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  • Why Worry about Financial Exclusion?

    Paola Boel Peter Zimmerman

    Should policymakers aim to expand access to bank accounts? When financial exclusion is due to frictions that prevent banking from operating efficiently, intervention may be justified. Applying simple economic principles, we highlight possible frictions that may give rise to inefficient exclusion in the United States, and we assess their importance using insights from data and the academic and policy literature. Read More

  • Small Business Credit Survey 2022 Report on Hiring and Worker Retention

    Seventy-five percent of employer firms tried to hire workers in 2021; close to half called the experience “very difficult.” In response, firms most often increased wages or shifted more work to existing employees. Read More

  • Small Business Credit Survey 2022 Report on Firms Owned by People of Color

    Businesses owned by people of color faced more financial and operational challenges than their white-owned counterparts and often were less successful at obtaining the funding needed to weather the effects of the pandemic. Read More

  • Planning for Surprises, Learning from Crises: The 2021 Financial Stability Conference

    Joseph G. Haubrich

    This Commentary summarizes the academic papers and keynote talks delivered at the 2021 Financial Stability Conference hosted by the Office of Financial Research and the Federal Reserve Bank of Cleveland, held virtually on November 17–19, 2021. Read More

  • Potential Impacts of the War in Ukraine on the Fourth District

    Stephan D. Whitaker

    The Russia–Ukraine war has had significant effects on both countries’ exports, and trade partners worldwide have experienced interruptions in supplies. This District Data Brief examines how much our region’s economy may be affected by the disruptions. Read More

  • Feeding Families during a Pandemic: Trends from a Northeast Ohio Food Bank

    Merissa Piazza

    Food insecurity has been a familiar issue for many lower-income households. But pandemic-related school and business closures put additional families in a new territory of needing to supplement their food budgets. Read More

  • Unbanked in America: A Review of the Literature

    Paola Boel Peter Zimmerman

    We review the recent literature on the causes and consequences of financial exclusion—that is, the lack of bank account ownership—in the United States. We examine existing work in a range of fields, including economics, finance, public policy, and sociology. Read More

  • Demographic Trends Are Major Factors in Today’s Weak Labor Force Growth

    Joel Elvery Isabel Brizuela

    The size of the US labor force declined by 2.3 million people between December 2019 and December 2021. Our experts examine demographic changes to determine if this decline is a passing trend or if it’s here to stay. Read More

  • Disruptions Are Expected to Persist, Prompting Some Firms to Rethink Supply Chain Management

    Julianne Dunn

    Despite expectations that supply chain challenges would have subsided, disruptions continue. In response, some firms are making changes to the way that they manage their supply chains, and these changes are expected to be long-lasting. Read More

  • Understanding Which Prices Affect Inflation Expectations

    Chris Campos Michael McMain Mathieu Pedemonte

    Inflation expectations have an impact on one’s economic behavior. We show that the inflation expectations of professional forecasters and consumers are predicted by very different prices. While professional forecasters weigh prices similar to the consumer price index, consumers seem to focus on prices they see more often, such as those for food and new vehicles. These are also prices that have seen disproportionally high volatility since the onset of the pandemic. We argue that heterogeneity in the importance of component-specific inflation can have relevant economic implications and disproportionate effects on consumers’ inflation expectations that can, in turn, affect economic behavior. Read More

  • Adjusting Median and Trimmed-Mean Inflation Rates for Bias Based on Skewness

    Robert Rich Randal J. Verbrugge Saeed Zaman

    Median and trimmed-mean inflation rates tend to be useful estimates of trend inflation over long periods, but they can exhibit persistent departures from the underlying trend over shorter horizons. In this Commentary, we document that the extent of this bias is related to the degree of skewness in the distribution of price changes. The shift in the skewness of the cross-sectional price-change distribution during the pandemic means that median PCE and trimmed-mean PCE inflation rates have recently been understating the trend in PCE inflation by about 15 and 35 basis points, respectively. Read More

  • When Benefits Cliffs Turn Raises into Penalties, Local and National Efforts Help Workers and Employers Navigate Options

    Lisa Nelson Ayan Goran

    Getting a raise is usually a good thing. But what if it comes at the cost of losing a benefit that you rely on? Here’s what some organizations are doing to help workers navigate the path to economic independence. Read More

  • Age-adjusted COVID-19 Mortality Rates by Demographic Groups

    Rubén Hernández-Murillo

    We know that the COVID-19 deaths were disproportionate across age groups. And some research has suggested the virus affects individuals differently, inviting comparisons across other demographic groups. Our researchers argue that failing to adjust for age among such comparisons may lead to incorrect conclusions. Read More

  • Access to Credit for Small and Minority-Owned Businesses

    Mark E. Schweitzer Brent Meyer

    Equal access to small-business credit is a critical underpinning to equity in economic opportunity; however, it is difficult to regularly assess the fairness of credit provision. Prior research has focused on the Federal Reserve Board’s Survey of Small Business Finance, but the most recent data from this source is from 2003. This article provides preliminary results on new credit access questions added to the Census Bureau’s 2021 Annual Business Survey. We find that minority-owned businesses generally were just as likely to apply for credit in 2020, but Black-, Asian-, and Hispanic-owned businesses were less likely than white-owned businesses to report receiving all of the credit that they sought. Also, Black-, Asian-, and Hispanic-owned businesses more frequently reported seeking credit in order to cover operating expenses rather than for financing capital expenditures or expansion. Heading into 2022, minority-owned businesses report weaker ongoing viability. Read More

  • Indirect Consumer Inflation Expectations

    Ina Hajdini Edward S. Knotek II Mathieu Pedemonte Robert Rich John Leer Raphael Schoenle

    Surveys often measure consumers’ inflation expectations by asking directly about prices in general or overall inflation, concepts that may not be well-defined for some individuals. In this Commentary, we propose a new, indirect way of measuring consumer inflation expectations: Given consumers’ expectations about developments in prices of goods and services during the next 12 months, we ask them how their incomes would have to change to make them equally well-off relative to their current situation such that they could buy the same amount of goods and services as they can today. Using a massive number of survey responses at a high frequency, we show that this measure of indirect consumer inflation expectations has risen sharply since early 2021. Higher inflation experiences correlate with higher indirect consumer inflation expectations across US cities and around the world. Read More

  • Average Inflation Targeting in a Low-Rate Environment

    Chengcheng Jia

    One significant change in the US economy in the last 20 years is the trend decline in real interest rates that pushes the policy rate near the effective lower bound (ELB) and puts downward pressure on inflation. This environment leaves conventional monetary policy tools less effective in accommodating adverse shocks. To better achieve the Federal Reserve’s dual mandate at the ELB, the FOMC adopted a new framework called average inflation targeting (AIT). In this Commentary, I demonstrate that AIT is a better policy in a low-rate environment because of its ability to anchor inflation expectations, and I present possible implications of the flexible implementation of AIT. Read More

  • Small Business Credit Survey 2022 Report on Employer Firms

    Revenue and employment improved for small businesses since 2020, but performance largely lags prepandemic levels. Financing approval rates continued to trend lower than in years prior to the pandemic. Read More

  • Underemployment Following the Great Recession and the COVID-19 Recession

    Daniela Dean Avila Kurt G. Lunsford

    The underemployment rate, the percent of employed people who are working part-time but prefer to be working full-time, moves closely with the unemployment rate, rising during recessions and falling during expansions. Following the Great Recession, the underemployment rate had stayed persistently elevated when compared to the unemployment rate, that is, until the COVID-19 recession. Since then, it has been consistent with its pre-2008 levels. We find that changes in relative industry size account for essentially none of the underemployment rate increase after the Great Recession nor the underemployment rate decrease after the COVID-19 recession. Based on this finding, we do not expect the underemployment rate to revert to its pre-COVID-19 levels if industry composition reverts to its pre-COVID-19 structure. Read More

  • What’s Holding Back Employment in the Recovery from the COVID-19 Pandemic?

