Federal Reserve Bank of Richmond

1
Federal Reserve Bank of Richmond

• Sean Heryet
• Jasmine Ghazinour

2

• Jeffrey Lacker
• President
• Federal Reserve Bank of Richmond

3
Nationally

• Overview
• Overall economic activity continues to expand
• Labor markets have softened further
• Financial Markets remain under stress
• The CPI continues to rise rapidly

4
Nationally

• Inflation uncertainty remains high
• Rising fuel costs place a strain on the US
  worker
• Recent decision by the FED
• Keep target federal funds rate at 2

5
5th District

• Unemployment rate remains lower than national
  average 4.6
• Labor Market and unemployment claims growing...

6
FIFTH DISTRICT
Fifth District Payroll Employment Performance
Labor Market Conditions
Year-over-Year Percent Change through April 2008
Government
1.52
Payroll Employment (SA)
Period
Level (000s)
MoM Change
YoY Change
Other Services
2.33
United States - Total
April
137,803.0
-0.04
0.17
Leisure and Hospitality
2.18
Fifth District - Total
April
13,999.9
-0.01
0.97
Education and Health Services
3.08
April
855.1
-0.62
-1.04
Construction
Professional and Business Services
1.78
April
1,236.5
-0.12
-1.93
Manufacturing
Financial Activities
-0.48
Trade, Transportation, and Utilities
April
2,471.5
-0.24
0.29
Information
-0.40
Information
April
274.4
-0.07
-0.40
Trade, Transportation, and Utilities
0.29
April
725.1
0.04
-0.48
Manufacturing
-1.93
Financial Activities
Construction
-1.04
April
2,005.9
0.19
1.78
Professional and Business Services
Fifth District - Total
0.97
Education and Health Services
April
1,762.3
0.28
3.08
Leisure and Hospitality
April
1,336.0
-0.02
2.18
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
April
686.1
0.18
2.33
Other Services
April
2,602.5
0.11
1.52
Government
Fifth District Unemployment Rate
Unemployment Rate (SA)
April 08
March 08
April 07
Through April 2008
United States
5.0
5.1
4.5 6.5
Fifth District
4.6
4.5
4.1
United States
Civilian Labor Force (SA)
6.0
Fifth District
Period
Level (000s)
MoM Change
YoY Change
United States
April
153,957
0.11
0.935.5
Fifth District
April
14,967
0.14
1.27 5.0
Initial Unemployment Claims (NSA)
Period
Level
MoM Change
YoY Change 4.5
United States
April
1,525,321
7.17
18.05
Fifth District
April
136,418
8.33
20.72
4.0 3.5
2003
2004
2005
2006
2007
2008
7
5th District

• Real Income growing below the national average
• House Price index dropping at a rate 11 times the
  national average.
• Existing home sales continue to decline.

8
JUNE 2008
FIFTH DISTRICT
Fifth District Real Personal Income
Year-over-Year Percent Change through 4Q07
Household Conditions
5.0
Real Personal Income (SA)
Period
Level (mil)
QoQ Change
YoY Change
4.0
United States
4Q07
9,970,713
-0.16
2.66
Fifth District
4Q07
946,783
0.17
2.19
3.0
Non-Business Bankruptcies
Period
Level
QoQ Change
YoY Change
United States
1Q08
236,982
8.49
26.48
2.0
Fifth District
1Q08
18,897
9.97
26.06
United States
Fifth District
1.0
FIFTH DISTRICT
0.0
Real Estate Conditions
Total Private Building Permits
Period
Level
MoM Change
YoY Change
-1.0
United States
April
89,524
15.69
-30.09
2003
2004
2005
2006
2007
Fifth District
April
12,040
-2.15
-26.80
Fifth District Existing Home Sales
Total Private Housing Starts
Period
Level (000s)
MoM Change
YoY Change
Year-over-Year Percent Change through 1Q08
30.0
United States (SAAR)
April
1,008
2.02
-32.21
Fifth District (SAAR)
April
140
-1.18
-26.82
20.0
House Price Index (1980100)
Period
Level
QoQ Change
YoY Change
United States
1Q08
388
-0.23
-0.03
10.0
Fifth District
1Q08
393
-0.14
-0.34
0.0
Existing Home Sales
Period
Level (000s)
QoQ Change
YoY Change
United States (SAAR)
1Q08
4,950
-0.94
-22.21
-10.0
Fifth District (SAAR)
1Q08
483
0.00
-25.57
-20.0
-30.0
2003
2004
2005
2006
2007
2008
9
Justification

• Fear of a wage price spiral
• Previous rate decreases have yet to have their
  full economic impact
• Slowing inflation must be of the highest priority
• And just as easing policy aggressively in
  response to emerging downside risks made sense,
  withdrawing some of that stimulus as those risks
  diminish makes eminent sense as well
  Jeffrey Lacker

10
Recommendation

• Increase the Federal Funds target rate from 2 to
  2¼

11
Sources

• www.bls.gov
• www.richmondfed.org
• www.economist.com