The Atlanta Fed's macroblog provides commentary on economic topics including monetary policy, macroeconomic developments, financial issues and Southeast regional trends.
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April 20, 2015
What the Weather Wrought
At Seeking Alpha, Joseph Calhoun responds to Friday's macroblog post, which noted that, over the course of the recovery, first-quarter gross domestic product (GDP) growth has on average been slower than the quarterly performance over the balance of the year:
... the "between-the-lines" meaning of the Atlanta post is to ignore all of this since this weakness is being portrayed as "just like last year" a statistical problem in the one measure that economists think most represents the economy.
Rest assured, we try pretty hard to not place any messages "between the lines," and the penultimate sentence of Friday's piece was meant to strike the appropriately tentative tone: "As for the rest of the year, we'll have to wait and see."
We do believe, like others, that weather was at play in the subpar performance of 2015's debut. Severe weather, in February in particular, can explain some of the first-quarter weakness, but "some" is the operative qualifier.
As the following chart illustrates, relative to a baseline forecast without weather effects—proxied with National Oceanic and Atmospheric Administration measures of heating and cooling days through March—we estimate that the severity of the winter subtracted about 0.6 percentage point from GDP growth:
Two points: First, to the extent that weather is a culprit in subpar first-quarter growth, we should see some payback in the current quarter (as, dare we say, we saw last year).
Second, we (the Atlanta Fed staff) did not begin the year projecting first-quarter growth at a mere 1.8 percent annualized (as the benchmark forecast in the experiment illustrated above implies). That rate of growth is a considerable step-down from our forecast at the beginning of the year, forced by the realities of the incoming data (as captured, for example, by GDPNow estimates). That gap leaves plenty of explaining left to do.
Observable developments can plausibly explain much of the forecast miss—mainly the initial, somewhat ambiguous, impact of energy price declines and the rapid, steep appreciation of the dollar, which has clearly been associated with a suppression of export activity. Our current view is that, as energy prices and the exchange rate stabilize, we will see a return to growth patterns that are closer to 3 percent than 1 percent.
We are not, however, selling the position that it is wise to be completely sanguine about the rest of the year. Here is the official word from Dennis Lockhart, president of the Atlanta Fed (subscription required for full citation):
I lean to a later lift-off date [for the federal funds rate target]. To the extent you want to simplify that debate to June versus September, I lean to September. I don't think, given the progress we have made, the state of the economy, and my confidence that the first quarter was an aberration, that it would be horribly damaging to go a little earlier versus later. But my preference would be to wait for more confirming evidence that we are on the track we think we are on and we expect to carry us back to inflation toward target.
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March 06, 2015
Signs of Improvement in Prime-Age Labor Force Participation
This morning's job report provided further evidence of a stabilizing labor force participation (LFP) rate. After falling over 3 percentage points since 2008, LFP has been close to 62.9 percent of the population for the past seven months. Although demographics and behavioral trends explain much of the overall decline (our web page on LFP dynamics gives a full account), there is a cyclical component at work as well. In particular, the labor force attachment of "prime-age" (25 to 54 year olds) individuals to the labor force is something we're watching closely. Federal Reserve Bank of Atlanta President Dennis Lockhart noted as much in a February 6 speech:
Over the last few years, there has been a worrisome outflow of prime-age workers—especially men—from the labor force. I believe some of these people will be enticed back into formal work arrangements if the economy improves further.
There are signs that some of the prime-age individuals who had retreated to the margins of the labor market have been flowing back into the formal labor market.For one thing, LFP among prime-age individuals stopped declining 16 months ago for women and nine months ago for men. By our estimates, declining LFP in this age category accounts for about one-third of the overall decline in LFP since 2007, so 25- to 54-year-olds' decision to engage in the labor market has a big effect on the overall rate (see the chart). Even with an improving economy, however, a turnaround in LFP among prime-age individuals might not occur.
The reason an improving economy might not reverse the LFP trends is that LFP for both prime-age men and women had been on a longer-term downward trend even before the recession began, suggesting that factors other than the recession-induced decline in labor demand have been important. But the decline in the "shadow labor force"—the share of the prime-age population who say they want a job but are not technically counted as unemployed—demonstrates the cyclical nature of the labor market. For the last year and half, the share of these individuals in the labor force has been generally declining (see the chart).
