Hosted by: James Hotchkiss Director, Member …The improvements in the labor market reflected the continuous resumption of economic activity that had been curtailed in March and April

Hosted by:James HotchkissDirector, Member Strategy and Solutions

Date:July 9, 2020

Contacts

Federal Home Loan Bank of Chicago | Member owned. Member focused. 2

James HotchkissDirector, Member Strategy and [email protected]: @econ_james_

Jessica NickAssociate Director, Member Strategy and [email protected]

Discussion Topics


• Weekly Interest Rate Comparisons

• Economic Data Releases

• COVID-19 Outbreak Updates

• Employment Report

• Preview of the Coming Week

• Q and A

Weekly Interest Rate MovementsFor the Week Ending 07/09/2020


U.S. Treasury Yields

7/9/20 7/2/20

3mo 0.13% 0.14%

2yr 0.15% 0.16%

5yr 0.28% 0.29%

10yr 0.63% 0.68%

FHLBank Chicago Advance Rates

7/9/20 7/2/20

3mo 0.31% 0.31%

2yr 0.42% 0.42%

5yr 0.65% 0.68%

10yr 1.24% 1.28%

Source: U.S. Treasury, FHLBank Chicago

U.S. Economic Data ReleasesFor the Week Ending 07/09/2020

Federal Home Loan Bank of Chicago | Member owned. Member focused.

Chicago Purchasing Managers Index (PMI)June: 36.6 vs. May: 32.3

• Rose 4.3 points to 36.6 in June. New orders and production had largest gains, while supplier deliveries and employment declined. Production jumped 10.1 points and order backlogs gained 5 points. Employment eased 5.1 points, marking the 12th consecutive sub-50 reading. Supplier Deliveries fell 10.2 points in June, marking it the highest level since Q1 1979.

Construction SpendingMay: -2.1% vs. April: -2.9 %

• Fell 2.1% in May. Contributing to the index, both residential and non-residential construction fell 3.9% and 0.9% month-over-month, respectively.

Source: Institute for Supply Management, U.S. Census Bureau

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ISM Manufacturing IndexJune: 52.6 vs. May: 43.1

• Jumped 9.5 points to 52.6 in June, beating consensus expectations by 2.6 points. This is the second month of growth after a month of contraction in April. The new orders and production indices surged 24.6 points to 56.4 and by 24.1 points to 57.3, respectively.

ISM Non-Manufacturing IndexJune: 57.1 vs. May: 45.4

• Rose 11.7 points to 57.1 in June. This represents the first month of growth after two months of contraction. This month is the single largest month point increase in the index since its debut in 1997. The business activity and new orders indices both rose 25 and 19.7 points, respectively.

Source: Institute for Supply Management

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Initial Jobless ClaimsJuly 4: 1,314K vs. June 27: 1,413K

• Decreased by 99K to 1,314K in the week ending July 4. The previous week was downwardly revised by 14K to 1,413K. As a result, the 4-week moving average decreased by 63K to 1,437.25K.

Continuing ClaimsJune 27: 18,062K vs. June 20: 18,760K

• Decreased by 698K to 18,062K in the week ending June 27. The prior week was downwardly revised by 530K to 18,760K. As a result, the 4-week moving average decreased by 636K to 19,085K. The insured unemployment rate decreased by 0.5% to 12.4%.

Source: Department of Labor

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COVID-19 UpdateGlobal Cases and Deaths


Source: WHO; CDC as of July 8, 2020

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COVID-19 Update Illinois and Wisconsin


Source: Illinois DPH; Wisconsin DHS as of July 8, 2020

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COVID-19 UpdateGreen Shoots as States Open Up


Source: EIA, OpenTable, STR, TSA

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June Non-Farm Payroll Report

• The Bureau of Labor Statistics released June’s Non-Farm Payroll Report. Payrolls increased by 4.8M, significantly better than consensus expectations of an increase of 3.2M. The improvements in the labor market reflected the continuous resumption of economic activity that had been curtailed in March and April due to COVID-19.

• The unemployment rate declined by 2.2% to 11.1% in June. – Employment rose sharply in leisure and hospitality. There were also

notable gains in retail trade, education and health services, other services, manufacturing, and professional and business services.

– Average hourly wages decreased 1.2% month-over-month and are 5.0% higher from one year ago.

– The labor force participation increased by 0.7% to 61.5%.• Payrolls in April were downwardly revised from -20.7M to -20.8M. Payrolls

in May were upwardly revised from 2.5M to 2.7M. As a result, employment gains in April and May were 90K higher than previously reported.

Source: Bureau of Labor Statistics



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June Non-Farm Payroll ReportService and Goods-Producing Payrolls Rise

The private service-providing sector grew in June, increasing 4.26M compared to an increase of 2.54M jobs in May.

The goods-producing sector also increased, rising by 504K this month after rising 684K last month.

Employment in the government sector increased by 33K following a decrease of 533K in May.



June Non-Farm Payroll ReportPayrolls by Sector


Payroll sectors were almost all increased in June. Leisure and Hospitality rebounded the most, gaining 2.088M jobs.

Employment in the retail trade and education and healthcare sector both increased by 740K and 568K, respectively.

Mining and Logging was the only sector to decline, moderately, falling 10K.

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June Non-Farm Payroll Report3-Month and 6-Month Moving Averages Edge Higher

The 3-month moving average and 6-month moving average both increased this month.

The 3-month moving average increased by 2,058K to -4.4M, while the 6-month moving average increased by 769K to -2.4M.



