Federal Reserve Bank of Cleveland: http://www.clevelandfed.org

The CPI fell further than expected, posting a record decrease of −18.4 percent (annualized rate) in November. Rapidly falling energy prices (down 89.3 percent at an annualized rate), accounted for a large part of the decrease. Outside of energy prices, there was a rather curious uptick in owners’ equivalent rent (OER)—it increased 3.4 percent in November. Read more

12.18.2008

The Yield Curve, December 2008

The yield curve has flattened since November, with long rates falling more than short rates, but the difference between the rates remained strongly positive. The flight to quality and the turmoil in the financial markets may affect the reliability of the yield curve as an indicator, but projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 3.0 percent rate over the next year. This remains on the high side of other forecasts. Read more

12.11.2008

Fourth District Community Banks

Kent Cherny, Joseph G Haubrich and Saeed Zaman

There are 238 community banks headquartered in the Fourth District. We look at their annual asset growth, income stream, balance sheet composition, liabilities, problem loans, net charge–offs, and coverage ratio. Read more

12.11.2008

Fourth District Employment Conditions, October 2008

The District’s unemployment rate rose 0.1 percent, reaching 7.0 percent in October and exceeding the nation’s rate by 0.5 percentage point. Year–over–year,the District’s unemployment rate has increased 1.5 percentage points, compared to the nation’s increase of 1.7 percentage points. Read more

12.11.2008

Metro-Area Differences in House Price Indexes

On the last Tuesday of every month, when the monthly S&P/Case–Shiller housing price indexes are released, newspapers fill up with dour headlines about another new record drop in home prices. While these headlines may be factually correct, it’s important to realize that the numbers being quoted are almost always the composite figures. Read more

12.10.2008

Japan’s Quantitative Easing Policy

The federal funds rate is now at 1 percent, and financial markets expect a further substantial cut. The United States has entered a recession, and the outlook for next year seems so somber that some economists are asking if deflation—a drop in overall prices—is not a distinct possibility. Japan underwent a decade–long odyssey with deflation and the zero–bound problem. The Bank of Japan’s experience during this period offers a guide for getting back to more familiar economic turf. Read more

12.05.2008

The Employment Situation, November 2008

November employment fell by 533,000 in the largest one-month drop since December 1974, coming in far worse than expectations. Additionally, payrolls in September and October were revised down to losses of 403,000 and 320,000, respectively. Since the start of the recession in December 2007, job losses in the United States have totaled about 1.9 million, roughly 1.3 million of which have come in just the past three months. Read more

12.02.2008

GDP: Third-Quarter Preliminary Estimate

Third-quarter real GDP was revised down 0.2 percentage point, to −0.5 percent, according to the preliminary estimate released by the Bureau of Economic Analysis. The downward revision, which was largely anticipated, reflected downward adjustments to personal consumption and exports, which were somewhat offset by an upward adjustment to inventories, and a downward revision to imports. Read more

11.28.2008

Industrial Production, Commodity Prices, and the Baltic Dry Index

Industrial production rebounded in October, rising 1.26 percent after declining a downwardly revised 3.7 percent in September. The revision to September output was caused, in part, by a larger-than-anticipated estimate of the impact of hurricanes Gustav and Ike on the chemical industry. The September drop resulted in the largest month-over-month percent decline in the series since February 1946. Read more

11.26.2008

The Yield Curve, November 2008

In the midst of the horrendous economic news of the last month, the yield curve might provide a slice of optimism. Since last month, it has flattened, as short rates fell more than long rates. On the other hand, the historic turmoil in the financial markets also suggests that the historical relationships on which our interpretation of the yield curve depends may not be holding up in times of stress. Read more

11.25.2008

October Price Statistics

The Consumer Price Index decreased at an annualized rate of 10.9 percent in October. It was the largest monthly decrease on record in the series (which goes back to 1947), conjuring the specter of deflation just four short months after inflation looked to be a major concern. Read more

11.13.2008

Business Loan Markets

The Federal Reserve Board’s October 2008 survey of senior loan officers was recently released. It found significant tightening of standards for commercial and industrial loans since the last survey. Read more

11.07.2008

Financial Turmoil and Global Growth

A new IMF report says the turmoil in world financial markets is impeding global economic growth and predicts that subpar growth will likely continue for a fairly prolonged period. Advanced economies are expected to bear the brunt of the slowdown, with most predicted to experience a contraction in 2009. Emerging-market and developing countries will experience a slowing in economic growth as well, although the slowdown is expected to leave their economic growth fairly high relative to their history. Read more

11.07.2008

Fourth District Employment Conditions, September

The District’s unemployment rate remained steady at 6.9 percent for the month of September. The District’s rate was again higher than the nation’s (by 0.8 percentage point). Read more

