Economic Letter Countdown: Most Read Topics from 2024

With the new year fast approaching, here’s a countdown of our own to close out 2024. Check out the list of our most widely read FRBSF Economic Letter topics in 2024, featuring research and insights from SF Fed economists.

5. The Decline of Pandemic-Era Excess Wealth

The Rise and Fall of Pandemic Excess Wealth
Hamza Abdelrahman, Luiz Edgard Oliveira, Adam Shapiro
February 26, 2024

U.S. households accumulated significantly more wealth following the pandemic onset than would have been expected without the pandemic shock. Overall excess household wealth—measured as households’ inflation-adjusted net worth beyond pre-pandemic projections—peaked in late 2021 at $13 trillion, then rapidly fell to zero in late 2022, where it broadly remained through the third quarter of 2023. This rise and fall can be attributed mainly to financial assets, particularly equity holdings. Similarly, real liquid asset holdings currently sit below pre-pandemic projections despite a persistent rise in checking account balances.

Pandemic-Era Liquid Wealth Is Running Dry
Hamza Abdelrahman, Luiz Edgard Oliveira, Adam Shapiro
August 12, 2024

Households accumulated more liquid assets beginning in 2020 than would have been expected without the pandemic. These “extra” liquid assets have dissipated, but their evolution has differed significantly by income group. While middle- and lower-income households hold substantially less liquid wealth than implied by pre-pandemic projections, the level for higher-income households remains close to its pre-pandemic path. Over the same period, credit card delinquency rates initially dropped and, more recently, have steadily risen as pandemic-era liquid wealth was depleted, especially for middle- and lower-income households.

4. Elevated Labor Force Participation

Breakeven Employment Growth
Nicolas Petrosky-Nadeau, Stephanie A. Stewart
July 8, 2024

Employment growth has consistently come in above pre-pandemic estimates of the rate needed for unemployment to stay near its long-run natural rate. Even so, unemployment has held steady, which raises the question of whether the “breakeven” employment growth rate has changed. In the short-run, recent surges in immigration and labor force participation have caused the current breakeven employment growth rate to rise as high as 230,000 jobs per month. However, the long-run breakeven employment growth rate appears unchanged, ranging around 70,000 to 90,000 jobs per month.

Why Is Prime-Age Labor Force Participation So High?
Deepika Baskar Prabhakar, Robert G. Valletta
February 5, 2024

The labor force participation (LFP) rate for prime-age workers surged from early 2021 through early 2023, especially for women. This helped reduce the large shortfall of available workers relative to available jobs that emerged during the recovery from the pandemic. Analysis of state labor markets indicates that the cyclical response of prime-age LFP was much more pronounced during the two most recent business cycles than in prior ones. This state-level relationship weakened in 2023, however, suggesting that the cyclical gains in prime-age LFP are winding down.

Recent Spike in Immigration and Easing Labor Markets
Evgeniya Duzhak
July 15, 2024

The Congressional Budget Office recently raised its demographic projections for net U.S. immigration. Most of the increase in the projections came from undocumented immigrants. Updating the CBO estimates with recent data points shows a continuing strong inflow of undocumented migrants. Analysis linking the revised estimates for this group to labor market statistics shows that immigrants joining the workforce are likely to have modestly eased labor market tightness.

3. The Impacts of Monetary Policy

How Quickly Do Prices Respond to Monetary Policy?
Zoë Arnaut, Leila Bengali
April 8, 2024

With inflation still above the Federal Reserve’s 2% objective, there is renewed interest in understanding how quickly federal funds rate hikes typically affect inflation. Beyond monetary policy’s well-known lagged effect on the economy overall, new analysis highlights that not all prices respond with the same strength or speed. Results suggest that inflation for the most responsive categories of goods and services has come down substantially from recent highs, likely due in part to more restrictive monetary policy. As a result, the contributions of these categories to overall inflation have fallen.

Monetary Policy and Financial Conditions
Zoë Arnaut, Michael Bauer
March 4, 2024

Financial conditions indexes summarize a broad range of financial indicators with the goal of measuring how financial markets affect economic activity. Evidence from event studies with high-frequency data supports the view that monetary policy is a key driver of financial conditions. The effects are evident, not only around monetary policy announcements but also, indirectly, around macroeconomic data releases. The impact of inflation surprises on financial conditions has strengthened over the past year, likely due to the perceived implications for the future course of monetary policy.

2. Productivity Growth

Does Working from Home Boost Productivity Growth?
John G. Fernald, Ethan Goode, Huiyu Li, Brigid Meisenbacher
January 16, 2024

An enduring consequence of the COVID-19 pandemic is a notable shift toward remote and hybrid work. This has raised questions regarding whether the shift had a significant effect on the growth rate of U.S. productivity. Analyzing the relationship between GDP per hour growth and the ability to telework across industries shows that industries that are more adaptable to remote work did not experience a bigger decline or boost in productivity growth since 2020 than less adaptable industries. Thus, teleworking most likely has neither substantially held back nor boosted productivity growth.

1. The Ups and Downs of Inflation

Are Markups Driving the Ups and Downs of Inflation?
Sylvain Leduc, Huiyu Li, Zheng Liu
May 13, 2024

How much impact have price markups for goods and services had on the recent surge and the subsequent decline of inflation? Since 2021, markups have risen substantially in a few industries such as motor vehicles and petroleum. However, aggregate markups—which are more relevant for overall inflation—have generally remained flat, in line with previous economic recoveries over the past three decades. These patterns suggest that markup fluctuations have not been a main driver of the ups and downs of inflation during the post-pandemic recovery.

When Is Shelter Services Inflation Coming Down?
Òscar Jordà, Aren S. Yalcin
September 3, 2024

Shelter costs are one of the largest expenses for most households and an important component of overall inflation. It is therefore important to understand why shelter costs have remained stubbornly high. A key explanation is that, especially since the pandemic, demand for housing has been growing faster than new units have come into the market. Using the gap between the demand for and supply of housing along with other leading indicators of shelter prices can help assess whether shelter inflation will continue on a path toward historically normal levels.