    Rachel Widra Mark E. Schweitzer

    Bureau of Labor Statistics data indicate that five million jobs lost during the pandemic have not been recovered, but it is difficult to ascertain how many workers will return to available jobs. The Census Bureau’s Household Pulse Survey includes a detailed set of reasons for nonemployment, including households’ responses to the pandemic that provide a new perspective on reasons for not working. Among prime-age workers, reasons for nonemployment during the SARS-CoV-2 (COVID-19) pandemic have shifted substantially from mostly labor demand reasons to primarily labor supply inhibitors. At this point, most nonemployment is connected to three categories: sickness and concerns about COVID-19; child- and eldercare responsibilities; and the residual category “other reasons.” The persistence of these answers and the characteristics of individuals’ providing these answers point to barriers to fully recovering prior employment rates. Read More

  • Boomerang Kids in the Pandemic: How High-Income Families Are Their Own Safety Net

    Rachel Widra André Victor D. Luduvice

    In this Economic Commentary, we use the Current Population Survey to identify and examine the influx of young adults who moved in with their parents during the COVID-19 pandemic—the so-called boomerang kids—and how being in their family home influences their labor market decisions and sensitivity to occupational risk relative to that of other young adults. We find that most boomerang kids come from high-income families that can financially support them through nonemployment spells that are, on average, longer than those of young adults not living with their parents. Young adults living with their parents are also more responsive to the risk of COVID-19 exposure in the workplace and are less likely to work in occupations with high exposure risk. Read More

  • Evaluating Homeownership as the Solution to Wealth Inequality

    Daniel R. Carroll Ross Cohen-Kristiansen

    Homeownership presents an opportunity to accumulate wealth, making it an appealing vehicle for reducing wealth inequality. We find that the opportunity for leveraged returns can lead to wealth gains among lower-income households but note that homeownership for low-income homeowners carries risks that are higher for them than for high-income homeowners. Read More

  • PPP Loans & State-level Employment Growth

    Murat Tasci Bezankeng Njinju Hana Braitsch

    In this Economic Commentary, we focus on the first round of Paycheck Protection Program (PPP) loans granted beginning in March 2020 until early August 2020, when turbulence in the labor market was pronounced, in order to demonstrate the PPP’s effects on local labor markets. We find that PPP loans helped mitigate the negative impact of the pandemic recession on state-level employment growth. States that received most of their funding early in the loan period had smaller employment declines than did states that received comparable funds later in the period. Read More

  • Smallest Firms Reveal Barriers to Economic Inclusion: Lessons from Pandemic Support Programs

    Emily Garr Pacetti Maria Thompson

    Data from the Small Business Credit Survey and insights from community-based organizations prove to be invaluable tools for helping small businesses access the credit they need. Read More

  • Manufacturing Wage Premiums Have Diverged between Production and Nonproduction Workers

    Joel Elvery Julianne Dunn

    Manufacturing jobs have long been associated with good wages. While some manufacturing workers still enjoy relatively high wages, the premium for workers on the factory floor has shrunk dramatically. Why? And what does it mean for workforce policy? Read More

  • Whose Inflation Expectations Best Predict Inflation?

    Randal J. Verbrugge Saeed Zaman

    We examine the predictive relationship between various measures of inflation expectations and future inflation. We find that the expectations of professional economists and of businesses have tended to provide more accurate predictions of future inflation than the expectations of households and of financial market participants. However, the forecasts coming from a relatively simple and popular benchmark inflation forecasting model have historically been roughly as accurate as the expectations of businesses and professional economists. Read More

  • Does Spending Slide When COVID-19 Surges?

    Joel Elvery Mark Oleson

    Driven by the delta variant, the latest COVID-19 surge is the largest and most widespread since that of November and December 2020. How do consumer spending and social distancing habits during the delta surge compare to those of last fall’s surge? Read More

  • Small Businesses in Our Region Appear to Have Had Greater Access to Traditional Credit Compared to the Nation...but Inequalities among Firms Persist

    Emily Wavering Corcoran Emma Montgomery Emily Garr Pacetti

    Nearly 18 months from the outbreak of COVID-19, small employer firms—businesses with fewer than 500 employees—continue to cope with the extra challenges the pandemic brought. How are they weathering the pandemic? Read More

  • How Large Are the American Rescue Plan Fund Distributions to State and Local Governments?

    Stephan D. Whitaker Grant Rosenberger

    Because of the American Rescue Plan, $350 billion will be distributed to state and local governments to help speed the nation’s economic recovery from the pandemic. Will these allocations be modest, or will they create a once-in-a-generation opportunity? Read More

  • Strong Demand, Limited Supply, and Rising Prices: The Economics of Pandemic-Era Housing

    Julianne Dunn Isabel Brizuela

    When the coronavirus pandemic began, many feared the housing market would collapse as it did in the mid-2000s. Instead, the industry has struggled to keep up with an influx of demand for homes, leading to rapidly rising prices. What’s next for residential real estate and construction? Read More

  • The Racial Wealth Gap and Access to Opportunity Neighborhoods

    Dionissi Aliprantis Daniel R. Carroll Eric Young

    Some Black households live in neighborhoods with lower incomes than their own incomes might suggest, and this may impede their economic mobility. We investigate possible reasons and find that differences in financial factors do not explain racial distributions across neighborhoods. Our findings indicate other factors such as discrimination in the housing market, racial hostility, and social networks are at work. Read More

  • Access to Broadband is Essential for Positive Economic Outcomes

    Erik Tiersten-Nyman

    Though the pandemic has put the spotlight on the issue of limited broadband access in some regions, the Federal Reserve System has been studying it for years. Recent analyses explore the relationship between broadband access and employment. Read More

  • Semiconductor Shortages and Vehicle Production and Prices

    Pawel Krolikowski Kristoph Naggert

    Vehicle production has fallen since the beginning of the pandemic recession. We investigate reasons for this decline. Manufacturers in this industry cite insufficient materials, including a lack of semiconductors, as increasingly responsible. Demand seems to be less of an issue. In fact, demand has been strong, and together with accelerating prices and sharply declining inventories, it suggests an insufficient supply of new cars. Our best guess is that the materials shortages and their effects on new car prices will subside within the next six to nine months. Read More

  • Why Has Durable Goods Spending Been So Strong during the COVID-19 Pandemic?

    Kristen Tauber Willem Van Zandweghe

    Consumers increased their purchases of durable goods notably during the COVID-19 pandemic. The pandemic may have lifted the demand for durable goods directly, by shifting consumer preferences away from services toward a variety of durable goods. It may also have stimulated spending on durable goods indirectly, by prompting a strong fiscal policy response that raised disposable income. We estimate the historical relationship between durable goods spending and income and find that income gains in 2020 accounted for about half of the increase in durable goods spending, indicating that the direct and indirect effects of the pandemic on durable goods spending were about equally important. Read More

  • Why Wasn’t there a Nonbank Mortgage Servicer Liquidity Crisis?

    Lara Loewenstein

    In March 2020, in the early days of the COVID-19 pandemic, many were concerned about the liquidity of nonbank mortgage servicers. As it turned out, the vast majority of these servicers did not face a liquidity crisis. In this Commentary I detail the reasons why, including lower than expected take up rates of forbearance, the role played by mortgage origination income, and the actions taken by the government-sponsored enterprises, Ginnie Mae, and housing agencies. Read More

  • Shared Equity Affordable Homes Unlock Racial Equity for All

    Home prices are rising, pricing out many potential homebuyers. This alternative homeownership model keeps homes affordable for lower-income buyers and increasingly for buyers of color. Read More

  • How the Pandemic Has Reshaped Economic Inclusion in the United States

    Mark E. Schweitzer Emily Dohrman

    The pandemic brought unusually large and novel changes to the US labor market. We investigate how the pandemic affected workers of different ages, racial or ethnic backgrounds, and gender and the degree to which these effects have persisted after a year of recovery. Read More

  • How Well Did PPP Loans Reach Low- and Moderate-Income Communities?

