The U.S.

U S Economic Outlook
Charts presented by William C. Dudley
Charts presented by William C Dudley
President and Chief Executive Officer
Federal Reserve Bank of New York
Washington and Lee University 
H. Parker Willis Lecture in Political Economics
Lexington, VA
April 1, 2010
 Current Account Balance as a Percent of GDP
Percent Percent
2 2

0 0

-2
2 -2
2

-4 -4

-6
6 -6
6

-8
8 8
-8
1970 1976 1982 1988 1994 2000 2006
Note: Shading represents NBER recessions, vertical line 1
Source: Bureau of Economic Analysis represents 2007Q4 business cycle peak.
 Real Broad Trade Weighted Value of the US Dollar
Index Index

130 130

120 120

110 110

100 100

90 90

80 80
1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line 2
Source: Federal Reserve Board represents 2007Q4 business cycle peak.
 10-Year Treasury Note Yield at Constant Maturity
Percent Percent
20 20

16 16

12 12

8 8

4 4

0 0
1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line 3
Source: Federal Reserve Board represents 2007Q4 business cycle peak.
Net Stock: Private Residential, Nonresidential Structures, and
Equipment and Software
% Change – Year to Year % Change Year - Year
10 10
Equipment and
Software
8 8

6 6

4 4
Residential

2 2

Nonresidential
Structures
0 0
1960 1966 1972 1978 1984 1990 1996 2002 2008
Note: Shading represents NBER recessions, vertical line 4
Source: Bureau of Economic Analysis represents 2007Q4 business cycle peak.
 Total Balance by Credit Score Quintile
Billions of Dollars

2005-Q1 2008-Q3 2009-Q3

Percent Percent
Median Change Change
Credit Score from from
of Quintile Percent of Percent of Previous Percent of Previous
(2005-Q1) Total Debt Total Total Debt Total Period Total Debt Total Period

807 2020.0 22.2% 2290.0 18.7% 13.4% 2190.0 18.8% -4.4%

767 2330 0
2330.0 25 6%
25.6% 3110 0
3110.0 25 5%
25.5% 33 5%
33.5% 3010 0
3010.0 25 8%
25.8% -3 2%
-3.2%

708 2360.0 26.0% 3450.0 28.2% 46.2% 3300.0 28.3% -4.3%

631 1450.0 16.0% 2280.0 18.7% 57.2% 2130.0 18.3% -6.6%

538 928.0 10.2% 1090.0 8.9% 17.5% 1040.0 8.9% -4.6%

Total 9088.0 100.0% 12220.0 100.0% 34.5% 11670.0 100.0% -4.5%

q
Source: FRBNY Equifax Panel Dataset

5
 Homeownership Rate
Percent Percent
70 70

68 68

66 66

64 64

62 62
1970 1976 1982 1988 1994 2000 2006
Note: Shading represents NBER recessions, vertical line 6
Source: Census Bureau represents 2007Q4 business cycle peak.
 Consumption and Personal Saving
Percent Percent
72 15

70
Personal Consumption
p as 12
Saving Rate Share of GDP
(right axis) (left axis)
68
9

66

6
64

3
62

60 0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line 7
Source: Bureau of Economic Activity represents 2007Q4 business cycle peak.
 Loan Performance House Price Index & Commercial
Index Index
Real Estate Price Index
240 240

200 200
Loan Performance:
HPI

160 Commercial 160

Real Estate

120 120

80 80
2000 2003 2006 2009
Note: Shading represents NBER recessions, vertical line 8
Source: Loan Performance and MIT Real Estate Center represents 2007Q4 business cycle peak.
 First Mortgages: 90+ Day Delinquency Rates
Ratio
(Series set to 1.0 at 4Q prior to NBER peak) Ratio
50
5.0 50
5.0
% of number of loans Q4 ‘09

40
4.0 40
4.0

Current Cycle
3.0 3.0

2.0 2.0
2001 Cycle

1.0 1.0
1974-1975 Cycle 1990-1991 Cycle 1981-1982 Cycle

0.0 0.0
-8
8 -6
6 -4
4 -2
2 0 2 4 6 8 10 12
Quarters Since 4Q Prior to NBER Peak
9
Source: Mortgage Bankers Association
 Percent of 90+ days Late Mortgage Balance Owned by
Multiple Home Owners
Percent Percent
45 45
3+ home owners 2 home owners
40 40

