MEMORANDUM
TO: Investment Committee
FROM: Senior Economist
DATE: August 12, 2026
SUBJECT: Analysis of Recent Federal Reserve District Research
I have reviewed the latest publications from the Fed districts. While several papers focus on structural sociology or international capital, the following selections provide the most immediate signal for our macro positioning and policy forecasting.
1. [NY] How Distressed Are Consumers?
The slight decline in total household debt balances ($13B in Q2 2026) suggests a cooling of consumer credit expansion. This is a critical signal for our consumption models, indicating that households may be deleveraging or facing tighter credit constraints, which could dampen GDP growth in the coming quarters.
2. [RIC] The Ins and Outs of Long-Term Unemployment
The finding that rising long-term unemployment is driven by a decline in "outflow rates" (the speed of re-employment) suggests a growing structural mismatch in the labor market. This implies that the "natural rate" of unemployment may be drifting higher, potentially limiting the Fed's ability to tighten without triggering a sharper-than-expected spike in joblessness.
3. [NY] A Window into Bond Investors’ Uncertainty About R-Star
This research analyzes how the term structure of sovereign yields reflects market uncertainty regarding the neutral real interest rate ($r^$). For our fixed-income desk, this highlights that current volatility is likely a "discovery phase" for the long-term equilibrium rate, suggesting that duration bets should remain cautious until $r^$ stabilizes.
4. [NY] AI’s Impact on Labor and Hiring
The New York Fed is actively tracking the displacement and creation effects of AI on hiring patterns. As this transitions from theoretical to empirical data, it will be the primary driver of productivity assumptions in our long-term equity valuations and inflation forecasts.
5. [NY] Why Do Fewer Renters Expect to Move?
The long-term decline in residential mobility rates suggests a "lock-in" effect that reduces labor market fluidity and suppresses housing turnover. This structural rigidity can create localized inflationary pressures in housing costs even as broader economic activity slows.
Synthesis:
The collective data points toward a fragile consumer transition characterized by deleveraging and a labor market struggling with structural frictions and AI-driven disruption. We should anticipate a policy environment where the Fed is increasingly concerned with labor market "scarring" and the uncertainty of the neutral rate.
The analysis examines household debt trends, noting a slight decline in total balances alongside stable delinquency rates across most products. It specifically seeks to reconcile diverging measures of credit card distress to assess overall consumer financial health.
Total debt balances declined slightly by $13 billion in the second quarter of 2026, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Mortgage and student loan balances saw a small decline, while there were increases across other debt products. Delinquency rates across most products remained fairly stable. Still, between 2022:Q3 and 2026:Q1, the percentage of credit card balances 90+ days delinquent rose from 7.6 percent to 12.8 percent, prompting concerns that Americans are falling behind on their debt payments at rate
The paper examines the reporting gaps in FINRA's aggregate trading volume for U.S. Treasury securities, specifically focusing on the exclusion of STRIPS. It analyzes how this lack of transparency affects the understanding of Treasury market liquidity.
In March 2020, the Financial Industry Regulatory Authority (FINRA) began reporting aggregate trading volume for securities issued by the U.S. Treasury Department. The public data do not, however, include information about the trading activity of Separate Trading of Registered Interest and Principal of Securities (STRIPS). STRIPS are created from existing Treasury securities and offer risk […]
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 analyzes the decline of public infrastructure and capital investment in Portugal. It explores the long-term implications of this erosion on national productivity and economic growth.
This study investigates the relationship between selective higher education admissions and the rate of intergenerational economic mobility. It argues that college access patterns significantly influence long-term income distribution and employment outcomes.
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.