11.07.2008

The Employment Situation, October 2008

October nonfarm payrolls fell by 240,000, for the tenth straight month of decline this year and slightly worse than consensus expectations. After revisions, September now marks the largest monthly loss since November 2001. Average employment losses in the four most recent recessions ranged anywhere from 120,000 to 180,000 per month, although much larger losses occasionally occurred in a single month. Cumulative losses for the U.S. economy have reached 1.2 million jobs since January, when the downward slope began. Read more

11.06.2008

Comparing Current Payroll Employment Changes with Past Recessions

The “R” word has been tossed around plenty this year, although the NBER has not declared that a recession has started. But now seems a good time to ask how employment behavior so far this year sizes up to that of recent recessions. Read more

11.06.2008

More Measures Introduced to Help Financial Markets

Charles T Carlstrom and Sarah Wakefield

On October 8, the Federal Reserve joined with several other central banks to announce reductions in policy interest rates. In an intermeeting action, the FOMC voted to reduce the target for the federal funds rate to 1.5 percent. At its next meeting on October 28 and 29, it decided to again reduce the target to 1 percent. Also during the month the Fed began to pay interest on reserves, altering the original interest rate formula soon after, and introduced a new lending facility to address signs of stress in the short-term commercial paper market. Read more

11.04.2008

Trends in the Components in Real GDP

Paul W Bauer and Michael Shenk

To get a clue as to where the economy may be headed, we step back to see how the components of GDP have evolved over the past two decades. Read more

11.03.2008

GDP: Third-Quarter Advance Estimate

Real GDP decreased at an annualized rate of 0.3 percent in the third quarter, slightly above expectations. Much of the decrease was due to a dramatic drop in consumption and a decrease in investments. Personal consumption expenditures decreased 3.1 percent in the third quarter, their largest decrease since the second quarter of 1980. Even worse, spending on nondurable goods fell 6.5 percent during the quarter, its largest decrease since the fourth quarter of 1950. Read more

10.28.2008

September Price Statistics

The Consumer Price Index was virtually unchanged in September, falling just 0.4 percent at an annualized rate. Over the past couple of months, the median CPI has remained stubbornly elevated (falling only slightly), while the 16 percent trimmed–mean CPI has fallen dramatically from July’s 7.2 percent increase. This disparity between the median CPI and the 16 percent trimmed–mean has a lot to do with the majority of the index’s components falling in the tails of the distribution. Read more

10.24.2008

The Yield Curve, October 2008

Since last month, the yield curve has gotten steeper, as short rates fell and long-term rates rose. The flight to quality and the turmoil in the financial markets may impact the reliability of the yield curve as an indicator, but projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 3.0 percent rate over the next year. This remains on the high side of other forecasts, many of which are predicting reductions in real GDP. Read more

10.10.2008

What Exactly Is a Recession—and Are We in One?

The common definition of a recession, and the one most frequently cited in the media, is a period of two consecutive quarterly declines in real GDP. NBER’s actual definition is fairly vague, which explains why many prefer the shorthand definition, but the idea is fairly simple. A recession is any period when economic activity experiences a prolonged and widespread decline. Read more

10.09.2008

Fourth District Employment Conditions, August

The District’s unemployment rate increased 0.2 percent, reaching 6.9 percent for the month of August. Compared to the nation’s unemployment rate, the District’s was again higher in August (by 0.8 percentage point), as it has consistently been since early 2004. Read more

10.08.2008

Swap Lines

The Federal Reserve is using swap lines to provide U.S. dollar liquidity to other central banks dealing with the global financial crisis.On September 29, the Fed offered swaps totaling $620 billion dollars to nine key central banks through April 2009, if necessary. Read more

10.07.2008

Housing and the Banking Industry

Kent Cherny and Ozgur Emre Ergungor

The deterioration of the housing market shows few signs of nearing an end. Home price indexes have continued to fall. Mortgage-related losses are taking a big bite out of mortgage lenders’ profits, and increasingly, the deterioration in earnings is affecting more than a few large institutions and becoming a widespread problem. Read more

10.06.2008

The Employment Situation, September 2008

Nonfarm payrolls declined by 159,000 between August and September, with losses spread across a wide range of industries. This marks the ninth consecutive month of employment decline and a continuation of the 6.1 percent unemployment rate, which remains the highest seen since September 2003. Read more

10.02.2008

Cracks in the Real Economy

Not too surprisingly, news of general economic activity has taken a backseat to news of the problems plaguing the U.S. financial system. A look at the main data releases of September (which describe the economic activity of August) suggests a picture of weakening across a broad range of the economy. Read more

10.02.2008

Second-Quarter GDP, Final Revision

Real GDP advanced at an annualized rate of 2.8 percent in the second quarter, according to the final release from the Bureau of Economic Analysis. This is a downward revision of 0.5 percentage point from the preliminary estimate, but it is still up 0.9 percentage point from the advance estimate. The downward adjustment (from preliminary to final) was largely due to a revision to real consumption growth, from an increase of 1.7 percent to 1.2 percent. Read more

