Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

The New York Fed released the Quarterly Report on Household Debt and Credit for the third quarter of 2014 today. Balances continued to rise slightly, with an overall increase of $78 billion. The aggregate household debt balance now stands at $11.71 trillion, up 0.7 percent from the previous quarter, but still well below the peak of $12.68 trillion in the third quarter of 2008.

Rod Garratt and Rosa Hayes





In June 2014, the mining pool Ghash.IO briefly controlled more than half of all mining power in the Bitcoin network, awakening fears that it might attempt to manipulate the blockchain, the public record of all Bitcoin transactions. Alarming headlines splattered the blogosphere. But should members of the Bitcoin community be worried?

Mary Tao





Prior to 1876, there was fierce competition among engraving firms and private bank note companies for contracts to print U.S. Treasury bank notes. Then, in 1877, congressional legislation established the Bureau of Engraving and Printing (BEP) as the exclusive printer of U.S. government currency.

Basit Zafar and Wilbert van der Klaauw

Today, we are releasing new data on consumers’ experiences and expectations regarding credit demand. We’ve been collecting these data every four months since mid-2013, as part of our Survey of Consumer Expectations (SCE). Other data sources describing consumer credit either provide aggregates that are an interaction of credit supply and demand (such as the FRBNY Consumer Credit Panel), or show only short-term changes in supply and demand (as reported by the supply side in the Senior Loan Officer Opinion Survey), or are too infrequent to provide a real-time picture of changes in consumer credit demand and access (Survey of Consumer Finances). The goal of the SCE Credit Access Survey—which will henceforth be published every four months—is to fill this void. In this blog post, we provide an overview of the survey and highlight some of its features.

Robert C. Dent, Samuel Kapon, Fatih Karahan, Benjamin Pugsley, and Ayşegül Sahin

This is the third in a series of blog posts on the topic of measuring labor market slack. In this post, we assess the relationships between short- and long-term unemployment and wages by comparing the differences in states’ experiences over the business cycle. While all states felt the impact of the Great Recession, some fared better than others. Consequently, it is possible to use differences in the composition and shifts of short- and long-term unemployment to determine whether short-term unemployment exerts a greater influence on wage determination. The results suggest that there is little difference in how long-term and short-term unemployment affect wages, and as a consequence, the long-term unemployed shouldn’t be dismissed when evaluating labor market slack.

Robert C. Dent, Samuel Kapon, Fatih Karahan, Benjamin Pugsley, and Ayşegül Sahin

In this second post in our series on measuring labor market slack, we analyze the labor market outcomes of long-term unemployed workers to assess their employability and labor force attachment. If long-term unemployed workers are essentially nonparticipants, their job-finding prospects and attachment to the labor force should resemble those of nonparticipants who are not looking for a job and should differ considerably from those of short-term unemployed workers. Using data that allow us to follow workers over longer time periods, we find that differences in labor market outcomes between short- and long-term unemployed workers exist, but these differences narrow at longer horizons. In contrast, labor market outcomes for the long-term unemployed are substantially different from those of nonparticipants who do not want a job.

Robert C. Dent, Samuel Kapon, Fatih Karahan, Benjamin Pugsley, and Ayşegül Sahin


There has been some debate in the Liberty Street Economics blog and in other outlets, such as Krueger, Cramer, and Cho (2014) and Gordon (2013), about whether the short-term unemployment rate is a better measure of slack than the overall unemployment rate. As the chart below shows, the two measures are sending different signals, with the short-term unemployment rate back to its pre-recession level while the overall rate is still elevated because of a high long-term unemployment rate. One can argue that the unemployment rate is exaggerating the extent of underutilization in the labor market, based on the premise that the long-term unemployed are, in practice, out of the labor force and likely to exert little pressure on earnings. If this is indeed the case, inflationary pressures might start building up sooner than suggested by the overall unemployment rate. In a three-part series, we study the available evidence on the long-term unemployed and argue against this premise. The long-term unemployed should not be excluded from measures of labor market slack.

Amy Farber

Does the Federal Reserve or the government care about pocketbooks? Not literally pocketbooks (except perhaps for the role of handbag manufacturing in the economy). But yes, if “pocketbook” is meant to refer to the spending capacity of the country’s citizens. It is easy to find phrases like this opening statement in the Federal Reserve Bank of Richmond Monthly Review for October 1968: “In 1967, the consumer emptied his pocketbook of more than $492 billion on various goods and services.” A more recent article in the Wall Street Journal put it this way: “One worry, however, is that rising food and energy prices could hit households in the pocketbook and make them less willing to spend on other goods and services, weakening the recovery.” The budget of the U.S. government for 2009 proposed that “total discretionary spending rise no faster than the size of the economy, to prevent day-to-day government spending from consuming an even larger share of the nation’s pocketbook.” “Nation’s purse” is more commonly used in reference to government spending, whereas “nation’s pocketbook” refers to consumer spending. (In Britain, they actually use the phrase “nation’s handbag.”)

Ravi Bhalla and Rajashri Chakrabarti





In the first of this two post series, we investigated the relationship between state aid and local funding before and after the Great Recession. We presented robust evidence that sharp changes in state aid brought about by the prolonged downturn influenced local budget decision-making. More specifically, we found that relative to the pre-recession relationship, a dollar decline in state aid resulted in a $0.19 increase in local revenue and a $0.14 increase in property tax revenue in New York school districts. In this post, we dive deeper to consider whether there were variations in this compensatory response across school districts, using an approach described in our recent study. For example, one might expect that there would be differences in willingness and ability to offset cuts in state aid across districts with varying levels of property wealth, which in turn might lead to differences in responses. Was this really the case?

Ravi Bhalla and Rajashri Chakrabarti





Correction: Earlier, we inadvertently posted the content of the second post in this two-part series under today’s headline. We have updated the blog with the correct content and will post part two on November 12. We apologize for the error.

It’s well known that the Great Recession led to a massive reduction in state government revenues, in spite of the federal government’s attempt to ease budget tightening through American Recovery and Reinvestment Act aid to states. School districts rely heavily on aid from higher levels of government for their funding, and, even with the federal stimulus, total aid to school districts declined sharply in the post-recession years. But the local school budget process gives local residents and school districts a powerful tool to influence school spending. In this post, we summarize our recent study in which we investigate how New York school districts reacted when state aid declined sharply following the recession.