greenbooks · February 1, 1982

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.

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)

January 29, 1982

CLASS II - FOMC

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

Page THE DOMESTIC NONFINANCIAL ECONOMY

Labor productivity and costs . . . . . . . . . . . . Collective bargaining settlements . . . . . . . . . TABLES: Labor productivity and costs . . . . . . . . . . . . Negotiated wage rate changes . . . . . . . . . . . . THE DOMESTIC FINANCIAL ECONOMY Federal government budget and financing developments Corrigendum . . . . . . . . . . . . . . . . . . . . TABLES: Federal government and sponsored agency financing Monetary aggregates . . . . . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . .

SUPPLEMENTAL NOTES

Labor Productivity and Costs Output per hour for all persons

in the nonfarm business sector of

the economy tumbled at a 7.6 percent annual rate in the fourth quarter of last year, following a 1.8 percent rate of decline in the preceding quarter.

While productivity always falls in the initial stages of a

recession, the fourth quarter decline is the most severe in the history of the series (which begins with data for 1947).

Over the four quarters

of 1981, output per hour in the nonfarm business sector fell 1 percent; the rise during 1980 was 0.2 percent.

This weak productivity performance--

well below the recent trend of 0.6 percent annually--occurred in a period when nonfarm business output was contracting, on balance, at a 0.7 percent annual rate. Hourly compensation in this sector increased markedly less in the fourth quarter than for some time--at only a 6.5 percent annual rate (the lowest rate of increase since the third quarter of 1975) from a 10 percent rate rise over the preceding eight quarters.

Unit labor cost,

reflecting the compensation developments as well as the poor productivity performance, rose at a 15.2 percent annual rate in the fourth quarter and 10.4 percent over the four quarters of 1981.

This increase from a

year earlier is the largest since the second quarter of 1980.

Collective Bargaining Settlements Wage rate increases and compensation gains in the first -year of major collective bargaining agreements reached in the final quarter of 1981 for unionized workers in the private sector of the economy were smaller than in the preceding two quarters--considerably smaller over the life of the contract.

Wage rate increases negotiated for the first

year of the contract averaged 9-1/4 percent--down from 11-3/4 percent in the second and third quarters, and for the life of the contract 5-1/2 percent per year--down from around 9-1/2 percent per year in those two quarters.

Increases negotiated in the fourth quarter for compensation

averaged 11 percent for the first year of the contracts and about 5-1/2 percent per year over the life of the contract, the former down only a little from the average in second and third quarters while the latter dropped sharply.

For 1981 as a whole, first-year and over-the-life-of-

the-contract settlements exceeded those in 1980, as did first-year agreements for compensation 1981 compensation increases over the life of the contracts averaged only a trifle less than in 1980. Effective wage rate increases, which reflect provisions of previous settlements and cost-of-living adjustments, as well as current agreements, increased 1.3 percent in the fourth quarter--less than half the increases in the two preceding quarters.

For the year as a whole, the effective

wage increase averaged 9.1 percent, down from 9.9 percent in 1980.

LABOR PRODUCTIVITY AND COSTS (Percentage change at compound annual rates; based on seasonally adjusted data)1

1981 1979

1980

1981

-.7 -.9 .1

.0 .2 1.1

-0.1 -1.0 -.8

3.5 1.4 4.1

-1.1 -1.8 1.2

-7.2 -7.6 -11.3

10.1 9.9 9.7

10.3 10.1 12.3

9.3 9.3 9.8

10.4 9.6 10.8

9.3 9.5 9.3

5.7 6.5 7.5

10.9 10.9 9.6

10.3 9.9 11.0

9.5 10.4 10.6

6.6 8.1 6.5

10.6 11.5 8.0

14.0 15.2 21.1

Output per hour Total private business Nonfarm business Manufacturing Compensation per hour Total private business Nonfarm business Manufacturing Unit labor costs Total private business Nonfarm business Manufacturing

1. Changes are from final quarter of preceding period to final quarter of period indicated.

NEGOTIATED WAGE-RATE CHANGES UNDER MAJOR COLLECTIVE BARGAINING SETTLEMENTS 1

1979

All Industries First-year adjustments Average over life of contract

1980

Same parties as during 1981 under prior 1981 settlements

7.4 6.0

9.5 7.1

8.6 7.0

10.1 8.1

3492

3787

--- 2295

Contracts with escalator provisions First-year adjustments Average over life of contract

6.2 4.6

8.0 5.0

n.a. n.a.

8.2 5.5

Workers affected (in thousands)

2028

2268

n.a.

612

9.1 8.0

11.7 10.3

n.a. n.a.

