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The Post-FOMC Post Mortem: QE not so Mortem
2013 Gulf Power Economic SymposiumSandestin, FLSeptember 30, 2013
… the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.
FOMC statement; September 18 2013
Shock, if not awe.
“… our policy decision had two
main elements. First, the
Committee decided
to continue purchasing additional
agency mortgage-backed
securities… and longer-term
Treasury securities…
Chairman Ben BernankeMarch 20, 2013
“Second, the Committee kept the target
for the federal funds rate at 0 to ¼
percent... we anticipate that this
exceptionally low range for the funds
rate will be appropriate at least as long
as the unemployment rate remains
above 6½ percent…
Chairman Ben BernankeMarch 20, 2013
“If the incoming data are broadly
consistent with [our] forecast, the
Committee anticipates that it
would be appropriate to moderate
the monthly pace of purchases
later this year…”
Chairman Ben BernankeJune 19, 2013
“We have a three-part baseline
projection which involves increasing
growth…, continuing gains in the labor
market, and inflation moving back
towards objective… we’ll be looking to
see if the data confirm that basic
outlook.”
Chairman Ben BernankeSeptember 18, 2013
“We have a three-part baseline
projection which involves increasing
growth…, continuing gains in the labor
market, and inflation moving back
towards objective… we’ll be looking to
see if the data confirm that basic
outlook.”
Chairman Ben BernankeSeptember 18, 2013
08 09 10 11 12 13-1000
-800
-600
-400
-200
0
200
400
600
184
169
12-month average
Monthly change
Payroll Employment Changes seasonally adjusted, thousands of jobs
Source: Bureau of Labor Statisticsdata through August 2013
9
While the longer-term average of monthly employment growth continued near its two-year
trend….
Source: Bureau of Labor Statistics, author’s calculationsdata through August 2013
10
… job growth over the summer was a substantial step down from the pace earlier in the year.
2010 - Oct
2010 - Dec
2011 - Feb
2011 - Apr
2011 - Jun
2011 - Aug
2011 - Oct
2011 - Dec
2012 - Feb
2012 - Apr
2012 - Jun
2012 - Aug
2012 - Oct
2012 - Dec
2013 - Feb
2013 - Apr
2013 - Jun
2013 - Aug
0
0.5
1
1.5
2
2.5
Job Growth MomentumAverage 3-month change relative to average 12-
month changeIncreasing momentum
Decreasing momentum
11
May-13 Jun-13 Jul-13-60,000
-50,000
-40,000
-30,000
-20,000
-10,000
0
10,000
20,000
Monthly U.S. Payroll RevisionsThousands
Change from 1st Re-lease
Change from 2nd Re-lease
U.S. Department of Labor Statistics
Additionally, the revisions to initial employment reports have been persistently negative.
“We have a three-part baseline
projection which involves increasing
growth…, continuing gains in the labor
market, and inflation moving back
towards objective… we’ll be looking to
see if the data confirm that basic
outlook.”
Chairman Ben BernankeSeptember 18, 2013
13Source: Bureau of Economic Analysis
Real GDP 2013: H1
Q1actual Q2 actual
Annualized Real GDP Growth
1.1 2.5
The U.S. economy grew by a bit less than 2% over the first half of this year.
14Source: Bureau of Economic Analysis, Macroeconomic Advisers, FRB Atlanta
2013:H1 and 3rd Quarter Tracking Forecasts (Sept. 27th)
Real GDP Component Tracking Estimate and Forecast
Q1actual Q2 actual
FRB Atlanta Tracking Model
ForecastMA
Forecast
Annualized Real GDP Growth
1.1 2.5 1.7 1.8
Recent tracking estimates for real GDP suggest the third quarter will look like the
first half.
15
2008 2009 2010 2011 2012 2013 2014 2015 2016-2
-1
0
1
2
3
4
5
U.S. 4Q GDP Growthyear-over-year, percent change
Actual Jun-13 SEP Sep-13 SEP
Source: U.S. Bureau of Economic Analysis
The FOMC Summary of Economic Projections: A downward revision
“We have a three-part baseline
projection which involves increasing
growth…, continuing gains in the labor
market, and inflation moving back
towards objective… we’ll be looking to
see if the data confirm that basic
outlook.”
Chairman Ben BernankeSeptember 18, 2013
10 11 12 13-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0PCE Price Index
year-over-year % change, monthlyHeadline Core
data through August 2013
Sources: Bureau of Labor Statistics; Federal Reserve Bank of Dallas
(annualized % change)
Overall PCE
Core PCE
Trimmed-mean
PCE
August 2013 1.7 1.9 1.6
Past 3 months 2.5 1.7 1.7
Past 6 months 0.6 1.1 1.2
Past 12 months
1.2 1.2 1.3
FOMC’s longer-term inflation objective
Though the August price report was encouraging, inflation remains well short of
2%.
17
In summary, then:
• Inflation looks low relative to the objective.
• GDP growth has disappointed.
• Continued labor market improvement is a little shaky at the moment.
Will QE go on forever?
