Economic Trends
Filling you in on the current state of the economy.
2013
- 05.06.2013
- The Delayed Recovery of Investment in Nonresidential Structures
- Business fixed investment remains below its pre-recession peak, mainly due to the delayed recovery of one of its components, investment in nonresidential structures (factories, office buildings, etc.). One reason for the slow recovery is the overhang of structures that had been built before the recession. Read more
- 05.03.2013
- Employment Growth Slows in Ohio
- Employment in Ohio has grown 2.7 percent since the start of the recovery (June 2009 to March 2013). Over the same period, national employment grew almost a percentage point more. Ohio’s employment growth to this point in the recovery puts it close to the middle of the distribution. Read more
- 05.02.2013
- The Evolution of Debt Balances
- Since the end of the recent financial crisis, individuals have been reducing the large amounts of debt that they had built up prior to the recession. Recent studies show that the percentage of individuals holding debt in 2012 is less than in 2000. Read more
- 04.26.2013
- Has the Natural Gas Boom Impacted the Trade Deficit?
- Natural gas production in the United States has surged, thanks to innovations and expansions of shale drilling activity. Though the boom has the potential to affect the broader economy, its impact on the trade deficit has thus far been small. Read more
- 04.23.2013
- The Yield Curve and Predicted GDP Growth, April 2013
- Over the past month, the yield curve has moved down, and though both short and long rates fell, the change in long rates dominated, and the curve became significantly flatter. Calculations based on the yield curve suggest that real GDP will grow at about a 0.5 percent rate over the next year, and the expected chance of the economy being in a recession next April has risen a bit to 8.1 percent. Read more
- 04.19.2013
- An Enhanced Approach to Measuring Financial Stress
- The CFSI monitors stress in the overall financial system by tracking conditions in different types of financial markets. Two new markets have just been incorporated into the index, making it more sensitive to potential instability. And because early detection is critical, the CFSI will now be updated daily. In recent months, the CFSI has remained low, as key financial conditions continued to improve. Read more
- 04.09.2013
- Government Spending and Employment in Recoveries
- After steadily increasing for a decade, government spending and employment began to reverse course halfway into 2010. We are now almost four years into the recovery, and neither has returned to levels typical of past recoveries. Our trend analysis of government spending and employment suggests that it is still too soon to expect a return to historical norms after the Great Recession. Read more
- 04.01.2013
- GDP Growth in U.S. Metropolitan Areas during the Recovery
- On the whole, GDP growth in U.S. metropolitan areas was strong in the first two years of the recovery. But growth rates varied widely in different places. Some metro areas continued to struggle with the effects of the housing boom and subsequent bust. Others benefitted from natural resource extraction or high-tech industries. We look at some other factors associated with these different growth rates. Read more
- 03.28.2013
- Long-term Inflation Expectations
- In February, the CPI stood at 2.0 percent year-over-year, and the core CPI, which is simply the headline CPI measure excluding food and energy prices, was also 2.0 percent over the same period. How can we predict what inflation will be in the more distant future, especially in light of the Fed’s accommodative policies? Read more
- 03.26.2013
- Household Financial Position
- In the years preceding the stock market and housing bubbles, household wealth grew faster than incomes, leading Americans to believe that they were getting richer. As the bubbles burst, the nation’s wealth-to-income ratio took a dive and returned to its long-term trend. The adjustment took place as households constrained their spending and reduced their debt. Although consumption expenditures have rebounded since hitting the trough, growth has not been consistent. Read more
- 03.26.2013
- Recent Changes in FOMC Communication and the Committee’s Updated Projections
- Over time, the Federal Open Market Committee (FOMC) has sought to improve its public communications by providing more guidance on the likely future path of monetary policy. That is, the FOMC has tried to better explain to the public the direction the Committee expects its target for the federal funds rate to take in the future. Read more
- 03.26.2013
- The Impact of Sequestration on Federal Outlays in Fourth District Metropolitan Areas
- During the previous decade, federal expenditures and transfers flowing into the metro areas of the Fourth District rose by 48 percent. By 2010, nine of the district’s ten largest metro areas were receiving inflows of federal funding larger than one-fifth of their gross metropolitan product. Federal money has helped smooth the district’s economy through both the business cycle and structural changes. However, reliance on federal spending means the districts’ metro areas will feel the impact of the sequestrations mandated by the Budget Control Act of 2011. Read more
- 03.22.2013
- What Shape Is Commercial Bank Capital In?