09.29.2008

The Yield Curve, September 2008

Since last month, the yield curve has flattened modestly, with short-term interest rates increasing and longer rates holding steady. The financial crisis showed up in the yield curve, with rates falling since last month, as investors fled to quality.The flight to quality and the turmoil in the financial markets may impact the reliability of the yield curve as an indicator, but projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 3.0 percent rate over the next year. Read more

09.26.2008

August Price Statistics

The Consumer Price Index (CPI) fell for the first time since October 2006, declining at an annualized rate of 1.6 percent in August. In August, 30 percent of the components of the CPI exhibited price decreases, while 22.5 percent experienced increases at rates exceeding 5.0 percent (so a majority of the index’s components fell into the tails of the distribution). Read more

09.19.2008

Trend Unemployment and What It Says about Unemployment Patterns

Removing cyclical elements from monthly unemployment data reveals the underlying trend, which can help us see longer-term patterns. When we look at the trend along with the monthly data for the last two recessions and the recoveries that followed, we see characteristics of the typical unemployment cycle, as well as features of the behavior of various segments of the workforce. Read more

09.17.2008

Staying the Course

John B Carlson and Sarah Wakefield

In a unanimous vote, the Federal Open Market Committee (FOMC) voted to keep its target fed funds rate steady at 2 percent. Just last week, most market participants took the no–change outcome as a given. However, financial market developments over the weekend sent shockwaves through the whole financial system. By Monday, options and futures prices on the fed funds rate indicated that odds slightly favored a rate cut of at least 25 basis points. But that was not to be. Read more

09.12.2008

Do Oil Prices Directly Affect the Stock Market?

Market commentators and journalists like to draw direct lines between the behavior of crude oil prices and market behavior on a given day, with such headlines as “Oil Spike Pummels Stock Market” (Wall Street Journal) or “U.S. Stocks Rally as Oil Prices Fall”(Financial Times). But does a change in oil prices affect the overall stock market in any predictable, meaningful way? Might a hike in crude foretell a weak day on the Street? Read more

09.11.2008

Fourth District Employment Conditions, July

The district’s unemployment rate jumped up 0.4 percent to 6.6 percent for the month of July. The District’s rate was 0.9 percent higher than the nation’s in July, and it has been consistently higher since early 2004. Since this time last year, the Fourth District’s unemployment rate has increased 1.2 percentage points and the nation?s has increased 1.0 percentage points. Read more

09.09.2008

Global Developments in the Economic Outlook

The dollar’s recent depreciation and exceptionally strong economic growth abroad have been a boon to U.S. economic growth, but that may now be changing. Read more

09.09.2008

The Employment Situation, August

Nonfarm payrolls declined by 84,000 in August, and the unemployment rate rose to 6.1 percent, up from 5.7 percent in July. This marks the eighth consecutive month of employment decline and the highest rate of unemployment since September 2003. The decline in payrolls and the rise in the unemployment rate were both larger than consensus expectations. Read more

09.05.2008

Second-Quarter GDP Preliminary Revision: Onward and Upward?

Real GDP advanced at an annualized rate of 3.3 percent in the second quarter, outpacing its growth over the past four quarters, according to the preliminary release from the BEA. This is an extremely large upward revision (1.4 percentage points) from the advance estimate when compared to the average advance–to–preliminary revision over the past 20 years of 0.5 percentage point. If this estimate holds, the economy will have grown in the second quarter at a rate in excess of its average over the past 20 years (not bad for a quarter that, not too long ago, was expected to post near–zero growth). Read more

09.04.2008

Update on the Housing Market

Over the past two weeks, a lot of data on the housing market has been released, giving us a fairly comprehensive look at where the market stands through July. Here’s a brief overview of that data and the picture it paints of the housing market. Read more

09.03.2008

The Columbus Metropolitan Statistical Area

Located in the geographic center of Ohio, the Columbus MSA is home to 1.75 million people dispersed across eight counties. Columbus’s population has grown faster than other Fourth District MSAs, and its workforce has a lower share of workers employed in manufacturing, factors which partly explain the MSA’s overall employment growth numbers as well as that of particular industries. Read more

08.26.2008

July Price Statistics

The CPI rose at an annualized rate of 10.3 percent in July, much higher than expected, as energy and commodity prices continued to surge. One-year-ahead average inflation expectations fell 0.8 percentage point to 5.5 percent in August, likely reflecting the recent decline in energy and commodity prices from near–term peaks. Longer–term (5–10 year–ahead) average expectations ticked up to 3.8 percent in August from 3.5 percent in July, holding slightly above their recent trend. Read more

