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1996 Economic Trends

  • Work Stoppages


    Union membership in the U.S. grew considerably during the first half of this century, from about 4% in 1901 to a peak of about 33% in the early 1950s. Read More

  • Trade Deficits and National Saving


    The U.S. trade balance has been in deficit, on average, for the last 25 years. This is reflected in the behavior of U.S. gross saving and investment. Read More

  • The Stock Market


    In recent months, much attention has been given to the stupendous ascent of the stock market. Read More

  • The Economy in Perspective


    Twas the day before Christmas, when all through the land, forecasts converged and the outlook was grand. For growth was expected to be at potential, and continued expansion seemed most evidential. Read More

  • Resource Annuitization and Consumption


    From the early 1960s to the late 1980s, the fraction of resources consumed annually has remained more or less steady for all U.S. age groups except retirees, for whom this fraction increased dramatically. Read More

  • Monetary Policy


    It has been more than 10 months since the Federal Open Market Committee (FOMC) last changed the intended federal funds rate. Read More

  • Labor Markets


    Civilian unemployment rose to 5.4% in November, an uptick from its August low of 5.1%, but still consistent with a robust labor market. Read More

  • International Developments


    Overall, the international value of the dollar has changed little over the last month, despite the fact that both short-term and long-term interest rates have fallen more in the U.S. than in most industrialized countries. Read More

  • Interest Rates


    The yield curve on U.S. Treasuries has flattened noticeably since last month, with long rates falling but short rates remaining steady. Read More

  • Inflation and Prices


    The monthly price statistics took an unexpected jump in October, spurred mostly by higher food and energy prices. Read More

  • Housing Finance


    One of the most interesting trends in housing finance throughout the 1990s has been the declining importance of government insurance in the mortgage market. Read More

  • Economic Activity


    The Commerce Department recently pared its estimate of third-quarter economic growth from 2.2% to 2.0%. Read More

  • Consumer Debt


    Attention has been lavished on the recent rise in consumer debt levels, and in fact, household debt of all types has increased rapidly throughout the 1990s. Read More

  • Banking Industry Employment


    Until recently, the U.S. banking industry provided employment that was relatively free from the uncertainties that affected other industries, such as steel. Read More

  • U.S. Productivity


    Much has been made of the U.S. productivity slowdown, which began in the early 1970s. Read More

  • The Economy in Perspective


    Potential problems ... Has the economy been expanding beyond its potential, threatening to boost inflation? Read More

  • The Auto Industry


    With another round of negotiations between the major automakers and the unions winding down, a potentially large shock to Fourth Federal Reserve District employment appears to have been averted. Read More

  • Monetary Policy


    Over the last five years, the narrower monetary aggregates have tended to grow more rapidly than their more broadly defined counterparts. Read More

  • Labor Markets


    After a slight decline in September, nonfarm payrolls rose by 210,000 in October, continuing the trend of moderate gains that began in 1995. Read More

  • International Developments


    The economies of the U.S., Canada, Japan, and their major European trading partners grew at a slow to moderate pace over the past year. The U.S. fared best with an annual growth rate of 2.7%, while France saw the slowest growth at 0.4%. Read More

  • Interest Rates


    The yield curve has flattened since last month, with all rates falling except those on short-term bills of three and six months. Read More

  • Inflation and Prices


    The September price statistics remain generally in line with their 3% trend of the last few years. Read More

  • Federal Deficits and the Economy


    According to conventional wisdom, U.S. government budget deficits compete against private investment for a fixed supply of loanable funds. Read More

  • Exchange Rates and Inflation


    When the dollar depreciates in the foreign exchange market, Americans must pay more for foreign goods. Read More

  • Economic Activity


    According to initial Commerce Department estimates, the economy slowed to a 2.2% rate of growth in the third quarter, down from 4.7% in 1996:IIQ. Read More

  • Banking Conditions


    For many years, a distinct characteristic of U.S. banking regulations was the prohibition on interstate banking. In the mid-1980s, this tradition began to give way, generation a strong consolidation movement in the industry. Read More

