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Prefatory Note The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. Content last modified 04/01/2015. Class III FOMC - Internal (FR) August 7, 2009 CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System Contents The Domestic Nonfinancial Economy ........................................................ 1 Labor Market Developments ..........................................................1 Exhibits Changes in Employment ..................................................................2 Selected Unemployment and Labor Force Participation Rates .......3 Real Personal Consumption Expenditures.......................................4 Price Measures .................................................................................5 The Domestic Financial Economy .............................................................. Tables Commercial Bank Credit .................................................................6 Selected Financial Market Quotations .............................................7 -i- 6 Supplemental Notes The Domestic Nonfinancial Economy Labor Market Developments Job losses continued to abate in July, and aggregate hours of production and nonsupervisory workers were unchanged. Private payroll employment fell 247,000; in addition, the average monthly decline of 373,000 in May and June is now slightly less than previously reported. In the manufacturing sector, employment fell 52,000 in July. The step-up in motor vehicle assemblies boosted employment 28,000; elsewhere in manufacturing job losses were smaller in a number of industries, and workweeks generally moved up. Employment declines in July were also smaller than in recent months in business and financial services while employment in nonbusiness services posted its third monthly gain, supported the continued uptrend in health and education and a small gain in the leisure and hospitality industry. However, job losses in the construction industry continued at about the recent rate; since the spring, the contraction in establishments associated largely with residential building has eased a bit, but cutbacks have remained sizable in those associated with nonresidential construction. Elsewhere, declines in employment in continued to be widespread in warehousing and transportation and in retailing. Employment at state and local governments is now estimated to have edged down in June and July, extending the general downtrend that began in the fall of 2008. In the household survey, the unemployment rate ticked down in July to 9.4 percent. In recent months, both the proportion of workers on part-time schedules for economic reasons and the proportion of unemployed workers who lost their job in the previous 5 weeks have leveled off. However, the number of longer term unemployed—particularly those jobless for more than 27 weeks—has continued to move up. The labor force participation rate fell back in July to its March level of 65.5 percent. Average hourly earnings of production and nonsupervisory workers rose 0.2 percent in July to a level 2.5 percent higher than it was a year earlier. This measure of wage change has decelerated noticeably over the past year; in the 12 months ending in July 2008, average hourly earnings increased 3.5 percent. Note: Attached are updated versions of tables on personal consumption expenditures and prices that include newly released detail from the annual NIPA revision. -1- -2Changes in Employment (Thousands of employees; seasonally adjusted) 2008 Measure and sector 2008 2009 Q4 Q1 Q2 May Average monthly