Small Business & Agricultural Advisory Board Federal ......10:30am Introductory Remarks Christine Cumming, First Vice President 10:40am-11:10am The National Economy Joseph Tracy, Executive

Small Business & Agricultural Advisory Board

Federal Reserve Bank of New York 33 Liberty Street

10F, Paul Volcker Boardroom Tuesday, April 15, 2014

AGENDA 10:30am Introductory Remarks

Christine Cumming, First Vice President 10:40am-11:10am The National Economy

Joseph Tracy, Executive Vice President 11:10am-11:30am Regional Update

Jim Orr, Vice President 11:30am-12:00pm International Update

John Clark, Senior Vice President

12:00pm 12:15pm 12:15pm-1:55pm

Adjourn to NWCR-10F Lunch Round Table Discussion with William Dudley, President Questions for discussion with President Dudley: Your experience and that of your customers and suppliers can give us insight into current economic conditions. 1. Has your firm experienced an increase in demand in recent

months? 2. Has demand for your product or service increased sufficiently that you increased or plan to increase employment in 2014? 3. Has demand for your product or service increased sufficiently

that you plan to increase investment in plant and equipment in 2014?

4. Has your access to credit changed in 2014? 5. Has demand for your products or services or your plans for

employment at your firm been impacted by recent changes in tax policy, legislation or regulations?

6. Did severe weather reduce demand for your product or services this year?

2:00 pm Adjourn

US Macro Overview April 15, 2014 Joe Tracy

Overview of US Economic Conditions

• Since the end of the Great Recession, the US economy has grown at a compound annual rate of 2.3%, somewhat less than over the period from 2000 to 2007. • The apparent “output gap” has not closed despite significant fiscal & monetary stimulus • Price and wage data are consistent with the economy still operating with “slack”. • The amount of slack is unknown and the subject of a great deal of research.

• Consumer spending strengthened over the second half of 2013. • Household deleveraging is well advanced – wealth effects supporting consumption • Need stronger income growth to sustain momentum

• Excess supply of housing appears to have been worked off, but household formation remain low, likely due to relatively weak labor market and continued tight mortgage underwriting standards.

• Business investment spending not providing the growth contribution that it has at this point in previous business cycles.

• Inflation running below the FOMC’s stated goal of 2% (measured by PCE deflator).

12

13

14

15

16

17

18

19

20

12

13

14

15

16

17

18

19

20

2000 2002 2004 2006 2008 2010 2012 2014 2016

Real GDP Trillions of 2009 US$ Trillions of 2009 US$

Source: Bureau of Economic Analysis

2000Q1 to 2007Q4: 2.5% Compound Annual Growth Rate

2009Q2 to 2013Q4: 2.3% Compound Annual Growth Rate

Note: * Based on 2000Q1-2007Q4 Trend

3

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

2000 2002 2004 2006 2008 2010 2012 2014-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

Real Personal Consumption Expenditures (PCE) % Change - Year to Year % Change – Year to Year


Real PCE

-15

-10

-5

0

5

10

15

20

25

-15

-10

-5

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014

Consumer Debt by Credit Score Quintile % Change – 4 Quarter % Change – 4 Quarter

Source: FRBNY Consumer Credit Panel

1st Quintile

2nd Quintile 3rd Quintile

4th Quintile

5th Quintile

Note: Includes Student Loans 5

400

450

500

550

600

650

700

1959 1971 1983 1995 20072

4

6

8

10

12

14

16

Household Net Worth and the Saving Rate Ratio Percent

Source: Federal Reserve Board and BEA

Household Net Worth As a Percent of Disposable Income (left axis)

Personal Saving Rate (right axis)

0

2

4

6

8

10

12

400 450 500 550 600 650 7000

2

4

6

8

10

12

Source: Bureau of Economic Analysis and Federal Reserve Board Households’ Net Worth as a Percent of Disposable Income

2006-2007

2008Q2

2009Q2

Note: Fitted line is from 1983Q1 to 2005Q4.

