Indeed, anecdotal reports suggest that consumer spending during the month of February was adversely affected by the increase in taxes. Third, while we avoided the full fiscal cliff back in early January, there remain several vexing fiscal policy issues on the immediate horizon that, depending on how they are resolved, could adversely affect the economy. Indeed, at this time it looks like the sequester will go into effect on March 1. If it remains in effect for the full year, estimates from forecasters suggest that the sequester could reduce projected real GDP growth for 2013 by about ½ percentage point, which would be on top of the ¾ to 1 percentage point drag coming from already-implemented fiscal policy actions. Presentations on household debt and credit Our special topic today is household debt and credit. Over the last several years, researchers at the New York Fed have put considerable effort into improving public understanding of consumer debt and credit conditions. Consumer debts occupy the intersection of Main and Wall Streets, and are thus of great interest to the public. In addition, of course, by most accounts the financial crisis grew out of the mortgage market – the largest and most important form of consumer debt. So to better inform the public and policymakers, New York Fed economists have developed a series of quarterly reports and topical studies on consumer debts. We will have two presentations.
After falling by 3.1 percent in 2009, growth in real GDP averaged 2.4 percent in 2010, 1.8 percent in 2011 and 2.2 percent in 2012, a consistent but sluggish pace. This sluggishness has been quite evident in the labor market. After falling by 421,000 per month in 2009, payroll employment grew by 85,000 per month in 2010, 175,000 per month in 2011, and 181,000 in 2012. To put these numbers in perspective, the trend rate of growth of the civilian non-institutional population is around 200,000 per month. The unemployment rate has declined from a peak of 10 percent in October of 2009 to just under 8 percent recently, due largely to the fact that the labor force participation rate has declined by considerably more than would be suggested by underlying demographic trends. Fortunately, long-term unemployment, defined as those unemployed for 15 weeks or longer, has declined from nearly 9 million in the first quarter of 2010 to about 6.6 million in recent months – a decline of 28 percent. The median duration of unemployment has declined from 23 weeks in the second quarter of 2010 to 16 weeks recently. Nonetheless, as of January there were still about 3.2 million fewer jobs than at the end of 2007. The unemployment rate remains elevated, despite a significant decline of the labor force participation rate. And the ratio of employment to population in January was lower than it was at the end of the recession, indicating that employment growth has not kept pace with population growth.