change Nonfarm payroll employment (establishment survey) Private Natural resources and mining Manufacturing Ex. motor vehicles Construction Residential Nonresidential Wholesale trade Retail trade Financial activities Temporary help services Nonbusiness services1 Total government Federal government Total employment (household survey) Memo: Aggregate hours of private production workers (percent change)2 Average workweek (hours)3 Manufacturing (hours) June July Monthly change -257 -270 4 -73 -58 -57 -35 -22 -16 -44 -19 -44 19 14 3 -246 -553 -552 -2 -140 -121 -97 -51 -45 -32 -80 -35 -70 -19 -1 2 -564 -691 -695 -12 -202 -176 -124 -53 -71 -36 -55 -51 -73 -25 4 10 -817 -422 -426 -10 -142 -119 -82 -29 -53 -20 -27 -34 -29 22 5 4 -230 -303 -292 -9 -146 -123 -57 -14 -43 -15 -28 -27 -1 63 -11 -16 -437 -443 -395 -6 -131 -109 -86 -33 -53 -14 -21 -29 -31 26 -48 -41 -374 -247 -254 0 -52 -80 -76 -27 -49 -19 -44 -13 -10 28 7 12 -155 -3.3 33.6 40.8 -7.4 33.4 40.2 -8.9 33.2 39.6 -7.8 33.1 39.5 -.3 33.1 39.4 -.7 33.0 39.5 .0 33.1 39.8 1. Nonbusiness services comprises education and health, leisure and hospitality, and "other." 2. Establishment survey. Annual data are percent changes from Q4 to Q4. Quarterly data are percent changes from preceding quarter at an annual rate. Monthly data are percent changes from preceding month. 3. Establishment survey. Changes in Private Payroll Employment 400 Aggregate Hours and Workweek of Production and Nonsupervisory Workers Thousands 3-month moving average 200 400 200 35.0 34.5 Hours 2002 = 100 Aggregate hours (right scale) 110 108 106 0 0 34.0 -200 July 104 Workweek (left scale) -200 102 33.5 -400 -600 -600 100 -400 98 -800 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -800 Source: U.S. Department of Labor, Bureau of Labor Statistics. 33.0 July 32.5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 96 94 -3Selected Unemployment and Labor Force Participation Rates (Percent; seasonally adjusted) 2008 Rate and group 2009 2008 Q4 Q1 Q2 May June July Civilian unemployment rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 5.8 18.7 10.2 4.8 4.4 6.9 20.7 11.3 6.0 5.2 8.1 21.3 13.0 7.4 6.2 9.2 22.7 15.0 8.8 6.9 9.4 22.7 15.0 9.0 7.0 9.5 24.0 15.2 9.2 7.0 9.4 23.8 15.3 9.0 6.9 Labor force participation rate Total Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older 66.0 40.2 74.4 75.4 60.0 65.9 38.7 74.1 75.2 60.1 65.6 38.3 73.7 74.6 60.0 65.8 38.4 74.1 74.9 60.3 65.9 38.5 73.7 75.1 60.3 65.7 38.6 73.4 75.0 60.3 65.5 38.0 73.5 74.8 60.1 Unemployment Rate Labor Force Participation Rate Percent 11 10 NBER peak July 11 Percent 67.5 67.5 10 9 9 8 8 7 6 5 5 4 NBER peak 67.0 7 6 67.0 4 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3 66.5 65.5 65.0 66.0 65.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 65.0 Note: See the note to the figure "Unemployment Rate." Job Losers Unemployed Less Than 5 Weeks Persons Working Part Time for Economic Reasons 6.5 July 66.0 Note: Shaded bar indicates a period of business recession as defined by the National Bureau of Economic Research (NBER). The NBER peak is the last business cycle peak as defined by the NBER. 7.0 66.5 Percent of household employment July 6.0 7.0 1.8 Percent of household employment 6.5 6.0 5.5 5.5 5.0 4.5 4.0 3.5 3.0 3.0 2.5 1.6 3-month moving average (thick line) 4.0 3.5 1.6 5.0 4.5 1.8 July 2.5 2.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: U.S. Department of Labor, Bureau of Labor Statistics. 2.0 1.4 1.4 1.2 1.2 1.0 1.0 0.8 0.8 0.