Greenbook/Tealbook
Prefatory Note The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.
Content last modified 02/09/2012.
Confidential (FR) Class III FOMC
December 8, 2006
CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes
Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System
Contents The Domestic Nonfinancial Economy ........................................................ 1 Labor Market Developments ...........................................................1 Consumer Sentiment........................................................................5
Tables Changes in Employment ..................................................................2 Selected Unemployment and Labor Force Participation Rates .......3 University of Michigan Survey Research Center: Survey of Consumer Attitudes .............................................................6 Charts Changes in Private Payroll Employment .........................................2 Aggregate Hours and Workweek of Production or Nonsupervisory Workers .....................................................2 Labor Force Participation Rate and Unemployment Rate ...............3 Employment Change in the Household and Payroll Surveys ..........3 Long-Term Unemployed .................................................................3 Labor Market Indicators ..................................................................4
The Domestic Financial Economy ...........................................................7 Tables Commercial Bank Credit .................................................................7 Selected Financial Market Quotations .............................................8 Charts Net Interest Margin ..........................................................................7 Loan-Loss Provisioning ...................................................................7
Supplemental Notes The Domestic Nonfinancial Economy Labor Market Developments Private payroll employment increased 114,000 in November from a level in October that was 20,000 higher than previously estimated. Over the three months ending in November, private employment rose 104,000 jobs per month on average, slightly less than the pace of 130,000 per month of the preceding three months. Once again in November, hiring at nonbusiness services establishments accounted for much of the overall gain, with employment in the education and health services industry up 41,000 and jobs in the leisure and hospitality industry up 31,000. Retail trade employers stepped up their hiring noticeably last month (20,000) after having shed nearly 100,000 jobs thus far this year. However, weakness persisted in manufacturing (-15,000) and construction (-29,000). In contrast to recent months, the weakness in construction employment was not confined to residential construction; rather, all the major subcategories, within both residential and nonresidential, posted losses. Finally, government employment continued to expand (18,000), again led by hiring in education. Average weekly hours of production or nonsupervisory workers on private nonfarm payrolls held steady at 33.9 hours in November, but were up from the third quarter. The level of aggregate hours of these workers was 0.4 percent (not an annual rate) above the third-quarter average. Average hourly earnings of production or nonsupervisory workers on private nonfarm payrolls rose 0.2 percent in November. For the twelve months ending in November, average hourly earnings rose 4.1 percent, up from an increase of 3.0 percent over the preceding twelve months. In the household survey, the unemployment rate ticked up 0.1 percentage point to 4.5 percent in November, reversing part of its decline the previous month. In contrast, the labor force participation rate edged up to 66.3 percent in November—the highest level that the participation rate has reached since 2003. 1
1
The November survey reference week for the household survey was moved forward from the week that included the 12th of the month to the week that included the 5th of the month. According to our contacts at the BLS, the major aggregates such as the unemployment rate and participation rate should be little affected by the change.
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-2-
Changes in Employment (Thousands of employees; seasonally adjusted) 2006 Measure and sector
2005
Q1
Q2
Q3
Sept.
Average monthly change Nonfarm payroll employment (establishment survey) Private Natural resources and mining Manufacturing Construction Wholesale trade Retail trade Transportation and utilities Information Financial activities Professional and business services Temporary help services Nonbusiness services1 Total government Total employment (household survey) Memo: Aggregate hours of private production workers (percent change)2 Average workweek (hours)3 Manufacturing (hours)
Oct.
Nov.
Monthly change
165 152 4 -6 25 7 13 6 -1 12 41 14 51 14 221
176 169 6 1 26 13 2 4 2 20 26 -8 69 7 287
115 98 5 11 1 8 -28 9 -3 11 40 -1 44 17 241
185 144 3 -12 4 7 -5 9 -1 15 32 -4 92 42 162
203 147 2 -9 -1 13 -5 12 -2 27 13 -11 96 56 271
79 51 6 -44 -24 -3 2 7 2 0 29 2 76 28 437
132 114 4 -15 -29 11 20 2 -3 11 43 5 69 18 277
2.3 33.8 40.6
3.0 33.8 41.0
2.6 33.9 41.2
1.1 33.8 41.3
.1 33.8 41.1
.3 33.9 41.2
.1 33.9 41.1
1. Nonbusiness services comprises education and health, leisure and hospitality, and "other." 2. Establishment survey. Annual data are percent changes from Q4 to Q4. Quarterly data are percent changes from preceding quarter at an annual rate. Monthly data are percent changes from preceding month. 3. Establishment survey.
Changes in Private Payroll Employment
Aggregate Hours and Workweek of Production or Nonsupervisory Workers Thousands 400
400
Hours 35.0
2002 = 100 106
3-month moving average 300
300
200
200
100
34.5
100 0
-100
34.0
-200
-300
-300
1999 2000 2001 2002 2003 2004 2005 2006 2007
-400
100 98
-100
-200
-400
102
Nov.
Nov. 0
104
Aggregate hours (right scale)
96 33.5
Workweek (left scale)
94 92
33.0
1999 2000 2001 2002 2003 2004 2005 2006 2007
90
-3-
Selected Unemployment and Labor Force Participation Rates (Percent; seasonally adjusted) 2006 Rate and group
2005
Q1
Q2
Q3
Sept.
Oct.
Nov.
Civilian unemployment rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older
5.1 16.6 8.8 3.8 4.2
4.7 15.5 8.1 3.6 3.9
4.7 14.7 8.1 3.6 3.8
4.7 16.1 8.2 3.5 3.8
4.6 16.4 8.0 3.3 3.8
4.4 15.4 8.5 3.2 3.4
4.5 15.1 8.4 3.3 3.6
Labor force participation rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older
66.0 43.7 74.6 75.4 59.4
66.0 43.7 74.0 75.5 59.4
66.1 43.8 74.2 75.5 59.5
66.2 43.6 74.9 75.4 59.8
66.2 43.3 74.7 75.5 59.7
66.2 43.3 74.6 75.5 59.8
66.3 43.4 74.7 75.7 59.8
Labor Force Participation Rate and Unemployment Rate
Percent 67.6 67.4
Percent 7.0
Participation rate (left scale)
6.5
67.2
6.0
67.0 66.8
5.5
66.6
5.0
66.4
Nov.
66.2
4.0
66.0 Unemployment rate (right scale)
65.8 65.6
2000
2001
3.5 2002
2003
2004
Employment Change in the Household and Payroll Surveys
400 Payroll employment**
Nov.
200
2005
3.0
2006
Long-Term Unemployed (More Than 26 Weeks)
Thousands of employees 500 Household employment* 400
500
300
4.5
100 0
1.6
Percent of labor force 1.6
1.4
1.4
300
1.2
1.2
200
1.0
1.0
100
0.8
0
0.6
0.6
Nov.
0.8
-100
-100
0.4
0.4
-200
-200
0.2
0.2
-300
0.0
-300
2000
2001
2002
2003
2004
Note. Six-month moving averages. * Adjusted to the payroll concept. ** Adjusted for benchmark revision.
2005
2006
2007
2000
2001
2002
2003
2004
2005
2006
2007
0.0
-4-
Labor Market Indicators
Unemployment Insurance Millions 4.0 4-week moving average
Layoff Announcements Thousands 550
Insured unemployment (left scale)
3.6
500
3.2
450
2.8
400 Nov. 25
2.4
Initial claims (right scale)
2.0 1.6
250
Thousands 250
200
200
150
150
100
100
350
Dec. 2 1999 2000 2001 2002 2003 2004 2005 2006 2007
300 250
Nov. 50
0
50
1999 2000 2001 2002 2003 2004 2005 2006 2007
0
Note. Seasonally adjusted by FRB staff. Source. Challenger, Gray, and Christmas, Inc.
Labor Market Tightness
Exhaustion Rate Percent 50
50
Percent 45
Index 150
3-month moving average 40 45
130
45 Job availability* (right scale)
35 40
40
30
90
Oct.
Nov.
35
35
30
30
25 20
25
1999 2000 2001 2002 2003 2004 2005 2006 2007 Note. The exhaustion rate is calculated as the number of individuals who were receiving unemployment insurance benefits but reached the end of their potential eligibility expressed as a percent of all individuals who began receiving such benefits 6 months earlier.
110
25
70 Hard to fill** (left scale)
50
15
30
10
10 1999 2000 2001 2002 2003 2004 2005 2006 2007 *Proportion of households believing jobs are plentiful, minus the proportion believing jobs are hard to get, plus 100. **Percent of small businesses surveyed with at least one "hard to fill" job opening. Source. For job availability, Conference Board; for hard to fill, National Federation of Independent Business.
Net Hiring Plans
Expected Labor Market Conditions Percent 30
30
Index 120
120 Conference Board
Manpower, Inc. 25
25 100 Q4
20
Nov.
20
100
Nov. 15
15
10
10
5 0
National Federation of Independent Business (3-month moving average) 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note. Percent planning an increase in employment minus percent planning a reduction.
80
60
Dec.
Michigan SRC
80
60
5 0
40
1999 2000 2001 2002 2003 2004 2005 2006 2007 Note. The proportion of households expecting labor market conditions to improve, minus the proportion expecting conditions to worsen, plus 100.
40
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Consumer Sentiment According to the preliminary report, the Michigan Survey Research Center’s (SRC) index of consumer sentiment dipped in early December to 90.2 after having edged down in November. The recent decrease reflected a weakening in the “expected conditions” component that more than offset a modest strengthening in the “current conditions” component of the overall index. Among those items not included in the overall sentiment index, consumers’ expectations about the change in unemployment over the next twelve months worsened a bit. In addition, consumers’ appraisals of buying conditions for cars weakened. However, consumers’ appraisals of buying conditions for homes improved. Meanwhile, the median of expected inflation over the next twelve months remained unchanged, and the median over the next five to ten years ticked up to 3.1 percent in early December.
-6December 8, 2006
University of Michigan Survey Research Center: Survey of Consumer Attitudes Indexes of consumer sentiment (Not seasonally adjusted) 2006 Category
Dec.P
May
June
July
Aug.
Sept.
Oct.
Nov.
Composite of current and expected conditions1 Current conditions1 Expected conditions1
79.1 96.1 68.2
84.9 105.0 72.0
84.7 103.5 72.5
82.0 103.8 68.0
85.4 96.6 78.2
93.6 107.3 84.8
92.1 90.2 106.0 108.2 83.2 78.6
Personal financial situation Now compared with 12 months ago2 Expected in 12 months2
102 112
113 120
110 122
109 112
99 122
118 131
119 125
118 123
81 80
88 79
87 80
75 84
99 92
113 97
112 97
97 95
Appraisal of buying conditions Cars Large household appliances2 Houses
112 147 121
124 159 123
130 158 119
124 160 117
128 151 116
137 160 129
140 156 134
137 162 136
Expected unemployment change - next 12 months
127
127
129
130
125
122
121
123
Prob. household will lose a job - next 5 years
24
21
21
19
23
22
23
20
Expected inflation - next 12 months Mean Median
4.7 4.0
4.4 3.3
3.8 3.2
4.6 3.8
3.6 3.1
3.7 3.1
3.3 3.0
3.5 3.0
Expected inflation - next 5 to 10 years Mean Median
3.8 3.2
3.4 2.9
3.2 2.9
3.5 3.2
3.2 3.0
3.5 3.1
3.5 3.0
3.6 3.1
Expected business conditions Next 12 months2 Next 5 years2
Note. Figures on financial, business, and buying conditions are the percent reporting ’good times’ (or ’better’) minus the percent reporting ’bad times’ (or ’worse’), plus 100. Expected change in unemployment is the fraction expecting unemployment to rise minus the fraction expecting unemployment to fall, plus 100. P Preliminary. 1. Feb. 1966 = 100. 2. Indicates the question is one of the five equally-weighted components of the index of sentiment.
Consumer sentiment
Expected inflation
1985 = 100 180
1966 = 100 130
160
Percent 5
5
120 4 Michigan SRC (right scale)
140 120
100
100
Nov.
90
Dec.P 80
4
Median, 5 to 10 years ahead
110 Dec.P
3
2
2
80
Median, 12 months ahead 1
60 40
P Preliminary.
2002
2004
1
70
Conference Board (left scale) 2000
3
2006
60
0
2000 P Preliminary.
2002
2004
2006
0
-7-
The Domestic Financial Economy
Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit
Total2
Level,1 Nov. 2006*e
2004
2005
H1 2006
Q3 2006
Oct. 2006*
Nov. 2006*e
8.9
10.5
11.9
7.7
.0
6.0
7,794
Loans3 Total To businesses Commercial and industrial Commercial real estate
9.7
11.6
11.7
10.0
3.5
5.3
5,835
1.2 11.7
13.2 17.1
16.4 15.6
18.9 12.9
9.1 2.2
4.6 6.9
1,162 1,408
To households Residential real estate Revolving home equity Consumer Originated4 Other5
15.6 43.8 8.8 6.0 7.4
12.0 13.3 3.1 .5 8.4
7.7 .1 6.7 7.1 12.0
7.0 3.2 5.8 5.5 3.0
6.5 .3 -10.9 -1.6 4.8
-1.9 4.3 9.5 9.6 15.8
1,726 449 725 1,113 814
6.6 5.2 4.9 5.7
7.6 5.3 .0 13.3
12.8 13.0 8.3 19.4
1.1 2.1 4.2 -.6
-10.6 -12.4 -27.5 7.0
8.1 10.6 -2.0 26.5
1,960 2,124 1,171 953
Securities Adjusted2 Reported Treasury and agency Other6
* Adjusted to remove the effects of a consolidation of a sizable amount of thrift assets onto a commercial bank’s books in October 2006. Note. Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data are adjusted to remove estimated effects of consolidation related to FIN 46 and for breaks caused by reclassifications. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Adjusted to remove effects of mark-to-market accounting rules (FIN 39 and FAS 115). 3. Excludes interbank loans. 4. Includes an estimate of outstanding loans securitized by commercial banks. 5. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables. 6. Includes private mortgage-backed securities, securities of corporations, state and local governments, foreign governments, and any trading account assets that are not Treasury or agency securities, including revaluation gains on derivative contracts. e Estimated.
Net Interest Margin
Loan-Loss Provisioning Percent
Percent of average assets 4.6
Quarterly
1.4 Quarterly
Q3
4.4
1.2
4.2
1.0
4.0
0.8
3.8
0.6
3.6
0.4
3.4
Q3
3.2 1990
1993
1996
1999
2002
2005
Note. Net interest margin is net interest income divided by average interest-earning assets. Source. Call Report.
0.2 0.0
1990
1993
1996
Source. Call Report.
1999
2002
2005
-8III-T-1
Selected Financial Market Quotations (One-day quotes in percent except as noted) 2004
2005
Change to Dec. 7 from selected dates (percentage points)
2006
Instrument June 28
Dec. 30
Oct. 24
Dec. 7
2004 June 28
2005 Dec. 30
2006 Oct. 24
1.00
4.25
5.25
5.25
4.25
1.00
.00
1.36 1.74
3.99 4.22
5.00 4.99
4.85 4.86
3.49 3.12
.86 .64
-.15 -.13
Commercial paper (A1/P1 rates)2 1-month 3-month
1.28 1.45
4.23 4.37
5.25 5.24
5.25 5.23
3.97 3.78
1.02 .86
.00 -.01
Large negotiable CDs1 3-month 6-month
1.53 1.82
4.49 4.65
5.33 5.37
5.30 5.28
3.77 3.46
.81 .63
-.03 -.09
Eurodollar deposits3 1-month 3-month
1.29 1.51
4.36 4.52
5.32 5.38
5.35 5.35
4.06 3.84
.99 .83
.03 -.03
Bank prime rate
4.00
7.25
8.25
8.25
4.25
1.00
.00
Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year
2.88 3.97 4.90
4.43 4.35 4.47
4.93 4.78 4.90
4.58 4.42 4.56
1.70 .45 -.34
.15 .07 .09
-.35 -.36 -.34
U.S. Treasury indexed notes 5-year 10-year
1.56 2.25
2.03 2.10
2.61 2.52
2.17 2.17
.61 -.08
.14 .07
-.44 -.35
Municipal general obligations (Bond Buyer)5
5.01
4.38
4.33
4.03
-.98
-.35
-.30
Private instruments 10-year swap 10-year FNMA6 10-year AA7 10-year BBB7 10-year high yield7
5.21 5.38 5.60 6.25 8.41
4.92 4.84 5.27 5.82 8.30
5.36 5.19 5.78 6.34 8.39
4.95 4.79 5.40 5.95 8.19
-.26 -.59 -.20 -.30 -.22
.03 -.05 .13 .13 -.11
-.41 -.40 -.38 -.39 -.20
Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable
6.21 4.19
6.21 5.16
6.40 5.60
6.11 5.43
-.10 1.24
-.10 .27
-.29 -.17
Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month
Record high
2005
Change to Dec. 7 from selected dates (percent)
2006
Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000
Level
Date
Dec. 30
Oct. 24
Dec. 7
Record high
2005 Dec. 30
2006 Oct. 24
12,343 1,527 5,049 797 14,752
11-17-06 3-24-00 3-10-00 12-5-06 3-24-00
10,718 1,248 2,205 673 12,518
12,128 1,377 2,345 762 13,802
12,278 1,407 2,428 792 14,200
-.52 -7.87 -51.91 -.64 -3.74
14.56 12.74 1.08 17.69 13.44
1.24 2.17 3.53 3.92 2.89
1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Most recent Thursday quote. 6. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 7. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: June 28, 2004, is the day before the most recent policy tightening began. October 24, 2006, is the day before the most recent FOMC announcement. _______________________________________________________________________
Cite this document
Federal Reserve (2006, December 11). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20061212_part1
@misc{wtfs_greenbook_20061212_part1,
author = {Federal Reserve},
title = {Greenbook/Tealbook},
year = {2006},
month = {Dec},
howpublished = {Greenbooks, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/greenbook_20061212_part1},
note = {Retrieved via When the Fed Speaks corpus}
}