08.26.2008

The Yield Curve, August 2008

Michael F Bryan, Kent Cherny, Joseph G Haubrich and Brent Meyer

Since last month, the yield curve has flattened modestly, with both short-term interest rates increasing and longer rates holding steady. The yield curve slope became somewhat flatter, with short rates moving up, and the spread remains positive. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 3.0 percent rate over the next year. Read more

08.15.2008

State Labor Markets

Since the start of the credit crisis, labor markets in the 50 states have generally weakened. As the national unemployment rate rose from 4.7 percent to 5.5 percent from September 2007 to June 2008, the vast majority of U.S. states also saw rising unemployment rates. Within the Fourth District, Pennsylvania was the only state adding employment over the period. Read more

08.14.2008

Aggregate Labor Force Participation

After peaking at 67.3 percent in the first quarter of 2000, the labor force participation rate fell steadily to around 66 percent by early 2005 and has remained at around 66 percent since then. When the baby–boom cohort entered the labor force—from 1980 to 2000—the share of prime–age workers (ages 25 to 54) in the population increased from 53 percent to 56 percent. As this cohort starts retiring, the Census Bureau projects that the share of prime–age workers will decrease to 47 percent in the 2020s, and the share of older people will increase to 37 percent. Read more

08.12.2008

Fourth District Employment Conditions, June

The Fourth District’s unemployment rate notched up 0.1 percent in June, reaching 6.2 percent. The increase can be attributed to monthly increases in the number of people unemployed (0.6 percent) along with a decrease in the number of people employed (−0.3 percent). Since the same time last year, the Fourth District’s unemployment rate has increased 0.6 percentage point, while the nation’s has increased 1.1 percentage points. Read more

08.11.2008

Real GDP: Second–Quarter Advance Estimate and Benchmark Revisions

Real GDP increased at an annualized rate of 1.9 percent in the second quarter of 2008, according to the advance estimate released by the BEA, 0.1 percentage point higher than its growth over the last four quarters. The revision to the fourth quarter of 2007, from 0.6 percent to −0.2 percent, garnered far more interest and renewed some recession speculation. Read more

08.07.2008

Another Steady Rate Decision

Charles T Carlstrom and Sarah Wakefield

On August 5, 2008, the Federal Open Market Committee (FOMC) voted to keep its target for the federal funds rate at 2%. The committee’s statement noted that tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. However, it added that upside risks to inflation are also of significant concern. Read more

08.06.2008

The Net International Investment Position

The United States has run a current account deficit almost continuously since 1982. We have financed this deficit by issuing financial claims, such as stocks, bonds, and bank accounts, to the rest of the world. Since 1986, foreigners have held more claims on the United States than U.S. residents have held on them, or, in the jargon of international finance, the United States has maintained a negative net international investment position. Last year, that negative position reached a record $2.5 trillion. Read more

08.04.2008

The Employment Situation, July

The economy lost 51,000 jobs in July, marking the seventh consecutive month of payroll decline, and the unemployment rate increased from 5.5 percent to 5.7 percent. Read more

07.30.2008

Fourth District Bank Holding Company Conditions

How are bank holding companies in the Fourth District faring? Here’s a first-quarter 2008 update on a number of indicators of conditions in the industry. Read more

07.30.2008

Will We Have Another “Jobless” Recovery?

Paul W Bauer

After the last business cycle peak—still officially March 2001—labor productivity remained strong, but employment took longer than usual to recover. As we continue through another soft economic patch, we might wonder whether labor productivity will be as strong as it was after the last business cycle peak. While this would be good for real wages and living standards in the long run, it could mean a slow recovery in employment growth in the short run. Read more

07.25.2008

June Price Statistics

The CPI rose at an annualized rate of 13.4 percent in June, outpacing all of its longer-term trends and pushed up by a 116.3 percent spike in energy prices and a 9.6 percent increase in food prices. Over the past 12 months, the PPI has increased 9.1 percent, its largest growth rate in 27 years. Average inflation expectations, as measured by the University of Michigan’s Survey of Consumers, have been holding near recent highs. Read more

07.16.2008

The Yield Curve, July 2008

Since last month, the yield curve has taken a parallel upward shift, with both short-term and long-term interest rates rising. The yield curve slope became slightly flatter, with both long and short rates moving down. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 3.0 percent rate over the next year—on the high side of other forecasts. Read more

07.10.2008

Differences in Educational Attainment across States

The relationship between economic growth and human capital is well established in economics. Looking at Fourth District states, Kentucky and Pennsylvania have above-average growth in the share of the population with both four-year and advanced degrees, while Ohio had below-average growth in both categories. West Virginia had a higher-than-average growth rate in four-year degrees, but the state remains the lowest ranked of the 50 states, with only 1 in 6 adults over 25 having earned a four-year college degree. Read more

07.10.2008

Fourth District Employment Conditions, May

The district’s unemployment rate jumped 0.6 percent, to 6.1 percent, for the month of May. Compared to the national rate, the district’s unemployment rate stood 0.6 percent higher in May and has been consistently higher since early 2004. Since the same time last year, the Fourth District unemployment rate has increased 0.7 percentage point. The national rate has increased 1.0 percentage point. Read more

07.09.2008

Why Hasn’t the United States Intervened?

