Interbank Market News Scan: Traders should be mindful of the difference between brokers; Treasury provides assessment of US economy.

Interbank. Why do market-makers provide high leverage? Given that a high percentage of forex traders lose money, do these brokers take advantage of traders’ risk? Or do brokers pass the orders to the interbank network and make money off of spreads? Here are a few answers. Source: FXStreet.

Interbank, Ghana. As expected, the Monetary Policy Committee of the Bank of Ghana has kept the policy rate at 14.5%. Source: MyJoyOnline.

Interbank, U.S. Treasury. The U.S. Department of the Treasury announces marketable borrowing estimates.

Interbank, U.S. Treasury. Benjamin Harris, Treasury Department assistant secretary, issues statement on U.S. economic status and expectations.

Foreign exchange rates of interest










Source: OANDA

Janet Yellen describes local government role in turning around the US economy….

January 19, 2022

As prepared for delivery

Thank you, Mayor Suarez, and thank you all for welcoming me. More than that, thank you all for your tireless work over the past two years. 

There have been few harder – or more crucial – jobs during this pandemic than being a mayor. Local governments have been the first line of defense against this pandemic, and as much as anything else, it has been the work of the city that has kept our recovery on track. That’s what I want to talk about today.  

Almost exactly a year ago – 364 days this morning, to be precise – I was putting on a very large coat and getting ready to drive to the National Mall to watch President-elect Biden and Vice President-elect Harris take the oath of office. 

It was a historic day for the country, but one that played out against the backdrop of real jeopardy:

Roughly thirty-nine hundred Americans would die of COVID that day – and the next. 
More Americans were applying for unemployment insurance than during the worst week of the 
Great Recession, and millions of people said they didn’t have enough food to eat. Some economists were making dire predictions – that the pandemic would plunge our economy further into recession, with many more jobs lost. 

Of course, such predictions never materialized. In fact, if somehow you transported a group of economists – including me – from that moment to today… and just showed us the current topline data… we would be quite thrilled. Unemployment is now at 3.9 percent – the sharpest one-year drop in the rate ever. GDP now exceeds pre-pandemic levels, and 2021 witnessed one of the biggest reductions in child poverty and child hunger in American history. 

Yes, Omicron has presented a challenge and will likely impact some of the data in the coming months, but I am confident it will not derail what has been one of the strongest periods of economic growth in a century. 

None of this was guaranteed. I think it’s important we recognize that. There’s a very real counterfactual where Omicron did derail our recovery; a scenario where the new variant hurdled our economy backwards towards its state on Inauguration Day 2021. 

It’s an important question to ask: Why didn’t that happen? 

Well, there are innumerable reasons. One, obviously, is that most of the country is now vaccinated. But it’s also quite clear that you – that mayors – had something to do with it. The reason January 2022 is not January 2021 is, in large part, due to what’s happening in local governments. 

I think the best place to begin the story is 10 months ago, in March. That was the pivotal moment, a time where the future could’ve forked in different directions. In fact, it was the last time I spoke to many of you at a gathering of city leaders. The American Rescue Plan – or the ARP – had passed the Senate and awaited a final vote in the House.  

Many of you had teleconferenced into various congressional offices to push the bill to that point and to the make the case for one of its largest programs: The State and Local Fiscal Recovery Fund, $350 billion dollars to help communities make it to the other side of the pandemic.  

At the time, I think we all believed that state and local funding was important; that it was essential. In retrospect, though, that program in particular – and the ARP in general – proved absolutely essential. You can draw a straight line between the ARP’s passage and our economic performance during Delta and Omicron. 

As this group knows better than anyone, the first year of the pandemic decimated government budgets, forcing states and communities to layoff or furlough a collective 1.3 million workers. 
These were the employees we rightly called “essential” – teachers, first responders, public health officials. 

How would your cities be different if those essential workers stayed off the job? It’s a question that probably has a very unpleasant answer. I think about the challenge schools are facing now, and then I imagine how they’d navigate that same challenge… but with hundreds of thousands fewer teachers and other school staff. I expect that would’ve been the case without the ARP. 

Of course, you are the experts, but it seems hard to overstate how quickly and completely the ARP changed the everyday institutions that keep our society working.  Hawaii, for instance, had planned to furlough 10,000 employees, but on the day President Biden signed the Rescue Plan they cancelled the layoffs. Denver was able to rehire for 265 city staff positions left vacant because of pandemic-related cuts, while Wichita, Kansas is hiring for 161 jobs, everything from animal control officers… to security screeners… to street and park maintenance workers.  

Many places have used the ARP funding not only to hire for public sector jobs, but to rebuild elements of the private sector that are essential to weathering pandemic. Columbus, Ohio, for example, is providing $1,000-dollar signing bonuses for new teachers at childcare centers. They’re also granting scholarships to low-income families so their kids can attend. 

This, I think, is some of what the $350 billion did: When Omicron started spreading around our cities, it did not find them broke and broken; it found them much readier to respond. 

In some ways, the ARP acted like a vaccine for the American economy, protecting our recovery from the possibility of new variants. The protection wasn’t complete, but it was very strong – and it prevented communities from suffering the most severe economic effects of Omicron and Delta. 