    Mark E. Schweitzer Garrett Borawski

    We investigate the degree to which Paycheck Protection Program (PPP) loans reached small businesses in low- and moderate-income (LMI) communities. We find evidence that the program did have a broad reach within LMI communities, but that it reached higher-income communities to a greater extent and areas with Black, Hispanic, and American Indian or Alaska Native majorities to a lesser extent. Read More

  • Building Resilient Communities Takes a Network: Group Shares Success Stories, Resources, and Opportunities to Connect

    Communities and regional partners in eastern Kentucky are joining forces—sharing resources, solutions, and stories of success—to promote a resilient economy. Read More

  • How Sure Can We Be about a COVID-19 Test Result if the Tests Are Not Perfectly Accurate?

    Allan Dizioli Roberto Pinheiro

    In this Commentary, we show how the interpretation of test results is affected by a test’s reliability rate. Moreover, we discuss how test fallibility may affect the use of tests as a tool to curb the spread of a disease. In particular, we show how administering inexpensive and less precise tests that can be conducted multiple times may be a more efficient way of curbing the pandemic than administering expensive more precise tests once. Read More

  • Looking for Opportunities to Advance? The Occupational Mobility Explorer Can Help

    Kyle Fee

    Both jobseekers and workforce development professionals can use this interactive tool to turn job skills into higher-paying positions. How will you use it? Read More

  • Closing the Racial Wealth Gap One Homeowner and Good Job at a Time: Toledo Taps Existing Resources to Increase Equity

    Think you don’t have the resources to increase equity and inclusion? Maybe you already have what you need. Toledo’s approach makes use of financial resources and partnerships already in place. Read More

  • Expected Post-Pandemic Consumption and Scarred Expectations from COVID-19

    Edward S. Knotek II Michael McMain Raphael Schoenle Alexander Dietrich Kristian Ove R. Myrseth Michael Weber

    We examine the evolution of consumers’ expectations for their post-crisis spending on services that have been dramatically curtailed by the pandemic: visiting restaurants, bars, and hotels, using public transportation, and attending crowded events. While most groups now plan to return to their previous spending on these services, higher-income individuals expect to sharply increase their use of these services, but older Americans expect to lower theirs. Read More

  • Two Approaches to Predicting the Path of the COVID-19 Pandemic: Is One Better?

    Ben R. Craig Tom Phelan Jan-Peter Siedlarek Jared Steinberg

    We compare two types of models used to predict the spread of the coronavirus, both of which have been used by government officials and agencies. We describe the nature of the difference between the two approaches and their advantages and limitations. We compare examples of each type of model—the University of Washington IHME or “Murray” model, which follows a curve-fitting approach, and the Ohio State University model, which follows a structural approach. Read More

  • Feedback Appreciated: What Community Members Told Us about Modernizing the Community Reinvestment Act (CRA)

    Ken Surratt

    Discussions to share info and seek public comment on proposed changes to modernize the CRA revealed two things key for ensuring access to capital for all people and communities. Read More

  • Flexible Average Inflation Targeting and Inflation Expectations: A Look at the Reaction by Professional Forecasters

    Kristoph Naggert Robert Rich Joseph Tracy

    This Commentary examines the response of longer-run inflation expectations to the FOMC’s August 2020 announced switch to a flexible average inflation-targeting (FAIT) regime.  Read More

  • Investing in Community-Driven Solutions Key to Pandemic Recovery

    Communities know what improvements they need, but many lack resources or infrastructure to act. This policy tool, and an example of where it is working, can help communities put solutions into action. Read More

  • Which Industries Received PPP Loans?

    Mark E. Schweitzer Garrett Borawski

    We examine the financial challenges faced by small businesses during the COVID-19 pandemic and estimate the scale of loans provided to small businesses through the Paycheck Protection Program. We find that the program reached businesses throughout the economy, and we estimate that small businesses in most industry sectors received loans equivalent to between 80 percent and 120 percent of 10 weeks of their 2017 payrolls. That said, there are important differences in the distribution of funds across sectors that suggest some businesses had problems accessing loans and that a significant number of firms with more than 500 employees likely used alternative size criteria to qualify for the program. Read More

  • Migrants from High-Cost, Large Metro Areas during the COVID-19 Pandemic, Their Destinations, and How Many Could Follow

    Stephan D. Whitaker

    When the COVID-19 pandemic forced tens of millions of people to work remotely, some chose to relocate out of high-cost, large metro areas. Did people move to cheaper metros or give up in city living altogether? How many will follow in their footsteps, and what could their relocating mean for the places they choose? Read More

  • Economic Inclusion 2000–2020: Labor Market Trends by Race in the US and States

    Kyle Fee

    This Commentary examines the extent to which disparities exist between Blacks and whites in labor market outcomes such as levels of labor force participation, unemployment rates, and earnings. To gauge whether disparities have narrowed or widened since 2000, national trends in these outcomes during the past two decades are compared to the trends in three states: Kentucky, Ohio, and Pennsylvania. Finally, to assess the current state of economic inclusion as reflected in the labor market, gaps in Black and white outcomes are compared across US states in 2020. Read More

  • Modeling Behavioral Responses to COVID-19

    Ben R. Craig Tom Phelan Jan-Peter Siedlarek Jared Steinberg

    Many models have been developed to forecast the spread of the COVID-19 virus. We present one that is enhanced to allow individuals to alter their behavior in response to the virus. We show how adding this feature to the model both changes the resulting forecast and informs our understanding of the appropriate policy response. We find that when left to their own devices, individuals do curb their social activity in the face of risk, but not as much as a government planner would. The planner fully internalizes the effect of all individuals’ actions on others in society, while individuals do not. Further, our simulations suggest that government intervention may be particularly important in the middle and later stages of a pandemic. Read More

  • COVID-19 and Education: A Survey of the Research

    Peter L. Hinrichs

    This Commentary reviews evidence on three areas of concern related to the COVID-19 pandemic and education in the United States for which research currently exists. First, the evidence suggests that the spread of the COVID-19 virus at K–12 schools has been low, although it may have spread through colleges at a higher rate. Second, while anecdotal evidence suggests that school closures have reduced labor force participation, the research evidence thus far does not find much support for this situation. Third, the limited research evidence does, however, suggest the COVID-19 pandemic is negatively affecting students’ academic performance. Read More

  • COVID-19 and Supply Chains: A Year of Evolving Disruption

    Julianne Dunn

    From product shortages to capacity constraints in the freight sector, the coronavirus pandemic has impacted supply chains continuously if inconsistently. As COVID-19 continues to disrupt the global economy, will supply chain disruptions continue, too? Read More

  • Inflation: Drivers and Dynamics 2020 CEBRA Annual Meeting Session Summary

    Edward S. Knotek II Robert Rich Raphael Schoenle Michael Lamla Emanuel Moench Michael Weber

    The Cleveland Fed’s Center for Inflation Research sponsored a session on inflation dynamics at the 2020 CEBRA annual meeting. The presentations focused on inflation expectations and firms’ price-setting behavior. This Economic Commentary summarizes the papers presented during the session. Read More

  • Recessions and the Trend in the US Unemployment Rate

    Kurt G. Lunsford

    The unemployment rate in the United States falls slowly in expansions, and it may not reach its previous low point before the next recession begins. Based on this feature, I document that the frequent recessions prior to 1983 are associated with an upward trend in the unemployment rate. In contrast, the long expansions beginning in 1983 are associated with a downward trend. I then estimate a two-variable vector autoregression (VAR) that includes the unemployment rate and a recession indicator. Long-horizon forecasts from this VAR conditioned on no future recessions project that the unemployment rate will go to 3.6 percent after a long period with no recessions. Read More

  • Did the COVID-19 Pandemic Cause an Urban Exodus?

    Stephan D. Whitaker

    In 2020, several media stories reported that residents were leaving urban neighborhood because they feared contracting COVID-19. However, people's taking flight from urban areas is only part of the reason dense neighborhoods were left with fewer residents. Read More

  • CRA, Racism & the Federal Reserve: A Midwest Perspective

    Emily Garr Pacetti

    The Community Reinvestment Act is up for its first significant revision in 25 years. It’s important we optimize this tool to address systemic disinvestment in lower-income and minority communities. Read More

  • How Well Does the Cleveland Fed’s Systemic Risk Indicator Predict Stress?

