FRBSF Economic Letters

Economic analysis for a general audience

Simon H. Kwan and Thomas M. Mertens


News about the COVID-19 public health crisis has affected asset prices to varying degrees across sectors of the U.S. economy. Stocks in the utilities, real estate, and energy sectors initially suffered the worst sector-specific shocks, while the information technology, health-care, and telecommunications sectors fared relatively better. Businesses with higher financial leverage saw larger declines in their valuations. A simultaneous repricing of credit derivatives suggests concerns about insolvency contributed to the valuation declines. Although some stocks are recovering from the initial lows, significant differences across sectors remain.

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Analysis of current economic developments and the outlook

SF Fed Forecast Preview

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Western Economic Developments

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Working Papers

The latest in economic research

Robert E. Hall and Marianna Kudlyak

It is a remarkable fact about the historical US business cycle that, after unemployment reached its peak in a recession, and a recovery began, the annual reduction in the unemployment rate was stable at around 0.55 percentage points per year. The economy seems to have had an irresistible force toward restoring full employment. There was high variation in monetary and fiscal policy, and in productivity and labor-force growth, but little variation in the rate of decline of unemployment. We explore models of the labor market's self-recovery that imply gradual working off of unemployment following a recession shock. These models explain why the recovery of market-wide unemployment is so much slower than the rate at which individual unemployed workers find new jobs. The reasons include the fact that the path that individual job-losers follow back to stable employment often includes several brief interim jobs, sometimes separated by time out of the labor force. We show that the evolution of the labor market involves more than the direct effect of persistent unemployment of job-losers from the recession shock--unemployment during the recovery is elevated for people who did not lose jobs during the recession.

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