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2005 Economic Trends

  • The Interest Rate Conundrum and the Savings Glut


    Two of the brightest blips on U.S. policymakers’ radar screens are the low level of U.S. long-term interest rates and our large, expanding current account deficit. Global saving and investment patterns go a long way toward explaining both of them. Read More

  • The Economy in Perspective


    Although some people worried U.S. economy would stumble at the end of this year and limp into next, it appears to be running in fine form. Income and output actually accelerated last quarter, despite soaring energy prices and storm damage. Read More

  • The Cincinnati Metropolitan Area


    Cincinnati was undoubtedly hurt by the last recession, but it was affected less than the U.S. or Ohio, at least where employment is concerned. Throughout the recovery, employment fell more slowly than the rest of the U.S. and for fewer weeks. Read More

  • Temperature and Retail Sales


    Many retailers credited colder October weather with improving the month’s sales. It is easy to think of individual goods—down-filled jackets and swimsuits, say—whose sales depend on temperature. Read More

  • Money and Financial Markets


    Despite 12 straight increases in the federal funds rate, long-term interest rates remain low by historical standards. For more than three years, the economy has been expanding at an average annual rate of 3.5%. Read More

  • Monetary Policy


    At its November 1 meeting, the Federal Open Market Committee (FOMC) raised its federal funds rate target from 3.75% to 4%, which is less than 2 percentage points above the core inflation rate of personal consumption expenditures for the past year. Read More

  • Manufacturing Employment


    Manufacturing’s share of total U.S. employment has been dropping for at least 60 years. Since 1975 alone, the share plummeted from about 22% to roughly 11% of all nonfarm jobs. Read More

  • Labor Markets


    Nonfarm payrolls grew by 215,000 in November, beating consensus expectations by 5,000 jobs. This followed meager growth in September (17,000) and October (44,000), which was attributable to Hurricane Katrina’s direct and indirect effects. Read More

  • Inflation and Prices


    After surging 15.7% (annualized rate) in September—its largest monthly rise in more than 25 years, the Consumer Price Index (CPI) rose a relatively modest 2.4% (annualized rate) in October. Read More

  • Fourth District Employment


    The Fourth District unemployment rate rose 0.1 percentage point to 5.8% in September. Although employment increased 0.3% over the month, both labor force and number of unemployed were estimated to have grown even more (0.4% and 0.6%, respectively). Read More

  • FDIC Funds


    Insured deposits grew over the past five years at an average annual rate of 4.99% for members of the FDIC’s Bank Insurance Fund (BIF) and 4.54% for members of its Saving Association Insurance Fund (SAIF). Read More

  • Economic Activity


    The Commerce Department’s preliminary reading of 2005:IIIQ real GDP growth was 4.3%, up from the advance reading of 3.8%. Read More

  • Coincident Economic Indexes


    Although measures such as the unemployment rate and gross domestic product are significant, they can leave out important information that is captured in other economic series. Read More

  • The Economy in Perspective


    This essay is decidedly not about Ben Bernanke, the economist nominated by President Bush to become the next chairman of the Federal Reserve Board. It’s not that Mr. Bernanke doesn’t deserve the attention. Read More

  • Oil and Natural Gas


    Energy prices remain high. With the end of summer driving, oil prices eased a bit by October 28, falling to $61.22 for West Texas intermediate crude. Seasonal demand pressures are increasing for natural gas as we begin winter heating. Read More

  • Money and Financial Markets


    The federal funds rate directly affects only the reserve desks of banks and a few brokers and dealers; however, as a transmitter of Federal Reserve policy, it influences other rates of wider concern. Read More

  • Monetary Policy


    With the November 1 increase, the Federal Open Market Committee has increased the target federal funds rate by 25 basis points for 12 meetings in a row, bringing the rate from 1.00% in June 2004 to 4.00%. Read More

  • Labor Markets


    Nonfarm payrolls grew by 56,000 jobs in October, and September’s job loss was revised from 35,000 to 8,000. Read More

  • International Markets


    In September, the International Monetary Fund (IMF) published its second biannual World Economic Outlook, which predicted that world GDP would grow 4.3% in 2005 as well as 2006. Read More

