August 6, 2020

By Laura Choi

COVID-19 is accelerating rapid changes in the ways we work, learn, and access key services. In particular, it’s clearer than ever that inclusion in the financial system is critical for households and businesses to access timely relief funds.

The $2 trillion CARES Act is a great example. The IRS distributed direct cash stimulus payments to individuals and couples, primarily through direct deposit to a bank account and in some cases through paper checks or prepaid debit cards sent by mail. The timely distribution of funds at scale, however, presented numerous challenges, including issues related to technology and communication.

Inflation fell dramatically following the onset of the COVID-19 pandemic. Dividing the underlying price data according to spending category reveals that a majority of the drop in core personal consumption expenditures inflation comes from a large decline in consumer demand. This demand effect far outweighs upward price pressure from COVID-related supply constraints. A new monthly data page from the San Francisco Fed tracks how sensitivity to the economic disruptions of COVID-19 affects different categories of inflation over time.

The Daily News Sentiment Index is a high frequency measure of economic sentiment based on lexical analysis of economics-related news articles. The index is described in Buckman, Shapiro, Sudhof, and Wilson (2020) and based on the methodology developed in Shapiro, Sudhof, and Wilson (2020).  

The study by Shapiro, Sudhof, and Wilson (2020, hereafter SSW), constructs sentiment scores for economics-related news articles from 16 major U.S. newspapers compiled by the news aggregator service LexisNexis. The newspapers cover all major regions of the country, including some with extensive national coverage such as the New York Times and the Washington Post. SSW selected articles with at least 200 words where LexisNexis identified the article’s topic as “economics” and the country subject as “United States.” Combining publicly available lexicons with a news-specific lexicon constructed by the authors, the study develops a sentiment-scoring model tailored specifically for...

U.S. fair lending laws require that we do not take into consideration protected classes such as race, religion, sexual orientation, and more. Our laws also require that individuals be provided with adverse action notices, basically an explanation of why they did not get a loan.

Machine learning as a tool is challenging for these two issues in particular:

1. The strength of machine learning is finding patterns that we cannot see ourselves by analyzing more and more information. Actively excluding information, like race, can impact how effective the algorithm is. Additionally, many things in our society are interconnected, and can become proxies for protected classes anyway. For example, where you went to school, or where you live, can be closely related to protected categories.

2. Also, many advanced machine learning techniques, like neural networks, do not provide a roadmap to the recommendations they give. This is where the term "black box" comes from. We put...

Inflation Sensitivity to COVID-19 updates data on the contributions to core personal consumption expenditures (PCE) inflation by the degree of sensitivity to the economic disruptions caused by the pandemic. The decomposition is based on the methods described in Shapiro (2020a, b).

The PCE measure of U.S. inflation is considered particularly useful for identifying underlying inflation trends. It tracks the change in prices of a particular basket of goods and services purchased by consumers throughout the economy. The “core” measure excludes food and energy products, whose prices tend to be volatile.

The data on this page divide the categories of core PCE inflation into sensitive and insensitive components, as shown in Chart 1. COVID-sensitive components include those categories where either prices or quantities moved in a statistically significant manner at the onset of the pandemic, between February and April 2020. COVID-insensitive components include...

Inflation fell dramatically following the onset of the COVID-19 pandemic. Dividing the underlying price data according to spending category reveals that a majority of the drop in core personal consumption expenditures inflation comes from a large decline in consumer demand. This demand effect far outweighs upward price pressure from COVID-related supply constraints. A new monthly data page from the San Francisco Fed tracks how sensitivity to the economic disruptions of COVID-19 affects different categories of inflation over time.

Productivity growth shows evidence of switching between long periods of high and low average growth. Estimates suggest that the United States has been in the low-growth regime since 2004. Assuming this low growth continues, productivity growth in the year 2025 would be 0.6%. By dropping this assumption and allowing for a switch to consistent higher growth, an alternative estimate forecasts that the distribution of possible productivity growth across quarters could average about 1.1% in 2025.