  • The Mexican Economy


    Analysts now expect Mexico's economy to expand by 4% in 1996, although even the Mexican government's stated goal of 3% was previously viewed with skepticism. Read More

  • The Economy in Perspective


    Les Misérables ... A few decades ago, during a period of slow economic growth and high inflation, the economist author Okun added together the unemployment and inflation rates and dubbed the sum the Misery Index. Read More

  • Political Business Cycles


    The 1980 returns exemplify how the state of the economy before a presidential election can affect an incumbent's ability to stay in office. Read More

  • Ouput, Inflation, and Unemployment


    Monetary policymakers are concerned with the relationships among real GDP, the unemployment rate, and inflation. Read More

  • Monetary Policy


    The Federal Open Market Committee (FOMC) left the intended federal funds rate unchanged at its September 24 meeting. Read More

  • Lifetime Non-Asset Income Profits


    At any given moment, those who work and earn income do not necessarily have all of it available for their use. Read More

  • Labor Markets


    The September jobs picture, though fuzzy, seems to show little overall change from August. There was a small (0.1%) rise in the civilian unemployment rate. Read More

  • International Finance


    According to the Bank for International Settlements, net new issues of international debt securities reached a record high in the second quarter. Read More

  • Interest Rates


    In the last month, the yield curve has shifted upward and steepened somewhat, with long rates pushing to 6.95%. Read More

  • Inflation and Prices


    After accelerating during the first five months of the year, the inflation indicators slowed substantially through August. Inflations for the year to date is comparable to its 1995 pace - 3% or so. Read More

  • Economic Activity


    The Commerce Department's final GDP estimate for 1996:IIQ put real economic growth at 4.7%, substantially above the first quarter's 2.0% rate. Read More

  • Consumption Trends


    Both the amount and the pattern of consumption by different age groups has undergone a substantial change in the U.S. Total consumption per capita for all ages was much higher in the 1980s than in the early 1960s. Read More

  • Consumer Indebtedness


    Consumer spending relative to income has been on an upward trend since the early 1980s. Over the past 15 years, households have increased the share of their income that they spend by four percentage points - to about 92.5%. Read More

  • Banking Conditions


    Insured commercial banks reported their second-highest level of total quarterly earnings for 1996:IIQ - $13.78 billion, just below the $13.83 record set in 1995:IIIQ. Read More

  • U.S. International Debt


    As a result of persistent current account deficits, the U.S. international investment position has shifted from a net credit of $265 billion in 1982 to a net debt of $775 billion in 1995. Read More

  • The Economy in Perspective


    Close calls ... The Federal Reserve's Open Market Committee will meet on September 24 to review the state of the economy and to consider making changes in its chief monetary policy instrument, the federal funds rate. Read More

  • Skills and Unemployment


    When thinking about labor market policies for reducing unemployment, it is important to consider what skills the pool of jobless people possess. More specifically, how do their skills compare with those of the employed? Read More

  • Regional Conditions


    Over time, an economy not only grows, but also experiences sectoral reallocations. These reallocations affect both employment in specific industries and the national and regional mix of occupations. Read More

  • Monetary Policy


    Since its February meeting, the Federal Open Market Committee (FOMC) has chosen to maintain the federal funds rate near and intended level of 5.25%. Read More

  • Labor Markets


    Continuing this year's string of strong labor market reports, August brought 250,000 net new jobs and a drop in umemployment to a seven-year low of 5.1%. Read More

  • International Trade


    The U.S. current account deficit grew by $20.6 billion (annual rate) in the first quarter, reaching $142.4 billion. Read More

  • Interest Rates


    After having spent most of August at lower levels, the yield curve has recently shifted up to where it stood at the end of July. Read More

  • Inflation and Prices


    After dropping sharply in June, retail prices resumed the strong upward trend that began last December. Read More