    Ben R. Craig

    A number of financial stress measures were developed after the financial crisis of 2007–2009 in the hope that they could provide regulators with advance warning of conditions that might warrant a corrective response. The Cleveland Fed’s systemic risk indicator is one such measure. This Commentary provides a review of the SRI’s performance from 2001 to 2020 and finds that it has performed well, providing a reliable, valid, and timely signal of elevated levels of financial system stress. Read More

  • Forward Guidance during the Pandemic: Has It Changed the Public’s Expectations?

    Wesley Janson Chengcheng Jia

    In responding to the COVID-19 crisis, the Federal Reserve has both lowered the federal funds rate and provided forward guidance. We study whether the forward guidance given with the April and June 2020 FOMC meetings altered the public’s expectations of future policy rates, GDP growth, and inflation. We find that forward guidance was effective in altering the public’s expectations about future policy rates if it was accompanied by an SEP but not expectations about economic fundamentals. We suggest that the difference might be explained by FOMC statements being interpretable in two different ways and the public not having a dominant view on which interpretation was intended. Read More

  • The CRA Is Important for Underserved Communities, and Your Input Can Help Modernize It

    Susan Schaaf

    The Fed is seeking to modernize the Community Reinvestment Act in a way that significantly expands financial inclusion, and you can have a say in how it’s done. Read More

  • Short-Time Compensation: An Alternative to Layoffs during COVID-19

    Pawel Krolikowski Anna Weixel

    We discuss the costs and benefits of short-time compensation (STC), an unemployment insurance program that allows workers with temporarily reduced hours to receive some unemployment insurance benefits. We describe the provisions for STC in the Middle Class Tax Relief and Job Creation Act of 2012 and the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and report the utilization of STC before and after these acts. The number of states with STC programs has remained unchanged at 27 since the beginning of the pandemic, but STC utilization has recently risen to unprecedented levels, driven largely by increases in Michigan and Washington. However, these increases are small relative to increases in Germany’s popular Kurzarbeit program, suggesting that the United States’ STC program may still have scope for expansion. Read More

  • Were Fourth District Local Governments Ready for a Recession? How the Great Recession Influenced How Much They Save

    Stephan D. Whitaker Cornelius Johnson

    Did the Great Recession give local governments a better idea of how much savings they needed to weather another economic downturn? To find out, our economists studied financial statements from 25 cities and 25 counties in the Fourth District at two points in time: the most recent statements available and at the close of the 2007, just before the Great Recession. Read More

  • Equality Is Not Enough: Reflections on the Paycheck Protection Program

    Treye Johnson

    Our society often designs and implements policies that prioritize equality, but prioritizing equity or justice would better address the disparities between racial groups. Read More

  • Subprime May Not Have Caused the 2000s Housing Crisis: Evidence from Cleveland, Ohio

    Lara Loewenstein

    During the 2000s housing bust, Cleveland’s Slavic Village was dubbed “ground zero of the foreclosure crisis” by the national media. Despite this, during the preceding housing boom Cleveland had stable house price growth and relatively low mortgage debt growth, a stark contrast to circumstances in areas such as California that had exceptionally high house price and mortgage debt growth. What explains the relatively minor housing boom and perceived sharp downturn in Cleveland? In this Commentary I show that while subprime debt was a prominent source of debt in Cleveland and especially in its Slavic Village neighborhood during the 2000s, it is difficult to peg subprime debt as playing a causal role in the subsequent foreclosure crisis. Read More

  • Why Are Headline PCE and Median PCE Inflations So Far Apart?

    Daniel R. Carroll Ross Cohen-Kristiansen

    Mean (or headline) PCE inflation has typically fallen below median PCE inflation, and since 2012 the difference has been large. To understand the reasons for this trend, we investigate which components of the headline measure are contributing to the difference. We find that energy components, which frequently undergo wide price swings, and electronics, which have been steadily decreasing in price for decades, explain most of the difference between the two inflation measures. We argue that the outsized impacts of such components on headline PCE inflation reinforce the need for policymakers to consider both headline and median PCE inflation measures. Read More

  • Improving Epidemic Modeling with Networks

    Ben R. Craig Tom Phelan Jan-Peter Siedlarek Jared Steinberg

    Many of the models used to track, forecast, and inform the response to epidemics such as COVID-19 assume that everyone has an equal chance of encountering those who are infected with a disease. But this assumption does not reflect the fact that individuals interact mostly within much narrower groups. We argue that incorporating a network perspective, which accounts for patterns of real-world interactions, into epidemiological models provides useful insights into the spread of infectious diseases. Read More

  • Layoffs during the COVID-19 Pandemic: Four Findings from WARN Act Data

    Rubén Hernández-Murillo Pawel Krolikowski

    With economic conditions changing so rapidly during the COVID-19 pandemic, the standard layoff indicators that policymakers and analysts use are falling short. Worker Adjustment and Retraining Notification (WARN) Act data—a more timely indicator—reveal four findings about job loss during this pandemic. Read More

  • Partnership Connects Pittsburgh’s Small Businesses to Paycheck Protection Program Funds

    Drew Pack

    Community partnerships are essential for local responsiveness during a crisis. Just one such Pittsburgh partnership led to saving more than 100 jobs and securing more than $1.3 million in PPP funds. Read More

  • Assessing Layoffs in Four Midwestern States during the Pandemic Recession

    Rubén Hernández-Murillo Pawel Krolikowski

    We use WARN data to assess layoffs in four Midwestern states during the current pandemic-induced recession—Kentucky, Ohio, Pennsylvania, and West Virginia. The data come from the advance layoff notices filed under the Worker Adjustment and Retraining Notification (WARN) Act. We find that the number of workers affected by layoff announcements rose sharply in the second half of March and April, and unexpected changes in economic conditions meant that workers received little advance notice before layoff. Layoff announcements have affected workers across these four states, and workers in mining and leisure and hospitality have been affected the most. Most recently, the number of workers affected by WARN notices has almost returned to prerecession levels. Read More

  • Community Support Gives Small Businesses Strength in College Hill, Ohio

    Bonnie Blankenship

    Through investment in its community, one organization is helping its business district remain a local economic driver—even during a pandemic. Read More

  • Consumers and COVID-19: Survey Results on Mask-Wearing Behaviors and Beliefs

    Edward S. Knotek II Raphael Schoenle Alexander Dietrich Gernot Müller Kristian Ove R. Myrseth Michael Weber

    Masks or cloth face coverings have the potential to help reduce the spread of COVID-19 without greatly disrupting economic activity if they are widely used. To assess the state of mask wearing, we surveyed US consumers about their recent and prospective mask-wearing behavior. We find that most respondents are wearing masks in public but that some respondents are less likely to follow social-distancing guidelines while doing so, indicating a potential tradeoff between two of the recommended methods that jointly reduce coronavirus transmission. While most respondents indicated that they were extremely likely to wear a mask if required by public authorities, the reported likelihood is strongly dependent on age and perceived mask efficacy. Read More

  • How Aggregation Matters for Measured Wage Growth

    Michael Morris Robert Rich Joseph Tracy

    Wage growth is often measured by the change in average hourly earnings (AHE), a gauge of overall wages that aggregates information on earnings and hours worked across individuals. A close look at this aggregation method demonstrates that AHE growth reflects disproportionately the profile of high-earning workers who typically display lower and less cyclically sensitive wage growth. Using data from the Current Population Survey (CPS), we adopt a different aggregation method and compute wage growth as the average of individuals’ wage growth. The analysis indicates that the CPS measure of average wage growth is significantly higher than AHE growth and that it displays a more meaningful nonlinear relationship with the Congressional Budget Office’s unemployment gap. Last, our findings do not support the claim that there was hidden slack in the labor market during the recent expansion that was restraining wage growth. Read More

  • Measuring Deaths from COVID-19

    Dionissi Aliprantis Kristen Tauber

    Medical data are new to the analyses and deliberations of Federal Reserve monetary policymakers, but such data are now of primary importance to policymakers who need to understand the virus’s trajectory to assess economic conditions and address the virus’s impacts on the economy. The number of deaths caused by COVID-19 is one key metric that is often referred to, but as with other COVID metrics, it is a challenge to measure accurately. We discuss the issues involved in measuring COVID-19 deaths and argue that the change in the number of directly observed COVID-19 deaths is the most reliable and timely approach when using deaths to judge the trajectory of the pandemic in the United States, which is critical given the current inconsistencies in testing and limitations of hospitalization data. Read More