Moreover, the job-finding success of the shadow labor force has improved. Although the 12-month flow into the official labor force has remained reasonably close to 50 percent, the likelihood of flowing into unemployment (as opposed to employment) rose during the recession. But during the past two years, that trend appears to be reversing (see the chart).
The ability of the prime-age shadow labor force to find work is improving at the same time that the LFP rate of the prime-age population is stabilizing. Taken together, this trend is consistent with improving job market opportunities and further absorption of the nation's slack labor resources.For a more complete analysis of long-term behavioral and demographic effects on LFP for the prime-age and non-prime-age populations, see our Labor Force Participation Dynamics web page, which now includes 2014 data.
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February 12, 2015
Are We Becoming a Part-Time Economy?
Compared with 2007, the U.S. labor market now has about 2.5 million more people working part-time and about 2.2 million fewer people working full-time. In this sense, U.S. businesses are more reliant on part-time workers now than in the past.
But that doesn't necessarily imply we are moving toward a permanently higher share of the workforce engaged in part-time employment. As our colleague Julie Hotchkiss pointed out, almost all jobs created on net from 2010 to 2014 have been full-time. As a result, from 2009 to 2014, the part-time share of employment has declined from 21 percent to 19 percent and is about halfway back to its prerecession level.
But the decline in part-time utilization is not uniform across industries and occupations. In particular, the decline is much slower for occupations that tend to have an above-average share of people working part-time. This portion of the workforce includes general-service jobs such as food preparation, office and administrative support, janitorial services, personal care services, and sales.
The following chart compares the share of part-time employment for these general-service occupations with the share for production-type occupations (such as machine operators, fabricators, construction workers, and truck drivers).
The above chart suggests that if you talk to retailers or restaurateurs, they will say that they always relied pretty heavily on part-time workers. Their utilization increased during the recession, and it really hasn't changed much since then. But manufacturers or construction firms are more likely to say that part-time work is not that common, and although they did increase their utilization of part-time workers during the recession by quite a lot, things have been gradually returning to normal.
Why is the part-time share of employment declining more slowly in general-service occupations? The economy has been generating full-time general-service jobs at a much slower pace than in the past. Of the approximately 7.6 million full-time jobs created between 2010 and 2014, only about 17 percent have been in general-service occupations, versus about 32 percent of the 7.8 million full-time jobs created between 2003 and 2007. At the current rate of full-time job creation in general-service occupations, it would take more than 10 years for the part-time share of employment in general-service occupations to return to its prerecession average.
From the workers' perspective, a relevant question is whether these part-time utilization rates are desirable. Some people work part-time and do not currently want or are not available for full-time work (so-called part-time for noneconomic reasons, PTNER). Others are available and want full-time work but are working part-time because of slack business conditions or the unavailability of full-time jobs (so-called part-time for economic reasons, PTER). The following chart shows the share of employment in the general-service and production occupation groupings that is PTER and PTNER.
The chart indicates that most of the movement in the part-time share of employment is coming from people who want full-time work. In both cases, the share of involuntary part-time employment rose during the recession, but for general-service occupations it has been more persistent than for production jobs.
Why has the demand for full-time workers in general-service occupations been more subdued than for other jobs? As the following chart shows, wage growth for these occupations has been quite weak in the past few years, suggesting that employers have not been experiencing much tightness in the supply of workers to fill vacancies for these occupations. Presumably, then, the firms generally find it acceptable to have a greater share of part-time workers than in the past.
The overall share of the workforce employed in part-time jobs is declining and is likely to continue to decline. But the decline is not uniform across industries and occupations. Working part-time has become much more likely in general-service occupations than in the past—and a greater share of those workers are not happy about it.
