The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
WHERE ARE THE JOBS? In the nearly five years since the recession ended, we have recovered a lot of ground in the labor market. But we still are far short of replacing the 8.7 million lost jobs. To view the 2013 Annual Report, visit frbatlanta.org/pubs/annualreport/13ar/ CONTENTS 4 President’s Message 6 Where Does the Labor Market Stand? 8 Employment: Recovery Has Been Historically Slow 10 Unemployment: Lower Unemployment Doesn’t Tell the Whole Story 14 Labor Force Participation: Millions Have Left the Labor Force 16 Southeastern Perspective: The Southeast Lags the Nation 18 What’s Holding Back Job Growth? 20 Polarization-Offshoring: Are Jobs Going Overseas Faster? 22 Skills Mismatch: A Factor in Labor Market Woes 23 Dynamism & Small Business: Who or What Creates the Jobs? 26 Uncertainty: Has Uncertainty Restricted Hiring? 28 How Dow We Get More Jobs? 30 Monetary Policy: Important but No Panacea 32 Fiscal Policy: “Fiscal Drag” Dissipates Late in 2013 34 General Economic Conditions: A Healthy Economy Is the Best Medicine for the Labor Market 38 Boards of Directors 48 Other Officers 52 Advisory Councils 56 Milestones 62 Audit Statement 4 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT PRESIDENT’S MESSAGE The Federal Reserve has a dual mandate, with two objectives, and those objectives are full employment and low and stable prices. For most Americans, the critical element of our ongoing economy recovery is employment. Since the end of the worst recession in the post-World War II era, jobs in the nation and the Southeast have been growing more slowly than in earlier recoveries. Policymakers and researchers have been focusing on the forces that affect the labor market. In this year’s annual report, the Federal Reserve Bank of Atlanta is exploring the labor market in a lively and interactive format. We want to bring to life a timely and important topic: where are the jobs? I invite you to come along as the Federal Reserve Bank of Atlanta explores that question in our 2013 Annual Report. “IN ITS MONETARY POLICY RESPONSIBILITIES, THE FED IS TASKED WITH PROMOTING STABLE PRICES AND MAXIMUM EMPLOYMENT.” Dennis Lockhart President and CEO of the Federal Reserve Bank of Atlanta 5 WHERE DOES THE LABOR MARKET STAND? EMPLOYMENT UNEMPLOYMENT Jobs in private service–providing industries came back relatively quickly, while other major sectors, notably manufacturing, construction, and government, lagged. How much of the improvement in the unemployment rate is due to declining labor force participation? A falling unemployment rate does not necessarily mean a healing labor market. PAGE 8 PAGE 10 6 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT The labor market has been recovering slowly. We look at vital signs, including recent employment growth and unemployment and some of the key ingredients of both. Labor force participation has been a particular concern for economists and policymakers. LABOR FORCE PARTICIPATION SOUTHEASTERN PERSPECTIVE The unemployment rate has improved considerably since the recession ended, but other labor market indicators showed less progress. By the end of 2013, the United States had regained 87 percent of lost jobs; the Southeast had reclaimed only 62 percent. PAGE 16 PAGE 14 7 EMPLOYMENT RECOVERY HAS BEEN HISTORICALLY SLOW The nation’s labor market has recovered far more slowly after the Great Recession than it did following every other economic downturn since World War II. To be sure, employment growth was promising in 2013, and the unemployment rate declined. O The labor market recovery has been even more constrained by weakness in other major sectors. A long-term decline in manufacturing employment accelerated during the recession. Factory job numbers ticked back up a bit last year. Still, as 2013 ended, manufacturing employment remained below its cyclical peak in 2007 and at a level roughly equal to that of 1940, according to ther measures of the labor market remained subdued, the U.S. Bureau of Labor Statistics. however. The compensation to workers—including benefits and adjusted for inflation—has barely risen above its prerecession level. Construction employment fared even worse. The number of At year’s end, almost 38 percent of unemployed people had been construction jobs declined 30 percent during the Great Recession. jobless for at least 27 weeks, by far the highest percentage of At the end of 2013, construction employment was still nearly 25 long-term unemployment since World War II. Moreover, 12.6 million percent below the prerecession high. people left the labor force in the six years through December 2013. Unlike the manufacturing and construction sectors, public-sector By any measure, the labor market healing has been gradual. employment traditionally withstands downturns relatively well. Consider that it took 10 months on average for the United States During this cycle, however, governments at all levels slashed staffing to regain all the jobs lost during seven recessions between 1950 as revenues tumbled. Local government, the biggest public- and 1989. It’s taken increasingly longer to recover lost jobs in each sector employer, cut the most jobs. Like the manufacturing and subsequent downturn. construction sectors, government employment was still below its prerecession level at the end of 2013. This recovery has been the slowest yet. From the prerecession employment peak in 2007, total U.S. nonfarm employment declined by 8.7 million jobs. At the end of 2013, almost five years after the recession’s end, the nation’s labor market was still roughly a million jobs shy of that peak. The muted pace of the jobs recovery has not been the result of just a few underperforming sectors. Employment in private service–providing industries, for example, now exceeds the level it had reached before the Great Recession. But the increase in service-sector jobs is still 20 percentage points below the average improvement enjoyed in recent recoveries. 8 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT arket Recovery Taking Labor Longer Market with Recovery Each Recession Taking Labor Longer Market with Recovery Each Recession Taking Labor Longer Market with Recovery Each Recession Taking Longer with Each Rece LABOR MARKET RECOVERY TAKING LONGER WITH EACH RECESSION 10 MONTHS 23 MONTHS 38 MONTHS 54 MONTHS to replace all jobs lost during the average of seven recessions between 1950 and 1989 to replace all jobs lost during the recession of 1990-91 to replace all jobs lost during the recession of 2001 since the end of the Great Recession of 2007-09, and we still have not replaces all jobs months to replace all jobs lost during Number recessions of months to replace all jobs lost during Number recessions of months to replace all jobs lost during Number recessions of months to replace all jobs lost during recessions Sources: Atlanta Fed research, U.S. Bureau of Labor Statistics U.S. Labor Market's Gradual Progress U.S. LABOR MARKET’S GRADUAL PROGRESS Jjobs in millions 140 135 130 125 2007 2008 2009 2010 2011 2012 2013 2014 Source: U.S. Bureau of Labor Statistics U.S. PROFESSIONAL AND BUSINESS SERVICE EMPLOYMENT Percent deviation from peak Notes: The gray area indicates the range of the last five major recessions preceding the most recent one. Years of the previous recessions are 1970, 1974, 1981-82, 1990, and 2001. “Current cycle” measures the change in employment 12 quarters before the last recession’s peak (Q42007) and the 24 quarters since the peak. Source: U.S. Bureau of Labor Statistics 9 LOWER UNEMPLOYMENT DOESN’T TELL THE WHOLE STORY Since peaking at 10 percent in October 2009, the U.S. unemployment rate has improved significantly. At the end of 2013, the jobless rate was 6.7 percent, its lowest point in five years. But that figure may overstate the actual level of utilization of the nation’s labor resources for at least two reasons. F for work within just a few months. In the years before the Great Recession, only about 20 percent of unemployed people had been searching for a job for more than six months. But this figure rose sharply after the recession, reaching 45 percent in 2010 and 37 percent at the end of 2013. Moreover, those out of work for more than six months are getting a job at a much lower rate than before the recession. irst, there is a thin line between being officially counted as unemployed and being counted as out of the labor force. This issue The economic and human costs of long-term unemployment are may be particularly severe among those who have been out of work disturbing. A long spell of unemployment can create significant for a long time. Consider, for example, that about 1 million more financial stress. People who endure long periods of unemployment people are marginally attached to the labor force than before the tend to have a more difficult time reentering the workforce even recession, and much of that increase came from people who had after the economy improves. Long periods of unemployment can previously been unemployed for more than half a year. If these erode workers’ skills, making it more difficult to find a comparable additional marginally attached people were counted as unemployed, job. Once they do find a job, their wages are typically lower than then the effective unemployment rate