“… the Committee tied its asset
purchases to the outlook for the labor
market… conditions in job market today
are still far from what all of us would like
to see. Nevertheless, meaningful
progress has been made in the year
since we announced the asset purchase
program.”
Chairman Ben BernankeSeptember 18, 2013
11 12 136.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
Unemployment Rate: Actual and Blue Chip Consensus Forecasts
Percent, quarterly averages
Actual data Sep-12
Meaningful progress: Missing the forecast in a good way.
20Sources: Bureau of Labor Statistics; Blue Chip Economic Indicators, September 10, 2012 and August 10, 2013
actual data through Q2 2013;forecast data through Q4 2014
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13125.00%
150.00%
175.00%
200.00%
225.00%
250.00%
275.00%
300.00%
10-year Treasury yielddaily
data through September 26, 2013
Percent
JulyFOMC
Julymin-utes re-leased
June min-utes re-leased
SeptFOMC
Source: Bloomberg 21
Index
June FOMC
May FOMC
Is policy effective? A case can be made.
22
Payroll
Vacancies (JOLTS)*
Hires (JOLTS)*
NFIB Hiring Plans
Conference Board Job
Availability
Quits (JOLTS)*
UnemployedMarginally attached workers
Job finding rate
Work part time for economic
reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services
employmentLeading Indicators Employer Behavior
ConfidenceUtilization
*June 2013 – Aug 2013 value is May 2013- July 2013Sources: U.S. Bureau of Labor Statistics, U.S. Department of Labor, National Federation of Independent Business, and The Conference Board
Far from what we would like it to be? The Atlanta Fed spider chart.
23
Payroll
JOLTSOpens
JOLTSHires
NFIBHiringPlans
ConfBoardJobAvail
JOLTSQuits
UnemployedMarginAttachSA
UtoErate
PTER
InitialClaims
NFIBCantFill
Temp
2007q4=100
2009q4=0
Payroll
Vacancies (JOLTS)*
Hires (JOLTS)*
NFIB Hiring Plans
Conference Board Job
Availability
Quits (JOLTS)*
UnemployedMarginally attached workers
Job finding rate
Work part time for economic
reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services
employmentLeading Indicators Employer Behavior
ConfidenceUtilization
*June 2013 – Aug 2013 value is May 2013- July 2013Sources: U.S. Bureau of Labor Statistics, U.S. Department of Labor, National Federation of Independent Business, and The Conference Board
Far from what we would like it to be? The Atlanta Fed spider chart.
24
Payroll
JOLTSOpens
JOLTSHires
NFIBHiringPlans
ConfBoardJobAvail
JOLTSQuits
UnemployedMarginAttachSA
UtoErate
PTER
InitialClaims
NFIBCantFill
Temp
2007q4=100
2009q4=0
Payroll
Vacancies (JOLTS)*
Hires (JOLTS)*
NFIB Hiring Plans
Conference Board Job
Availability
Quits (JOLTS)*
UnemployedMarginally attached workers
Job finding rate
Work part time for economic
reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services
employmentLeading Indicators Employer Behavior
ConfidenceUtilization
*June 2013 – Aug 2013 value is May 2013- July 2013Sources: U.S. Bureau of Labor Statistics, U.S. Department of Labor, National Federation of Independent Business, and The Conference Board
25%
50%
75%
Far from what we would like it to be? The Atlanta Fed spider chart.
25
Payroll
JOLTSOpens
JOLTSHires
NFIBHiringPlans
ConfBoardJobAvail
JOLTSQuits
UnemployedMarginAttachSA
UtoErate
PTER
InitialClaims
NFIBCantFill
Temp
2007q4=100
2009q4=0
Jun-13-Aug-13
Payroll
Vacancies (JOLTS)*
Hires (JOLTS)*
NFIB Hiring Plans
Conference Board Job
Availability
Quits (JOLTS)*
UnemployedMarginally attached workers
Job finding rate
Work part time for economic
reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services
employmentLeading Indicators Employer Behavior
ConfidenceUtilization
*June 2013 – Aug 2013 value is May 2013- July 2013Sources: U.S. Bureau of Labor Statistics, U.S. Department of Labor, National Federation of Independent Business, and The Conference Board
Few labor market indicators have returned to pre-recession levels…
26
Payroll
JOLTSOpens
JOLTSHires
NFIBHiringPlans
ConfBoardJobAvail
JOLTSQuits
UnemployedMarginAttachSA
UtoErate
PTER
InitialClaims
NFIBCantFill
Temp
2007q4=100
2009q4=0
Jun-12-Aug-12
Jun-13-Aug-13
Payroll
Vacancies (JOLTS)*
Hires (JOLTS)*
NFIB Hiring Plans
Conference Board
Job Availabilit
yQuits (JOLTS)*
UnemployedMarginally attached workers
Job finding
rate
Work part time for
economic reasons
Initial claims
Difficult to fill (NFIB)
Temporary help
services employment
Leading Indicators
Employer Behavior
ConfidenceUtilization
*June 2013 – Aug 2013 value is May 2013- July 2013Sources: U.S. Bureau of Labor Statistics, U.S. Department of Labor, National Federation of Independent Business, and The Conference Board
… though in most cases things have improved since last summer.