Transcript Slide 1

Society of CPA’s
February 20, 2014
Chad Wilkerson
Vice President, Economist, and Oklahoma City Branch Executive
Federal Reserve Bank of Kansas City
www.kansascityfed.org/oklahomacity
Overview of the
Federal Reserve System
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The “Fed” consists of three main entities:
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Board of Governors: 7 members appointed by U.S. President
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Federal Reserve Banks: 12 total; semi-independent by design
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Federal Open Market Committee: 19 members; 12 voting
As with most central banks, the Fed’s primary
responsibilities fall within four general areas:
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Lender of last resort – provide liquidity in times of crisis
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Monetary policy – promote full employment and low inflation
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Bank regulation – ensure safety and soundness of banks
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Financial services – bank for banks, bank for federal govt.
Federal Reserve Districts
and Office Locations
The Oklahoma City Branch of the
Federal Reserve Bank of Kansas City
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Functions – 40 staff
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Research on U.S. and Oklahoma economies
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Economic and financial education outreach
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Examinations of Oklahoma financial institutions
2014 board of directors
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Jim Dunn (chair), Chairman, Mill Creek Lumber & Supply, Tulsa
Clint Abernathy, Owner, Abernathy Farms, Inc., Altus
Paula Bryant-Ellis, COO, BOK Financial Mortgage Group, Tulsa
Linda Capps, Vice Chairman, Citizen Potawatomi Nation, Shawnee
Michael Coffman, CEO, Panhandle Oil & Gas, Inc., Oklahoma City
Pete Delaney, Chairman & CEO, OGE Energy Corp., Oklahoma City
Charles Hall, Chairman & CEO, Exchange Bank & Trust Co., Perry
The U.S.
Economy
GDP was strong in the second half of 2013,
although partly due to growing inventories
Growth in Components of Real GDP
20
Percent change from the previous period, SAAR
Q2 2013
15
14.2
Q3 2013
Q4 2013
10
5
11.4
10.3
8.0
4.1
2.5
4.7 4.8
3.3
3.2
3.8
3.9
1.8 2.0
0.4
0
-0.4
-5
-4.9
-10
-9.8
-15
Total GDP
Consumer
spending
Residential
investment
Business
investment
Exports
Government
spending
Source: U.S. Bureau of Economic Analysis, Macroeconomic Advisors
Monthly data show similar strength in Q4,
but a bit of a bumpy start to 2014
U.S. Private Payroll Employment and Business Indexes
600
Change from previous month, thousands
Index
65
400
60
200
55
0
50
-200
45
-400
40
-600
35
Private Employment (left axis)
ISM Manufacturing Index (right axis)
-800
-1000
Jan-09
ISM Non-Manufacturing Index (right axis)
Jan-10
Jan-11
Jan-12
Jan-13
30
25
Jan-14
Source: Institute for Supply Management, Bureau of Labor Statistics
GDP forecasts for 2014-16 remain strong,
as the economy recovers further
Real Gross Domestic Product
Percent change, year-over-year
8
8
Dec. FOMC Forecast
Ranges in Yellow
6
6
4
4
2
2
0
0
-2
Long
Term
-4
-2
-4
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Source: U.S. Bureau of Economic Analysis, FOMC
Unemployment continues to fall and
could reach long-term levels by 2015
Unemployment Rate
Seasonally Adjusted
Percent
12
12
Dec. FOMC Forecast
Ranges in Yellow
10
Long
Term
10
8
8
6
6
4
4
2
2
0
0
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Sources: U.S. Bureau of Labor Statistics, FOMC
Inflation remains relatively low and is
expected to stay subdued through 2016
PCE Inflation Index
8
Percent change, year-over-year
8
7
7
6
6
5
5
Dec. FOMC Forecast
Ranges in Yellow
4
4
Long
Term
3
3
2
2
1
1
0
0
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Sources: U.S. Bureau of Labor Statistics, FOMC
Most FOMC participants project the first
federal funds rate increase in 2015
Federal Funds Rate
Year-end target
12
Percent
12
10
10
8
Long
Term
6
8
6
Dec. FOMC Forecast
Ranges in Yellow
(3)
4
(12)
2
4
2
(2)
0
0
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Note – Number of participants who project the initial
increase will occur in the specified year in parenthesis
Sources: Federal Reserve Board, FOMC
The Fed’s balance sheet is now set to grow
slightly slower in 2014 than in 2013
Federal Reserve Balance Sheet
5
$Trillions
5
Assets
4
4
3
2
1
3
Other
Short term lending,
targeted lending
programs, and
rescue operations
MBS & agency debt
2
1
Treasury
securities
0
0
Currency
-1
-1
Reserves
-2
-2
Other
-3
-3
-4
Liabilities
-5
2008
2009
-4
2009
2010
2010
2011
2011
2012
2012
2013
2013
Sources: Federal Reserve Board
-5
2014
The Oklahoma Economy
OK employment is above pre-recession levels,
with some differences across the state
Level of Payroll Employment
Through December 2013
106
Index: Jan-08=100
106
104
104
OKC Metro
102
Oklahoma
100
102
100
Non-Metro
98
98
U.S.
