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Federal Reserve Bank of New York
33 Liberty Street, New York, NY 10045 Museum & Learning Center & West Wing
Joint Meeting of Advisory Council on Small Business and Agriculture &
Upstate New York and Regional Advisory Board
Thursday, November 21, 2019
AGENDA 3:00 p.m. – 3:30 p.m. Welcome and Brief Introductions, Tony Davis, Officer
3:30 p.m. – 3:45 p.m. U.S. Economic Conditions, David Lucca, AVP
3:45 p.m. – 4:00 p.m. Economic Conditions in the Region, Jaison Abel, AVP
4:00 p.m. – 4:15 p.m. Minimum Wage Research, Jason Bram, Officer
4:15 p.m. – 5:30 p.m. Facilitated Discussion, Claire Kramer Mills, AVP
5:30 p.m. – 5:45 p.m. Update on New Advisory Board, John Williams, President and CEO
5:45 p.m. – 7:00 p.m. Reception
Federal Reserve Bank of New York
33 Liberty Street, New York, NY 10045
Museum & Learning Center & West Wing
Joint Meeting of Advisory Council on Small Business and Agriculture &
Upstate New York and Regional Advisory Board
Thursday, November 21, 2019
ATTENDEE LIST
SBAAC & UNYRAB Council Members
Donnel Baird
Founder & CEO
BlocPower
Adenah Bayoh
Founder & CEO
Adenah Bayoh & Companies
Jaswinder (Jassi) Chadha
Co-Founder & CEO
Axtria
Kevin Ellis
CEO
Cayuga Milk Ingredients
Kenneth Franasiak
Chairman
Calamar
Sarah LaFleur
Founder & CEO
MM.LaFleur
Melanie Littlejohn
VP, Customer & Community Engagement
National Grid
Linda MacFarlane
Executive Director
Community Loan Fund of the Capital Region
Anthony E. Shorris
John Weinberg/Goldman Sachs Visiting Scholar
Princeton University
Waleska Rivera
President
Danosa Caribbean, Inc.
Federal Reserve Bank of New York
John Williams
Jack Gutt
Kausar Hamdani
Rosanne Notaro
David Erickson
Claire Kramer Mills
Tony Davis
Matthew Higgins
Jaison Abel
David Lucca
Jason Bram
Chelsea Cruz
Edison Reyes
Jessica Battisto
President & CEO
EVP, Communications & Outreach
SVP, Communications & Outreach
VP, Legal
SVP, Outreach & Education
AVP, Outreach & Education
Officer, Outreach & Education
VP, Research & Statistics
AVP, Research & Statistics
AVP, Research & Statistics
Officer, Research & Statistics
Associate, Outreach & Education
Associate, Outreach & Education
Senior Analyst, Outreach & Education
November 21, 2019
U.S. Economic ConditionsDavid Lucca, Assistant Vice President
The views expressed here are those of the presenter and do not necessarily represent
those of the Federal Reserve Bank of New York or the Federal Reserve System.
2
Real GDP grew at 2.3% thus far this year above the economy’s estimated potential (1¾%).
Continued gains in the labor market but some moderation in earnings growth.
After a weak start of the year, inflation is firming but remains muted.
Consumer spending remains strong while business fixed investment is weakening as the manufacturing sector is experiencing a contraction.
Overview
3
4
6
8
10
12
-6
-4
-2
0
2
4
6
8
2013 2015 2017 2019
Personal Savings Rate
(Right Axis)
Real Disposable
Personal Income
(Left Axis)
12-Month Percent Change
Source: Bureau of Economic Analysis via Haver Analytics.
Percent of Disposable Income
Consumer Spending Remains Strong
Real Personal
Consumption
Expenditures
(Left Axis)
4
14.25
15
15.75
16.5
17.25
18
18.75
500
550
600
650
700
1990 1995 2000 2005 2010 2015
Household Financial
Obligation Ratio
(Right Axis)
Household Net Worth as % of
Disposable Personal Income
(Left Axis)
Percent of Disposable Income
Source: Federal Reserve Board
via Haver Analytics.
Percent of Disposable Income
Household Sector in Strong Financial Position
Note: Shading shows NBER recessions.
5
56
58
60
62
64
66
68
0
2
4
6
8
10
12
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Percent Percent
Unemployment Rate
(Left Axis)
Labor Force
Participation Rate
(Right Axis)
Employment to
Population Ratio
(Right Axis)
Source: Bureau of Labor Statistics.
Unemployment Rate at 50-year Lows
Note: Shading shows NBER recessions.
6
1
1.5
2
2.5
3
3.5
4
4.5
1
1.5
2
2.5
3
3.5
4
4.5
2007 2009 2011 2013 2015 2017 2019
12-Month Percent Change 12-Month Percent Change
Moderation in Earnings Growth
All EmployeesNonsupervisory
Employees
Source: Bureau of Labor Statistics
via Haver Analytics.
Note: Average Hourly Earnings.
Shading shows NBER recessions.
7
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
12-Month Percent Change 12-Month Percent Change
Source: Bureau of Economic Analysis
via Haver Analytics.
