This report presents the global and domestic economic developments in the period to May 2020. Even so, lending standards for both households and businesses have become less accommodative, and borrowing conditions are tight for low-rated households and businesses. As liquidity improved, inflation compensation partially retraced. The wage component of compensation per hour also references the March survey week but was adjusted by the BLS with additional information to better capture job losses during the latter half of March. Leverage at broker-dealers changed little in the second half of 2019 and remained at historically low levels. Inflation compensation implied by the TIPS breakeven inflation rate is based on the difference, at comparable maturities, between yields on nominal Treasury securities and yields on TIPS, which are indexed to the total consumer price index (CPI). The legislation also provides nearly $50 billion in payroll tax relief for businesses significantly affected by COVID-19 shutdowns in order to retain employees. Return to text, 10. The LFPR in April, at 60.2 percent, was the lowest since January 1973. 108 (May), pp. In response to these developments, the Federal Reserve quickly lowered its policy rate to close to zero to support economic activity and took extraordinary measures to stabilize markets and bolster the flow of credit to households, businesses, and communities. Furthermore, if employees are not called back to their former jobs, their period of unemployment could increase, potentially leading to lower wages when they do eventually find a job. The rest of this discussion provides a brief overview of the main components of the four stimulus bills, focusing on the CBO's estimate of fiscal support (increased outlays minus reduced tax revenues) for fiscal 2020, organized by the four categories assigned in the figure. However, in April, real DPI jumped 13-1/2 percent, pushing its April level up relative to the fourth quarter at an annual rate of more than 30 percent. (See the box "Small Businesses during the COVID-19 Crisis" in Part 1. The Federal Reserve is bolstering the effectiveness of the PPP through the Paycheck Protection Program Liquidity Facility, which extends credit to eligible financial institutions to finance PPP loans. Return to text, A sharp reduction in tax revenues due to a collapse in income and retail sales tax revenue is placing significant stress on state governments. This decrease in factory output included nearly all motor vehicle and civilian aircraft manufacturers. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent, and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Disruptions to global trade may also result in a costly reconfiguration of global supply chains. This measure was 51.3 percent in April and 52.8 percent in May, the lowest readings in the history of this series, which began in 1948. United States: Fed keeps rates at effective floor and additional stimulus measures unchanged in June. In that survey, employers are asked to report the number of workers on their payrolls during the reference period, which is the pay period that includes the 12th of the month. Funding for the Department of the Treasury to provide loans to the airline industry and to fund lending facilities established by the Federal Reserve are not included. In addition, the Federal Emergency Management Agency is expected to spend $50 billion in disaster relief funds to provide assistance to individuals and organizations affected by the COVID-19 crisis. The Federal Reserve established the Main Street Lending Program to provide up to $600 billion in four-year loans for small and medium-sized businesses that were in good financial standing before the pandemic. The pandemic has curtailed business investment, as many investment projects were delayed or canceled because of lower profit expectations, concerns about future demand, reduced credit availability, and uncertainty about how businesses will operate in the future. Small businesses are also prevalent in manufacturing supply chain industries.2 Moreover, the businesses that spur innovation, contribute to nationwide job and productivity growth, and turn into large household names typically start out as small businesses.3, Small businesses are particularly vulnerable to social distancing for two main reasons. Return to text, 7. For example, in the most recent projections, the median of FOMC participants' estimates of the longer-run normal rate of unemployment was 4.4 percent. In their previous meeting held on 27 th May 2020, the committee … Perhaps reflecting this possibility , the number of unemployed workers reporting that they had permanently separated from their previous employer rose by roughly 300,000 between April and May, even as the total number of unemployed persons began to decline. 101 (March), pp. The abrupt slowing in total PCE price inflation this year partly reflects sharp declines in consumer energy prices that resulted from the collapse in oil prices. In response to the public health emergency precipitated by the spread of COVID-19, many protective measures were adopted to limit the transmission of the virus. In the financial sector, banks, as of the fourth quarter of 2019, were well capitalized relative to historical levels, in part due to the regulatory reforms enacted after the GFC. Against this backdrop, the COVID-19 outbreak poses severe risks to businesses and millions of households. Return to text, While reliable data are limited, anecdotal evidence suggests that the economic downturn is putting downward pressure on wages. After turning up starting around the middle of 2019 as mortgage rates moved lower, new home sales, existing home sales, and single-family starts and permits have posted outsized declines beginning in March that are all close to the largest ever recorded (figures 19 and 20). Return to text, 20. 107 (December), pp. The Monetary Policy Statement reviews the recent global and domestic macroeconomic developments, and the outcome of implementation of monetary policy during 2019/20 against …
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