would be higher. before. A growing body of research, including a 2013 Urban Institute study, also points to potential negative effects on mental Second, since 2007, about 3 million more people say they are health and family stability. working fewer hours than they want to, either because of slack work conditions or the unavailability of full-time jobs. If this additional stock of involuntary part-time workers were counted as being at least partly unemployed, then the effective unemployment rate would be even higher. An upper bound on the possible distortion to the unemployment rate caused by these effects can be seen by comparing the official unemployment rate statistic known as U-3 with the alternative unemployment rate measure known as U-6. Long-term unemployment The Great Recession caused the largest surge in joblessness since the 1930s. About 3.4 million more people were unemployed at the end of 2013 than before the recession. In more normal times, jobs are created fast enough to absorb most people who are looking 10 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT THE STATE OF UNEMPLOYMENT CITIES WITH BIGGEST CHANGES IN UNEMPLOYMENT STATE-LEVEL UNEMPLOYMENT RATES December 2013 0 Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Washington D.C. 1 2 3 4 percent 5 6 7 8 9 10 +2.2 DANVILLE, IL –4.5 ATLANTIC CITY, NJ PERCENTAGE POINT CHANGE, DECEMBER 2012 TO DECEMBER 2013 THERE WERE 10.4 MILLION PEOPLE UNEMPLOYED AS OF DECEMBER 2013 CHANGE IN UNEMPLOYMENT RATE Percentage point change, December 2012 to December 2013 –1.6 or more –1.1 to –1.5 –0.6 to –1.0 –0.1 to –0.5 0 to 0.5 DATA FROM U.S. BUREAU OF LABOR STATISTICS 11 OTHER LABOR MARKET INDICATORS “It's important to remember, however, that the official unemployment rate and the monthly payroll jobs growth number don't represent a complete picture of labor market conditions.” —Dennis Lockhart, June 2013 speech UNEMPLOYMENT BY DURATION 8 Less than 5 weeks Persons (millions) 5 to 14 weeks 15 to 26 weeks 6 27 weeks and over 4 2 0 2007 2008 2009 2010 2011 2012 2013 Sources: U.S. Bureau of Labor Statistics, Haver Analytics 37.1 16.6 WEEKS AVERAGE DURATION OF UNEMPLOYMENT IN DECEMBER 2013 2.6 7.8 MILLION PEOPLE WORKING PART-TIME FOR ECONOMIC REASONS IN DECEMBER 2013 WEEKS AVERAGE DURATION OF UNEMPLOYMENT IN DECEMBER 2007 JOB SEEKERS FOR EVERY JOB OPENING December 2013 ALTERNATE MEASURES OF UNEMPLOYMENT 20 Percent 16 U-4: Unemployed + discouraged workers U-5: Unemployed + marginally attached workers U-6 U-5 12 U-6: Unemployed + marginally attached + part-time for economic reasons U-4 8 4 0 2007 2008 2009 2010 2011 2012 2013 Sources: U.S. Bureau of Labor Statistics, Haver Analytics 12 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT MILLIONS HAVE LEFT THE LABOR FORCE FOR VARIED AND COMPLEX REASONS The unemployment rate not only reflects the number of people who say they looked for and couldn’t find work, but also people’s decision to look for work in the first place. Participation in the labor market has been declining in recent years for reasons that are not totally understood. T However, the labor force participation rate can decline for other reasons. The most important of these is the aging population. For example, the share of the population aged 55 and older has risen by almost 4 percentage points since 2007. Because this age group also has a relatively low rate of labor force participation (because of higher levels of retirement and disability), the aging of the population is putting significant downward pressure on overall labor force he labor force participation rate has been falling since the participation. early 2000s, and that trend has accelerated since 2007. Between 2000 and 2007, the participation rate declined by about 1 Most research, including work done at the Atlanta Fed, suggests percentage point. It dropped by another percentage point between that about half of the decline in labor force participation since 2007 2007 and 2009, and by a further 2 percentage points since then. By can be attributed to the ongoing compositional changes of the U.S. the end of 2013, labor force participation reached the lowest level population. The rest is the result of declines in participation within since the late 1970s. demographic groups, especially by young people but also by men and women aged 25–54. The health of the labor market clearly affects individuals’ decisions to enroll in school, apply for disability insurance, or stay home and How much do these trends reflect changes over time, and how much take care of family. Discouragement over job prospects rose during can they be attributed to the recession and slow recovery? It’s hard the Great Recession, causing many unemployed people to drop out to say with certainty. For example, young people have been enrolling of the labor force. The rise in the number of marginally attached in school in larger numbers since the late 1980s, but enrollments workers reflects this and can account for some of the decline in accelerated somewhat after 2007. Some people will reenter the participation between 2007 and 2009. labor market as it strengthens. But for others, the prospect of not finding a satisfactory job will cause them to continue to stay out of Discouragement may be a factor even when people say they don’t the labor market. Overall, labor force participation is expected to currently want a job. The share of people aged 25–54 who said they edge down slightly more over the next few years. The effect of the didn’t currently want a job remained relatively stable between 2002 ongoing aging of the population will dominate, only partially offset by and 2009, but has risen by almost 2 percentage points since then. upward pressure from improving employment prospects. It seems likely that some of the recent increase is associated with a rise in discouragement over job prospects. 14 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT P LABOR FORCE PARTICIPATION RATE, BY AGE Source: U.S. Bureau of Labor Statistics Reasons for Being Out of the Labor Force, by Age REASONS FOR BEING OUT OF THE LABOR FORCE, BY AGE Disabled or ill Other Taking care of house or family In school Retired Wants a job 100% 75% 50% 25% 0% 16 21 26 31 36 41 46 51 56 61 66 71 76 85 Sources: Current Population Survey, U.S. Census Bureau, and author’s calculations 15 UNLIKE IN RECENT RECOVERIES, THE SOUTHEAST LAGS THE NATION Employment in the Southeast declined more and recovered more slowly after the end of the Great Recession than in the nation as a whole. The second half of 2013 brought progress, as the region’s two largest states—Florida and Georgia— led steady employment gains across the region. S But the Great Recession hit the Southeast’s building sector especially hard. Florida alone lost more than half of its construction jobs, and a vast majority of those losses have not been recouped. Manufacturing was another sector in which the Southeast suffered severe employment declines. In fact, job losses in the construction and manufacturing sectors accounted for nearly the entire gap between the Southeast’s nonfarm employment at the end of 2013 till, the Southeast ended the year with fewer jobs than it had and the prerecession peak during 2007. before the recession. And the Southeast’s labor market had more ground to make up than the national jobs market did. As 2014 Those two sectors added jobs during 2013. Among the major began, the country had regained nearly 90 percent of lost jobs; the economic sectors, only government did not add jobs last year. Southeast had reclaimed only 64 percent. Meanwhile, the aggregate unemployment rate for the region ended the year at 6.7 percent, down from 7.8 percent a year earlier and The region’s labor market was weaker by other measures as well. well below the peak of 10.5 percent in January 2010. At the end of 2013, the labor force participation rates in all six southeastern states were below the national rate of 63 percent. Broader measures of unemployment were also worse in most of the region. For example, only Alabama and Louisiana posted lower average U-6 unemployment rates than the country as a whole throughout 2013. This recovery has been different. The Southeast weathered the downturns of the early 1990s and 2001 comparatively well, losing a smaller portion of jobs and recovering those jobs more quickly than the nation. Steady in-migration in the 1990s and early 2000s strengthened the southeastern economy and labor market. Population growth fueled housing construction, commercial real estate development, and related industries, generating large numbers of jobs. 16 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT EMPLOYMENT IN THEinSOUTHEAST Employment the Southeast Percent change, year-over-year United States Alabama Georgia Mississippi Southeast Florida Louisiana Tennessee 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 2008 2009 2010 2011 2012 2013 Source: U.S. Bureau of Labor Statistics Southeastern Labor Force Participation SOUTHEASTERN LABOR FORCE PARTICIPATION Percent, seasonally adjusted Alabama Georgia Mississippi United States Florida Louisiana Tennessee 70 2010 census adjustment 65 60 55 2007 2008 2009 2010 2011 2012 2013 Source: U.S. Bureau of Labor Statistics 17 WHAT’S HOLDING BACK JOB GROWTH? POLARIZATION-OFFSHORING SKILLS MISMATCH While it’s clear that