mar. Apr. Monthly change 189 169 5 -7 11 11 -3 9 2 16 42 -1 83 20 262 202 166 3 -11 11 9 -2 8 1 20 32 -4 94 36 173 177 164 4 -25 -14 12 11 11 7 10 52 6 96 13 340 143 116 3 -12 2 3 25 2 3 3 18 -4 70 27 109 90 56 5 -17 -77 11 7 -3 13 6 36 -13 75 34 -38 177 157 4 -18 50 3 33 4 -3 0 6 -1 78 20 335 88 63 2 -19 -11 13 -26 1 3 -11 24 -6 88 25 -468 2.5 33.8 41.1 1.4 33.8 41.3 2.0 33.9 41.1 1.1 33.8 41.0 -.3 33.7 40.9 .8 33.9 41.2 -.4 33.8 41.1 1. Nonbusiness services comprises education and health, leisure and hospitality, and "other." 2. Establishment survey. Annual data are percent changes from Q4 to Q4. Quarterly data are percent changes from preceding quarter at an annual rate. Monthly data are percent changes from preceding month. 3. Establishment survey. Changes in Private Payroll Employment Aggregate Hours and Workweek of Production or Nonsupervisory Workers Thousands 400 400 Hours 35.0 2002 = 100 108 3-month moving average 300 300 200 200 100 34.5 100 0 -100 34.0 -200 -300 -300 1999 2000 2001 2002 2003 2004 2005 2006 2007 -400 102 100 -100 -200 -400 104 Apr. Apr. 0 106 Aggregate hours (right scale) 98 33.5 Workweek (left scale) 96 94 33.0 -2- 1999 2000 2001 2002 2003 2004 2005 2006 2007 92 Selected Unemployment and Labor Force Participation Rates (Percent; seasonally adjusted) 2006 Rate and group 2007 2006 Q3 Q4 Q1 Feb. Mar. Apr. Civilian unemployment rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 4.6 15.4 8.2 3.5 3.7 4.7 16.1 8.3 3.5 3.8 4.5 15.1 8.3 3.3 3.5 4.5 14.8 7.7 3.6 3.5 4.5 14.9 7.4 3.7 3.5 4.4 14.5 7.6 3.5 3.4 4.5 15.3 7.8 3.5 3.5 Labor force participation rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 66.2 43.6 74.6 75.5 59.6 66.2 43.5 74.9 75.4 59.9 66.3 43.4 75.0 75.7 59.8 66.2 42.2 75.1 75.7 59.6 66.2 42.2 74.8 75.7 59.6 66.2 41.6 75.3 75.7 59.6 66.0 41.6 74.3 75.6 59.4 Labor Force Participation Rate and Unemployment Rate Percent 67.6 67.4 Percent 7.0 6.5 Participation rate (left scale) 67.2 6.0 67.0 66.8 5.5 Unemployment rate (right scale) 66.6 5.0 66.4 4.5 66.2 66.0 4.0 Apr. 3.5 65.8 65.6 2000 2001 2002 Job Losers Unemployed Less Than 5 Weeks 1.4 (as a percent of household employment) 2003 2004 2005 2006 2007 3.0 Unemployed Due to Job Loss Percent 1.4 (as a percent of the labor force) 4.0 Percent 4.0 3.5 3.5 3.0 3.0 3-month moving average (thick line) 1.2 1.2 1.0 1.0 0.6 2.5 Apr. Apr. 0.8 2.5 2.0 2.0 1.5 1.5 0.8 2000 2001 2002 2003 2004 2005 2006 2007 0.6 1.0 -3- 2000 2001 2002 2003 2004 2005 2006 2007 1.0 Labor Market Indicators Layoffs Unemployment Insurance Millions 4.0 4-week moving average Layoff Announcements Thousands 550 Insured unemployment (left scale) 3.6 500 3.2 450 2.8 400 Apr. 21 Initial claims (right scale) 2.4 2.0 1.6 250 Thousands 250 200 200 150 150 100 Apr. 350 50 300 Apr. 28 1999 2000 2001 2002 2003 2004 2005 2006 2007 250 0 100 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 0 Note. Seasonally adjusted by FRB staff. Source. Challenger, Gray, and Christmas, Inc. Hiring Job Openings and Hires Net Hiring Plans 30 Percent 30 4.5 Percent of private employment 4.5 25 4.0 20 3.5 15 3.0 3.0 10 2.5 2.5 5 2.0 0 1.5 Manpower, Inc. 25 20 Q2 15 4.0 Hires Feb. 3.5 Mar. 10 5 0 Job openings National Federation of Independent Business (3-month moving average) 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note. Percent planning an increase in employment minus percent planning a reduction. 2.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 1.5 Source. Job Openings and Labor Turnover Survey. Labor Market Tightness Exhaustion Rate Job Availability and Hard-to-Fill Positions Percent 45 Index 150 Percent 50 50 3-month moving average 40 130 Job availability* (right scale) 35 45 45 40 40 110 Apr. 30 90 Mar. 25 20 70 Hard-to-fill** (left scale) 35 35 Mar. 50 30 15 30 10 10 1999 2000 2001 2002 2003 2004 2005 2006 2007 *Proportion of households believing jobs are plentiful, minus the proportion believing jobs are hard to get, plus 100. **Percent of small businesses surveyed with at least 1 "hard-to-fill" job opening. Source. For job availability, Conference Board; for hardto-fill, National Federation of Independent Business. 25 -4- 30 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note. The exhaustion rate is calculated as the number of individuals who were receiving unemployment insurance benefits but reached the end of their potential eligibility expressed as a percent of all individuals who began receiving such benefits 6 months earlier. 