Greenbook/Tealbook
Prefatory Note
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1
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CONFIDENTIAL (FR) CLASS III - FOMC July 2, 1987
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
THE DOMESTIC NONFINANCIAL ECONOMY
Page
Employment and unemployment in June . .............
1
Tables Changes in employment .
. . . . . . . .
. . .
. . .
.
...
3
4
Hourly earnings index . . . . . . . . . . . . . . . .... . .. THE FINANCIAL ECONOMY Monetary aggregates and bank credit in June . . . . .
. . . ..
5
Tables Monetary aggregates ....
. . . . .
. . . . . .
. ...
.
6
.
7
. ...........
8
Commercial bank credit and short- and intermediateterm business credit
.................
Selected financial market quotations
SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Employment and Unemployment in June Nonfarm employment, as measured by the establishment survey, grew 116,000 after a downward-revised increase of 74,000 in May. 1
Employment in
the service-producing sector, which only rose about 100,000 in June, has slowed considerably from the pace in the first part of the year.
In June,
almost half of the job pickup in the service-producing sector occurred at state and local governments, where 46,000 new jobs were added; a pickup of 47,000 in the services industry, and small gains in finance, insurance, and real estate, and retail trade accounted for the balance of the growth. Employment gains in the goods-producing industry were lackluster as manufacturing employment rose only 4,000; outside of manufacturing, construction employment increased 13,000 and mining fell slightly. Employment, as measured by the household survey, fell 190,000, but the labor force dropped nearly half a million.
As a result, the civilian
unemployment rate declined 0.2 percentage points to 6.1 percent.
More than
two-thirds of the drop in unemployment was the result of fewer young people than normal entering the labor force as of the early June survey week.
The
jobless rate for teenagers, a particularly volatile series, dropped almost 2 percentage points.
Unemployment also declined among adult women, with
their rate edging down 0.2 percentage points to 5.2 percent.
The unemploy-
ment rate for adult men remained unchanged in June. 1. The downward revision of 60,000 jobs to the May figure was more than accounted for by the service-producing sector which was revised down 68,000. The services industry was revised down 25,000, government 22,000 and retail trade 16,000.
-2-
Wage rates, as measured by the hourly earnings index for production and nonsupervisory workers, increased 0.2 percent after remaining flat in May.
The small pickup in wages was widespread across industries.
Over the
past 12 months, the hourly earnings index has risen 2.3 percent for the private nonfarm economy and 1.5 percent in manufacturing.
-3CHANGES IN EMPLOYMENT 1 (Thousands of employees; based on seasonally adjusted data)
1985
1987 Q1
1986 Q4
1986
1987 Q2
Apr.
1987 May
June
-- Average monthly changesNonfarm payroll employment 2 Manufacturing Durable Nondurable Construction Trade Finance and services Total government Private nonfarm production workers Manufacturing production workers Total employment 3 Nonagricultural
254 8 0 8 32 57 124 18
153 11 2 9 -8 31 87 22
269 16 -1 17 -13 67 116 61
106
199
94
156
44
83
-7
18
6
19
14
14
29
174 e 174 e
217 210
244 203
296 332
467 461
612 567
-190 -33
213 -30 -22 -8 20 60 130 34
159 -14 -17
152
105
-27 162 182
4 13 31 110 30
1. Average change from final month of preceding period to final month of period indicated. Strike-adjusted data noted. 2. Survey of establishments. 3. Survey of households. e--Adjusted by Board staff to eliminate distortions caused by the introduction of revised population estimates.
SELECTED UNEMPLOYMENT RATES (Percent; based on seasonally adjusted data)
1985
1986
1986 Q4
1987 Q1
1987 Q2
Civilian, 16 years and older
7.2
7.0
6.9
6.7
Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older
18.6 11.1 5.3 5.9
18.3 10.7 5.4 5.5
17.8 10.5 5.4 5.3
White Black
6.2 15.1
6.0 14.5
6.8
7.1
Fulltime workers Memo: Total national1
Apr.
