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FHLBNY
FHLBNY
© 2020 FEDERAL HOME LOAN BANK OF NEW YORK • 101 PARK AVENUE • NEW YORK, NY 10178 • WWW.FHLBNY.COM
Brian Jones, Financial Economist
August 13, 2020
How Strong a Rebound?
FHLBNY
FHLBNY
Early Projections Call for a Fairly Sharp Snapback in Q3 Real GDP Growth
18.0%
17.0%
20.5%
16.9%
15.6%
17.8%
10%
12%
14%
16%
18%
20%
22%
Bloomberg Consensus Congressional Budget Office Atlanta Fed NY Fed GDP Nowcast NY Fed WEI Hours Worked
Average17.6%
2
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FHLBNY
Rebound in Real Consumer Spending Expected to Fuel Rise in Q3 GDP Growth
Source: Bureau of Economic Analysis
-1.1
5.5 5.02.3 3.8 2.7
1.5 0.62.3 1.3 2.2 2.5 2.3 1.7
2.93.9
3.8 2.72.1
1.32.9
1.52.6 2.4
-5.0
-32.9
17.6
6.5
-40
-30
-20
-10
0
10
20
2014 2015 2016 2017 2018 2019 2020
Net Contributions to Real GDP Growth(quarterly percentage change at seasonally adjusted annual rate)
Consumer Spending Business Fixed Investment Residential Investment Inventories Net Exports Government Outlays Real GDP
3
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FHLBNY
Recovery of Jobs Lost Amid COVID-19 Crisis Will Be Crucial to Magnitude of Bounceback
Note: Shaded areas denote recessions. Source: U.S. Department of Labor
4
0
5,000
10,000
15,000
20,000
25,000
Still a Considerable Way to Go to Recover COVID-19 Job Losses(thousands, seasonally adjusted)
Jobs Lost Jobs Recovered
1,000,000
4,000,000
7,000,000
10,000,000
13,000,000
16,000,000
19,000,000
22,000,000
25,000,000
28,000,000
100,000
1,100,000
2,100,000
3,100,000
4,100,000
5,100,000
6,100,000
7,100,000
2007 2009 2011 2013 2015 2017 2019
Initial Claims (scale left) Continuing Claims (scale right)
Jobless Claims Remain on Downtrends, But Further Progress Necessary to Ensure Recovery
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FHLBNY
NBER May Ultimately Determine That the Economy Bottomed in April
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 1995 2000 2005 2010 2015 2020
St. Louis Fed Smoothed Recession Probabilities Model NY Fed Yield Curve Model
June 2020: 39.0%July 2021: 20.0%
Note: Shaded areas denote recessions. Sources: Federal Reserve Banks of New York and St. Louis
5
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Recent Economic Soundings Have Beat Consensus Expectations By a Wide Margin
-150
-100
-50
0
50
100
150
200
250
300
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Citi U.S. Economic Surprise Index(end of month observations)
Note: Shaded areas denote recessions. Source: Citi Investment Research, Bloomberg
6
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FHLBNY
Key Economic Indicators Have All Moved off Coronavirus-Induced Lows
7
Note: Shaded area denotes recession. Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, Federal Reserve System, Institute for Supply Management
91.6
91.3
91.8
105.9
96.986.6
108.2
101.4
50
60
70
80
90
100
110
80
85
90
95
100
105
110
Jan Feb Mar Apr May Jun Jul
Recent Performances of Key Economic Variables(Index February Cycle Peak = 100)
Nonfarm Payrolls (left) Total Hours Worked (left) Industrial Production (left)Control Retail Sales (left) Nondefense Capital Goods Shipments Ex Aircraft (left) Motor Vehicle Sales (right)ISM Manufacturing (right) ISM Non-Manufacturing
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FHLBNY
U.S. Railroad Traffic Now Well Off Pandemic Bottoms
8
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FHLBNY
Activity Improving in Service-Producing Industries, Even in Areas That May Have Reopened Prematurely
Source: Calculated Risk
9
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FHLBNY
Consumers Returning to the Road; Public Transit Usage Will Climb as Social-Contact Restrictions Are Relaxed
Source: Calculated Risk
10
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FHLBNY