polarization in the labor market has occurred over the decades, it’s not clear whether it accelerated during the Great Recession. Skills mismatch may be part of the story for the slow job growth that the economy has experienced, but it’s not the full story. PAGE 20 PAGE 22 18 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT General economic weakness in the wake of a severe financial crisis is perhaps the biggest reason the labor market has not rebounded more quickly. Yet there is no single, simple answer to this question. We examine a few of the particular forces that continued to limit employment growth during 2013. DYNAMISM & SMALL BUSINESS UNCERTAINTY The Atlanta Fed has investigated trends in a variety of firm types to better understand why labor market progress continued to be slow in 2013. The past several years have been marked by high levels of policy-related uncertainty. How has this affected the economy? PAGE 26 PAGE 23 19 ARE JOBS GOING OVERSEAS FASTER? Since the 1990s, corporations have moved large numbers of jobs, especially in manufacturing, out of the United States to countries with lower labor costs. Yet that fact itself does not mean that offshoring results in no additional job creation here in the United States. I n fact, Atlanta Fed economists have looked at the net effect of Along with technological change and immigration of low-skilled workers, offshoring appears to be a significant factor in labor market polarization, Mandelman has found. Jobs done by middleskilled workers are the jobs that are typically offshored. In addition, research shows that the weakening of labor unions over time may have contributed to the decline of middle-skill jobs. Labor market polarization has been associated with job losses in offshoring and found evidence of some countervailing job creation occupations that involve routine tasks, which are typically found in that occurs as a result. For instance, when a manufacturer of hand- the middle of the skill distribution. Routine occupations include blue- held electronic devices sends its manufacturing overseas, that collar manufacturing jobs and office and administrative support. might increase the overall competitiveness of the firm, pointed out These workers tend to follow well-defined procedures that can be Atlanta Fed research economist Federico Mandelman. Consequently, coded in computer software, executed by machines, moved to lower- the firm could hire more higher-wage domestic workers such as wage countries, or assumed by immigrants who will generally work marketers or product designers. for lower wages than native workers. A paper prepared for a 2010 Atlanta Fed conference on immigration It’s clear that labor market polarization has occurred over decades. concluded that offshoring has little or no effect on domestic But economists debate whether and how much polarization employment. “Increased offshoring reduces the share of native accelerated during the Great Recession and other downturns. employment in an industry while…stimulating overall industry Researchers at the Kansas City Fed concluded in a 2013 paper that employment via the productivity effect such that offshoring has no while labor market polarization is a long-term phenomenon affecting aggregate impact on the level of native employment,” wrote the all economic sectors, it intensifies during recessions. The rapid economists Gianmarco Ottaviano, Giovanni Peri, and Greg Wright. pace of polarization during recessions, according to the research, stems from the decline in the share of middle-skill occupations in Labor market polarization has hollowed out middle of jobs spectrum manufacturing and, to a lesser extent, in construction. The U.S. labor market has become polarized over the past three decades: employment growth has been strong for both high- and low-skill occupations, while jobs for middle-skilled workers have disappeared. Real wages have followed a different pattern. Wages for high-skill occupations have increased; earnings of low- and middle-skilled workers generally have not. 20 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Middle-Skill Jobs in Decline Percentage of nonfarm, civilian workers aged 16–64 who are not self-employe Middle-skill High-skill Low-skill 15% Jobs in Decline Middle-SkillMiddle-Skill Jobs in Decline MIDDLE-SKILL JOBS IN DECLINE Percentage of workers nonfarm,aged civilian workers aged 16–64 who are not self-employed Percentage of nonfarm, civilian 16–64 not Percentage of nonfarm, civilian workerswho agedare 16–64 whoself-employed are not self-employed 26% 59% Middle-skill High-skill Low-skill 1983 15% Middle-skill High-skill Low-skill 2012 15% 18% 45% 26% 26% 59% 59% 37% Sources: Census data and calculations of Didem Tüzemen and Jonathan Willis, Kansas City Fed 18% 18% 45% 37% 45% 37% 21 SKILLS MISMATCH A FACTOR IN LABOR MARKET WOES Skills mismatch, the situation in which workers lack the skills that employers need, appears to account for some of the rise in unemployment during the Great Recession. J oblessness caused by skills mismatch can arise as the result of an economic downturn when job losses are concentrated in certain industries but job openings are in other industries. Between 2007 and 2013, about half of all jobs lost were in manufacturing and construction, while roughly 90 percent of new positions opened in other industries, according to the U.S. Bureau of Labor Statistics. That disparity suggests that “sectoral mismatch” may have increased. This sectoral imbalance of job losses and job openings held true in the Southeast as well as the nation. Skills mismatch is a real issue. However, the evidence is not conclusive on the degree to which higher joblessness during 2013 was caused primarily by persistent mismatch between available jobs and the skills of peopleJobs seeking to fill them. Unemployment declined through the year roughly in Mismatch proportion to the increase in job openings, which might suggest that more vacancies will absorb more job seekers. On the other hand, an Atlanta Fed Other sectors poll of employers and providers of training and social services to low-wage earners in the Southeast revealed that Construction, lack of technical skills and lack of manufacturing experience were the two biggest hurdles to low-wage individuals seeking jobs. On balance, though, it appears that skills mismatch may be part of the story for the less-than-desirable job growth the economy has experienced—but it’s far from the full story. The mismatch can also partly explain why there is an unusually large share of unemployed individuals who have been unemployed for a long time. MISMATCH Jobs MismatchJOBS Jobs Mismatch 49% 51% Share of total jobs lost: 12/2007-02/2010 Jobs Mismatch Other sectors Other sectors Other sectors Construction, manufacturing Construction, manufacturing g Construction, manufacturing Share of total jobs lost: 12/2007-02/2010 Share of job openings: 03/2010-10/2013 10% 49% 49% 51% 51% 49% 51% 90% Note: February 2010 was the low point of U.S. nonfarm employment. Source: U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey 10% 22 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT 10% 10% WHO OR WHAT CREATES THE JOBS? The unemployment rate not only reflects the number However, the labor force participation rate can decline for other of people who say they looked for and couldn’t find reasons. The most important of these is the aging population. For work, but also people’s decision to look for work in example, the share of the population aged 55 and older has risen the first place. Participation in the labor market has by almost 4 percentage points Because Coming out of the Great Recession, one ofsince the2007. puzzles is,this age group been declining in recent years for reasons that are also has a relatively low rate of labor force participation (because of why has job creation not picked up? The Atlanta Fed recently not totally understood. higher levels of retirement and disability), the aging of the population completed a study that islooked at the downward properties of fast-growing putting significant pressure on overall labor force T he labor force participation rate hasfirms been falling since the That study participation. in Georgia. found that half of fast-growing early 2000s, and that trend has accelerated since 2007. Between firms could be categorized as gazelles—they were young fast2000 and 2007, the participation rate declined by about 1 Most research, including work done at the Atlanta Fed, suggests growing businesses. Turns out that older fast-growing firms percentage point. It dropped by another percentage point between that about half of the decline in labor force participation since 2007 actually job creation thancompositional these young 2007 and 2009, and by a further 2 percentage pointscontribute since then. By more can to be attributed to the ongoing changes of the U.S. the end of 2013, labor force participationgazelle reached the lowest level population. The rest is the result of declines in participation within businesses. since the late 1970s. demographic groups, especially by young people but also by men and women aged 25–54. The health of the labor market clearly affects individuals’ decisions to enroll in school, apply for disability or stay Thereinsurance, is evidence much these trendsthat