Total PCE
Core PCE
FOMC Objective
Core PCE Inflation Rising but Still Muted
Note: Shading shows NBER recessions.
8
30
35
40
45
50
55
60
65
70
30
35
40
45
50
55
60
65
70
2008 2010 2012 2014 2016 2018 2020
ISM Non-Manufacturing Index
ISM Manufacturing Index
Index
Source: Institute of Supply Management.
Index
US Manufacturing Sector Contracting
Note: Shading shows NBER recessions.
9
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
-40
-30
-20
-10
0
10
20
30
40
2008 2010 2012 2014 2016 2018
Share of GDP
(percent):
IPP: 4.7
Equipment: 5.9
Structures: 3.0
4-Quarter Percent Change
Source: Bureau of Economic Analysis.
4-Quarter Percent Change
Note: Share calculated as of 2019:Q2.
Business Fixed Investment Slowing
10
60
62
64
66
68
6
7
8
9
10
11
12
13
14
15
2008 2010 2012 2014 2016 2018
Percent of National Income
Source: Bureau of Economic Analysis.
Percent of National Income
Declining Profit Share of National Income
Note: Corporate profits includes IVA and CC
Adjustments. Shading shows NBER recessions.
Corporate Profits
After Tax (Left Axis)
Compensation of
Employees, Paid
(Right Axis)
Corporate (Left Axis)
11
-20
-10
0
10
20
-20
-10
0
10
20
2008 2010 2012 2014 2016 2018
4-Quarter Percent Change
Source: Bureau of Economic Analysis.
4-Quarter Percent Change
Weak Global Demand
Note: Growth rates in real terms. Shading shows NBER recessions.
Imports of Goods
and Services
(Left Axis)
Exports of Goods
and Services
(Right Axis)
12
0
200
400
600
800
1000
1200
1400
1600
1800
2000
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2008 2010 2012 2014 2016 2018
Frequency of articles in American
newspapers that discuss policy-related
economic uncertainty and also contain
one or more references to trade policy.
Index (1985 = 100)
Source: Baker, Bloom and Davis
PolicyUncertainty.com via Haver Analytics.
Index (1985 = 100)
Nov.
2016
July
2018
Aug.
2019
Elevated Trade Policy Uncertainty
Note: Shading shows NBER recessions.
13
0
1
2
3
4
5
6
7
300
400
500
600
700
800
900
1000
2008 2010 2012 2014 2016 2018
30-Year Fixed-Rate
Mortgage (Right Axis)
Single-Unit
Housing Starts
(Left Axis)
Thous. Units
Source: US Census and FHLMC.
Percent
Housing Units Authorized:
Single-Unit (Left Axis)
Single Family Housing Responding to Lower Rates
Note: Shading shows NBER recessions.
14
0
500
1000
1500
2000
2500
3000
3500
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2008 2010 2012 2014 2016 2018
S&P 500
(Right Axis)
BAA - AAA
Yield Spread
(Left Axis)
Percentage Points
Source: Wall Street Journal, U.S. Treasury,
and Moody’s via St. Louis FRED. Note: Shading shows NBER recessions.
10-Year Treasury
Yield (Left Axis)
Index
Financial Conditions Supportive to Economic Growth
15
-10
-8
-6
-4
-2
0
2
4
6
8
10
-10
-8
-6
-4
-2
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
4-Quarter Percent Change 4-Quarter Percent Change
Source: Bureau of Economic Analysis via Haver Analytics.
Federal
State and Local
Government Spending Boosts Economic Growth
Note: Growth rates in real terms. Shading shows NBER recessions.
Economic Conditions in the Region
Jaison R. Abel
Joint SBAAC and UNYRAB Meeting – November 21, 2019
The views expressed here are those of the presenter and do not necessarily represent
those of the Federal Reserve Bank of New York or the Federal Reserve System.
Overview of Regional Conditions
• There has been little or no growth in the New York-Northern
New Jersey region in recent months.
• Job growth has slowed in much of the region, particularly in and
around New York City, in part because tight labor markets have
made it difficult for businesses to find workers.
• Looking ahead, businesses in the region have become much less
optimistic about future economic conditions.
FEDERAL RESERVE BANK OF NEW YORK 1
Current Economic ConditionsFRBNY Regional Business Surveys
Source: Federal Reserve Bank of New York. 2
-60
-40
-20
0
20
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Business LeadersSurvey
(Service Sector)
Empire StateManufacturing
Survey
Nov
Diffusion Index
Shading indicates NBER recession
Average
15
22018 to Early 2019:
Past 3 Months:
Current Business ClimateFRBNY Business Leaders Survey
Source: Federal Reserve Bank of New York. 3
-100
-75
-50
-25
0
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Business LeadersSurvey
(Current Climate)
Nov
Diffusion Index
Shading indicates NBER recession
Regional Consumer ConfidenceOverall Consumer Confidence
Source: Sienna Research Institute, University of Michigan. 4
45
60
75
90
105
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Upstate NY
Downstate NY
Nov
Index Value
Shading indicates NBER recession
Sep(Q3)
United States
Regional Employment TrendsIndexes of Total Employment, Seasonally Adjusted
Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com; data are early benchmarked by FRBNY staff. 5
84
92
100
108
116
124
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Downstate NY
United States
Upstate NY
Puerto Rico
Northern NJ
Sep
+1.3%
+0.5%
+0.5%
+0.8%
Oct +1.5%
Index (Jan2010=100)
Percent Change
Q3-18 to Q3-19
Sectors Driving Regional Job GainsAnnual Employment Change (Ths), Q3-2018 to Q3-2019
6
13
6 5
-8
0
8
16
4.5
3.0
0.6
-2.3
-3.3
-6
-3
0
3
6
12
6
3
-5
0
5
10
15
54
128
-20
0
20
40
60Downstate NY
Northern NJ
Upstate NY
Puerto Rico
Health & Education Services
Construction
Leisure & Hospitality
Government
Retail Trade
Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com.
