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Journal Article
Forecasting with Feelings: The Modest Link Between Consumer Sentiment and Spending
Recent declines in consumer sentiment have prompted concerns about an impending slowdown in spending growth. However, the link between consumer sentiment and growth in real household spending has been modest historically, suggesting changes in consumer sentiment are unlikely to significantly alter forecasts of household spending. Consistent with this interpretation, despite the downbeat tone from consumers, sentiment does not meaningfully alter near-term predictions of 2025 spending growth.
Journal Article
Is It Time to Add Food-at-Home Inflation to Measures of Core Inflation?
Since the mid-1970s, the Federal Reserve has used core inflation to examine trends in underlying inflation. Core inflation is considered a more stable measure as it excludes energy and food, historically viewed as the most volatile components of inflation. However, core inflation can be a challenge for central bankers to communicate, as food inflation is highly salient to consumers. We argue that food-at-home inflation has become less volatile over time and could be added to measures of core inflation with few drawbacks.
Journal Article
Corporate Profits Contributed a Lot to Inflation in 2021 but Little in 2022—A Pattern Seen in Past Economic Recoveries
Corporate profits rose quickly in 2021 along with inflation, raising concerns about corporations driving up prices to increase profits. Although corporate profits indeed contributed to inflation in 2021, their contribution fell in 2022. This pattern is not unusual: in previous economic recoveries, corporate profits were the main contributor to inflation in the first year and displaced by costs in the second year.
Journal Article
Understanding the Role of Wealth in Worker Flows
Wealth significantly influences how workers transition between jobs and employment states. When workers are unemployed, wealth may help them maintain their usual consumption levels and be more selective in their job search. Wealth may also encourage workers with a greater financial cushion to take potentially risky but high-paying jobs. However, wealth is often missing from standard labor market datasets. To fill this gap, recent work has turned to alternative data sources such the Survey of Income and Program Participation (SIPP) to document worker flows by wealth.Yusuf Mercan and Jalen ...