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  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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.

     

    Appendix

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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

  • 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

  • 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

  • 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