Of course, the relief package did not predict when exactly those variants would emerge, but it did anticipate that our recovery would run up against some unforeseen barriers. The pandemic produced a highly unusual economic crisis – one tied not to the movements of markets but to the spread and evolution of microbes. The crisis could ebb and flow. It would hit different places in different ways at different times. The state and local fund was designed with that in mind, too. 

Rather than one burst of money that could only be spent in certain ways, it called for sustained funding, and our Treasury team has worked hard so you can use the money as flexibly as possible. 

Indeed, in response to Omicron, cities and states across the country have used ARP money to put on a clinic in quick and creative government. Many have provided extra support to vaccine campaigns. Others have built up their public health infrastructure. In recent weeks, Minnesota has authorized over $80 million in ARP funds for everything from the distribution of rapid COVID tests to emergency surge staffing in hospitals. 

Then are cities like St. Louis, which saw that two trends were colliding: the spread of new variants and the expiration of the nation’s eviction moratorium. There was a risk that people were going to lose the roofs over their heads, something that would not only complicate our efforts to stop the spread but also complicate people’s lives for years to come.   

St. Louis had been busy dispersing dollars from the ARP’s emergency rental assistance program, but also chose to use $58 million of its state and local dollars to keep people in their homes and shelter those experiencing homelessness.  

Today, eviction filings are 60 percent below their pre-pandemic levels in large part because of work like that. We’ve avoided a national eviction crisis because mayors like you have helped build the infrastructure to deliver over three million rental assistance payments into the pockets of renters.  

In this country, we don’t often recognize the crises that do not happen; we don’t celebrate the bridge that doesn’t collapse. But maybe in this case, we should. Last year, the first time I spoke to a group of mayors, I said that fiscal policy often finds humanity in the city budget. But in 2021, it may have been that our economy found its salvation in the city budget. 

Of course, the job of fully implementing the ARP is not done yet, and our team is ready to continue working with you on projects from building affordable housing… to rehiring of educators… to the laying of broadband. But there’s a good argument that without your work thus far – and without the Biden Administration’s relief funding – we would be reliving something approximating the early days of the pandemic. And not just now, but for some time to come.  

That was the lesson of 2008. During the Great Recession, when cities and states were facing similar revenue shortfalls, the federal government didn’t provide enough aid to close the gap. It was a profound error. Cities had to slash spending, and that undermined the broader recovery. One study concludes that for every $1 local governments cut in spending during a recession, there is a corresponding drop in GDP of more than $1 – and possibly as much as $3. After 2008, state government employment didn’t recover from the Great Recession until 2019.

Today, I can state unequivocally: That history will not repeat itself. 

More than just protecting and accelerating our recovery, I think that the passage of the American Rescue Plan finally allowed us to do what most of us came to government for – not simply to fight fires and resolve crises, but to build a better country. It gave us a window to start building a better post-COVID world. 

By helping us alleviate the immediate crisis, the American Rescue Plan created the environment for new, transformational legislation: the infrastructure bill, the biggest investment we’ve made since Eisenhower built the Interstate. 

And congressional negotiations are ongoing regarding the Build Back Better legislation. While we don’t know the final form this will take, it will revolutionize how we care for children in this country, invest in climate change, and overhaul the international tax system to ensure 
corporations pay their fair share. 

Paired together, these pieces of legislation amount to a once-in-a-generation transformation of our economy. They will lead to higher rates of productivity, an expanded labor force, and greater GDP growth. 

None of it would’ve been possible without the American Rescue Plan and your partnership with Treasury to implement it. I am forever grateful for your partnership during the last ten months, and I look forward to continuing to work with you over the years ahead.

Thank you for having me.   

Source: U.S. Department of Treasury

Interbank market news scan: Lael Brainard provides detailed description of the inflationary bump expected from the American Recovery Plan …

The following remarks by Federal Reserve Governor Lael Brainard were delivered yesterday before the annual conference of the National Association of Business Economics …

“It has now been a year since the onset of COVID-19 in the United States. The past year has been marked by heartache and hardship, especially for vulnerable communities, as well as by the resilience and extraordinary efforts of Americans everywhere, particularly those on the front lines. The past year has also seen determined efforts on the part of policymakers—public health, fiscal, and monetary—to do what is necessary and stay the course until we return to full strength.1

These determined efforts have contributed to a considerably brighter economic outlook. A comparison between the median of the most recent Federal Open Market Committee (FOMC) Summary of Economic Projections (SEP) and the first projection following the onset of the pandemic, in June of last year, highlights the improvement in the outlook. The change in the SEP median suggests an improvement in the projected level of gross domestic product of 6 percent at the end of 2021 and 2022, a decline in the unemployment rate of 2 percentage points at the end of 2021 and 1-1/2 percentage points at the end of 2022, and an upward revision to the headline inflation rate of 0.8 percentage point at the end of 2021 that narrows to a 0.3 percentage point upward revision at the end of 2022.2 The expected improvements in the outlook reflect progress on controlling the virus, nearly $3 trillion in additional fiscal support, and forceful and timely support from monetary policy.

Although the outlook has brightened considerably, the fog of uncertainty associated with the virus has yet to lift completely, and current employment and inflation outcomes remain far from our goals. The focus on achieved outcomes rather than the anticipated outlook is central to the Committee’s guidance regarding both asset purchases and the policy rate. The emphasis on outcomes rather than the outlook corresponds to the shift in our monetary policy approach that suggests policy should be patient rather than preemptive at this stage in the recovery.

