Regional President Speech

The Dome~ic Boooomic Outlook Cathy E. Minehan President and Chief Executive Officer Bank Federal Reserve of Boston Presented to K©ooedy School of Government Joint Center for Housing Studies September 30, 2003 01\rerview • GBf lf11JW/tll Bl Q~ will t.)1 qaite str0ng ~ C@~)D1J@ft dlwta mib9~ im; JiMlo/ and Amgwst ~ ]Ji1Jtltuldrillll ]P1tto81li@tm am«ll lmlif ~m@m.m seem to be t©Ge't.erioog ., H•JW manl 1i-,jhl1 p11w•r- DJJ reeent m0mentt1m? i-.•~ ~©} ~ts of D fK J:} 1 ~~iIDy, d@f©n~© spendmg, wtei@Si Ii~ -- Jf gJolNAi. p>emtiS~s, wJruoo w.iH if stimulate hiriu~? • hi ,- lllf qaffl i1mlln1te111entr. ill Jllb)(lr .-t~t ••llllllct -,- F l1Bt ttt lit• ffl (lbJft 1ttt 1110t0M~ 0mpt0ymiam -" Ct~ ~ al'txoJUrtt--- Ill! t11mw.flll @4f ··••* e~- • M(...,._XIC(IJl1(1111tl« fi'f•)f•)])11 a mtlidr ~ ~ BAlll II~~- ~ ~fltfdi1tj ltlMll.lll mti• -l\ith m]~ n• ~•• e1 ct - Jlilfltflct ... lll ad 1lD11~ t!I Sales have - Monthly Sales been boosted by & Quarterly Average incentives. ~ -~10 l /~ ✓ Vi~ - MBA Purchase Index • Spending on Residential Structures - 1-qtr. Growth in PDE Investment - Smoothed Growth in Orders for Nondefense Capital Goods - - - - - - - - - - - - - - - - - - - -1-qtr. Growth in Computers Spending - Smoothed Growth in Orders for Computers - • Mfg. Employment Growth Overall Index New Orders -Employment -New Export Orders ,"' \ (\ \ - Dow Jones Industrial Average -S&P 500 I I Up 8.8% since 1/2/03 I I Up 7.6% since 1/2/03 - IO-year A spread - I O-year BBB spread - IO-Year Junk spread (right scale) - Real Federal Funds Rate - Real Federal Funds Rate ~, •' t-Jl \ Real disposable i~ ,f%JuJ +_~ Real ,J~ consumptio spending - \ - - - . ' • ,. • Real income before ' taxes ■ Total federal spending rfffJ Forecast ■ Key Trading Partners ■ U.S. Is This Near-Term Growth Sustainable? Employment continues to decline during this recovery - ~ 'b4~ 1.08 ~~ 1.07 1.06 verage of The 0 postwar ~ 1.05 II "Jobless" recoveri• es ..c rn 5 ... 1.04 ..... or the >< Cl) -g 1.03 "Job-Loss" recovery? 1.02 1.01 'Jo'b' '~·, g'i~'owth '' 1 1111 111'" I'""'"'""'''""'""'' I"'"'"""'"''"""'"""""' I' I'''"'"""' I'''''' I"'''''''''''' 11'' '' '' '11' ''''I Ii''''''"' since Nov. 0.99 2001 0 5 10 15 20 Nonfarm payroll employment, indexed to beginning of recovery Heavy black line represents average of recessions Heavy red line represents current experience Shaded area shows range of outcomes across all business cycles 16 -Civilian Unemployment Rate Unemployment usually rising Unemployment usually stable Unemploym usually fallin -~f!;:tll~ /J.A-1.! "d.-(_ fl _, {Ju I tJ./ ~ - Productivity growth (left scale) ~ k>~,da(~· -CBO's Potential GDP growth(right scale) clt.Mfl.U'- ~ l\~M , ~di! 70/s- p 1w/4-,. r • qo W-- 9f.-6..1)) ~J)._u)J~ µ/I 1971:Ql 1977:Ql 1989:Ql 1995:Ql 2001:Ql -~,w~ '~nw, . = ~d:f~ ~ ·UH-JU~~~ Real GDP lessfa-AJ/! potential GDP ~ '/ALP· "Output Gap" (CBO estimate)...;~ Closing this gap requires sustained growth in excess of potential 1997:Ql 1999:Ql 2001:Ql 2003:Ql ~ ~a1JJi ·JJLI o3:;~ I Implies so~e progress op output gff,p Real GDP less potential GDP= "Output Gap" (CBO estimate) ----•••••••-•••••,r•••••·••••• Forecast ,,,,.,,, ,,,,., / 1997:Ql 1999:Ql 2001 :Ql 2003:QI - Core CPI inflation - Core PCE inflation Summary • Gofld news: - Si1ns of more sustained and vigorous recovery - Fis~a] ~timu]us; both spending and tax cuts - Olngoing monetary policy stimulus • Ri ks: -· Employm©nt still falling (bad for consumers, gna of weak business confidence) 3- • - C pit1tl sp!€nding may not last - Stat© rmd local sector will offset a part of f~1• ~i · m.~lu~ - Ris«~ m iJotlBltie>n: aee on dowH.~icl~

Cathy E. Minehan (2003, September 29). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20030930_cathy_e_minehan

@misc{wtfs_regional_speeche_20030930_cathy_e_minehan,
  author = {Cathy E. Minehan},
  title = {Regional President Speech},
  year = {2003},
  month = {Sep},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20030930_cathy_e_minehan},
  note = {Retrieved via When the Fed Speaks corpus}
}