  • Inflation and Prices


    The Consumer Price Index surged up 15.7% (annualized rate) in September, the largest monthly rise in overall retail prices in more than 25 years. Read More

  • Fourth District Homes


    Is the U.S. is experiencing a “bubble” in housing prices? Although it is difficult to tell if homes are selling above their fundamental values, we do know that home prices nationwide have been rising rapidly over the past several years. Read More

  • Fourth District Employment


    The Fourth District’s unemployment rate rose from 5.6% in July to 5.7% in August. Although employment increased 0.1% during the month, the labor force is estimated to have grown even more (0.2%). Read More

  • Employment in the Pittsburgh Metropolitan Area


    Although the 2001 recession ended almost four years ago, payroll employment in the Pittsburgh metropolitan area has yet to return to its prerecession levels. In this respect, it is unlike both the U.S. and Pennsylvania. Read More

  • Employment Growth in the Fourth District’s Urban Areas


    In the early 1990s, employment growth in the Fourth District’s urban areas (metropolitan statistical areas or MSAs) mirrored that of MSAs throughout the nation. Read More

  • Economic Activity


    The Commerce Department’s advance reading of 3.8% real GDP growth in 2005:IIIQ was 0.5 percentage point (pp) higher than growth in the previous quarter. On a year-over-year basis, real GDP grew 3.6%. Read More

  • Credit Unions


    Credit unions are mutually organized depository institutions that provide financial services to their members. Like banks and savings associations, credit unions appear to be consolidating. Read More

  • The Gulf Region before Hurricane Katrina


    Hurricane Katrina caused terrible loss of lives and immeasurable human suffering. Areas affected are eligible to receive assistance from Federal Emergency Management Agency for state and local governments and certain private nonprofit organizations. Read More

  • The Economy in Perspective


    For 10 years, inflation as measured by the Consumer Price Index has ranged between 1% and 3 3/4%, and inflation as measured by the CPI excluding food and energy (core inflation) has moved in a very similar zone, bounded by 1% and 3%. Read More

  • The Current Account


    During the first half of 2005, the U.S. registered a current account deficit of $789 billion, an amount equal to 6.4% of GDP, as we continued importing more goods and services from the rest of the world than we exported to them. Read More

  • New Foreign Direct Investment in the U.S.


    Foreigners account for a substantial part of all new direct investment in the U.S., through acquisition of existing U.S. businesses. (Direct investment implies that the foreign investor has acquired a controlling interest—10% or more—in a U.S. firm.) Read More

  • Natural Gas


    As the winter heating season draws nearer, many consumers are worried about natural gas supplies and prices. By August, prices had already surpassed the most recent price spikes of December 2000 and February 2003. Read More

  • Money and Financial Markets


    Implied yields from euro-dollar futures fell in August and September, suggesting that market participants expect the current round of tightening may end or moderate significantly in 2006. Read More

  • Monetary Policy


    On September 20, the Federal Open Market Committee (FOMC) increased the intended federal funds rate 25 basis points (bp) to 3.75%, the eleventh such increase since the current round of tightening began in late June 2004. Read More

  • Mass Layoffs in Ohio


    The Worker Adjustment Retraining Notification (WARN) Act protects workers, their families, and their communities by requiring employers to give notice 60 days before plant closings and mass layoffs. Read More

  • Labor Markets


    Employment changed little in September. After a total upward revision of 77,000 jobs for July and August, nonfarm payroll employment declined by 35,000 jobs in September, significantly fewer than had been anticipated in the wake of Hurricane Katrina. Read More

  • Inflation and Prices


    The Consumer Price Index rose 6.3% in August, following a 6.4% rise in July. Energy prices surged ahead for the second consecutive month, jumping nearly 80% (annualized rate), but growth in the core retail price measures was much more subdued. Read More

  • Fourth District Employment


    The Fourth District’s unemployment rate fell to 5.6% in July, down 0.2 percentage point from June and its lowest level in nearly three years. The U.S. rate fell from 5.0% in July to 4.9% in August. Read More

  • Fourth District Banks


    Overall, Fourth District banks’ financial indicators point to strong balance sheets. JPMorgan Chase, chartered in Columbus, is not included because its assets are mostly outside the District and its size dwarfs other District institutions. Read More