Recent data indicate that activity has picked up this year. After a dip in the final months of 2020, personal consumption expenditures (PCE) stepped up considerably so far this year, and spending on durable goods has been particularly strong. This pattern appears consistent with a quick spend-out from the Consolidated Appropriations Act (CAA) stimulus checks at the turn of the year, particularly among lower-income households that may have previously exhausted the funds provided in the CARES Act (Coronavirus Aid, Relief, and Economic Security Act).3

Like the spending data, the labor market data turned more positive in January and February following weakness at the end of 2020. Although the unemployment rate has moved down 1/2 a percentage point since December, the K-shaped labor market recovery remains uneven across racial groups, industries, and wage levels.4 The employment-to-population (EPOP) ratio for Black prime-age workers is 7.2 percentage points lower than for white workers, while the EPOP ratio is 6.2 percentage points lower for Hispanic workers than for white workers—an increase in each gap of about 3 percentage points from pre-crisis lows in October 2019.

Workers in the lowest-wage quartile continued to face staggering levels of unemployment of around 22 percent in February, reflecting the disproportionate concentration of lower-wage jobs in services sectors still sidelined by social distancing.5 The leisure and hospitality sector is still down almost 3.5 million jobs, or roughly 20 percent of its pre-COVID level. This sector accounts for more than 40 percent of the net decline in private payrolls since February 2020. Overall, with 9.5 million fewer jobs than pre-COVID levels, we are far from our broad-based and inclusive maximum-employment goal.

Inflation similarly remains far from the goal of 2 percent inflation on average over time. Both headline and core PCE inflation were below 2 percent on a 12-month basis throughout 2020 and came in at 1.5 percent in January.

Finally, while vaccinations are continuing at an accelerating pace, over two-thirds of the adult population have yet to receive their first dose, and there are risks from more contagious strains of the virus, social-distancing fatigue, and vaccine hesitancy.6

As the economy reopens, the potential release of pent-up demand could drive stronger growth in 2021 than we have seen in decades. However, it is uncertain how much pent-up consumption will be unleashed when social distancing completely lifts, and how much household spending will result from the new stimulus and accumulated savings. With PCE accounting for roughly 70 percent of the economy, this uncertainty about consumption spending contributes to uncertainty about activity, employment, and inflation.

In part, the outcome will hinge on distributive questions that are imperfectly understood. Households accrued considerable additional savings that led to a $2.1 trillion increase in liquid assets by the end of last year.7 Higher-income households appear to have cut back on discretionary services spending over the past year and increased their purchases of durable goods, which may see some satiation going forward. For moderate-income households that are not cash constrained, it is possible there will be a lower near-term spend-out from the American Rescue Plan payments relative to the CAA payments, given that less than 75 days elapsed between the two rounds of payments. Households whose cash flows were improved by the CAA stimulus may save more of the most recent stimulus for precautionary reasons. That said, there is upside risk if a substantial fraction of stimulus payments and accumulated savings are spent in 2021 rather than more slowly over a longer time period.

On the other side, there is potential for some leakage abroad if, as anticipated, foreign demand growth in some regions is weaker than in the United States. Imports soared during the second half of last year and grew further in January, even with worsening backlogs at U.S. ports. As port congestion and supply chain bottlenecks ease, international spillovers could lead to some slippage between the increase in domestic demand and resource utilization, which has implications for employment and inflation.

In the labor market, as vaccinations continue and social distancing eases, businesses in hard-hit services sectors will increase hiring, accelerating the pace at which workers find employment. The strong and timely support from fiscal as well as monetary policy likely reduced the extent of scarring during the pandemic, which should aid the pace of hiring at in-person services establishments once the virus is well controlled.

The speed of further improvement in the labor market following the initial rush of reopening is less clear, however. Some employers may be cautious about significantly increasing payrolls before post-COVID consumption patterns are more firmly established. Others may be implementing measures to stay lean and contain costs. In the December Duke CFO survey, roughly one-half of CFOs from large firms and about one-third of those from small firms reported “using, or planning to use, automation or technology to reduce reliance on labor.”8

In addition to greater use of technology, there is likely a significant amount of slack on the participation and part-time margins. The EPOP ratio among workers ages 25 to 54 is still a full 4 percentage points below its pre-COVID level, and the number of workers working part time because they cannot find a full-time job is 1.7 million higher than pre-COVID.

Although core and headline PCE inflation came in at 1.5 percent on a 12-month basis in January, the well-anticipated base effects from price declines in March and April of last year will cause inflation to move above 2 percent in April and May. It also seems likely that a surge of demand may be met by some transitory supply bottlenecks amid a rapid reopening of the economy, leading PCE inflation to rise somewhat above 2 percent on a transitory basis by the end of 2021.

Entrenched inflation dynamics are likely to take over following the transitory pressures associated with reopening. Underlying trend inflation has been running persistently below 2 percent for many years.9 In addition, research suggests that although increasing labor market tightness may show through to wage inflation, the pass-through to price inflation has become highly attenuated.10 These results suggest that businesses tend to respond to increased labor costs by reducing margins rather than increasing prices later in the cycle. Thus, as resource utilization continues to tighten over coming years, recent decades provide little evidence to suggest there will be a material nonlinear effect on price inflation.