reflectthe changes over time, and how in the How data todosuggest dynamism much can they be attributed to the recession and slow recovery? of the U.S. economy has slowed over the last couple of rose during the Great Recession, causing many unemployed people It’s hard to say with certainty. For example, young people have decades. We still see fast-growing businesses, but we see to drop out of the labor force. The rise in the number of marginally been enrolling in school in larger numbers since the late 1980s, fewerforfast-growing businesses than we have in the attached workers reflects this and can account some of the but enrollments accelerated somewhat after past, 2007. Some people decline in participation between 2007 and 2009. will reenter the labor market as it strengthens. But for others, the and those fast-growing businesses are actually adding fewer prospect of not finding a satisfactory job will cause them to continue jobs. The diversity of the types of businesses that create Discouragement may be a factor even when people say they don’t to stay out of the labor market. Overall, labor force participation is firms,toyoung old over firms—creates currently want a job. The share of people jobs—large aged 25–54 who firms, said they smallexpected edge downfirms, slightly more the next few years. The didn’t currently want a job remained relatively stable betweeneconomic 2002 effect of thechallenge. ongoing aging ofNo the single populationpolicy will dominate, a significant policy is only and 2009, but has risen by almost 2 percentage points since then. offset by upward pressure from improving employment necessarily going to bepartially effective in solving the jobs problem It seems likely that some of the recent increase is associated with a prospects. of the United States. rise in discouragement over job prospects. home and take care of family. Discouragement over job prospects JOHN ROBERTSON Vice President and Senior Economist 23 WHO OR WHAT CREATES THE JOBS? A striking feature of the Great Recession was not so much the rise in the number of firms cutting their payrolls—that always happens in recessions. What was unprecedented was the dramatic collapse in the number of firms that expanded. Early in the recovery, firms continued to have the lowest rate of job creation on record, and fewer new firms were created in 2009 and 2010 than in any other time in the previous 30 years. Although the unemployment rate fell faster than expected in the latter part of 2013—roughly four-and-a-half years into the recovery—hiring rates at firms were still relatively subdued. T Large firms are also an important source of new jobs. The largest 1 percent of firms account for about as many new jobs each year as do all the firms with fewer than 50 employees. But large firms have also been creating jobs at an unusually slow pace. New firms versus young firms Start-ups gained a lot of attention in the aftermath of the recession, in part because of the dramatic decline in new business formation. These new firms are also important because they create an outsized share of new jobs. In 2011, 8 percent of firms were new—most of them were very small—and they contributed about 16 percent (or 2.5 million) of new jobs that year. But having a continual flow of new firms each year is important because the jobs that start-ups create can be fleeting. Indeed, more than half of young firms typically fail he Atlanta Fed has investigated trends in a variety of firm within their first five years of operation. types to better understand why labor market progress continued to be slower than hoped for in 2013. Researchers started by looking Gazelles versus gorillas at small firms, since their economic struggles are often singled out Although many firms fail in their early years, a small fraction of young as a major reason why the U.S. jobs engine has faltered. These firms grow very rapidly. These so-called gazelle businesses are researchers found that all businesses were hit hard by the recession. also a significant source of job creation. A recent Atlanta Fed study They looked at firms across a variety of dimensions—age, size, looked at the properties of fast-growing Georgia firms during the industry, and location—to determine where the jobs are. 2000s and found that about half of the firms that had a high rate of employment growth were young. However, more jobs were generated Small firms versus large firms by older, generally larger, fast-growing firms, sometimes called Most businesses are small. Almost 96 percent (or 4.7 million) of gorillas. On a national level, high-growth firms have declined as a firms had payrolls with fewer than 50 people in 2011 (the latest share of all firms, from 3 percent in the late 1990s to 1.5 percent in census data available). These firms accounted for 28 percent of all 2011. During the same time, these fast-growing firms added fewer payroll jobs. They also create many new jobs—about 40 percent of jobs, falling from 45 percent of jobs created at expanding firms to 34 new jobs each year, on average. However, the rate of gross job gains percent. fell sharply for small firms during the recession and recovery, in 24 part because fewer new firms were created but also because small While data on these and other characteristics provide a window into firms sharply curtailed hiring as heightened uncertainty and a weak the types of firms that typically create jobs, they also underscore the economy made them more hesitant to expand. fact that when it comes to job creation, there is no simple solution. WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT WHERE DO JOBS COME FROM? Where are the jobs? Which types of companies create the most jobs? Researchers have studied firms across a variety of dimensions looking for the answers to these questions. What they’ve found is that when it comes to job creation, there’s no simple solution. 57 PERCENT OF EMPLOYMENT IS AT FIRMS FIRM SIZE 1–9 10–19 WITH MORE THAN 250 EMPLOYEES, EVEN THOUGH THOSE FIRMS ARE FEWER THAN 1 PERCENT OF ALL FIRMS! 20–49 50–249 250+ Outer ring shows distribution of firms. Inner ring shows distribution of employment. MOST FIRMS ARE VERY SMALL, BUT MOST EMPLOYEES WORK FOR A HANDFUL OF VERY LARGE (AND OLD) FIRMS. 66 PERCENT OF EMPLOYMENT IS AT FIRMS FIRM AGE New OLDER THAN 20 YEARS. 1–5 6–10 11–15 16–20 >20 17 PERCENT OF JOB CREATION EACH YEAR JOB CREATION BY AGE New 1–5 YRS COMES FROM NEW FIRMS. 6–10 YRS 50–249 11–15 YRS 500,000 = NUMBER OF FIRMS BORN EACH YEAR. 16–20 YRS 20+ YRS FAST-GROWING YOUNG FIRMS— GAZELLES—ARE ONLY 1 PERCENT OF ALL FIRMS, BUT THEY ACCOUNT FOR ABOUT 10 PERCENT OF JOB CREATION. JOB CREATION BY SIZE 1–4 5–9 10–19 20–49 50–249 250–9,999 10,000+ 250-9,999 AVERAGE SURVIVAL RATE OF FIRMS BY AGE OF FIRM (1983–2011) 100% 74.5% 61.5% 52.2% 44.8% NEW 1 YEAR 2 YEARS 3 YEARS 4 YEARS 38.8% 5 YEARS SOURCES: U.S. CENSUS BUREAU BUSINESS DYNAMICS STATISTICS DATABASE AND DANE STANGLER, “HIGH-GROWTH FIRMS AND THE FUTURE OF THE AMERICAN ECONOMY,” 2010 25 HAS UNCERTAINTY RESTRICTED HIRING? Heightened uncertainty is one of several forces that weighed on the economy and hiring in 2013. Much of the uncertainty emanated from the government sector, especially regarding fiscal policy. Other factors clouded the outlook, too, including uncertainty about health care costs and the Affordable Care Act, and the economic outlook. A lthough fiscal and monetary policy uncertainty seemed to ebb The Atlanta Fed’s Small Business Survey also honed in on the issue. Nearly half of respondents to the third-quarter 2013 survey reported a higher level of uncertainty relative to the first quarter. Moreover, many firms indicated that uncertainty was having a greater than usual impact on their decisions. Among them, about 20 percent expected their workforce to decrease and roughly half expected no change to their headcount. The evidence linking heightened uncertainty and sluggish economic somewhat earlier in the year, it returned full force in the fall as the growth is not just the anecdotal sort. An emerging body of research two-week federal government shutdown and the debt ceiling standoff supports these linkages, too. Last year, a much-cited report by dealt a blow to consumer and business confidence. Congress research firm Macroeconomic Advisers attempted to quantify the resolved the budget issue by the end of the year. economic effect of fiscal policy uncertainty, estimating that since 2009 it has shaved 0.3 percentage point per year from U.S. GDP. In The question of how uncertainty affects the economy has been 2013 alone, fiscal policy uncertainty kept the unemployment rate particularly relevant in the current recovery, although it has higher by 0.6 percentage point—the equivalent of 900,000 jobs, the interested economists for some time. (Fed Chairman Ben Bernanke report said. studied the topic earlier in his career.) According to a measure of economic policy uncertainty developed by economists Scott Baker, Nick Bloom, and Steven Davis, the past several years have been marked by historically high levels of policy-related uncertainty. The crux of the problem is that firms—unsure of what lies ahead for taxes, regulations, and the economy—may delay investing and hiring. Anecdotal evidence gathered as part of the monetary policy process supports this theory. As the Federal Open Market Committee prepared to meet in October, the Beige Book noted that “employers continued to report hiring hesitancy related to changes in healthcare regulation and fiscal policy uncertainty.” 