Thursday , May 28 2020
Home / New York Fed
New York Fed

NY Fed

The Federal Reserve Bank of New York was incorporated in May 1914 and opened for business in November later that year. To commemorate the New York Fed’s centennial, take a look at the people and events that helped shape our history.

Articles by NY Fed

Job Training Mismatch and the COVID-19 Recovery: A Cautionary Note from the Great Recession

2 days ago

Benjamin G. Hyman and Karen X. Ni

Displaced workers have been shown to endure persistent losses years beyond their initial job separation events. These losses are especially amplified during recessions. (1) One explanation for greater persistence in downturns relative to booms, is that firms and industries on the margin of structural change permanently shift the types of tasks and occupations demanded after a large negative shock (Aghion et al. (2005)), but these new occupations do not match the stock of human capital held by those currently displaced. In response to COVID-19, firms with products and services that complement social-distancing (like Amazon distribution centers) may continue hiring during and beyond the recovery, while workers displaced from higher risk

Read More »

Consumers Increasingly Expect Additional Government Support amid COVID-19 Pandemic

2 days ago

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 Public Policy Survey, which provides information on consumers’ expectations regarding future changes to a wide range of fiscal and social insurance policies and the potential impact of these changes on their households. These data have been collected every four months since October 2015 as part of our Survey of Consumer Expectations (SCE). Given the ongoing COVID-19 pandemic, households face significant uncertainty about their personal situations and the general economic environment when forming plans and making decisions. Tracking individuals’ subjective beliefs about future government policy changes is important for understanding and

Read More »

The Primary and Secondary Market Corporate Credit Facilities

3 days ago

Nina Boyarchenko, Richard Crump, Anna Kovner, Or Shachar, and Peter Van Tassel

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.

On April 9, the Federal Reserve announced that it would take additional actions to provide up to $2.3 trillion in loans to support the economy in response to the coronavirus pandemic. Among the initiatives are the Primary Market and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF), whose intent is to provide support for large U.S. businesses that typically finance themselves by issuing debt in capital markets. Corporate bonds support the operations of companies with more than 17 million employees based in

Read More »

Have the Fed Swap Lines Reduced Dollar Funding Strains during the COVID-19 Outbreak?

7 days ago

Nicola Cetorelli, Linda S. Goldberg, and Fabiola Ravazzolo

In March 2020, the Federal Open Market Committee (FOMC) made changes to its swap line facilities with foreign central banks to enhance the provision of dollars to global funding markets. Because the dollar has important roles in international trade and financial markets, reducing these strains helps facilitate the supply of credit to households and businesses, both domestically and abroad. This post summarizes the changes made to central bank swap lines and shows when these changes were effective at bringing down dollar funding strains abroad.

Strains in Overseas Dollar Funding Markets and the Fed’s Response
Financial and nonfinancial institutions around the world transact in dollars. In early to mid-March

Read More »

What Do Financial Conditions Tell Us about Risks to GDP Growth?

8 days ago

Patrick Adams, Tobias Adrian, Nina Boyarchenko, Domenico Giannone, Nellie Liang, and Eric Qian

The economic fallout from the COVID-19 pandemic has been sharp. Real U.S. GDP growth in the first quarter of 2020 (advance estimate) was -4.8 percent at an annual rate, the worst since the global financial crisis in 2008. Most forecasters predict much weaker growth in the second quarter, ranging widely from an annual rate of -15 percent to -50 percent as the economy pauses to allow for social distancing. Although growth is expected to begin its rebound in the third quarter absent a second wave of the pandemic, the speed of the recovery is highly uncertain. In this post, we estimate the risks around the modal forecast of GDP growth as a function of financial conditions. Tighter

Read More »

The Paycheck Protection Program Liquidity Facility (PPPLF)

9 days ago

Haoyang Liu and Desi Volker

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.

On April 9, 2020, the Federal Reserve announced that it would take additional actions to provide up to $2.3 trillion in loans to support the economy in response to the COVID-19 crisis. Among the measures taken was the establishment of a new facility intended to facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program (PPP). Under the Paycheck Protection Program Liquidity Facility (PPPLF), Federal Reserve Banks are authorized to supply liquidity to financial institutions participating in the PPP in the form of term financing

Read More »

The Primary Dealer Credit Facility

10 days ago

Antoine Martin and Susan McLaughlin

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.

On March 17, 2020, the Federal Reserve announced that it would re-establish the Primary Dealer Credit Facility (PDCF) to allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF started offering overnight and term funding with maturities of up to ninety days on March 20. It will be in place for at least six months and may be extended as conditions warrant. In this post, we provide an overview of the PDCF and its usage to date.