1987 May
June
6.2
6.3
6.3
6.1
17.9 10.4 5.2 5.1
17.0 10.1 4.8 4.6
17.4 10.1 4.8 4.7
17.7 9.8 4.9 4.7
15.9 10.2 4.7 4.4
6.0 14.1
5.7 14.2
5.3 13.2
5.4 13.0
5.3 13.8
5.2 12.7
6.6
6.5
6.3
5.9
5.9
5.9
5.9
6.9
6.7
6.6
6.1
6.2
6.2
6.0
1. Includes resident Armed Forces as employed.
-4-
HOURLY EARNINGS INDEX 1 (Percentage change; based on seasonally adjusted data) 2
1986
1986 Q4
1987 Q1
Q2
--Annual rateTotal private nonfarm Manufacturing Durable Nondurable Contract construction Transportation and public utilities Finance, insurance, and real estate Total trade Services
Apr.
1987 May
June
--Monthly rate-
2.3
3.3
2.1
2.6
,3
.1
.2
1.7 1.3 2.3 2.2
1.4 .9 2.3 6.1
1.5 .3 3.5 -2.7
2.1 2.1 2.1 3.4
.4 .5 .3 .0
-.4 -.1 -.9 .3
.2 .3 .2 .4
2.8
3.6
3.2
4.1
.3
.4
.4
4.4 1.8 3.1
6.3 2.9 4.7
9.7 .7 4.2
.5 2.4 3.3
-.2 .4 .2
.1 .3 .2
-. 1 -. 1 .3
1. Excludes the effect of interindustry shifts in employment and fluctuations in overtime hours in manufacturing. 2. Changes over periods longer than one quarter are measured from final quarter of preceding period to final quarter of period indicated. Quarterly changes are compounded annual rates.
-5-
THE FINANCIAL ECONOMY Monetary Aggregates and Bank Credit in June Latest data indicate that growth in the monetary aggregates during June was weaker than estimates presented in the Greenbook.
M1 is now esti-
mated to have contracted at a 10 percent annual rate in June, with particular weakness in demand deposits.
Estimated growth of M2 in June has been
reduced to a 1 percent rate, owing to downward revisions in both M1 and the nontransactions component of M2.
Downward revisions to savings deposits,
overnight RPs and Eurodollars, and MMDAs more than offset an upward revision in small time deposits.
M2 growth from the fourth quarter of 1986 to June
is now placed at 4 percent.
Slower growth in M2 was the principal contri-
butor to a downward revision in M3 growth in June to 6 percent.
This
change leaves M3 at about the low end of its target range. Bank credit data for June also have been revised downward.
Total
loans and investments are now estimated to have expanded at an annual rate of 4 percent.
The major revisions among components of bank credit include
securities holdings, now estimated to have declined at a 2-1/2 percent annual rate last month, and consumer loans, which now appear to have contracted slightly.
(Based
-6MONETARY AGGREGATES on seasonally adjusted data unless otherwise noted)1 1985:Q4 to 1986:04 ----
1. 2. 3.
M1 M2 M3
15.3 8.9 8.8
01
02Pe
1987 Apr.
May
July 2,
JunePe
1987
Growth from Q4 1986 to June 1987Pe
Percentage change at annual rates ---13.1 6.3 6.4
6-1/2 2-1/2 4-1/4
17.7 6.0 5.9
7-3/4 4 5-1/2
4.5 0.6 4.9
Levels in
billions
of dollars May 1987 Selected components
7.5
10.1
6-1/2
7.7
8.3
6
Demand deposits
11.6
2.5
1/4
18.8
0.0
-25
304.0
6.
Other checkable deposits
28.5
29.7
14-1/4
24.9
7.2
-3
252.3
7.
M2 minus M12
6.9
3.9
1-1/4
2.0
-0.8
5
14.7
10.9
-23-3/4
-3.2
-20.8
-16
17.3 6.8
6.2 6.0
1-1/4 -1-1/4
1.1 -1.9
-8.5 -6.2
5 4
210.3 900.4
16.0 -4.2 4.3
13.4 -4.9 3.9
1 -4-1/2 5-1/2
2.4 -8.3 5.3
-9.4 -1.3 2.8
0 10 7
543.3 357.1 911.9
12.0 -1.2
14.3 -4.6
10.0 1.2
4.5 1.2
1 12
425.4 486.5
8.3
6.8
5.3
22.6
23
715.6
3.0 2.7 3.4
2.9 9.7 -9.7
9-1/2 18-1/2 -8-1/2
12.0
13.2
15
27.7 -19.1
18.4 2.4
19 8
459.6 310.6 149.0
30.3 28.3 2.7
0.9 14.4 38.1
-11-1/2 55-1/2 10
-25.4 86.2 -47.1
4.
