Escolar Documentos
Profissional Documentos
Cultura Documentos
of Business and
Economic Conditions
Vol. 24, No. 2
Immigration
Which Populations
Are Growing, Shrinking?
Commodities
April 2016
C O N T E N T S
A Quarterly Review
of Business and
Economic Conditions
Immigration
Which Populations
Are Growing, Shrinking?
Commodities
April 2016
By Yi Wen
Chinas industrial revolution over the past 35 years is probably one of the
most important economic and geopolitical phenomena since the original
Industrial Revolution in the 18th century. The rapid growth has puzzled
many, in part because China tried and failed at this transformation before.
What was the secret this time?
Chinas Rapid Rise
From Backward Agrarian Society
to Industrial Powerhouse
in Just 35 Years
ECONOMIST
APRIL 2016 | VOL. 24, NO. 2
PRESIDENTS MESSAGE
Measuring Trends
in Income Inequality
By Michael T. Owyang
and Hannah G. Shell
By Stephen Williamson
20 M E T R O P R O F I L E
Cape Girardeau, Mo.:
Ahead, Yet Behind
By Charles S. Gascon
and Joseph T. McGillicuddy
This small MSA scores well on
educational attainment, cost
of living, employment in health
care services and in other categories. Still, output and job growth
are relatively slow.
Director of Research
Christopher J. Waller
Chief of Staff to the President
Cletus C. Coughlin
Deputy Director of Research
David C. Wheelock
subhayu.bandyopadhyay@stls.frb.org.
You can also write to him at the
address below. Submission of a
letter to the editor gives us the right
to post it to our website and/or
Commodities Importance
to Emerging Economies
By Alexander Monge-Naranjo
and Faisal Sohail
17 E C O N O M Y A T A G L A N C E
23 N A T I O N A L O V E R V I E W
to Subhayu Bandyopadhyay
at 314-444-7425 or by email at
18 D I S T R I C T O V E R V I E W
Immigration Patterns
Yield Some Surprises
By Subhayu Bandyopadhyay
and Rodrigo Guerrero
The percentage of foreign-born
in the four major metro areas of
the District is smaller than for the
nation as a whole. However, some
of the metro areas are showing
faster growth in their Asian, African and Latin American populations than is the nation overall.
2015 (Actual)
2016
2017
2018
5.0
5
Percent
THE REGIONAL
4.7 4.6
4
3
2
1.9
2.0
1
0
Real GDP
Unemployme
ONLINE EXTRA
Read more at www.stlouisfed.org/publications/re.
P R E S I D E N T S
M E S S A G E
ENDNOTES
1 The
New York Feds Survey of Consumer Expectations also provides a measure of consumers
expectations for inflation. See www.newyorkfed.org/
microeconomics/sceindex.
2 For instance, see Gospodinov, Nikolay; Tkac, Paula;
and Wei, Bin. Are Long-Term Inflation Expectations Declining? Not So Fast, Says Atlanta Fed,
Macroblog, Jan. 15, 2016. Also see Bauer, Michael
D.; and McCarthy, Erin. Can We Rely on MarketBased Inflation Forecasts? FRBSF Economic Letter
2015-30, Sept. 21, 2015.
3 Another market-based measure of inflation expectations is so-called inflation swaps. For a discussion of
TIPS breakeven rates and inflation swaps, see Lucca,
David; and Schaumburg, Ernst. What to Make of
Market Measures of Inflation Expectations? Liberty
Street Economics, New York Fed, Aug. 15, 2011.
4 The drop since 2014 has been highly correlated with
oil prices. For more on this topic, see my presentation
on Feb. 24, 2016, More on the Changing Imperatives for U.S. Monetary Policy Normalization.
ECONOMICS
Measuring Trends
in Income Inequality
By Michael T. Owyang and Hannah G. Shell
THINKSTOCK / ISTOCK
Economists use Gini coefficients, percentiles and detailed survey data to study trends
in income inequality. They find that inequality
has been rising in the U.S. since World War
II, reaching its highest level in 2013 since the
1920s. This result is robust for the definition of
income and the chosen measure of inequality.
Understanding the facts about inequality is the first step in assessing what can and
should be done. While there is a general
consensus that some reallocative transfers
from the top of the income distribution to the
bottom are desirable, the optimal amount of
these redistributions is still up in the air.
Michael T. Owyang is an economist, and Hannah G. Shell is a senior research associate, both
at the Federal Reserve Bank of St. Louis. For
more on Owyangs work, see https://research.
stlouisfed.org/econ/owyang.
