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May 14, 2020

Putting the Current Oil Price Collapse into Historical Perspective

Jan J. J. Groen and Michael B. Nattinger

Since the outbreak of the COVID-19 pandemic in late January, oil prices have fallen sharply. In this post, we compare recent price declines with those seen in previous oil price collapses, focusing on the drivers of such episodes. In order to do that, we break oil price shocks down into demand and supply components, applying the methodology behind the New York Fed’s weekly Oil Price Dynamics Report.

Posted by Blog Author at 7:00 AM in Financial Markets , International Economics , Macroecon , Pandemic | Permalink | Comments ( 0 )

May 13, 2020

Inflation Expectations in Times of COVID-19

Olivier Armantier, Gizem Kosar, Rachel Pomerantz, Daphne Skandalis, Kyle Smith, Giorgio Topa, and Wilbert van der Klaauw

As an important driver of the inflation process, inflation expectations must be monitored closely by policymakers to ensure they remain consistent with long-term monetary policy objectives. In particular, if inflation expectations start drifting away from the central bank’s objective, they could become permanently “un-anchored” in the long run. Because the COVID-19 pandemic is a crisis unlike any other, its impact on short- and medium-term inflation has been challenging to predict. In this post, we summarize the results of our forthcoming paper that makes use of the Survey of Consumer Expectations (SCE) to study how the COVID-19 outbreak has affected the public’s inflation expectations. We find that, so far, households’ inflation expectations have not exhibited a consistent upward or downward trend since the emergence of the COVID-19 pandemic. However, the data reveal unprecedented increases in individual uncertainty—and disagreement across respondents—about future inflation outcomes. Close monitoring of these measures is warranted because elevated levels may signal a risk of inflation expectations becoming unanchored.

Posted by Blog Author at 7:00 AM in Expectations , Inflation , Monetary Policy , Pandemic | Permalink | Comments ( 0 )

May 12, 2020

How Did China’s COVID-19 Shutdown Affect U.S. Supply Chains?

Sebastian Heise

The COVID-19 pandemic has had a significant impact on trade between the United States and China so far. As workers became sick or were quarantined, factories temporarily closed, disrupting international supply chains. At the same time, the trade relationship between the United States and China has been characterized by rising protectionism and heightened trade policy uncertainty over the last few years. Against this background, this post examines how the recent period of economic disruptions in China has affected U.S. imports and discusses how this episode might impact firms’ supply chains going forward.

Posted by Blog Author at 7:00 AM in International Economics , Pandemic | Permalink | Comments ( 1 )

May 11, 2020

Does the BCG Vaccine Protect Against Coronavirus? Applying an Economist’s Toolkit to a Medical Question

Richard Bluhm and Maxim Pinkovskiy

Editor’s note: A sentence in this post has been corrected to state that Heinsberg, Germany, borders the Netherlands (rather than France, as originally stated). (May 11, 2020, 12:30 p.m.)

As COVID-19 has spread across the globe, there is an intense search for treatments and vaccines, with numerous trials running in multiple countries. Several observers and prominent news outlets have noticed that countries still administering an old vaccine against tuberculosis—the Bacillus Calmette-Guérin (BCG) vaccine—have had fewer coronavirus cases and fewer deaths per capita in the early stages of the outbreak. But is that correlation really strong evidence that the BCG vaccine provides some defense against COVID-19? In this post, we look at the incidence of coronavirus cases along the former border between East and West Germany, using econometric techniques to investigate whether historical differences in vaccination policies account for the lower level of infection in the former East.

Posted by Blog Author at 7:00 AM in Crisis , Pandemic | Permalink | Comments ( 5 )

May 08, 2020

The Money Market Mutual Fund Liquidity Facility

Marco Cipriani, Gabriele La Spada, Reed Orchinik, and Aaron Plesset

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This post is part of an ongoing series on the credit and liquidity facilities established by the Federal Reserve to support households and businesses during the COVID-19 outbreak.

Over the first three weeks of March, as uncertainty surrounding the COVID-19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation, such as the 2008 financial crisis and the 2011 European bank crisis, outflows from prime and muni MMFs were mirrored by large inflows into government MMFs, which have historically been seen by investors as a safe haven in times of crisis. In this post, we describe a liquidity facility established by the Federal Reserve in response to these outflows.

