Economic uncertainty rose to record levels in the wake of the COVID-19 pandemic in the United States, fueled by concerns over the direct impact of the virus and the public policy response. Many uncertainty measures remain elevated relative to their pre-pandemic levels, even as the economy has recovered.
The authors examine the evolution of several uncertainty measures that are both forward-looking and available in near real-time. Their analysis benefits from real-time measures that supplement traditional macro indicators, which become available with lags of weeks or months. Forward-looking uncertainty measures gleaned from business decision makers prove especially useful for assessing prospective responses to a pandemic shock or other fast-moving developments.
In brief, the authors find the following:
The authors note that these and other results illustrate the value of business surveys like the SBU that directly elicit own-firm forecast distributions and self-assessed effects of uncertainties on investment and other outcomes of interest.
1 In partnership with Steven J. Davis of Chicago Booth and Nicholas Bloom of Stanford, the Federal Reserve Bank of Atlanta developed the Atlanta Fed/Chicago Booth/Stanford Survey of Business Uncertainty (SBU), a panel survey that measures one-year-ahead expectations and uncertainties that firms have about their own employment and sales. (atlantafed.org/research/surveys/business-uncertainty)