10.8 9.1

1464

1489

--- 1683

6.9 5.4

7.4 5.4

1939

Workers affected (in thousands)

Contracts without escalator provisions First-year adjustments Average over life of contract Workers affected (in thousands)

Manufacturing First-year adjustments Average over life of contract Workers Affected Construction First-year adjustments Average over life of contract Workers Affected Non-Manufacturing, Non-Construction First-year adjustmets Average over life of contract Workers Affected

n.a. n.a.

7.3 6.3

1554

--- 765

8.8 8.3

13.6 11.5

n.a. n.a.

462

777

--- 7.6 6.2

9.5 6.6

n.a. n.a.

10.2 7.5

1091

1456

--- 936

13.5 11.3 594

1. Contracts covering 1,000 or more workers; estimates exclude potential gains under cost-of-living clauses.

-5Federal Government Budget and Financing Developments The Treasury Department's monthly statement for December, released after printing of the Greenbook, showed a considerably larger increase last month in unified budget outlays--primarily in defense spending--than had been suggested by the Treasury's daily statements.

[This larger rise

suggests that federal government defense purchases of goods and services (GNP component) increased more in the fourth quarter of last year than the very large rise indicated by the preliminary estimates.]

Unified budget

receipts in December were a little higher than anticipated and the deficit somewhat larger.

For the fourth quarter of 1981 as a whole, unified budget

outlays totaled $195.4 billion, receipts were $147.2 billion, and the deficit was $48.2 billion--nearly $2-1/2 billion more than estimated. The combined federal deficit (which includes developments of off-budget activities) totaled $51.8 billion, $1.5 billion higher than implied by earlier data, an amount financed by other than borrowing from the public or reducing the Treasury cash balance. The Treasury announced that it will auction a record $10 billion of securities in its upcoming mid-quarter refunding, raising nearly $5.7 billion of new money.

Specifically, it will auction $5 billion of 3-year

notes on February 2, $2-1/2 billion of 10-year notes on February 4, and $2-1/2 billion of 29-3/4-year bonds on February 5.

For the quarter as a

whole, the Treasury announced that it intends to raise an unprecedented $41-1/4 billion in the market, and to end the period with a cash balance of $10 billion ($2 billion less than at the end of 1981).

The staff

currently estimates that the Treasury's marketable borrowing will be only $38-3/4 billion in the current quarter, and its cash balance will be

$10-1/2 billion on March 31.

The Treasury also stated in its announce-

ment that it expects to raise $10 to $15 billion of new money in the second quarter of 1982, with a projected end-of-quarter cash balance of $15 billion.

The amounts are similar to the staff's estimates.

Corrigendum Part I, page 1-7: The percentage changes in the fixed-weighted price index for gross domestic business product excluding food and energy over the four quarters ending 1982-Q4 and 198 3 -Q4 should read 6.4 and 4.8, respectively.

Revised

-7-

FEDERAL GOVERNMENT AND SPONSORED AGENCY FINANCING 1 (Total for period; billions of dollars) 1981

1982 f

FY81

Dec.

-78.9

-20.5

-51.8

8.0

-28.8

79.4

14.3

35.6

10.4

35.8

88.9 23.0 65.9 -9.5

15.5 11.1 4.4 -1.2

37.4 21.6 15.8 -1.8

11.0 5.9 5.1 -.6

38.7 19.0 19.7 -2.9

2.3

-4.2

6.7

-9.2

1.5

-2.7

10.4

9.5

-9.2

-8.5

37.5

2.9

Jan.

Treasury financing Combined surplus/deficit(-) Means of financing deficit: (1) Net cash borrowing from the public Marketable borrowings/ repayments(-) Bills Coupons Nonmarketable (2) Decrease in the cash balance (3) Other means of finance 2 Federally sponsored credit agencies net cash borrowing 3

3.1

f--forecast. 1. Numbers reported on a not seasonally adjusted, payment basis. 2. Includes checks issued less checks paid, accrued items and other transactions. 3. Includes debt of Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, and the Federal Farm Credit Bank System.

January 29, 1982 -8MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) 1 1981 Q3

Q2 --Money stock measures 1. M1 2 (Adjusted) 2. 3. M2 4. M3 Selected components 5. Currency

Oct.

Nov.

Dec.

QIV '80 to QIV. '81

Percentage change at annual rates ---

8.6 (5.2) 10.6 10.6

0.5 (-0.4) 7.2 10.3

7.9

5.6 (4.6) 10.6 9.8

3.3 (3.1) 8.1 5.9

13.6 (11.4) 17.2 13.8

11.0 (9.6) 10.9 10.1

4.9 (2.1) 9.5 11.2

5.0

4.0

3.0

6.9

9.8

5.7

4.6

Demand deposits

-11.8

-8.0

0.0

1.5

6.1

Other checkable deposits

107.4

21.5

26.6

10.0

46.2

36.5

175.2

8. M2 minus M1 (9+10+11+14) 3 Overnight RPs and Eurodollars, NSA 9. Money market mutual fund shares, NSA 10. 11. Commercial banks 2. savings deposits 13. small time deposits 14. Thrift institutions 15. savings deposits 16. small time deposits 17. 18. 19.

