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Federal Reserve issues FOMC statement (June 17, 2015)

June 17, 2015 Comments off

Federal Reserve issues FOMC statement
Source: Federal Reserve Board

Information received since the Federal Open Market Committee met in April suggests that economic activity has been expanding moderately after having changed little during the first quarter. The pace of job gains picked up while the unemployment rate remained steady. On balance, a range of labor market indicators suggests that underutilization of labor resources diminished somewhat. Growth in household spending has been moderate and the housing sector has shown some improvement; however, business fixed investment and net exports stayed soft. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports; energy prices appear to have stabilized. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.

Productivity in the Slow Lane? The Role of Information and Communications Technology

June 15, 2015 Comments off

Productivity in the Slow Lane? The Role of Information and Communications Technology
Source: Federal Reserve Bank of Boston

Key Findings

  • We find that this pattern of a TFP speed-up followed by a slowdown has been widespread across industries.
  • Prior to the mid-2000s, investment in ICT capital grew much faster than investment in non-ICT capital for most industries, and there is little correlation across industries in the growth of these two types of investment. Since then, the relative growth of ICT investment has declined more than its relative price growth has increased. In addition, growth rates of the two types of investment have also become highly correlated across industries.
  • For those industries that use ICT more intensively, the acceleration in TFP in the early 2000s seems to have depended positively on the intensity of ICT investment in the second half of the 1990s, which is likely highly correlated with the unmeasured spending on restructuring. This can be construed as evidence that firms invested simultaneously in tangible ICT capital and intangible organizational capital that diverted resources but enhanced the future efficacy of ICT capital.

Nudging Credit Scores in the Field: The Effect of Text Reminders on Creditworthiness in the United States

June 14, 2015 Comments off

Nudging Credit Scores in the Field: The Effect of Text Reminders on Creditworthiness in the United States
Source: Federal Reserve Bank of Boston

Key Findings

  • Monthly text reminders had a positive effect, a gain of 23–24 points on average, on the credit scores of individuals who initially had low scores (below 584), no effect on the credit scores of initially mid-score individuals (584–671), and a negative effect of about 17–18 points on the credit scores of individuals who started with high credit scores (672 or higher).
  • The effect of information about the relationship between credit scores and average APR had a marginal effect in decreasing the number of credit report inquiries for low-score individuals and in reducing the number of collection accounts among mid-score individuals. For high-score individuals the information had a marginal effect in increasing total past-due amounts by an average of $81–$82, based on a comparison of the figures in the 2013 and 2014 credit reports.
  • The positive effect of these interventions on low-score individuals comes from helping them achieve their debt goals and reduce their rate of credit use, and some weak evidence that the intervention helps them improve their payment patterns as reflected in delinquencies.

Agencies Issue Final Standards for Assessing Diversity Policies and Practices of Regulated Entities

June 10, 2015 Comments off

Agencies Issue Final Standards for Assessing Diversity Policies and Practices of Regulated Entities
Source: Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Securities and Exchange Commission

Federal agencies today issued a final interagency policy statement establishing joint standards for assessing the diversity policies and practices of the entities they regulate.

Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required the Federal Reserve Board, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission to establish an Office of Minority and Women Inclusion (OMWI) at each agency to be responsible for all matters relating to diversity in management, employment, and business activities. The Dodd-Frank Act also instructed each OMWI director to develop standards for assessing the diversity policies and practices of the agencies’ regulated entities.

The final standards, which are generally similar to the proposed standards, provide a framework for regulated entities to create and strengthen their diversity policies and practices—including their organizational commitment to diversity, workforce and employment practices, procurement and business practices, and practices to promote transparency of organizational diversity and inclusion within the entities’ U.S. operations.

Did Abnormal Weather Affect U.S. Employment Growth in Early 2015?

June 10, 2015 Comments off

Did Abnormal Weather Affect U.S. Employment Growth in Early 2015?
Source: Federal Reserve Bank of Boston

Key Findings

+ During the first four months of 2015, the harsh winter weather exerted a significant effect on the pattern of monthly payroll employment. The severe weather explains about 40 percent of the surprising March dip in employment growth and a significant portion of the April rebound.

+ When the effects of the abnormal weather are removed, the resulting pattern of employment growth over the first four months of this year is much more stable than that of the actual monthly data, suggesting an underlying rate of employment growth of just less than 200,000 jobs per month.

+ Over the first four months of 2015, the weather effect averages out to essentially zero. Consequently, bad weather does not appear to be responsible for the overall slowdown in monthly employment growth, which averaged more than 300,000 jobs per month in 2014:Q4.

Report on the Economic Well-Being of U.S. Households in 2014

June 2, 2015 Comments off

Report on the Economic Well-Being of U.S. Households in 2014 (PDF)
Source: Federal Reserve Board

This report analyzes results of the Board’s second Survey of Household Economics and Decisionmaking, conducted in October 2014, and compares them with results from the previous year’s survey. The survey aims to capture a snapshot of the financial and economic well-being of U.S. households, as well as to monitor their recovery from the Great Recession and identify perceived risks to their financial stability.

The Effect of Shocks to College Revenues on For-Profit Enrollment: Spillover from the Public Sector

May 25, 2015 Comments off

The Effect of Shocks to College Revenues on For-Profit Enrollment: Spillover from the Public Sector (PDF)
Source: Federal Reserve Board

This paper investigates whether declines in public funding for post-secondary institutions have increased for-profit enrollment. The two primary channels through which funding might operate to reallocate students across sectors are price (measured by tuition) and quality (measured by resource constraints). We estimate, on average, that a 10 percent cut in appropriations raises tuition about 1 to 2 percent and decreases faculty resources by 1/2 to 1 percent, creating substantial bottlenecks for prospective students on both price and quality. These cuts, in turn, generate a nearly one percentage point increase in the for-profit market share of “elastic” enrollment (i.e. attendees of community colleges plus for-profit institutions), owing entirely to students who, in a better funding environment, would have attended a public institution. We estimate an elasticity of for-profit enrollment with respect to state and local appropriations of 0.2. Finally, we extend our analys is to show that for every 1 percent increase in flagship tuition generated by funding shortfalls, for-profit attendance increases by 1-1/2 percent.

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