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fomc | 1,997 | Is there a second? | 5 |
fomc | 1,997 | Second. | 2 |
fomc | 1,997 | Without objection. Let us move on to Messrs. Prell and Truman. | 16 |
fomc | 1,997 | Thank you, Mr. Chairman. [Statement--see Appendix.] | 13 |
fomc | 1,997 | [Statement--see Appendix.] | 6 |
fomc | 1,997 | That is about as good a "Chart Show" as the staff has presented to this Committee in quite a long time. | 24 |
fomc | 1,997 | It was very interesting. | 5 |
fomc | 1,997 | Very, very informative. | 5 |
fomc | 1,997 | Ted suggests it is because we set a low standard previously. [Laughter] But I will try to take it more positively. | 26 |
fomc | 1,997 | I am sorry you raised the hurdle; that will require more work in the future. Questions for either gentleman? Yes, President Broaddus. | 29 |
fomc | 1,997 | When you started off, Mike, I think I heard you say that the actual fourth-quarter data published after the Greenbook was completed had not changed the profile of your forecast from what you had in the Greenbook. What about the risk to that forecast and specifically the upside risk to which you gave some attention in t... | 195 |
fomc | 1,997 | Perhaps, but not so much that I felt the need to feature that aspect of the picture. There are some sectors where historically one would look for positive serial correlation. The fact that consumption was as strong as it was according to the published numbers, though only a little stronger than we had forecast, might l... | 464 |
fomc | 1,997 | President Parry. | 4 |
fomc | 1,997 | Mike, I had a question that is somewhat similar in terms of the implications of the fourth-quarter number for, say, 1997. At the end of the fourth quarter, the GDP gap was obviously a couple of tenths higher. Are you saying that if you were to revise the Greenbook forecast that the degree of resource utilization by the... | 128 |
fomc | 1,997 | You will recall that we learned nothing new about the level of resource utilization in the fourth quarter as measured by unemployment or capacity utilization. So, there is a question of alignment here. In the fourth quarter, by Okun's law equations, we found the unemployment rate to be a little higher than we might hav... | 223 |
fomc | 1,997 | Governor Phillips. | 3 |
fomc | 1,997 | Thank you. On chart 3, in the middle section that shows inflation and price-earnings ratios, I had not seen the information presented quite like that before. I am wondering whether there are enough observations in each of these buckets to get a meaningful average. In addition, I assume that the less-than-3-1/2 percent ... | 81 |
fomc | 1,997 | Because it is such a long period, there are a lot of quarters to put into these buckets. | 20 |
fomc | 1,997 | So this is done on a quarterly basis? | 9 |
fomc | 1,997 | I cannot tell you how many quarters there are in each of those inflation ranges; I probably should have checked that. In terms of the broad sweep, if you look at a chart of inflation versus the P-E ratios--all the noise in the relationship makes it a little hard to see--you can perceive this correlation. There are reas... | 213 |
fomc | 1,997 | The tabulation was impressive, and I guess I was surprised that the relationship is as consistent as is implied by this table. | 25 |
fomc | 1,997 | To be fair, this table is just a slight variation of the one Abby Cohen has used. As you know, she has been among the most bullish and the most correct stock market forecasters. This is one of the key exhibits she presents in support of her opinion. | 54 |
fomc | 1,997 | Thank you. | 3 |
fomc | 1,997 | President Stem. | 3 |
fomc | 1,997 | Mike, a couple of technical things: The principal surprise to me in the fourth-quarter data was the employment cost index, and I know you looked into that. My question is whether you are satisfied with what you found out because there were a couple of characteristics that looked a little out of line to me. | 61 |
fomc | 1,997 | I can pick one that was widely discussed, namely the behavior of the nonproduction bonus component of benefits. It struck many people on Wall Street who were pocketing huge bonuses as out of keeping with reality. However, as best we can tell, this is probably at least in part a matter of timing. If the bonuses were not... | 163 |
fomc | 1,997 | Is there evidence that the Wall Street bonuses at the end of 1996 were significantly greater than the year before? | 23 |
fomc | 1,997 | Yes. | 2 |
fomc | 1,997 | That is what I read in the newspapers. | 9 |
fomc | 1,997 | What is the order of magnitude? What information have you got? | 13 |
fomc | 1,997 | At some of the major firms the level was approximately 50 percent higher in 1996 than in 1995. The tax receipts of New York City and New York State reflect this boom as well. | 41 |
fomc | 1,997 | When do they usually pay the bonuses? | 8 |
fomc | 1,997 | The earliest is December and most of them are paid out by the end of January. | 17 |
fomc | 1,997 | Our supposition is that a lot of this discussion just did not recognize that a good share of the bonuses will be paid out after December. | 28 |
fomc | 1,997 | So, the seasonal adjustments do not capture this change? | 11 |
fomc | 1,997 | I don't know whether that timing is new, though I think there has been some shifting over time. In part, it is inconvenient in terms of tax planning to get this big slug of money very late in the year. But I think there are other considerations, too. | 54 |
fomc | 1,997 | My second question: What is your estimate now for fourth-quarter productivity? Is it up 1-1/2 to 2 percent or something like that? | 32 |
fomc | 1,997 | My recollection is it that it is up 2-1/2 percent. | 17 |
fomc | 1,997 | 2-1/2 percent? | 7 |
