As Manufacturing Weakens, Consumers Pull Back
The United States has faced two recent downturns in manufacturing: one from 2014 to 2015 and one that has been ongoing since 2018. We examine consumption growth at the state level to see how consumers have responded to the current downturn relative to the last. We find that during the current downturn, changes in consumption growth at the state level have been negatively correlated with the state?s share of workers in manufacturing. In contrast, we find the opposite relationship during the 2014?15 downturn.
Rural Hospital Closures and Growth in Employment and Wages
Since 2011, 74 hospitals have closed in rural counties isolated from larger towns. I evaluate the implications for employment and aggregate wage growth in these counties and find that hospital closures are associated with substantially lower annual growth in county employment and aggregate wages. Smaller counties with a greater share of hospital employment in total employment may see the most severe economic outcomes.
How Have Banks Responded to Declining Reserve Balances?
Reserve balances have declined by more than $1 trillion since 2014, leading banks to increase their holdings of other high-quality assets to meet liquidity requirements. However, the composition of these assets varies substantially across banks, suggesting the drivers of demand for reserves are not uniform.
Escaping the Housing Shortage
Despite the continuing economic expansion, home construction remains extremely low by historical benchmarks, constrained by the scarcity of undeveloped land in desired locations and land use regulations. Escaping the resulting housing shortage will take many years and likely require a shift toward multifamily construction, the freeing up of single-family homes by downsizing baby boomers, and the faster relative growth of medium-sized metropolitan areas.
Rainy Day Funds Have Grown as State Tax Revenue Strengthens
Many state governments have seen solid growth in their tax revenues over the past couple of years. We show that recent changes in the federal tax code contributed to the uptick in state revenues. In addition, we show that states have used the recent revenue windfall to build up rainy day funds at a much faster pace than they did before the Great Recession.
Policymakers Have Options for Additional Accommodation: Forward Guidance and Yield Curve Control
With the federal funds rate near zero, policymakers are evaluating options for providing additional monetary policy accommodation, including a tool known as yield curve control. We find that despite low nominal Treasury yields, some scope for additional accommodation remains should policymakers deem it appropriate. However, we argue that forward guidance about future interest rates could deliver much, though not all, of the accommodation of yield curve control.
The G-Spread Suggests Federal Reserve Restored Calm to Treasury Markets
In March, the coronavirus pandemic led to a sell-off in Treasury markets and a subsequent period of financial stress. I use one measure of Treasury market pressure, the G-spread, to gauge how liquidity in Treasury markets changed in response to the pandemic and the Federal Reserve’s interventions. I find that timely Federal Reserve interventions restored calm to the Treasury market, and that these interventions stand out in speed and scale compared with interventions in the early days of the 2007–08 financial crisis.
COVID-19 Stuns U.S. and Tenth District Economies, but Both Show Signs of Stabilization
COVID-19 and attempts to slow its spread have led to a decline in economic activity unprecedented in both severity and speed. Although every part of the United States experienced dramatic decreases in activity, states in the Tenth Federal Reserve District, with lower COVID-19 cases as a percentage of the population, have fared slightly better. More recently, national and regional measures of business and consumer activity have improved but remain well below pre-pandemic levels.
Drilling Productivity in the United States: What Lies Beneath
We construct new measures of drilling productivity and find that productivity increased sixfold from the mid-2000s to early 2017. Gains in below-ground efficiency?the number of barrels produced per foot of drilled wells?have largely driven this increase in overall productivity. The large oil price declines during the Great Recession and from 2014 to 2016 also played a role. However, further large increases in productivity are unlikely absent additional improvements in technology or a subsequent large downturn in oil prices.
Women Take a Bigger Hit in the First Wave of Job Losses due to COVID-19
The temporary shutdown orders and social distancing measures taken to fight the COVID-19 outbreak have caused substantial job losses in the United States. Women, especially those without a college degree, have taken a bigger hit in the first wave of job losses. This imbalance could lead to prolonged damage to women’s employment and labor market attachment if job losses deepen and persist in the coming months.