  • The Effect of the 2017 Tax Reform on Investment

    Filippo Occhino

    The 2017 tax reform affected investment through many channels. I use a macroeconomic model to estimate the overall effect. That estimate suggests that, because the different provisions worked in different directions, the initial impact of the tax reform on investment was small. The same model predicts that the tax reform will hold investment down in the medium term. Read More

  • A Growth-Augmented Phillips Curve

    Kristen Tauber Willem Van Zandweghe

    Empirical studies find that the link between inflation and economic slack has weakened in recent decades, a development that could hamper monetary policymakers as they aim to achieve their inflation objective. We show that while the role of economic slack has diminished, economic growth has become a significant driver of inflation dynamics, indicating that the link between inflation and economic activity remains but the relevant gauge of activity has changed. The new evidence suggests that the COVID-19-related recession could induce substantial disinflationary pressure. Read More

  • The Information Effect of Monetary Policy: Self-Defeating or Optimal?

    Wesley Janson Chengcheng Jia

    As the Federal Reserve has become more transparent about its decisions on the federal funds target rate, the general public has begun to regard the rate as not only a benchmark interest rate, but also as a signal about the state of the economy. However, the specific information considered by the public to be revealed is not clearly understood. We investigate this question and find that the information revealed by monetary policy decisions is regarding future output growth, not inflation, and that such an information effect is theoretically optimal and does not make interest-rate policies self-defeating. Read More

  • Skills Are Bridges Not Gaps: A Skills-Based Approach for Transitioning Workers to Higher-Paying Occupations

    Kyle Fee

    Skills-based hiring practices—those that prioritize skills necessary to succeed in a role over formal educational credentials—show potential for securing higher positions for lower-wage workers and helping employers get the workers they need. Read More

  • The 1918 Flu and COVID-19 Pandemics: Different Patients, Different Economy

    Ross Cohen-Kristiansen Roberto Pinheiro

    Many observers seeking historical precedent for COVID-19 draw on the 1918 influenza pandemic. In this Commentary, we highlight the differences between the 1918 flu and COVID-19 pandemics in terms of the most significantly affected populations. We also show key differences in the US economy in the late 1910s and now. Not only did the 1918 influenza virus primarily affect significantly younger cohorts, but the US economy’s industry and geographic distributions were notably different at the time compared to today’s. Consequently, caution is needed when using the 1918 influenza pandemic as a guideline for implementing and evaluating policy responses to COVID-19. Read More

  • Intergenerational Homeownership and Mortgage Distress

    Nicholas Fritsch Rawley Z. Heimer

    Rates of US homeownership have declined in the past two decades, and the decline has been especially pronounced for young adults. Motivated by recent research that explores the ways in which personal experiences can affect financial attitudes and beliefs, we explore whether the negative homeownership experiences of parents during the 2008 financial crisis could have caused their children to view homeownership less favorably. We find that parental mortgage distress negatively correlates with the probability that a child will purchase a home, and we explore various channels through which this link may occur. Read More

  • Lessons on the Economics of Pandemics from Recent Research

    Sewon Hur Michael Jenuwine

    The spread of the COVID-19 pandemic has resulted in a dual public health and economic crisis. Many economic studies in the past few months have explored the relationship between the spread of disease and economic activity, the role for government intervention in the crisis, and the effectiveness of testing and containment policies. This Commentary summarizes the methods and findings of a number of these studies. The economic research conducted to date shows that adequate testing and selective containment measures can be effective in fighting the COVID-19 pandemic, and in the absence of adequate testing capabilities, optimal interventions involve social distancing and other lockdown measures. Read More

  • An Uncommon Crisis: COVID-19 and its Disproportionate Impacts on Vulnerable Communities

    Mary Helen Petrus

    When we asked community partners how COVID-19’s disruptions are impacting low- and moderate income families and neighborhoods and traditionally underserved communities, they heard this: the virus is impacting the already vulnerable disproportionately, and in a way that accentuates existing disparities. Read More

  • The Labor-Market Skills of Foreign-born Workers in the United States, 2007–2017

    Rubén Hernández-Murillo

    Various measures of the labor-market skills of foreign-born workers have improved during the past decade. The largest gains are concentrated among immigrants from Mexico, who traditionally have shown the lowest skill levels among foreign-born workers. The data suggest that the apparent increase in skills is the result of a shift in the distribution of immigrants coming to the United States, with increased immigration of workers from Asia and a precipitous decline in immigration of workers from Mexico. Read More

  • The Unemployment Cost of COVID-19: How High and How Long?

    Ayşegül Şahin Murat Tasci Jin Yan

    We use flows into and out of unemployment to estimate the unemployment rate over the next year. This approach produces less stark projections for the unemployment rate over the course of the next year than some of the more alarming projections that have been reported. Using our approach and assuming that the severest social-distancing measures will be lifted in June, we estimate that the unemployment rate will peak in May at about 16 percent but gradually decline thereafter and end the year at 7.5 percent. Read More

  • Help for Those Facing Eviction Increases to Meet the Challenge of COVID-19

    Bonnie Blankenship

    With businesses closed and orders to shelter in place, many tenants—especially those with low- to moderate-incomes—are finding themselves unemployed, unable to pay their rents, and subject to eviction. There are resources to help. Read More

  • Consumers and COVID-19: A Real-Time Survey

    Edward S. Knotek II Raphael Schoenle Alexander Dietrich Keith Kuester Gernot Müller Kristian Ove R. Myrseth Michael Weber

    We summarize the results from an ongoing survey that asks consumers questions related to the recent coronavirus outbreak, including their expectations for how the economy is likely to be affected by the outbreak and how their own behavior has changed in response to it. The survey began in early March, providing a window into how consumers’ responses have evolved in real time since the early days of the acknowledged spread of COVID-19 in the United States. In updating and charting the survey’s findings on the Cleveland Fed’s website going forward, we seek to inform policymakers and researchers about consumers’ beliefs during a time of high uncertainty and unprecedented policy responses. Read More

  • An Unfamiliar Champion in the Fight: Black Homeownership Has an Enduring Advocate

    Layisha Bailey

    By raising awareness of issues that challenge black homeownership today, the Cleveland Realtist Association helps anyone—but black consumers in particular—buy property and sustain the benefits of homeownership in any community. Read More

  • Collaboration in Cuyahoga County Leads to Housing Funding

    Ken Surratt

    As a worldwide pandemic adds strain to already vulnerable LMI communities, one new program will create access to funding for home repairs and purchases. Read More

  • Credit Market Frictions, Business Cycles, and Monetary Policy: The Research Contributions of Charles Carlstrom and Timothy Fuerst

    Todd E. Clark Matthius Paustian Eric Sims

    Charles Carlstrom and Timothy Fuerst were prolific and prominent research economists who, until their untimely deaths a few years ago, were long-associated with the Federal Reserve Bank of Cleveland. Their myriad contributions include the incorporation of financial market imperfections into macroeconomic models and the study of optimal monetary policy. We provide an overview of their work and summarize a few key themes from a research conference held in their honor. Read More

  • The CPI–PCEPI Inflation Differential: Causes and Prospects

    Wesley Janson Randal J. Verbrugge Carola Conces Binder

    The Federal Open Market Committee’s inflation target is stated in terms of the personal consumption expenditures price index (PCEPI). The PCEPI, like the consumer price index (CPI), measures inflation in the expenditures of households, but these indexes differ in purpose, scope, and construction. Notably, since the CPI is used as the reference rate for numerous financial contracts, one can derive implied longer-run CPI inflation forecasts from financial contracts. Such forecasts are widely reported. But if policymakers are to use these forecasts to guide their pursuit of the inflation target, they need to translate these CPI inflation forecasts into corresponding implied PCEPI forecasts. Since 1978, CPI inflation has averaged 0.3 percentage points above PCEPI inflation, but this differential has varied significantly over time. In this Commentary, we explain why, investigate a key historical episode, and provide an updated estimate of the likely differential going forward. Read More

  • A Brief History of Bank Capital Requirements in the United States

    Joseph G. Haubrich

    Modern capital requirements can appear to be overly complex, but they reflect centuries of practical experience, compromises between different regulators, and legal and financial systems that developed over time. This Commentary provides a historical perspective on current discussions of capital requirements by looking at how the understanding of bank capital and the regulations regarding its use have changed over time. Read More

  • Do Affirmative Action Bans Cause Students to Move Across State Lines to Attend College?