2011Q2

Personal Saving Rate and Household Net Worth Personal Saving Rate (Percent) Personal Saving Rate (Percent)

2010Q2

2013Q4 Est. (639, 4.5)

2012Q2

2013Q3

7

Source: Bureau of Labor Statistics

% Change - Year to Year % Change - Year to Year

-12

-9

-6

-3

0

3

6

9

2000 2002 2004 2006 2008 2010 2012-12

-9

-6

-3

0

3

6

9

Real Compensation and Aggregate Hours Nonfarm Business Sector

Compensation Per Hour

Aggregate Hours

-12

-10

-8

-6

-4

-2

0

2

4

6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-12

-10

-8

-6

-4

-2

0

2

4

6

Private Employment and Hours Worked % Change – 3-month Annual Rate % Change – 3-month Annual Rate


Aggregate Hours

Employment

Note: Both series are private industries only.

106

107

108

109

110

111

112

113

114

115

116

117

2000 2002 2004 2006 2008 2010 2012 2014106

107

108

109

110

111

112

113

114

115

116

117

Millions Millions


Private Non-Farm Payroll Employment

8.8 million

0

2

4

6

8

10

12

2000 2002 2004 2006 2008 2010 2012 201456

57

58

59

60

61

62

63

64

65

66

67

68

Measures of the Employment Situation


Unemployment Rate (Left Axis)

Labor Force Participation Rate

(Right Axis)

Percent Percent

Employment to Population

Ratio (Right Axis)

11 11

20

50

80

110

140

170

200

230

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 20143

4

5

6

7

8

9

10

11

12

13

Single Family Housing Market Index Months’ Supply

Source: CoreLogic, National Association of Realtors

CoreLogic Single Family Detached House Price

Index (Left Axis)

NAR Months’ Supply of Single Family Homes on the Market

(Right Axis)

Sellers’ Market

12 12

Cumulative Housing Production and Household Formations Relative to Trend

-3000

-2000

-1000

0

1000

2000

3000

4000

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015-3000

-2000

-1000

0

1000

2000

3000

4000

Thousands Thousands

Source: Census Bureau and author’s calculations.

Cumulative Housing Starts Relative to

Demographic Trend

Cumulative Household Formations Relative to

Demographic Trend

13 13

0

75

150

225

300

375

450

525

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

400

800

1200

1600

2000

Housing Starts Units (Thousands) Units (Thousands)

Source: Census Bureau

Multifamily (Left Scale)

1 Unit (Right Scale)

14 14

0

1

2

3

4

5

6

1948 1960 1972 1984 1996 20080

1

2

3

4

5

6

Real Net Stock of Private Fixed Nonresidential Capital Year/Year % Change Year/Year % Change


Includes structures, equipment, and intellectual property products.

15

-4

-2

0

2

4

6

2000 2002 2004 2006 2008 2010 2012 2014-4

-2

0

2

4

6

Inflation: CPI Yr/Yr % Change Yr/Yr % Change


Total CPI

Core CPI

16 16

-3

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014-3

-2

-1

0

1

2

3

4

5

Inflation Breakdown: Core Goods and Core Services Yr/Yr % Change Yr/Yr % Change


Core Goods

Core Services

17 17

-10

-8

-6

-4

-2

0

2

4

6

8

10

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-10

-8

-6

-4

-2

0

2

4

6

8

10

Import Prices & Core Goods Prices Year over Year % Change Year over Year % Change

Source: Bureau of Labor Statistics, Federal Reserve Board

Nonpetroleum Import Price Index

CPI: Core Goods

TIPS Based Inflation Expectations

Source: Federal Reserve Board

0

1

2

3

4

2006 2007 2008 2009 2010 2011 2012 2013 20140

1

2

3

4Percent Percent

Note: Dashed lines represent 2 Standard Deviations from the mean

5-10 Years

March 3: 2.43 2011 – Present

Average 2.71

3.13 (+2 SD)

2.29 (-2 SD)

19

Appendix Charts:

-1000

-500

0

500

1000

1500

2000

2003 2005 2007 2009 2011 2013-1000

-500

0

500

1000

1500

2000

Household Formations 2 Year Avg. Change 2 Year Avg. Change

Source: Bureau of the Census

Total

Owner Occupied

Renter Occupied

21 21

0

3

6

9

12

15

1980 1986 1992 1998 2004 20100

3

6

9

12

15

Private Employment Cost Indices Year over Year % Change Year over Year % Change


Total Compensation Index

Benefits Index

Wage and Salaries Index

22

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1991 1994 1997 2000 2003 2006 2009 2012-1

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Long-Term Trends in Productivity and Compensation 5 % Year Change, AR 5 Year % Change, AR

Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

Real Output Per Hour

(Left Axis)

Real Compensation

Per Hour (Left Axis)

23

Age and Gender Contributions to Change in Labor Force Participation Rate

Age Gender ∆ 1964-2000 ∆ 2000-2007 ∆ 2007-2013 16-24 -0.1 -1.0 -0.9

Men -0.7 -0.5 -0.5 Women 0.6 -0.5 -0.4

25-54 10.4 -2.7 -4.0 Men 0.6 -1.2 -2.4

Women 9.8 -1.5 -1.6 55-64 -1.4 2.2 1.3

Men -1.7 1.0 0.6 Women 0.3 1.2 0.6

65+ -0.5 0.5 0.8 Men -0.5 0.2 0.5

Women 0.8 0.3 0.3

Total 8.4 -1.0 -2.8

Men -2.4 -0.5 -1.8

Women 10.8 -0.6 -1.0 24

Components of Net Lending/Borrowing as a Share of GDP Share of GDP Share of GDP

Source: Federal Reserve Board, BEA Note: Shading represents NBER recessions.

-15

-10

-5

0

5

10

-15

-10

-5

0

5

10

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Government

Business

Households

25

Net Lending

25

Regional Economic Outlook Presentation to the Advisory Council on Small Business and Agriculture

James Orr, Vice President April 15, 2014

The views expressed here are those of the presenter and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System.

Regional Economic Activity Index of Coincident Economic Indicators (CEI)

1 Source: Federal Reserve Bank of New York; Puerto Rico Government Development Bank. Note: The Puerto Rico composite index is based on a different methodology than the indexes produced by the FRBNY.

80

85

90

95

100

105

110

115

Jan07 Jul07 Jan08 Jul08 Jan09 Jul09 Jan10 Jul10 Jan11 Jul11 Jan12 Jul12 Jan13 Jul13 Jan14

New Jersey

New York City

New York State

Puerto Rico

Feb

Index (December 2007 = 100)

Shading indicates NBER recession

Apr08 Mar08

Jan08

Nov05

Nov09

Oct09 Nov10

Current Economic Conditions FRBNY Business Surveys, Current Conditions

Source: Federal Reserve Bank of New York. 2

-60

-40

-20

0

20

40

60



Diffusion Index

Mar

Empire State Manufacturing Survey

Business Leaders Survey

Future Economic Conditions FRBNY Business Surveys, Conditions Six Months Ahead

Source: Federal Reserve Bank of New York. 3

-60

-40

-20

0

20

40

60



Diffusion Index

Mar

Empire State Manufacturing Survey

Business Leaders Survey

Total Employment Seasonally Adjusted Index

Source: Bureau of Labor Statistics and Moody’s Economy.com. 4

88

92

96

100

104

108



Index (December 2007 = 100) Dashed Line Indicates U.S. Employment Trough (February 2010)

Puerto Rico

New York State

New Jersey

United States

Mar

Feb



88

92

96

100

104

108




New York City

Northern New Jersey

Upstate Metros

United States

Mar

Feb



88

92

96

100

104

108




Mar

Dashed Line Indicates U.S. Employment Trough (February 2010)

Fairfield

Hudson Valley

Long Island

United States

Feb



85

90

95

100

105

110

115

120

125

130




Mar

Feb

New York City

United States New York

New Jersey

Nevada

North Dakota

Florida

Recovered All Lost Jobs Recovered At Least 75 percent of Lost Jobs Recovered Less Than 75 percent of Lost Jobs No Recovery

Newark

Glens Falls

Elmira Binghamton

Putnam Fair- field

Edison

Kingston

Buffalo

Rochester Syracuse

Utica

Albany

Ithaca

NYC

US = 92 percent

Puerto Rico

Status of Jobs Recovery Share of Lost Jobs Gained Back During Local Recovery

8

Source: Bureau of Labor Statistics and Moody’s Economy.com. Note: Putnam and Bergen are the Putnam-Rockland-Westchester and Bergen-Hudson-Passaic Special BLS Areas.

