Firms frequently revise their expectations, and their reported uncertainty about future outcomes also varies over time. Using the U.S. Survey of Business Uncertainty, we study how this perceived uncertainty changes when firms revise forecasts of their own sales and employment growth. Larger revisions to firms’ point forecasts are associated with higher perceived uncertainty, particularly for the most recent revision. This recency pattern is not confined to periods of elevated sectoral volatility. We develop a model in which agents learn about volatility using observations they recall imperfectly. Noisy recall gives recent surprises disproportionate influence, even when objective volatility is constant.
Suggested citation:
Acosta, Miguel and Yeji Sung. 2026. “Recency Effects in Perceived Uncertainty.” Federal Reserve Bank of San Francisco Working Paper 2026-12. https://doi.org/10.24148/wp2026-12