  • Housing Finance


    Although one might expect the general rise in long-term mortgage rates (up over 100 basis points since the beginning of the year) to have dampened the demand for new home loans ... Read More

  • Economic Activity


    The Commerce Department increased its second-quarter GDP estimate by $9.4 billion, lifting the quarterly growth rate from 4.2% to 4.8%. Read More

  • Consumer Bankruptcies


    Much attention has been given to the recent rise in bankruptcies. Indeed, in the first quarter of this year there were 252,761 personal bankruptcy filings in the U.S., the highest quarterly posting in history and an increase of 27% since 1995:Q1. Read More

  • Wage Trends


    When inflation accelerates, so does the pace at which labor costs increase. The converse, however, is not true; that is, rising labor costs do not lead to inflation. Read More

  • The Economy in Perspective


    Whither government? ... Welfare as we know it is ending. The same can be said for agriculture, national defense, health care, and (though few public officials will openly admit it) Social Security. Read More

  • Regional Conditions


    In nonrecessionary times, nearly a tenth of all initial unemployment insurance claims result from mass layoffs. Read More

  • Monetary Policy


    The semiannual Federal Reserve monetary policy testimony and report to Congress, delivered by Chairman Greenspan on July 18, summarizes the Fed's view of current economic conditions and its outlook for economic performance through 1997. Read More

  • Labor Markets


    Labor markets continued to grow at a good pace in July, as nonfarm payroll employment increased by 193,000. This latest figure brings jobs growth for 1996 to an average of 230,000 per month, which is much higher than the 1995 rate. Read More

  • International Developments


    Nominal exchange rates fluctuate substantially and often seem unrelated to short-run movements in such fundamentals as income or trade balances. Nonetheless, certain long-run relationships involving exchange rates may be reliable. Read More

  • Interest Rates


    The yield curve has flattened slightly in the past month, with short rates rising and long rates unchanged. Read More

  • Inflation and Prices


    After increasing at a ate slightly above 4% during the first five months of 1996, the Consumer Price Index (CPI) moderated to an annualized rate of less than 1% in June. Read More

  • Growth Accounting


    The U.S. is experiencing a capital spending boom, led by investment in information processing equipment, primarily computers. Business fixed investment has risen from 9% of GDP in 1991 to 11% thus far this year. Read More

  • Economic Activity


    The advance estimate for second-quarter GDP growth is a strong 4.2%, up more than 2 percentage points from the first quarter and almost twice the growth rate anticipated by most analysts when the quarter began. Read More

  • Banking Conditions


    The consolidation of the banking industry that began in the mid-1980s has been driven primarily by changes in the regulations on banks' geographic expansion. Read More

  • The Economy in Perspective


    Good news bears ... Financial markets were rocked on July 5 when the Bureau of Labor Statistics (BLS) released its report on labor market conditions for June, along with revised data for April and May. Read More

  • Monetary Policy


    So far this year, the narrow monetary aggregates continue to be rather weak. Currency, which has expanded at an average annual rate of nearly 8.5% over the past 22 years, is growing only around 3%. Read More

  • Labor Markets


    June was characterized by wide spread strength in the nation's labor markets, as nonfarm payrolls added 239,000 workers. Read More

  • International Development


    The spread between long-term and short-term interest rates has expended during most of 1996 in the US, Germany, and the UK. Read More

  • Interest Rates


    The yield curve has changed little since last month. Read More

  • Inflation and Prices


    The Consumer Price Index (CPI) continued to accelerate in May, rising at an annual rate of 3.9% and contributing to a year-to-date increase of 4.1%. This represents a substantial deterioration from the 2.6% rate observed in 1995. Read More

  • Federal Budget Projections


    Congressional Budget Office (CBO) projections how that, under current fiscal policies, total federal revenue as a share of GDP will decline from 18.9% in 1995 to about 8.5% in 2001, and will remain at that level through 2006. Read More