Job Growth by Sector Year-Over-Year Percent Change, February 2014


United States

New York State

New York City

New Jersey

3.7 2.2 2.9 1.4 3.0 2.7 2.5 -1.4 2.6 -1.1 0.5 -5.5 2.0 1.0

1.3 1.5

1.9 1.8 4.2 1.6

1.8 3.1 5.1 1.6 1.5 2.3 3.2 0.5 0.8 0.1

0.3 -1.9

0.7 -0.8 2.8 0.7 0.1 -0.2 -0.4 -0.9

-2.0 1.5 4.2 -3.4

1.6 1.3 2.2 0.0

Professional & Business Services Leisure & Hospitality

Construction Wholesale Trade

Retail Trade

Transportation & Utilities Education & Health Services

Financial Activities

Manufacturing State & Local Government

Information

Total

Job Growth by Sector Year-Over-Year Percent Change, February 2014


Puerto Rico

5.9 0.5 3.6 4.7

-5.9 6.8 1.9 1.8 1.2 0.3

4.8 4.0 1.1 1.8

-1.6 -1.1

-1.3 -2.0 -3.7 -1.1 1.6 -2.8

0.1 0.7

Connecticut

Professional & Business Services Leisure & Hospitality

Construction Wholesale Trade

Retail Trade

Transportation & Utilities Education & Health Services

Financial Activities

Manufacturing State & Local Government

Information

Total

State and Local Government Seasonally Adjusted Index

Source: Bureau of Labor Statistics and Moody’s Economy.com.

11

95

96

97

98

99

100

101

102


United States

New York State

New Jersey

Mar

Feb


Note: Dotted line smoothes fluctuations due to summer jobs programs.


Financial Activities Employment Seasonally Adjusted


200

225

250

275

300

325

350

375

400

350

375

400

425

450

475

500

525

550

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

New York City

(left scale)

New Jersey (right scale)

Feb

Thousands – New York City Thousands – New Jersey

Shading indicates NBER recessions

Sep01

Financial Activities Employment February 2014

NYC 438,046 NJ 250,700

NYC Technology Employment Level Change, 2009Q3 to 2013Q3

Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

13

14,429 new jobs

35% change

10,175

205%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Computer Systems Design and Related

Services

Internet Publishing and Broadcasting and Web

Search Portals

Unemployment Rates in the Region Seasonally Adjusted, February 2014

14 Source: Bureau of Labor Statistics and Moody’s Economy.com.

0%

2%

4%

6%

8%

10%

12%

14%

16%

New

Jersey

New York

City New York State

United States

Connecticut

6.7% (6.7% Mar)

6.8%

7.9% 7.1% 7.0%

15.0%

Puerto Rico

Dec11

Home Prices CoreLogic Home Price Index, Seasonally Adjusted

15 Source: CoreLogic Home Price Index (including distressed sales); Seasonally adjusted by FRBNY staff. Note: ‘NYC Metro’ refers to the ‘New York-White Plains-Wayne NY-NJ Metro Division.’

40

50

60

70

80

90

100

110

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Index (U.S. Peak of March 2006 = 100)


Feb

NYC Metro

Upstate NY

New York State

United States

Negative Equity Share of Mortgages with Amount Owed Greater Than Home Value

16 Source: CoreLogic Negative Equity Report.

25%

8%

20%

65%

32%

47% 51%

13%

6%

14%

30%

13%

28%

22%

0%

10%

20%

30%

40%

50%

60%

70%

US NY NJ NV CA FL AZ

2011Q4 2013Q4

Backlog of Foreclosures Share of Mortgages in Foreclosure

17 Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS).