  • Economic Activity


    The Commerce Department’s final reading of real GDP for 2005:IIQ was 3.3%, unchanged from the preliminary estimate. This was 0.5 percentage point (pp) lower than the final 2005:IQ growth of 3.8%. Read More

  • Business Loan Markets


    Credit availability for businesses continued to improve in 2004, according to the Federal Reserve’s Senior Loan Officer Survey. A positive net percentage indicates more banks reported higher standards than reported no change or easing standards. Read More

  • The Ohio State Budget


    In February 2005, Governor Taft presented his biennial executive budget for Ohio’s fiscal years 2006 and 2007. The biennial budget is the financial plan, providing historical revenue, spending information and projections for the next two years. Read More

  • The Economy in Perspective


    The Tuesday, August 30 New York Times carried the front page headline, “Hurricane Slams into Gulf Coast…New Orleans Escapes a Direct Hit.” We now know that the optimistic reports were premature. Read More

  • Taylor Rules and Communication


    The FOMC statement continues to assert that “monetary policy remains accommodative,” but it is difficult to judge whether or not this is the case. One approach is to calculate what the funds rate would have been in the past under similar conditions. Read More

  • Older Americans in the Workforce


    Labor force participation among workers 55 and older declined significantly from the late 1940s to the mid-1990s. Participation rates for older males dropped, possibly because rising wealth has allowed them to retire earlier. Read More

  • Monetary Policy


    At its August 9 meeting, the Federal Open Market Committee (FOMC) raised its federal funds rate target from 3.25% to 3.50%. This widely anticipated increase of 25 basis points (bp) was the tenth in a row since June 2004. Read More

  • Labor Markets


    Total nonfarm payroll employment increased by 169,000 in August. Although the month’s gains were below the consensus estimate, the economy’s average monthly job gain of 195,000 over the last three months remains strong. Read More

  • Inflation and Prices


    The Consumer Price Index, which was unchanged in June, rose at a 6.4% annualized rate in July. After falling for two months, energy costs rose a sharp 56.8% (annualized), accounting for over half of the rise in the overall CPI. Read More

  • Fourth District Employment


    In June, the Fourth District’s unemployment rate held steady at 5.8% for the third consecutive month. The U.S. unemployment rate was 5.0% in both June and July. Read More

  • Fourth District Banks


    FDIC-insured commercial banks headquartered in the Fourth Federal Reserve District posted net income of $5.56 billion for the first two quarters of 2005 or $11.13 billion on an annual basis. Read More

  • Foreign Central Banks


    The Federal Reserve recently raised its interest rate target by another 25 basis points (bp) and the Bank of England lowered its rate target by 25 bp. Read More

  • Economic Activity


    On August 31, the Department of Commerce released its preliminary estimate of GDP and its components for 2005:IIQ. Compared to the advance estimate, real GDP growth was revised down from 3.4% to 3.3% for the quarter. Read More

  • China’s Trade, the Dollar, and the Renminbi


    On July 21, China ended its 10-year policy of pegging the renminbi against the U.S. dollar and announced that it will use a basket of currencies to guide its exchange rate. Read More

  • The U.S. International Investment Position


    The net international investment position of the United States reached –$2.5 trillion or 21% of GDP in 2004, according to recently released data. Read More

  • The Renminbi Revaluation


    On July 21, China devalued renminbi 2.1% to 8.11 per U.S. dollar and revised its exchange rate policy. Since then, renminbi has not changed much relative to the dollar, suggesting this revaluation may not be first in a near-term series. Read More

  • The Economy in Perspective


    The U.S. economy has come a long way since the 2001 recession. Despite terrorist attacks, an ongoing war, and a series of energy price shocks, economic activity has steadily advanced for four years and shows no sign of abating. Read More

  • Ohio’s Labor Market


    Throughout this recovery, Ohio has had the most stubbornly high unemployment rate of any Fourth District state. Ohio’s rate has exceeded 6% in all but one month since January 2003, whereas the U.S. unemployment rate has fallen from more than 6%. Read More

  • Money and Financial Markets


    In a recent speech, Federal Reserve Board Governor Donald Kohn noted that the Federal Reserve pays “a lot of attention to financial market prices in the formulation of monetary policy.” Read More