  • Education and Earnings


    American workers are becoming more educated. Read More

  • Economic Activity


    According to the Commerce Department's final figures, the economy expended at a 2.2% annual rate in 1996:IQ. The initial estimate of 2.8% was revised downward primarily because of a massive drawdown of inventories. Read More

  • Bank Lending Standards


    Banks face a delicate trade-off in making loans. On the one hand, if they lend only to undeniably safe and secure creditors, then lending, profits, and perhaps economic growth will suffer. Read More

  • Balance-of-Payment Trends


    Preliminary data show the US current account deficit running at a $142 billion annual rate in 1996:IQ. The current account includes trade in goods and services, net investment income, and unilateral transfers. Read More

  • An Alternative Measure of Money


    In recent years, deregulation and financial innovation have wreaked havoc on relationships between traditionally defined measures of money - M1 and M2 - and economic activity and interest rates. Read More

  • The Mexican Economy


    Observers were surprised by first-quarter data showing that the Mexican economy shrank only 1% compared to the first quarter of 1995, but they remain concerned that this strength is limited to the export sector ... Read More

  • The Economy in Perspective


    Taking stock ... Luckey, Castalia, Delphos, Ada. Just back from a road trip to northwest Ohio, talking with community bankers about economic conditions and the banking business. Read More

  • State Labor Trends


    US employment growth stalled during the past year. Read More

  • Small Business Lending


    Between June 1994 and June 1995, small business lending increased 4.9% nationwide (to $282.2 billion), but it showed striking regional variations. Read More

  • Secondary Mortgage Market Activity


    The rapid rise in interest rates during 1994 led to a marked drop in mortgage purchases by the two major players in the secondary market ... Read More

  • Regional Conditions


    Every week, the US Department of Agriculture reports on weather conditions and crop progress. Read More

  • Monetary Policy


    Except for the monetary base and currency, all of the narrow measures of money fell last month. Read More

  • Labor Markets


    Nonfarm payroll employment surged by 348,000 in May, about twice as high as expected, while April's figure was revised upward from 2,0000 to 163,0000. Read More


  • Since last month, the yield curve has shifted up across all maturities and has steepened slightly. Read More

  • Inflation and Prices


    Retail prices continued to climb sharply in April, rising at an annualized rate of 4.7%. Since last December, the Consumer Price Index (CPI) has averaged about a 4% pace. Read More

  • Fiscal Balances and World Economic Growth


    Fiscal deficits (or surpluses) influence economic growth, and public spending can boost productivity through wise investments in infrastructure. Read More

  • Economic Activity


    Recent economic data, including downward revisions in first-quarter GDP estimates, suggest continued moderate growth with high levels of resource utilization. Read More

  • Demographics


    The Census Bureau estimates that the US population now stands at 265 million - roughly 66 times larger than in 1790, when the first census was taken. Read More

  • The Ohio Economy


    Ohio started 1995 with one of its lowest unemployment rates in recent years - 4.5%. While that rate was not sustained, the state stayed consistently below the US average throughout 1995 and into 1996. Read More

  • The Minimum Wage


    Economists prefer solutions to social problems that make some people better off without making others worse off. Read More

  • The Economy in Perspective


    Once upon a time, a husband and wife lived alone in the country, far away from the nearest town. Maynard and Philippa were a well-intentioned couple, serious and analytical. Before long, they learned that they were to be parents. Read More

  • Productivity Trends


    Growth in hourly output has decelerated significantly since the early 1970s, reflecting a decline in labor productivity growth. Read More

  • Monetary Policy


    Since the Federal Open Market Committee's last meeting on march 26, interest rates have drifted up across all maturities. Read More

  • Labor Markets


    Employment continued its seesaw pattern in April, as nonfarm payrolls edged up by only 2,000. Read More

  • International Developments


    In January, the gap between US imports and exports narrowed. It's too soon to tell whether this represents a break in what appears to be an almost uninterrupted decline in net exports since 1992. Read More

  • Interest Rates


    The yield curve has steepened slightly since last month. It remains nearly linear - much as it looked at this time last year. Read More