Currency
5.
8. 9. 10. 11. 12. 13. 14. 15. 16.
Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, 3 plus MMDAs, NSA Small time deposits Thrift institutions Savings deposits, SA, 3 plus MMDAs, NSA Small time deposits M3 minus M24
Large time deposits At commercial banks, net 5 At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA
-MEMORANDA: 23. Managed liabilities at commercial banks (24+25) 24. Large time deposits, gross 25. Nondeposit funds 26. Net due to related foreign institutions, NSA 6 Other 27.
9-3/4 1-3/4 11
Average monthly change in
2.0 0.6 1.4
8.4 2.8 5.6
5-1/4 6-1/4 -1
0.6 0.8
4.4 1.2
-2
1
-18.8
190.2
2086.7 73.8
81.8 96.3 89.8
69.9 57.4
billions of dollars --
2.1 5.7 -3.6
14.2 6.4 7.8
-6
532.1 366.2 165.9
-3.6 0.0
10.1 -2.3
-4 -2
0.5 165.4
1 7
U.S. government deposits at commercial 7 banks 0.4 -1.2 3-1/2 3.0 5.5 2 26.1 1. Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (MMDAs), not seasonally adjusted. Commercial bank savings deposits excluding MMDAs increased during May and June 1987 at rates of 16.0 percent and 7 percent, respectively. At thrift institutions, savings deposits excluding MMDAs increased during May and June 1987 at rates of 17.5 percent and 13 percent, respectively. 4. The non-M2 component of M3 is seasonally adjusted as a whole. 5. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 28.
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, loan RPs and other minor items). Data are partially estimated. 7. Consists of Treasury demand deposits and note balances at commercial banks. pe--preliminary estimate
-7COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT 1 (Percentage changes at annual rates, based on seasonally adjusted data)
1986 Q4
Q1 -------
1.
2.
Total loans and securities at banks
U.S.
4.
Other securities
5.
goverment securities
Business loans
7.
Security loans
8.
Real estate loans
9.
Consumer loans
10.
2
11.9
7.4
6.0
2.4
5.3
7.5
11.2
20.2
5.7
3.8
5.7
16.3
-10.5
317.3
-14.5
-2.8
7.8
10.4
2.4
10.3
199.3
9.1
8.4
8.6
13.3
6.3
6.1
1651.2
18.5
7.6
4.2
4.8
4.1
3.5
557.4
-39.3
-3.1
36.6
166.1
-44.0
-5.7
41.8
16.3
17.9
19.1
16.1
19.6
20.7
536.9
5.3
2.1
1.3
3.8
0.4
-0.4
315.1
-20.5
0.0
0.6
15.6
-1.1
--- 11.
Business loans net of bankers acceptances 3
12.
Loans at foreign branches
13.
Sum of lines 11 & 12
14.
Commercial paper issued by nonfinancial firms
15.
Sums of lines 13 & 14
16.
Bankers acceptances: related4 ,5
17.
3.9
2167.7
-2.5
516.6
-11.9
200.0
- Short- and Intermediate-Term Business Credit -
18.8
8.1
-27.3
-2.4
-19.6
17.2
7.9
2.8
-19.1
-13.0
17.6
12.3
3.3
3.4
3.1
551.5
-22.8
15.4
1.1
2.5
567.1
28.6
-16.2
80.5
647.6
-71.4
-
5.3
4.6
9.0
4.5
0.2
2.5
n.a.
33.9
11.0
n.a.
33.1 (May)
10.8
5.1
n.a.
10.4
4.8
n.a.
680.7 (May)
11.2
14.7
n.a.