fomc | 1,997 | Yes. That is based on a reasonably firm view of what the nonfarm business output was for the quarter but only a tentative view about what the total hours worked ultimately will look like. We think we have a reasonable handle on it. It will probably be in the 2-1/2 percent vicinity. | 62 |
fomc | 1,997 | What is the comparable compensation per hour figure? | 9 |
fomc | 1,997 | It's 3-1/2 percent. | 9 |
fomc | 1,997 | President Hoenig. | 4 |
fomc | 1,997 | Mike or Ted, I have a question on your oil price comments. I don't disagree with your projection of a decline in oil prices. But I am hearing more from individuals in the energy industry that, given their current outlook for world oil demand and the limited ability of producers to accommodate that demand, they are incr... | 101 |
fomc | 1,997 | I think there are two aspects to your question. One would relate to the short term, meaning the period we are looking at here, and the other would be a longer-term perspective. With regard to our assessment of what the industry is saying about the short-term supply and demand balance and abstracting from accidents of o... | 367 |
fomc | 1,997 | Okay. Thank you. | 5 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | I have a couple of questions, Mike, following up on what President Stern was talking about in terms of productivity assumptions. You have a discussion in the Greenbook about a change in your thinking about the trend rate in productivity growth. I was interested first of all because it moved down rather than upward, and... | 143 |
fomc | 1,997 | We aren't certain and I don't see how anyone really could be in this area. We had clung with great determination to the assumption that the underlying growth trend in this decade would prove to be 1.1 percent. We have been continuing to reassess this assumption, and I guess particularly because this meeting is one of t... | 590 |
fomc | 1,997 | Just to follow up on that: The lower trend rate of productivity growth, then, has been consistent in your mind with where we are on an unemployment basis and where we are on a change-in-inflation basis. | 44 |
fomc | 1,997 | That was another factor. We looked at Okun's Law. It has worked pretty well. | 19 |
fomc | 1,997 | Okay. | 2 |
fomc | 1,997 | It does not in itself suggest that output growth has been a lot more rapid than measured. That also gives one pause because, while Okun's Law is not a relationship one can depend on from quarter to quarter or even year to year, over extended periods it works pretty well. So, that gave us some pause as to whether we sho... | 119 |
fomc | 1,997 | Further questions? If not, let me raise the question that President Jordan raised in his letter to all of us with respect to our individual forecasts. I always thought that the combination of the central tendency and the range was an effective way of summarizing what everyone has been trying to convey. It is not clear ... | 99 |
fomc | 1,997 | My emphasis was not so much on the distribution, although I would like to see the detailed distribution of these forecasts because I know that three on each side get tossed out to arrive at the central tendency. I am more interested in the multi-year aspect of our efforts to address our problem of distinguishing betwee... | 81 |
fomc | 1,997 | I think that is an issue that will be coming up later. So, you are not focusing on the question of publishing more detail than we do currently? | 31 |
fomc | 1,997 | No, I am not worrying about that. More detail would not add much to what we already publish, though I don't know why we don't share the detailed distribution. I don't care who makes which forecast. But I am interested in trying to evaluate specific forecasts in terms of what I think of as my version of the internal con... | 93 |
fomc | 1,997 | I'm not terribly certain what you would learn if you looked at that. The degrees of freedom that exist in playing around with those numbers, as you know better than anybody, are quite large. Let me suggest this, rather than getting into a discussion now, which I don't think we really need to do. You all have gotten Jer... | 110 |
fomc | 1,997 | That would be fine. | 5 |
fomc | 1,997 | Let us move on to the Committee's discussion. Who would like to start? President Parry. | 20 |
fomc | 1,997 | Thank you, Mr. Chairman. Strong growth has continued in the Twelfth District in recent months and the base of the expansion is broadening. The recent trend of growth has been robust in California despite some lack of cooperation from Mother Nature. Severe flooding in northern California destroyed a large number of home... | 547 |
fomc | 1,997 | President Jordan. | 3 |
fomc | 1,997 | Thank you. There are a couple of things that I want to talk about. One is a report that the National Federation of Independent Business made two weeks ago covering the end of last year and the beginning of this year. I thought there were some interesting items in the report. The percentage of firms reporting higher pri... | 1,563 |
fomc | 1,997 | President Moskow. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. Overall, 1996 was a very good year for the Seventh District. For most of our key manufacturing industries, shipments exceeded their early 1996 expectations and housing activity for the year as a whole was much stronger than anticipated. As we move into 1997, expectations are that these sectors ... | 714 |
fomc | 1,997 | President Guynn. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. The burst of year-end 1996 economic activity that shows up in the national data and that people have already mentioned around the table is not reflected in either the most recent data for our southeastern region or the anecdotal reports that we are getting from directors and other people we tal... | 931 |
fomc | 1,997 | President Broaddus. | 5 |