By John Robertson, vice president and senior economist, and
Ellie Terry, an economic policy analysis specialist, both of the Atlanta Fed's research department
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January 15, 2015
Contrasting the Financing Needs of Different Types of Firms: Evidence From a New Small Business Survey
The National Federation of Independent Business's (NFIB) small business optimism index surpassed 100 in December, a sign that small business' outlook on the economy has now reached "normal" long-run average levels. But that doesn't mean that everything is moonlight and roses for small firms. One question from the NFIB's survey (one that is not used in its overall optimism index) concerns a firm's ability to obtain credit. The survey asks, "During the last three months, was your firm able to satisfy its borrowing needs?" The chart below shows the net percent (those responding "yes" minus those saying "no") of firms reporting improving credit access.
The chart suggests that credit access has improved significantly since the end of the recession but that conditions still appear to be tougher than typical. Given the importance of small firms to employment growth, we at the Atlanta Fed have been particularly interested in monitoring financing conditions for small businesses. For this reason, we've conducted a regular survey of small businesses in the Southeast since 2010. In the fall of 2014, we joined forces with the New York, Philadelphia, and Cleveland Feds to expand and refine the small business data collection effort. The results of that survey are now available on our website and include downloadable data tabulations by different types of firms. Specifically, data are available by criteria including states, industries, firm size (in terms of revenue), and firm development stage.
Our previous small business surveys have focused on the experiences of young firms, so I found the new survey's tabulation by firm development stage of particular interest. For example, here's a summary of the experience of startups' ability to access financing markets versus that of mature firms.
First, what constitutes a startup? For comparison purposes, we draw the line (somewhat arbitrarily) at less than five years old. For mature firms, they not only have to be at least five years old, but they also must have at least 10 employees and hold some debt. When I picture a startup, I imagine a new restaurant owner purchasing tables and chairs, or a tech company manufacturing a prototype to market to potential investors. These types of firms are unproven and risky and tend to need relatively small amounts of money. Which begs the question: where are they going to get funds they need to grow? Before answering that question, let's examine the recent business performance of startups in the survey. About half of startups operated at a loss during the previous 12 months, but only about 20 percent had shrinking revenues. Most were either increasing the size of their workforce or had the same number of employees as a year ago. The top challenge reported by these young businesses was nearly tied between "difficulty attracting customers" (reported by 27 percent of firms) and "lack of credit availability" (reported by 26 percent of firms).
So how do those behind startups fund their businesses? In 2013, nearly half relied primarily on personal savings, whereas about 18 percent primarily used retained business earnings. Without a solid revenue history to prove their creditworthiness, financing was understandably difficult to come by. Only about 38 percent of startups received at least some financing, compared with 93 percent of mature firms. Many startups assumed it would be a fruitless endeavor—about one-fifth of them assumed they would be turned down, the cost would be too high, or the search would be too time consuming. The number of people who sought financing was about equal to those who were discouraged, and most were seeking less than $250,000.
Where did they apply? Their search was much broader than used by their counterparts at mature firms. Although both types of firms sought mostly loans and lines of credit, applications for products backed by the Small Business Administration, credit cards, and equity investments were notably higher for younger firms compared to mature firms. When it came to loans and lines of credit, there were large differences not only in what types of insitutions they submitted applications to, but also where they were most successful. Startups were mostly likely to apply at large regional and large national banks, but their approval rates were higher with smaller banks and online lenders (see the table).
The differences between young firms and mature ones is only one way to look at the data. The full report details variations by firm size, industry, and state. For more on general business and finance conditions of small firms, visit the small business trends dashboard.
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December 23, 2014
Chances of Finding Full-Time Employment Have Improved
Today's sharp upward revision to the third-quarter GDP reading reinforces the view that the underlying strength of the U.S. economy has been sufficient to support more rapid improvement in the labor market. Last week we noted the solid and broad-based recent improvement in the involuntary part-time work (part-time for economic reasons or PTER) situation over the last year, noting significant declines in the stock of PTER workers across industrial sectors and occupational categories.
In this post we look at labor market improvement over the last year in terms of worker flows. Because the Current Population Survey is set up as a rotating panel, many of the people in the survey in any given month were in the survey a year earlier as well. This allows us to ask the question: if you were an unemployed prime-age individual (25–54 years old) or working PTER one year ago, what are you doing today? Have your chances of becoming employed full-time improved? Chart 1 shows the distribution of labor market outcomes of prime-age workers who were PTER one year earlier. Chart 2 shows the distribution of outcomes for those who were unemployed one year earlier. The data are 12-month moving averages to smooth out seasonal variation.