Other Areas of the Economy Will Take Significantly Longer Time to Recover
11
Source: Calculated Risk
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FHLBNY
Core Consumer Inflation Gauges Will Remain Well Below Fed Target Until Spring 2021
Notes: Light blue shaded areas denote recessions. Pink shaded area denotes projections. Sources: Bureau of Labor Statistics and FHLBNY estimates
0.5
1.0
1.5
2.0
2.5
3.0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Core Consumer Price Index Core PCE Chain Price Index Federal Reserve Target
%
Core Consumer Inflations Measures
12
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Financial Conditions Have Moved Into Accommodative Territory
Note: Shaded areas denote recessions. Source: Bloomberg
-10
-8
-6
-4
-2
0
2
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Bloomberg United States Financial Conditions Index
Std Dev
22-Jul-20 13-Aug-20 Change
US Financial Conditions 0.02 0.28 0.26
Money Market Spreads:
TED Spread 14.90 17.24 2.34
Libor/OIS Spread 18.05 18.79 0.74
Com Paper/T-Bill Spread 9.59 10.00 0.41
Bond Market Spreads:
Baa/10-Yr Treasury Spread 174.28 161.78 -12.50
High-Yield/10-Yr Treas Spread 5.06 4.80 -0.26
Muni/10-Yr Spread 26.94 5.83 -21.11
Swaption Volatility Index 58.79 62.24 3.45
Equity Market:
S&P 500 3265.84 3380.35 114.51
VIX S&P Volatility Index 24.73 22.31 -2.42
13
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Fed Officials Anticipate No Change in Administered Rates Through 2022
Percent Percent
3.375 3.375
3.25 ll l l 3.25
3.125 l l 3.125
3 ll l l ll 3
2.875 l ll ll 2.875
2.75 lll lll ll l 2.75
2.625 ll lll l ll ll 2.625
2.5 llllllll llllllll llllllll llllllll 2.5
2.375 lllll l lllll lllll lll lllll llll l l l l 2.375
2.25 l ll lll 2.25
2.125 ll llllll ll llll lllll llll lll 2.125
2 l l l 2
1.875 lllllll ll llll lllll lll llll lll lllll 1.875
1.75 1.75
1.625 llllllll lllllllllllll llll llll l l 1.625
1.5 1.5
1.375 1.375
1.25 1.25
1.125 l 1.125
1 1
0.875 0.875
0.75 0.75
0.625 0.625
0.5 0.5
0.375 l 0.375
0.25 0.25
0.125 lllllllllllllllll lllllllllllllllll lllllllllllllll 0.125
Jun '19 Sep '19 Dec '19 Jun '20 Jun '19 Sep '19 Dec '19 Jun '20 Sep '19 Dec '19 Jun '20 Jun '19 Sep '19 Dec ' 19 Jun '20
Longer Run2020 2021 2022
Source: Federal Reserve Board
14
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FHLBNY
Fed Securities Holdings Stand $2.3 Trillion Above Their Pre-COVID-19 Level
Source: Federal Reserve Board
15
$0
$1
$2
$3
$4
$5
$6
$7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Securities Held Outright by the Federal Reserve(trillions of dollars)
Treasuries Federal Agency Debt Mortgage-Backed Securities CMBS Securities Held Outright
FHLBNY
FHLBNY
Consensus Projections Call for Steady Rise in Treasury Rates Through Summer 2021
Sources: Bloomberg, Blue Chip Consensus
0.130.10 0.11 0.14 0.16
0.30
0.68
1.37
0.10.2
0.30.4
0.5
0.8
1.2
1.9
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
Fed Funds 3-Month 6-Month 1-Year 2-Year 5-Year 10-Year 30-Year
8/13/2020 4Q20 1Q21 2Q21 3Q21 4Q21
16
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FHLBNY
NY Factory Activity Expanded in July, Firms More Hopeful About the Future
Note: Shaded areas denote recessions. Sources: Federal Reserve Bank of New York, FHLBNY estimates
10
20
30
40
50
60
70
80
Empire State Manufacturing Survey(diffusion indexes, 50 = no change from prior month)
Composite New Orders Employment
25
30
35
40
45
50
55
60
65
70
Empire State Manufacturing Composite Indexes
Present Future
17
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FHLBNY
Local Service-Producing Activity Stabilized, But Firms Remain Concerned About Business Climate
Note: Shaded areas denote recession. Sources: Federal Reserve Bank of New York, FHLBNY estimates
0
10
20
30
40
50
60
70
80
90
