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Economic Perspectives

Luca Benzoni, Christian Cabanilla, Alessandro Cocco, Cullen Kavoussi

We document the sharp increase in trading activity, gross and net notional outstanding, and overall premiums in the U.S. sovereign credit default swaps (CDS) market that took place during the 2023 debt ceiling episode. Unlike the periods leading up to the 2011 and 2013 debt ceiling events, we show that in the recent episode elevated CDS spreads were partially due to a high expected loss given default, because of the very low valuations of long-term Treasury securities that would have been deliverable to settle CDS contracts.

Raffaella Giacomini and Yaakov Levin

In this article, the authors present a new disaggregated approach to forecasting inflation as measured by the Personal Consumption Expenditures Price Index. They developed this new microforecasting approach primarily because of the widespread heterogeneity evident in the dynamics of inflation both across its components and over time.

Emma LaGuardia , Kristin Dziczek, and Rick Mattoon

State and federal highways are currently funded by a combination of motor fuel taxes (MFTs), general fund transfers, fees, tolls, property taxes, and bond revenues. The MFT share of funding is declining due to increasing overall fuel economy trends, inflation, and recent vehicle miles traveled (VMT) trends—especially during the 2020–21 pandemic years which saw lower passenger and freight travel. Electric vehicles (EVs) have the potential not only to accelerate the fuel efficiency of vehicles in use, but also to lead to a sizable population of individual road users who pay no fuel taxes. A recent study estimated that EVs reduce gas tax revenues by $250 million a year. So how will states pay to fix the roads?

Bart Hobijn and Ayşegül Şahin

Since the start of the Covid-19 pandemic, the U.S. labor market has been characterized as being plagued by missing jobs, i.e., payroll employment has fallen more than five million jobs short of its pre-pandemic trend, and missing workers, i.e., the labor market participation rate has declined by 0.7 percentage points. We show that both the number of missing jobs and the number of workers missing due to Covid have been overstated and that the decline in the labor market participation rate since the start of the pandemic reflects a continuation of its long-run downward trend. Instead, our payroll jobs accounting yields a 1.4 million cyclical surplus in payroll jobs in April 2023 compared with right before the pandemic.

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