25 Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit Total Level,1 Apr. 2007 2005 2006 Q4 2006 Q1 2007 Mar. 2007 Apr. 2007 10.5 9.4 3.7 8.4 7.7 10.1 8,141 Loans2 Total To businesses Commercial and industrial Commercial real estate 11.6 10.6 7.1 9.5 4.4 11.6 6,113 13.2 16.9 16.4 13.5 10.1 7.0 6.3 9.0 7.9 8.9 9.4 10.5 1,196 1,481 To households Residential real estate Revolving home equity Other Consumer Originated3 Other4 12.0 13.3 11.5 3.1 .7 8.6 7.0 1.4 9.1 5.1 6.3 11.1 4.8 1.3 6.0 .3 4.7 14.6 10.1 2.9 12.6 6.9 7.6 15.8 -1.3 6.4 -3.8 -5.0 2.4 12.1 11.8 -3.2 16.9 10.6 2.0 17.0 1,817 454 1,363 745 1,142 873 7.6 .0 13.5 5.9 5.0 12.6 -6.0 -2.7 7.1 5.1 -.3 7.7 17.5 8.4 22.7 5.5 -24.5 45.8 2,028 1,188 1,033 Securities Total Treasury and agency Other5 Note. Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FIN 39 and FAS 115), the consolidation of certain variable interest entities (FIN 46), the adoption of fair value accounting (FAS 159), and the effects of sizable thrift-to-bank and bank-to-thrift structure activity in October 2006 and March 2007, respectively. Data also account for breaks caused by reclassifications. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks. 4. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables. 5. Includes private mortgage-backed securities, securities of corporations, state and local governments, foreign governments, and any trading account assets that are not Treasury or agency securities, including revaluation gains on derivative contracts. -5- III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2004 2006 Change to May 3 from selected dates (percentage points) 2007 Instrument June 28 June 29 Mar. 20 May 3 2004 June 28 2006 June 29 2007 Mar. 20 1.00 5.25 5.25 5.25 4.25 .00 .00 1.36 1.74 4.88 5.06 4.92 4.91 4.76 4.83 3.40 3.09 -.12 -.23 -.16 -.08 Commercial paper (A1/P1 rates)2 1-month 3-month 1.28 1.45 5.27 5.37 5.24 5.23 5.23 5.24 3.95 3.79 -.04 -.13 -.01 .01 Large negotiable CDs1 3-month 6-month 1.53 1.82 5.47 5.59 5.30 5.30 5.31 5.31 3.78 3.49 -.16 -.28 .01 .01 Eurodollar deposits3 1-month 3-month 1.29 1.51 5.33 5.49 5.32 5.34 5.32 5.35 4.03 3.84 -.01 -.14 .00 .01 Bank prime rate 4.00 8.25 8.25 8.25 4.25 .00 .00 Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year 2.88 3.97 4.90 5.26 5.15 5.28 4.64 4.45 4.64 4.74 4.56 4.74 1.86 .59 -.16 -.52 -.59 -.54 .10 .11 .10 U.S. Treasury indexed notes 5-year 10-year 1.56 2.25 2.49 2.61 2.03 2.19 2.10 2.27 .54 .02 -.39 -.34 .07 .08 Municipal general obligations (Bond Buyer)5 5.01 4.71 4.13 4.25 -.76 -.46 .12 Private instruments 10-year swap 10-year FNMA6 10-year AA7 10-year BBB7 10-year high yield7 5.21 5.38 5.60 6.25 8.41 5.81 5.59 6.20 6.74 8.74 5.08 4.93 5.56 6.01 8.11 5.22 5.03 5.64 6.12 7.96 .01 -.35 .04 -.13 -.45 -.59 -.56 -.56 -.62 -.78 .14 .10 .08 .11 -.15 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable 6.21 4.19 6.78 5.82 6.16 5.40 6.16 5.42 -.05 1.23 -.62 -.40 .00 .02 Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month Record high 2006 Change to May 3 from selected dates (percent) 2007 Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000 Level Date June 29 Mar. 20 May 3 Record high 2006 June 29 2007 Mar. 20 13,241 1,527 5,049 834 15,159 5-3-07 3-24-00 3-10-00 4-26-07 5-3-07 11,191 1,273 2,174 714 12,846 12,288 1,411 2,408 794 14,302 13,241 1,502 2,565 829 15,159 .00 -1.64 -49.18 -.59 .00 18.32 18.03 17.99 16.04 18.01 7.76 6.48 6.53 4.44 5.99 1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Most recent Thursday quote. 6. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 7. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: June 28, 2004, is the day before the most recent policy tightening began. June 29, 2006, is the day the most recent policy tightening ended. March 20, 2007, is the day before the most recent FOMC announcement. _______________________________________________________________________ -6-5- 

Federal Reserve (2007, May 8). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20070509_part2

@misc{wtfs_greenbook_20070509_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2007},
  month = {May},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20070509_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}