Economy at a Glance :: Federal Reserve Bank of Cleveland

Economy at a Glance

Executive Summary

The economy slowed markedly in the third quarter, with the final estimate of real GDP growth coming in at 1.7 percent and marking the second straight quarter of slowing growth.
Final sales (which exclude inventories) rose a modest 0.9 percent as inventory accumulation once again added to …  Executive Summary
The economy slowed markedly in the third quarter, with the final estimate of real GDP growth coming in at 1.7 percent and marking the second straight quarter of slowing growth.
Final sales (which exclude inventories) rose a modest 0.9 percent as inventory accumulation once again added to top-line growth. Consumption spending, the largest component of final sales, rose 2.2 percent following a 1.9 percent increase in the first quarter. Business fixed investment in equipment and software was again the brightest light in the second quarter, rising 20-plus percent for the second quarter in a row. Business investment in structures was essentially flat but less of a drag on growth than in recent quarters, although most of the support came from drilling in the energy sector and not spending on buildings. Foreign trade was the biggest drag on growth, as a 33.5 percent surge in imports swamped a 9.1 percent rise in exports. In all, net exports knocked 3.5 percentage points off real GDP growth in the second quarter.
Waning growth has given little opportunity for improvement in the employment situation. Private payrolls rose 64,000 in September, but the elimination of temporary Census jobs and declines in state and local government employment resulted in an overall decline of 95,000 jobs. Of the 83,000 cut in state and local government, 50,000 fell to local education at the beginning of the school year. The unemployment rate held steady at 9.6 percent, as household employment rose by 141,000. The labor force rose by a lesser 48,000, meaning that unemployment fell, but not enough to move the needle on the unemploymnet rate.
Inflation remains subdued. The core CPI (which excludes food and energy prices) was virtually unchanged in September. Over 12-month periods, core CPI inflation is now running at 0.8 percent and has followed five consecutive year-over-year readings of 1.0 percent. The top-line CPI ticked 0.1 percent higher (monthly rate) in September on modest increases in food and energy prices. Continued weakness in consumer prices has sparked fears of a “deflationary trap” and led to rampant speculation that the Federal Reserve is readying another round of large-scale asset purchases or “quantitative easing.” In asset markets, bond yields remain extremely low, with the 10-year Treasury rate hovering in the neighborhood of 2.5 percent.  [2010-10-21]  Executive Summary

Inflation and Prices   

Growth and Production   

Second-quarter GDP growth was revised up from 1.6 percent to 1.7 percent in the third and final estimate—at least until the July benchmark revisions next year. The overall picture remained virtually unchanged, with upward revisions to private consumption expenditures and inventories countered …  Growth and Production
Second-quarter GDP growth was revised up from 1.6 percent to 1.7 percent in the third and final estimate—at least until the July benchmark revisions next year. The overall picture remained virtually unchanged, with upward revisions to private consumption expenditures and inventories countered by a higher import flow than previously recorded. The lackluster second-quarter performance marked the second consecutive quarterly slowdown in growth coupled with weak third-quarter, which indicates a distinct loss in the recovery’s momentum, with subpar growth expected in the second half of the year. Indeed, the economy is on track to register the weakest decade of growth in the post-WWII period.   [2010-10-21]  Growth and Production
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Regional Economics   

Employment levels in the Fourth District’s main metropolitan areas were steady to down slightly over the June to July period. Cleveland’s and Cincinnati’s employment levels held steady, while Pittsburgh’s and Columbus’s employment fell slightly. Since the beginning of …  Regional Economics
Employment levels in the Fourth District’s main metropolitan areas were steady to down slightly over the June to July period. Cleveland’s and Cincinnati’s employment levels held steady, while Pittsburgh’s and Columbus’s employment fell slightly. Since the beginning of the year, Cleveland has experienced some rebound in employment, adding roughly 20,000 jobs. However, Cleveland also experienced a relatively large slide in employment over the last recession and thus is recovering from a low level. Currently, the Cleveland metro area is still down 65,000 jobs, representing roughly 6 percent of its prerecession employment. On the other hand, Pittsburgh has experienced a much milder recession, having lost on net 27,000 jobs (2.3 percent of prerecession employment). This better performance is also reflected in the fact that Pittsburgh has had a lower unemployment rate over the recession compared to other Fourth District metro areas or to the nation, as a whole.
This tepid recovery is seen in recent bank lending trends, as well. Our regional trends article on Small Business Lending highlights some key features of business lending for both the nation and for the Fourth District. From the perspective of the firm owner, bankers appear to be reluctant to lend regardless of credit history or ability to repay. In turn, bankers say that while lending standards remain tight, they have the capital and are anxious to lend, but demand is low. The key take-away from the article is that loan activity is low and such reticence to either borrow or lend will certainly slow the nascent recovery.  [2010-09-01]  Regional Economics
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Labor Markets, Unemployment, and Wages   

The labor market continued to show some improvement in August, though the pace of job creation remained quite weak. Private sector employment expanded by 67,000 in August, though overall payroll employment declined by 54,000 because of a drop in Census-related employment. July’s private sector …  Labor Markets, Unemployment, and Wages
The labor market continued to show some improvement in August, though the pace of job creation remained quite weak. Private sector employment expanded by 67,000 in August, though overall payroll employment declined by 54,000 because of a drop in Census-related employment. July’s private sector employment was also revised up to show a rise of 107,000. On the household side, the unemployment rate rose slightly to 9.6 percent and the employment-to-population ratio remained at a very anemic 58.5 percent, close to its recent lows.
Goods-producing industries showed no change in employment, while the service sector expanded with relatively large contributions from the temporary help and health-related industries. Looking at the distribution of employment changes across more detailed industries, we see that employment diffusion indexes show that a little more than half of all industries expanded employment over the last month and over the last three months. This month’s Trends article provides more detail on differences in payrolls and vacancies across sectors and across the cycle.  [2010-09-03]  Labor Markets, Unemployment, and Wages
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International Markets and Foreign Exchange