ENDNOTES
1 Piketty and Saez also estimate the portion of lower
REFERENCES
DeNavas-Walt, Carmen; and Proctor, Bernadette D.
Income and Poverty in the United States: 2014.
Current Population Reports. September 2015. See
www.census.gov/content/dam/Census/library/
publications/2015/demo/p60-252.pdf.
The Distribution of Household Income and Federal
Taxes, 2011. Congress of the United States:
Congressional Budget Office. November 2014.
See www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/49440-Distribution-ofIncome-and-Taxes.pdf.
Piketty, Thomas; and Saez, Emmanuel. Income
Inequality in the United States, 1913-1998. The
Quarterly Journal of Economics, Vol. 118, No. 1,
2003, pp. 1-39. See http://eml.berkeley.edu/~saez/
pikettyqje.pdf.
Saez, Emmanuel. Striking It Richer: The Evolution
of Top Incomes in the United States, updated
with 2014 preliminary estimates. University of
California, Berkeley. June 2015. See http://eml.
berkeley.edu/~saez/saez-UStopincomes-2014.pdf.
Stone, Chad; Trisi, Danilo; Sherman, Arloc; and
DeBot, Brandon. A Guide to Statistics on Historical Trends in Income Inequality. Center on
Budget and Policy Priorities. October 2015.
See www.cbpp.org/sites/default/files/atoms/
files/11-28-11pov_0.pdf.
0.50
0.48
0.46
0.44
0.42
0.40
0.38
0.36
0.34
0.32
0.30
TRADE
Commodity Prices
and the Business Cycle
ENDNOTES
FIGURE 1
Commodity Exports as a Percentage of GDP in 2013
Argentina
Brazil
Canada
Chile
Colombia
Indonesia
Mexico
Russia
South Africa
Venezuela
REFERENCES
8
10
As a Percentage of GDP
12
14
16
Metals
18
20
Energy
Conclusion
0.01
0.00
0.01
1.0
0.8
0.6
0.4
0.2
0.0
0.2
0.4
0.6
0.8
1.0
2015:Q1
2014:Q1
2009:Q1
2008:Q1
2007:Q1
2006:Q1
2005:Q1
2004:Q1
2003:Q1
2002:Q1
2001:Q1
0.02
2000:Q1
2013:Q1
2012:Q1
2011:Q1
2010:Q1
Quarter
All Commodities (left axis)
Canada
Argentina
Colombia
Brazil
Russia
INTERNATIONAL
By Yi Wen
FIGURE 1
90%
80%
70%
60%
50%
40%
30%
20%
10%
Germany
India
Japan
Italy
France
China
Russia
Spain
United States
2014
2010
2000
1990
1980
1970
1960
1950
1940
1913
1900
1870
1850
1820
1700
1600
1500
1000
0%
United Kingdom
FIGURE 2
Manufacturing Output for Top Five Countries in 2013
3,500
China
3,000
U.S. dollars, billions
United States
2,500
Japan
2,000
Germany
1,500
Russia
1,000
500
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
1. 1600-1760: Proto-industrialization in
rural areas, organized and financed by
rich merchants (e.g., via the putting-out
system7);
2. 1760-1830: first industrial revolution
in textile industries, relying on woodframed and water-powered textile
machines for mass production;
3. 1830-1850: boom in industrial trinity:
energy (such as coal), transportation
(such as railroad) and locomotive (such
as steam engine);
4. 1850-1900: second industrial revolution,
involving the mass production of the
means of mass production, such as iron,
steel, chemicals and machinery; and
5. After 1900: entering the welfare state
(e.g., universal suffrage in 1928).
U.S. path to industrialization:
ENDNOTES
1 See Chang.
com/2008/08/napoleon-and-his-view-on-china.
html.
3 The Malthusian trap, named after the 19th century British political economist Thomas Robert
Malthus, suggests that for most of human history,
income was largely stagnant because technological
advances and discoveries only resulted in more
people, rather than improvements in the standard
of living. It is argued that many countries in tropical
Africa still find themselves in the Malthusian trap.
4 See Acemoglu and Robinson.
5 The specific components of the industrial trinity
evolve over time. In terms of energy, it was coal in
the 19th century, oil in the 20th century and solar
power in the 21st century. In terms of communication, it was the telegraph in the 19th century,
the telephone in the 20th century and electronic
mail in the 21st century.
6 The demarcations of the stages are approximations and can never be exact, and they often tend
to overlap with each other for a substantial period
of time. But a higher stage always appears later
than a lower stage in history for the successfully
industrialized nations, whereas the unsuccessfully
industrialized nations tend to directly jump into
higher stages by skipping earlier stages.