Recent Job Growth in the NY-NNJ RegionAnnual Percent Change, Q3-2018 to Q3-2019
7
GlensFalls
Elmira Binghamton
Kingston
Buffalo Rochester Syracuse
Utica
Albany
Ithaca
NYC
Watertown
Du
tch
ess-
Pu
tna
m
Newark
MiddlesexMonmouth
Ocean
NorthCountry
Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com;
data are early benchmarked by FRBNY staff.
.
Strong Growth
Moderate Growth
Modest Growth
Little or No Growth
Decline
Regional Labor Markets Remain TightLong-Run and Current Unemployment Rates, Seasonally Adjusted
Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com. 8
6.1
5.15.1 5.0
7.8
6.1
4.8
4.1
5.86.2
5.3
5.9 5.86.1
5.8
8.3
3.6 3.53.6 3.84.1
3.0
3.6 3.74.1 4.2 4.2 4.3 4.3 4.4
4.7
5.8
0%
2%
4%
6%
8%
10%
United States
LongIsland
New York City
Ithaca
Albany
Rochester
Syracuse
GlensFalls Buffalo
UticaElmira
Binghamton
Watertown
Fairfield
NorthernNew
JerseyLower
HudsonValley
Long-Run Average
Current
Future Economic ConditionsFRBNY Regional Business Surveys
Source: Federal Reserve Bank of New York. 9
-60
-40
-20
0
20
40
60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Empire StateManufacturing Survey
(Future Conditions)
Business LeadersSurvey
(Future Activity)
Nov
Shading indicates NBER recession
Diffusion Index
Average
33
132018 to Early 2019:
Past 3 Months:
The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.
Overview of Minimum Wage Issues in NY
Jason Bram, Research Officer
Advisory Council on Small Business & Agriculture / Upstate New York & Regional Advisory Board Joint meeting: November 21, 2019
Economics of a Minimum Wage
• Economic theory on minimum wage legislation
– Theory suggests that a rise in the minimum wage, relative to market wages, would have some adverse employment effects—i.e. potentially generate a sub-optimal level (and distribution) of employment.
• Research on effects of minimum wage
– A main question involves the effect on jobs—i.e., by how much would a given increase in the minimum wage (say, 10%) reduce employment? And how quickly would it occur?
– This research often exploits border differences—using one side of the border (between a low/high minimum wage area) as a control group.
– Much of the empirical evidence suggests that moderate increases in an area’s minimum wage tend to have fairly small, if any, near-term effects on employment.
– The employment effect in a particular area may depend on a variety of factors, such as prevailing market wages, industry mix, strength of the local economy, and prevalence of local-market vs export industries.
2
• How do various businesses respond to a hike (or series of hikes) in a local minimum wage?
• Some of the responses, starting with the most extreme, might include:
– Close up shop
– Move the business to another locale
• For example, with lower minimum wage or stronger demand.
– Reduce the number of workers
• For example, invest in automation, provide less service, etc.
– Replace lower skill (productivity) workers with higher skill workers
– Reduce the hours of workers
– Raise selling prices to offset wage effect
– Cut other costs to offset wage effect
– Accept lower profits
3
Potential Effects of a Minimum Wage
• We look at counties along both sides of the New York-Pennsylvania border.
4
Analysis of the NY/PA Border
Taken from Liberty Street Economics blog post:
https://libertystreeteconomics.newyorkfed.org/2019/09/minimum-wage-impacts-along-the-
new-york-pennsylvania-border.html
• Since the fourth quarter of 2009, workers in both New York and Pennsylvania have been subject to the federal minimum wage of $7.25 per hour.
• Over the past 6 years, upstate New York’s minimum wage has gone up and currently stands at $11.10 (50% higher than in PA) and $12.75 for non-tipped, fast-food workers.
5
Minimum Wage Increases in Upstate NY
Results of Analysis of the NY/PA Border
6
Results of Analysis of the NY/PA Border
7
• What has been your experience with the minimum wage?
– For those in NY State, dealing with the increases.
– For those in NJ, planning for upcoming increases.
• Do you have thoughts about how different types of businesses might respond?
• At what level might you consider the minimum wage to become disruptive?
8
Questions for Discussion
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