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Over the past three decades, the United States has seen substantial growth in both high- skill and low-skill jobs, while growth of those in the middle has stagnated. At the same time, a growing gap in wages between jobs that pay the most and those that pay the least has emerged. As we discussed in a previous blog post, this combination of trends is often referred to as job polarization, and it is happening in much of the developed world. In this post, we examine the extent to which job polarization has occurred in upstate New York, downstate New York, and Northern New Jersey. We find that job polarization has been significant in all of these places, contributing to a sharper than average rise in inequality in downstate New York and Northern New Jersey.
Title VII of the Dodd-Frank Act requires that some derivatives contracts be traded on centralized exchanges. While the Act is broadly targeting mostly standardized derivative instruments, the most important derivatives contracts under scrutiny are credit default swaps (CDS). Several policy makers and financial commentators argue that CDS trading amplified risks during the recent financial crisis. In this post, I summarize some findings of my recent New York Fed Staff Report (coauthored with Vanessa Savino) that investigates whether a company with CDS trading on its debt faces a higher default risk.
Two key monetary aggregates, M1 and M2, have grown quickly recently—especially M1, the narrow aggregate. In this post, we show that we can attribute most, but not all, of the recent high money growth rate of M1 to low current interest rates as well as the growth in bank reserves that has resulted from the Fed’s asset purchase programs. It’s unlikely that the current high growth rate will continue in the long term, however, as both low interest rates and the Fed’s expansion of bank reserves will likely be reversed as economic growth accelerates.
The U.S. market share of world merchandise exports has declined sharply over the past decade. Throughout the 1980s and 1990s, approximately 12 percent of the value of goods shipped globally originated in the United States; by 2010, this share had dropped to only 8.5 percent. How can we account for the United States’ flagging merchandise export performance? Have U.S. manufacturing firms simply become less competitive than their foreign counterparts?
The European Central Bank (ECB) released the results of its 2012:Q2 Survey of Professional Forecasters (SPF) on May 3. As noted in our recent post, the previous survey conducted in January was worrisome because it not only reflected a marked slowdown and increased downside risks to the growth outlook, but also displayed many parallels to the 2008:Q4 survey, when Europe was in a deep recession. The current survey (collected April 17-19) indicates stabilization rather than a further deterioration in the growth outlook. As shown in the chart below, the mean forecasts at both the one-year-ahead (2011:Q4-2012:Q4) and one-year/one-year-forward (2012:Q4-2013:Q4) horizons indicate little change from the previous survey.
In a 2012 New York Fed study, Chenyang Wei and I find that interest rate spreads on publicly traded bonds issued by companies with privately traded equity are about 31 basis points higher on average than spreads on bonds issued by companies with publicly traded equity, even after controlling for risk and other factors. These differences are economically and statistically significant and they persist in the secondary market. We control for many factors associated with bond pricing, including risk, liquidity, and covenants. Although these controls account for some of the absolute pricing difference, the price wedge between public and private companies remains. Despite these pricing differences, private companies with public bonds are no more likely to go bankrupt or to be downgraded than are similar public companies. In this post, we briefly summarize the findings of our study.
The Great Recession of 2007-09 was a dramatic macroeconomic event, marked by a severe contraction in economic activity and a significant fall in inflation. These developments surprised many economists, as documented in a recent post on this site. One factor cited for the failure to anticipate the magnitude of the Great Recession was a form of complacency affecting forecasters in the wake of the so-called Great Moderation. In this post, we attempt to quantify the role the Great Moderation played in making the Great Recession appear nearly impossible in the eyes of macroeconomists.
We are presenting the New York Fed staff outlook for the U.S. economy to the New York Fed’s Economic Advisory Panel (EAP) at their meeting here today. It is an opportunity we take occasionally to get critical feedback from leading economists in academia and the private sector on the staff forecast; such feedback helps us evaluate the assumptions and reasoning underlying the forecast and the risks to it. Subjecting the staff forecast to such evaluation is important because it is an input assisting New York Fed President William Dudley in his preparation for the monetary policy decisions made at Federal Open Market Committee (FOMC) meetings. In a similar spirit of inviting feedback, we are sharing a short summary of the staff forecast in this post; for more detail, see the material from the EAP meeting on our website.
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