Regional President Speech

•. I ///,·' ... ..> I' ..·. .. . r Cathy B. Minehan Executive President and Chief Officer Federal Reserve Bank of Boston Presented to Boston Security Analysts Society November 7, 2003 • GDP growth in Q] was quifre strong - Led by strong con~umption, <,Slp>·~~iatly 21Uiros and durable goods - Business and residential inv@,~iftnoot sttPobfg • This can't last - Strength driven by tax cuts, tow mortgage rates, auto incentives - "Sugar High?" - Fourth quarter growth will be slower • Whatabout2004? - Depends on business spending and hiring - Q3 encouraging on this front I( () I - : - Profits, productivity will support ongoing strength '°' .r.: C:J t/ - /1.. /o • The Jobless Recovery: Is It Turning Around? - Higher productivity hurts in short run - 2004 should see more vigorous job gltiowdt • J-qtr, Growth Rate 7, ;)_ ¾ fJ7JJ-ld - 4-qtr. Growth Rate fALul b: ;;;;;µ} - }µJi.411:il!IM - ,I ~{1/u( Jtu;~W M A.A,...,~-r- - Monthly Sales • Quarterly Average - Residential Spending (4-qtr . o,,o, chg.) -Existing Home Sales - MBA Refinancing Index ,, \ Real disposable income Real consumptio spending - \ , \ Real income I , before taxes ' \ ' , ' ■ Total federal spending ~ Forecast - Real Federal Funds Rate Conventional 30-year Contract Rate - Real GDP Growth - - Potential Growth ■ l-qtr. Growth in PDE Investment \ 1 \'l"j]Y {•\ d~D 1 )b I"') I S i 1[ ~ 1\-, l I f ~ f/ \ll ,lo I ~ - -- - -- - -- - -- - -- - -- - Orders for Non defense Capital Goods 12-month Growth Rate .. _ . I I ' I I\ \ I \ \ .., \,, '- l&-(o P/fJ- V 5 -S&P operating earnings li$-d-f-rwr,. ~'w - BEA after-tax profits w/ IVA and CCAdj ah!JU ~ - IO-year A yield - I O-year BBB yield - IO-Year Junk yield (right scale) - Dow Jones Industrial Average -S&P500 I I Up 13.6% since 1/2/03 j Up 12.4% since 1/2/03 j ■ Key Trading Partners - IP Growth, 6-month % chg. - ISM Composite Index But Employment Continues to Be an Issue Although We Have Had Three Months of Growth Now! - -- - - -- - 1.08 - - - - - - -- - - - - 1.07 - - -- -- - -- - -- 1.06 -- - The - -- -- verage of -- "Jobless" . 0 .- 1.05 - --- - postwar - II -- - - or the recoveries .c - - C) -- -::J 1.04 - - - "Job-Loss" 0 '- - -- -- x- - recovery? -- Q) - - "C 1.03 -- C - - -- - - - -- 1.02 -- = - - 1990-91 = -- - 1.01 &#45;&#45;&#45; - - recession - - - ······f - ···...................... ·············.................................................................................. ·························Job··"growth" 1 1111 1111111111111111111111111111111111111111111111111111111111111111111111111111 1111111111111111111111111111111111111111111111111111111111111111 ~ since Nov. L---L---~--------'------'---------"----=-2-001 0.99 0 5 10 Months 15 20 N onfarm payroll employment, indexed to beginning of recovery Heavy black line represents average of postwar recessions Heavy red line represents current experience Shaded area shows range of outcomes across all postwar business cycles Unemployment usually rising Unemployment usually stable l Unemployme usually fallin cklde s/Ic 6. .).. ,8l - ~ 9 ~ ~· · _ - Nonfann Productivity il~io"1h K,VN -,, ~'/:d; e,vJ A -el-( y;;;_J /J - 4-qtr Moving Average cJ~-7- w~aw£j) +u ~µ;:, M~ Forecast Real GDP less Economy healthy, potential GDP= producing above potential "Output Gap" Economy producing below potential l Gap Implie by Blue Chip Forecast - Core CPI inflation J\ , - Core PCE inflation r ~ ~ ~?~ Summary - Signs of more sustained md igorous recovery - Fiscal stimulus in place - Ongoing monetary policy stimull!U.S • Lleoking Forwai;d~ / - Supports for capital spondfung Me m place - Autos, residential eonstruolion leas likely to grow as ~trrongly - Employment now growing (bllli we need more) - Productivity strong - Which should help invesUJBettt, hiring, and inflation

Cathy E. Minehan (2003, November 6). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20031107_cathy_e_minehan

@misc{wtfs_regional_speeche_20031107_cathy_e_minehan,
  author = {Cathy E. Minehan},
  title = {Regional President Speech},
  year = {2003},
  month = {Nov},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20031107_cathy_e_minehan},
  note = {Retrieved via When the Fed Speaks corpus}
}