San_Francisco_Federal_Reserve_Bank

The Federal Reserve System is the central banking system of the United States. It was created in 1913, with the enactment of the Federal Reserve Act. Its duties today are to conduct the nation's monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system and provide financial services to depository institutions, the U.S. government, and foreign official institutions. The Federal Reserve Bank of San Francisco is part of the Federal Reserve System and thus works with the eleven other Reserve Banks and the Board of Governors in Washington. We also partner with other U.S. regulators such as the Treasury Department and Office of the Comptroller of the Currency. The Twelfth Federal Reserve District includes the nine western states; Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, Washington also Guam, American Samoa, and the Northern Mariana Islands. To serve this expansive region, the San Francisco Reserve Bank has six offices. Branch offices are located in Los Angeles, Portland, Salt Lake City, and Seattle, with a cash processing center in Phoenix. The information presented here does not include the District’s island territories. The Twelfth District Economic Advisory Council is a source of information on current and pending economic developments in the Twelfth District. The members provide observations, opinions, and advice to members of the boards of directors and management of the Federal Reserve Bank of San Francisco. The Twelfth District Economic Advisory Council members reside within the nine-state District of this Reserve Bank. Of the Twelve Federal Reserve Districts, the Twelfth District is the largest, covering about 1.3 million square miles, or 36 percent of the nation’s area. The District’s estimated 63.0 million people accounted for a little more than 20 percent of the total U.S. population in 2009. The District also ranks first in the size of its economy: Its 24.8 million workers accounted for about 19 percent of the nation’s total employment and they earned close to 21 percent of the nation’s total personal income in 2009. Altogether, District states accounted for a bit over 20 percent of the nation’s exports of manufactured goods in 2009. In broad terms, the District’s industry mix mirrors that of the rest of the nation. However, the District employs a slightly higher share of workers in the following major sectors: construction, information, professional & business services, leisure and hospitality, and government. Several of the nation’s leading information technology (IT) centers are located in the District. As a percentage of total workers, the District employs a considerably larger share of IT workers than the rest of the nation. Moreover, these District IT workers on average earn more in annual wages than IT workers in the rest of the nation. In the recent recession and recovery, the unemployment rates, part-time employment trends, and earnings growth of recent college graduates have closely mirrored the patterns they displayed during the cyclical recession of 2001 and the subsequent jobless recovery. Recent college graduates are typically not subject to structural frictions that can contribute to weak labor markets, such as mismatches between the skills of job seekers and the needs of employers. Similarities in the labor market experiences of recent college graduates in the two recessions and recoveries suggest that the current high unemployment rate is primarily cyclical. Although the U.S. economy is recovering from the 2007–09 recession, the labor market remains weak. The unemployment rate was 8.9% in February 2011, down more than a percentage point from its peak in 2009, but about four percentage points higher than before the recession. Some economists have concluded that this persistently high unemployment rate is due largely to structural frictions in the U.S. labor market rather than to weak demand for workers associated with the severe recession. Generally, such structural frictions arise from mismatches between workers and employers. A common example of a mismatch occurs when employers are looking for skills that are different from those that available workers offer. Another type of mismatch occurs when jobs are available in geographic regions with few qualified job seekers. One way of testing whether such structural factors are important in the overall labor market is to examine a segment of the market that is not subject to these constraints. Recent college graduates for the most part don’t experience skill and geographic constraints because they tend to be highly educated and mobile Thus, if structural unemployment were the principal factor accounting for labor market weakness in this downturn, then the job market for recent college graduates would be relatively stronger than in a mainly cyclical downturn. By examining the extent of structural constraints on employment by comparing current trends for recent college graduates with the trends that prevailed during the recovery after the 2001 recession, a labor market downturn that was mainly cyclical in nature. We find that the labor market for recent college graduates is equally weak or even weaker than the overall market, just as in the 2001 recession and its aftermath. The weakness of the current labor market for college graduates is reflected not only in the unemployment rate for this group, but also in their part-time employment rate and earnings. This indicates that structural factors are of minor importance for current unemployment. Economists have cited several structural factors that might be pushing the unemployment rate higher than would normally be expected at this stage of the business cycle. The temporary extensions of unemployment insurance (UI) benefits up to 99 weeks could be increasing the unemployment rate. However, the UI extensions barely affect recent college graduates because, as new entrants to the labor force, they generally are not eligible for benefits. Even if a graduate worked during college, the individual would be ineligible for UI benefits in most states if he or she worked part time or through work-study. The current labor market outcomes of recent college graduates closely mirror those observed during the 2001 recession and the subsequent jobless recovery. This is important because recent college graduates are not subject to the kinds of structural factors that have been posited as the main sources of weakness in the overall labor market. Unemployment rates during the 2001 recession are widely recognized as cyclical in nature. Similarities in the experiences of recent college graduates in the labor market during the two recessions and recoveries are evidence that high unemployment rates in the current downturn and recovery are also mainly cyclical.