For both PTER workers and the unemployed, the chances of becoming employed full-time are up from a year earlier (and the chances of being unemployed are down). In November 2013 there was about a 45 percent chance of someone who was PTER a year earlier having a full-time job. In November 2014 that had improved to about a 48 percent chance. This full-time employment flow rate is still much lower than the prerecession average of around 55 percent, and the improvement appears to have stalled a bit in recent months, but it is a notable improvement from a year earlier nonetheless. For PTER workers, the picture along other dimensions is more mixed. The chances of becoming unemployed appear to have returned to around prerecession levels, which is good, but the likelihood of remaining PTER is still quite elevated.
For the unemployed, there has been an even more marked improvement in the full-time finding rate over the last year. In November 2013 there was around a 32 percent chance of someone who was unemployed a year earlier having a full-time job. In November 2014 the chances improved to close to 36 percent. Moreover, the improvement in the rate of finding full-time work is responsible for the similar-sized decline in the chances of remaining unemployed. The only negative here is that the likelihood of an unemployed worker becoming PTER, while low, remains elevated compared with before the recession.
All in all, we think these developments are encouraging and add to the view that the pace of labor market improvement has picked up over the last year.
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December 19, 2014
Exploring the Increasingly Widespread Decline in Involuntary Part-Time Work
We at the Atlanta Fed have been arguing for some time that the unusually large number and share of workers employed part-time but wanting full-time work (counted in the Current Population Survey as part-time for economic reasons, or PTER) partly reflects slack in the labor market that is not reflected in the official unemployment statistics. We are in good company. Chair Yellen reiterated this view in her prepared remarks during Wednesday’s Federal Open Market Committee press conference. The good news is that the stock of PTER workers has declined by around 900,000 during the last year compared with a decline of fewer than 200,000 in 2013. Moreover, the CPS data suggest the decline is primarily because these workers have either found full-time work or are no longer wanting full-time work (that is, are working part-time for noneconomic reasons), and not because they have become unemployed or have joined the ranks of the discouraged outside of the formal labor market. Even better news is that the recent decline has been very broad based (see the charts).
Up until about a year ago, the overall decline in the number of PTER workers was driven primarily by those in middle-skill occupations in goods-producing industries and, to a lesser extent, in services-producing industries. But during 2014, the decline is also evident in services-producing industries among PTER workers in both low- and high-skill occupations—two categories that had not seen any material decline in their PTER ranks since the end of the recession. (A previous macroblog post discussed the various occupational skill categories.) There is still a ways to go, but these developments are very encouraging.
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November 24, 2014
And the Winner Is...Full-Time Jobs!
Each month, the U.S. Census Bureau for the U.S. Bureau of Labor Statistics (BLS) surveys about 60,000 households and asks people 15 years and older whether they are employed and, if so, if they are working full-time or part-time. The BLS defines full-time employment as working at least 35 hours per week. This survey, referred to as both the Current Population Survey and the Household Survey, is what produces the monthly unemployment rate, labor force participation rate, and other statistics related to activities and characteristics of the U.S. population.
For many months after the official end of the Great Recession in June 2009, the Household Survey produced less-than-happy news about the labor market. The unemployment rate didn't start to decline until October 2009, and nonfarm payroll job growth didn't emerge confidently from negative territory until October 2010. Now that the unemployment rate has fallen to 5.8 percent—much faster than most would have expected even a year ago—the attention has turned to the quality, rather than quantity, of jobs. This scrutiny is driven by a stubbornly high rate of people employed part-time "for economic reasons" (PTER). These are folks who are working part-time but would like a full-time job. Several of my colleagues here at the Atlanta Fed have looked at this phenomenon from many angles (here, here, here, here, and here).
The elevated share of PTER has left some to conclude that, yes, the economy is creating a significant number of jobs (an average of more than 228,000 nonfarm payroll jobs each month in 2014), but these are low-quality, part-time jobs. Several headlines have popped up over the past year or so claiming that "...most new jobs have been part-time since Obamacare became law," "Most 2013 job growth is in part-time work," "75 Percent Of Jobs Created This Year  Were Part-Time," "Part-time jobs account for 97% of 2013 job growth," and as recently as July of this year, "...Jobs Report Is Great for Part-time Workers, Not So Much for Full-Time."