The FOMC has communicated its reaction function under the new framework and provided powerful forward guidance that is conditioned on employment and inflation outcomes. This approach implies resolute patience while the gap closes between current conditions and the maximum-employment and average inflation outcomes in the guidance.

By focusing on eliminating shortfalls from maximum employment rather than deviations in either direction and on the achievement of inflation that averages 2 percent over time, monetary policy can take a patient approach rather than a preemptive approach. The preemptive approach that calls for a reduction of accommodation when the unemployment rate nears estimates of its neutral rate in anticipation of high inflation risks an unwarranted loss of opportunity for many of the most economically vulnerable Americans and entrenching inflation persistently below its 2 percent target.11 Instead, the current approach calls for patience, enabling the labor market to continue to improve and inflation expectations to become re-anchored at 2 percent.

One simple illustration of this difference is the way in which FOMC communications under the new framework have shifted market expectations around the conditions associated with the lift off of the policy rate from the lower bound. This shift is suggested by a comparison of the surveys of primary dealers and market participants conducted by the Federal Reserve Bank of New York in the most recently available surveys, in January 2021, and under the prior policy framework, in March 2015. In the January 2021 surveys, the median respondent expected the unemployment rate to be a bit below 4 percent at the time of liftoff, as compared with 5.3 percent in the March 2015 surveys. Similarly, in the January 2021 surveys, the median respondent expected a 12-month headline PCE inflation rate of 2.2 to 2.3 percent at the time of liftoff, as compared to roughly 0.5 percent in the March 2015 surveys. The most recently available surveys suggest that market participants expect policy to look through the rolling off of base effects as well as possible transitory price increases due to short-term supply-demand imbalances.

The FOMC has stated that in order to anchor inflation expectations at 2 percent, it seeks to achieve inflation that averages 2 percent over time. This language recognizes that the public’s expectations of inflation are linked to the experience of inflation outcomes. In the nine years since the Committee formally defined price stability as annual PCE inflation of 2 percent, the average 12-month PCE inflation reading has been 1.4 percent. Persistently low inflation creates the risk that households and businesses come to expect inflation to run persistently below target and change their behavior in ways that reinforce low inflation.12

With inflation expected to rise above 2 percent on a transitory basis, I will be closely monitoring a dashboard of indicators to assess that inflation expectations remain well anchored at levels consistent with the Committee’s objective. These indicators include survey and market-based measures, along with composite measures like the staff’s Index of Common Inflation Expectations.13 Survey measures have picked up a little but remain around pre-COVID levels. Meanwhile, five- and 10-year TIPS (Treasury Inflation-Protected Securities)-based measures of inflation compensation have moved up almost 1 percentage point since last summer and are now at levels last seen in 2013 and 2014. These changes likely reflect both the improvement in the anticipated outlook and market participants’ understanding of the Committee’s new reaction function.14

The overall price-stability objective of achieving inflation that averages 2 percent over time provides an important guidepost for assessing the path of inflation. Along with realized inflation, I will be monitoring a range of average inflation concepts in the literature to assess the path of policy that would be consistent with closing the inflation gap under a variety of make-up strategies.15

While the outlook has brightened considerably, with jobs nearly 10 million below the pre-COVID level and inflation persistently below 2 percent, the economy remains far from our goals, and it will take some time to achieve substantial further progress. By taking a patient approach based on outcomes rather than a preemptive approach based on the outlook, policy will be more effective in achieving broad-based and inclusive maximum employment and inflation that averages 2 percent over time. The combination of patient monetary policy, together with accelerating progress on vaccinations and substantial fiscal stimulus, should support a strong and inclusive recovery as the economy reopens fully.”

Treasury releases assessment of US economy

The following is a press release from the U.S. Department of the Treasury:

“In the final quarter of 2020, the U.S. economy expanded further, with growth in real GDP of 4.0 percent, according to the advance estimate released last Thursday.  Despite this second consecutive quarter of growth, real GDP still declined 2.5 percent over the four quarters of 2020, given the severity of the contraction in the first half of the year.  The economy’s recovery slackened by the end of the year.  Payroll job creation slowed noticeably from September through November, before declining outright in December, largely due to losses in leisure and hospitality service industries—such as restaurants and bars, hotels, performing arts venues, and other establishments that are particularly vulnerable to stay-at-home orders and other measures implemented to combat the pandemic.  While real personal consumption rose in the fourth quarter, the pace of growth was constrained in part by renewed lockdowns and reduced capacity in key service industries.  Though the second Federal economic aid package passed in December 2020 should boost growth in the first half of 2021, a full recovery nonetheless depends on effectively resolving the pandemic – the efficacy of public health measures and the rapid vaccination of the population – while ensuring that households and businesses can cope with the variety of headwinds presented by the pandemic.


Real GDP grew 4.0 percent at an annual rate in the fourth quarter of 2020, following a surge of 33.4 percent in the third quarter.  Two major components of GDP – private fixed investment and residential investment – grew at double-digit paces, but private consumption also made healthy positive contribution to growth in the fourth quarter.  Private domestic final purchases – the sum of personal consumption, business fixed investment, and residential investment – increased 5.6 percent at an annual rate in the fourth quarter, extending the 39.0 percent advance in the third quarter.  This measure captures the economy’s capacity for a self-sustaining recovery, and also attests to an underlying upward momentum in private demand.