  • Monetary Policy


    After each of its meetings, the Federal Open Market Committee (FOMC) releases a statement to explain its decision on the federal funds rate—a benchmark for all short-term interest rates. Read More

  • Labor Markets


    Labor markets continued to improve in July. Nonfarm payroll employment rose by 207,000, slightly above the average monthly gain of 188,000 jobs in first half of the year. Read More

  • Inflation and Prices


    Growth in retail prices was subdued in June. After falling 0.6% in May, the Consumer Price Index remained unchanged. There were modest increases in the core CPI and the median CPI. Read More

  • Fourth District Employment


    The Fourth District’s unemployment rate, which has been above the U.S. average for 30 consecutive months, remained unchanged at 5.8% in May. Read More

  • Foreign Central Banks


    The Bank of England maintained a 4.75% repo rate at its early July meeting, although only by the slimmest of margins: Four of the nine members wanted to cut the rate in anticipation of a “softer [growth] outlook going forward.” Read More

  • Foreign Banking Organizations


    The U.S. banking industry shows the impact of financial markets’ increasing globalization. Despite some loss of market share since 1994, foreign banks remain important competitors in the U.S. Read More

  • Employment Costs


    Firms’ costs of employing workers include wages and salaries as well as benefits. Total compensation costs, as measured by the Employment Cost Index (ECI), continue to grow only moderately. Read More

  • Economic Activity


    The Commerce Department’s advance reading for GDP growth in 2005:IIQ was 3.4%, which was 0.4 percentage point (pp) lower than the final 2005:IQ rate of 3.8%. Read More

  • Demographics and Income in Ohio


    Ohio’s population growth has consistently lagged the United States’ since 1970. For much of the 1970s and 1980s, U.S. population growth hovered around 1%, but Ohio showed essentially no net growth. Read More

  • West Virginia Employment and Income


    Throughout the 1990s, West Virginia’s unemployment rate was significantly higher than the nation’s. Since the last recession ended, however, it has tracked the U.S. average closely. Read More

  • Unemployment Changes


    Nonfarm job openings and separations influence the dynamics of the labor market. The U.S. rate of job separations has recently trended up and is now close to its average 2001 recession level of 3.5%. Read More

  • The European Union


    The recent French and Dutch votes to reject the European Union’s constitution have raised doubts about the sustainability of Europe’s single currency, the euro. Read More

  • The Economy in Perspective


    The Federal Open Market Committee increased its federal funds rate target by 25 basis points, to 3.25%, at its June 30 meeting. Read More

  • Oil Prices


    In March 2005, the U.S. imported 65% of all the oil it consumed. About 30% of those imports came from its immediate neighbors: 16% from Mexico and 14% from Canada. Slightly more than two-thirds of U.S. oil imports came from five countries. Read More

  • Money and Financial Markets


    Although the Federal Reserve sets the federal funds rate and the discount rate, the ultimate impact on the economy depends on what happens to other interest rates, which policy may influence but not control. Read More

  • Monetary Policy


    On June 30, the Federal Open Market Committee (FOMC) announced that the target federal funds rate increased by 25 basis points to 3.25, the ninth consecutive increase. Read More

  • Labor Markets


    Nonfarm employment increased by 146,000 jobs in June, exactly half the gains posted in April (292,000) but about 50% more than in May (104,000). Read More

  • Inflation and Prices


    The Consumer Price Index (CPI) declined 0.6% (annualized rate) in May following substantial gains of 6.4% (annualized rate) in April and 7.8% (annualized rate) in March. Read More

  • Home Prices


    Since 1970, residential investment—new home construction—has averaged 4.5% of GDP. Since 1991, its share of GDP has increased 2.5 percentage points. Read More

  • GDP Growth


    The Commerce Department’s final reading of real GDP for 2005:IQ was 3.8%. This figure has been revised up from its advance reading of 3.1% in April and its preliminary reading of 3.5% in May. Read More

  • Fourth District Employment


    The Fourth District’s unemployment rate for April fell to 5.9%, its second consecutive monthly decline of 0.1 percentage point. The nation’s unemployment rate was 5.2% in April and fell to 5.1% in May, the lowest since September 2001. Read More