35 35

30 30

25 25

20 20

15 15

10 10

5 5

0 0
04Q1 05Q1 06Q1 07Q1 08Q1 09Q1
10
Source: Equifax, FRBNY
 Household Liabilities as a Percent of Net Worth
Percent Percent
30 30

25 25

20 20

15 15

10 10
1970 1976 1982 1988 1994 2000 2006
Note: Shading represents NBER recessions, vertical line 11
Source: Federal Reserve Board represents 2007Q4 business cycle peak.
 Real GDP
(Series Set to 1.0 at NBER Peak)
Ratio Ratio
1.10 1.10

1.05 1.05

1981 Cycle 1973 Cycle

1.00 1.00

Current Cycle

0.95 0.95
-4
4 -2
2 0 2 4 6 8 10 12
Quarters Since NBER Peak
12
Source: Bureau of Economic Analysis
 Unemployment Rate
(Series Set to 0.0 at NBER Peak)
Difference Difference
6.0 6.0

5.0 Current Cycle 5.0

4.0 4.0

1973 Cycle
3.0 3.0

2.0 2.0

1981 Cycle
1.0 1.0

0.0 0.0

-1.0 -1.0
-4
4 -2
2 0 2 4 6 8 10 12
Quarters Since NBER Peak
13
Source: Bureau of Labor Statistics
Labor Force Participation Rate and Average Weekly Hours
Percent – 3 Month Moving Average Hours – 3 Month Moving Average
68 36.0
Participation Rate
(left axis) 35.5

67
35.0

34.5
66

34.0

65 Average W
A Weekly
kl Hours
H 33.5
(right axis)

33.0
64

32.5

63 32.0
1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line14
Source: Bureau of Labor Statistics represents 2007Q4 business cycle peak.
 Nonfarm Business Sector: Hours Worked
(Series Set to 1.0 at NBER Peak)
Ratio Ratio
1.10 1.10

1.05 1.05
1981 C
Cycle
l

1.00 1.00

1973 Cycle
0.95 0.95

0.90 0.90
Current Cycle

0 85
0.85 0 85
0.85

0.80 0.80
-4
4 -2
2 0 2 4 6 8 10 12
Quarters Since NBER Peak
15
Source: Bureau of Labor Statistics
 Total and Core CPI
% Change - Year to Year % Change - Year to Year
6 6

5 Total CPI 5

4 4

3 3

2 2

1 C
Core CPI 1

0 0

-1 -1

-2 -2
1998 2000 2002 2004 2006 2008 2010
Note: Shading represents NBER recessions, vertical line16
Source: Bureau of Labor Statistics represents 2007Q4 business cycle peak.
 Exports and Industrial Production
6-Month % Change - Annualized 6-Month % Change - Annualized
30 15

Exports (left axis)

20 10

5
10

0
0
Industrial Production: -5
Manufacturing
-10 (right axis)
-10

-20
-15

-30 -20

-40 -25
1995 1997 1999 2001 2003 2005 2007 2009
17
Source: Federal Reserve Note: Shading represents NBER recessions, vertical line
Board and Census Bureau represents 2007Q4 business cycle peak.
 Net Worth over Disposable Personal Income
Percent Percent
700 700

650 650
Net Worth/DPI

600 600

550 550

500 500

450 450

400 400
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line18
Source: Federal Reserve Board represents 2007Q4 business cycle peak.
 Household Liabilities as a Percent of Net Worth
Percent Percent
30 30

25 25

Average over
A
last 10 years
20 20

15 15

10 10
1970 1976 1982 1988 1994 2000 2006
Note: Shading represents NBER recessions, vertical line19
Source: Federal Reserve Board represents 2007Q4 business cycle peak.
 MBA Purchase Mortgage Applications and Existing
Index Home Sales Thousands

500 8000
Purchase Loan
Applications
450 (left axis)

7000

400

350 6000

Existing Home
300 Sales (right axis)

5000

250

200 4000
1999 2001 2003 2005 2007 2009 20
Source: Mortgage Bankers Association, Note: Shading represents NBER recessions, vertical line
National Association of Realtors represents 2007Q4 business cycle peak.
Percent
Vacancy Rates Percent