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June Non-Farm Payroll ReportUnemployment Rate and Labor Force Participation Rate

The unemployment rate decreased by 2.2% to 11.1% in June.

The labor force participation rate, which includes underemployed and discouraged workers, similarly improved and increased modestly to 61.5% in June.



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June Non-Farm Payroll ReportJob Openings Increase in May

Job openings data, which is lagged by an additional month, reflected an increase in the number of job openings in May. Openings rose from 4.99M to 5.40M.

Meanwhile, the number of unemployed persons declined, falling to 17.75M.



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June Non-Farm Payroll ReportFull-Time Workers and Part-Time Workers Increase

The number of full-time workers increased to 118.9M from 116.5M in May.

Part-time workers increased more modestly, rising to 23.17M from 20.74M in May.



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June Non-Farm Payroll ReportAverage Hourly Earnings Miss Expectations

Average hourly earnings fell 1.2% month-over-month.

Year-over-year, wages have increased by 5.0%, a moderate decrease from last month.



Summary:• Payrolls increased by 4.8M in June, following net revisions to April and

May payrolls, resulting in a 90K net increase. • Both the 3-month moving average and the 6-month moving average

increased. • The unemployment rate fell slightly to 11.1% from 13.3% in the prior

month. • Hourly wages decreased 1.2% month-over-month and are 5.0% higher

from one year ago.

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June Non-Farm Payroll Report




This and That

Source: Yelp.com

As of June 15, there were still nearly 140,000 total business closures on Yelp, down from 175,000 in April, and indicating that only 20% of closed businesses nationwide have reopened.

Of the 140,000 businesses that remain closed, approximately 41% have been closed permanently.

Among those with the highest rate of business closures are shopping and retail (27,663 closed businesses), restaurants (23,981 closed businesses), beauty (15,348 closed businesses) and fitness (5,589 closed businesses).


The week ends with economic data to be released on the Producer Price Index.

Next week, all eyes will be focused on the release of the Beige Book

During the rest of the week, there are economic data releases for Small Business Optimism, the Consumer Price Index, and Retail Sales.

Economic Data Release CalendarJuly 2020

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Notes: 1 2 3

6 7 8 9 10

13 14 15 16 17

20 21 22 23 24

27 28 29 30 31

Dallas Fed Outlook Consumer Confidence Pending Home Sales GDP Consumer Sentiments

Richmond Fed Outlook FOMC Rate Decision

Durable Goods S&P Case-Shiller HPI MBA Mortgage Applications Jobless Claims Personal Income

Existing Home Sales

Chicago Fed Nat'l Activity MBA Mortgage Applications Jobless Claims New-Home Sales FHFA House Price Index Kansas City Fed Outlook

Beige Book Buisness Inventories

Consumer Price Index Industrial Production Philadelphia Fed Outlook Housing Starts Atlanta Fed Outlook Retail Sales

Small Buisness Optimism MBA Mortgage Applications Jobless Claims Consumer Sentiment

ISM Nonmanufacturing JOLTS MBA Mortgage Applications Jobless Claims Producer Price Index Consumer Credit Wholesale Trade

ISM Manufacturing IndexFOMC Minutes

ADP Employment Report Employment Construction Spending Factory Orders

July 2020Monday Tuesday Wednesday Thursday Friday

MBA Mortgage Applications Jobless Claims


Certain information included in this presentation speaks only as of a particular date or dates included in this presentation. The information in the presentation may have become out of date. The Federal Home Loan Bank of Chicago (FHLBC) does not undertake an obligation, and disclaims any duty, to update any of the information in this presentation. “Mortgage PartnershipFinance®”, “MPF®”, “MPF Xtra®”, “Downpayment Plus®”, “DPP®”, “Downpayment Plus Advantage®”, “DPP Advantage®”, and “Community First®” are registered trademarks of the Federal Home Loan Bank of Chicago . The “MPF Mortgage Partnership Finance” logo is a trademark of the Federal Home Loan Bank of Chicago.

The data, scenarios and valuations provided to you in this presentation are for information purposes only and are provided as anaccommodation and without charge and are not intended for further distribution. The data, scenarios and valuations are estimates only and may not represent the actual or indicative terms at which new (or economically equivalent) transactions couldbe entered into or the actual or indicative terms at which existing (or economically equivalent) transactions could be prepaid, terminated, liquidated, assigned or unwound. The scenarios and valuations were derived using proprietary pricing models and estimates and assumptions about relevant future market conditions and other matters, all of which are subject to change without notice. The scenarios and valuations were prepared without specific information about your institution’s balance sheet composition, hedging strategies or financial assumptions and plans, any of which may affect the relevance of these valuations toyour own analysis.

The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this presentation, and no representation of non-infringement. This presentation is not intended to constitute legal, accounting, investment or financial advice or the rendering of legal, accounting, consulting, or other professional services of any kind. You should consult with your accountants, counsel, financial representatives, consultants and/or other advisors regardingthe extent these scenarios and valuations may be useful to you and with respect to any legal, tax, business and/or financial matters or questions. This presentation may contain forward-looking statements which are based upon the FHLBC’s current expectations and speak only as of the date hereof. These forward-looking statements involve risks and uncertainties including, but not limited to, the risk factors set forth in the FHLBC’s periodic filings with the Securities and Exchange Commission, which are available on its website at www.fhlbc.com

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http://www.fhlbc.com/

Documents

Hosted by: James Hotchkiss Director, Member …The improvements in the labor market reflected the continuous resumption of economic activity that had been curtailed in March and April