  • Inflation and Prices


    After a string of small increases, consumer prices have risen more quickly in the past several months. Read More

  • Employment Revisions


    Every year, the Bureau of Labor Statistics (BLS) corrects the employment series for jobs missed by the monthly establishment survey, which covers more than 350,000 workplaces. Read More

  • Economic Activity


    Advance estimates released by the Commerce Department show real GDP rising 2.8% in the first quarter. substantially above the 1.5% that analysts had generally anticipated. Read More

  • Business Fixed Investment


    Business fixed investment - necessary to build capital, promote innovation, and busy living standards - rose 7.4% in 1995, capping three years of above - average growth. Read More

  • Banking Conditions


    The latest statistical information on insured commercial banks confirms the strength of the banking industry. In 1995, about 97 percent of commercial banks reported profits, and 68 percent of them posted higher profits than in 1994. Read More

  • Bank Mergers and Acquisitions


    Between 1960 and 1979, US bank mergers and acquisitions totaled 3,404. This consolidation continued in the 1980s and early 1990s, largely due to state regulatory changes that allowed out of state bank holding companies to acquire home-state banks. Read More

  • The Mexican Economy


    Macroeconomic conditions in Mexico seem to have stabilized, and concerns about growth have become focused on the condition of the banking system. Read More

  • The Household Balance Sheet


    Consumer debt as a share of income, which has risen sharply since 1992, has reached a historic peak. Read More

  • The Economy in Perspective


    Are we there yet? ... The constant dollar value of goods and services produced in the United States increased for the fifth consecutive year in 1995. Read More

  • Social Security


    Since World War II, average Old-Age and Survivors Insurance (OASI) contributions per worker have grown much faster than average hourly compensation. Read More

  • Regional Conditions


    Total employment in the US rose a solid 5.3% from 1993 to 1995. The largest gains occurred in the South-west: Nevada (17%) and Arizona (12%). Read More

  • Monetary Policy


    In the past year, the Federal Open Market Committee has thrice voted to lower its key federal funds rate target: from 6% to 5.75% in July, to 5.5% in December then to 5% in January. Read More

  • Labor Markets


    Nonfarm employment moved ahead at a moderate pace in March, rising by 140,000. Read More

  • Interest Rates


    In recent weeks, the yield curve (particularly the long end) has shifted upward. Read More

  • Inflation and Prices


    Labor markets were solid but not spectacular in 1995, as the nation posted a yearlong employment gain of 1.5 million jobs. Read More

  • Exchange Rates and Interest Rates


    Since the end of 1995, the difference between long and short-term interest rates has been widening in the U.S., Japan, Germany, and the U.K., possibly because short-term rates are expected to rise in all these countries. Read More

  • Economic Activity


    Winter's recession fears have melted away, but forecasted growth rates - approximately 2% this year and next - remain below historic norms. Read More

  • Banking Conditions


    Insured commercial banks reported a near-record income of $12.1 billion in 1995:IVQ and a set of yearly record for total income of $48.8 billion. Read More

  • West German Demographics and Social Security


    Many US policymakers are worried about the effect of changing demographics on the Social Security system. Read More

  • The Economy in Perspective


    Taxing matters ... I was far too busy to travel, so I had to settle for a video conference with my old friend Andre. Read More

  • Tax Reform


    Recent calls for simplifying the US tax code have sparked heated debate about the relative merits of consumption based taxes and flat tax rates. Read More

  • Regional Conditions


    Recent labor market trends in Ohio, Kentucky, and Pennsylvania seem to reflect the slowing in national economic activity, but the regional picture - like the national one - is mixed and difficult to interpret. Read More

  • Monetary Policy


    All of the narrow measures of money fell last month. Read More

  • Labor Markets


    Rarely has employment shown such wide month to month swings as in the first two months of 1996. Read More

  • International Developments


    Since 1960, most European countries' unemployment rates have trended steadily upward, while US unemployment has shown virtually no trend increase. Read More

