Federal Reserve Bank
of San Francisco Federal Reserve Bank
of San Francisco

Economic Letter

Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.

  • Did the $600 Unemployment Supplement Discourage Work?

    2020-28

    Nicolas Petrosky-Nadeau and Robert G. Valletta

    People receiving unemployment insurance benefits during the COVID-19 recession were entitled to $600 of additional payments per week through July. This large increase in benefit payments raised a concern that recipients would delay returning to work. However, analysis suggests that the available aid would not outweigh the value of a longer-term stable income in workers’ decisions to accept job offers. Evidence from recent labor market outcomes confirms that the supplemental payments had little or no adverse effect on job search.

  • Adjusting the Unemployment Thermometer

    2020-27

    Regis Barnichon and Winnie Yee

    Stay-at-home orders issued to slow the spread of COVID-19 may have severely distorted labor market statistics, notably the official unemployment rate. A method to correct the survey biases associated with the pandemic indicates that the true unemployment rate was substantially higher than the official rate in April and May. However, the biases appeared to fade thereafter, making the drop in June even more dramatic than implied by the official data.

  • The Illusion of Wage Growth

    2020-26

    Mary C. Daly

    Despite a sharp spike in unemployment since March 2020, aggregate wage growth has accelerated. This acceleration has been almost entirely attributable to job losses among low-wage workers. Wage growth for those who remain employed has been flat. This pattern is not unique to COVID-19 but is more profound now than in previous recessions. This means that, in the wake of the virus, evaluations of the labor market must rely on a dashboard of indicators, rather than any single measure, to paint a complete picture of the losses and the recovery.

  • Disruptions to Starting a Business during COVID-19

    2020-25

    Huiyu Li and Mitchell G. Ochse

    Applications to start new businesses tanked from mid-March through May, contracting more severely than during the 2008–2009 financial crisis. Since then, however, applications have recovered so strongly that the total number filed in 2020 should be similar to that for 2019, even if applications growth reverts to the average lows experienced during the early days of the pandemic. This should result in only a modest loss of new businesses and is not likely to cause much additional strain on overall jobs and productivity gains.

  • Monitoring the Inflationary Effects of COVID-19

    2020-24

    Adam Hale Shapiro

    Inflation fell dramatically following the onset of the COVID-19 pandemic. Dividing the underlying price data according to spending category reveals that a majority of the drop in core personal consumption expenditures inflation comes from a large decline in consumer demand. This demand effect far outweighs upward price pressure from COVID-related supply constraints. A new monthly data page from the San Francisco Fed tracks how sensitivity to the economic disruptions of COVID-19 affects different categories of inflation over time (discontinued September 2023).

  • Emerging Bond Markets and COVID-19: Evidence from Mexico

    2020-23

    Jens H.E. Christensen, Eric Fischer, and Patrick J. Shultz

    The pandemic caused by the coronavirus is depressing economic activity and severely straining government budgets globally. Without international support, the ability of emerging economies to weather this crisis will depend crucially on access to and the cost of borrowing in domestic government bond markets. Analyzing bond flows and risk premiums for Mexican government bonds during the pandemic gives some insights into a major emerging economy’s experience. Mexican risk premiums have increased more than 1 percentage point above predicted levels, pointing to tighter funding conditions for the Mexican government.

  • Average-Inflation Targeting and the Effective Lower Bound

    2020-22

    Renuka Diwan, Sylvain Leduc, and Thomas M. Mertens

    In response to the COVID-19 pandemic, the Federal Reserve cut the federal funds rate to essentially zero. It took further measures to support the functioning of financial markets and the flow of credit. Nevertheless, the economic downturn is putting downward pressure on inflation, which had already been running below the Fed’s 2% target for several years. This raises additional concerns that inflation expectations could decline and push inflation down further, ultimately hampering economic activity. A monetary policy framework based on average-inflation targeting could help address these challenges.

  • The Highs and Lows of Productivity Growth

    2020-21

    Andrew Foerster, Christian Matthes, and Lily M. Seitelman

    Productivity growth shows evidence of switching between long periods of high and low average growth. Estimates suggest that the United States has been in the low-growth regime since 2004. Assuming this low growth continues, productivity growth in the year 2025 would be 0.6%. By dropping this assumption and allowing for a switch to consistent higher growth, an alternative estimate forecasts that the distribution of possible productivity growth across quarters could average about 1.1% in 2025.

  • The Fog of Numbers

    2020-20

    Òscar Jordà, Noah Kouchekinia, Colton Merrill, and Tatevik Sekhposyan

    In times of economic turbulence, revisions to GDP data can be sizable, which makes conducting economic policy in real time during a crisis more difficult. A simple model based on Okun’s law can help refine the advance data release of real GDP growth to provide an improved reading of economic activity in real time. Applying this to data from the Great Recession explains some of the massive GDP revisions at that time. This could provide a guide for possible revisions to GDP releases during the current coronavirus crisis.

  • Rising Wildfire Risk for the 12th District Economy

    2020-19

    James Aylward and Luiz E. Oliveira

    The growing risk from natural disasters is a key economic effect of climate change. Severe wildfires are a leading example, and they are particularly important for the western states that make up the 12th Federal Reserve District. Analyzing data on wildfire hazard and economic activity confirms that these states are substantially more exposed to wildfire risk than the rest of the country. This gap in regional wildfire risk is likely to grow over time as climate change continues.