  • Fourth District Banks


    FDIC-insured commercial banks headquartered in the Fourth Federal Reserve District posted net income of $2.77 billion for the first quarter of 2005 or $11.08 billion on an annual basis. Read More

  • Foreign Central Banks


    As expected, the Federal Open Market Committee raised its overnight federal funds rate target from 3% to 3.25% at the end of June. The Bank of England’s repo rate, maintained at 4.75% in early June, has been unchanged since August of last year. Read More

  • Unemployment Insurance


    The U.S. Unemployment Insurance (UI) program, launched by the Social Security Act of 1935, gives monetary assistance to the unemployed. The program is also a countercyclical tool that helps sustain income levels in difficult economic times. Read More

  • The Economy in Perspective


    The Second Law helps explain why hot frying pans cool off after removed from the heat source, and why ice cubes melt in a glass of tap water. Left to its own devices, tap water will not store up energy and transform itself into ice cubes. Read More

  • Money and Financial Markets


    The secular decline in long-term rates that began in 1982 resulted primarily from a decline in the inflation expectations associated with a sustained disinflation. Read More

  • Monetary Policy


    At its May 3 meeting, the Federal Open Market Committee (FOMC) raised its federal funds rate target from 2.75% to 3%—about 1 percentage point above the core inflation rate of personal consumption expenditures over the past year. Read More

  • Labor Markets


    Nonfarm payrolls increased by 78,000 jobs in May, the smallest monthly gain since August 2003. However, job growth averaged 176,000 throughout April and May, generally in line with the average monthly gain of 184,000 in the previous 12 months. Read More

  • Inflation and Prices


    After jumping 7.8% in March, Consumer Price Index (CPI) rose a strong 6.4% in April. Energy prices, which account for roughly 8.0% of overall index, rose a dramatic 69.5% (annualized rate) in April after two months of sharp price increases. Read More

  • Income Inequality


    Between 1947 and 1974, income growth was distributed fairly evenly among households in various income groups. However, income inequality has increased over the past 30 or so years. Read More

  • Fourth District Employment


    In March, Fourth District’s unemployment rate fell 0.1 percentage point to 6.0%, compared to the 5.2% U.S. average (which was unchanged in April). The number of unemployed people in the District fell by about 7,000 (down 1.3%) from February to March. Read More

  • Foreign Central Banks


    None of the four major central banks has changed its policy setting since the Federal Reserve raised its funds rate target to 3% on May 3. Read More

  • Federal Spending


    Federal tax receipts surged 26% in April 2005 compared to April 2004, putting the budget almost $58 billion in surplus. Read More

  • Economic Growth in the Euro Area and Japan


    Economic growth in the euro area and Japan has been sluggish—less than 2% on balance—and is likely to remain so this year and next. The dollar’s depreciation and higher oil prices have weighed heavily on these economies. Read More

  • Economic Activity


    According to U.S. Commerce Department’s preliminary estimate, GDP growth in 2005:IQ was 3.5%, up from 3.1%. The revision was attributed primarily to upward revisions for personal consumption expenditures, residential investment, and exports. Read More

  • Business Loan Markets


    Credit availability for businesses continued to improve throughout 2004, according to the Federal Reserve’s Senior Loan Officer Survey. Read More

  • Betting on a Renminbi Revaluation


    The U.S. has turned up the heat on China to revalue the renminbi: The Treasury has threatened to label China a currency manipulator, and Congress may impose tariffs if China does not comply. Read More

  • Workforce Education and Income


    American workers are becoming more educated. Over the past 34 years, the share of workers with at least a college degree more than doubled (from 14.1% in 1970 to 32.4% in 2004). Read More

  • The U.S. Current Account Deficit


    The nominal U.S. deficit for trade on goods and services increased in February to $61 billion, the largest on record. The trade deficit has been increasing for the last three years. Read More

  • The Economy in Perspective


    The monetary policy situation now facing the FOMC is a textbook classic of advanced macroeconomics courses: How should the monetary authority respond to an adverse energy shock? Read More

  • Pennsylvania Employment


    In 2003, Pennsylvania’s industrial structure resembled the nation’s in many ways but, like many Midwestern states, the share of its workforce in the manufacturing sector was slightly above the U.S. average (15% versus 12%). Read More

