MEMORANDUM
TO: Investment Committee
FROM: Senior Economist
DATE: August 7, 2026
SUBJECT: Analysis of Recent Federal Reserve District Research
I have reviewed the latest research outputs from the Federal Reserve districts. While some entries were incomplete, several papers provide critical signals regarding labor market frictions and the neutral rate of interest.
1. [NY] A Window into Bond Investors’ Uncertainty About R-Star
This research analyzes the term structure of sovereign yields to gauge market uncertainty regarding the long-run neutral real interest rate ($r^*$). For our portfolio, this is critical as it suggests that volatility in long-end yields may be driven by a fundamental lack of consensus on the "terminal" neutral rate rather than short-term noise.
2. [RIC] The Ins and Outs of Long-Term Unemployment
The Richmond Fed identifies a decline in "outflow rates," meaning the unemployed are staying unemployed longer due to a breakdown in job-matching efficiency. This suggests a structural hardening of labor market frictions that could keep the NAIRU higher than previously estimated, limiting the Fed's room for dovish pivots.
3. [NY] AI’s Impact on Labor and Hiring
This series examines the real-time integration of AI into corporate hiring and labor productivity. Understanding whether AI is augmenting current roles or displacing them is essential for our equity valuations in the tech and professional services sectors, as it dictates the long-term trajectory of corporate margins.
4. [NY] Why Do Fewer Renters Expect to Move?
The data shows a multi-decade decline in residential mobility, which has significant implications for the housing market's elasticity. Lower mobility rates suggest a "lock-in" effect that could sustain elevated home prices and rents even in a higher-rate environment, contributing to persistent shelter inflation.
5. [STL] The Implications of Labor Market Heterogeneity for Unemployment Insurance Design
This paper argues that "one-size-fits-all" unemployment insurance fails to account for diverse worker profiles, potentially distorting labor supply. From a policy perspective, any shift toward targeted UI could accelerate labor force reentry, impacting wage growth projections.
Synthesis:
The prevailing theme across the districts is a transition toward structural rigidity, evidenced by declining residential mobility and slowing unemployment outflow rates. These frictions suggest that the economy may face persistent inflationary pressures and a higher neutral rate, necessitating a more cautious approach to duration risk in our fixed-income allocations.
The paper analyzes a long-term decline in residential mobility rates among Americans since the 1980s. It argues that reduced moving rates hinder households' ability to access employment opportunities and optimize labor market matching.
Americans are moving less than they used to. Moving rates have declined steadily for decades, falling from close to 20 percent annually in the mid-1980s to below 10 percent by 2019. This decline has persisted through business cycles and has been evident across all regions, and has affected a broad range of demographic groups. Falling mobility matters because moving helps households access job opportunities, adjust to changing circumstances, and improve their housing situations. In this post, we show that the decline in mobility also holds for renters, with growing challenges to owning a home b
The analysis explores the intersection of artificial intelligence and workforce dynamics. It specifically examines how AI integration influences hiring patterns and overall labor market structures.
Welcome to Street Level, my new series on Liberty Street Economics. As research director, I try to keep track of the wide range of work that the economists at the New York Fed produce. My goal for this series is to periodically offer some thematic discussion of that work, highlighting recent analysis by Research staff and adding my own observations on the issue at hand. In this inaugural post, I’ll focus on perhaps the hottest topic going: How artificial intelligence is changing the labor market and hiring behaviors.
The paper examines how sovereign bond yields reflect market participants' beliefs and uncertainty regarding the natural real rate of return (r-star). It analyzes the term structure of yields to determine the extent to which investors can accurately signal the neutral rate to policymakers.
Monetary policymakers closely monitor the term structure of sovereign bond yields to uncover market participants’ beliefs about the future monetary policy stance, inflation, and activity. A particular object of interest is the natural real rate of return, or “r-star,” which acts as a guide for monetary policy decisions. Numerous papers have questioned how much information investors possess, and how precisely they know r-star. In this post based on a recent Staff Report, we explore what the term structure of interest rates can teach us about r-star and its perception by investors.
The paper identifies a decline in unemployment outflow rates as the primary driver for the increase in long-term unemployment. It argues that the difficulty unemployed workers face in securing new roles is central to this trend.
The recent rise in long-term unemployment is largely due to a decline in unemployment outflow rates, especially the rate at which unemployed workers find jobs.
The research examines how differences in worker characteristics affect the efficacy of unemployment insurance. It argues for design adjustments to better accommodate labor market heterogeneity.
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