26 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Monthly U.S. Economic Policy Uncertainty Index MONTHLY U.S. ECONOMIC POLICY UNCERTAINTY INDEX 250 200 150 100 50 0 1985 1990 1995 2000 2005 2010 Source: Scott Baker, Nicholas Bloom, and Steven J. Davis at www.PolicyUncertainty.com. Impact of Uncertainty on Business Decisions Compared to Prior Six Mont IMPACT OF UNCERTAINTY ON BUSINESS DECISIONS COMPARED TO PRIOR SIX MONTHS First Quarter 2013 Third Quarter 2013 60% 50% 40% 30% 20% 10% 0% Less impact Same impact Greater impact Note: 268 firms participated in both surveys. Source: Atlanta Fed Small Business Survey 27 HOW DO WE GET MORE JOBS? MONETARY POLICY FISCAL POLICY With the appropriate monetary policy, the Federal Open Market Committee expected that the jobless rate would gradually decline toward levels the Committee judges consistent with its dual mandate. The good news was that the worst of the fiscal drag appeared to be over as 2013 ended. And the fiscal situations of states and municipalities generally improved. PAGE 32 PAGE 30 28 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Stronger economic conditions, along with astute monetary and fiscal policy, can help accelerate job creation. Some of those conditions and policies are already in place. Some policies are widely accepted. Others are contentious and thus difficult to achieve. GENERAL ECONOMIC CONDITIONS Watching inflation and wage growth can help gauge whether the economy is gathering the underlying strength it needs to quicken the healing of the labor market. PAGE 34 29 MONETARY POLICY IMPORTANT BUT NO PANACEA With the federal funds rate as low as it could effectively go, the Federal Open Market Committee (FOMC) used two unconventional policy tools in 2013: forward guidance about the expected path of the federal funds rate and large-scale asset purchases (often called quantitative easing, or QE), at a pace of $85 billion per month. Both tools aimed to push down longer-term interest rates to spur households and businesses to borrow, spend, and invest—in turn, triggering a virtuous cycle that would include increased production, hiring, and more spending. T employment are indirect. However, recent research suggests that monetary policy has helped push down interest rates and boost asset prices. And as Atlanta Fed President Dennis Lockhart noted in a February 2013 speech, the Fed’s monetary stimulus has “without question helped achieve the economic progress we’ve made since the end of the recession.” The economy has recovered considerably, but the job is not done. The jobless rate, at 6.7 percent in December, remained well above FOMC members’ projections for the longer-run rate of unemployment, which ranged from 5.2 to 5.8 percent. Obviously, there’s still work to do. But with the appropriate monetary policy, the he FOMC conditioned the duration of the QE program on FOMC in December expected that the jobless rate would gradually achieving substantial improvement in the outlook for labor markets. decline toward levels the Committee judges consistent with its dual By the end of 2013, the unemployment situation had improved mandate. enough that the Committee voted to reduce its purchases by $10 billion per month, thus beginning the much-anticipated “tapering” process. With that transition under way, the key monetary policy question for the Fed is how long to keep the fed funds rate at zero. Throughout 2013, FOMC members continued to anticipate that the fed funds rate would stay put at least until the unemployment rate falls below 6.5 percent. In the statement following its December meeting, the Committee also noted that the near-zero rate would likely be appropriate “well past” the 6.5 percent threshold, especially if annual inflation continues to look like it will fall short of the Committee’s longer-run objective of 2 percent. Is it working? It’s difficult to isolate precisely the effects of the Fed’s monetary stimulus, in part because the linkages between policy and 30 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT FOMC Projections of Unemployment Rate FOMC PROJECTIONS OF UNEMPLOYMENT RATE 11% 10% 9% 8% 7% 6% 5% 4% 2008 2009 2010 2011 2012 2013 2014 2015 2016 Longer run Note: Definitions of variables are in the general note to the projections table. The data for the actual values of the variables are annual. Source: Summary of Economic Projections, Board of Governors Appropriate Timing of Policy Firming APPROPRIATE TIMING OF POLICY FIRMING Number of participants 14 12 10 8 6 4 2 0 2014 2015 2016 Note: The height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy, the first increase in the target federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year. Source: Federal Reserve Board of Governors Target Federal Funds Rate at Year-end TARGET FEDERAL FUNDS RATE AT YEAR-END 5% 4% 3% 2% 1% 0% 2013 2014 2015 2016 Longer run Note: Each shaded circle indicates the value (rounded to the nearest 1/4 percentage point) of an individual participant’s judgment of the appropriate level of the target federal funds rate at the end of the specified calendar year or over the longer run. Source: Federal Reserve Board of Governors 31 “FISCAL DRAG” DISSIPATED LATE IN 2013 The executive and legislative branches of government control federal taxation and spending. But the Federal Reserve pays close attention to fiscal policy because it influences the economy and labor market. and tax increases likely lowered economic growth in 2013 by as W ithout advocating particular positions, it is possible to and in January 2014 passed a comprehensive spending bill. Further, identify general fiscal conditions that would promote the ongoing during 2013, likely reducing the need for further cuts in employment recovery of the labor market. As Atlanta Fed President Dennis and investment. much as 1.5 percentage points, according to the CBO. The good news: the worst of the fiscal drag appeared to be over as 2013 ended. In December, Congress reached a budget compromise the fiscal situations of states and municipalities generally improved Lockhart explained in a September 2013 speech, public policy can foster economic dynamism “by removing obstacles to growth and entrepreneurship and contributing pro-growth actions that address investment in human capital and productive infrastructure.” It is important for elected officials to set fiscal policy on a sustainable long-term path. Establishing a course on which the ratio of federal debt to gross domestic product (GDP) eventually stabilizes or declines is critical to ensure longer-run economic growth and stability, Lockhart pointed out. Yet even as policymakers address longer-range fiscal sustainability, they should avoid unnecessarily adding to forces that are slowing the economic recovery. Those forces in 2013 included a “fiscal drag” consisting of the effects of tax increases early in the year, reduced spending, the partial federal government shutdown, and the impact of fiscal policy uncertainty on business investment and consumer spending. The Congressional Budget Office (CBO) estimated that federal spending cuts lowered employment by between 300,000 and 1.6 million jobs. Meanwhile, the partial shutdown of the federal government in October reduced fourth-quarter GDP by an estimated 0.25 to 0.5 percentage point. In total, cuts in government spending 32 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Government Spending as Share of GDP GOVERNMENT SPENDING AS SHARE OF GDP 30% 25% 20% 15% 1990 1995 2000 2005 2010 2013 Note: Includes federal, state, and local governments. Source: U.S. Bureau of Economic Analysis 33 A HEALTHY ECONOMY IS THE BEST MEDICINE FOR THE LABOR MARKET In large part, the conditions that characterize a generally healthy economy are the same conditions that will encourage increased hiring. T unambiguously positive or negative. For example, because of declining labor force participation, the unemployment rate has been particularly difficult to read during the recovery. And monthto-month reports of employment growth can fluctuate dramatically. he second half of 2013 brought promising signs on both In such circumstances, measures of inflation can be especially fronts. Overall economic growth, as measured by the gross domestic helpful. In general, weak overall demand is associated with weak product (GDP), improved significantly in the third and fourth quarters prices. Therefore, watching inflation and wage growth can help gauge compared to the previous three quarters. In the first half of 2013, whether the economy is gathering the underlying strength it needs to real GDP—adjusted for inflation—expanded at a rate of 1.8 percent quicken the healing of the labor market. annualized, slower than the average during the recovery from the Great Recession. Growth then accelerated to an estimated annual Economic performance in the latter part of 2013 suggested glad pace of 3.3 percent in the second half of the year. tidings. If that pace of growth persists—thus signaling the longawaited acceleration in the economic expansion—then better labor Some of the strength in the second half resulted from the buildup