  • Interest Rates


    Long-term interest rates have increased in the past month, leading to a steepening in the Treasury yield curve. A slight drop in short-term rates also contributed to the rise. Popular explanations for this development vary. Read More

  • Inflation and Prices


    The CPI made an unexpected jump in January (4.8% at an annualized rate), following a string of very moderate increases leading back to mid-1995. Read More

  • Housing Finance


    Despite the recent jump in 30-year fixed mortgage rates - 45 basis points during the last half of February - housing finance activity has demonstrated strong growth over the last year. Read More

  • World Trade Patterns


    According to the Organisation for Economic Co-operation and Development (OECD), the U.S. share of the world's export trade has inched up over the last decade. Read More

  • The Economy in Perspective


    On the road (again). . .America, it is said, is a nation that keeps reinventing itself. Read More

  • Regional Conditions


    While politicians in Washington make painfully slow progress toward resolving their battle over the size of government, state legislatures have apparently committed themselves to making do with less. Read More

  • Monetary Policy


    Economists generally accept that monetary policy determines the rate of inflation, but they continue to debate whether it can affect real variables, such as the level of employment and the rate of economic growth. Read More

  • Labor Markets


    The U.S. employment situation was off to an unusual start in 1996 as nonfarm payrolls tumbled by 201,000 in January. Read More

  • International Developments


    The dollar has strengthened against both the German mark and the Japanese yen over the last month. Read More

  • Interest Rates


    Interest rates across the board have come down sharply in the past year, but this drop has not been completely even, as the flattening of the yield curve shows. Read More

  • Inflation and Prices


    Retail prices increased at an annualized rate of 2.4% in December, just a shade under their average increase for the whole of 1995. Read More

  • Foreign Trade


    International trade is becoming increasingly important to the U.S. economy. Read More

  • Economic Activity


    Recent data - though sketchy and tentative - and anecdotal accounts indicate that economic activity weakened in the last months of 1995. Read More

  • Banking Conditions


    Since 1986, commercial banks have been substituting retail loans for loans to commercial borrowers. Read More

  • The Yield Curve


    The yield curve on Treasury securities - which describes rates of return at different maturities in ascending order - has flattened dramatically since the third quarter of 1994. Read More

  • The Mexican Economy


    A year after Mexico's disastrous peso depreciation, the worst of the matter may be over. Read More

  • The German Economy


    When the Bundesbank cut official interest rates on December 14, other European central banks quickly followed suit. Read More

  • The Federal Budget


    National debt doubled from about 35% of gross domestic product in 1980 to more than 70% in 1995. Read More

  • The Economy In Perspective


    On the outs... It has long been conventional in politics to portray oneself as an outsider. Read More

  • Monetary Policy


    "Since the last easing of monetary policy in July, inflation has been somewhat more favorable than anticipated, and this result, along with an associated moderation in inflation expectations, warrants a modest easing in monetary conditions." Read More

  • Labor Markets


    Labor markets were solid but not spectacular in 1995, as the nation posted a yearlong employment gain of 1.5 million jobs. Read More

  • Labor Market Trends


    The U.S. workforce has undergone dramatic changes since World War II. Read More

  • International Saving Trends


    Measured real interest rates have in creased in developed countries over the last 30 years. Read More

  • Interest Rates


    Interest rates continue to fall. Rates at all maturities have dropped roughly half a point since late June. Read More

  • Inflation and Prices


    The Consumer Price Index (CPI) showed no change in November, contributing to the measure's lowest six-month growth rate in nearly 10 years. Read More

  • Economic Activity


    According to the Blue Chip panel of economists, U.S. economic activity is likely to slow this year from an anticipated 3.3% increase in 1995. Growth forecasts for 1996 center on a range of 2.5% to 2.7% but exhibit a fairly wide dispersion. Read More

  • Banking Conditions


    Commercial bank earnings soared to a record high of $13.8 billion in the third quarter, spurred by strong loan growth, stable net interest margins, and reduced deposit insurance premiums. Read More