  • Money and Financial Markets


    Before January 9, 2003, the Federal Reserve discount rate was set lower than the FOMC’s federal funds rate target for open market operations. The Reserve Banks had to use administrative means to discourage borrowing at this attractive rate. Read More

  • Monetary Policy


    Since the current round of monetary policy tightening began in late June 2004, the Federal Open Market Committee has increased the federal funds rate a total of 2.00%. Read More

  • Labor Markets


    Total nonfarm payroll employment increased by 274,000 in April, well above the consensus estimate of 175,000 and the first quarter’s monthly average of 190,000. Furthermore, February and March increases were revised up a net 93,000 jobs. Read More

  • Inflation and Prices


    In March, retail prices jumped but longer-term inflation trends held steady. The Consumer Price Index (CPI) rose 7.8%, following a 4.5% rise in February. Read More

  • Income Variation


    Americans' average income varies considerably across states. In 2004, Connecticut had highest real per capita personal income at $42,107; Mississippi had the lowest at $22,863. Of Fourth District states, only Pennsylvania exceeded U.S. average. Read More

  • GDP Growth


    The U.S. Commerce Department’s advance estimate of real GDP growth in 2005:IQ was 3.1%, substantially lower than the final 2004:IVQ estimate of 3.8%. Read More

  • Fourth District Employment


    In February, the Fourth District’s unemployment rate rose 0.4 percentage point (pp) to 6.1%, double the U.S. increase of 0.2 pp from 5.2% to 5.4%. (March data show the U.S. unemployment rate falling back to 5.2%.) Read More

  • Foreign Central Banks


    Among the four major central banks, only the Federal Reserve has changed a policy setting recently. It raised the target for the overnight federal funds rate another 25 basis points (bp) to 3.00%. This was expected. Read More

  • Federal Deposit Insurance Funds


    FDIC-insured deposits grew in 2004: Those insured by the Bank Insurance Fund (BIF) grew at a 4.61% annualized rate and those insured by the Savings Association Insurance Fund (SAIF) at 6.12%. Read More

  • The U.S. Current Account in a Global Context


    In 2004, U.S. current account deficit climbed to $666 billion, nearly 6% of our GDP. We financed the increase primarily by issuing financial claims to foreign governments and their central banks. Direct investment flows were essentially unchanged. Read More

  • The Economy in Perspective


    This edition of The Economy in Perspective contains both a crossword puzzle and its answers. Read More

  • Oil Prices and the Macroeconomy


    Increases in oil prices and the funds rate have preceded every recession since the early 1970s. Oil price increases usually depress economic activity, but part of the decline in output results from the funds rate increase. Read More

  • Monetary Policy


    Growth in the sweep-adjusted monetary base (total currency in circulation plus total reserves plus vault cash of depository institutions not applied to reserve requirements) moderated in January. Read More

  • Measuring Employment in the Fourth District


    The Fourth District unemployment rate fell to 5.7% in January; the U.S. average for the month was 5.2%. In March, the national unemployment rate, which is available sooner than the regional measures, was unchanged. Read More

  • Labor Markets


    Total nonfarm payroll employment rose by 110,000 in March, less than the average monthly increase of 183,000 in 2004. The average monthly employment gain for 2005:IQ was 159,000, down from the average of 190,000 in 2004:IVQ. Read More

  • Inflation and Prices


    The Consumer Price Index (CPI) rose at an annualized rate of 4.5% in February. The Bureau of Labor Statistics attributed virtually all of the monthly acceleration in the CPI growth rate to an annualized 26.8% rise in energy prices. Read More

  • Fourth District Banks


    FDIC-insured commercial banks headquartered in the Fourth Federal Reserve District posted net income of $10.1 billion in 2004, a 9% decline from 2003. The U.S. banking industry as a whole posted earnings of $118.38 billion for the same period. Read More

  • Foreign Central Banks


    Of the four major central banks, only the Federal Reserve has changed its policy setting recently, raising its target for the overnight federal funds rate by another 25 basis points to 2.75%. Read More

  • Economic Activity


    The U.S. Commerce Department’s final estimate of the real GDP growth rate in 2004:IVQ is 3.8%, unchanged from the preliminary estimate. Exports and personal consumption expenditures had minor upward revisions. Read More