New York Fed Business Leaders Survey(diffusion indexes, 50 = no change from prior month)
Business Activity Business Climate Employment Wages
10
20
30
40
50
60
70
80
New York Fed Business Leaders Survey(diffusion indexes, 50 = no change from prior month)
Future Business Activity Future Business Climate
18
FHLBNY
FHLBNY
Labor Market Conditions in FHLBNY Coverage Area Improving
Note: Shaded areas denote recession. Source: U.S. Department of Labor
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2016 2017 2018 2019 2020
Initial Claims (scale left) Continuing Claims (scale right)
Unemployment Insurance Claims in the FHLBNY District
0
2
4
6
8
10
12
14
16
18
20
2016 2017 2018 2019 2020
FHLBNY Insured Unemployment Rate
19
FHLBNY
FHLBNY
Low Rates Are Supporting a Sharp Rebound in Home-Purchase Mortgage Applications
Note: Shaded areas denote recessions. Sources: Mortgage Bankers Association
2.50
3.00
3.50
4.00
4.50
5.00
5.50
2014 2015 2016 2017 2018 2019 2020
Mortgage Interest Rates
5-Yr ARM 15-Yr Fixed 30-Yr Fixed
100
150
200
250
300
350
400
450
500
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Home-Purchase Mortgage Applications
20
FHLBNY
FHLBNY
Leap in Contract Signings Point to Coming Surge in Existing Home Sales
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
60
70
80
90
100
110
120
130
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
U.S. Pending and Existing Home Sales
Pending Home Sales (index 2001 = 100, left) Existing Home Sales (millions saar, right)Annual Averages
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
2012 2013 2014 2015 2016 2017 2018 2019 2020
Pending and Closed Home Sales in New York & New Jersey(seasonally adjusted)
Pending Sales Closed Sales Annual Average Sales
Note: Shaded areas denote recessions. Sources: National Association of Realtors, NJ Realtors, NYSAR
21
FHLBNY
FHLBNY
Mortgage Delinquencies Continued to Climb in May, But Forbearances Are Edging Lower
Sources: CoreLogic, Mortgage Bankers Association
3.6%
1.7%
0.6%0.3%
1.0%
0.4%
7.3%
3.0% 2.8%
0.5%1.0%
0.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
30+ Days Past Due 30-59 Days Past Due 60-89 Days Past Due 90-119 Days Past Due 120+ Days Past Due In Foreclosure
Mortgage Delinquency Rates
May-19 May-20
22
FHLBNY
FHLBNY
The Most Important Healthcare Data to Watch
23
Source: The COVID Tracking Project
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
U.S. COVID-19 Tests Results Per Day
Tests Conducted (scale left) 7-Day Moving Avg (scale left) Percent Positive (scale right)
FHLBNY
FHLBNY
When Financial Stress Rises, the FHLBNY Stands Ready to Lend
24
Note: Shaded areas denote recessions. Sources: Federal Reserve Bank of Kansas City, FHLBNY estimates
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
-3
-2
-1
0
1
2
3
4
5
6
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Financial Stress & FHLBNY Advances vs. Trend
Kansas City Fed Financial Stress Index (scale left) Advances Vs. Trend (right)
Std Dev $ Millions
FHLBNY
FHLBNY
101 PARK AVENUE • NEW YORK, NY 10178 • WWW.FHLBNY.COM
Advancing Housing and Community Growth
The information provided by the Federal Home Loan Bank of New York (FHLBNY) in this communication is set forth for informational purposes only. The information should not be construed as an opinion,
recommendation or solicitation regarding the use of any financial strategy and/or the purchase or sale of any financial instrument. All customers are advised to conduct their own independent due diligence
before making any financial decisions. Please note that the past performance of any FHLBNY service or product should not be viewed as a guarantee of future results. Also, the information presented here and/or
the services or products provided by the FHLBNY may change at any time without notice.
Brian M. Jones
FHLBNY, Financial Economist
Office: (212) 441- 6802; Mobile (914) 351-8994