When a financial firm suffers sufficiently high losses, it might default on its counterparties, who may in turn become unable to pay their own creditors, and so on. This “domino” or “cascade” effect can quickly propagate through the financial system, creating undesirable spillovers and unnecessary defaults. In this post, we use the framework that we discussed in “Assessing Contagion Risk in a Financial Network,” the first part of this two-part series, to answer the question: How vulnerable is the U.S. financial system to default spillovers?
Regional employment data provided by the U.S. Bureau of Labor Statistics (BLS) are a critically important tool used to track and assess local economic conditions on a timely basis. However, the primary data used for this purpose are monthly survey-based estimates that are revised once per year, and these revisions can sometimes be substantial and surprising. As a result, initial readings of these data can lead to conclusions about employment trends that may later change. It is possible to anticipate these revisions in advance of their release using a second publicly available data set released by the BLS. Like some of our colleagues at other Federal Reserve Banks, the Federal Reserve Bank of New York is now performing an “early benchmark” of initial monthly employment releases throughout the year and making these benchmarked data available to the public on a monthly basis. Our early benchmarked estimates tend to more closely track revised data than the initial releases do, and can help policymakers and the public better monitor regional economic conditions on a timely basis.
Duarte, Jones, and Ruela describe how stress can propagate through the financial system and sketch out an approach for quantifying economic losses stemming from default cascades.
The June model forecast for 2019-22 is summarized in the table below, alongside the January forecast, and in the following charts. The model uses quarterly macroeconomic data released through the first quarter of 2019, and financial data and staff forecasts available through May 31, 2019.
In our last post, we showed that the cost of college has increased sharply in recent years due to the rising opportunity cost of attending school and the steady rise in tuition. This steep increase in the cost of college has once again raised questions about whether college is “worth it.” In this post, we weigh the economic benefits of a bachelor’s degree against the costs to estimate the return to college, providing an update to our 2014 study. We find that the average rate of return for a bachelor’s degree has edged down slightly in recent years due to rising costs, but remains high at around 14 percent, easily surpassing the threshold for a good investment. Thus, while the rising cost of college appears to have eroded the value of a bachelor’s degree somewhat, college remains a good investment for most people.
College is much more expensive than it used to be. Tuition for a bachelor’s degree has more than tripled from an (inflation-adjusted) average of about $5,000 per year in the 1970s to around $18,000 today. For many parents and prospective students, this high and rising tuition has raised concerns about whether getting a college degree is still worth it—a question we addressed in a 2014 study. In this post, we update that study, estimating the cost of college in terms of both out-of-pocket expenses, like tuition, and opportunity costs, the wages one gives up to attend school. We find that the cost of college has increased sharply over the past several years, though tuition increases are not the primary driver. Rather, opportunity costs have increased substantially as the wages of those without a college degree have climbed due to a strong labor market. In a follow-up post, we will consider whether college is still “worth it” by weighing the benefits relative to the costs to estimate the return to a college degree.