market conditions should follow. of inventory, which can’t go on indefinitely. But the economy also exhibited renewed strength in consumer spending, business spending on equipment, and exports—which suggests rising confidence about future prospects for the economy. Anecdotal evidence from business contacts in the Southeast also indicated solid confidence. Brighter sentiment and stronger consumer spending bode well for the labor market. What’s more, these two factors—business confidence and consumption—feed off each other. If people running firms believe demand for their products and services is sufficiently strong, then they are more likely to invest in people through hiring. Likewise, better job prospects, along with rising stock and home prices, should fuel more consumer spending. As 2013 ended, it was premature to declare the start of such a virtuous cycle. Moreover, it is almost always difficult to discern the precise state of the economy, as incoming data are rarely 34 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Asking the question of what conditions need to be in place for employment growth is the same thing as asking the question about what conditions need to be in place for growth in general. That is, businesses have to have confidence in the fact that they’re going to be able to make profits, which means they have to be confident that the demand will be there when they produce. Monetary policy has an important role to play in supporting economic growth and employment growth. The Federal Open Market Committee [FOMC]—the decision-making branch of the Federal Reserve—has decided that it’s going to keep in place the policy of accommodation—that is to say, really low interest rates—for some period of time to support exactly that growth in both jobs and in overall economic activity. There’s a lot of debate about how much of the employment picture is about structural developments—that is, things that monetary policy really can’t fix—versus cyclical elements that have to do with not enough spending in the economy, for example. Monetary policy can do a lot about the spending side of the picture, and really, what we need to know is how much of the problem is associated with those demand-type problems. How will we know when we’ve met our employment goal? Well, that’s a tricky question, but interestingly, our second goal—our inflation goal—will help us know that. In an economy that’s weaker than it should be, the rate of inflation is likely to be below the 2 percent target that the FOMC has set. So by keeping our eye on the inflation goal, we are also keeping our eye on the employment goal. The conditions for a pickup in employment growth appear to be with us today. We ended the year with substantial momentum that ought to take us into 2014. So not only will 2014 be a year of better GDP [gross domestic product] growth, but hopefully of better employment growth as well. DAVE ALTIG Executive Vice President and Director of Research GDP Growth GDP GROWTH 4% 3% 2% 1% 0% -1% -2% -3% -4% 2009 2010 2011 2012 2013 Source: U.S. Bureau of Economic Analysis GDP Growth GDP GROWTH IN 2013 5% 4% 3% 2% 1% 0% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Source: U.S. Bureau of Economic Analysis 36 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Inflation: Personal Consumption Expenditures Index INFLATION: PERSONAL CONSUMPTION EXPENDITURES INDEX Year-over-year percent change 5 4 3 FOMC target 2 1 0 -1 -2 2007 2008 2009 2010 2011 2012 2013 Source: U.S. Bureau of Economic Analysis 37 FEDERAL RESERVE BANK OF ATLANTA BOARDS OF DIRECTORS Federal Reserve Banks each have a board of nine directors. Directors provide economic information, have broad oversight responsibility for their bank’s operations, and, with the Board of Governors approval, appoint the bank’s president and first vice president. Six directors—three class A, representing the banking industry, and three class B—are elected by banks that are members of the Federal Reserve System. Three class C directors (including the chair and deputy chair) are appointed by the Board of Governors. Class B and C directors represent agriculture, commerce, industry, labor, and consumers in the district; they cannot be officers, directors, or employees of a bank; class C directors cannot be bank stockholders. Fed branch office boards have five or seven directors; the majority are appointed by head-office directors and the rest by the Board of Governors. 38 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT 39 ATLANTA BOARD OF DIRECTORS Thomas I. Barkin, CHAIR Director McKinsey & Company Atlanta, Georgia Carol B. Tomé, DEPUTY CHAIR Chief Financial Officer and Executive Vice President The Home Depot Atlanta, Georgia Thomas A. Fanning Chairman, President and Chief Executive Officer Southern Company Atlanta, Georgia Renée Lewis Glover Former President and Chief Executive Officer Atlanta Housing Authority Atlanta, Georgia Gerard R. Host President and Chief Executive Officer Trustmark Corporation Jackson, Mississippi T. Anthony Humphries President and Chief Executive Officer NobleBank & Trust Anniston, Alabama Clarence Otis, Jr. Chairman and Chief Executive Officer Darden Restaurants Inc. Orlando, Florida William H. Rogers, Jr. Chairman and Chief Executive Officer SunTrust Banks Inc. Atlanta, Georgia José S. Suquet Chairman, President and Chief Executive Officer Pan-American Life Insurance Group New Orleans, Louisiana 40 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT BIRMINGHAM BOARD OF DIRECTORS Thomas R. Stanton, CHAIR Chairman and Chief Executive Officer ADTRAN Inc. Huntsville, Alabama Brandon W. Bishop Business Manager and Financial Secretary International Union of Operating Engineers Birmingham, Alabama Pamela B. Hudson, M.D. Chief Executive Officer Crestwood Medical Center Huntsville, Alabama James K. Lyons Director and Chief Executive Officer Alabama State Port Authority Mobile, Alabama Macke B. Mauldin President Bank Independent Sheffield, Alabama C. Richard Moore, Jr. Chairman, President, and Chief Executive Officer Peoples Southern Bank Clanton, Alabama John A. Langloh President and Chief Executive Officer United Way of Central Alabama Birmingham, Alabama 41 JACKSONVILLE BOARD OF DIRECTORS 42 Carolyn M. Fennell, CHAIR Director of Public Affairs Greater Orlando Aviation Authority Orlando International Airport Orlando, Florida Hugh F. Dailey President and Chief Executive Officer Community Bank & Trust of Florida Ocala, Florida Michael J. Grebe Chairman and Chief Executive Officer Interline Brands Inc. Jacksonville, Florida Leerie T. Jenkins, Jr. Chairman of the Board Reynolds, Smith and Hills Inc. Jacksonville, Florida D. Kevin Jones President and Chief Executive Officer MIDFLORIDA Credit Union Lakeland, Florida Lynda L. Weatherman President and Chief Executive Officer Economic Development Commission of Florida’s Space Coast Rockledge, Florida WHERE ARE THE JOBS? Oscar J. Horton President and Chief Executive Officer Sun State International Trucks LLC Tampa, Florida FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT MIAMI BOARD OF DIRECTORS Michael J. Jackson, CHAIR Chairman and Chief Executive Officer AutoNation Inc. Fort Lauderdale, Florida Facundo L. Bacardi Chairman Bacardi Limited Coral Gables, Florida Alberto Dosal Chairman and Chief Executive Officer Dosal Capital LLC Miami, Florida Carol C. Lang President HealthLink Enterprises Inc. Miami Beach, Florida Gary L. Tice Chairman and Chief Executive Officer First National Bank of the Gulf Coast Naples, Florida Millar Wilson Chief Executive Officer Mercantil Commercebank Coral Gables, Florida Thomas W. Hurley Chairman and Chief Executive Officer Becker Holding Corporation Vero Beach, Florida 43 NASHVILLE BOARD OF DIRECTORS Kathleen Calligan, CHAIR Chief Executive Officer Better Business Bureau Middle Tennessee Nashville, Tennessee Dan W. Hogan Chief Operating Officer CapStar Bank Nashville, Tennessee 44 WHERE ARE THE JOBS? Kent M. Adams President and Chief Executive Officer Caterpillar Financial Services Corporation Vice President Caterpillar Inc. Nashville, Tennessee William J. Krueger Senior Vice President, Nissan Americas Nissan North America Inc. Franklin, Tennessee Jennifer S. Banner Chief Executive Officer Schaad Companies LLC Knoxville, Tennessee William Y. Carroll, Jr. President and Chief Executive Officer SmartBank Pigeon Forge, Tennessee Scott McWilliams Executive Chairman OHL Brentwood, Tennessee FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT NEW ORLEANS BOARD OF DIRECTORS T. Lee Robinson, Jr., CHAIR President OHC Inc. Mobile, Alabama Elizabeth A. Ardoin Senior Executive Vice President Director of Communications IBERIABANK Lafayette, Louisiana Kevin P. Reilly, Jr. President and Chairman Lamar Advertising Company Baton Rouge, Louisiana Terrie P. Sterling Executive Vice President and Chief Operating Officer Our Lady of the Lake Regional Medical Center Baton Rouge, Louisiana Carl J. Chaney President and Chief Executive Officer Hancock Holding Company New Orleans, Louisiana Phillip R. May President and Chief Executive Officer Entergy Louisiana LLC and Entergy Gulf States Louisiana L.L.C. Jefferson, Louisiana 45 MANAGEMENT COMMITTEE 46 Dennis P. Lockhart President and Chief Executive Officer Marie C. Gooding First Vice President David E. Altig Executive Vice President and