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Update on the Economy
This Economic Letter is adapted from several recent presentations by Robert T. Parry, President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, to civic and professional organizations in California.
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The Natural Rate of Unemployment over the Past 100 Years
The natural rate of unemployment, or u-star, is used by economists and policymakers to help assess the overall state of the labor market. However, the natural rate is not directly observable and must be estimated. A new statistical approach estimates the natural rate over the past 100 years. Results suggest the natural rate has been remarkably stable over history, hovering between 4.5 and 5.5% for long periods, even during the Great Depression. Recent readings on the unemployment rate have been running slightly below the natural rate estimate.
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Will Rising Rents Push Up Future Inflation?
Rising rents account for a significant portion of recent inflation. Estimates of how rent inflation typically responds to two leading indicators—current asking rents and current house prices—can help forecast the path of overall inflation for the next two years. This method predicts that higher rent inflation could add about 0.5 percentage point to personal consumption expenditures price inflation for both 2022 and 2023. These potential additions are important in light of the Federal Reserve’s 2% inflation target.
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Highway Grants: Roads to Prosperity?
Federal highway grants to states appear to boost economic activity in the short and medium term. The short-term effects appear to be due largely to increases in aggregate demand. Medium-term effects apparently reflect the increased productive capacity brought by improved roads. Overall, each dollar of federal highway grants received by a state raises that state’s annual economic output by at least two dollars, a relatively large multiplier.
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2006 Annual Pacific Basin Conference: Summary
This Economic Letter summarizes the papers presented at the annual Pacific Basin Conference held at the Federal Reserve Bank of San Francisco on June 16-17, 2006, under the sponsorship of the Bank’s Center for Pacific Basin Studies. The papers are listed at the end and are available online.
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Impact of U.S. Labor Productivity Losses from Extreme Heat
Extreme heat decreases labor productivity in sectors like construction, where much work occurs outdoors. Because construction is an important component of investment, lost productivity today will slow how much capital is built up for future use and thus can have long-lasting impacts on overall economic outcomes. Combining estimates of lost labor productivity due to extreme heat with a model of economic growth suggests that, by the year 2200, extreme heat will reduce the U.S. capital stock by 5.4% and annual consumption by 1.8%.
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Monetary Policy in an Era of Crises
The enormous and prolonged economic fallout from the global financial crisis and the subsequent deleveraging have convincingly demonstrated the need to mitigate the risk of crisis. We should have known this from the work of Carmen Reinhart and Ken Rogoff (2009), but the lesson has finally stuck. My topic this afternoon centers on the role […]
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Linkages between Monetary and Regulatory Policy: Lessons from the Crisis
The crisis of the past two years has underscored the connections between monetary policy, which seeks to foster maximum employment and price stability, and regulatory policy, which works to protect the financial system. The two domains can’t be regarded as separate. Researchers are currently examining ways in which monetary policy may play a role in managing systemic risk and regulatory policy may serve to promote macroeconomic goals. The following is adapted from a presentation made by the president and CEO of the Federal Reserve Bank of San Francisco to the Institute of Regulation & Risk, North Asia, in Hong Kong on November 17, 2009.
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Policy Applications of a Global Macroeconomic Model
Central banks and other policy institutions have a long history of using macroeconomic models to help prepare forecasts and to quantify the economic consequences of various policies. Likewise, private sector firms have long depended on models to summarize these complex interactions succinctly and to evaluate the likelihood of specific macroeconomic outcomes; this is especially true for financial institutions, where such models can help with capital investment and asset allocation decisions.
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Prospects for Asia and the Global Economy: Conference Summary
A new volume, Prospects for Asia and the Global Economy, summarizes the 2013 Asia Economic Policy Conference hosted by the Federal Reserve Bank of San Francisco’s Center for Pacific Basin Studies. The conference focused on challenges faced by policymakers in advanced and emerging economies as they continue to recover from the recent global financial crisis. Issues discussed included the monetary policy spillovers from advanced economies to emerging markets, the costs and benefits of foreign reserve accumulation, and the desirability of macroprudential interventions, restrictions on cross-border capital flows, and financial regulatory reforms to reduce the likelihood of future crises.