Regional President Speech

Federal Reserve Bank of San Francisco ABOUT US OUR PEOPLE JOIN US What We Study Our District Research & Insights News & Media / NEWS & MEDIA / SPEECHES / MARY C. DALY’S SPEECHES Net-Net: Opportunity SPEECH INFO Slides presented at the 2019 Clausen Center Conference on Global Economic Issues Berkeley, California By Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco For delivery on November 16, 2019 These slides were presented during a discussion by President Daly at the 2019 Clausen Center Conference on Global Economic Issues. Net-Net: Opportunity 2019 Clausen Center Conference on Global Economic Issues 2019 November 16, 2019 Mary C. Daly President & CEO Federal Reserve Bank of San Francisco The views expressed here are my own and do not necessarily reflect those of anyone else in the Federal Reserve System. Unemployment near historic lows Unemployment Rate - Unemployment rate CBO natural rate estimate 12% 10% 8% 6% 4% 2% 0% 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 Sources: FOMC Summary of Economic Projections, Haver Analytics. Inflation below 2% target Core and headline PCE inflation - PCE PCE less food & energy • • FOMC inflation target -2% 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 Sources: Bureau of Economic Analysis, Haver Analytics, FRBSF staff calculations. Note: 12-month change. Phillips Curve has flattened Slopes of Wage and Price Inflation Phillips Curves - Wage Phillips Curve Price Phillips Curve 0.0 -0.2 -0.4 -0.6 -0.8 1980 1990 2000 2010 2020 4 Source: Hooper, Mishkin, and Sufi (2019). Dilemma or Opportunity? Cyclical inflation is alive Core PCE Inflation by Sector - Cyclical Acyclical 4.5% 4% 3.5% 3% 2.5% 1.5% 1% 0.5% 0% 2003 2006 2009 2012 2015 2018 Source: Update from Mahedy and Shapiro (2017). Natural rate of unemployment (u*) is a moving target SEP Longer Run Unemployment Rate - Median Central Tendency 6% 5.5% 5% 4.5% 4% 2013 2014 2015 2016 2017 2018 2019 Sources: FOMC Summary of Economic Projections, Haver Analytics. Short-run and long-run u* may differ Unemployment Rate - Short-run noninflationary rate of unemployment CBO long-run natural rate of unemployment 8% 6% 4% 2% 1985 1990 1995 2000 2005 2010 2015 2020 8 Source: Updated from Petrosky-Nadeau and Valletta (2019). ~ or Opportunity? 9 Benefits 10 Prime-age participation is up Labor force participation rates - Age 25-54 (left axis) Overall (right axis) 88% 68% 87% 67% 86% 66% 85% 65% 84% 64% 83% 63% 82% 62% 81% 61% 80% 60% 1992 1996 2000 2004 2008 2012 2016 11 Sources: Bureau of Labor Statistics, Haver Analytics. Disadvantaged workers making gains Job finding rate, men aged 25 to 64 - White Black - Hispanic 50% 40% 30% 20% 10% 1977 1982 1987 1992 1997 2002 2007 2012 2017 Source: Petrosky-Nadeau and Valletta (2019). 12 Note: 12•month moving average. Disadvantaged workers making gains • Similar improvements seen in other outcomes* • Unemployment • Labor force participation • EPOP • Wage growth • Confirmed in reports from Fed Listens events 13 Source: Aaronson, Daly, Wascher. and Wilcox (2019). Costs? 14 Young workers not rushing in Labor force participation rates - Age 20 to 24 (left axis) Age 16 to 19 (right axis) ~% ~% 66% ~---~---~-.......- ~----~---~---~---- 28% 1992 1996 2000 2004 2008 2012 2016 Sources: Bureau of Labor Statistics, Haver Analytics. 15 Note: 6-month moving average, seasonally adjusted. School enrollment rates still high Percentage of population enrolled in school, by age - 18 and 19 year olds (left axis) 20 to 24 year olds (right axis) 75% 45% 70% 40% 65% 35% 60% 30% 55% 25% 1992 1996 2000 2004 2008 2012 2016 16 Sources: Integrated Public Use Microdata Series-Current Population Survey, National Center for Education Statistics, FRBSF staff calculations. Net-Net: Opportunity ... for the labor market 17 Implications for Fed policy • Dual mandate • Full employment • Price stability • Financial stability 18 Net-Net: Opportunity ... for the economy 19 FEDERAL RESERVE BANK OF SAN FRANCISCO FRBSF.ORG fW 20

Mary C. Daly (2019, November 15). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20191116_mary_c_daly

@misc{wtfs_regional_speeche_20191116_mary_c_daly,
  author = {Mary C. Daly},
  title = {Regional President Speech},
  year = {2019},
  month = {Nov},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20191116_mary_c_daly},
  note = {Retrieved via When the Fed Speaks corpus}
}