The dollar’s precipitous fall since February 2002, particularly against the euro, has renewed interest in foreign-exchange-market intervention, that is, official purchases and sales of foreign exchange designed to influence dollar exchange rates. But such intervention is unwise for two reasons. Read more

07.08.2008

Just When Did the Labor Market Begin to Soften?

While net employment changes are usually tracked as a major indicator of the growth or decline of the economy, these numbers mask the underlying process that begets the net results, a process that includes employment turnover, job creation, and job destruction. The most recent BED data show gross job gains totaling 7.25 million in the third quarter of 2007 and gross job losses totaling 7.5 million. Read more

07.08.2008

The Employment Situation, June

Today’s Employment Report revealed a net decline of 62,000 jobs in June, in line with expectations and identical to May’s 62,000 drop (after revision). This report brings the sixth consecutive month of decline, which began in January. Read more

07.07.2008

First Quarter Real GDP: Final Estimate

Real GDP increased at an annualized rate of 1.0 percent in the first quarter of 2008, according to the final estimate released by the BEA. The revision was primarily due to upward adjustments to private investment and exports, which were mostly offset by a downward adjustment to inventories and an increase in imports (which enter as a negative in GDP accounting). Read more

07.02.2008

May Price Statistics

The CPI rose 8.1 percent (annualized rate) in May, pushed up, in part, by a 67.8 percent increase in energy components. Over the past three months, the CPI is up 4.9 percent. Looking forward, professional forecasts see headline consumer prices remaining elevated throughout the rest of 2008 and falling to 2.4 percent by the end of 2009. Read more

07.02.2008

That Giant Sucking Sound

Mark S Sniderman

Applied often, Ross Perot’s apt metaphor has not outlived its usefulness. There are still plenty of sucking sounds to worry about, not the least of which is our current fiscal posture, which is unsustainable. Read more

06.26.2008

Steady on Policy Rate, but Alert to Inflationary Pressures

John B Carlson and Sarah Wakefield

The Federal Open Market Committee left its target for the federal funds rate unchanged at 2 percent on June 25. This outcome surprised few: The market’s assessment of the probability of a rate change never rose above 25 percent during the intermeeting period. In its post–meeting statement, the FOMC noted that “[t]ight credit conditions, the ongoing credit contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.” Moreover, “the Committee expects inflation to moderate later this year and next year.” Read more

06.19.2008

Housing Values

Ozgur Emre Ergungor

The Case–Shiller Home Price Index continued its rapid descent in the first quarter of 2008. Currently, it stands 14 percent below the peak it hit in the second quarter of 2006. Home prices continued to deteriorate in the Cleveland metropolitan area. According to the Case–Shiller home price index, home prices are back to their February 2002 levels. In comparison, the well–publicized price collapse in the bubble areas (Miami and Las Vegas, for example) brought those prices back only to their 2004–2005 levels. In other words, people who purchased a house in Cleveland or Detroit in late 2002 are now in the red but those who bought in Miami or Las Vegas are still solidly in the black. Read more

06.19.2008

Where’s the Spillover from Housing?

Recently, the argument has been made that outside of the housing market, the economy is actually doing pretty well. Looking at the GDP numbers, that argument appears to hold some weight. Once you take into account the direct impact of large declines in residential investment, GDP growth looks pretty good over the past two quarters. With homes so important to a household’s financial situation, how is it that a serious downturn in housing can have such a limited effect on the rest of the economy? Read more

06.18.2008

The Yield Curve, June 2008

Since last month, the yield curve has taken a parallel upward shift, with both short-term and long-term interest rates rising. The yield curve slope stayed the same, with both long and short rates edging up. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 3.0 percent rate over the next year—on the high side of other forecasts. Read more

06.12.2008

Exchange–Rate Pass–Through to Import Prices

A dollar depreciation tends to raise the dollar price of all goods and services imported into the United States. But the full amount of the depreciation rarely gets passed through to the dollar prices of imports, and lately the amount of pass-through seems to have declined along with worldwide inflation. Read more

06.06.2008

Real Income Growth across Metropolitan Areas

The economic performance of different regions is often compared by looking at differences in per capita income growth. Before income growth can be compared, though, it has to be adjusted for inflation. Often, a national price index is used to make the adjustment. But prices can grow at different rates in different areas of the country, and when regional price indexes are used instead of a national index to adjust the data on income growth, it can make a big difference. Read more