Large time deposits at commercial banks, net at thrift institutions

20.

Term RPs, NSA

11.3 58.9 113.7 4.2 -11.9 13.4 -0.3 -12.6 4.7

9.4 13.9 88.2 6.7 -19.6 21.0 -2.9 -23.0 5.1

MEMORANDA: 21. Managed liabilities at commercial banks (22+23) (Adjusted for shifts to IBFs) 5 22. Large time deposits, gross 5 (Adjusted for shifts to IBFs) 23. Nondeposit funds 5 (Adjusted for shifts to IBFs) 24. Net due to related foreign institutions, NSA 5 (Adjusted for shifts to IBFs) 25. Otherb 5 (Adjusted for shifts to IBFs) 26.

U.S. government deposits at 7 commercial banks

12.2 -52.7 83.0 .10.6 -10.4 20.6 1.6 -11.1 6.2

9.7 -124.3 71.8 10.9 -19.0 24.7 1.8 -16.3 8.3

18.4 25.5 73.6 16.5 13.9 17.3 5.4 0.7 7.0

10.8 21.4 53.7 5.2 9.2 4.1 2.5 19.9 -3.9

11.0 3.1 129.2 7.1 -17.0 23.0 0.5 -17.8 9.0

7.7 4.4 22.9

20.8 20.3 23.0

10.3 10.1 11.2

25.3 27.3 15.1

3.1 -1.0 24.3

-4.0 -10.1 26.2

-9.6 -16.0 21.0

12.2

43.6

22.3

-17.8

36.2

-Average

9.0

6.6

7.5

7.0

1.5

-0.4

0.7

1.1

0.9

-1.6

-0.3

-0.7

-12.7

26.1

monthly change in billions of dollars--

-7.2 (0.5) -0.9 (-0.7) -6.3 (1.2)

-4.7

-2.8

-1.2

-3.1

-3.5

0.3

-8.6 (-1.8) 2.3 (3.0)

-4.5 1.1

1.6

0.5

3.4

-0.4

-1.4

-14.0 (9.1) 1.6 (2.3) -15.6 (6.8)

3.2 (5.1) 4.7 (4.7) -1.5 (0.4)

-19.8 (0.6) 4.2 (6.2)

-2.1 (-0.4) 0.6 (0.8)

-1.5

0.2

1. Quarterly growth rates are computed on a quarterly average basis. Dollar amounts shown under memoranda for quarterly and year over year changes are calculated on an end-month-of-quarter basis. 2. Figures in parentheses have been adjusted to remove the distorting effects during 1981 of shifts of funds out of demand deposits and other accounts into NOW accounts. Based on a variety of evidence, it is estimated that 77-1/2 percent of inflows into other checkable deposits-in excess of "trend"--was from demand deposits in January, and 72-1/2 percent in other months. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks, net of amounts held by money market mutual funds, plus overnight Eurodollar deposits issued by Caribbean branches of U.S. member banks to U.S. nonbank customers. Excludes retail RPs. 4. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 5. Numbers in parentheses have been adjusted to remove the effects of shifts of assets and liabilities from domestic banking offices to International Banking Facilities (IBFs). 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), loans sold to affiliates, loan RPs, and other minor items. Changes since October 1980 are partially estimated. 7. Consists of Treasury demand deposits at commercial banks and Treasury note balance.

COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data) 1 1981 Q2

Q3 ----

1. Total loans and investments -at banks 2 3 (Adjusted for shifts to IBFs) 2.

Investments

Treasury securities

Other securities 2

Oct.

Dec.

QIV 80 to QIV 81

-8.9 (11.1)

8.2 (8.8)

Nov.

Commercial Bank Credit ---

10.9

6.8

7.2

.1 (6.8)

5.7

3.5

4.6

8.9

1.1

4.2

6.5

13.5

-12.0

-8.1

- 7.4

-23.5

6.5

2.6

4.0

7.2

11.0

16.5

13.1

3.1

8.6

4.6

4.3

-13.5 (13.4)

8.8 (9.6)

- .3

-18.1 (21.3)

12.6 (13.9)

Total loans 3 (Adjusted for shifts to IBFs

12.2

9.0

-1.6 (7.5)

Business loans 2 3 (Adjusted for shifts to IBFs)

16.6

17.7

-2.6 (10.6)

Security loans

28.6

-36.2

58.6

31.4

85.7

51.4

20.9

Real estate loans

10.8

8.0

7.0

5.1

5.5

10.2

9.8

Consumer loans

1.3

4.4

1.3

2.0

9.8

3.0

10. Total short- and intermediateterm business credit (sum of lines 14, 15 and 16) 11.

12.