3.5 12

3.0

10

2.5 Rental Vacancy Rate

(right axis)

2.0 8

1.5

Homeowner Vacancy 6

1.0 Rate (left axis)

0.5
0 5 4
1970 1976 1982 1988 1994 2000 2006
Note: Shading represents NBER recessions, vertical line 21
Source: Census Bureau represents 2007Q4 business cycle peak.
 Total Receipts of State and Local Governments
% Change – Year to Year % Change – Year to Year

30 30

20 Federal 20
Currentt
C
Grants Receipts

10 10

0 0

-10 Receipts -10

Less
Grants
-20 -20

-30 -30
1985 1991 1997 2003 2009
Note: Shading represents NBER recessions, vertical line 22
Source: Bureau of Economic Analysis represents 2007Q4 business cycle peak.
 Real Imports and Exports
2-qtr % Change - Annualized 2-qtr % Change - Annualized
30 30

20 20
Imports E
Exports
t

10 10

0 0

-10 -10

-20 -20

-30
30 30
-30
1999 2001 2003 2005 2007 2009
Note: Shading represents NBER recessions, vertical line 23
Source: Bureau of Economic Analysis represents 2007Q4 business cycle peak.
 Corporate Profits as a Fraction of National Income
Ratio Ratio
0.14 0.14

0.12 0.12

0.10 0.10

0.08 0.08

0.06
0 06 0.06
0 06
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line 24
Source: Bureau of Economic Analysis represents 2007Q4 business cycle peak.
Corporate Net Cash Flow as a Fraction of Nominal GDP
Ratio Ratio
0.12 0.12

0.10 0.10

0.08 0.08

0.06
0 06 0.06
0 06
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Note: Shading represents NBER recessions, vertical line 25
Source: Bureau of Economic Analysis represents 2007Q4 business cycle peak.
 Manufacturing Capacity Utilization Rate
Percent Percent
85 85

80 80

75 75

70 70

65 65

60 60
1999 2001 2003 2005 2007 2009
26
Note: Shading represents NBER recessions, vertical line
Source: Federal Reserve Board represents 2007Q4 business cycle peak.
 Rent Inflation
% Change - Year to Year % Change - Year to Year

50
5.0 50
5.0

4.5 4.5

40
4.0 40
4.0
Tenant Rent (8%)
3.5 3.5

30
3.0 30
3.0

2.5 2.5

20
2.0 Owners' 20
2.0
Equivalent Rent
1.5 (31%) 1.5

10
1.0 10
1.0

0.5 0.5

0.0 0.0
1996 1998 2000 2002 2004 2006 2008 2010
Note: Shading represents NBER recessions, vertical line
represents 2007Q4 business cycle peak. 27
Source: Bureau of Labor Statistics Numbers in parentheses represent share of core CPI.
 Productivity, Compensation, and Unit Labor Costs
1003

Nonfarm Business Sector

% Change - Year to Year % Change - Year to Year
10 10

8 8

Compensation per Hour

6 6

4 4

2 2

0 0
Output per Hour

-2 -2

-4 Unit Labor Costs -4

-6 -6
1999 2001 2003 2005 2007 2009
Note: Shading represents NBER recessions, vertical line 28
Source: Bureau of Labor Statistics represents 2007Q4 business cycle peak.
 TIPS Implied Inflation Compensation: 2-3, 4-5, 5-10
Percent
Year Horizons Percent
40
4.0 40
4.0
Mar 30:
3.5 2.92 3.5
5-10 Year
30
3.0 30
3.0

2.5 2.5
4-5 Year
Mar 30:
20
2.0 2 57
2.57 20
2.0
2-3 Year
Mar 30:
1.5 1.5
1.92
10
1.0 10
1.0

0.5 0.5

00
0.0 00
0.0

-0.5 -0.5

-1.0
10 10
-1.0
Jun-07 Aug-07 Nov-07 Feb-08 May-08 Jul-08 Oct-08 Jan-09 Apr-09 Jun-09 Sep-09 Dec-09 Mar-10
29
Source: Federal Reserve Board Note: Carry Adjusted.