Real personal consumer expenditures (PCE), which accounts for about two-thirds of overall GDP, grew 2.5 percent at an annual rate in the fourth quarter.  This followed a surge of 41.0 percent in the third quarter; by the fourth quarter, PCE had recovered 77 percent of what was lost in the first half of 2020.  Purchases of durable goods – a category that includes motor vehicles, household equipment and furnishings, among other items – were unchanged in the fourth quarter, after spiking 82.7 percent in the third quarter.  Purchases of nondurable goods – such as food and beverages purchased for off-premises consumption, gasoline and other energy goods, clothing, footwear, and other goods – declined 0.7 percent in the fourth quarter, following a gain of 31.1 percent in the third quarter.  Meanwhile, household expenditures on services – the component of PCE most severely affected by the pandemic and related measures – grew 4.0 percent in the fourth quarter, after rebounding by 38.0 percent in the third quarter.  With two consecutive quarters of gains in most categories, consumer spending was 2.6 percent below its level at the end of 2019.  Overall, real personal consumption expenditures added 1.7 percentage points to the rise in total GDP in Q4.

Business fixed investment (BFI) rose 13.8 percent at an annual rate in the fourth quarter, driven by gains in all three major components, and following a jump of 22.9 percent in the third quarter.  Equipment investment showed the most rapid and broad-based growth in the fourth quarter, rising 24.9 percent overall – with gains in each sub-component – after surging 68.2 percent in the third quarter.  Investment in intellectual property products grew 7.5 percent, roughly comparable to the 8.4 percent increase in the third quarter.  Meanwhile, investment in structures was up 3.0 percent in the fourth quarter.  This represented a sharp swing from the 17.4 percent drop in the third quarter, when appetite for such investment was diminished due to lower oil prices and less oil exploration, continued use of telework, and a shift in consumption patterns away from brick-and-mortar to online retail sites.  While the latter two factors were still present in the fourth quarter, oil prices have trended up since late October, prompting more investment in oil-drilling structures; according to private sources, the average rig count rose 21 percent from the third to the fourth quarters.  The fourth quarter rebound in investment for mining-related structures partially offset annualized declines of 82.1 percent and 67.0 percent in the second and third quarters, respectively. Overall, total business fixed investment added 1.7 percentage points to real GDP growth in the fourth quarter, after contributing 3.2 percentage points in the third quarter.

Inventory accumulation, albeit a volatile component, returned to a more normal pace in the fourth quarter, after a significant buildup in the third quarter.  In the fourth quarter, the change in private inventories added 1.0 percentage points to economic growth, after contributing 6.6 percentage points in the third quarter.

In three of the past four quarters, residential investment has grown at double-digit paces. After surging by 63.0 percent in the third quarter – its largest advance since 1983 – residential investment increased 33.5 percent in the fourth quarter.  This component added 1.3 percentage points to growth, after contributing 2.2 percentage points in the third quarter.  Prior to the pandemic, residential investment had contributed to GDP growth for two quarters, and growth in this sector was solid in the first quarter of 2020.  The pandemic led to a steep but temporary decline in the second quarter.  Yet since last May, this sector has gained considerable strength, supported by record-low interest rates and record highs in builder confidence.  Demand for homes has far outstripped available supply, which has led to the recent, strong acceleration in home price growth—as well as strong gains in housing wealth among homeowners.  High house prices should eventually draw in more supply to help redress the current imbalance; until then, the rise in prices is making owner-occupied housing somewhat less affordable.  

Single-family housing starts and permits have grown strongly each month since May.  As of December, single-family housing starts were nearly 30 percent above their February level and single-family building permits – a leading indicator for starts – were 23 percent above pre-pandemic levels.  Existing home sales, which account for 90 percent of all home sales, rose to a fourteen-year high in October and were up more than 22 percent over the year through December.  New single-family home sales reached a 13-year high last August; though pulling back since, new home sales were still 15.2 percent higher over the year through December. In November, the National Association of Home Builder’s home builder confidence index rose to a record high of 90; though declining a combined 7 points over the two subsequent months, the home builder confidence index in January was still at an elevated level, conveying a significantly positive outlook about market conditions in the housing sector.  In early January, average rates for 30-year mortgages set a record low that was 2¼ percentage points below the levels since in November 2018.  In the intervening weeks, rates have risen only modestly above the record low.

Government spending declined 1.2 percent at an annual rate in the fourth quarter, reflecting a 0.5 percent decline in Federal spending and a 1.7 percent decline in state and local government expenditures. Total government spending pared 0.2 percentage points from GDP growth in the fourth quarter, mostly due to the state and local government component.  State and local government consumption has fallen for three consecutive quarters, partially owing to the reduction in employees as these governments struggled to meet balanced-budget requirements. The pandemic increased health care costs for these governments but social distancing restrictions lowered revenue, creating budget shortfalls. 

The net export deficit increased $102.1 billion at an annual rate during the fourth quarter to $1.12 trillion, as recovering domestic demand fueled another surge in imports.  Exports grew strongly, if less so than imports.  Total exports of goods and services grew by 22.0 percent, while imports advanced 29.5 percent. The widening of the trade deficit subtracted 1.5 percentage points from fourth quarter GDP growth, though this was less than one-half the 3.2 percentage points of drag posed by net exports in the third quarter.