19.7

23.0

n.a.

10.3

14.7

n.a.

16.2

19.6

-2.8 (10.6)

9.2

1.3

-18.9 (21.2)

12.8 (14.0)

39.7

56.0

32.5

7.1

54.3

33.9

40.8

19.1

24.4

1.2 (14.3)

8.9

8.0

-15.6 (23.1)

15.8 (16.9)

18.6

25.6

5.0 (16.6)

12.8

11.8

-9.5 (24.7)

17.6 (18.7)

Finance company loans to 6 business

19.3

14.7

n.a.

3.0

12.2

n.a.

Total bankers acceptances 6 outstanding

26.6

16.6

n.a.

3.7

38.6

n.a.

Business loans net of bankers acceptances 3 (Adjusted for shifts to IBFs) Commercial paper issued by 4 nonfinancial firms

13.

Sum of lines 11 & 12 3 (Adjusted for shifts to IBFs)

14.

Line 13 plus loans at 3 foreign branches 5 (Adjusted for shifts to IBFs)

15.

16.

Short- and Intermediate-Term Business Credit -

1. Average of Wednesdays for domestic-chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans include outstanding amounts of loans reported as sold outright to a bank's own foreign branches, unconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and unconsolidated nonbank subsidiaries of the holding company. 3. Numbers in parentheses have been adjusted to remove the effects of shifts of assets from domestic banking offices to International Banking Facilities (IBFs). 4. Average of Wednesdays. 5. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestic-chartered banks. 6. Based on average of current and preceding ends of month. n.a.-not available.

-10SELECTED FINANCIAL MARKET OUOTATIONS 1 (Percent)

Highs

__ 1981 Nov.-Dec. Lows

FOMC Dec. 22

Jan. 28

Federal funds 2

20.06

12.04

12.43

13.98

i.94

1.55

Treasury bills 3-month 6-month 1-year

17.01 15.93 15.21

9.94 10.34 10.42

11.03 11.93 12.06

12.28 12.59 12.47

2.34 2.25 2.05

1.25 .66 .41

Commercial paper 1-month 3-month

18.63 18.29

11.17 11.04

12.65 12.65

13.54 13.67

2.37 2.63

.89 1.02

Large negotiable CDs 3 1-month 3-month 6-month

18.90 19.01 18.50

11.16 11.23 11.64

12.73 13.11 13.76

13.68 14.00 14.37

2.52 2.77 2.73

Eurodollar deposits 2 1-month 3-month

19.80 19.56

11.86 12.16

13.23 13.65

14.43 15.10

2.57

21.50

15.75

14.46 14.20

10.58 11.07

12.70 13.01

13.08 13.29

2.50 2.22

16.59 15.84 15.20

12.54 12.92 12.76

14.11 14.02 13.65

14.33 14.29 13.98

1.79 1.37 1.22

Buyer)

13.44

11.43

13.00 4

13.15

1.72

Corporate--Aaa utility Recently offered

17.72

14.52

15.40

15.61p

1.09

S&L fixed-rate mortgage commitment

18.63

16.90

16.905

17.615 1982

1982

Change from: Nov.-Dec. FOMC Lows Dec. 22

Short-term rates

Bank prime rate Treasury bill futures June 1982 contract Dec. 1982 contract

2.94

.95 .89 .61

1.20 1.45

Intermediate- and longterm rates U.S. Treasury (constant 3-year 10-year 30-year Municipal (Bond

maturity)

1981 FOMC Dec. 22

.71 .71 Percent change from: 1981 FOMC Dec. 22 Highs

Jan. 28 Stock Prices -. 9 864.25 Dow-Jones Industrial 1,024.05 871.96 -15.6 71.27 68.58 -13.3 -3.8 79.14 NYSE Composite 292.59 -8.1 AMEX Composite 380.36 318.49 -23.1 'TASDAO (OTC) 186.22 223.47 -4.8 195.64 -16.7 )ne-day quotes except as noted. 4. One-day quotes for preceding Thursday. Averages for statement week closest to date shown. 5. One-day quotes for preceding Friday. 3. Secondary market. p--Preliminary. Highs

Cite this document

APA

Federal Reserve (1982, February 1). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19820202_part3

BibTeX

@misc{wtfs_greenbook_19820202_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1982},
  month = {Feb},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19820202_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}