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Assets and liabilities on the Fed’s balance sheet

The gradual build-up of overnight reverse repurchase agreement operations

The Board of Governors reports the consolidated balance sheet of the 12 Federal Reserve Banks in its H.4.1 “Factors Affecting Reserve Balances” release. Table 5 of that release includes the sum of all assets, liabilities, and capital.

Changes in the composition of the Fed’s balance sheet reflect the operations of the Federal Reserve as it conducts monetary policy. The FRED graph above shows two series from that release as well as an indicator of the Fed’s monetary policy:

  • The blue line is the weekly dollar value, as of Wednesday, of the repurchase agreement operations conducted by the Fed. These are assets to the Fed created when it temporarily purchases Treasury securities held by banks.
  • The red line is the weekly dollar value, also as of Wednesday, of the reverse repurchase agreement operations conducted by the Fed. These are liabilities created when it accepts overnight deposits from financial institutions, with a security held as collateral.
  • The third line, in green, is the effective federal funds rate, as reported by the Federal Reserve Bank of New York; the units are percent, which are plotted on the right axis.

The graph shows that the value of the overnight reverse repurchase agreements started to increase almost exactly 1 year before the Federal Open Market Committee (FOMC) started to raise its target range for the federal funds rate on March 17, 2022. That is, financial institutions gradually changed the composition of their own balance sheets by trading increasingly larger amounts of Treasury securities in exchange for earning the overnight reverse repurchase agreements award rate paid by the Fed. Those financial transactions effectively reduced the liquidity of lenders and, by doing so, contributed to higher interest rates for borrowers.

How this graph was created: Search FRED for “Assets: Other: Repurchase Agreements: Wednesday Level.” Click the “Edit Graph” button and use the “Add Line” tab to add the other two series: “Liabilities and Capital: Liabilities: Reverse Repurchase Agreements: Wednesday Level” and “Effective Federal Funds Rate.” Use the “Format” tab to change the Y-axis position of Line 3 from left to right.

Suggested by Diego Mendez-Carbajo.

Who left the labor force during the pandemic?

A look at the LFPRs for various age groups

As the US began to emerge from the pandemic, many different news sources provided many different explanations for the labor shortage: from childcare disruptions and fear of illness keeping minimum wage workers out of the labor force to a new wave of retirements from older workers.

A previous post looked at the labor force overall, but today we look at changes in the labor force participation rate (LFPR) for specific age groups: 20 to 24 years old, 25 to 54 years old, and 55+ years old. We subtract the LFPR from January 2020 to show the percentage-point change in labor force participation relative to the month right before the pandemic.

When the pandemic hit, the sharpest decline in the LFPR was for workers between the ages of 20 and 24. Their LFPR decreased from 73% to 64.4% in 4 months before increasing again. However, at the end of 2022, the LFPR for 20- to 24-year-olds still hadn’t fully recovered and remained 1.7 percentage points below its January 2020 value.

This overall pattern is similar but less extreme for the other age groups. Although no age group fully recovered by the end of 2022, the 25-54 group was closest, at 0.7 percentage points below its January 2002 level. There’s been much discussion of older workers retiring early (and permanently) during the pandemic, and the 55+ group remained 1.4 percentage points below its January 2020 level as of December 2022, with no sign of further recovery.

How this graph was created: Search FRED for “Labor Force Participation 20-24” and select “Labor Force Participation Rate- 20-24 Yrs.” Click the orange “Edit Graph” button on the right: From the “Add Line” section, add the 25-54 age group by searching for and selecting “Labor Force Participation Rate, 25-54 Yrs.” Repeat this process for the “55 plus” series. All three series should have “Percent” as the units. You must customize each series by subtracting the value for the series in January 2020: From the “Edit Line” section for each age group, use the customize data section at the bottom add the following formulas in the formula bar and hit “Apply”: For 20-24 Yrs, insert a-73.0; for 25-54 Yrs, insert a-83.1; for 55+ Yrs, insert a-40.2. Finally, change the beginning date of the graph to 2018-01-01.

Suggested by Maggie Isaacson and Hannah Rubinton.

Egg and poultry price inflation

Why did the chicken cross the road? To get a better deal on the high price of eggs

Egg prices are absolutely soaring, while chicken meat prices have been well-grounded. What gives?

Team FRED Blog never wants to sound like Chicken Little, but we also don’t want to walk on eggshells. So, first, let’s simply look at the data: The FRED graph above shows that the average price of whole fresh chickens (in brown) rose 13% between January and December 2022 while the average price of eggs (in yellow) rose 120%. That’s 10 times faster!

Now let’s combine these data with some reporting from the US Department of Agriculture: During 2022, repeated outbreaks of avian influenza ravaged farm flocks of egg-laying hens, thereby drastically reducing the supply of eggs, which drove their prices to record highs. But the price of chicken meat has not experienced the same degree of inflation. Why?

Well, farmers don’t have all their chickens in one basket. Chickens raised for meat (a.k.a. “broilers”) have been less exposed and therefore less susceptible to the avian influenza that has decimated the egg-laying hens, and the supply of broilers has been reduced less than 1/10 of 1%. Because these two separate supplies of chickens have not been equally affected, neither have their prices. And, despite the regional concentration of losses to poultry populations, the average price of eggs remained remarkably similar across US regions.

If you want to avoid getting egg on your face and, instead, rule the data roost, read on for an explanation of how we chose to present this graph: We started with the monthly data from the Bureau of Labor Statistics (the good eggs who bring you the CPI), but we transformed the units of the data from dollars and cents to an index with a customized base period of January 2022. This transformation really helps illuminate the differences between the two series that have occurred since January 2022.

How this graph was created: Search FRED for “Average Price: Chicken, Fresh, Whole.” Next, click the “Edit Graph” button and use the “Add Line” tab to add “Average Price: Eggs, Grade A, Large.” Last, change the units to “Index (Scale value to 100 for chosen date),” enter “2020-01-01,“ and click on “Copy to all.”

Suggested by George Fortier and Diego Mendez-Carbajo.



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