If that were to occur, that would be a troublesome development that would complicate the pursuit of our dual mandate of high employment and low and stable inflation Because we have an Federal Open Market Committee meeting next Tuesday, I will not comment today on the implications of the economic outlook for monetary policy. Outlook for the region and Queens Now, let me turn briefly to the situation here in the city and in Queens, in particular. While the national economic outlook improved considerably during the latter part of 2010 and into early this year, growth in New York City’s economy appears to have slowed a bit. The regional economists at the Federal Reserve Bank of New York have developed a composite economic index for New York City. It incorporates measures such as employment, unemployment and income, and can serve as a barometer of the state of the local economy. Based on this measure, the city’s economic activity, which had declined fairly sharply throughout much of 2008 and all of 2009, rebounded at an encouraging pace in the first half of 2010. Growth slowed in the second half of the year, but recently released employment data point to some pickup in the city’s economy in early 2011 and suggest that the local economic recovery remains on track. Over the past year, employment in the city has expanded fairly strongly in a number of key industries, including finance, professional and business services, education and health, and tourism, including air transportation.
The coast is not completely clear – the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness. In particular, housing activity remains unusually weak and home prices have begun to soften again in many parts of the country. State and local government finances remain under stress, and this is likely to lead to further spending cuts, tax increases, or job losses in this sector that will offset at least a part of the federal fiscal stimulus. And we cannot rule out the possibility of further shocks from abroad. For example, higher oil prices cut into household purchasing power, and the situation in the Middle East and Africa remains uncertain and dynamic. Also, we cannot ignore the risks stemming from the longer-term fiscal challenges that we face in the United States. But in the near-term, the most immediate domestic problems may recede rather than become more prevalent. On the housing side, stronger job growth should lead to more household formation. For example, more young people will be able to move out of their parents’ homes when they get jobs. This trend should provide more support to housing demand. And anxieties about the large overhang of unsold homes represented by the foreclosure pipeline may overstate the magnitude of the excess supply of housing. Families that have lost their homes through foreclosures are likely to seek new homes as their income permits, even though many may re-enter the housing market as renters rather than buyers.