06.06.2008

The Employment Situation, May

The unemployment rate shot up from 5.0 percent to 5.5 percent in May, its sharpest increase in 22 years. As always, though, one needs to be cautious when interpreting monthly changes in household data, because they are very volatile. One factor contributing to this uptick is an unusually high level of teenagers entering the labor force. Read more

06.03.2008

Labor Turnover and Employment in Different U.S. Regions

According to BLS data, there is significant variation in the way labor turnover behaves in different regions of the United States. Some of the patterns might indicate, for example, that a structural change is affecting only the Midwest, resulting in a regional labor market that does not follow the rest of the country. Read more

06.03.2008

Real GDP First-Quarter 2008 Preliminary Estimate

The BEA’s preliminary estimate of first-quarter real GDP growth was revised up a bit from the advance release (to 0.9 percent at an annualized rate). The Blue Chip consensus economic forecast is predicting that the economy will grow a shade above zero next quarter, before snapping back in the third quarter and rising to near trend growth by the end of 2009. Read more

05.27.2008

Business Loan Markets

The Federal Reserve Board’s April 2008 survey of senior loan officers found significant tightening of standards for commercial and industrial loans since the last survey. Read more

05.23.2008

Fourth District Employment Conditions, March

Since this time last year, both the Fourth District and the national unemployment rates have increased by 0.7 percentage point. The district’s unemployment rate jumped 0.4 percent for the month of March. The increase in the unemployment rate can be attributed to increases in the number of people unemployed (6.6 percent) and the labor force (0.1 percent), along with a decrease in the number of people employed (−0.3 percent). The district’s unemployment rate was higher than the national rate in March (by 0.6 percent), as it has been since early 2004. Read more

05.22.2008

FDIC Funds

As of December 31, 2007, the FDIC has insured $4.3 trillion of member deposits. Growth in reserves outstripped insured deposits, and the insurance fund’s reserve-to-deposit ratio remains in the mandated target range with the ongoing financial mess—suggests that the Deposit Insurance Fund’s losses might go up in the near future. Read more

05.21.2008

April Price Statistics

The CPI rose at an annualized rate of 2.5 percent in April, following a 4.2 percent increase in March. Over the past six months, the CPI has risen 4.5 percent (annualized rate). In contrast to the rather well-behaved headline and core price indexes, the median and 16 percent trimmed-mean CPI measures rose 2.9 percent and 2.7 percent, respectively. Read more

05.13.2008

Gender Differences in Employment Statistics

One key measure of the condition of an economy’s labor market is the unemployment rate. At 5.0 percent, some see recent unemployment data as further evidence of an economy in distress. The unemployment rate has inched slightly higher in the past few months (4.9 percent in January to 5.0 percent in April) and over the course of the past year (it was 4.5 percent last April). Historically, though, the rate is actually somewhat low. Read more

05.13.2008

The Yield Curve, May 2008

Joseph G Haubrich

Since last month, the yield curve has witnessed a parallel upward shift, with both short-term and long-term interest rates rising. One reason for noting this is that the slope of the yield curve has achieved some notoriety as a simple forecaster of economic growth. The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year, and yield curve inversions have preceded each of the last six recessions. Read more

05.09.2008

Bifurcation?

The International Monetary Fund lowered its projections for world economic growth. No surprise there! But the report also suggested that the traditional correlation between growth in advanced-developed countries and growth in developing countries was weakening. Global trade gains and macroeconomic policy improvements have reduced—but not eliminated—the developing countries’ dependency on the developed world. Now that’s interesting! Read more

05.08.2008

The Employment Situation, April

Beth Mowry and Michael Shenk

The April Employment Report came in better than anticipated, with a total loss of just 20,000 nonfarm jobs from payrolls. Revisions to February and March numbers increased the losses in those months by just 8,000. The unemployment rate edged slightly lower, from 5.1 percent to 5.0 percent over the month. Read more

05.06.2008

Real GDP 2008:Q1 Advance Estimate

Real GDP grew at an annualized rate of 0.6 percent in the first quarter of 2008, the same growth rate as last quarter, according to the advance release by the BEA. Over the past four quarters, real GDP has increased 2.5 percent, slightly below its long term (30-year) average of 3.0 percent. Growth in the first quarter was primarily due to increases in exports and private inventories, which were partly offset by a decrease in private investment and an increase in imports (which subtract from real GDP). Read more

05.02.2008

Supplying Liquidity: The Tried and True and the New

Bruce A Champ and Sarah Wakefield

With the onset of financial turmoil in the fall of 2007, the Federal Reserve has implemented a number of facilities to enhance market liquidity and the functioning of financial markets. Despite the new liquidity-providing facilities, measures of liquidity pressures remain elevated. On April 30, 2008, the Federal Open Market Committee (FOMC) voted to lower its target for the federal funds rate by 25 basis points to 2 percent. Since this latest round of rate cuts began in September 2007, the federal funds rate has been lowered a total of 3.25 percent. Read more