  • Dollar Depreciation and Inflation


    Since February 2002, the U.S. dollar has depreciated nearly 16% on average against currencies of our most important trading partners, with surprisingly little impact on prices of most traded goods. Oil accounts for most of change in import prices. Read More

  • Compensation Costs


    Measures of compensation growth are sensitive to differences in method: Both the Employer Costs for Employee Compensation (ECEC) and the Employment Cost Index (ECI) gauge the cost of labor. Read More

  • The Economy in Perspective


    The vexed question of the nation’s deficits, both actual and projected, has aroused a cacophony of opinions. Despite the tumult, however, there is an element of arithmetic that must be respected. Read More

  • Money and Financial Markets


    In his February 16 testimony before Congress, Federal Reserve Chairman Greenspan discussed yield curve movements. Changes at the long end of the nominal yield curve can be attributed: changes in real rates and changes in inflation expectations. Read More

  • Monetary Policy


    On February 2, the Federal Open Market Committee (FOMC) raised the intended federal funds rate 25 basis points (bp) to 2.5%, the sixth such increase since the current round of tightening began in late June 2004. Read More

  • Labor Markets


    Nonfarm payroll employment grew by 262,000 jobs in February 2005, exceeding the 183,000 average monthly gain in 2004. At 132.8 million, nonfarm payroll employment surpassed the February 2001 peak by about 300,000 jobs. Read More

  • Labor Force Participation


    In the 46 months between the March 2001 business cycle peak and January 2005, the labor force participation rate fell to 65.8%. After the 1990 recession, however, the rate slightly exceeded prerecession levels (66.6%) within 46 months of the peak. Read More

  • Kentucky Employment


    Kentucky’s labor market conditions stand out among the Fourth District states. Indeed, its December unemployment rate of 4.5% was the lowest in the District and almost a full percentage point below the U.S. average. Read More

  • Japan's Economy


    In the fourth quarter of 2004, Japan’s real GDP fell at an annualized rate of 0.5%. Following the downward revisions to second- and third-quarter growth rates, 2004:IVQ was the third straight quarter in which real GDP contracted. Read More

  • Inflation and Prices


    The Consumer Price Index (CPI) rose at an annualized rate of 0.6% in January after remaining unchanged in December; the core CPI, which excludes the volatile food and energy prices, rose at a 2.4% annualized rate. Read More

  • Foreign Central Banks


    None of the four major central banks has changed its policy setting since the last Federal Reserve action. Japan’s overnight interbank rate has been zero for three years, reflecting the Bank of Japan’s anti-deflation policy of quantitative easing. Read More

  • Employment in the Fourth District


    The Fourth District’s unemployment rate fell to 5.8% in December. This decline seems to have been driven largely by a reduction in the estimated size of the labor force; estimated employment actually fell slightly during the month. Read More

  • Economic Activity


    U.S. Commerce Department’s preliminary estimate of real GDP growth in 2004:IVQ is 3.8%, higher than the advance estimate of 3.1%. This brought 2004:IVQ growth within 0.2 pp of 2004:IIIQ growth of 4.0% and only 0.1 pp below the 2004 average. Read More

  • Business Loan Markets


    Credit availability for businesses continued to improve for most of 2004, according to the Senior Loan Officer Survey. Read More

  • The Economy in Perspective


    The remarkable aspect of current economic conditions is that they are so unremarkable. Real GDP expanded at a 3.7% rate during last four quarters, unemployment rate stands at 5.2%, and core CPI inflation registered 2.2% during the last year. Read More

  • The Chinese Renminbi


    During the 12 months ending in November 2004, the U.S. registered a $157.6 billion deficit in goods trade with China, a shortfall that accounts for nearly 25% of the total U.S. trade deficit. Read More

  • Monetary Policy


    Growth in the sweep-adjusted monetary base (total currency in circulation plus total reserves plus vault cash of depository institutions not applied to reserve requirements) has been fairly constant for a couple of years. Read More

  • Labor Markets


    Nonfarm payroll employment increased 146,000 in January. December’s growth was revised down 24,000, although the employment level was raised 161,000 after the benchmark revision and updating of seasonal factors. Read More