The personal consumption expenditure price index (PCEPI) is one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCEPI includes the broadest set of goods and services.

The PCEPI captures the average percentage change in prices across all categories within personal consumption expenditures. The statistics here provide a more detailed picture of these price changes. They include the distribution of price changes across categories of goods and services, for example, the median, 25th, and 75th percentile price change. Additional statistics include the distribution of price accelerations, calculated as the change in the inflation rate by category, diffusion indices that capture the share of total price changes that are either positive or negative, and t-diffusion indices that indicate the share of categories with price changes significantly...

August 4, 2020

“I moved to Utah from California in the fourth grade. My parents were divorced, so during the summer, I traveled back-and-forth between states. They both taught me to be responsible, prepared me for adult life, and encouraged me to grow by trying new things.” says Angela Moore.

As a young adult, Angela extended the spirit of support and encouragement to others. Notably, she volunteered at the Boys and Girls Club, helping kids engage in after-school activities.

After high school, Angela worked for the Utah Transit Authority for 18 years, in Customer Service and as a Revenue Processor. Then a friend told her about a position in Cash Processing at the Federal Reserve Bank of San Francisco. At first, the timing was clunky.

“She encouraged me to apply—twice. The first time was at my baby shower. I said, ‘Well, I’m about ready to have this baby, so now isn’t a good time, but let me know if there’s something in the future,'” Angela notes...

The Diary of Consumer Payment Choice (Diary) is an ongoing annual research effort conducted by the Federal Reserve to better understand payment habits of the U.S. population. This paper highlights findings from the sixth Diary study in 2019, and the fourth conducted annually in the month of October since 2016. A demographically-representative sample of 3,016 individuals from the Understanding America survey panel were asked to participate. Each individual was instructed to report all of their payments and transactions over an assigned, consecutive three-day period. The high-level findings are:

Thursday, August 20, 2020 10–11 a.m. Pacific Federal Reserve Bank of San Francisco Virtual

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From physical distancing and face coverings, to a need for flexible schedules and remote work, what started as a response to a health crisis is turning into a new normal. The current pandemic is compelling American employers and employees to reconsider the way we work and live.

What’s next for the workplace once the pandemic is behind us? What aspects of work are so essential that they will revive once this crisis passes? And how do we help get millions of unemployed Americans back into this changing work environment and ensure they have the skills and capabilities to compete?

What is the new future of work?

August 4, 2020

“I moved to Utah from California in the fourth grade. My parents were divorced, so during the summer, I traveled back-and-forth between states. They both taught me to be responsible, prepared me for adult life, and encouraged me to grow by trying new things.” says Angela Moore.

As a young adult, Angela extended the spirit of support and encouragement to others. Notably, she volunteered at the Boys and Girls Club, helping kids engage in after-school activities.

After high school, Angela worked for the Utah Transit Authority for 18 years, in Customer Service and as a Revenue Processor. Then a friend told her about a position in Cash Processing at the Federal Reserve Bank of San Francisco. At first, the timing was clunky.

“She encouraged me to apply—twice. The first time was at my baby shower. I said, ‘Well, I’m about ready to have this baby, so now isn’t a good time, but let me know if there’s something in the future,'” Angela notes...

July 23, 2020

The Federal Reserve Board of Governors is touring the country to talk with banks working with financial technology and fintech firms. Through a lot of open discussion, the Fed wants to get an accurate, well-rounded picture of emerging technologies as well as challenges facing the industry.

The Board and San Francisco Fed are co-hosting exclusive office hours for three days only. Here’s how you can get involved.

Productivity growth shows evidence of switching between long periods of high and low average growth. Estimates suggest that the United States has been in the low-growth regime since 2004. Assuming this low growth continues, productivity growth in the year 2025 would be 0.6%. By dropping this assumption and allowing for a switch to consistent higher growth, an alternative estimate forecasts that the distribution of possible productivity growth across quarters could average about 1.1% in 2025.