Background

Primary dealers are trading

Read More »

Modeling the Global Effects of the COVID-19 Sudden Stop in Capital Flows

11 days ago

Ozge Akinci, Gianluca Benigno, and Albert Queralto

The COVID-19 outbreak has triggered unusually fast outflows of dollar funding from emerging market economies (EMEs). These outflows are known as “sudden stop” episodes, and they are typically followed by economic contractions. In this post, we assess the macroeconomic effects of the COVID-induced sudden stop of capital flows to EMEs, using our open-economy DSGE model. Unlike existing frameworks, such as the Federal Reserve Board’s SIGMA model, our model features both domestic and international financial constraints, making it well-suited to capture the effects of an outflow of dollar funding. The model predicts output losses in EMEs due in part to the adverse effect of local currency depreciation on private-sector balance sheets

Read More »

The Commercial Paper Funding Facility

14 days ago

Nina Boyarchenko, Richard Crump, and Anna Kovner

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.

In mid-March, the Federal Reserve announced a slew of credit and liquidity facilities aimed at supporting credit provision to U.S. households and businesses. Among the initiatives is the Commercial Paper Funding Facility
(CPFF) which aims to support market functioning and provide a liquidity backstop for the commercial paper market. The domestic commercial paper market provides a venue for short-term financing for companies which employ more than 6 million Americans. Securities in the commercial paper market represent a key asset class for money

Read More »

Putting the Current Oil Price Collapse into Historical Perspective

15 days ago

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.

Historic Oil Price Collapses

The recent drop in oil prices has certainly been severe, but large oil price declines are hardly unprecedented. Over the past four decades, four such episodes stand out:

1986-1987: By 1985 OPEC’s share of world oil production had fallen to about 30 percent from 52 percent in 1973 (Fattouh, 2007),

Read More »

Inflation Expectations in Times of COVID-19

16 days ago

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

Read More »

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

17 days ago

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.

Based on data for the first four months of 2020, this post shows that U.S. imports from China declined sharply in February and March, before bouncing back

Read More »

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

18 days ago

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

Read More »

The Money Market Mutual Fund Liquidity Facility

21 days ago

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

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

Read More »

Amid the COVID-19 Outbreak, Consumers Temper Spending Outlook

21 days ago

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.

Consumers report a series low median 1.0 percent increase in household monthly spending relative to twelve months ago, down from to 2.5 percent in December 2019.

Read More »

Translating Weekly Jobless Claims into Monthly Net Job Losses

22 days ago

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.

What Exactly Are Initial Jobless Claims?

When a worker is laid off, that person has the option to file a claim to

Read More »

Where Have the Paycheck Protection Loans Gone So Far?

23 days ago

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

Read More »

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

23 days ago

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

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.

Read More »

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

25 days ago

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.

The U.S. production juggernaut was a large

Read More »

Treasury Market Liquidity during the COVID-19 Crisis

April 17, 2020

Michael Fleming and Francisco Ruela

A key objective of recent Federal Reserve policy actions is to address the deterioration in financial market functioning. The U.S. Treasury securities market, in particular, has been the subject of Fed and market participants’ concerns, and the venue for some of the Fed’s initiatives. In this post, we evaluate a basic metric of market functioning for Treasury securities— market liquidity—through the first month of the Fed’s extraordinary actions. Our particular focus is on how liquidity in March 2020 compares to that observed over the past fifteen years, a period that includes the 2007-09 financial crisis.

The COVID-19 Crisis and the Federal Reserve

The Federal Reserve responded aggressively to the COVID-19 pandemic, as described in this

Read More »

How Widespread Is the Impact of the COVID-19 Outbreak on Consumer Expectations?

April 16, 2020

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

In a recent blog post, we showed that consumer expectations worsened sharply through March, as the COVID-19 epidemic spread and affected a growing part of the U.S. population. In this post, we document how much of this deterioration can be directly attributed to the coronavirus outbreak. We then explore how the effect of the outbreak has varied over time and across demographic groups.

To address these issues, we use data that extend to April 12 and look at new questions included in the Survey of Consumer Expectations (SCE) since the beginning of March: in addition to the typical monthly questions about their actual expectations, respondents are asked

Read More »

New York Fed Surveys: Business Activity in the Region Sees Historic Plunge in April

April 16, 2020

Jaison R. Abel, Jason Bram, and Richard Deitz

Indicators of regional business activity plunged to historic lows in early April, as efforts to slow the spread of the coronavirus kept many people at home and shut down large parts of the regional economy, according to the Federal Reserve Bank of New York’s two business surveys. The headline index for both surveys plummeted to nearly -80, well below any historical precedent including the depths of the Great Recession. About 60 percent of service firms and more than half of manufacturers reported at least a partial shutdown of their operations thus far. Layoffs were widespread, with half of all businesses surveyed reporting lower employment levels in early April.

Business Activity Tumbles

Business conditions were exceptionally

Read More »

The COVID-19 Pandemic and the Fed’s Response

April 15, 2020

Michael Fleming, Asani Sarkar, and Peter Van Tassel

The Federal Reserve has taken unprecedented actions to mitigate the effects of the COVID-19 pandemic on U.S. households and businesses. These measures include cutting the Fed’s policy rate to the zero lower bound, purchasing Treasury and mortgage-backed securities (MBS) to promote market functioning, and establishing several liquidity and credit facilities. In this post, we briefly review the developments motivating these actions, summarize what the Fed has done and why, and compare the Fed’s response with its response to the 2007-09 financial crisis.

