Economic Letter Countdown: Most Read Topics from 2025

As we approach the end of the year, here’s a top five list of our most widely read FRBSF Economic Letter topics in 2025, featuring research and insights from SF Fed economists and research staff.

5. Data Revisions

Do Low Survey Response Rates Threaten Data Dependence?
Sylvain Leduc, Luiz Edgard Oliveira, Caroline Paulson
March 31, 2025

Monetary policy is forward-looking and dependent on policymakers’ economic outlook. When the outlook is deemed highly uncertain, policymakers may put more weight on incoming data when making monetary policy considerations. However, falling survey response rates suggest employment and inflation data may have become less reliable. Analysis of payroll employment and consumer price inflation data shows that data revisions over the past few years have been in line with their pre-pandemic averages. This suggests that these data have not been an outsized source of uncertainty in recent years.

4. How Demand-Driven Inflation Responds to Monetary Policy

Does Monetary Policy Tightening Reduce Inflation?
Rami Najjar, Adam Shapiro
February 3, 2025

Recent research has identified periods when the Federal Reserve intentionally acted to slow inflation when it exceeded desired levels. The success of these disinflation attempts reveals the extent of policymakers’ commitment to lowering inflation. An extension of this analysis indicates that successful disinflations are associated with a decline in the demand-driven component of inflation. This was especially evident during recent monetary policy tightening, with contributions to core inflation from demand declining 2 percentage points since the summer of 2022—the largest decline for any deliberate disinflation attempt since 1969.

Is Demand or Supply More Important for Inflation?
Kevin Lansing
June 23, 2025

Simulations using a Phillips curve-type relationship provide insights into the importance of demand versus supply for inflation over different periods. The decade of low inflation after the Great Recession was driven mainly by supply forces. Given that monetary policy operates to influence demand but not supply, this result helps to account for the persistent undershooting of the Fed’s 2% inflation goal during these years. In contrast, the period of high inflation during the pandemic era was driven mainly by demand forces.

3. The Neutral Rate and Perceptions About Monetary Policy

Underlying Trends in the U.S. Neutral Interest Rate
Carlos Carvalho, Andrea Ferrero, Felipe Mazin, Fernanda Nechio
April 21, 2025

After a prolonged decline, U.S. inflation-adjusted interest rates have increased somewhat since the pandemic—possibly implying a higher new normal. As central banks attempt to tame the post-pandemic inflationary bout, whether real rates will fall back closer to pre-pandemic levels will ultimately depend on the trends in their long-term underlying determinants. Estimates suggest that the pre-pandemic downward pressures from global factors and from U.S. population aging have faded, while fiscal conditions continue to put upward pressure on U.S. real rates.

Current Perceptions About Monetary Policy
Michael Bauer, Carolin Pflueger, Adi Sunderam
February 24, 2025

Surveys of professional economic forecasters and financial market data can reveal public perceptions about the future conduct of monetary policy. Current estimates suggest that both professional forecasters and investors expect the Federal Reserve to respond strongly and systematically to changes in economic conditions. The current perceived responsiveness to inflation is particularly high relative to past responsiveness. Furthermore, the perceived importance of employment as a driver of future policy interest rates has strengthened since 2024.

2. Shifting Labor Market Conditions

Tracking Labor Market Stress
Rohit Garimella, Òscar Jordà, Sanjay R. Singh
August 18, 2025

State-level unemployment claims can provide a real-time measure of national labor market conditions and the overall state of the economy. A rapid and widespread buildup of stress in state labor markets usually signals the start of a recession. In mid-2024, some widely followed indicators of recession risk flashed red. However, analysis of state-level data indicates that labor market declines were not as widespread as they had been in previous recessions. Applying this analysis to the latest data suggests that the labor market has remained stable through mid-2025.

Assessing the Recent Rise in Unemployment
Greeshma Avaradi, Marianna Kudlyak, Brandon Miskanic, David Wiczer
April 14, 2025

The unemployment rate has risen over half a percentage point since the second quarter of 2023. Individual survey data underlying the unemployment rate can help in assessing which labor market transitions account for this rise. One dominant factor appears to be a fall in the job-finding rate—the share of unemployed individuals finding employment. The duration of unemployment has also increased recently. In past decades, these patterns have frequently occurred during the onset of recessions, which suggests that these data should be closely monitored.

Immigration and Changes in Labor Force Demographics
Evgeniya Duzhak, Addie New-Schmidt
November 19, 2025

Recent shifts in immigration flows have lowered the estimates of net international migration into the United States. New data indicate that net migration will be close to half a million people in 2025, down from 2.2 million in 2024. Estimates based on these data and on past trends for the U.S.-born population suggest that this could lead to a decrease in the working-age population and slower growth in the prime-age labor force. Continued low levels of immigration would lead to decreases in the total prime-age labor force.

1. The Economic Effects of Tariffs

The Effects of Tariffs on Inflation and Production Costs
Bart Hobijn, Fernanda Nechio
May 19, 2025

A range of tariffs on U.S. imports has been enacted or considered recently. Trade tariffs can potentially affect price inflation for consumption and investment goods. Estimates suggest that the impact on prices for investment goods is likely to be much larger than for consumption goods. For example, if an across-the-board 25% tariff is fully passed through to finished goods, near-term price increases are estimated to be about 9.5% for investment goods and 2.2% for consumption goods. These price increases for investment goods can have important implications for businesses’ investment decisions.

The Economic Effects of Tariffs
Naomi Halbersleben, Òscar Jordà, Fernanda Nechio
November 24, 2025

The United States announced new, higher tariff rates this year. Tariffs can affect supply chains, investment, and firms’ input costs, resulting in supply-side effects such as higher inflation and higher unemployment. However, tariffs can also affect spending, the demand side of the economy. Weaker demand translates to higher unemployment but lower inflation. Estimates using 40 years of international data show that, following a change in tariffs, initially the unemployment rate increases and inflation declines. Over time, however, the unemployment rate returns to normal levels while inflation increases.

The Economic Implications of Tariff Increases
Caroline Paulson, Aditi Poduri, Aayush Singh, Mauricio Ulate
July 14, 2025

Trade policy in the United States has been in flux in recent months. A theoretical analysis of recent increases in U.S. tariffs, including potential retaliatory tariffs by other countries, suggests a resulting drop in overall U.S. employment, although manufacturing employment increases. Results also indicate a decline in overall real income for the United States of around 0.4%, although this number masks important variation across U.S. states.

Photo by Sean Qiu