Director of Research André T. Anderson Senior Vice President W. Brian Bowling Adviser, Vice President, and General Auditor Leah L. Davenport Senior Vice President Anne M. DeBeer Senior Vice President Michael E. Johnson Senior Vice President Richard A. Jones Adviser, Senior Vice President, and General Counsel James M. McKee Senior Vice President Cheryl L. Venable Senior Vice President, System Retail Payments Office WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT 47 FEDERAL RESERVE BANK OF ATLANTA OTHER OFFICERS 48 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT SENIOR VICE PRESIDENTS Scott H. Dake Senior Vice President Brian D. Egan Senior Vice President William J. Tignanelli (retired) Senior Vice President Julius Weyman Senior Vice President Michael F. Bryan Vice President and Senior Economist Richard M. Fraher Vice President and Counsel to the Retail Payments Office John A. Kolb Jr. Vice President Cynthia L. Rasche Vice President Joan H. Buchanan Vice President and Chief Diversity Officer Amy S. Goodman Vice President and Branch Operations Officer, New Orleans Jacquelyn Lee Vice President John C. Robertson Vice President and Senior Economist VICE PRESIDENTS Annella D. Campbell-Drake Vice President Michael J. Chriszt Vice President Suzanna J. Costello Vice President Thomas J. Cunningham Vice President and Regional Executive, Atlanta William J. Devine Vice President D. Blake Lyons Vice President Cynthia C. Goodwin Vice President Mary M. Mandel Vice President Todd H. Greene Vice President Lesley A. McClure Vice President and Regional Executive, Birmingham Lee C. Jones Vice President and Regional Executive, Nashville Mary M. Kepler Vice President and Chief Risk Officer Bobbie McCrackin Vice President and Public Affairs Officer Christopher Oakley Vice President and Regional Executive, Jacksonville Juan C. Sanchez Vice President Adrienne L. Slack Vice President and Regional Executive, New Orleans Timothy R. Smith (retired) Vice President and Regional Executive, Miami Paula A. Tkac Vice President and Senior Economist Stephen W. Wise Vice President 49 ASSISTANT VICE PRESIDENTS Christopher N. Alexander Assistant Vice President Jennifer L. Gibilterra Assistant Vice President M. Darlene Martin Assistant Vice President Maria Smith Assistant Vice President Daniel M. Baum Assistant Vice President James M. Gibson Assistant Vice President Daniel A. Maslaney Assistant Vice President Anthony S. Stallings Assistant Vice President S. Dwight Blackwood Assistant Vice President and Assistant General Counsel Paul W. Graham Assistant Vice President and Branch Operations Officer, Miami Lantanya N. Mauriello Assistant Vice President Allen D. Stanley Assistant Vice President David R. McDermitt Assistant Vice President Jeffrey W. Thomas Assistant Vice President Kerri R. O’Rourke-Robinson Assistant Vice President Charles L. Weems Assistant Vice President J. Elaine Phifer Assistant Vice President and Compliance Officer William R. Wheeler III Assistant Vice President Kim Blythe Assistant Vice President Anita F. Brown Assistant Vice President Karen W. Clayton Assistant Vice President, EEO Officer, and Deputy Diversity Officer Paige B. Harris Assistant Vice President Carolyn Ann Healy Assistant Vice President Chapelle D. Davis Assistant Vice President Kathryn G. Hinton Assistant Vice President Angela H. Dirr Assistant Vice President and Assistant General Counsel Evette H. Jones Assistant Vice President Patrick E. Dyer Assistant Vice President Gregory S. Fuller Assistant Vice President 50 Rebecca L. Gunn Assistant Vice President and Corporate Secretary WHERE ARE THE JOBS? Torion L. Kent Assistant Vice President Stephen A. Levy Assistant Vice President Doris Quiros Assistant Vice President Robin R. Ratliff Assistant Vice President and Public Information Officer Kenneth Wilcox Assistant Vice President Molly T. Willison Assistant Vice President Princeton G. Rose Assistant Vice President Christina M. Wilson Assistant Vice President and Branch Operations Officer, Jacksonville Jeffrey F. Schiele Assistant Vice President G. Edward Young Assistant Vice President FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT 51 FEDERAL RESERVE BANK OF ATLANTA ADVISORY COUNCILS 52 www.frbatlanta.org FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT FEDERAL ADVISORY COUNCIL REPRESENTATIVE Daryl G. Byrd President and Chief Executive Officer IBERIABANK Corporation REGIONAL ECONOMIC INFORMATION NETWORK (REIN) ADVISORY COUNCILS AGRICULTURE David Bertrand Owner/Partner Bertrand Rice LLC Mike Giles President Georgia Poultry Federation Gaylon Lawrence Jr. Partner The Lawrence Group Jill Stuckey Chief Relationship Officer J&J EcoCool Lorraine Bertrand Owner Bertrand Rice LLC George F. Hamner Jr. President Indian River Exchange Packers Inc. Larkin Martin Owner Martin Farms Robert M. Thomas President Two Rivers Ranch Inc. Donna Jo Curtis Owner/Operator Curtis Farm David Kahn President and Chief Executive Officer Pizza 120 LLC James H. Sanford Chairman of the Board HOME Place Farms John D. Williams President and Chief Executive Officer Zen-Noh Grain Corporation John E. Estes Jr. Vice President J. E. Estes Wood Company Inc. Bart Krisle Chief Executive Officer Tennessee Farmers Co-op W. Gilbert Sellers President Sellers Inc. ENERGY Kenneth Beer Executive Vice President and Chief Financial Officer Stone Energy W. Paul Bowers President and Chief Executive Officer Georgia Power Company Mark Maisto President, Commodities and Retail Markets Nextera Energy Resources Donald T. Bollinger President and Chief Executive Officer Bollinger Shipyards Charles Goodson Chairman and Chief Executive Officer PetroQuest Energy Deloy Miller Executive Chairman Miller Energy Resources Earl Shipp Vice President Dow Chemical Texas Operations Stephen Toups Corporate Vice President Turner Industries 53 TRADE AND TRANSPORTATION Reid Dove President and Chief Operating Officer AAA Cooper Transportation Myron Gray President, U.S. Operations United Parcel Service of America Inc. Gary LaGrange President and Chief Executive Officer Port of New Orleans John Giles Principal Great Lakes Partners LLC John Hourihan Senior Vice President and General Manager Puerto Rico and Caribbean Crowley Holdings Chris Mangos Director–Marketing Division Miami-Dade Aviation Department Miami International Airport Clarence Gooden Executive Vice President CSX Corporation Bill Johnson Port Director Port of Miami Clifford K. Otto President Saddle Creek Logistics Services David Parker Chairman, President, and Chief Executive Officer Covenant Transportation Deborah A. McDowell Director of Customer Service and Business Development Seaonus TRAVEL AND TOURISM ADVISORY COUNCIL Robert Dearden Chief Operating Officer The Florida Restaurant and Lodging Association Patricia Denechaud President and Chief Executive Officer Crescent City Consultants Cynthia Flowers Executive Manager Alabama Bureau of Tourism and Travel Nicki Grossman President and Chief Executive Officer Greater Fort Lauderdale Convention and Visitors Bureau Tony Quintero Association Aviation Director– Government Affairs Miami-Dade Aviation Miami International Airport Brian Rice Executive Vice President and Chief Financial Officer Royal Caribbean Cruises Ltd. Will Seccombe President and Chief Executive Officer VISIT FLORIDA William D. Talbert III President and Chief Executive Officer Greater Miami Convention and Visitors Bureau Mark Vaughan Executive Vice President Chief Sales and Marketing Officer Atlanta Convention and Visitors Bureau Jack Wert Executive Director Naples, Marco Island, Everglades Convention and Visitors Bureau OTHER ADVISORY COUNCILS AMERICAS CENTER ADVISORY COUNCIL Catalina Amuedo-Dorantes Professor Department of Economics San Diego State University Martin Eichenbaum Ethel and John Lindgren Professor of Economics Northwestern University Jeffry Frieden Stanfield Professor of International Peace Department of Government Harvard University Susan Kaufman Purcell Director Center for Hemispheric Policy University of Miami Kenneth Coates Economist 54 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT CENTER FOR QUANTITATIVE ECONOMIC RESEARCH ADVISORY COUNCIL Lawrence Christiano Department of Economics Northwestern University Martin Eichenbaum Ethel and John Lindgren Professor of Economics Northwestern University Sergio Rebelo Department of Economics Kellogg School of Management Northwestern University Richard Rogerson Department of Economics and Public Affairs Woodrow Wilson School of Public and International Affairs Princeton University Thomas Sargent Department of Economics New York University Chris Sims Department of Economics Princeton University COMMUNITY DEPOSITORY INSTITUTIONS ADVISORY COUNCIL Austin H. Adkins Chief Executive Officer First National Bank Earl O. Bradley III Chief Executive Officer First Advantage Bank Thomas A. Broughton III President and Chief Executive Officer ServisFirst Bank Calvin L. Cearley President and Chief Executive Officer Palm Beach Community Bank Milton H. Jones Jr. Executive Chairman CertusBank, N.A. and Certus Holdings Inc. Fred Miller President and Chief Executive Officer Bank of Anguilla Joseph F. Quinlan III President and Chief Executive Officer First National Bankers Bank Mark E. Rosa President and Chief Executive Officer Jefferson Financial Credit Union Claire W. Tucker (National Council