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0.6 -4Real Personal Consumption Expenditures (Percent change from preceding comparable period) Category 2009 Q1 Q2 Annual rate 2008 Total real PCE Apr. 2009 May June Monthly rate -.2 -1.2 -.2 .0 -.1 -13.6 .4 5.8 .7 .8 6.7 2.8 -1.0 -.3 -.2 -11.9 -5.0 -7.2 .1 .5 -3.4 -.6 .2 .1 .1 3.6 .3 -.5 -.1 .0 -2.1 .6 1.5 .0 .0 3.8 Motor vehicles Goods ex. motor vehicles Ex. energy Services Ex. energy Memo: Personal saving rate1 .6 4.0 5.2 4.7 6.2 4.6 1. The annual value is the Q4 level. Source: U.S. Department of Commerce, Bureau of Economic Analysis. Change in Real PCE Goods Percent 1.0 NBER peak 0.8 1.0 Percent 2.0 6-month moving average 2.0 0.8 1.6 0.6 0.6 1.2 1.2 0.4 0.4 0.8 0.8 0.2 0.4 0.4 -0.0 -0.0 -0.0 0.2 June -0.0 -0.2 1.6 -0.2 -0.4 -0.4 -0.4 -0.8 -0.6 -0.6 -1.2 -0.8 -0.8 -1.6 -1.6 -1.0 -1.0 -2.0 -2.0 -1.2 6-month moving average June -0.4 -0.8 Monthly -1.2 -1.2 -2.4 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2006 2007 2008 2009 Note: Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research (NBER). The NBER peak is the last business cycle peak as defined by the NBER. Source: U.S. Department of Commerce, Bureau of Economic Analysis. -2.4 Change in Real PCE Services Percent 0.5 0.5 NBER peak 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 6-month moving average June 0.0 0.0 -0.1 -0.1 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Percent 1.0 0.8 6-month moving average 0.6 0.4 0.8 0.6 0.4 0.2 June -0.0 -0.2 0.2 -0.0 -0.2 -0.4 -0.4 Monthly -0.6 -0.8 1.0 -0.6 2006 2007 2008 2009 Note: Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research (NBER). The NBER peak is the last business cycle peak as defined by the NBER. Source: U.S. Department of Commerce, Bureau of Economic Analysis. -0.8 -5- Price Measures (Percent change) 12-month change June 2008 June 2009 1-month change Annual rate Measures 3-month change Monthly rate Mar. 2009 June 2009 May 2009 June 2009 CPI Total Food Energy Ex. food and energy Core goods Core services Shelter Other services Memo: core ex. tobacco Chained CPI (n.s.a.) 1 Ex. food and energy 1 5.0 5.3 24.7 2.4 .2 3.3 2.5 4.3 2.4 4.2 2.1 -1.4 2.1 -25.5 1.7 1.5 1.8 1.3 2.6 1.5 -1.3 1.3 2.2 -.8 7.9 2.2 3.8 1.5 .1 2.6 1.7 ... ... 3.3 -1.5 22.1 2.4 4.1 1.8 1.4 2.1 2.0 ... ... .1 -.2 .2 .1 .2 .1 .1 .1 .1 ... ... .7 .0 7.4 .2 .3 .1 .0 .2 .2 ... ... PCE prices Total Food and bev. at home Energy Ex. food and energy Core goods Core services Housing services Other services Memo: core ex. tobacco Core market-based Core non-market-based 4.1 5.5 25.4 2.6 .0 3.5 2.9 3.7 2.6 2.4 3.8 -.4 1.6 -26.3 1.5 1.5 1.5 2.1 1.4 1.3 2.0 -1.4 1.5 -2.5 7.4 1.6 3.8 .8 2.5 .3 1.1 2.5 -3.6 2.7 -2.8 26.5 2.0 2.7 1.8 1.4 2.0 1.6 2.0 1.9 .1 -.4 .2 .1 .0 .1 .1 .1 .1 .1 .2 .5 .1 8.3 .2 .2 .2 .0 .2 .2 .2 .2 PPI Total finished goods Food Energy Ex. food and energy Core consumer goods Capital equipment Intermediate materials Ex. food and energy Crude materials Ex. food and energy 9.1 8.2 27.2 2.9 3.3 2.5 14.7 8.8 43.6 32.8 -4.6 -2.2 -25.2 3.3 3.8 2.6 -12.5 -6.6 -40.0 -35.6 -.9 -8.5 -2.4 1.9 3.1 .3 -9.4 -6.6 -28.7 -1.6 9.5 4.2 44.7 2.1 2.7 1.3 6.8 -3.0 55.2 40.3 .2 -1.6 2.9 -.1 -.1 -.1 .3 -.2 3.6 6.7 1.8 1.1 6.6 .5 .5 .5 1.9 .4 4.6 2.6 1. Higher-frequency figures are not applicable for data that are not seasonally adjusted (n.s.a.). ... Not applicable. Source: For consumer price index (CPI) and producer price index (PPI), U.S. Dept. of Labor, Bureau of Labor Statistics; for personal consumption expenditures (PCE), U.S. Dept. of Commerce, Bureau of Economic Analysis. -6Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit Total Level1 July 2009e 2007 2008 H2 2008 Q1 2009 Q2 2009 June 2009 July 2009e 9.8 5.1 4.6 -5.5 -3.2 -1.3 -13.6 