To: Investment Committee
From: Senior Economist
Date: June 28, 2026
Subject: Analysis of Recent Federal Reserve District Research
I have reviewed the latest publications from the Federal Reserve districts. While much of the research is academic, several papers provide critical signals regarding structural labor shifts, systemic risk, and a growing divergence between model-based forecasts and real-economy sentiment.
The following publications are the most analytically significant for our current positioning:
1. [NY] The New York Fed DSGE Model Forecast—June 2026: This provides the current baseline for the Fed’s expectations on GDP and inflation. It is the essential benchmark against which we must measure our own proprietary forecasts to identify "Fed gaps" in policy expectations.
2. [NY] Struggling Regional Small Businesses Deeply Pessimistic About 2026 Prospects: This serves as a critical leading indicator, showing a sharp decline in sentiment among small businesses in the NY/NJ/CT corridor. The deep pessimism suggests that the "ground-level" economy is deteriorating faster than the aggregate DSGE models may indicate.
3. [NY] Synthetic Stablecoins and Financial Stability: This analysis links the October 2025 tariff shocks to volatility in digital assets and broader credit spreads. It highlights a new transmission mechanism where geopolitical trade tensions can trigger systemic risk through the "synthetic" digital asset ecosystem.
4. [NY] The Post‑COVID Decline in the Labor Share: The finding that the labor share of income is at its lowest post-war level suggests a structural shift toward capital over labor. This has long-term implications for aggregate demand and consumer spending patterns, as a smaller portion of GDP is flowing to households.
5. [RIC] Forecasting Wage Growth Using Months Supply: The introduction of "months supply" as a measure of labor tightness offers a more precise tool for predicting wage inflation. This may lead the Fed to adjust its policy pivot timing based on this new metric rather than lagging unemployment data.
6. [NY] Remote Work Leaves Younger Workers Sidelined: This research identifies a structural friction where remote work hinders the onboarding and development of youth
This research evaluates the resilience of emerging market economies during the 2022-23 U.S. monetary tightening cycle. It focuses on the cross-border spillover effects of U.S. policy shifts on international financial markets and regional economic activity.
The cross-border spillover effects of shifts in U.S. monetary policy have long been a focus of academics and policymakers alike. A common finding in the literature is that changes in the stance of U.S. monetary policy have sizable effects on economic activity and financial markets in emerging market economies (EMEs). In this post, we analyze one specific aspect of these spillovers: how EMEs fared through the U.S. monetary policy tightening cycle of 2022-23 relative to the predictions of a model, which was calibrated to capture empirically relevant features of these economies based on historica
The labor share of income in the U.S. is currently at its lowest-ever level in the post-war period. The labor share measures the fraction of economic output paid to workers as wages and salaries. As such, it is a useful benchmark for wage growth: when the labor share falls, it means that productivity, prices, or both are growing faster than wages. After much-studied drops in the 2000s, the labor share fell sharply again after the COVID pandemic. In this post, we compare the dynamics of the labor share post-COVID to earlier periods to understand whether the recent decline represents the continu
On October 10, 2025, the announcement of a potential additional 100 percent tariff on Chinese goods drove risk-off moves across equities, Treasuries, credit spreads, and digital assets. Digital asset prices fell sharply, trading volumes surged, and liquidity vanished from key exchanges. In this post, we show how the price shock in digital assets was transmitted and amplified through a class of instruments called synthetic stablecoins—crypto assets whose structural design turned an external shock into a self-reinforcing deleveraging spiral within the crypto ecosystem.
This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since March 2026. To summarize, inflation forecasts are higher in 2026 than predicted in March. Projections for the short-run real natural rate of interest (r*) increased slightly relative to March.
This research analyzes how state-imposed interest rate caps on consumer loans affect credit distribution. It finds that these regulations lead to credit rationing for risky borrowers and a reallocation of funds toward safer borrowers.
Several states have recently capped consumer loan rates with the stated purpose of protecting borrowers. In a recent Staff Report, we study how these interventions have played out in three states. In our first post about that study, we showed that rate caps lead riskier borrowers to face rationing in the credit market. One question that naturally arises is what lenders do with the credit they used to provide to high-risk borrowers before the caps were imposed. Lenders that lend exclusively to high-risk borrowers (at rates above the cap) may decide to stop lending to high-risk borrowers in that
This paper explores the effects of interest rate caps on alternative credit providers, including payday and installment lenders. It argues that such caps inadvertently cause credit rationing for high-risk borrowers despite the goal of reducing borrowing costs.
In imperial China, 3 percent was the maximum legal monthly loan rate; charging more was punishable by 40 to 100 blows with the “light cane.” (Rockoff 2003) Centuries later, many U.S. states are imposing the same cap (without corporal penalties) on alternative credit providers, such as payday, installment, and auto-title lenders, with the goal of lowering credit costs and delinquency for the high-risk borrowers that rely on these funding sources. A concern, however, is that lenders will simply refuse to lend to these borrowers at lower interest rates. Our recent Staff Report studies how interes
Analysis of the 2025 Small Business Credit Survey reveals severe declines in revenue and employment growth for small businesses in the Second District. The findings indicate deep pessimism regarding economic prospects heading into 2026.
We recently updated the suite of indicators describing the performance of small businesses in the Second District (defined, for the purpose of this study, as New York, New Jersey, and Connecticut) and nationally with data from the 2025 edition of the Small Business Credit Survey (SBCS). In this post, we find that regional small businesses reported severe declines in employment and revenue growth in 2025 and became more pessimistic about growth in 2026. In contrast, small firms in the rest of the nation enjoyed stable revenues and employment in 2025 and, while they also had lower expectations o
The paper argues that the rise of remote work has contributed to increased youth unemployment by hindering the training and mentorship of entry-level staff. It estimates that distributed work arrangements explain a significant portion of the decline in hiring for less-experienced workers.
Youth unemployment has risen dramatically since the pandemic—as has the prevalence of remote work. Our analysis suggests that these trends are related, with remote work making it more difficult for managers to train and mentor new employees. Accordingly, companies may be reluctant to hire less-experienced workers in distributed work arrangements. We estimate that remote work can explain 64 percent of the recent increase in unemployment among young college graduates. Further, the timing of this surge suggests that remote work—not generative AI—explains the bulk of the rise in youth unemployment
A new measure of labor market tightness could help produce more accurate forecasts of wage growth.
The study analyzes the prevalence and scale of informal financial and in-kind transfers between friends and family. It provides empirical evidence on the role of private support networks in mitigating financial instability for individuals.
The Understanding America Study examines financial and in-kind transfers people have given to and/or received from friends and family.
This analysis examines post-pandemic commuting trends across four major metropolitan areas in the Fifth District. It identifies a divergence in how urban employment centers are recovering based on employer-reported data.
Employer-reported data through 2023 reveal a divergence in postpandemic commuting patterns across four large metropolitan areas within the Fifth District.
The paper examines the dual impact of natural resource abundance on the sovereign credit risk of emerging economies. It analyzes how resource wealth can either stabilize finances or exacerbate volatility and risk through economic dependence.
The paper details the construction and application of a Dynamic Stochastic General Equilibrium (DSGE) model used by the St. Louis Fed. It focuses on simulating macroeconomic shocks to inform policy analysis and forecasting.
The paper explores how diverse characteristics within the labor market affect the efficacy of unemployment insurance. It argues for design adjustments to better accommodate labor market heterogeneity.