- Regulators require banks to maintain a certain level of capital. Those requirements are put into place to ensure that banks will have enough of a cushion to maintain their daily activities in the event of an unforeseen shock. Due to the nature of bank debt, regulators focus on bank capital—the difference between a bank’s assets and its liabilities—when they are overseeing the safety and soundness of individual banks and the banking system overall. Read more
- 03.21.2013
- The Yield Curve and Predicted GDP Growth, March 2013
- Over the past month, the yield curve has gotten somewhat steeper, as long rates rose and short rates fell (both slightly). Calculations based on the yield curve suggest that real GDP will grow at about a 0.5 percent rate over the next year, and the expected chance of the economy being in a recession next March is 5.9 percent. Read more
- 03.18.2013
- Educational Attainment and Demographic Differences in Employment
- It is well-known that employment outcomes such as unemployment rates and employment-to-population ratios vary markedly across demographic groups. Differences in unemployment rates are especially pronounced across age and racial groups. It is also well-known that employment outcomes depend significantly on educational attainment, and that levels of educational attainment vary across race and ethnicity. In this article, we examine these factors. Read more
- 03.08.2013
- The Recession and Recovery from an Industry Perspective
- Real GDP grew at an annualized rate of 0.1 percent in the fourth quarter of 2012, according to the Bureau of Economic Analysis’s revised estimate. Although this revision may confer the important psychological effect of keeping a streak of 14 consecutive quarters with positive growth alive, the reality is that the U.S. economy stagnated in the last quarter of last year. The overall growth rate of real GDP hides a fair amount of heterogeneity across industries. Read more
- 03.07.2013
- Improvements in High School Graduation Rates
- High school graduations rates have risen, according to the latest figures from the Department of Education. But will the trend continue? The answer depends, in part, on future changes in the measurement of the rate. Beginning with the 2010-2011 academic year, all states will be required to report graduation rates using a new, more rigorous, and uniform standard. Read more
- 03.04.2013
- Yield Curve and Predicted GDP Growth, February 2013
- Over the past month, the yield curve has moved up, getting somewhat steeper in the process, as long rates moved more than short rates. Calculations based on the yield curve suggest that real GDP will grow at about a 0.6 percent rate over the next year, and the expected chance of the economy being in a recession next February has fallen. Read more
- 02.25.2013
- Does Nonfarm Payroll Growth Improve the Taylor Rule?
- There has been a lot of interest in financial circles in finding a guidepost or rule of thumb that reflects how monetary policymakers decide how to set interest rates. Given that the federal funds rate—the short-term interest rate set by the Federal Open Market Committee (FOMC)—has been at zero for a while, such a rule may not seem useful today. But presumably it will be once the rate is above zero, and it is interesting to see what the rule suggests about when the rate will increase. Some versions of the rule predict an earlier increase than the FOMC’s current projections, and we explain why this would be so. Read more
- 02.22.2013
- Has the Appetite for Risk Returned?