The Spread of COVID-19

On December 31, 2019, the World Health Organization (WHO) was informed of an outbreak of a pneumonia of unknown cause in Wuhan, China. The outbreak was

Read More »

Helping State and Local Governments Stay Liquid

April 10, 2020

Andrew F. Haughwout, Benjamin G. Hyman, and Matthew Lieber

Update (5:45 p.m.): An earlier version of this post misstated the ending date of New York’s fiscal year. It is March 31, not April 30.

On April 9, the Federal Reserve announced up to $2.3 trillion in new support for the economy in response to the coronavirus pandemic. Among the initiatives is the Municipal Liquidity Facility (MLF), intended to support state and local governments. The details of the facility are described in the term sheet. The state and local sector is a unique but very important part of the economy. This post lays out some of the economics of the sector and the needs that the facility intends to satisfy.

Most first year economics students know that gross output is comprised of consumption,

Read More »

The Coronavirus Shock Looks More like a Natural Disaster than a Cyclical Downturn

April 10, 2020

Jason Bram and Richard Deitz

It’s tempting to compare the economic fallout from the coronavirus pandemic to prior business cycle downturns, particularly the Great Recession. However, such comparisons may not be particularly apt—as evidenced by the unprecedented surge in initial jobless claims over the past three weeks. Recessions typically develop gradually over time, reflecting underlying economic and financial conditions, whereas the current economic situation developed suddenly as a consequence of a fast-moving global pandemic. A more appropriate comparison would be to a regional economy suffering the effects of a severe natural disaster, like Louisiana after Hurricane Katrina or Puerto Rico after Hurricane Maria. To illustrate this point, we track the recent path of

Read More »

How Does Supervision Affect Bank Performance during Downturns?

April 8, 2020

Uyanga Byambaa, Beverly Hirtle, Anna Kovner, and Matthew Plosser

Supervision and regulation are critical tools for the promotion of stability and soundness in the financial sector. In a prior post, we discussed findings from our recent research paper which examines the impact of supervision on bank performance (see earlier post How Does Supervision Affect Banks?). As described in that post, we exploit new supervisory data and develop a novel strategy to estimate the impact of supervision on bank risk taking, earnings, and growth. We find that bank holding companies (BHCs or “banks”) that receive more supervisory attention have less risky loan portfolios, but do not have lower growth or profitability. In this post, we examine the benefits of supervision over time, and especially

Read More »

Coronavirus Outbreak Sends Consumer Expectations Plummeting

April 6, 2020

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

The New York Fed’s Center for Microeconomic Data released results today from its March 2020 Survey of Consumer Expectations (SCE), which provides information on consumers’ economic expectations and behavior. In particular, the survey covers respondents’ views on how income, spending, inflation, credit access, and housing and labor market conditions will evolve over time. The March survey, which was fielded between March 2 and 31, records a substantial deterioration in financial and economic expectations, including sharp declines in household income and spending growth expectations. As shown in the first two columns of the table below, the median expected

Read More »

How the Fed Managed the Treasury Yield Curve in the 1940s

April 6, 2020

Kenneth D. Garbade

The coronavirus pandemic has prompted the Federal Reserve to pledge to purchase Treasury securities and agency mortgage-backed securities in the amount needed to support the smooth market functioning and effective transmission of monetary policy to the economy. But some market participants have questioned whether something more might not be required, including possibly some form of direct yield curve control. In the first half of the 1940s the Federal Open Market Committee (FOMC) sought to manage the level and shape of the Treasury yield curve. In this post, we examine what can be learned from the FOMC’s efforts of seventy-five years ago.

Lessons in Yield Management

The FOMC’s efforts offer two lessons in yield curve management:

1. The shape of

Read More »

The Value of Opacity in a Banking Crisis

April 2, 2020

Haelim Anderson and Adam Copeland

During moments of heightened economic uncertainty, authorities often need to decide on how much information to disclose. For example, during crisis periods, we often observe regulators limiting access to bank&#8209level information with the goal of restoring the public’s confidence in banks. Thus, information management often plays a central role in ending financial crises. Despite the perceived importance of managing information about individual banks during a financial crisis, we are not aware of any empirical work that quantifies the effect of such policies. In this blog post, we highlight results from our recent working paper, demonstrating that in a crisis, a policy of suppressing information about banks’ balance sheets has a significant

Read More »

Monitoring Real Activity in Real Time: The Weekly Economic Index

March 30, 2020

Daniel Lewis, Karel Mertens, and Jim Stock

3/30: After this post was published, we received requests for the underlying WEI data. We are providing that here in a downloadable file. Note that the values differ slightly from those plotted due to a minor methodological adjustment since these charts were created on Friday.

Economists are well-practiced at assessing real activity based on familiar aggregate time series, like the unemployment rate, industrial production, or GDP growth. However, these series represent monthly or quarterly averages of economic conditions, and are only available at a considerable lag, after the month or quarter ends. When the economy hits sudden headwinds, like the COVID-19 pandemic, conditions can evolve rapidly. How can we monitor the high-frequency

Read More »