  • Job Reallocation in the Recovery


    The labor market recovery after the November 2001 business cycle trough has been unusually weak. Has increased sectoral reallocation (a permanent shift in a way employment is distributed among economic sectors) been a factor in this slow transition? Read More

  • Inflation and Prices


    During December, the Consumer Price Index (CPI) declined at a 0.6% annualized rate, reflecting a 19.8% drop in energy prices. The core CPI rose 1.8% for the second straight month, while the median CPI increased 2.1%. Read More

  • Fourth District Employment


    By some measures, Ohio’s economic performance during the current recovery has been disappointing. Ohio trails the other Fourth District states in employment growth. Read More

  • Foreign Central Banks


    On February 2, the Federal Reserve’s Federal Open Market Committee again raised its target for the overnight interbank (federal funds) rate by 25 basis points, bringing the target to 2.50%. Read More

  • Education in the U.S. and Fourth District States


    Very few people would deny that there is a positive relationship between economic development and education. How does the Fourth Federal Reserve District stack up against the nation? It depends on the state. Read More

  • Economic Activity


    Real GDP grew at an annual rate of 3.1% in 2004:IVQ, according to the U.S. Commerce Department’s advance estimate. This was 0.9 percentage point (pp) lower than the 2004:IIIQ growth rate of 4.0%. Read More

  • Business Cycles


    Oil prices and the federal funds rate typically spike before recessions. Both are likely to be causal factors, although the spikes’ timing and impact on the economy vary. Oil prices spiked before the 2001 downturn, but earlier than they typically do. Read More

  • Bankruptcies in the Fourth District


    Bankruptcies cost businesses and consumers billions of dollars every year, but they also offer essential protection for debtors. Read More

  • Banking Structure


    Passage of the 1994 Reigle–Neal Act, which regulates interstate banking, spurred consolidation of depository institutions. The number of FDIC insured commercial banks fell at a decline of more than 30%. Read More

  • The Foreign-Born Labor Force


    A significant fraction of U.S. workers were born overseas to parents who were not U.S. citizens. In 2003, these foreign-born workers represented about 14% of the labor force. Read More

  • The Economy in Perspective


    Many analysts believe that the U.S. economy overall will perform much the same in 2005 as it did in 2004. They expect that real GDP will grow in a range centered on 3.5 percent and that core CPI inflation will increase at roughly 2 percent. Read More

  • Money and Financial Markets


    The federal funds rate gets attention, not because everyone borrows or lends at that rate (only banks do), but because its movement affects other rates at which people do borrow and lend. Read More

  • Monetary Policy


    On December 14, the Federal Open Market Committee raised its target for the federal funds rate by 25 basis points to 2.25%, its fifth consecutive upward move. Separately, the Federal Reserve’s Board of Governors raised the discount rate to 3.25%. Read More

  • Labor Markets


    Although employment growth continued in 2004, it was disappointing compared to earlier expansions. Nonfarm payroll employment increased by 157,000 in December, better than November’s upward net gain but still below the average monthly increase. Read More

  • International Transactions


    The current account balance measures the combined balance on international trade, net foreign investment income, and net unilateral transfers to foreigners. Read More

  • Inflation and Prices


    Retail price measures grew modestly in November. The Consumer Price Index (CPI) rose at a 1.9% annualized rate during the month after surging 7.9% in October. Growth in alternative retail price measures was equally restrained. Read More

  • Fourth District Employment


    In November, the Fourth Federal Reserve District’s unemployment rate rose 0.1 percentage point to 6.2%, while the national unemployment rate fell by the same amount to 5.4%. Read More

  • Fourth District Banking


    FDIC-insured commercial banks headquartered in the Fourth Federal Reserve District posted net income of $7.85 billion for the first three quarters of 2004 ($10.46 billion on an annual basis). Read More

  • Foreign Central Banks


    The Federal Reserve’s Federal Open Market Committee continued its series of policy rate increases at its December 14 meeting, bringing the target for the overnight federal funds rate up 25 basis points to 2.25%. Read More

  • Economic Activity


    According to the U.S. Commerce Department’s final estimate, the annualized growth rate of real GDP in 2004:IIIQ was 4.0%, up from the preliminary estimate of 3.9% and the final 2004:IIQ estimate of 3.3%. Read More