05.01.2008

March Price Statistics

The Consumer Price Index (CPI) rose at an annualized rate of 4.2 percent in March, returning to its recent elevated trend after a respite in February, when it increased only 0.3 percent (annualized rate). The CPI is up 4.6 percent over the past six months. Read more

05.01.2008

What Interest Rate Spreads Can Tell Us about Mortgage Markets

The target for the federal funds rate has been slashed three full percentage points since September, from 5.25 to 2.25 percent. Yet the average interest rate on 30-year fixed-rate mortgages has fallen only about half a percentage point—from about 6.4 to about 5.9 percent—over the same time span. Why has the central bank’s aggressive action had such a small impact on these mortgage rates, and what does this mean? Read more

04.29.2008

Mortgage Delinquencies in Fourth District Metropolitan Areas

Timothy Dunne and Guhan Venkatu

The U.S. housing market continued to be under considerable stress in the first quarter of 2008. Recent data show that building permits and housing starts are still falling, and mortgage delinquency rates rose again in the first quarter. Read more

04.18.2008

Fourth District Employment Conditions, February

The district’s unemployment rate dropped 0.2 percent to 5.3 percent for the month of February. Of the district’s 169 counties, 29 had an unemployment rate below the national average in February and 140 had a higher one. Rural Appalachian counties continue to experience higher levels of unemployment. Read more

04.16.2008

Fourth District Bank Holding Companies

There are three fewer bank holding companies in the District with assets of more than $1 billion since 1999, but total assets of all of those remaining has increased every year except 2000. Their income streams deteriorated somewhat in 2007, problem real estate loans jumped to their highest level, problem consumer loans edged up slightly, and the risk-based capital ratio fell sharply. Read more

04.16.2008

The Yield Curve, April 2008

Katie Corcoran and Joseph G Haubrich

The yield curve steepened slightly since last month, with long rates edging up and short rates edging down. The spread remains positive with the 10-year rate moving up 3 basis points to 3.54 percent, while the 3-month rate dropped 4 basis points to 1.33 percent (both for the week ending April 11). Read more

04.09.2008

Should the Fed Prop Up the Buck?

Congress mandates the Federal Reserve “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates?” Recently, some observers have suggested that the Federal Reserve pay more attention to the dollar, but adding an exchange-rate objective to the existing menu could greatly complicate the Fed’s ability to hit its key domestic objectives. A lot depends on what the reasons behind the dollar’s depreciation are. Read more

04.08.2008

Fourth District Employment Conditions, January

The district’s unemployment rate dropped 0.1 percent to 5.6 percent for the month of January. Since this same time last year, the Fourth District’s unemployment rate increased 0.1 percentage point, while the national rate rose 0.3 percentage point. Read more

04.07.2008

The Employment Situation, March

Total nonfarm payroll employment declined by 80,000 in March to 137,846, according to the initial estimate released by the BLS today. Revisions suggest 22,000 more job losses were added to the original estimate for January and 63,000 more were added for February. Overall these numbers indicate the lowest quarterly employment growth since the first quarter of 2003. Read more

03.31.2008

Real GDP: Fourth-Quarter 2007 Final Estimate

Real GDP, according to the final estimate by the Bureau of Economic Analysis (BEA), was unchanged from both the preliminary and advance estimates, rising at an annualized rate of 0.6 percent in the fourth quarter. While the overall growth rate in GDP remained identical to the advance estimate, the performance of its underlying components changed. Read more

03.31.2008

Recession: Are We or Aren’t We?

Paul W Bauer and Katie Corcoran

Living in an age when we expect access to virtually all goods and services 24/7 and real-time reporting on even minor news events, many people have little patience with economists who cannot say for sure whether we are currently in a recession or not. Given the financial headlines and carnage in the housing markets, how could there be any uncertainty? Read more

03.25.2008

Down Another Seventy-Five

Charles T Carlstrom and Sarah Wakefield

On March 18, 2008, the Federal Open Market Committee (FOMC) voted to lower its target for the federal funds rate by 75 basis points to 2.25 percent.To address pressures in financial markets, the Federal Reserve has not only cut the funds rate, it has also created two new lending programs, the Term Auction Facility and the Term Security Lending Facility. Read more

03.25.2008

February Price Statistics

The (CPI) was virtually unchanged from January, rising only 0.3 percent at an annualized rate in February. This moderation from increases of 4.8 percent in January and 4.4 percent in December resulted from a modest increase in food prices, which was offset by a decrease in energy prices, and a slowdown in price appreciation among all items less food and energy. Read more

03.24.2008

Does the Recent Trend in Labor Demand Presage Recession?