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Downstate NY

United States

Northern NJ

Upstate NY Jan

Downstate New York includes Ulster, Dutchess, Orange, and all New York counties to the south. Upstate New York

includes all metropolitan counties to the north. Northern New Jersey includes Ocean, Monmouth, Middlesex,

Somerset, Hunterdon and all counties to the north.


Household Debt Total Debt Balance Per Capita

Source: FRBNY Consumer Credit Panel/Equifax.

18

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Q4

New York State

United States

Nevada

California

Texas

Thousands

New Jersey


Dec11

Home Prices CoreLogic Home Price Index, Seasonally Adjusted

19 Source: CoreLogic Home Price Index (including distressed sales); Seasonally adjusted by FRBNY staff. Note: ‘NYC Metro’ refers to the ‘New York-White Plains-Wayne NY-NJ Metro Division.’

40

50

60

70

80

90

100

110

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Index (U.S. Peak of March 2006 = 100)


Feb Fairfield County

New Jersey

United States

Office Vacancy Rates Overall Vacancy Rates

20 Source: Cushman & Wakefield.

0%

5%

10%

15%

20%

25%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Q4

Northern NJ

NYC Midtown

NYC Downtown

Central NJ


Office Vacancy Rates Overall Vacancy Rates

21 Source: Cushman & Wakefield.

0%

5%

10%

15%

20%

25%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Q4 Fairfield

County

Long Island


Job Polarization

Occupations by Skill Categories Based on 2010 Median Occupational Wage, United States

Source: U.S. Bureau of the Census and FRBNY Calculations.

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Legal Computer/Math Engineers/Architects Management Social Scientists

Scientists Finance Business Operation Health Practitioners

Protective Services Installation/Repair Teachers Arts/Entertainment Construction Precision Production Community Service

Admin Support Machine Operators Sales Transportation

Health Support Bldg Maintenance Farming Personal Care Food Prep

High Skill

Upper Middle

Lower Middle

Low Skill

25% 21% 38% 16% Employment Share

23

Job Growth by Skill Category Change in Jobs: 1980-2010, Our Region

Source: U.S. Bureau of the Census and Current Issues in Economics and Finance, “Job Polarization and Rising Inequality in the Nation and the New York-Northern New Jersey Region.”

-20%

0%

20%

40%

60%

80%

100%

120%

101%

46%

20%

91%

60%

38%

-7%

92%

United States Downstate NY High Skill

Upper Middle

Lower Middle

Low Skill

Note: Downstate NY includes all counties in New York State to the south of and including Dutchess and Orange counties.

24

Recent College Graduates

Source: U.S. Census Bureau and U.S. Bureau of Labor Statistics, Current Population Survey. Note: College graduates are those with a BA degree or higher; recent college graduates are those aged 22-27; figures exclude those currently enrolled in school.

0%

2%

4%

6%

8%

10%

12%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Working Age Population

All College Graduates

Apr 2013

Recent Graduates


Unemployment Rate

U.S. Unemployment Rates 12-Month Moving Average

26

College Graduate Underemployment

• Classify jobs into two categories based on information from the Department of Labor:

Bachelor’s degree required: • e.g., pharmacist, social worker, software developer

Bachelor’s degree not required: • e.g., retail salesperson, food server, electrician,

health care technician

• Graduates working in these jobs are considered underemployed

27 FEDERAL RESERVE BANK OF NEW YORK

46% 49% 44% 46%

6% 5%

7% 7%

0%

10%

20%

30%

40%

50%

60%

United States Upstate NY Downstate NY Northern NJ

Underemployment

Unemployment

Total 52% 54%

51% 54%

Regional Unemployment & Underemployment Recent College Graduates, Share of Labor Force, 2009-11

Source: U.S. Census Bureau, American Community Survey; U.S. Department of Labor, O*NET. Note: Recent college graduates are those with a BA degree or higher aged 22-27; figures exclude those currently enrolled in school. 28

Documents

Small Business & Agricultural Advisory Board Federal ......10:30am Introductory Remarks Christine Cumming, First Vice President 10:40am-11:10am The National Economy Joseph Tracy, Executive