    Peter L. Hinrichs

    This Economic Commentary studies whether statewide bans on affirmative action in admission to public universities cause students to move to a new state to attend college. Regression results using data from the decennial census and the American Community Survey provide little evidence that affirmative action bans result in migration across state lines to attend college. In addition to being of direct interest, these results provide a check on earlier research that treats different states roughly as separate higher education markets. Read More

  • Is the Middle Class Worse Off Than It Used to Be?

    Emily Dohrman Bruce Fallick

    We analyze how median real incomes in the United States have changed since 1980 under a definition of the middle class that adjusts for changes in demographics. We find that failing to adjust for demographic shifts in the population relating to age, race, and education can indicate a more positive outlook than is truly the case. We also find that the real median incomes of today’s middle class are somewhat higher than they used to be, particularly for households headed by two adults. We find, as in prior research, that prices for housing, healthcare, and education have risen more than middle-class incomes, while prices for transportation, food, and recreation have risen less than middle-class incomes. Read More

  • For Too Many Minority Workers, Earnings Still Don’t Add Up

    Emily Garr Pacetti

    Gaps in earnings—the annual wage of workers aged 16 and older—matter. While there are some reasons for optimism, there is also a need for ongoing vigilance about how this economy is playing out in real time for minority workers and their families. Read More

  • Revisiting Wage Growth after the Recession

    Roberto Pinheiro Meifeng Yang

    In this Commentary, we show that realized wage growth since 2015 has mostly been at a rate that would be expected given observed rates of inflation and labor productivity growth. Moreover, labor productivity growth has been in line with its potential over the same period. This picture of the post-recession recovery of wages is very different from the one we observed in an earlier analysis, when all we had were data up through the end of 2015. The reasons underlying the difference are large revisions in labor productivity data and upticks in the inflation rate and labor productivity growth since our last report. Read More

  • A Forecasting Assessment of Market-Based PCE Inflation

    Mark Bognanni

    This article explores the potential for market-based inflation measures to improve inflation forecasting. To do so, I compare the pseudo-real time forecasting performance of a suite of models for forecasting total or “headline” PCE inflation over the short and medium run. In the forecasting exercise, a simple model using only market-based core PCE inflation showed the best forecasting performance at all horizons. Read More

  • Making Change: Addressing Skills-training and Employment Needs for Returning Citizens

    Treye Johnson

    Finding a quality job is important for both formerly incarcerated individuals and the communities in which they live. One Cleveland-area program is helping, but the need for additional support for this vulnerable population is great. Read More

  • Profit with a Purpose: Manufacturing Success for Cincinnati’s Second-Chance Citizens

    Bonnie Blankenship

    For the formerly incarcerated, questions abound: What is the next step? Where can I get a job? How can I begin rebuilding my life? One Cincinnati company is providing answers. Read More

  • Inflation: Drivers and Dynamics 2019 Conference Summary

    Andres Blanco Mina Kim Edward S. Knotek II Matthius Paustian Robert Rich Jane Ryngaert Raphael Schoenle Joris Tielens Henning Weber Michael Weber Mirko Wiederholt Tony Zhang

    To provide insights into the processes that drive inflationary dynamics, the Federal Reserve Bank of Cleveland holds an annual conference on the topic of inflation: “Inflation: Drivers and Dynamics.” This Commentary summarizes the papers presented at the 2019 conference. Read More

  • Using Advance Layoff Notices as a Labor Market Indicator

    Kurt G. Lunsford Pawel Krolikowski Meifeng Yang

    We use advance layoff notices filed under the Worker Adjustment and Retraining Notification (WARN) Act as an indicator of current and imminent labor market conditions. We have constructed a database of establishment-level notices starting in 1990 by scraping state government websites, contacting state officials, and retrieving historical data. We find evidence that these notices, aggregated to the national level, lead other prominent labor market indicators, such as initial unemployment insurance claims, the change in the unemployment rate, and changes in private employment. The lead relationship seems strongest at one month with economically meaningful magnitudes. Most recently, WARN data suggest a slight increase in labor market slack. Read More

  • Federal Reserve Bank of Cleveland announces officer promotion

    Jacqueline Dalton has been promoted to vice president of strategy and engagement at the Federal Reserve Bank of Cleveland. Read More

  • Federal Reserve Bank of Cleveland announces officer promotion

    Michael Beedles has been promoted to senior vice president and chief financial officer at the Federal Reserve Bank of Cleveland. Read More

  • The Souk al-Manakh Crash

    Ben R. Craig

    From 1978 to 1981, Kuwait’s two stock markets, one the conservatively regulated “official” market and the other the unregulated Souk al-Manakh, exploded in size, growing to the point where the amount of capital actively traded exceeded that of every other country in the world except the United States and Japan. A year later, the system collapsed in an instant, causing huge real losses to the economy and financial disruption lasting nearly a decade. This Commentary examines the emergence of the Souk, the simple financial innovation that evolved to solve its rapidly increasing need for liquidity and credit, and the herculean efforts to solve the tangled problems resulting from the collapse. Two lessons of Kuwait’s crisis are that it is difficult to separate the banking and unregulated financial sectors and that regulators need detailed data on the transactions being conducted at all financial institutions to give them the understanding of the entire network they must have to maintain financial stability. If Kuwaiti officials had had transaction-by-transaction data on the trades being made in both the regulated and unregulated stock markets, then the Kuwaiti crisis and its aftermath might not have been so severe. Read More

  • Have Stress Tests Impacted Small-Business Lending?

    Yuliya Demyanyk

    The Federal Reserve conducts stress tests of the largest bank holding companies to ensure that the banking system has sufficient capital to stay financially sound in the event of worsening economic conditions. Some groups have raised concerns that the stress tests will reduce lending to small businesses. This article describes recent research investigating the impact of the stress tests on small-business lending. It finds that the banks that are most affected by stress tests have reduced their small-business credit, but aggregate credit to small businesses has not fallen. Read More

  • Challenges with Estimating U Star in Real Time

    Murat Tasci

    Although the concept of the natural rate of employment, NAIRU, or “U star” is used to measure the amount of slack in the labor market, it is an unobservable quantity that must be estimated using data currently available. This Commentary investigates the degree to which our estimates of U star at various points in the current business cycle have changed as real-time data have been revised and as more data points have accumulated. I find that the availability of additional data has contributed to a significant change in our estimates of U star at earlier points in the business cycle, a result that suggests we might have been underestimating the level of labor market slack during some of the recent recovery period. In retrospect, our updated estimates of U star suggest labor markets were not as tight as we thought they were then. Read More

  • Racial Inequality, Neighborhood Effects, and Moving to Opportunity

    Dionissi Aliprantis

    Moving to Opportunity (MTO) was a housing mobility program designed to investigate neighborhood effects, the influences of the social and physical environment on human development and well-being. Some of the results from MTO have been interpreted as evidence that neighborhood effects are not as strong as earlier evidence had indicated. This Commentary discusses new research suggesting that neighborhood effects are, on the contrary, as strong and policy relevant as suspected before the experiment. This Commentary also discusses why the interpretation of the MTO data is important: If neighborhood effects drive outcomes, then addressing racial inequality requires concerted efforts beyond ending racial discrimination. Read More

  • Columbus—Steady Overall Employment Growth

    Mekael Teshome Sarah Mattson

    The Columbus metro area continues to be one of the region’s strongest performers, with a low unemployment rate that continues to fall even as the labor force expands, steady employment growth, appreciating home prices, and low consumer debt and credit card delinquency levels. Read More

  • Toledo—Conditions Continue to Improve

    Joel Elvery Julianne Dunn

    Economic conditions in the Toledo metro area continue to improve. The unemployment rate has fallen, and employment levels are holding relatively steady. The housing market is a particularly bright spot, with rising residential building permit numbers, growing home prices, and median home values that exceed their prerecession peak. Read More

  • Has the Real-Time Reliability of Monthly Indicators Changed over Time?

