Rachel Lang

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.

In our recent Economic Letter, “Pandemic-Era Liquid Wealth Is Running Dry,” we look at the accumulation of extra liquid wealth by U.S. households during the pandemic and its eventual depletion.

SF Fed Visitng Scholar Scott Allard and Assistant Vice President of Community Development Research Elizabeth Kneebone discuss the importance of job proximity, especially for lower-income workers, and their research collaboration focused on understanding how proximity to jobs has shifted for low-income workers and communities since the pandemic.

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.

Calendar-year inflation forecasts from Federal Open Market Committee meeting participants typically start near 2% and then are revised in response to incoming data. Before the pandemic when actual inflation was mostly below 2%, participants consistently lowered their forecasts over time. From 2021 onward when inflation surged to 40-year highs, participants consistently raised their forecasts over time. In both periods, cumulative forecast revisions help predict the size of subsequent forecast errors. This implies that the typical inflation forecast was slow to adjust to new information that could have improved forecast accuracy.

Inflation still lies somewhat above the Federal Reserve’s 2% goal after slowing significantly since its spring 2022 peak. Analysis shows that two labor market indicators—the ratios of job vacancies to unemployed workers and of vacancies to effective job seekers—are particularly informative in determining excess demand’s impact on recent inflation. The measures suggest that declines in excess demand pushed inflation down almost three-quarters of a percentage point over the past two years. However, elevated demand continued to contribute 0.3 to 0.4 percentage point to inflation as of September 2024.

U.S. labor productivity initially surged in 2020 during the COVID-19 pandemic, despite the massive economic upheaval. As the economy recovered, the level of productivity retreated to its slow pre-pandemic trend. As of mid-2024, it remained close to but just above that trend. The surge and retreat in productivity follows the pre-pandemic cyclical relationship in which U.S. productivity rises temporarily in recessions. This example highlights the need to look through temporary cyclical effects when trying to infer longer-run trends.

Access to water is necessary to sustain human civilization and agricultural production. Recent analysis finds that most of U.S. land area, economic activity, and agricultural production are in regions with stable to positive trends in local water availability. This provides reassuring news about overall U.S. vulnerability to water resource depletion. However, some Western and Southwestern regions are facing serious water risks that scientists expect to become more severe over time, suggesting that efforts to alleviate this concern should have a regional focus.

Robert G. Valletta, associate director and senior vice president at the Federal Reserve Bank of San Francisco, stated his views on the current economy and the outlook as of December 5, 2024.

Public transportation riders know that every year, Gold Coast Transit District goes full throttle into the holidays with the spectacularly decorated “Holiday Bus.” This year’s vehicle was unveiled on Dec.