Pieces of Eight: News Bulletins from the Eighth Federal Reserve District

Fed Program Explains the Risks of Mutual Funds

"Mutual Funds: Understand the Risks" is the theme of a new educational campaign by the Federal Reserve to provide basic information about the sale of investment products. The campaign, developed in cooperation with the American Association of Retired Persons (AARP), includes a series of seminars for retirees and those planning to retire.

This type of program was prompted by a 1993 survey by the AARP, the Consumer Federation of America and The North American Securities Administrators Association, which found that consumers who buy investment products are often unaware that these products—such as mutual funds, annuities and municipal securities—are not insured by the Federal Deposit Insurance Corporation. The survey also found that some consumers were confused about the costs and fees associated with investment products. In addition to the seminar, a short video providing basic information about mutual funds is under development for use by banks and consumer groups in their own educational programs.

Is Special Sauce a Tradeable Good?

Leave it to an economist to regard McDonald's Big Mac sandwich as an illustration of the principle of purchasing power parity among countries, instead of just a tasty fast food item.

According to a report by Federal Reserve Bank of St. Louis economist Michael Pakko in a recent issue of International Economic Conditions, the Big Mac serves as a useful reference point for comparing prices internationally because it represents a bundle of mostly tradeable commodities, like beef and wheat, and it contains a service element, as well.

This means that the price of the sandwich is generally closely tied to the overall price level in a given country. It should be noted that the Big Mac price used in the analysis includes a large order of fries.

For a free copy of Pakko's article, please contact Debbie Dawe of our Public Affairs Office at (314) 444-8809.

Beyond the "Jobless Recovery"

Compared with recoveries from other recessions, the employment rebound following the 1990-91 recession was somewhat sluggish. Why employment numbers were slow to catch up with the overall growth still puzzles most economists.

"I don't think anybody really understands why this happened in this recovery," says St. Louis Fed economist Joseph Ritter, who reported on the topic in a recent issue of National Economic Trends.

Ritter says that once the ball got rolling, however, growth has been healthy—with nonfarm payroll employment growing by 6.1 percent between February 1992 and November 1994. "Things are looking pretty typical now," Ritter says.

For a free copy of the issue in which Ritter's analysis appears, contact Debbie Dawe of our Public Affairs Office at (314) 444-8809.

Proportion of New Residents by State