An Overview of Economic Conditions in the Nation and Missouri Subhayu Bandyopadhyay Research Officer Federal Reserve Bank of St. Louis

Disclaimer The views expressed here do not reflect the official positions of the Federal Reserve System or the Federal Reserve Bank of St. Louis This presentation cannot be recorded or videotaped without the written permission of the Federal Reserve Bank of St. Louis

National Outlook

GDP growth slowed in Q1 National Output

The new normal—or what some call, the new mediocrity—of slower real GDP growth (2% to 2.5%). Forecasters have over-predicted real GDP growth over the past several years; this should humble us about our forecasting prowess. Some argue that it’s the legacy of the financial crisis and recession. Other explanations include the bust in the oil patch, the farm sector, and a stronger dollar. National Output

Historically, oil price increases have mattered more than decreases. Although lower oil prices help consumers, they also hurt producers. Energy consumption per dollar of real GDP has declined by about 40% since The U.S. is now a major oil producer; this has reduced crude oil imports by about 60% since The U.S. is still a net importer of crude oil, but a net exporter of petroleum products. The Changing Nature of Oil Shocks

7 The sharp decline in oil prices spurred a dramatic decline in inflation and inflation expectations. But it is important for policymakers and financial markets to “see through” transitory price changes. In this vein, core inflation measures are exhibiting considerably more vigor. Headline PCE inflation was 0.82% in March 2016 (year- over-year) and core PCE inflation was 1.56% over the same period. Inflation is beginning to stir

8 Job growth has averaged more than 200,000 per month over the past year, which is strong. 160,000 jobs were added in April. As a result, the unemployment rate has continued to fall; it was 5.0% in April. Labor Market

The unemployment rate has fallen considerably Labor Market

Annual average unemployment rate in 2015 Labor Market

Housing price and home sales Source: Census Housing Market Mar

Retail and auto sales in recent months Consumer Spending Apr Mar

Population growth ( ) is lowest in the Midwest and the North East Population Growth Notes: Annual estimates by the U.S. Bureau of the Census. The total U.S. population increased by 2.5 million in the same period.

Foreign-Born as a Percentage of U.S. Population Percent Foreign-Born

Share of Population with Bachelor’s Degree or Higher Educational Attainment

Distinct pockets of per capita income levels Per Capita Income Note: In 2014, the national per capita income was $46,029.

Forecasts Fall March 2016 FOMC Economic Projections for by Federal Reserve Board members and Bank presidents

Local Conditions

How do you expect local economic conditions to change in 2016? St. Louis Fed Survey (Feb 2016)

“ The tightening of the labor pool has happened a little faster than expected. We are increasing pay to prevent staff turn over.” – St. Louis area construction contact “Businesses are pulling back a bit. They are a little more cautious to take on loans.” – St. Louis banker St. Louis Fed Survey (Feb 2016)

Economic Growth

Labor Market

Unemployment rate is higher in Southern Missouri Labor Market

Housing Market

28 SOURCE: Nationwide’s Health of Housing Report, 2016:Q1 Housing Market A healthy housing market in the Midwest

Population Growth (2014 to 2015) Strong growth around largest cities: Kansas City, St. Louis, Springfield Source: Annual estimates by the U.S. Bureau of the Census.

Foreign-Born (MO and the Nation) Source: ACS, accessed via IPUMS-USA.

Foreign-Born (MO over time) Source: ACS, accessed via IPUMS-USA.

Educational Attainment Share of Population with Bachelor’s Degree or Higher

Per Capita Income Lower per capita income levels in Southern Missouri St. Louis MSA: $47,391 Kansas City MSA: $46,319

Summary National economic conditions continued to improve in and 2017 GDP projections have been revised down. Unemployment rate has continued to fall in Missouri and in the nation as a whole. Housing prices have continued to rise in Missouri. Business contacts in St. Louis are somewhat optimistic about continued growth. The educational attainment levels in the state are low outside major MSAs like St. Louis and Kansas City. The share of foreign-born in Missouri is much lower than the nation’s.

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