Due to measures taken to control the spread of the virus, the economy lost 22.2 million jobs last March and April, 21.1 million of which were in the private sector.  Payroll job growth resumed last May: through December, the economy had recovered nearly 56 percent of all jobs lost and 60 percent of the private sector’s job losses.  Nonetheless, the pace of job growth slowed in more recent months and the labor market recovery stalled in December, with the economy losing 140,000 jobs, including 95,000 jobs in the private sector.  In all, the number of unemployed persons stood at 10.7 million in December, and weekly initial unemployment claims continue to run about four times the average levels seen prior to the pandemic’s onset.

The headline unemployment rate remained at 6.7 percent in December for the second consecutive month, nearly double its pre-pandemic level but more than 8 percentage points below the 14.8 percent, post-World War II high reached in April 2020.  The broadest measure of labor market slack, the U-6 unemployment rate, has also declined noticeably over the past several months yet remains above pre-pandemic levels.  By December, the U-6 had been cut to 11.7 percent, roughly half its level in April 2020.  But it remains nearly 5 percentage points above the pre-pandemic low of 6.8 percent observed in in December 2019.  Moreover, long-term unemployment continues to rise: the share of the labor force who were unemployed 27 weeks or more reached 2.46 percent in December, or roughly four times the 0.68 percent rate seen in February 2020.

Although the headline labor force participation rate (LFPR) – as well as prime-age (ages 25-54) LFPR – have recovered from the lows seen in April, they have yet to return to their pre-pandemic levels and in recent months, progress has slowed.  As of December, the headline LFPR stood at 61.5 percent, or almost 2 percentage points below the six-year high seen in January 2020, and the prime-age LFPR was 81.0 percent, 2 percentage points below the eleven-year high seen in January 2020.  The employment report for January 2021 will be released this Friday, February 5.

Nominal average hourly earnings for production and nonsupervisory workers rose 5.2 percent over the year ending in December 2020, faster than the 3.2 percent pace over the 12 months through December 2019.  December marked the 29th month that this measure of wage growth has remained above 3 percent, a consistency not seen since the mid-2000s.  Job losses among lower-wage workers tended to push average wages much higher for a time, but even with the rehiring of many of these workers, wage gains remain elevated, possibly pointing to the continued shortage of skilled workers.  Relatively low inflation has also boosted purchasing power: real average hourly earnings rose 3.8 percent over the year through December 2020, accelerating sharply from the year-earlier pace of 0.9 percent.  In contrast, growth in wages and salaries for private industry workers, as measured by the Employment Cost Index, has slowed a bit.  This measure advanced 2.8 percent over the four quarters ending in December 2020, slowing from the 3.0 percent gain over the four quarters through December 2019.


Inflationary pressures remain subdued, even with the recent, moderate climb in oil prices, and still-sizeable gaps remain relative to year-ago rates.  The Consumer Price Index (CPI) for all items accelerated to 0.4 percent in December, reflecting a 4.0 percent jump in energy prices, but over the 12 months through December, CPI inflation was 1.4 percent, almost a full percentage point below its year-earlier pace.  Despite recent gains, energy prices were still 7.0 percent lower than a year ago, versus a 3.4 percent gain over the previous 12-month period.  After tapering in recent months, food price inflation accelerated again in December, as the re-imposition of dining-out restrictions boosted demand for food consumed at home.  It bears noting that 12-month food price inflation rates have remained in the range of 3.5 percent to 4.5 percent since April 2020.  Over the year through December, food prices rose 3.9 percent, more than double the 1.8 percent pace over the 12 months through December 2019.  Meanwhile, core CPI inflation edged down to 0.1 percent in the month of December.  Over the past 12 months, core inflation was 1.6 percent, or 0.7 percentage points below its pace over the year through December 2019.

The headline Personal Consumption Expenditures (PCE) Price Index (the preferred measure for the FOMC’s inflation target) also shows a restrained pace of inflation; in contrast to CPI inflation, however, current rates remain nearer to year-ago levels. The 12-month headline PCE inflation rate was 1.3 percent through December 2020, within range of the 1.6 percent pace over the previous year.  Core PCE inflation was 1.5 percent over the year through December 2020, close to the 1.6 percent, year-earlier rate.  Inflation as measured by the PCE price index has held below the FOMC’s target since November 2018.  The FOMC’s target for inflation is an average of 2 percent over time as measured by the PCE price index.  Due to the significant drop in prices during the March to May lockdowns, there may be a spike in inflation in late-winter and early-spring, but it should prove transitory.


After two consecutive quarters of growth, real GDP is nearing the level of economic activity achieved in the fourth quarter of 2019.  Yet, 10.7 million workers remain unemployed, and many businesses have closed.  A variety of headwinds and uncertainties persist, all presenting considerable downside risks to growth.  On the domestic front, the possibility that consumer mood simply levels off, or even deteriorates, could weigh on private consumption in the future.  In addition, there is considerable uncertainty about the reach of existing vaccines vis-à-vis the emergence of mutated forms of the virus, mutations which appear to be significantly more contagious.  Given the difficulties in distributing the virus to date, slower-than-expected attainment of so-called “herd immunity” could hamper the return to normal operation of the businesses most affected by the pandemic.  Finally, slower recovery in overseas markets could also adversely affect U.S. economic recovery.  To address some of these challenges, the Administration has presented a plan for rapid vaccination of the population and has proposed $1.9 trillion in additional fiscal support the economy more broadly.  Private forecasters currently project a growth rate in real GDP of 2.3 percent in the first quarter of 2021, and of 3.9 percent for the year as a whole.”

