Liberty Street Economics
May 15, 2015

The Class of 2015 Might Have a Little Better Luck Finding a Good Job



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With the college graduation season well under way, a new crop of freshly minted graduates is entering the job market and many bright young minds are hoping to land a good first job. It’s no wonder if they are approaching the job hunt with some trepidation. For a number of years now, recent college graduates have been struggling to find good jobs. However, the labor market for college graduates is improving. After declining for nearly two years, openings for jobs requiring a college degree have picked up since last summer. Not only has this increase in the demand for educated workers continued to push down the unemployment rate for recent graduates, but it has also finally started to help reduce underemployment, though the underemployment rate remains high. While successfully navigating the job market will likely remain a challenge, it appears that finding a good job has become just a little bit easier for the class of 2015.

Posted by Blog Author at 7:00 AM in Education , Labor Economics | Permalink | Comments ( 0 )

May 13, 2015

Financial Innovation: Evolution of the Tri-Party Repo Arrangement



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Second in a two-part series
In our earlier post, we described how the tri-party repo arrangement was a clever way to reduce the costs and risks that individual firms faced when settling bilateral repos. In this post, we explain how the efficiencies created by this new arrangement facilitated the growth of the repo market by expanding the class of securities to be used as collateral. This expansion had benefits as well as costs. On the positive side, it led to lower interest costs for a wide variety of borrowers in the real economy. But on the negative side, tri-party repos backed by riskier assets increase the risk of fire sales, which can have negative spillovers on the broader financial system.

Posted by Blog Author at 7:00 AM in Financial Markets | Permalink | Comments ( 0 )

May 12, 2015

Just Released: Mortgage Borrowing among Most Creditworthy Abates



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Today’s release of the New York Fed’s Quarterly Report on Household Debt and Credit for the first quarter of 2015 reports a flattening in household debt balances. The slow growth in debt balances has left many wondering about the dynamics behind this change—who is borrowing, and who is paying down their balances? Thus, we use the same data set, the New York Fed Consumer Credit Panel (which is itself based on Equifax credit data) to identify the changes in balances by credit score, updating a post from last year with more recent data and also providing an in-depth look at the change in mortgage balances.

Posted by Blog Author at 11:15 AM in Household Finance , Housing | Permalink | Comments ( 0 )

May 11, 2015

Financial Innovation: The Origins of the Tri-Party Repo Market



First in a two-part series
The conventional wisdom about financial innovation is that it is typically undertaken as a way to increase profits. However, financial innovation can also occur as a response to the need to reduce risk. Tri-party repo is an example of such innovation. While tri-party repo ultimately evolved in ways that created and amplified systemic risk (as we describe in the second post in this series), its origin was as a solution to inefficiencies and risks associated with the repo settlement arrangements prevailing at the time.

Posted by Blog Author at 7:00 AM in Financial Markets | Permalink | Comments ( 1 )

May 08, 2015

Crisis Chronicles: The Man on the Twenty-Dollar Bill and the Panic of 1837



Correction: This post was updated on May 8 to correct the book title and spelling of the author’s name in the fifth paragraph. We regret the error.

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President Andrew Jackson was a "hard money" man. He saw specie—that is, gold and silver—as real money, and considered paper money a suspicious store of value fabricated by corrupt bankers. So Jackson issued a decree that purchases of government land could only be made with gold or silver. And just as much as Jackson loved hard money, he despised the elites running the banking system, so he embarked on a crusade to abolish the Second Bank of the United States (the Bank). Both of these efforts by Jackson boosted the demand for specie and revealed the soft spots in an economy based on hard money. In this edition of Crisis Chronicles, we show how the heightened demand for specie ultimately led to the Panic of 1837, resulting in a credit crunch that pushed the economy into a depression that lasted until 1843.

May 07, 2015

From the Vault: Monetary Policy and Government Finances



Each year, the manager of the Federal Reserve’s System Open Market Account (SOMA) submits an accounting of open market operations and other developments influencing the composition and performance of the Fed’s balance sheet to the Federal Open Market Committee (FOMC).

Posted by Blog Author at 7:00 AM in Fiscal Policy | Permalink | Comments ( 0 )

May 06, 2015

U.S. Potential Economic Growth: Is It Improving with Age?



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The contribution of labor input to the potential GDP growth rate for the United States has changed over time. We decompose this contribution into two components: the size of the adult population and the average demographically adjusted employment rate. We find that these two components in the late 1960s and early 1970s contributed at least 2.5 percentage points to potential growth. Since the mid-1990s, the aging of the population has reduced the contribution of labor to growth. We estimate that the current contribution to potential economic growth from labor input has declined to around 0.6 percentage points. One implication going forward is that more labor productivity growth will be required to sustain U.S. growth.

Posted by Blog Author at 7:00 AM in Labor Economics , Macroecon | Permalink | Comments ( 4 )

May 04, 2015

Interest-Bearing Securities When Interest Rates are Below Zero



Note: A PDF version of this post fully documents the authors’ sources.

Negative interest rates have evolved, over the past few years, from a topic of modest academic interest to a practical reality. Short- and intermediate-term sovereign debt of several European countries, including Germany, Denmark, the Netherlands, Sweden, Austria, and Switzerland, now trades at negative yields.

April 20, 2015

Credit Supply and the Housing Boom



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There is no consensus among economists as to what drove the rise of U.S. house prices and household debt in the period leading up to the recent financial crisis. In this post, we argue that the fundamental factor behind that boom was an increase in the supply of mortgage credit, which was brought about by securitization and shadow banking, along with a surge in capital inflows from abroad. This argument is based on the interpretation of four macroeconomic developments between 2000 and 2006 provided by a general equilibrium model of housing and credit.
Posted by Blog Author at 7:00 AM in Macroecon | Permalink | Comments ( 5 )

April 17, 2015

At the New York Fed: Chapter 9 and Alternatives for Distressed Municipalities and States



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On Tuesday, April 14, the Federal Reserve Bank of New York hosted an all-day workshop entitled Chapter 9 and Alternatives for Distressed Municipalities and States. The workshop was jointly organized and sponsored by the Volcker Alliance and George Mason University’s State and Local Government Leadership Center. The event brought together key experts, practitioners, and researchers on the subject of fiscal distress at the state and local level. The aim of the session was to foster discussion on the role of Chapter 9 of the U.S. Bankruptcy Code, alternatives for distressed governments, and strategies to avoid stress and achieve good fiscal outcomes.

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Liberty Street Economics features insight and analysis from economists working at the intersection of research and policy.

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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