Federal Reserve Bank
of San Francisco Federal Reserve Bank
of San Francisco

Economic Letter

Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.

  • Landing Softly Is Just the Beginning

    2024-28

    Mary C. Daly

    The economy has significantly improved from just two years ago. Inflation has fallen substantially, and the labor market has returned to a more sustainable path. A soft landing is achievable, and the Fed is resolute to finish the job. But looking ahead, we should strive for a durable and sustained expansion that helps all Americans. The following is adapted from remarks presented by the president of the Federal Reserve Bank of San Francisco at the New York University Stern School of Business in New York City on October 15.

  • International Influences on U.S. Inflation

    2024-27

    River Bell, Oscar Jorda, Fernanda Nechio, Aditi Poduri, Stephanie Stewart

    The COVID-19 inflation surge experienced abroad undoubtedly left its mark on U.S. inflation. As global economies return to business as usual, it is natural to ask whether international considerations continue to affect U.S. inflation. Recent analysis shows that, although in normal times the international component of U.S. inflation is usually small, at other times it can contribute significantly to U.S. inflation dynamics.

  • Job Vacancies and Firms’ Labor Market Perceptions

    2024-26

    Marianna Kudlyak, Brandon Miskanic

    During the post-pandemic period, the vacancy-unemployment ratio was at historically high levels, but the strength of overall labor demand was unclear. Analysis using data from the National Federation of Independent Business on firms’ perceptions of the labor market confirms that during that time firms perceived the labor market as being unusually tight relative to historical norms. As of June-August 2024, however, both firms’ perceptions and measures of labor market tightness had returned to their 2019 levels.

  • How Aware Is the Public of Labor Market Conditions?

    2024-25

    Marianna Kudlyak, Brandon Miskanic

    Consumers’ perceptions of labor market conditions have historically aligned closely with the unemployment rate. However, the two diverged during the pandemic, when the unemployment rate spiked while people’s views of the labor market remained more positive. This raises the question of whether public perceptions around the labor market have become untethered from the data. Measuring labor market conditions using the jobless unemployment rate, which excludes temporary layoffs, suggests this is not the case: the historical link between people’s perceptions and measured labor market conditions has remained strong.

  • The Macroeconomic Impact of Cash Transfers in Brazil

    2024-24

    Arthur Mendes, Wataru Miyamoto, Thuy Lan Nguyen, Steven Pennings, Leo Feler

    Cash transfers are important fiscal policy tools for both advanced and developing countries. A study of one of the world’s largest cash transfer programs—Brazil’s Bolsa Familia—highlights the potentially large, positive, and persistent effects on the regional economy. Estimates using 2004-2019 data show that Brazilian states receiving 1% of GDP in extra transfers grew at least 2 percentage points faster in the first year. The transfers generate substantial increases in regional formal and informal employment. These effects are larger than those documented in advanced countries like the United States.

  • When Is Shelter Services Inflation Coming Down?

    2024-23

    Òscar Jordà, Aren S. Yalcin

    Shelter costs are one of the largest expenses for most households and an important component of overall inflation. It is therefore important to understand why shelter costs have remained stubbornly high. A key explanation is that, especially since the pandemic, demand for housing has been growing faster than new units have come into the market. Using the gap between the demand for and supply of housing along with other leading indicators of shelter prices can help assess whether shelter inflation will continue on a path toward historically normal levels.

  • Wildfires and Real Estate Values in California

    2024-22

    Leila Bengali, Fernanda Nechio, Stephanie A. Stewart

    Wildfires have been a concern in California for decades. The intensity of these events has increased recently, with particularly large and destructive fire seasons between 2018 and 2021. Analysis shows that distance from high fire-risk zones had little impact on residential housing values in the past. However, that has changed since the late 2010s, coinciding with more extensive fire damage to land and structures across the state. Insurance availability appears to help little in preserving home values in areas that are considered more at risk.

  • Pandemic-Era Liquid Wealth Is Running Dry

    2024-21

    Hamza Abdelrahman, Luiz Edgard Oliveira, Adam Shapiro

    Households accumulated more liquid assets beginning in 2020 than would have been expected without the pandemic. These “extra” liquid assets have dissipated, but their evolution has differed significantly by income group. While middle- and lower-income households hold substantially less liquid wealth than implied by pre-pandemic projections, the level for higher-income households remains close to its pre-pandemic path. Over the same period, credit card delinquency rates initially dropped and, more recently, have steadily risen as pandemic-era liquid wealth was depleted, especially for middle- and lower-income households.

  • Bank Franchise as a Stabilizing Force

    2024-20

    Simon H. Kwan, Zinnia Martinez

    The banking shock of 2023 stemmed from banks’ exposure to interest rate risk by gathering short-term funds to invest in long-term assets. When interest rates rose rapidly during the monetary tightening cycle, banks incurred significant capital losses on their long-term assets, some of which were unrealized on their financial statements. However, bank franchise value—the present value of all future excess profits—which is also unrecognized, could hedge against the losses and provide some stability. Moreover, the potential loss of franchise value could discourage risk-taking, further stabilizing the banking system.

  • Recent Spike in Immigration and Easing Labor Markets

    2024-19

    Evgeniya Duzhak

    The Congressional Budget Office recently raised its demographic projections for net U.S. immigration. Most of the increase in the projections came from undocumented immigrants. Updating the CBO estimates with recent data points shows a continuing strong inflow of undocumented migrants. Analysis linking the revised estimates for this group to labor market statistics shows that immigrants joining the workforce are likely to have modestly eased labor market tightness.