And both loan-level data and aggregates like the Flow of Funds miss an important dimension of borrower behavior that became very important during the crisis and recovery – the relationship between different kinds of credit use by individual borrowers or households. The creation of the Consumer Credit Panel is an example of the use of pre-existing commercial data in an innovative way that had not previously been pursued. The panel is based on credit report data collected by Equifax (one of the three credit bureaus in the United States) and it contains information on all outstanding loans – including mortgages, auto and student loans, and credit card debt – at the individual consumer level. While credit records are primarily used by lenders to evaluate a potential borrower’s creditworthiness and ability to repay, they can also provide a comprehensive picture of outstanding balances and delinquencies and how they interact. Of course, all the data are completely anonymous – the dataset has been stripped of all personally identifiable information. The CCP was created by our research group using an innovative sampling procedure, based on the randomness of the last four digits of social security numbers. The resulting panel allows one to track individuals over time and across different locations within the nation, starting in the quarter in which they establish their credit report when taking out their first loan.
In addition, inflation expectations, which may affect wage and price setting, appear to be edging lower: We see this both in survey results and in the financial markets— through noticeable declines in “inflation compensation”, measured by the difference between the yields on Treasury bonds with and without inflation protection. A third factor is productivity growth. BIS Review 52/2005  1  There have been concerns that a structural productivity slowdown was in the offing, which could put upward pressure on inflation; the good news is that structural productivity growth apparently still remains above the levels reached during the second half of the 1990s, although it may have edged down just a bit over the last few years. A final factor impacting the inflation outlook is the degree of slack in the labor market. Right now, the unemployment rate is relatively low: at 5 percent it’s near most estimates of the so-called natural rate. But other measures—such as the employment-population ratio, a survey of job market perceptions, and industrial capacity utilization—suggest that some slack still remains. Risks to economic growth and employment Now let me turn to the real side of the economy—growth and employment—and highlight some of the risks that affect my optimistic baseline projection. Even though overall growth has been respectable, economic activity has been burdened by some major drags over the past year or so. Three major ones result from the oil price shock, the deterioration of the trade balance, and a still relatively low level of business investment spending.