7 The putting-out system was a system of familybased domestic manufacturing that was prevalent
in rural areas of western Europe during the 17th
and 18th centuries. Domestic workers involved in
this system typically owned their own primitive
tools (such as looms and spinning wheels) but
depended on merchant capitalists to provide them
with the raw materials to fashion products, which
were deemed the property of the merchants. Semifinished products would be passed on by the merchant to another workplace for further processing,
while finished products would be taken directly to
market by the merchants.
8 In this regard, China contributed to and also benefited from the postwar peaceful world order created by the joint efforts of developing countries,
their independence movements and the industrial
world powers, especially the United States.
9 See Wen for more detailed analysis.
10 A theoretical framework for why successful industrialization must go through stages is provided
in my forthcoming book, titled The Making of an
Economic Superpower: Unlocking Chinas Secret
of Rapid Industrialization. See https://research.
stlouisfed.org/econ/wen/sel.
REFERENCES
F E D E R A L
R E S E R V E
S Y S T E M
The St. Louis Fed has just released its annual report.
The main essay, written by Williamson, is about the
Feds return to normal monetary policy after seven
years of abnormally low interest rates. St. Louis Fed
President and CEO James Bullard also addresses this
topic. Elsewhere in the annual report, the St. Louis
Feds work, people, mission and results are featured.
To read the report online, go to www.stlouisfed.org/
annual-report.
FIGURE 1
Value of ON-RRPs Outstanding
500
Dec. 31
Billions of Dollars
400
300
200
100
01/22/16
01/19/16
01/16/16
01/13/16
01/10/16
01/07/16
01/04/16
01/01/16
12/29/15
12/26/15
12/23/15
12/20/15
12/17/15
SOURCES: Federal Reserve Board/Haver Analytics. NOTE: ON-RRP stands for overnight reverse repurchase agreement.
FIGURE 2
A Floor and a Subfloor for the Federal Funds Rate
0.6
0.5
0.4
0.3
0.2
Dec. 31
01/20/16
01/18/16
01/16/16
01/14/16
01/12/16
ON-RRP Rate
01/10/16
01/08/16
12/31/15
12/29/15
12/27/15
12/25/15
12/23/15
12/21/15
12/17/15
12/19/15
IOER
0.0
01/06/16
0.1
01/04/16
E C O N O M Y
PERCENT
Q4
10
11
12
13
14
15
CPIAll Items
All Items, Less Food and Energy
March
11
12
13
14
15
16
3.00
0.8
2.75
0.7
2.50
0.6
2.25
0.5
2.00
April 8, 2016
1.75
PERCENT
PERCENT
I N F L AT I O N - I N D E X E D T R E A S U RY Y I E L D S P R E A D S
20-Year
1.50
12
13
1/27/16
12/16/15
3/16/16
0.4
0.3
0.1
5-Year
1.00
10/28/15
0.2
10-Year
1.25
14
15
0.0
16
1st-Expiring
Contract
C I V I L I A N U N E M P L O Y M E N T R AT E
3-Month
6-Month
12-Month
I N T E R E S T R AT E S
10
10-Year Treasury
9
3
8
PERCENT
7
6
5
4
3
March
11
12
13
14
15
16
11
12
13
14
15
February
16
NOTE: On Dec. 16, 2015, the FOMC set a target range for the
federal funds rate of 0.25 to 0.5 percent. The observations
plotted since then are the midpoint of the range (0.375 percent).
Exports
75
Imports
60
45
30
15
Trade Balance
0
11
12
13
14
15
February
16
REFERENCES
BILLIONS OF DOLLARS
1 See Williamson.
2 See Williamson for more information.
3 See Board of Governors.
4 See Bartolini, Hilton and McAndrews for more
information on the timing of transactions.
G L A N C E
ENDNOTES
PERCENT
expect that, on Dec. 31, lenders in the overnight market would shift their activity from
the fed funds market to the ON-RRP market,
as this would reduce risk on their balance
sheets. Sure enough, we saw a large increase
in ON-RRP activity on Dec. 31.
Still, why were fed funds market lenders
accepting an average interest rate of 0.20
percent on Dec. 31, 2015, which is lower
than the ON-RRP rate on that date, and why
were some participants accepting interest
rates as low as 0.08 percent? A potential
explanation for this is that fed funds market
trades and ON-RRP trades are very different in terms of the time of the day lending
occurs and when the loan is paid back the
next day. In particular, ON-RRP borrowing by the Fed occurs between 12:45 and
1:15 p.m. ET, and loans are paid back the
next day between 3:30 and 5:15 p.m. ET.