16.8
n.a.
n.a.
180.8 (Apr)
10.9
7.0
n.a.
11.7
n.a.
n.a.
858.8 (Apr)
U.S. trade -16.9
Line 15 plus bankers acceptances: U.S. trade related
18.
Finance company loans to business
19.
Total short- and intermediateterm business credit (sum of
lines 17 & 18)
Commercial Bank Credit ------------
7.8
2
Other loans
JuneP
7.0
Total loans
6.
May
1987
Levels in bil. of dollars JuneP
8.4
Securities
3.
Q2P
1987 Apr.
July 2,
4
n.a.--not available. p--preliminary. 1. Average of Wednesdays.
2. June growth rates for real estate and consumer loans are adjusted for series breaks caused by earlier reporting errors for home equity loans. 3. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 4. Based on average of current and preceding ends of month. 5. Consists of acceptances that finance U.S. imports, U.S. exports and domestic shipment and storage of goods.
-8SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) Change from: FOMC FOMC Mar. 31 May 19
June highs
Oct. lows
FOMC Mar. 31
1987 FOMC May 19
Federal funds 2
6.90
5.75
6.11
6.78
6.70
.59
-.08
Treasury bills 3 3-month 6-month 1-year
6.52 6.57 6.62
5.04 5.05 5.25
5.61 5.74 5.78
5.78 6.27 6.80
5.64
5.81 6.22
.03 .07 .44
-.14 -.46 -.58
Commercial paper 1-month 3-month
6.87 6.81
5.64 5.60
6.39 6.31
6.95 7.07
6.80 6.86
.41 .55
-.15 -.21
Large negotiable CDs 3 1-month 3-month 6-month
6.88 6.91 6.97
5.59 5.57 5.57
6.30 6.30 6.31
6.97 7.15 7.41
6.80 6.87 7.03
.50 .57 .72
-. 17 -.28 -.38
Eurodollar deposits 4 1-month 3-month
7.01 7.01
5.79 5.79
6.38 6.36
6.81 7.10
7.01 7.08
.63 .72
.20 -.02
Bank prime rate
8.50
7.50
7.50
8.25
8.25
.75
U.S. Treasury (constant maturity) 3-year 6.41 7.86 10-year 8.39 7.28 30-year 7.93 7.53
6.79 7.51 7.81
8.27 8.89 9.06
7.72 8.36 8.49
.93 .85 .68
-. 55 -.53 -.57
Municipal revenue 5 (Bond Buyer index)
8.57
7.30
7.11
8.20
8.16
1.05
-.04
Corporate--A utility Recently offered
9.70
9.32
9.05
10.26e
10.Ole
.96
-. 25
10.76 8.65
9.89 7.98
9.07 7.53
1.28 .35
-.13 .01
1986
Jul. 1
Short-term rates
Intermediate- and long-term rates
Home mortgage rates 6 S&L fixed-rate
S&L ARM, 1-yr.
1986 Highs Stock prices 1955.57 Dow-Jones Industrial 145.75 NYSE Composite 285.19 AMEX Composite NASDAQ (OTC) 411.16 1. One-day quotes except as noted.
March highs
10.48 10.35 7.87 7.88 1987 FOMC Jul. 1 May 19
Percent change from: FOMC March May 19 highs
8.49 1.57 2409.76 2221.28 7.97 157.93 170.52 -.33 3.95 -.41 337.91 325.07 408.15 424.46 -3.45 4.00 4. Averages for statement week closest to date shown. 2. Averages for two-week reserve maintenance period 5. One-day quotes for preceding Thursday. closest to date shown. Last observation is the 6. One-day quotes for preceding Friday. average for the maintenance period ending e--estimate July 1, 1987.
3. Secondary market.
2372.59 171.08 339.31 439.64
Cite this document
Federal Reserve (1987, July 6). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19870707_part2
@misc{wtfs_greenbook_19870707_part2,
author = {Federal Reserve},
title = {Greenbook/Tealbook},
year = {1987},
month = {Jul},
howpublished = {Greenbooks, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/greenbook_19870707_part2},
note = {Retrieved via When the Fed Speaks corpus}
}