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Working Paper
The Impact of the COVID-19 Pandemic on Business Expectations
We document and evaluate how businesses are reacting to the COVID-19 crisis through August 2020. First, on net, firms see the shock (thus far) largely as a demand rather than supply shock. A greater share of firms reports significant or severe disruption to sales activity than to supply chains. We compare these measures of disruption to their expected changes in selling prices and find that, even for firms that report supply chain disruption, they expect to lower near-term selling prices on average. We also show that firms are engaging in wage cuts and expect to trim wages further before the ...
Journal Article
Simple ways to forecast inflation: what works best?
There are many ways to forecast the future rate of inflation, ranging from sophisticated statistical models involving hundreds of variables to hunches based on past experience. We generate a number of forecasts using a simple statistical model and an even simpler estimating rule, adding in various measures thought to be helpful in predicting the course of inflation. Then we compare their forecast accuracy. We find that no single specification outperforms all others over all time periods. For example, the median and 16 percent trimmed-mean measures outperform all other specifications during ...
Journal Article
An unstable Okun’s Law, not the best rule of thumb
Okun?s law is a statistical relationship between unemployment and GDP that is widely used as a rule of thumb for assessing the unemployment rate?why it might be at a certain level or where it might be headed, for example. Unfortunately, the Okun?s law relationship is not stable over time, which makes it potentially misleading as a rule of thumb.
Working Paper
Lessons for Forecasting Unemployment in the U.S.: Use Flow Rates, Mind the Trend
This paper evaluates the ability of autoregressive models, professional forecasters, and models that leverage unemployment flows to forecast the unemployment rate. We pay particular attention to flows-based approaches?the more reduced form approach of Barnichon and Nekarda (2012) and the more structural method in Tasci (2012)?to generalize whether data on unemployment flows is useful in forecasting the unemployment rate. We find that any approach that leverages unemployment inflow and outflow rates performs well in the near term. Over longer forecast horizons, Tasci (2012) appears to be a ...
Working Paper
Unit Cost Expectations and Uncertainty: Firms' Perspectives on Inflation
We propose a novel, survey-based measure of nominal marginal cost expectations held by business decision makers to track building inflationary pressures and augment the existing set of inflation expectations data policymakers frequently monitor. Unlike other surveys of firms or households that elicit "aggregate" expectations, we focus on idiosyncratic costs that firms are well-aware of and plan for, and which matter for price setting. We document five key findings. First, once aggregated, firms' unit cost realizations closely comove with US inflation statistics. Second, in aggregate, firms' ...
Working Paper
Pandemic-Era Uncertainty on Main Street and Wall Street
We draw on the monthly Survey of Business Uncertainty (SBU) to make three observations about pandemic-era uncertainty in the U.S. economy. First, equity market traders and executives of nonfinancial firms share similar assessments about uncertainty at one-year lookahead horizons. That is, the one-year VIX has moved similarly to our survey-based measure of (average) firm-level subjective uncertainty at one-year forecast horizons. Second, looking within the distribution of beliefs in the SBU reveals that firm-level expectations shifted towards upside risk in the latter part of 2020. In this ...
Working Paper
Estimates of Cost-Price Passthrough from Business Survey Data
We examine businesses' price-setting practices via open-ended interviews and in a quantitative survey module with business contacts from the Federal Reserve Banks of Atlanta, Cleveland, and New York in December 2022 and January 2023. Businesses indicated that their prices were strongly influenced by demand, a desire to maintain steady profit margins, and wages and labor costs. Survey respondents expected reduced growth in costs and prices of about 5 percent on average over the next year. Backward-looking, forward-looking, and hypothetical scenarios reveal average cost-price passthrough of ...
Report
Estimates of Cost-Price Passthrough from Business Survey Data
We examine businesses’ price-setting practices via open-ended interviews and in a quantitative survey module with business contacts from the Federal Reserve Banks of Atlanta, Cleveland, and New York in December 2022 and January 2023. Businesses indicated that their prices were strongly influenced by demand, a desire to maintain steady profit margins, and wages and labor costs. Survey respondents expected reduced growth in costs and prices of about 5 percent on average over the next year. Backward-looking, forward-looking, and hypothetical scenarios reveal average cost-price passthrough of ...
Journal Article
The Impact of the Pandemic on US Businesses: New Results from the Annual Business Survey
Working with Federal Reserve staff, the US Census Bureau added to the 2021 Annual Business Survey (ABS) a special module of questions focused on the pandemic and small business finances. Questions ranged from the impact of the pandemic on business sales, to government assistance requested/received, and to the financial health of the firm. In this article, we report the results of these questions—and how they differ by race and ethnicity. The survey finds that more than 60 percent of business experienced declines in sales. Fully one-third experienced significant declines. More than 70 ...