Federal Reserve Bank of New York releases survey on consumer expectations regarding the economy …

Yesterday, the Federal Reserve Bank of New York released its October 2020 Survey of Consumer Expectations. Overall, consumer expectations regarding inflation, employment, and income appear to be trending negative.

November 09, 2020

NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data released the October 2020 Survey of Consumer Expectations, which shows a decline in income and spending growth expectations. Changes in labor market expectations were mixed showing declines in both average job loss and job finding expectations. Median inflation expectations declined at the short-term horizon, while remaining unchanged at the medium-term horizon. Uncertainty and disagreement about future inflation decreased slightly but remained at an elevated level.

The main findings from the October 2020 Survey are:


  • Median inflation expectations in October decreased from 3.0% to 2.8% at the one-year horizon and remained unchanged at 2.7% at the three-year horizon. The decline was driven by higher-income respondents (household income above $100,000). Our measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) was unchanged at the one-year horizon but declined at the three-year horizon. Both remain substantially above their pre-COVID-19 levels.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased at both horizons but remains elevated relative to pre-COVID-19 readings.
  • Median home price change expectations, which have been trending upward after reaching a series’ low of 0% in April 2020, were unchanged at 3.1% in October.
  • The median one-year ahead expected change in the cost of a college education declined from 5.2% to 4.9% in October. Median expectations for the cost of rent and medical care both increased from 5.4% and 6.8% to 5.7% and 9.1% in October, respectively.

Labor Market

  • Median one-year ahead expected earnings growth remained unchanged at 2.0% in October, for the third consecutive month. The series remains well below its 2019 average level of 2.4%.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased from 36.4% in September to 35.4% in October, its third consecutive decline. The decline was driven by respondents without a college education.
  • The mean perceived probability of losing one’s job in the next 12 months decreased from 16.6% in September to 15.5% in October, remaining above its pre-COVID-19 reading of 13.8% in February. This month’s decline was more pronounced among respondents with more than a high school education and those with household incomes above $50,000. The mean probability of leaving one’s job voluntarily in the next 12 months declined substantially from 20.3% in September to 17.8% in October. The decrease was broad-based across demographic groups.
  • The mean perceived probability of finding a job (if one’s current job was lost) declined from 49.9% in September to 46.9% in October, its lowest reading since April 2014. The decline was broad based across education and income groups. The series remains well below its 2019 average of 59.9% and its February 2020 level of 58.7%.

Household Finance

  • Median expected household income growth decreased by 0.3 percentage point to 2.1% in October. Since February, this series has moved within a narrow range from 1.9% to 2.3%, well below its 2019 average of 2.8%. The decrease was driven by respondents without a college education.
  • Median household spending growth expectations decreased from 3.4% in September to 3.1% in October, which was the same as its February 2020 level.
  • Expectations for year-ahead credit availability deteriorated in October, with more respondents expecting credit to become more difficult to obtain.
  • The average perceived probability of missing a minimum debt payment over the next three months decreased from 10.7% in September to 9.3% in October, remaining below its 2019 average of 11.5%.
  • The median expectation regarding a year-ahead change in taxes (at current income level) declined from 3.0% in September to 2.9% in October.
  • The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now declined from 27.6% in September to 24.3% in October, a new series low.
  • Perceptions about households’ current financial situations compared to a year ago were largely unchanged, while one-year ahead expectations about households’ financial situations deteriorated slightly with fewer respondents expecting their financial situation to improve and more respondents expecting their financial situation to worsen.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased 3.3 percentage points to 40.8% in October, its lowest monthly reading this year.

About the Survey of Consumer Expectations (SCE)
The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers’ outlooks. Expectations are also available by age, geography, income, education, and numeracy. 

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, our panel allows us to observe the changes in expectations and behavior of the same individuals over time.

Shelley Pitterson
(212) 720-2552

3815 Media, Inc., is expanding in metro Atlanta …

Source: Georgia Department of Economic Development

ATLANTA, October 30, 2020 —The Georgia Department of Economic Development (GDEcD) today announced that content development, production, marketing and distribution company 3815 Media, Inc. is expanding with a new headquarters in Peachtree Corners. Founded by two-time Emmy Award-winning executive producer and Georgia Minority Supplier Development Council member Rushion McDonald, 3815 Media’s focus is identifying and promoting positive values for the Black community through diverse content creation.

“Investments from innovative companies like 3815 Media, Inc. are a testament to Georgia’s support for the film and production industries and to the investments Georgia has made in developing creative talent in the state,” said Georgia Department of Economic Development Commissioner Pat Wilson. “I thank Rushion McDonald for his continued investment in Georgia, and look forward to seeing the incredible opportunities he creates in Peachtree Corners with his commitment to producing quality content with an eye to diversity.”

Originally started in 2014, 3815 Media, Inc.’s expansion to 3201 Peachtree Corners Circle is expected to create 23 jobs in Gwinnett County. 3815 Media’s mission is to produce and market diverse content to consumers. Company Founder Rushion McDonald is also a multiple Emmy and NAACP Image Award-winner for television production and has produced national campaigns for State Farm, Ford, MGM, iHeartRadio, HBCU Week, ESPN, NBC, BET and ABC. He has written and produced for Steve Harvey, Kevin Hart, Taraji P. Henson, Mo’Nique, Gabrielle Union, Tia and Tamera Mowry, Stephen A. Smith, Jamie Foxx and many other household names.