Posted by Blog Author at 7:00 AM in Central Bank , Credit , Federal Reserve , Financial Institutions , Financial Intermediation , Financial Markets , Liquidity , Monetary Policy , Pandemic | Permalink | Comments ( 0 )

May 07, 2020

Amid the COVID-19 Outbreak, Consumers Temper Spending Outlook

Gizem Koşar, Kyle Smith, and Wilbert van der Klaauw

The New York Fed’s Center for Microeconomic Data released results today from its April 2020 SCE Household Spending Survey, which provides information on consumers' experiences and expectations regarding household spending. These data have been collected every four months since December 2014 as part of our Survey of Consumer Expectations (SCE). Given the ongoing COVID-19 outbreak, the April survey, which was fielded between April 2 and 30, unsurprisingly shows a number of sharp changes in consumers’ spending behavior and outlook, which we review in this post.

Posted by Blog Author at 11:00 AM in Expectations , Household Finance , Pandemic | Permalink | Comments ( 0 )

Translating Weekly Jobless Claims into Monthly Net Job Losses

Jason Bram and Fatih Karahan

News headlines highlighting the loss of at least 30 million jobs (so far) underscore the massive shock that has hit the U.S. economy and the dislocation, hardship, and stress it has caused for so many American workers. But how accurately does this number actually capture the number of net job losses? In this post, we look at some of the statistical anomalies and quirks in the weekly claims series and offer a guide to interpreting these numbers. What we find is that the relationship between jobless claims and payroll employment for the month can vary substantially, depending on the nature, timing, and persistence of the disaster.

Posted by Blog Author at 7:00 AM in Employment , Financial Markets , Human Capital , Labor Economics , Labor Market , Pandemic , Regional Analysis , Unemployment | Permalink | Comments ( 4 )

May 06, 2020

Where Have the Paycheck Protection Loans Gone So Far?

Haoyang Liu and Desi Volker

The Paycheck Protection Program (PPP) is a central piece of the CARES Act. In the program’s first round, $349 billion in forgivable government-guaranteed loans were extended to small businesses to cover costs related to payroll and utilities, as well as mortgage and rent payments. The program opened for applications on April 3 and was oversubscribed by April 16. Because of its popularity, lawmakers passed a new bill replenishing the fund with another $310 billion and the Small Business Administration (SBA) started approving loans again on April 27. With a new round of PPP lending underway, it is natural to examine the allocation of credit in the first round and ask: Have PPP loans gone to the areas of the country and sectors of the economy hardest hit by COVID-19?

Posted by Blog Author at 7:00 AM in Credit | Permalink | Comments ( 3 )

May 05, 2020

U.S. Consumer Debt Payments and Credit Buffers on the Eve of COVID-19

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

American Consumer Debt Payments and Credit Buffers on the Eve of COVID-19

Today, the New York Fed’s Center for Microeconomic Data released the Quarterly Report on Household Debt and Credit for 2020:Q1. Because consumer debt servicing statements are typically furnished to credit bureaus only once during every statement period, our snapshot of consumer credit reports as of March 31, 2020 is, in effect, largely a pre‑COVID‑19 view of the consumer balance sheet. While significant indications of the pandemic are yet to appear in our Consumer Credit Panel (CCP—the data source for the Quarterly Report, based on anonymized Equifax credit reports), we are able to observe the credit position of the American consumer just as the pandemic and associated lockdowns struck the United States.

Posted by Blog Author at 11:00 AM in Household Finance | Permalink | Comments ( 0 )

May 04, 2020

W(h)ither U.S. Crude Oil Production?

Matthew Higgins and Thomas Klitgaard

People across the world have cut back sharply on travel due to the Covid-19 pandemic, working from home and cancelling vacations and other nonessential travel. Industrial activity is also off sharply. These forces are translating into an unprecedented collapse in global oil demand. The nature of the decline means that demand is unlikely to respond to the steep drop in oil prices, so supply will have to fall in tandem. The rapid increase in U.S. oil production of recent years was already looking difficult to sustain before the pandemic, as evidenced by the limited profitability of the sector. Now, U.S. producers may have to bear the brunt of the global supply adjustment needed over the near term.

Posted by Blog Author at 7:00 AM in Financial Markets , Macroecon , Pandemic | Permalink | Comments ( 0 )

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

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