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Long-Run Uncertainties for U.S. Agriculture
By , Rosamond L. Naylor
Summary Special Issue 2019 Changes in global food and fuel demand, the effects of climate change, and regional depletion of groundwater resources for irrigation create uncertainty for U.S. farmers.
The “Normal” Normal: Supply and Demand Drivers over the Next 10 Years
By , Seth Meyer, Joe Glauber
Summary Special Issue 2019 A growing population, evolving food and fuel consumption, and trade with China and other parts of the world will all influence U.S. agriculture over the next decade.
Agricultural Cycles and Implications for the Near Term
By , Ani L. Katchova, Ana Claudia Sant’Anna
Summary Special Issue 2019 While several indicators suggest that a repeat of the 1980s farm crisis is unlikely, the length of the current agricultural downturn may take a toll.
Transitioning to the Long Term
By , Michael Gunderson
Summary Special Issue 2019 To be successful in the future, agricultural producers will need to take leadership as production conditions, the climate, and technologies evolve.
Foreword
Summary Special Issue 2019 In July 2019, the Federal Reserve Bank of Kansas City hosted a symposium titled “Exploring Agriculture’s Path to the Long Term.” Esther L. George, the Bank’s President and Chief Executive Officer, notes both positive trends and challenges facing the agricultural sector today and in the future.
The Uneven Recovery in Prime-Age Labor Force Participation
Publication Third Quarter 2019 The labor force participation rate of prime-age individuals (age 25 to 54) in the United States declined dramatically during and after the Great Recession. Although the prime-age labor force participation rate has been increasing since mid-2015, it remains below its pre-recession level. Understanding the reasons for this decline requires detailed analysis; aggregate statistics on labor force participation may mask potential differences in labor market outcomes by sex or educational attainment. Didem Tüzemen and Thao Tran identify these differences, finding that prime-age men and women without a college degree experienced larger declines in their labor force participation rates during the recession than their college-educated counterparts. The disappearance of routine jobs over the last few decades may explain these declines. In addition, they find that only prime-age women with a college degree have seen their labor force participation rate fully recover to its pre-recession level, although their participation rate remains well below that of both college-educated and non-college-educated men.
Did Local Factors Contribute to the Decline in Bank Branches?
Publication Third Quarter 2019 Although the total number of bank branches in the United States increased from the mid-1990s to 2007, this number has declined since the 2007–08 financial crisis. A loss in bank branches is potentially problematic because it may reduce customers’ access to financial services as well as small businesses’ access to credit. Changes in local conditions may partly explain this loss: the number of branches varies signficantly across geographic areas, and local conditions have been shown to influence past trends in bank branching. Rajdeep Sengupta and Jacob Dice examine the relationship between bank branching and local conditions over the last two decades to assess which factors contributed to the decline in bank branches. They find a strong association between the number of branches in a county and that county’s population, income, and employment. In addition, they find that the relative influence of local market and competitive factors on branch openings and closings strengthened after the financial crisis, while the influence of local demographic and economic factors weakened.
Tracking U.S. GDP in Real Time
Publication Third Quarter 2019 Measuring the current state of the U.S. economy in real time is an important but challenging task for monetary policymakers. The most comprehensive measure of the state of the economy—real gross domestic product—is available at a relatively low frequency (quarterly) and with a significant delay (one month). To obtain more timely assessments of the state of the economy, the Federal Reserve Bank of Kansas City has developed a GDP tracking model that combines new econometric methods with two conventional approaches to estimating GDP. Taeyoung Doh and Jaeheung Bae review the KC Fed model’s underlying details and illustrate its performance by comparing the model’s tracking estimates to those from other real-time tracking models. Their results suggest the KC Fed model provides a useful tool for policymakers by combining estimates and forecasts from factor and accounting-based models.
The Phillips Curve and the Missing Disinflation from the Great Recession
Publication Second Quarter 2019 Although inflation has run somewhat below the Federal Reserve’s 2 percent objective during the ongoing economic expansion, the “missing disinflation” during the Great Recession presents a much bigger puzzle for economists. During the recession, unemployment rose sharply, but core inflation declined only moderately. As a result, some economists have questioned whether the traditional inverse relationship between inflation and unemployment—known as the Phillips curve—still holds. Willem Van Zandweghe estimates a Phillips curve model consistent with microdata on consumer prices. The model predicts stable inflation with a decline in unit labor costs during the recession, in line with the observed patterns in these macroeconomic variables. The model provides support for the view that inflation expectations shaped by monetary policy played an important role in preventing disinflation after the Great Recession. His results suggest Phillips curve models remain useful tools for central banks.
Capital Reallocation and Capital Investment
Publication Second Quarter 2019 Corporate debt levels have grown substantially during the 10-year recovery from the global financial crisis. This debt might be expected to finance investments that support firm expansion, as the U.S. economy has experienced strong growth over the last 10 years. However, much of the corporate debt has been used to reallocate capital through mergers and acquisitions rather than to fund investment activity. Perhaps as a result, some market watchers have expressed concerns that corporations are crowding out, rather than complementing, new investment. David Rodziewicz and Nicholas Sly show that rising merger and acquisition activity does not fully crowd out new capital investment, as both sales of existing capital between firms and investment in new capital tend to rise and fall together. Moreover, they find that this relationship holds both in the aggregate and within most U.S. industries. Their results suggest that rising merger and acquisition activity complements investment growth by allowing firms to strategically position themselves and build their productive capacity.