“It was a no brainer for me to open 3815 Media in a city recognized as one of the best places to live in the entire State of Georgia thanks to its education quality, low crime rate, cost of living, employment and access to amenities,” said 3815 Media CEO Rushion McDonald. 

3815 Media, Inc.’s additional staff will include graphic designers, legal experts, talent managers, producers, creative strategists, virtual exhibit designers, marketing experts and more. Individuals interested in working for 3815 Media, Inc. who have experience in graphic design, social media, digital marketing and SEOs are encouraged to email their resumes to 3815 Media, Inc. will also offer internship opportunities.

“It is indeed a pleasure to welcome Mr. McDonald and his talented team to Peachtree Corners,” said Peachtree Corners Mayor Mike Mason. “One of our city’s top priorities is to ensure that all businesses have the opportunity to succeed. Our zero-millage rate and business-friendly city continues to draw remarkable businesses like 3815 Media. We wish them great success.”

“Gwinnett County is a great home for 3815 Media due to the strong diversity within the community,” said Andrew Carnes, vice president of economic development at Partnership Gwinnett. “We are always excited to continue to expand the creative talent workforce and provide opportunities for our region.”

Project Manager Asante Bradford represented GDEcD’s Global Commerce division on this project. 

About 3815 Media, Inc. 
3815 Media is built on the vision and career success of Rushion McDonald. Whether it’s print, radio, TV, film, live touring productions, industry exhibits, in person or across social networks, 3815 Media can help its clients create the exact message to build their brand, as well as produce content on the right platform medium. 3815 Media covers content development, production, marketing, distribution and multi-platform initiatives including digital video.


Marie Hodge Gordon
Director of Communications

Alison Wentley
Communications Specialist

There is no such thing as economic equality

“Who is creating equal. I’m trying to find the equation.” — Louie Bagz

Byron Allen, a black billionaire media business owner, appeared on Fox Business News today sharing his insights on economic equality.  Economic equality has been one of the major topics during the last five or six weeks since the death of George Floyd last May.  At first glance, you could argue that Mr Floyd’s death had nothing to do with economics and that the media’s highlighting of the plight of black people in the American economy is another angle to either drive up ratings by keeping the story hot or to keep the American public distracted from other undercurrents.  Frankly I think it’s a bit of both.  Conflating an economic argument with an act of horrific brutality gives Emmy and Pulitzer chasing journalists something more to talk about.

On the flip side, you can make an argument that Mr Floyd’s death was related to economics based on an economic decision he made that tragically led to his death.  Mr Floyd was trying to make a purchase with a counterfeit twenty-dollar bill.  Somewhere in his decision matrix he concluded that his optimal currency for use in exchange for some other good or service was a dollar bill not recognized as legal tender in the United States.

But currency connotes more than just money in circulation.  The amount of currency one is in possession of transmits a message about the value that an individual brings to market.  Is this individual willing and able to pay for goods and services that I have in my inventory such that I am willing and able to supply such goods and services?  In Mr Floyd’s case that value, at that moment in time, may have been zero.  But did that necessarily mean he was not economically equal to the merchant he wanted to trade with or anyone else for that matter?  I would argue no for the simple reason that there is no such thing as economic equality.

Let’s first define “economic.”  Economic, which is derived from “economy”, entails the management of income and production.  To be economic is to derive and apply certain rules regarding the management of resources in order to achieve some targeted income or production goal.  An economy is a system of rules or decision-making matrices that determine how wealth and income are to be distributed and how production is to be managed.

“Equality” is to do or to make something equal.  Two or more items are said to be equal when they are of the same quantity, size, or value.  Two or more individuals may be considered equal where they have the same abilities, rights, or rank.  But can Mr Floyd’s decision-making matrix be equal to mine?  Would his approach to deciding between producing more bread versus producing more wine equally reflect mine? For the simple reason that no two people are alike I would conclude that economic equality does not exist because no two economic decision-making systems for income, output, and wealth are alike or can be alike.

Can we find economic equality on a macro or national level?  Specifically, can we find economic equality between Anglo-Americans and Afro-Americans?  Again, just like on the individual level, you won’t find the non-existent.  Anglo-Americans, as a collective, follow the rules of income, wealth, and production as determined by a minority made up of political, banking, and religious elites for the benefit of the masses to the extent sharing those benefits with the masses protects the interests of the elite.  After acquiring by force land, minerals, and waterways, Anglo-Americans were able to apply technology and free labor to build an economy and refine a political economy that applied rules of wealth distribution for its people.

Afro-Americans were not at the table when the rules of acquisition and distribution were made.  You cannot enjoy economic equality when you were never the author of the economy’s rules.

But even if Afro-Americans had garnered a sufficient amount of land and other resources such that they could design their own economy, would there be “economic equality”?  I would argue no because differences in lineage, history, environment, and values, to name a few characteristics, would likely create a decision matrix different to those of Anglo-America.  Even if per capita production and quality of goods and services were on par, I would argue that because of the difference in decision rules, both economies would not be equal.

And would it necessarily be a bad thing if both groups were not economically equal where each group decided via its own standards how best to distribute income and wealth?