| Detailed Objective: Historically, Food Stamp Program (FSP) caseloads are positively correlated with aggregate economic activity as measured by the unemployment rate. This relationship is useful in explaining fluctuations in FSP caseloads and predicting future caseload levels and budget requirements. Over time, however, the quantitative relationship between FSP caseloads and the unemployment rate appears to change with, for example, FSP caseloads being much higher than would be expected in the economic expansion of the 1990s. Since 2002, the relationship, in fact, seems to have reversed itself qualitatively, with increasing FSP caseloads associated with declining unemployment rates.
The changing nature of the relationship between FSP caseloads and the unemployment rate raises questions about the usefulness and reliability of this relationship in explaining period-by-period changes in FSP caseloads. These questions suggest a need to evaluate whether the relationship between FSP caseloads and aggregate economic activity, particularly, the unemployment rate, has changed structurally. The study will evaluate the ability of regressions of the FSP caseload equation that includes measures of economic activity (the unemployment rate and total nonfarm employment) to explain year-to-year changes in FSP caseloads. |