Overall, different measures of job availability suggest that the number of new job vacancies advertised might be falling. Dips in some of those measures are highly correlated with the occurrence of recessions. Read more

03.20.2008

The Yield Curve, March 2008

Katie Corcoran and Joseph G Haubrich

Since last month, the yield curve has gotten steeper, with long-term interest rates rising and short-term interest rates falling. Read more

03.18.2008

Home Price Indexes

03.18.2008

Preliminary Employment Data Might Miss a Recession Onset

As we move further into 2008, concerns are growing about the U.S. economy heading toward recession. The Employment Situation reports released by the Bureau of Labor Statistics have received a lot of attention in recent months, as economists try to determine the extent to which housing troubles may have spilled over to the broader economy. This month’s Employment Situation reported a decline of 63,000 two nonfarm payrolls in February and a revised loss in January, which increased the initial tally of 17,000 job losses to one of 22,000. The last time two consecutive months of decline occurred was in June 2003. Read more

03.14.2008

Patent Trends in the Fourth District

Robert Sadowski

Education and innovation contributed more to income growth at the state level than other potential factors, according to research conducted at the Federal Reserve Bank of Cleveland. Educational attainment, for example, increased a state?s average per capita personal incomes relative to other states by 8 percent, but innovation?measured by patents per capita?boosts personal income nearly 20 percent. Given the importance of innovation to economic performance, we investigate patenting activity in the Fourth District and compare District trends with those across the nation. Read more

03.12.2008

Housing Doldrums

Ozgur Emre Ergungor

The deterioration in the housing market shows no sign of abating. The S&P/Case-Shiller house price index registered a 9 percent year-over-year drop in the final quarter of 2007, the sharpest decline in its 21-year history. The Office of Federal Housing Enterprise Oversight (OFHEO) price index also moved into negative territory for the first time in its 17-year history. While both indexes show downward pressure on home prices, the magnitude of the decline differs significantly between the two indexes. The reason is that OFHEO tracks only homes with mortgages below Fannie Mae and Freddie Mac?s conforming loan limit ($417,000 in 2006 and 2007), while the S&P/Case-Shiller index tracks home sales in all price ranges and is therefore more affected by the pricey housing of the coastal areas. (OFHEO’s limit has been temporarily raised to $729,000 or 125 percent of an area’s median home price, whichever is lower.) Read more

03.12.2008

Labor Force Participation in the United States and Ohio

03.11.2008

January Price Statistics

03.10.2008

The Employment Situation, February

03.07.2008

Are We Importing Inflation?

03.07.2008

Real GDP 2007: Fourth-Quarter Preliminary Estimate

02.22.2008

Banking Structure

Passage of the 1994 Reigle-Neal Act, which regulates interstate banking, has spurred the consolidation of depository institutions. The number of FDIC-insured commercial banks fell from 10,166 in the middle of 1995 to 7,350 in the middle of 2007, a decline of more than 27 percent. The total number of banking offices, however, increased nearly 28 percent over that period, from 65,321 to 83,358. Read more

02.22.2008

Business Loan Markets

02.22.2008

Fourth District Employment Conditions, December

02.20.2008

The Yield Curve, February 2008

Katie Corcoran and Joseph G Haubrich

02.15.2008

December Price Statistics

02.07.2008

Chinese Inflation and the Renminbi

02.06.2008

The Pass-through of Oil Prices to Gasoline Prices

02.05.2008

Real GDP Fourth-Quarter 2007 Advance Estimate

02.01.2008

The Employment Situation, January

01.31.2008

Another Move, but with Less Surprise

John B Carlson and Sarah Wakefield

01.31.2008

The Ups and Downs in Regional Employment Statistics

Timothy Dunne, Kyle Fee and Guhan Venkatu

01.30.2008

The Yield Curve, January 2008

01.29.2008

Manufacturing Employment

01.25.2008

This Old House

Mark S Sniderman

01.22.2008

Fourth District Community Banks

01.22.2008

The Erie Metropolitan Statistical Area

The Erie metropolitan statistical area (MSA) is located in the northwest corner of Pennsylvania on Lake Erie. Home to 279,811 people, Erie, a Great Lakes city, has an employment history of heavy industry and manufacturing. In 2006, Erie was still heavily invested in manufacturing industries, having about an 80 percent higher proportion of its workforce in manufacturing than the nation as a whole. Meanwhile, Erie?s service industry workforce was proportionately higher in health services industries relative to the nation and lower in information, financial, and professional business and services industries. Read more

01.18.2008

Housing Markets

01.14.2008

Providing Liquidity

Bruce A Champ and Sarah Wakefield

01.09.2008

November Price Statistics

01.09.2008

The Employment Situation, December