However, a fed funds transaction can occur
as late as 6:30 p.m., with funds potentially
returned early the next day.4 So, while a fed
funds market transaction may be riskier
because lending is unsecured, it is also more
liquid, as lending can occur later in the day
and funds can be returned more quickly the
next day. Thus, lenders may be willing to pay
for liquidity with a lower overnight interest
rate, and this would have a larger effect at
the quarter-end, when trading on the fed
funds market is thin.
A T
Quality Farmland
4
Ranchland or Pastureland
2
0
2
4
6
On the web version of this issue, 11 more charts are available, with much of those charts data specific to the Eighth District.
Among the areas they cover are agriculture, commercial banking, housing permits, income and jobs. To see those charts, go to
www.stlouisfed.org/economyataglance.
The Regional Economist | www.stlouisfed.org 17
D I S T R I C T
O V E R V I E W
The table presents the share of foreignborn in the population in 2014 and the
compound annualized growth rate of foreign-born between 2005 and 2014, shown in
parentheses.2 The table also sorts these data
by different geographical areas of origin.
Out of all the foreign-born in the nation in
2014, about half were from Latin America,
and about half of the Latin Americans were
from Mexico. Asian nations contributed the
next highest share, at 4.1 percent, followed
by European nations at 1.9 percent, while
the African-born share was a modest 0.6
percent. The picture was roughly similar for
the Chicago MSA, except that the European
share was considerably larger compared
with that of the nation. In St. Louis, however, the Asian share (2 percent) was more
than twice that of all of Latin Americas
(0.9 percent), and the European share was
1.4 percent. The other district MSAs were
more similar to the nation in the sense that
the largest share of their foreign-born population was from Latin America.
For the U.S. as a whole, the foreign-born
population grew at 2 percent per year in
the 2005-2014 period. This substantially
exceeded the overall annual U.S. population growth rate of 1.1 percent during the
same period. What is quite interesting in
ENDNOTES
Percent
18.2 18.3
16.7
1990
2000
2010
2014
13.7 14.2
11.7
11.9
8.7
2.5
U.S.
Chicago
3.7
5.7 6.1
5.2 5.0
5.6 6.0
3.7
2.0
St. Louis
1.7
Memphis
3.3
5.2 4.9
2.3
Louisville
3.0
Little Rock
REFERENCE
IPUMS-USA, University of Minnesota.
See www.ipums.org.
SOURCES: Authors calculations from American Community Survey and decennial census data, accessed via IPUMS-USA.
Region
Total Foreign
Latin America
Mexico
Europe
Africa
North America
Oceania
Asia
Population (mil)
U.S.
14.2 (2.0)
7.1 (1.6)
3.8 (0.8)
1.9 (0.2)
0.6 (4.8)
0.3 (0.1)
0.1 (5.0)
4.1 (3.3)
319.0 (1.1)
Chicago
18.3 (0.4)
8.2 (0.5)
6.9 (0.7)
4.2 (0.4)
0.5 (3.8)
0.2 (1.1)
0.0 (2.3)
5.3 (2.6)
9.5 (0.3)
St. Louis
5.0 (1.0)
0.9 (0.9)
0.5 (2.6)
1.4 (2.0)
0.4 (7.0)
0.2 (7.3)
0.1 (5.0)
2.0 (3.4)
2.8 (0.8)
Memphis
6.1 (3.2)
3.0 (5.8)
1.6 (4.6)
0.8 (3.3)
0.4 (5.1)
0.1 (7.2)
0.0 (9.3)
1.7 (0.4)
1.2 (0.1)
Louisville
6.0 (5.4)
2.2 (6.6)
1.0 (3.1)
1.2 (0.4)
0.8 (13.0)
0.2 (0.4)
0.0 (24.0)
1.6 (6.8)
1.2 (1.3)
Little Rock
4.9 (1.4)
2.4 (3.3)
1.6 (4.1)
0.6 (5.9)
0.2 (2.0)
0.1 (0.6)
0.0 (13.0)
1.6 (4.5)
0.7 (1.8)
SOURCES: Authors calculations from American Community Survey data, accessed via IPUMS-USA.
NOTE: North America, in this case, consists of Canada and Atlantic Islands. The last column pertains to the level of the countrys or MSAs population as a whole;
its parenthetical numbers indicate 2005-2014 annual population growth rates.