However, a more careful look at the postrecession data illustrates that since October 2010, with the exception of four months (November 2010 and May–July 2011), the growth in the number of people employed full-time has dominated growth in the number of people employed part-time. Of the additional 8.2 million people employed since October 2010, 7.8 million (95 percent) are employed full-time (see the charts).
The pair of charts illustrates the contribution of the growth in part-time and full-time jobs to the year-over-year change in total employment between January 2000 and October 2014. By zooming in, we can see the same thing from October 2010 (when payroll job growth entered consistently positive territory) to October 2014. Job growth from one month to the next, even using seasonally adjusted data, is very volatile.
To get a better idea of the underlying stable trends in the data, it is useful to compare outcomes in the same month from one year to the next, which is the comparison that the charts make. The black line depicts the change in the number of people employed each month compared to the number employed in the same month the previous year. The green bars show the change in the number of full-time employed, and the purple bars show the change in the number of part-time employed.
During the Great Recession (until about October 2010), the growth in part-time employment clearly exceeded growth in full-time employment, which was deep in negative territory. The current high level of PTER employment is likely to reflect this extended period of time in which growth in part-time employment exceeded that of full-time employment. But in every month since August 2011, the increase in the number of full-time employed from the year before has far exceeded the increase in the number of part-time employed. This phenomenon includes all of the months of 2013, in spite of what some of the headlines above would have you believe.
So, in the post-Great Recession era, the growth in full-employment is, without a doubt, way out ahead.
Author's note: The data used in this post, which are the same data used to generate the headlines linked above, reflect either full-time or part-time employment (total hours of work at least or less than 35 per week, respectively). They do not necessarily reflect employment in a single job.
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October 15, 2014
What's behind Declining Labor Force Participation? Test Your Hypothesis with Our New Data Tool
The share of people (age 16 and over) participating in the labor market—that is, either working or looking for work—declined significantly during the recession. As many researchers have noted (see our list of supplemental reading under "More Information"), there is clearly a cyclical component to the decline. When labor market opportunities dry up, it influences decisions to pursue activities other than work, such as schooling, taking care of family, or retiring. However, much of the decrease in the overall labor force participation rate (LFPR) could be the result of the continuation of longer-term behavioral and demographic trends.
While the U.S. Bureau of Labor Statistics (BLS) produces aggregate statistics on LFPR by various demographic measures, the published data tables don't detail the reasons people give for not participating in the labor market. However, we have cut and coded the micro monthly data from BLS's Current Population Survey so that you can explore your own questions.
For example: Are millennials less likely to participate in the labor market than earlier cohorts? Are people retiring sooner? Are women less likely to stay at home than in the past? You can answer these and other types of questions on our new Labor Force Participation Dynamics page (click on "Interact and Download Data").
In addition to allowing you to create your own charts and download the chart data, the website also guides you through some of the major factors we found that contributed to the decline in LFPR from 2007 to mid-2014, as well as a picture of the trend in those factors before the recession began.
The chart below (also in the Executive Summary) provides an overview of the major factors that we noted in our analysis of the data. Each bar shows the contribution to the 3 percentage point change in the overall LFPR from 2007 to mid-2014.
What the chart doesn't show is whether the trends were occurring before the Great Recession. For a deeper dive into any of the factors in the chart, see the "Long-Term Behavioral and Demographic Trends" section. The most influential factor has been the changing distribution of the population (see "Aging Population"). The fact that a greater portion of Americans are retirement age now than in 2007 accounts for about 1.7 percentage points of the decline. At the same time, older Americans are more likely to be working than in the past, a trend that has been putting upward pressure on LFPR for some time. All else being equal, if those older than 60 were just as likely to retire as they were in 2007, LFPR would be about 1.0 percentage point lower than it is today.
Other factors bringing down the overall LFPR include an increased incidence of people saying they are unable to work as a result of disability or illness (click on "Health Problems"), increased school attendance among the young (click on "Rising Education"), and decreased participation among individuals 25–54—the age group with the greatest attachment to the labor force (click on "Focus on Prime Working-Age Individuals").