    Mark Bognanni

    Economic data are routinely revised after they are initially released. I examine the extent to which the real-time reliability of six monthly macroeconomic indicators important to policymakers has remained stable over time by studying the time-series properties of their short-term and long-term revisions. I show that the revisions to many monthly economic indicators display systematic behaviors that policymakers could build into their real-time assessments. I also find that some indicators’ revision series have varied substantially over time, suggesting that these indicators may now be less useful in real time than they once were. Lastly, I find that substantial revisions tend to occur indefinitely after the initial data release, a result which suggests a certain degree of caution is in order when using even thrice-revised monthly data in policymaking. Read More

  • The Winners and Losers from Trade

    Daniel R. Carroll Sewon Hur

    Although increased international trade is widely viewed as beneficial to the economies of the participating countries, the benefits are not distributed evenly across individuals within those countries, and indeed some individuals may bear a cost. We discuss two channels through which trade can affect individuals differently depending on their skill and income levels and assess the combined impact of those channels. We find that the effects of trade on the labor market and the effects of trade on prices go in opposite directions and are of similar magnitude. Read More

  • Trends in the Noninterest Income of Banks

    Joseph G. Haubrich Tristan Young

    A large fraction of banks’ revenue comes from noninterest income, which includes items such as overdraft fees and ATM charges. We investigate whether this source of income has increased since the financial crisis, given that banks’ interest income may have been impacted by the low interest rate environment. We find that total noninterest income has actually decreased. However, service charges, one of the subcomponents of noninterest income, have increased. The increase in service charges is masked in the data on total noninterest income because other types of noninterest income, specifically securitization fees and other types of noninterest income affected by the crisis, fell during the same period. Read More

  • Pittsburgh—Employment Steadily Advancing

    Mekael Teshome Julianne Dunn

    Employment in the Pittsburgh metro area expanded at a slow and steady pace, and the unemployment rate declined slightly. The healthcare, construction, and manufacturing sectors accounted for most of the net job gains. Read More

  • Lexington—Regaining Momentum?

    Richard Kaglic Tristan Young

    Recent data suggest conditions improved in the first half of 2019 for the Lexington metro area. A low unemployment rate combined with an increase in labor force participation may signify a resumption of employment growth. Read More

  • Proposed Solutions for Breaking the Cycle of Poverty

    Adiah Bailey

    How can we minimize the barriers that trap people in the cycle of poverty? The answer, at least in part, is a combination of providing access to resources and transportation. Read More

  • Looking beyond Data to Understand Economic Mobility

    Lucas Misera

    When living on the “wrong” side of a road can make a world of a difference, the proactive and hyper-local work of community development practitioners is essential for sparking change. Read More

  • Cyclical versus Acyclical Inflation: A Deeper Dive

    Saeed Zaman

    This Commentary builds on recent research separating the components of overall inflation into cyclical and acyclical categories, but it does so at a finer level of disaggregation than previous analyses to understand recent inflation developments in the two categories. The inflation rate among cyclically sensitive subcomponents, which comprise roughly 40 percent of overall core PCE inflation, has generally continued to firm in recent years in line with a strengthening labor market and has returned to near pre-Great Recession levels. By contrast, the inflation rate among the acyclical subcomponents remains subdued. A modest firming in acyclical core PCE inflation to a more normal level, combined with ongoing strength in the labor market, would be enough to return core PCE inflation to 2 percent within approximately one year. Read More

  • Homestead Program Is a Land Contract Success Story

    Bonnie Blankenship

    Land contracts, when appropriately administered, allow low-income individuals who might not qualify for conventional bank-financed mortgages a chance to become homeowners. Read More

  • Operationalizing Inclusion: Tools for Smaller Cities

    Susan Longworth

    Smaller cities face some of the same challenges that larger cities do. Here are three tools some smaller cities are employing to promote economic inclusion among their residents. Read More

  • Cincinnati—Favorable Economic Conditions Bolstering Cincinnati’s Labor Market

    Richard Kaglic Tristan Young

    A falling unemployment rate, the addition of more than 13,000 jobs, and an increase in per capita GDP are three encouraging factors for this metro area’s economy. Read More

  • Cleveland—Slow Growth and Falling Unemployment

    Joel Elvery Julianne Dunn

    Cleveland’s economy continues to improve, with slow employment growth and a steady drop in the unemployment rate. Read More

  • Bitcoin’s Decentralized Decision Structure

    Ben R. Craig Joseph Kachovec

    With the introduction of bitcoin, the world got not just a new currency, it also got evidence that a decentralized control structure could work in practice for institutional governance. This Commentary discusses the advantages and disadvantages of centralized and decentralized control structures by examining the features of the bitcoin payment system. We show that while the decentralized nature of the Bitcoin network "democratizes" payments, it is not obvious that the approach increases the equity or efficiency of markets or that the costs of the decentralized control structure won’t outweigh the benefits in the long run. Read More

  • The Community Reinvestment Act (CRA) for Smaller Communities and Rural Regions

    Drew Pack

    What’s one key element to drive funding to low-income areas of the country? Meaningful and productive partnerships between banks and community-based organizations (CBOs). Read More

  • The Flattening of the Phillips Curve: Policy Implications Depend on the Cause

    Filippo Occhino

    According to the historical relationship known as the Phillips curve, strengthening of the economy is commonly associated with increasing inflation. With inflation having only modestly picked up in the past few years as the economy has become more robust, many believe the Phillips curve relationship has weakened, with the curve becoming flatter. I show that the flattening can be due to very different types of structural changes and that knowing the type of change that has occurred is crucial for choosing the appropriate monetary policy. Read More

  • Behavior of a New Median PCE Measure: A Tale of Tails

    Daniel R. Carroll Randal J. Verbrugge

    We introduce two new measures of trend inflation, a median PCE inflation rate and a median PCE excluding OER inflation rate, and investigate their performance. Our analysis indicates that both perform comparably to other simple trend inflation estimators such as the trimmed-mean PCE. Furthermore, we find that the performance of the median PCE is related to skewness in the distribution of cross-sectional growth rates across categories in the PCE, and our results suggest that the Bowley skewness statistic may be useful in forecasting. Read More

  • Changes in the Occupational Structure of the United States: 1860 to 2015

    Joel Elvery

    This Commentary describes how the mix of occupations in which people have been employed in the United States has evolved over time. After 100 years of dramatic change, the mix of occupations has been more stable since 1970. This trend adds occupational structure to the growing list of ways our nation’s economy has become less dynamic in recent decades. Read More

  • Toledo—Economy Rebounds

    Joel Elvery Julianne Dunn

    Several measures—the number of jobs, the unemployment rate, output per person, and median personal income—indicate the economy of the Toledo metro area has essentially bounced back to where it was at the end of 2015. This represents a recovery from the 2017 closure of the Jeep Cherokee plant that reduced the number of jobs and increased the unemployment rate in the region. Read More

  • Columbus—Labor Market Cruising at a Slightly Slower Pace

    Mekael Teshome Sarah Mattson

    The Columbus metro area’s economy is sturdy, with a low and relatively stable unemployment rate. Total employment grew at a slower rate recently than the metro area’s average pace in the current economic expansion, but the growth was broad-based across sectors. Read More

  • Pittsburgh—Job Market Strengthens

    Mekael Teshome Sarah Mattson

    Adding enough jobs to accommodate a larger labor force is just one way the Pittsburgh metro area’s economy strengthened: Both GDP per capita and income per capita rose, too. Read More

  • Lexington—Economy Showing Mixed Signals

    Richard Kaglic Tristan Young

    The Lexington metro area showed signs of strength in some areas and signs of softness in others. For example, the unemployment rate remains low, but total employment decreased. Read More