Representative) President and Chief Executive Officer CapStar Bank Terry West President and Chief Executive Officer VyStar Credit Union Douglas L. Williams President and Chief Executive Officer Atlantic Capital Bank Agustin Velasco President and Chief Executive Officer InterAmerican Bank, FSB LABOR, EDUCATION AND HEALTH ADVISORY COUNCIL Jay Berkelhamer Past President American Academy of Pediatrics Stephen Dolinger President Georgia Association of Educators Michael Hecht President and Chief Executive Officer Greater New Orleans Inc. Richard Hobbie Executive Director National Association of State Workforce Agencies Rob Kight Senior Vice President Global Human Resources Services and Labor Relations Delta Air Lines Joseph Kilkenny General Manager CSX Transportation James D. King Vice Chancellor Tennessee Technology Centers Denise McLeod Vice President and Chief Operating Officer Landrum Staffing Services Rhonda Medows Chief Medical Officer and Executive Vice President United Healthcare Wayne Riley President and Chief Executive Officer Meharry Medical College Carolyn Meyers President Jackson State University Victoria Villalba President Victoria & Associates Career Services Inc. Rolando Montoya Provost Miami Dade College Stephen Newman Chief Operating Officer (retired) Tenet Healthcare Corporation 55 FEDERAL RESERVE BANK OF ATLANTA MILESTONES 56 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT RESEARCH / MONETARY POLICY Atlanta Fed economists published research on myriad topics such as commodity prices, links between land prices and unemployment, household employment status and the likelihood of mortgage default, the economic consequences of cigarette smoking, and the benefits of social insurance programs. The Bank launched a lecture series on real estate. Guest speakers included experts from the Federal Reserve Board of Governors and the Joint Center for Housing Studies at Harvard University. The Atlanta Fed held a half dozen major research and policy conferences on topics including financial stability, monetary and financial history, labor market developments and policy responses, central bank business surveys, and the use of extremely detailed Census Bureau data in research. Community and Economic Development discussion papers explored community resilience to disasters and whether locally owned businesses affect the health of local economies. Atlanta Fed researchers tracked municipal and state budgetary issues, including high-profile municipal bankruptcies and their effects on financial stability. The Atlanta Fed’s Regional Economic Information Network (REIN) gathered economic intelligence from southeastern business leaders and other sources in the region to inform monetary policymaking. The Community and Economic Development group convened presidents of historically black colleges and universities (HBCUs) and workforce development experts to discuss opportunities and issues HBCUs face in preparing students for the fast-changing labor market. 57 SUPERVISION AND REGULATION Bank performance in the Southeast continued to improve during 2013. Only about 10 percent of the region’s commercial banks were unprofitable, compared to more than 40 percent during the worst of the 2007–08 financial crisis. The Atlanta Fed Supervision and Regulation division’s annual Banking Outlook Conference in February assembled more than 200 bankers and regulators to address issues affecting financial institutions and the nation’s financial system. They discussed topics that included concerns facing southeastern banks, regulatory matters, cyberthreats, and the impact of technology on banks and their customers. The division led the Federal Reserve System’s 2013 implementation of the Capital Plan Review for institutions with more than $50 billion in assets that were not among the nation’s 19 largest banking companies. The Supervision and Regulation division helped review and analyze the capital adequacy of the nation’s largest financial institutions, including two institutions headquartered in the Southeast. RETAIL PAYMENTS OFFICE / PAYMENTS Cash Services operations met all cost recovery targets and continued to rank among the top tier of Reserve Banks’ cash operations. 58 WHERE ARE THE JOBS? Officials from the Central Bank of Nigeria visited the Atlanta Fed to study the U.S. payments system as they seek to transform their country’s payments infrastructure. FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT Under Atlanta Fed leadership, the Federal Reserve System’s check and ACH services nationwide surpassed cost recovery targets in all retail payments processing operations. The RPO improved efficiencies in check operations through the transition of all Treasury-item processing to a new technology platform. This centralized platform helped reduce Federal Reserve System costs to the U.S. Treasury by $1.7 million for Treasury check and postal money order processing. The Retail Payments Risk Forum cohosted conferences on the nation’s fast-changing payments system. Conferences explored payments risk management for financial institutions and the challenges and solutions involved in creating a more efficient, secure remote payment system. EDUCATION AND PUBLIC OUTREACH Atlanta Fed President and Chief Executive Dennis Lockhart delivered nearly two dozen speeches in 2013. Major themes included numerous aspects of employment and the challenges facing the recovering labor market, the dynamism of the U.S. economy, the impact of fiscal policy uncertainty, the economic outlook, and monetary policy response to economic and financial conditions. Atlanta Fed forums featured renowned speakers on topics including the changing economics of higher education, global economic issues, and the ongoing loss of Louisiana’s wetlands. The Atlanta Fed launched ECONversations, a webcast series in which Fed experts discuss economic issues with bankers. The webcasts are held twice a year. 59 EDUCATION AND PUBLIC OUTREACH The Economic Education Team conducted 180 workshops, which reached 5,358 teachers, who in turn reached an estimated 401,850 students. The team made an additional 146 presentations at teacher workdays and conferences, reaching more than 6,000 teachers. Roughly 51 percent of the Atlanta Fed’s financial literacy and financial education programming was consumed online during 2013. The Atlanta Fed and the Federal Reserve System prepared to mark the central bank’s centennial in 2014, with exhibits, speaking engagements, publications, and other events. The Atlanta Fed opened the Museum of Trade, Finance, and the Fed at the New Orleans Branch. Exhibits highlight the city’s evolution into a bustling trade and financial center. The travel website TripAdvisor awarded its Certificate of Excellence to the Atlanta Fed Monetary Museum in Atlanta. The museum attracted nearly 13,000 visitors in 2013. The Atlanta Fed hosted two banker outreach forums. The sessions in Tampa and Birmingham assembled more than 100 senior bankers for candid conversation with Atlanta Fed officials about the evolving business of banking and the financial regulatory landscape. 60 WHERE ARE THE JOBS? FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT CORPORATE CITIZENSHIP The Atlanta Fed was named one of America’s Top Workplaces by Workplace Dynamics. Forty-six percent of Atlanta Fed employees volunteered through workplace-based programs, contributing more than 5,100 hours to charities throughout the Southeast. The Atlanta Fed headquarters won a widely recognized certification for sustainability in building operations. The building earned LEED, or Leadership in Energy and Environmental Design, Existing Buildings Operations and Maintenance Gold level certification from the U.S. Green Building Council. Forty-five employees served on the boards of directors of 98 nonprofit agencies, most of them focused on education, workforce development, and community building. 61 FEDERAL RESERVE BANK OF ATLANTA 2013 AUDIT STATEMENT The Board of Governors engaged Deloitte & Touche LLP (D&T) to audit the 2013 combined and individual financial statements of the Reserve Banks and those of the consolidated LLC entities.1 In 2013, D&T also conducted audits of internal controls over financial reporting for each of the Reserve Banks. Fees for D&T’s services totaled $7 million, of which $1 million was for the audits of the consolidated LLC entities. To ensure auditor independence, the Board requires that D&T be independent in all matters relating to the audits. Specifically, D&T may not perform services for the Reserve Banks or others that would place it in a position of auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way impairing its audit independence. In 2013, the Bank did not engage D&T for any non-audit services. 1 In addition, D&T audited the Office of Employee Benefits of the Federal Reserve System (OEB), the Retirement Plan for Employees of the Federal Reserve System (System Plan), and the Thrift Plan for Employees of the Federal Reserve System (Thrift Plan). The System Plan and the Thrift Plan provide retirement benefits to employees of the Board, the Federal Reserve Banks, and the OEB. FEDERAL RESERVE BANK OF ATLANTA 2013 ANNUAL REPORT 63 GET CONNECTED Subscribe to our social media channels To view the 2013 Annual Report, visit frbatlanta.org/pubs/annualreport/13ar/
@FedFRASER