These are the factors we found to be the most significant drivers of changes in LFPR, but you can also explore many other questions with these data. Check out the interactive data tools and read our take on the data and let us know what you think.
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September 29, 2014
On Bogs and Dots
Consider this scenario. You travel out of town to meet up with an old friend. Your hotel is walking distance to the appointed meeting place, across a large grassy field with which you are unfamiliar.
With good conditions, the walk is about 30 minutes but, to you, the quality of the terrain is not so certain. Though nobody seems to be able to tell you for sure, you believe that there is a 50-50 chance that the field is a bog, intermittently dotted with somewhat treacherous swampy traps. Though you believe you can reach your destination in about 30 minutes, the better part of wisdom is to go it slow. You accordingly allot double the time for traversing the field to your destination.
During your travels, of course, you will learn something about the nature of the field, and this discovery may alter your calculation about your arrival time. If you discover that you are indeed crossing a bog, you will correspondingly slow your gait and increase the estimated time to the other side. Or you may find that you are in fact on quite solid ground and consequently move up your estimated arrival time. Knowing all of this, you tell your friend to keep his cellphone on, as your final meeting time is going to be data dependent.
Which brings us to the infamous “dots,” ably described by several of our colleagues writing on the New York Fed’s Liberty Street Economics blog:
In January 2012, the FOMC began reporting participants’ FFR [federal funds rate] projections in the Summary of Economic Projections (SEP). Market participants colloquially refer to these projections as “the dots” (see the second chart on page 3 of the September 2014 SEP for an example). In particular, the dispersion of the dots represents disagreement among FOMC [Federal Open Market Committee] members about the future path of the policy rate.
The Liberty Street discussion focuses on why the policy rate paths differ among FOMC participants and across a central tendency of the SEPs and market participants. Quite correctly, in my view, the blog post’s authors draw attention to differences of opinion about the likely course of future economic conditions:
The most apparent reason is that each participant can have a different assessment of economic conditions that might call for different prescriptions for current and future monetary policy.
The Liberty Street post is a good piece, and I endorse every word of it. But there is another type of dispersion in the dots that seems to be the source of some confusion. This question, for example, is from Howard Schneider of Reuters, posed at the press conference held by Chair Yellen following the last FOMC meeting:
So if you would help us, I mean, square the circle a little bit—because having kept the guidance the same, having referred to significant underutilization of labor, having actually pushed GDP projections down a little bit, yet the rate path gets steeper and seems to be consolidating higher—so if it’s data dependent, what accounts for the faster projections on rate increases if the data aren’t moving in that direction?
The Chair’s response emphasized the modest nature of the changes, and how they might reflect modest improvements in certain aspects of the data. That response is certainly correct, but there is another point worth emphasizing: It is completely possible, and completely coherent, for the same individual to submit a “dot” with an earlier (or later) liftoff date of the policy rate, or a steeper (or flatter) path of the rate after liftoff, even though their submitted forecasts for GDP growth, inflation, and the unemployment rate have not changed at all.
This claim goes beyond the mere possibility that GDP, inflation, and unemployment (as officially defined) may not be sufficiently complete summaries of the economic conditions a policymaker might be concerned with.
The explanation lies in the metaphor of the bog. The estimated time of arrival to a destination—policy liftoff, for example—depends critically on the certainty with which the policymaker can assess the economic landscape. An adjustment to policy can, and should, proceed more quickly if the ground underfoot feels relatively solid. But if the terrain remains unfamiliar, and the possibility of falling into the swamp can’t be ruled out with any degree of confidence...well, a wise person moves just a bit more slowly.
Of course, as noted, once you begin to travel across the field and gain confidence that you are actually on terra firma, you can pick up the pace and adjust the estimated time of arrival accordingly.
To put all of this a bit more formally, an individual FOMC participant’s “reaction function”—the implicit rule that connects policy decisions to economic conditions—may not depend on just the numbers that that individual writes down for inflation, unemployment, or whatever. It might well—and in the case of our thinking here at the Atlanta Fed, it does—depend on the confidence with which those numbers are held.