96
96
Tulsa Metro
94
94
92
Jan-08
92
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Source: U.S. Bureau of Labor Statistics
In 2013, federal jobs fell across the state,
but professional and service jobs rose
Oklahoma Job Growth by Industry
Dec-13
8
Percent change year-over-year
6
4
2
0
-2
-4
OKC
-6
Tulsa
Rest of OK
-8
-10
Total
Hospitality Constr.
Trade &
Transp.
State &
Local
Govt.
Prof. &
Bus.
Services
Finance
Edc. &
Health
Energy
Mfg.
Fed. Govt
Source: Bureau of Labor Statistics
But unemployment rates remain low through
much of the state, including Delaware Co.
Oklahoma County Unemployment Rates
December 2013
Source: OK Employment Security Commission
Rig counts have edged higher the last
few months, driven by oil
Oklahoma Active Drilling Rig Count
Seasonally Adjusted
250
Number of rigs
250
Oil
Natural Gas
200
200
150
150
100
100
50
50
0
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
0
Feb-14
Source: Baker Hughes
And oil and gas production in the
state has continued to increase
Oklahoma Oil and Gas Production
350
Bcf/month
Thousand barrels/day
210
Oil (left)
Natural gas (right)
300
180
250
150
200
120
150
Q3 2008
Q3 2009
Q3 2010
Q3 2011
Q3 2012
90
Q3 2013
Source: EIA
Drought conditions have improved
somewhat, helping some areas of the state
U.S. Drought Monitor, February 2014
Source: USDA
Housing construction continued to improve
in 2013 despite slightly higher rates
Single-Family Housing Permits
Seasonally adjusted
160,000
Number of permits, 3-month moving avg.
1,600
140,000
U.S. (left axis)
1,400
OK (right axis)
120,000
1,200
100,000
1,000
80,000
800
60,000
600
40,000
400
20,000
200
0
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Source: U.S. Census Bureau
0
Dec-13
And home prices rose further and are now
well-above pre-bust levels, unlike the nation
Home Price Index
Purchase-Only
110
Index: 2007Q1=100
110
OK
105
105
100
100
95
95
90
90
U.S.
85
85
80
80
75
75
70
70
65
2003Q3
2005Q3
2007Q3
2009Q3
2011Q3
65
2013Q3
Source: FHFA
Banking conditions in the state remain
better than in the but stalled a bit in 2013
Noncurrent Loans as a Share of Total Loans
Commercial Banks
6
Percent
6
5
5
U.S.
4
3
4
3
OK
2
2
1
1
0
0
Q3 2003 Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013
Source: FDIC
Summary
 Recent
U.S. growth has been solid
with low inflation, and the outlook
appears favorable for 2014
 Oklahoma’s
economy also continues
to grow, although some non-metro
areas saw some slowing in 2013
Questions and Links
For more information about the Oklahoma City
Branch of the Federal Reserve Bank of
Kansas City, visit our website at:
http://www.kansascityfed.org/oklahomacity/
For more information about the Oklahoma
economy, subscribe to the quarterly
Oklahoma Economist at:
www.kansascityfed.org/publications/research/oke