Recent Economic Developments and the Outlook Seattle Branch Briefing March 2, 2017 Liz Laderman Senior Outreach Economist Federal Reserve Bank of San Francisco These remarks represent the speaker’s views and not necessarily those of the Federal Reserve System, the Federal Reserve Board of Governors, or the Federal Reserve Bank of San Francisco.

Outlook Summary Growth to continue at moderate pace Unemployment at natural rate Inflation has increased and is headed towards target

Moderate growth forecast

Job gains still healthy

Unemployment near natural rate

Inflation headed towards target

Interest rates remain low

Washington unemployment near U.S.

Washington’s large metros vary

Overall, large faring better than other metros

Medium metros: timber vs. recreation and government

Small metros: timber vs. recreation and government

Alaska’s unemployment rates generally higher than U.S.

Conclusion Moderate growth expected At full employment Inflation headed towards 2% target Unemployment in Washington’s smaller metros related to economic activity in timber, government, and recreation. Alaska’s unemployment rates generally higher than in the U.S.

Questions for the directors Compensation Growth: The labor market appears to have reached or exceeded full employment and some measures of compensation growth have picked up in recent quarters. Has your business or industry experienced a pickup in compensation growth? Are there particular types of jobs where your firm is experiencing more significant compensation pressure, such as new hires or skilled workers? Have you noticed any differences between wage and non-wage compensation pressures, for instance, for health and retirement benefits? What are your plans for wages and benefits going forward? Import prices: Changes in tax or trade policies may affect the net cost of imports faced by domestic firms. To what extent does production in your business or industry depend on imported inputs? How would production costs be affected by a significant increase in import prices? Would higher production costs be passed on to higher product prices? Other developments: Are there other economic developments or emerging risks to the economy or financial markets that the Fed should be aware of?