FRBSF Economic Letters

Economic analysis for a general audience

Rob Valletta and Nathaniel Barlow


U.S. labor force participation by people in their prime working years fell substantially during the Great Recession, and it remains depressed despite some recovery since 2015. This appears to reflect longer-term developments, rather than lingering effects from the recession. One key factor is labor market polarization—manifested in the gradual disappearance of manual jobs—which helps predict declining worker attachment across states. This has been reinforced by other long-term economic and social trends, such as health considerations, that also have eroded prime-age labor force attachment.

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Analysis of current economic developments and the outlook

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Working Papers

The latest in economic research

Troy Davig and Andrew Foerster

Large pending fiscal policy changes, such as in the United States in 2012 or in Japan with consumption taxes, often generate considerable uncertainty. “Fiscal cliff” episodes have several features: an announced possible future change, a skewed set of possible out-comes, the possibility that implementation may not actually occur, and a known resolution date. This paper develops a model capturing these features and studies their impact. Fiscal cliff uncertainty shocks have immediate impact, with a magnitude that depends on the probability of implementation, which generates economic volatility. The possibility of fiscal cliffs lowers economic activity even in periods of relative certainty.

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