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Working Paper
Calibrating Macroprudential Policy to Forecasts of Financial Stability
The introduction of macroprudential responsibilities at central banks and financial regulatory agencies has created a need for new measures of financial stability. While many have been proposed, they usually require further transformation for use by policymakers. We propose a transformation based on transition probabilities between states of high and low financial stability. Forecasts of these state probabilities can then be used within a decision-theoretic framework to address the implementation of a countercyclical capital buffer, a common macroprudential policy. Our policy simulations ...
Journal Article
A New “Big Data” Index of U.S. Economic Activity
The authors present a new ?big data? index of U.S. economic activity that can be used to track business and inflation cycles in real time and estimate monthly real gross domestic product growth.
Newsletter
Blending Traditional and Alternative Labor Market Data with CHURN
In this article, we present a new real-time model called CHURN—short for Chicago Fed Unemployment Rate Nowcast. CHURN provides a weekly tracking estimate for the civilian unemployment rate (UR) produced by the U.S. Bureau of Labor Statistics (BLS). To do so, CHURN blends monthly statistics on job flows (i.e., job-finding and job-separation rates) from the BLS and other traditional labor market indicators with alternative high-frequency indicators from private sector sources.
Newsletter
Introducing the Chicago Fed’s New Adjusted National Financial Conditions Index
This article introduces improvements to the adjusted National Financial Conditions Index (ANFCI). Compared with the previous version, the new ANFCI uses an enhanced estimation procedure with a broader set of macroeconomic adjustment variables and produces a longer time series history.
Newsletter
What Does Labor Market Tightness Tell Us About the End of an Expansion?
We use a model based on the historical relationships between unemployment, inflation, and recessions, along with the Summary of Economic Projections (SEP) from the Federal Open Market Committee (FOMC),1 to examine the medium-term implications of current and projected unemployment rates for the U.S. economy. Our model predicts a low probability of a recession in the next two to three years based on SEP forecasts for additional labor market tightening over this horizon.
Newsletter
Measuring Detroit’s Economic Progress with the DEAI
This article explains what the Detroit Economic Activity Index (DEAI) tells us about Detroit’s economic progress as of late 2019. Although the rate of progress had slowed some since 2016, the city continued to make headway last year in its recovery from bankruptcy.In a previous Chicago Fed Letter,1 we introduced the DEAI to show that Detroit was doing better in late 2016 than in late 2014, when it exited bankruptcy. According to the DEAI, there were signs of increasing private investment, higher employment, lower unemployment, rising incomes, and improving real estate values in December ...
Newsletter
The Stay-at-Home Labor Market: Google Searches, Unemployment Insurance, and Public Health Orders
This article looks at the relationships between internet searches for unemployment-related terms, unemployment insurance (UI), and the public health orders issued in the U.S. during the Covid-19 pandemic. We find that Google searches for unemployment-related subjects surged before the record increase in initial UI claims, which in turn peaked before the public health orders were implemented. As of mid-April 2020, these orders covered the vast majority of the U.S. population. Since then, the rates of increase in both search activity and initial UI claims have slowed.
Newsletter
Looking down the road with ALEX: Forecasting U.S. GDP
In this article, we examine the recovery from the recession that began with the onset of the Covid-19 pandemic in the U.S. To do so, we present and discuss for the first time the results from a mixed-frequency Bayesian vector autoregressive model called ALEX. This model uses 107 monthly and quarterly indicators of economic activity to forecast the near-term path of U.S. real gross domestic product (GDP).
Newsletter
Measuring the Effects of the Covid-19 Delta Wave on the U.S. Hourly Labor Market
In this article, we take a closer look at the implications of rising Covid-19 cases and vaccination rates for the U.S. hourly labor market. To do so, we rely on geographic variation in the high-frequency data collected by the firm Homebase with its timekeeping software. This data source allows us to make use of U.S. state-level variation on a daily basis in order to decompose the effects on hourly employees and hours worked from both rising cases and vaccinations.
Newsletter
Measuring Detroit's Economic Progress with the DEAI
This article explains what the Detroit Economic Activity Index (DEAI) tells us about Detroit’s economic progress as of late 2019. Although the rate of progress had slowed some since 2016, the city continued to make headway last year in its recovery from bankruptcy.