9,331 Loans2 Total Core To businesses Commercial and industrial Commercial real estate 10.7 9.6 4.6 5.2 2.1 2.7 -7.1 -3.0 -6.6 -5.7 -9.5 -7.8 -18.9 -10.2 6,979 6,178 19.0 9.3 16.6 6.0 11.3 2.9 -13.3 -.7 -15.1 -2.1 -18.4 -4.1 -11.2 -6.8 1,490 1,695 To households Residential real estate Revolving home equity Closed-end mortgages Consumer Memo: Originated3 Other 5.6 5.7 5.5 6.7 6.5 18.7 -3.0 13.0 -7.9 7.2 5.7 .5 -5.2 13.0 -11.2 7.4 4.4 -1.5 -1.4 9.9 -5.6 8.1 1.4 -34.3 -1.4 2.6 -3.0 -6.3 -3.8 -13.6 -4.6 -4.1 -4.7 -4.6 -5.0 -21.4 -11.1 -6.3 -13.1 -13.1 -6.8 -82.2 2,143 608 1,535 850 1,257 801 7.0 -6.1 28.2 6.9 18.6 -7.0 12.9 32.4 -11.2 -.2 5.8 -9.4 7.6 -5.6 28.6 24.3 28.1 18.7 2.4 3.7 .6 2,352 1,393 959 Securities Total Treasury and agency Other4 Note: Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FAS 115) and the initial consolidation of certain variable interest entities (FIN 46). Data also account for the effects of nonbank structure activity of $5 billion or more. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks. 4. Includes private mortgage-backed securities; securities of corporations, state and local governments, and foreign governments; and any trading account securities that are not Treasury or agency securities. e Estimated. Source: Federal Reserve. -7- III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2007 Change to Aug. 6 from selected dates (percentage points) 2009 Instrument Aug. 6 Apr. 28 June 22 Aug. 6 2007 Aug. 6 2009 Apr. 28 2009 June 22 5.25 .13 .13 .13 -5.12 .00 .00 4.74 4.72 .13 .31 .20 .34 .17 .27 -4.57 -4.45 .04 -.04 -.03 -.07 Commercial paper (A1/P1 rates)2 1-month 3-month 5.26 5.29 .31 .55 .30 .63 .22 .30 -5.04 -4.99 -.09 -.25 -.08 -.33 Large negotiable CDs1 3-month 6-month 5.34 5.27 .80 1.38 .40 .68 .32 .45 -5.02 -4.82 -.48 -.93 -.08 -.23 Eurodollar deposits3 1-month 3-month 5.33 5.35 .90 1.40 .65 1.05 .45 .75 -4.88 -4.60 -.45 -.65 -.20 -.30 Bank prime rate 8.25 3.25 3.25 3.25 -5.00 .00 .00 Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year 4.49 4.52 4.82 .92 2.04 3.38 1.17 2.71 4.04 1.22 2.74 4.06 -3.27 -1.78 -.76 .30 .70 .68 .05 .03 .02 U.S. Treasury indexed notes5 5-year 10-year 2.43 2.48 1.55 1.92 1.45 2.10 1.57 1.98 -.86 -.50 .02 .06 .12 -.12 Municipal general obligations (Bond Buyer)6 4.51 4.57 4.86 4.65 .14 .08 -.21 Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8 5.44 5.34 6.12 6.57 9.21 3.07 3.88 6.33 8.49 12.79 3.97 4.40 5.94 7.58 12.13 4.01 4.38 5.48 6.78 10.66 -1.43 -.96 -.64 .21 1.45 .94 .50 -.85 -1.71 -2.13 .04 -.02 -.46 -.80 -1.47 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable 6.59 5.65 4.78 4.77 5.42 4.93 5.22 4.78 -1.37 -.87 .44 .01 -.20 -.15 Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month Record high Change to Aug. 6 from selected dates (percent) 2009 Stock exchange index Level Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 D.J. Total Stock Index Date Apr. 28 June 22 Aug. 6 Record high 2009 Apr. 28 2009 June 22 14,165 1,565 5,049 856 15,807 10-9-07 10-9-07 3-10-00 7-13-07 10-9-07 8,017 855 1,674 473 8,754 8,339 893 1,766 493 9,130 9,256 997 1,973 558 10,261 -34.65 -36.29 -60.92 -34.84 -35.08 15.46 16.60 17.88 17.93 17.22 11.00 11.65 11.72 13.15 12.39 1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: August 6, 2007, is the day before the August 2007 FOMC meeting. April 28, 2009, is the day before the April 2009 FOMC monetary policy announcement. June 22, 2009, is the day before the most recent FOMC monetary policy announcement. ________________________________________________________________________
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