Press Release - May 24, 2017 -
Minutes of the Federal Open Market Committee, May 2-3, 2017
Staff Review of the Economic Situation
The information reviewed for the May 2–3 meeting indicated that the labor market strengthened further in March but that growth of real gross domestic product (GDP) slowed in the first quarter, with the slowing likely reflecting transitory factors. The 12-month change in overall consumer prices was close to the Committee’s longer-run objective of 2 percent in recent months; excluding food and energy, consumer prices declined in March, and the 12-month change in core consumer prices remained somewhat below 2 percent. Surveybased measures of inflation expectations were little changed on balance.
Total nonfarm payroll employment rose in March, but the gain was smaller than in recent months, likely reflecting both warmer-than-usual temperatures in February that probably caused some hiring to be moved forward and a major winter storm in the Northeast in March that probably held down hiring somewhat; nevertheless, the increase in employment for the first quarter as a whole was solid. The unemployment rate decreased to 4.5 percent in March, and the labor force participation rate was unchanged. The share of workers employed part time for economic reasons declined. The rates of privatesector job openings, hiring, and quits were all little changed in January and February. The four-week moving average of initial claims for unemployment insurance benefits remained at a very low level through mid-April. Measures of labor compensation accelerated modestly. The employment cost index for private workers increased 2¼ percent over the 12 months ending in March, and average hourly earnings for all employees increased 2¾ percent over the same period; both increases were somewhat larger than those over the 12 months ending in March 2016.
The average unemployment rate for whites in the first quarter of this year was ½ percentage point lower than its annual average for 2015, while the unemployment rates for Hispanics and for African Americans were about 1 percentage point and 1¾ percentage points lower, respectively. The larger improvements in the rates for Hispanics and for African Americans mirrored the larger increases in those rates during the most recent recession. As of the first quarter, the unemployment rates for African Americans and for Hispanics remained above the rate for whites both overall and for people with similar educational backgrounds. Unemployment rates for Asians remained below those for whites.
Total industrial production rose in February and March, primarily reflecting a further expansion of mining output as well as a net increase in the output of utilities. Manufacturing production declined in March after advancing in each of the previous six months; about half of the decline in March was due to a decrease in the output of motor vehicles and parts. Automakers’ assembly schedules suggested that motor vehicle production would increase in the second quarter despite somewhat elevated levels of vehicle inventories. Broader indicators of manufacturing production, such as the new orders indexes from national and regional manufacturing surveys, pointed to modest gains in factory output over the near term.
Real personal consumption expenditures (PCE) rose only modestly in the first quarter, although monthly data indicated some improvement late in the quarter. Indeed, after declining in January and February, real PCE increased in March, partly reflecting a rebound in spending on energy services, which had been held down by unseasonably warm weather through February, as well as an increase in outlays for a variety of consumer goods. Motor vehicle sales picked up in April after declining in March, although sales remained somewhat below their average pace in the first quarter and noticeably below the high levels seen in the fourth quarter. Recent readings on key factors that influence consumer spending pointed to solid growth in real PCE in coming quarters, including further gains in employment, real disposable personal income, and households’ net worth. Moreover, consumer sentiment, as measured by the University of Michigan Surveys of Consumers, remained upbeat in March and April.
Residential investment increased at a brisk pace in the first quarter. Starts for both new single-family homes and multifamily units moved up, and issuance of building permits for new single-family homes—which tends to be a reliable indicator of the underlying trend in residential construction—also rose. Sales of both new and existing homes in the first quarter were above their levels in the previous quarter.
20th Street and Constitution Avenue N.W.
Washington, D.C. 20551
page source https://www.federalreserve.gov/monetarypolicy/