For us, anyway, that confidence is growing. Don’t take that from me. Take it from Atlanta Fed President Lockhart, who said in a recent speech:
I'll close with this thought: there are always risks around a projection of any path forward. There is always considerable uncertainty. Given what I see today, I'm pretty confident in a medium-term outlook of continued moderate growth around 3 percent per annum accompanied by a substantial closing of the employment and inflation gaps. In general, I'm more confident today than a year ago.
Viewed in this light, the puzzle of moving dots without moving point estimates for economic conditions really shouldn’t be much of a puzzle at all.
By Dave Altig, executive vice president and research director of the Atlanta Fed
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September 15, 2014
The Changing State of States' Economies
Timely data on the economic health of individual states recently came from the U.S. Bureau of Economic Analysis (BEA). The new quarterly state-level gross domestic product (GDP) series begins in 2005 and runs through the fourth quarter of 2013. The map below offers a look at how states have fared since 2005 relative to the economic performance of the nation as a whole.
It’s interesting to see the map depict an uneven expansion between the second quarter of 2005 and the peak of the cycle in the fourth quarter of 2007. By the fourth quarter of 2008, most parts of the country were experiencing declines in GDP.
The U.S. economy hit a trough during the second quarter of 2009, according to the National Bureau of Economic Research, but 20 states and the District of Columbia recovered more quickly than the rest. The continued progress is easy to see, as is the far-reaching impact of the tsunami that hit Japan on March 11, 2011, which disrupted economic activity in many U.S. states. By the fourth quarter of 2013, only two states—Mississippi and Minnesota—experienced negative GDP.
The map shows that not all states are growing even when overall GDP is growing, and not all states are shrinking even when overall GDP is shrinking. But if we want to know more about which states are driving the change in overall GDP growth, then the geographic size of the state might not be so important.
Depicting states scaled to the size of their respective economies provides another perspective, because it’s the relative size of a state’s economy that matters when considering the contribution of state-level GDP growth to the national economy. The following chart uses bubbles (sized by the size of the state’s economy) to depict changes in states’ real GDP from the second quarter of 2005 through the fourth quarter of 2013.
This chart shows how the economies of larger states such as California, New York, Texas, Florida, and Illinois have an outsize influence on the national economy, despite some having a smaller geographic footprint. (Conversely, changes in the relatively small economy of a geographically large state like Montana have a correspondingly small impact on changes in the national economy.)
Overall GDP is now well above its prerecession peak. But have all states also fully recovered their GDP losses? The chart below depicts the cumulative GDP growth in each state from the end of 2007 to the end of 2013. The size of the circle represents the magnitude of the change in the level of real GDP between the end of 2007 and 2013. Most states have fully recovered in terms of GDP. (North Dakota’s spectacular growth stands out, thanks to its boom in the oil and gas industry.) However, Florida, Nevada, Connecticut, Arizona, New Jersey, and Michigan had not returned to their prerecession spending levels as of the end of 2013. For Florida, Nevada, and Arizona, the depth of the collapse in those states’ booming housing sectors is almost certainly responsible for the relative shortfall in performance since 2007.
The next release of the state-level GDP data, scheduled for September 26, will provide insight into the relative performance of state economies during the first quarter of 2014 at a time when overall GDP shrank by more than 2 percent (annualized rate). Some analysts have suggested that weather disruptions were a leading cause for that decline. The state-level GDP data will help tell the story.
By Whitney Mancuso, a senior economic analyst in the the Atlanta Fed's research department
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Listed below are links to blogs that reference The Changing State of States' Economies:
- What the Weather Wrought
- Déjà Vu All Over Again
- Is Measurement Error a Likely Explanation for the Lack of Productivity Growth in 2014?
- What Seems to Be Holding Back Labor Productivity Growth, and Why It Matters
- Signs of Improvement in Prime-Age Labor Force Participation
- Could Reduced Drilling Also Reduce GDP Growth?
- Are Shifts in Industry Composition Holding Back Wage Growth?
- Are Oil Prices "Passing Through"?
- Business as Usual?
- What's (Not) Up with Wage Growth?
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit