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 02/07/2013.
Confidential (FR) Class III FOMC
December 7, 2007
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....................................................................................2 Tables Changes in Employment ..............................................................................3 Selected Unemployment and Labor Force Participation Rates.................................................................................................5 Reuters/University of Michigan Survey of Consumers ...............................6 Charts Changes in Private Employment..................................................................3 Aggregate Hours and Workweek of Production or Nonsupervisory Workers .................................................................3 Labor Market Indicators ..............................................................................4 Labor Force Participation Rate and Unemployment Rate ...........................5 Job Losers Unemployed Less Than 5 Weeks ..............................................5 Unemployed Due to Job Loss ......................................................................5
The Domestic Financial Economy ...........................................................7 Tables Commercial Bank Credit .............................................................................7 Selected Financial Market Quotations .........................................................8
ii
Supplemental Notes The Domestic Nonfinancial Economy Labor Market Developments Employment gains have stepped down in recent months, reflecting to a large extent the weakness in the housing market. Last month, private nonfarm payrolls rose 64,000, little different from the average rate over the three months ended in October, but down nearly 60,000 from the pace over the preceding three-month period. In November, residential construction shed 20,000 jobs—its fourth month of sizable declines—and employment in housing-related sectors such as finance, real estate, and building material and gardensupply retailers continued to trend down. Elsewhere, factory payrolls declined again, while employment in most service-producing industries continued to move up. Because the average workweek of production or nonsupervisory workers has been unchanged, on balance, over the past year, the rise in aggregate hours has slowed in line with employment. In November, the index of aggregate weekly hours of production or nonsupervisory workers inched up to a level 0.3 percent above its third-quarter average (not at an annual rate). Indicators from the household survey also point to some recent softening in the labor market.1 After having increased 0.2 percentage point over the third quarter, the unemployment rate held steady at 4.7 percent for a third month in November. Although the labor force participation rate moved back up to 66.1 percent last month, it remains about ¼ percentage point below its recent peak earlier this year. Other indicators of labor market activity point to some further slowing of labor demand in coming months. The four-week moving average of initial claims for unemployment insurance continued to trend up, but remains in a range consistent with modest employment gains.2 In addition, the index of expected unemployment change over the next twelve months in the Reuters/University of Michigan Survey of Consumers jumped in early December to its highest level since the aftermath of Hurricane Katrina in September 2005. Moreover, the National Federation of Independent Business reported that its index of net hiring plans continued to move down in November. 1
The reference week for the household survey was one week earlier in November than is typically the cast to avoid data collection during Thanksgiving week. The effects of this change on the monthly estimates are unclear. 2 We must interpret the recent claims figures with caution because seasonal adjustment of initial claims is particularly difficult around major holidays.
-1-
-2-
Average hourly earnings rose 0.5 percent in November following smaller increases in the previous two months. Over the twelve months ended in November, average hourly earnings rose 3.8 percent, off a bit from the 4.1 percent pace over the previous twelve months. Consumer Sentiment The Reuters/University of Michigan index of consumer sentiment ticked down further in early December as a result of respondents more pessimistic views of the outlook for their personal finances and for business conditions in the year ahead. Households’ assessment of current conditions turned up a touch reflecting more a favorable opinion of buying conditions for large household durables. Their appraisal of current buying conditions for cars slipped further, but, citing lower prices, their views of buying conditions for houses improved. Respondents’ median expectation for year-ahead inflation edged up further in December to 3.5 percent, and their median expectation for inflation over the next five to ten years moved up to 3.1 percent. Both readings are at the high end of the range of the past two years.
Changes in Employment (Thousands of employees; seasonally adjusted) 2007 Measure and sector
2006
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
189 169 5 -7 11 11 -3 9 2 16 42 -1 83 20 262
142 115 3 -14 3 2 27 2 4 2 14 -7 71 28 109
126 114 2 -13 -9 15 -7 1 2 5 17 -11 100 12 -38
77 61 2 -21 -23 9 0 9 0 -7 23 -9 70 15 39
44 37 0 -15 -25 11 -3 16 6 -24 12 -17 59 7 463
170 132 2 -15 -9 14 -15 3 -2 -2 64 28 91 38 -250
94 64 2 -11 -24 5 24 5 -6 -20 30 11 59 30 696
2.5 33.8 41.1
1.1 33.8 41.0
2.1 33.8 41.2
1.2 33.8 41.3
.1 33.8 41.3
.1 33.8 41.2
.1 33.8 41.3
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.
Aggregate Hours and Workweek of Production or Nonsupervisory Workers
Changes in Private Payroll Employment Thousands
400
400
35.0
Hours
2002 = 100
110
3-month moving average 300
300
200
200
100
108
Aggregate hours (right scale)
34.5
100
106
Nov.
104
Nov. 0
0
-100
102
-100
-200
-200
-300
-300
-400
34.0
1999 2000 2001 2002 2003 2004 2005 2006 2007
-400
100 33.5
Workweek (left scale)
98 96
33.0
1999 2000 2001 2002 2003 2004 2005 2006 2007
94
3
Labor Market Indicators
Unemployment Insurance 3.0
Percent
Layoffs and Job Cuts Thousands
Insured unemployment rate (left scale)
550
300
500
250
450
200
400
150
350
100
300
50
250 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
0
Percent of private employment
Thousands
1.6
2.5 Sept.
Nov. 24 2.0
1.5 Dec. 1
*4-week moving average.
1.0
Announced job cuts (left scale)
Nov.
0.8 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Note. Both series are seasonally adjusted by FRB staff. Source. For layoffs and discharges, Job Openings and Labor Turnover Survey; for job cuts, Challenger, Gray, and Christmas, Inc.
Net Hiring Plans
Job Openings and Hires Percent
30
1.4
1.2
Initial claims* (right scale)
1.0
1.8
Layoffs and discharges (monthly, right scale)
30
Percent of private employment
4.5
4.5
Hires (monthly)
Manpower, Inc. 25
25
4.0
20
20
3.5
15
3.0
3.0
10
2.5
2.5
5
2.0
2.0
0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1.5
1.5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Q4
15
Nov.
10 5 0
Sept.
3.5
Job openings
National Federation of Independent Business* (3-month moving average)
Note. Percent planning an increase in employment minus percent planning a reduction. * Seasonally adjusted by FRB staff.
Source. Job Openings and Labor Turnover Survey.
Reuters/Michigan Expected Unemployment Change (next 12 months) 160
4.0
Hard-To-Fill Positions Index
160
Percent
40
40
3-month moving average 140
Dec. (p)
120
35
35
30
30
25
25
140
120
20 100
80
Nov.
20
100
80 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Note. The fraction of households expecting unemployment to rise, minus the fraction expecting unemployment to fall, plus 100. p Preliminary.
15
15
10
10 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Note. Percent of small businesses surveyed with at least one "hard-to-fill" job opening. Seasonally adjusted by FRB staff. Source. National Federation of Independent Business.
4
Selected Unemployment and Labor Force Participation Rates (Percent; seasonally adjusted) 2007 Rate and group
2006
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
4.6 15.4 8.2 3.5 3.7
4.5 14.8 7.7 3.6 3.5
4.5 15.6 7.7 3.5 3.5
4.7 15.7 8.5 3.6 3.7
4.7 16.0 8.9 3.6 3.6
4.7 15.6 8.5 3.7 3.7
4.7 16.3 8.1 3.6 3.8
Labor force participation rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older
66.2 43.6 74.6 75.5 59.6
66.2 42.2 75.1 75.7 59.6
66.0 41.5 74.2 75.6 59.6
66.0 40.7 74.5 75.5 59.8
66.0 41.2 75.0 75.5 59.8
65.9 41.1 74.0 75.3 59.6
66.1 40.8 74.5 75.6 59.8
Labor Force Participation Rate and Unemployment Rate
Percent
Percent
67.6 67.4
6.5
Participation rate (left scale)
67.2
7.0
6.0
67.0 66.8
5.5
Unemployment rate (right scale)
66.6
5.0
66.4
Nov.
66.2
4.5 4.0
66.0
3.5
65.8 65.6
2000
2001
2002
2003
2004
Job Losers Unemployed Less Than 5 Weeks
2006
3.0
2007
Unemployed Due to Job Loss
(as a percent of household employment)
(as a percent of the labor force)
Percent
1.4
2005
1.4
Percent
4.0
4.0
3-month moving average (thick line) 1.2
Nov.
1.0
0.8
0.6
3.5
3.5
3.0
3.0
1.2
1.0
Nov.
2.5
2.5
2.0
2.0
1.5
1.5
0.8
2000
2001
2002
2003
2004
2005
2006
2007
0.6
1.0
2000
2001
2002
2003
2004
2005
2006
2007
1.0
5
December 7, 2007
Reuters/University of Michigan Survey of Consumers Indexes of consumer sentiment (Not seasonally adjusted) 2007 Category Composite of current and expected conditions1 Current conditions1 Expected conditions1 Personal financial situation Now compared with 12 months ago2 Expected in 12 months2
May
June
July
88.3 105.1 77.6
85.3 90.4 101.9 104.5 74.7 81.5
Aug.
Sept.
Oct.
Nov.
Dec.P
83.4 98.4 73.7
83.4 97.9 74.1
80.9 97.6 70.1
76.1 91.5 66.2
74.5 92.1 63.2
113 125
110 117
115 125
103 120
109 119
111 119
101 115
98 111
97 89
94 88
105 96
87 88
82 96
78 84
73 76
65 76
Appraisal of buying conditions Cars Large household appliances2 Houses
124 160 135
118 154 131
125 156 129
133 152 118
139 144 123
128 142 131
117 136 122
115 140 134
Expected unemployment change - next 12 months
120
125
123
131
127
130
128
138
Prob. household will lose a job - next 5 years
19
23
21
24
21
21
19
22
Expected inflation - next 12 months Mean Median
4.3 3.3
4.2 3.4
4.2 3.4
4.0 3.2
4.0 3.1
3.7 3.1
4.3 3.4
4.5 3.5
Expected inflation - next 5 to 10 years Mean Median
3.7 3.1
3.3 2.9
3.6 3.1
3.4 2.9
3.4 2.9
3.1 2.8
3.4 2.9
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 1966 = 100 130
1985 = 100 180 160
120 4 Reuters/Michigan (right scale)
140
100
100
90 Nov.
80
40
Dec.P
2002
P Preliminary.
2004
Dec.P
3
2
3
2
80
Median, 12 months ahead 1
1
70
Conference Board (left scale) 2000
4
Median, 5 to 10 years ahead
110
120
60
Percent 5
5
2006
2008
60
0
2000
2002
2004
2006
2008
0
P Preliminary.
6
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
1999
2002
2005
Source. Call Report.
7
III-T-1
Selected Financial Market Quotations (One-day quotes in percent except as noted) 2006
Change to Dec. 6 from selected dates (percentage points)
2007
June 29
Sept. 17
Oct. 30
Dec. 6
2006 June 29
2007 Sept. 17
2007 Oct. 30
5.25
5.25
4.75
4.50
-.75
-.75
-.25
4.88 5.06
4.05 4.15
3.86 3.92
3.02 3.18
-1.86 -1.88
-1.03 -.97
-.84 -.74
Commercial paper (A1/P1 rates)2 1-month 3-month
5.27 5.37
5.23 5.25
4.56 4.65
4.86 4.86
-.41 -.51
-.37 -.39
.30 .21
Large negotiable CDs1 3-month 6-month
5.47 5.59
5.52 5.36
4.78 4.73
5.17 4.92
-.30 -.67
-.35 -.44
.39 .19
Eurodollar deposits3 1-month 3-month
5.33 5.49
5.55 5.60
4.75 4.85
5.50 5.30
.17 -.19
-.05 -.30
.75 .45
Instrument Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month
Bank prime rate
8.25
8.25
7.75
7.50
-.75
-.75
-.25
Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year
5.26 5.15 5.28
4.12 4.18 4.58
3.84 4.02 4.51
3.03 3.41 4.20
-2.23 -1.74 -1.08
-1.09 -.77 -.38
-.81 -.61 -.31
U.S. Treasury indexed notes5 5-year 10-year
2.51 2.61
2.04 2.15
1.83 2.05
1.28 1.83
-1.23 -.78
-.76 -.32
-.55 -.22
Municipal general obligations (Bond Buyer)6
4.71
4.46
4.33
4.38
-.33
-.08
.05
Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8
5.81 5.59 6.20 6.74 8.74
5.17 5.01 6.05 6.46 8.95
5.03 4.90 5.86 6.26 8.67
4.65 4.65 5.95 6.41 9.27
-1.16 -.94 -.25 -.33 .53
-.52 -.36 -.10 -.05 .32
-.38 -.25 .09 .15 .60
Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable
6.78 5.82
6.34 5.65
6.26 5.57
5.96 5.46
-.82 -.36
-.38 -.19
-.30 -.11
Record high
Change to Dec. 6 from selected dates (percent)
2007
Level
Date
Sept. 17
Oct. 30
Dec. 6
Record high
2007 Sept. 17
2007 Oct. 30
14,165 1,565 5,049 856 15,807
10-9-07 10-9-07 3-10-00 7-13-07 10-9-07
13,403 1,477 2,582 776 14,839
13,792 1,531 2,817 816 15,482
13,620 1,507 2,709 787 15,203
-3.85 -3.69 -46.34 -8.04 -3.82
1.62 2.08 4.93 1.44 2.45
-1.25 -1.55 -3.82 -3.58 -1.80
Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000
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. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: June 29, 2006, is the day the most recent policy tightening ended. September 17, 2007, is the day before the most recent policy easing began. October 30, 2007, is the day before the most recent FOMC announcement. _______________________________________________________________________
8
Cite this document
Federal Reserve (2007, December 10). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20071211_part3
@misc{wtfs_greenbook_20071211_part3,
author = {Federal Reserve},
title = {Greenbook/Tealbook},
year = {2007},
month = {Dec},
howpublished = {Greenbooks, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/greenbook_20071211_part3},
note = {Retrieved via When the Fed Speaks corpus}
}