Federal Reserve Bank of New York 33 Liberty Street, New ...€¦ · 30-Year Fixed-Rate Mortgage (Right Axis) Single-Unit Housing Starts (Left Axis) Thous. Units Source: US Census

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


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.


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)


Source: Federal Reserve Board

via Haver Analytics.


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


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


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


Total PCE

Core PCE

FOMC Objective

Core PCE Inflation Rising but Still Muted


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


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.


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


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




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


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


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


-100

-75

-50

-25

0

25

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020


(Current Climate)

Nov

Diffusion Index


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


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


-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)


(Future Activity)

Nov


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

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

Documents

Federal Reserve Bank of New York 33 Liberty Street, New ...€¦ · 30-Year Fixed-Rate Mortgage (Right Axis) Single-Unit Housing Starts (Left Axis) Thous. Units Source: US Census