fomc | 1,997 | Mr. Chairman, overall economic growth in our District seems to be moderating a little. The level of activity is still high, especially in manufacturing. Some of the information we have for our District differs somewhat from what Jack Guynn was saying about the Atlanta District. We see substantial strength in a number o... | 919 |
fomc | 1,997 | President Melzer. | 4 |
fomc | 1,997 | Thanks, Alan. District economic activity has picked up in the past few months. Auto dealers reported a flat November and December compared with a year ago, but most expect a pickup in the first half of 1997. District auto production, which benefits from the popularity of light trucks, is expected to rise 3.6 percent in... | 745 |
fomc | 1,997 | President Hoenig. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. The economy in our District continues to do well. Our directors and other contacts report solid growth throughout the District. Manufacturing remains quite healthy. Construction activity, while off slightly due to weather conditions, is keeping pace with activity of a year ago. I might mention ... | 612 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. New England's economic picture remains much the same. It is characterized by slow, steady growth overall and pockets of weakness in Connecticut, Maine, and Rhode Island that are offset by islands of strength, notably in Massachusetts. Overall employment growth is modest at a rate only about hal... | 879 |
fomc | 1,997 | Vice Chairman. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. The reports on the Second District's economy have been steady to slightly stronger in recent weeks. The region's job market, which had shown some signs of slowing in September and October, picked up a bit in the final two months of 1996. In New York State, private nonfarm payrolls grew at an an... | 959 |
fomc | 1,997 | President Boehne. | 5 |
fomc | 1,997 | Thank you, Mr. Chairman. The Philadelphia District economy is growing moderately overall, with some strong areas and tight labor markets in central Pennsylvania, some Philadelphia suburbs, and Delaware. The rest of the District is improving for the most part but more modestly. Although there are examples of large wage ... | 352 |
fomc | 1,997 | President McTeer. | 5 |
fomc | 1,997 | On the national economy, our estimates are very similar to the broad outlines of the staff forecast in the Greenbook. We are right on with real GDP, while our inflation and unemployment forecasts are just a little higher. There are a number of risks in these forecasts, however, and on balance those risks probably are s... | 409 |
fomc | 1,997 | We get desperate sometimes. | 5 |
fomc | 1,997 | It reminds me of the joke about the three kinds of economists--those that can count and those that cannot. | 22 |
fomc | 1,997 | That is a new low in economist jokes. [Laughter] | 13 |
fomc | 1,997 | It has the virtue of being very short. On the downside, high debt burdens may induce households to restrain consumer spending. Banks are just beginning to get serious about tightening their consumer credit lending standards. The higher dollar and falling oil prices should restrain price pressures. The broader measures ... | 572 |
fomc | 1,997 | President Stem. | 3 |
fomc | 1,997 | Thank you. I am hard pressed to report anything new with regard to the Ninth District economy. Overall, the economy is healthy, labor is in short supply, and the weather is lousy even seasonally adjusted. [Laughter] One interesting anecdote came from a couple of business people who reported that they have postponed exp... | 293 |
fomc | 1,997 | Governor Rivlin. | 4 |
fomc | 1,997 | I would dearly love to say something startlingly different, but I think I would have to be living in a different country. We really do seem to have accumulating evidence of a quite consistent picture. The strong growth in the fourth quarter, like the strong growth in the second quarter, clearly will not continue and wi... | 552 |
fomc | 1,997 | Governor Kelley. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. In the midst of the enormous plethora of data and impressions that one is subjected to, I have been asking myself what developments over the recent past seem to be significant. I would like to list six things--three of them because they are moving and three because they are not. First are the t... | 834 |
fomc | 1,997 | Governor Phillips. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. As almost everybody has mentioned, the economy ended 1996 on a strong note. The question now is whether this is just a single burst of energy and the economy is about to settle down to the proverbial sustainable path, or does this burst of energy portend a stronger growth path that will strain ... | 951 |
fomc | 1,997 | Governor Meyer, you are the cleanup hitter. | 9 |
fomc | 1,997 | Thank you, Mr. Chairman. The fourth-quarter GDP report marks an extraordinary end to an extraordinary year. The defining feature of both the fourth quarter and the year as a whole was a pleasing combination of higher-than-expected growth and lower-than-expected inflation, including declines in core measures of inflatio... | 1,464 |
fomc | 1,997 | Thank you. We are only six minutes over schedule, which is quite remarkable. | 16 |
fomc | 1,997 | We are short two governors. | 6 |
fomc | 1,997 | They took that into consideration. Unlike President McTeer's economists who may or may not be able to count, these guys can count! We adjourn until 9:00 a.m. tomorrow morning. | 41 |
fomc | 1,997 | Good morning, everyone. Brian Madigan, would you start us off, please? | 17 |
fomc | 1,997 | Certainly, Mr. Chairman. I will be referring to the package labeled, "Material for Staff Briefing on Annual Ranges." [Statement--see Appendix.] | 32 |
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