- The year 2012 was a busy one for risky debt. The total value of the various forms of risky debt that were issued—corporate debt, asset-backed securities, collateralized debt obligations, and municipal debt in particular—grew substantially over the previous year, while yield spreads for these instruments decreased. Read more
- 02.12.2013
- Behind the Slowdown of Potential GDP
- The current level of real GDP is 11.4 percent below the forecast that the Congressional Budget Office (CBO) made back in 2007, before the beginning of the crisis. In this article, we explore the lower-than-expected output and recently revised forecasts. Read more
- 02.08.2013
- Uneven Debt Burdens across the United States
- Americans’ debt burden—the ratio of debt payments to disposable income—grew steadily before the last recession and fell sharply once the recession began. But the changes were not spread uniformly across all states. Some states saw dramatic swings in the overall indebtedness of their residents. Others experienced little change. Read more
- 02.07.2013
- The State of the U.S. Labor Market Recovery
- It has been five years since the beginning of the Great Recession, and the labor market recovery, while far from great, has been steady. Nevertheless, we are still more than 3 million jobs short of the pre-recession level. While these numbers underscore the severity and depth of the recession, looking at a host of labor market indicators gives one a mixed message about where we are in terms of the recovery; even though there has been gradual improvement, there are still persistent weaknesses. Read more
- 01.31.2013
- Exports from the Fourth District States
- In the Fourth District states of Kentucky, Ohio, Pennsylvania, and West Virginia, exports make a significant contribution to the economy. The total value of goods exported by these states is approximately $122 billion per year, which equals just under ten percent of their combined Gross State Products. We examine the District’s exports following the recession and what may lie ahead. Read more
- 01.29.2013
- Japanese Monetary Policy and the Yen
- Japan’s new prime minister, Shinzo Abe, has been concerned about the yen’s appreciation and has attributed the yen’s behavior to exceptionally easy monetary policies abroad. To remedy the situation, he has asked the Bank of Japan to ease up on monetary policy by doubling its inflation objective and expanding its asset purchase program to that end. Although an easier monetary policy could lower the yen and lift Japan from deflation, the yen’s past appreciation has not obviously hampered the competitive position of Japan’s trade sector and does not seem overvalued. Read more
- 01.17.2013
- Persistent Uncertainty for Economic Policymakers
- The uniqueness of the most recent recession and its connection to a financial crisis has provided many challenges to policymakers, including the FOMC. The subsequent recovery, which is slowly progressing, still features a number of factors that are creating uncertainty about when the economy might return to a more normal trajectory. Read more
- 01.16.2013
- Tracking Recent Levels of Financial Stress
- In recent months, the Cleveland Financial Stress Index (CFSI) has remained low as conditions in key financial markets continued to improve. Read more
- 01.11.2013
- Was 2012 the Year the Housing Market Recovered?
- On many occasions during the past few years, housing market conditions have been cited as a key factor contributing to the slow recovery. For a typical household, the largest component of wealth is house value. The decline in house values has also been suggested as partly responsible for stubbornly high unemployment due to “lock-in,” where a household that is underwater on its mortgage limits its job search because it cannot afford to move. Read more
- 01.10.2013
- Employment in Education and Healthcare Services
- Last month’s employment report showed continued modest expansion in payrolls for the month of December, with the economy adding 155,000 jobs. This is right on the monthly average for the entire year, which stands at 153,000 new jobs per month. About one-quarter of the jobs added in 2012 have been in the education and health services sector, and in December alone the sector accounted for 42 percent of the new jobs. Read more
- 01.09.2013
- Changes in District Employment Are Closely Following the U.S. Average
- At the national level, the Labor Department tracks employment using two different surveys. One survey asks business establishments how many people they employ, while the other asks households how many individuals in the home have jobs. Differences in the sample size of each survey and the way they define employment can lead to different estimates for employment. The District’s unemployment rate should be interpreted with caution and we explain why. Read more
- 01.09.2013
- Survey Measures of Inflation Expectations
- The annual inflation level as measured by the CPI was 1.8 percent as of November 2012, whereas the CPI excluding food and energy, usually referred to as the core CPI, was 1.9 percent. These latest figures, along with developments over the past year, show that the inflation scare of recent years has yet to be supported by the data. Read more
- 01.08.2013
- Bank-Holding Companies and Changing Capital Ratios
- The last financial crisis serves as a clear reminder of the importance of having a banking sector that can withstand a downturn in the economy or a drop in the value of its assets. One of the best protections from such a downturn is capital. Generally speaking, capital is what remains when bank liabilities are subtracted from assets; that is, it is the difference between what the bank owns and what it owes. Regulators use more precise definitions, and two of these have been steadily improving for bank-holding companies since the financial crisis. Read more
- 01.08.2013
- The Changing Composition of Bank-Holding Company Portfolios
- One test of the health of the banking sector is to evaluate how risky the assets in banks’ portfolios are. Regulators typically do this by considering banks’ risk-weighted assets. Here we will look at bank riskiness through the lens of the current regulatory system, where assets are risk-weighted according to a preset procedure established by regulators. Read more
- 01.07.2013
- Recent Changes in National Savings
- Economists study national savings—the share of national output not consumed by households, businesses, or the government—because it is the main source of funds available for domestic investment in new capital goods (used to produce other goods and services). Capital accumulation, in turn, is a key driver of productivity gains and rising living standards. Put simply, saving finances investment. This article examines recent trends in national savings, and household savings in particular. Read more