Firms remain divided about the value of the office for “office” workers. Some firms think that their employees are more productive when working from home. Others believe that the office is a key place for investing in workers’ skills. In this post, which is based on a recent working paper, we examine whether both sides could be right: Could working in the office facilitate investments in workers’ skills for tomorrow that diminish productivity today?
Climate change may pose two types of risk to the economy—from policies and consumer preferences as the energy system transitions to a lower dependence on carbon (in other words, transition risks) or from damages stemming from the direct impacts of climate change (physical risks). In this post, we follow up on our previous post that studied the exposure of the Federal Reserve’s Second District to physical risks by considering how transition risks affect different parts of the District and how they differentially affect the District relative to the nation. We find that, relative to other regions of the U.S., the economy of the Second District has considerably less exposure to fossil fuels. However, the cost of reducing even this relatively low economic dependence on carbon is still likely to be considerable.
When COVID-19 first struck the U.S. in early 2020, New York City was the epicenter of the pandemic. By early April, there was an unthinkable scale of suffering, with massive hospitalizations and roughly 800 fatalities per day, accounting for nearly half of the nationwide total. The rapid spread was facilitated by the city’s extraordinarily high population density and widespread use of mass transit. What followed was a quick and massive shutdown of restaurants, retail stores, personal services, offices, and more. And the shutdowns, of course, led to widespread job losses. Between February and May, one out of five jobs in the city vanished; in the restaurant industry, 70 percent of jobs were lost. Although the pandemic didn’t go away, the city’s economy has recovered steadily, aside from a brief but sharp setback in late 2020. By early 2023, New York had finally reversed just about all of the total job loss. In this post, we look at the contours of the city’s recovery as a possible guide to where we go from here.
The U.S. labor force participation rate (LFPR) currently stands at 62.5 percent, 0.8 percentage point below its level in February 2020. This “participation gap” translates into 2.1 million workers out of the labor force. In this post, we evaluate three potential drivers of the gap: First, population aging from the baby boomers reaching retirement age puts downward pressure on participation. Second, the share of individuals of retirement age that are actually retired has risen since the onset of the COVID-19 pandemic. Finally, long COVID and disability more generally may induce more people to leave the labor force. We find that nearly all of the participation gap can be explained by population aging, which caused a significant rise in the number of retirements. Higher retirement rates compared to pre-COVID have had only a modest effect, while disability has virtually no effect.
Even before the start of the new year, businesses in the tri-state region were hampered by supply disruptions, rising input costs, and difficulty finding adequate staff. On top of these challenges, the Omicron wave dealt another setback to the regional economy. With infections running high, many businesses were forced to deal with a combination of reduced demand from customers and renewed absenteeism among workers. Indeed, our regional business surveys indicate that economic growth stalled in early 2022 as firms continued to struggle to find workers. Moreover, employee absenteeism was reported to be nearly three times its normal level. While the path of recovery remains highly uncertain, firms generally expect conditions to improve in the months ahead and many are still adding or planning to add staff.
Seasonal adjustment is a key statistical procedure underlying the creation of many economic series. Large economic shocks, such as the 2007-09 downturn, can generate lasting seasonal echoes in subsequent data. In this Liberty Street Economics post, we discuss the prospects for these echo effects after last year’s sharp economic contraction by focusing on the payroll employment series published by the U.S. Bureau of Labor Statistics (BLS). We note that seasonal echoes may lead the official numbers to overstate actual changes in payroll employment modestly between March and July of this year after which distortions flip the other way.
Abel and Deitz look at the outsized impact of the COVID-19 pandemic on some workers, particularly those who are in lower-wage jobs, without a college degree, female, minority, and younger.
The New York-Northern New Jersey region experienced an unprecedented downturn earlier this year, one more severe than that of the nation, and the region is still struggling to make up the ground that was lost. That is the key takeaway at an economic press briefing held today by the New York Fed examining economic conditions during the pandemic in the Federal Reserve’s Second District. Despite the substantial recovery so far, business activity, consumer spending, and employment are all still well below pre-pandemic levels in much of the region, and fiscal pressures are mounting for state and local governments. Importantly, job losses among lower-income workers and people of color have been particularly consequential. The pace of recovery was already slowing in the region before the most recent surge in coronavirus cases, and we are now seeing signs of renewed weakening as we enter the winter.
In our previous post, we looked at the effects that the reopening of state economies across the United States has had on consumer spending. We found a significant effect of reopening, especially regarding spending in restaurants and bars as well as in the healthcare sector. In this companion post, we focus specifically on small businesses, using two different sources of high-frequency data, and we employ a methodology similar to that of our previous post to study the effects of reopening on small business activity along various dimensions. Our results indicate that, much like for consumer spending, reopenings had positive and significant effects in the short term on small business revenues, the number of active merchants, and the number of employees working in small businesses. It is important to stress that we are not expressing any views in this post on the normative question of whether, when, or how states should loosen or tighten restrictions aimed at controlling the COVID-19 pandemic.
The Federal Reserve Bank of New York’s June business surveys show some signs of improvement in the regional economy. Following two months of unprecedented decline due to the coronavirus pandemic, indicators of business activity point to a slower pace of contraction in the service sector and signs of a rebound in the manufacturing sector. Even more encouraging, as the regional economy has begun to reopen, many businesses have started to recall workers who were laid off or put on furlough since the start of the pandemic. Some have even hired new workers. Moreover, businesses expect to recall even more workers over the next month. Looking ahead, firms have become increasingly optimistic that conditions will improve in the coming months.