The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The New York Fed engages with individuals, households and businesses in the Second District and maintains an active dialogue in the region. The Bank gathers and shares regional economic intelligence to inform our community and policy makers, and promotes sound financial and economic decisions through community development and education programs.
Nora Fitzpatrick, Laura Pilossoph, Anika Pratt, and Aysegul Sahin
The Federal Reserve Bank of New York recently hosted “The Evolution of Work,” a conference that brought together thought leaders from academia, government, industry, labor, and the nonprofit sector to explore how the nature of work is evolving, including the expanding role of technology, shifts in employee work arrangements and employer-employee relationships, and the effects of these changes on workforce and community development strategies. The gathering was cosponsored by the Board of Governors of the Federal Reserve System and the Freelancers Union.
Sushant Acharya, Julien Bengui, Keshav Dogra, and Shu Lin Wee
Economic activity has remained subdued following the Great Recession. One interpretation of the listless recovery is that recessions inflict permanent damage on an economy’s productive capacity. For example, extended periods of high unemployment can lead to skill losses among workers, reducing human capital and lowering future output. This notion that temporary recessions have long-lasting consequences is often termed hysteresis. Another explanation for sluggish growth is the influential secular stagnation hypothesis, which attributes slow growth to long-term changes in the economy’s underlying structure. While these explanations are observationally similar, they have very different policy implications. In particular, if structural factors are responsible for slow growth, then there might be little monetary policy can do to reverse this trend. If instead hysteresis is to blame, then monetary policy may be able to reverse slowdowns in potential output, or even prevent them from occurring in the first place.
Bianca De Paoli, Thomas Klitgaard, and Harry Wheeler
Japan offers a preview of future U.S. demographic trends, having already seen a large increase in the population over 65. So, how has the Japanese economy dealt with this change? A look at the data shows that women of all ages have been pulled into the labor force and that more people are working longer. This transformation of the work force has not been enough to prevent a very tight labor market in a slowly growing economy, and it may help explain why inflation remains minimal. Namely, wages are not responding as much as they might to the tight labor market because women and older workers tend to have lower bargaining power than prime-age males.
James Vickery, Lauren Thomas, and Ulysses Velasquez
Profits and employment in the oil and natural gas extraction industry have fallen significantly since 2014, reflecting a sustained decline in energy prices. In this post, we look at how these tremors are affecting banks that operate in energy industry–intensive regions of the United States. We find that banks in the “oil patch” have experienced a significant rise in delinquencies on commercial and industrial loans. So far though, there appears to be limited evidence of spillovers to other types of loans and no evidence of widespread bank losses or failures in these regions.
The 9/11 terrorist attack on the World Trade Center left a deep scar on New York City and the nation, most particularly in terms of the human toll. In addition to the lives lost and widespread health problems suffered by many others—in particular by first responders and recovery workers—the destruction of billions of dollars’ worth of property and infrastructure led to severe disruptions to the local economy. Nowhere were these disruptions more severe and long-lasting than in the neighborhoods closest to Ground Zero.
In Monday’s post, we described the estimation of real wage growth rates for different cohorts of U.S. workers. We showed that the life-cycle pattern of real wage growth is characterized by high growth early in a worker’s career, little to no growth in mid-career, and negative growth as workers near retirement. We also documented that a growing fraction of the U.S. adult population is transitioning into the flat to negative real wage growth phases of their careers. Here, we turn our attention to estimating the effect of this demographic shift on the economy-wide average real wage growth rate. Our analysis shows that this economy-wide average real wage growth rate has declined by a third since the mid-1980s.
Estimates from the Current Population Survey show that the probability of finding a job declines the longer one is unemployed. Is this due to a loss of skills from being unemployed, employer discrimination against the long-term unemployed, or are there characteristics of workers in this segment of the workforce that lower their probability of finding a job? Studies that send out fictitious resumes find that employers do consider the length of unemployment in deciding whom to interview. Our recent work examines how such employer screening based on unemployment duration ultimately affects job-finding rates and long-term unemployment.
In 2015, upstate New York looked to be having its strongest job growth in years. Employment was estimated to be growing at around one percent—below the national pace, but twice the region’s trend growth rate since the end of the Great Recession. Buffalo, in particular, looked to be gaining significant numbers of construction and manufacturing jobs for the first time in decades, pushing it to its highest job growth since the late 1990s. Unfortunately, the good news was wrong. Annual benchmark revisions to New York State’s employment data released in early March cut upstate’s growth rate in half, indicating that the pickup in the pace of the region’s job growth never really happened.
Since the 1940s, employers that provide health insurance for their employees can deduct the cost as a business expense, but the government does not treat the value of that coverage as taxable income. This exclusion of employer-provided health insurance from taxable income—$248 billion in 2013, according to the Congressional Budget Office—is a huge subsidy for health spending. Many economists cite the distortionary effects of this tax subsidy as an important reason for why U.S. health care spending accounts for such a large share of the economy and why spending historically has grown so rapidly. In this blog post, we focus on a provision of the Affordable Care Act (ACA) that is intended to chip away at this tax subsidy, the colloquially labelled “Cadillac Tax” on the priciest employer-provided health insurance plans.
Liberty Street Economics features insight and analysis from economists working at the intersection of research and policy. The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Donald Morgan.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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