M E T R O
P R O F I L E
FIGURE 1
170
United States
Missouri
Cape Girardeau MSA
160
150
Index 1970=100
Population
140
130
120
110
100
90
80
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
MSA Snapshot
FIGURE 2
Total Nonfarm Payroll Employment
110
United States
Missouri
105
100
95
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Largest Employers
2002
90
2001
FIGURE 3
Output Growth
Other services 2%
4
3
1
1
2002
2003
Missouri
2004
2005
2007
22%
11%
14%
23%
10%
Manufacturing
United States
4%
8%
Professional and
business services
4%
Construction
Information 2%
Financial activities
Leisure and
hospitality
2008
2009
2010
2011
2012
2013
2014
Natural resources
and mining 0%
Education
and health
services
Trade,
transportation
and utilities
Government
2015
IS
ILLINOIS
S IS
SIP
P
ER
Cape
Girardeau
Cape Girardeau
Bollinger
Alexander
IV
IR
MISSOURI
MISSOURI
Recovery or Stagnation?
The Bill Emerson Memorial Bridge spans the Mississippi River between Cape Girardeau (foreground) and East Cape Girardeau,
Ill. The bridge was opened 12 years ago and was named in honor of a former congressman from the area.
FIGURE 4
Unemployment Rate
12
10
6
United States
Missouri
2016
2015
2014
2013
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2012
2011
Percent
EN DNOTE
1 See Baum-Snow and Pavan.
R EFER ENCE
Baum-Snow, Nathaniel; and Pavan, Ronni. Understanding the City Size Wage Gap. Review of
Economic Studies, January 2012, Vol. 79, No. 1,
pp. 88-127.
O V E R V I E W
Modest Improvement
in Economy Expected
over Rest of the Year
By Kevin L. Kliesen
fter beginning 2015 on a weak note, the
U.S. economy rebounded modestly in
the middle part of the year. However, the
economy then stumbled badly in the fourth
quarter, eking out a meager 1.4 percent rate
of increase in real gross domestic product
(GDP). For the year, the U.S. economy grew
by a modest 2.0 percent, a slowdown from
2014s gain of 2.5 percent.1
As usual, the headline GDP estimate was a
combination of some strengths and weaknesses during 2015. Bolstered by strong labor
markets, low interest rates and falling energy
prices, consumer spending continued to
advance at a healthy pace. In particular, automotive sales registered their highest sales rate
on record, and total housing salesnew and
existingregistered their highest levels since
2007. Nonresidential construction activity
also advanced at a brisk pace.
By contrast, business expenditures on capital
goods (real business fixed investment) in 2015
grew at their slowest pace since 2009, while real
U.S. goods and services exports declined for
the first time since 2008. Businesses were dramatically scaling back planned expenditures
because of a myriad of factors. These included
the effects of lower oil prices (less drilling and
exploration), an appreciation of the U.S. dollar
and weakening foreign growth that reduced the
foreign demand for manufactured goods.
Consumer prices, as measured by the
personal consumption expenditures price
index, rose by only 0.7 percent in 2015. Last
years inflation rate, although similar to that of
2014 (0.8 percent), was the lowest since 2008.
Low inflation over the past two years mostly
reflected the plunge in oil prices, which began
in late June 2014, although falling prices of
nonpetroleum imported goods and non-energy
commodity prices were also important factors. With inflation low and monetary policy
still highly accommodative, nominal interest
rates remain relatively low.
Evolving Trends in 2016
2015 (Actual)
2016
2017
2018
5.0
5
Percent
N A T I O N A L
Longer run
4
3
2
1.9
2.0
1.2
1
0
0.5
Real GDP
Unemployment Rate
Inflation
NOTE: Projections are the median projections of the FOMC participants. The projections for real GDP growth and inflation are the
percentage change from the fourth quarter of the previous year to the fourth quarter of the indicated year. Inflation is measured by
the personal consumption expenditures chain-price index. The projection for the unemployment rate is the average for the fourth
quarter of the year indicated. The longer-run projections are the rates of growth, unemployment and inflation to which a policymaker
expects the economy to converge over timemaybe in five or six yearsin the absence of further shocks and under appropriate
monetary policy.
EN DNOTE
1 Unless otherwise noted, this article follows Federal
Reserve convention in terms of defining yearly percentage changes. Thus, for quarterly series like GDP,
the percent changes are from the fourth quarter of
one year to the fourth quarter of the following year.
Similarly, yearly changes using monthly data are the
percentage change from December of one year to
December of the following year.
N E X T
I S S U E
What Is Neo-Fisherism?