  • Putting Middle Neighborhoods Back on the Map

    Treye Johnson

    Supporting the neighborhoods that are home to as many as 40 percent of residents of urban areas has become a movement. Read More

  • Changing Policy Rule Parameters Implied by the Median SEP Paths

    Edward S. Knotek II

    This Commentary estimates the implied parameters of simple monetary policy rules using the median paths for the federal funds rate and other economic variables provided in the Federal Open Market Committee's Summary of Economic Projections (SEP). The implied policy rule parameters appear to have changed over time, as the federal funds rate projections have become less responsive to the unemployment gap. This finding could reflect changes in policymakers' preferences, uncertainty over other aspects of the policy rule, or limitations of estimating simple monetary policy rules from the median SEP paths. Read More

  • Residual Seasonality in GDP Growth Remains after Latest BEA Improvements

    Victoria Consolvo Kurt G. Lunsford

    Measuring economic growth is complicated by seasonality, the regular fluctuation in economic activity that depends on the season of the year. The BEA uses statistical techniques to remove seasonality from its estimates of GDP, but some research has indicated that seasonality remains. As a result, the BEA began a three-phase plan in 2015 to improve its seasonal-adjustment techniques, and in July 2018, it completed phase 3. Our analysis indicates that even after these latest improvements by the BEA, residual seasonality in GDP growth remains. On average, this residual seasonality makes GDP growth appear to be slower in the first quarter of the year and more rapid in the second quarter of the year. Rapid second-quarter growth is particularly noticeable in recent years. As a result, business economists and policymakers may want to take seasonality into account when using GDP to assess the health of the economy.



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  • Update on fed funds rates based on 7 simple monetary policy rules: Cleveland Fed

    The median federal funds rate across 7 policy rules and 3 forecasts rises from 2.41 percent in 2019:Q1 to 3.05 percent in 2021:Q1. Read More

  • Cincinnati—Solid Growth Continues

    Richard Kaglic Tristan Young

    Unemployment remains low, and together the leisure and hospitality and trade, transportation, and utilities sectors added nearly 10,000 jobs to this metro area. Read More

  • Cleveland—Improved Economic Conditions

    Joel Elvery Julianne Dunn

    Employment is up, unemployment is holding steady, GDP per capita is up, and the housing market appears stable: This metro area’s economic situation has improved. Read More

  • Financial Statements for the Federal Reserve Bank of Cleveland

    The Federal Reserve System released the 2018 annual financial statements for the 12 Federal Reserve Banks, individually and combined, as well as for the Board of Governors. Read More

  • Custom Comparison Groups in the Integrated Postsecondary Education Data System

    Peter L. Hinrichs

    This Economic Commentary studies the behavior of colleges when they are asked to list a set of comparison group colleges in annual data reporting for the US Department of Education but are given little direction on how to do so. I find that, relative to themselves, colleges tend to list for comparison colleges that are more selective, are larger, and have better resources. One possible interpretation of these findings is that colleges overestimate where they stand relative to others, although an alternative interpretation is that colleges have accurate views but list comparison institutions based on aspirations. Read More

  • What Is Behind the Persistence of the Racial Wealth Gap?

    Dionissi Aliprantis Daniel R. Carroll

    Most studies of the persistent gap in wealth between whites and blacks have investigated the large gap in income earned by the two groups. Those studies generally concluded that the wealth gap was “too big” to be explained by differences in income. We study the issue using a different approach, capturing the dynamics of wealth accumulation over time. We find that the income gap is the primary driver behind the wealth gap and that it is large enough to explain the persistent difference in wealth accumulation. The key policy implication of our work is that policies designed to speed the closing of the racial wealth gap would do well to focus on closing the racial income gap. Read More

  • Why We All Should Care about Lead

    Treye Johnson

    Though the need to remediate lead seems to be a public health issue with a housing-based solution, the impacts of this crisis are far-reaching. Lead poisoning impacts all of us. The more people and organizations see themselves as part of the solution, the more likely we’ll find success. Read More

  • Do Longer Expansions Lead to More Severe Recessions?

    Murat Tasci Nicholas Zevanove

    We are now in one of the longest expansions on record. The recession that preceded that expansion was one of the worst in history. Are those two facts related? Some economists suggest they are, while others suggest it’s the other way around: Longer expansions lead to more severe recessions. We assess the evidence for these two hypotheses. We find clear evidence for the former and little for the latter. Deeper recessions are often followed by stronger recoveries, while longer and stronger expansions are not followed by deeper recessions. Read More

  • Asset Commonality in US Banks and Financial Stability*

    Jan-Peter Siedlarek Nicholas Fritsch

    One potential threat to a stable financial system is the phenomenon of contagion, where a risk that is ordinarily small becomes a problem because of the way it spreads to other institutions. Researchers have investigated multiple channels through which contagion might occur. We look at two--banks borrowing from each other and banks holding similar types of assets--and argue that the latter is a potential source of systemic risk. We review recent data on asset concentrations and capitalization levels of the largest US banks and conclude that the overall risk from this particular contagion channel is at present likely limited. Read More

  • Rail~Volution Rides into Pittsburgh

    Drew Pack

    The 2018 Rail~Volution conference brought together 1,000 transportation stakeholders to discuss transportation challenges and solutions. Increasing access and integrating technology were two areas of focus this year. Read More

  • NKU Center for Economic Education partners with Federal Reserve Bank of Cleveland to expand Danny Dollar Academy

    Students from Clark Elementary School in Cleveland, Ohio, and Rothenberg Academy and Westwood Academy in Cincinnati, Ohio, are among those participating in the program. Read More

  • Columbus—Stable, Broad-Based Employment Growth

    Mekael Teshome Sarah Mattson

    New jobs, increasing home prices, and a healthy GDP spell a stable economy for the Columbus metro area. Read More

  • Toledo—Economic Situation Has Improved

    Joel Elvery Julianne Dunn

    With the unemployment rate falling and house prices and household financial conditions remaining stable, the Toledo metro area’s economy appears to be firming up. Read More

  • Federal Reserve Bank of Cleveland appoints new leader within fast-growing technology division

    Dan Valerian has been appointed assistant vice president, product delivery and management, in the eGov Department of the Federal Reserve Bank of Cleveland. Read More

  • Cleveland students attend Y.O.U. Entrepreneurship Day at the Fed

    The students are enrolled in E CITY, a Youth Opportunities Unlimited class that teaches students entrepreneurial skills Read More

  • Defining the Challenge: Promoting Economic Mobility and Resilience

    Layisha Bailey

    To promote economic mobility and resilience among the underserved, an organization must first decide how it defines these terms. The definitions played a prominent role at a recent community development conference. Read how. Read More

  • Pittsburgh—Employment Momentum Stalls

    Mekael Teshome Sarah Mattson

    After nine months of the first meaningful employment gains in five years, employment growth in the Pittsburgh metro area stalled in the final quarter of 2017. And though the unemployment rate fell in the first half of 2018, it fell for the wrong reason. Read More

  • Lexington—A Strong Labor Market but Some Signs of Stress

    Guhan Venkatu Julianne Dunn

    The Lexington metro area’s unemployment rate remained low as of June 2018, and employment grew during 2017. However, per capita consumer debt levels and credit card delinquency rates have ticked up in recent quarters. Read More

  • Update on fed funds rates based on 7 simple monetary policy rules: Cleveland Fed

    The median federal funds rate coming from 7 simple policy rules and 3 economic forecasts rises from 2.19 percent in 2018:Q3 to 3.26 percent in 2020:Q3. Read More

  • The Evolution of the Labor Share across Developed Countries

    Roberto Pinheiro Meifeng Yang

    In most developed countries, the share of output accruing to labor has declined over the last 20 years. However, the underlying reasons for the decrease may have differed in the United States and other developed countries. In this Commentary, we examine some of the explanations economists have proposed for the decline in the labor share and discuss how well these explanations account for the decline across developed countries. Read More

  • Cleveland Fed elevates leaders to Information Technology and Business Services roles

    Brian Williams was promoted to vice president and Jennifer Donaldson to assistant vice president effective August 16, 2018. Read More