Liberty Street Economics

Look for our next post on August 5.

June 2, 2025

How Much Does Immigration Data Explain the Employment‑Gap Puzzle?

Richard Audoly and Roshie Xing

Photo: Immigrant cook working alone in a kitchen

A puzzling feature of official U.S. employment statistics in recent years has been the increase in the gap between the nonfarm payroll and household employment numbers. This discrepancy is not trivial. From the end of 2021 though the end of 2024, net job gains in the payroll survey were 3.6 million larger than in the household survey. In this Liberty Street Economics post, we investigate one potential explanation for the emergence of this gap: a sharp rise in undocumented immigration during the post-COVID period that would be differentially reflected in the two surveys. We leverage industry-level data to study the relationship between our estimate of employment of likely undocumented migrants and the payroll-household employment gap. These data suggest that factors besides undocumented immigration likely contributed to the emergence of the gap between the two measures of U.S. employment.

Posted at 7:00 am in Employment, Labor Market | Permalink

May 29, 2025

How Uncertain Is the Estimated Probability of a Future Recession?

Richard Crump and Nikolay Gospodinov

Decorative Photo: Conceptual image of a directional sign with arrow in all directions and one red one standing out from the rest

Since World War II, the U.S. economy has experienced twelve recessions—one every sixty-four months, on average. Though infrequent, these contractions can cause considerable pain and disruption, with the unemployment rate rising by at least 2.5 percentage points in each of the past four recessions. Given the consequences of an economic downturn, businesses and households are perennially interested in the near-term probability of a recession. In this post, we describe our research on a related issue: how much uncertainty is there around recession probability estimates from economic models?

Posted at 7:00 am in Macroeconomics | Permalink

May 28, 2025

Who’s Paying Those Overdraft Fees?

Gabriel Leonard, Donald Morgan, and Wilbert van der Klaauw

Personal social credit score. Machine Learning analytics identify person technology,Artificial intelligence no privacy security camera technology concept. Software ui analytics and recognition people.

One criticism of overdraft credit is that the fees seem borne disproportionately by low-income, Black, and Hispanic households. To investigate this concern, we surveyed around 1,000 households about their overdraft activity. Like critics, we find that these groups do tend to overdraft more often. However, when we control for respondents’ credit scores along with their socioeconomic characteristics, we discover that only their credit score predicts overdraft activity. While it’s not altogether surprising that credit constrained households overdrew more often, it’s noteworthy that socioeconomic characteristics did not help in predicting overdrafts. This more textured picture of overdraft activity helps inform the ongoing debate about overdraft credit and its users.

Posted at 7:00 am in Banks, Credit, Household Finance | Permalink

May 21, 2025

Nonbanks and Banks: Alone or Together?

Nicola Cetorelli, Gonzalo Cisternas, and Asani Sarkar

Nonbank financial institutions (NBFIs) constitute a variety of entities—fintech companies, mutual funds, hedge funds, insurance companies, private debt providers, special purpose vehicles, among others—that have become important providers of financial intermediation services worldwide. But what is the essence of nonbank financial intermediation? Does it have any inherent advantages, and how does it interact with that performed by banks? In this Liberty Street Economics post, which is based on our recent staff report, we provide a model-based survey of recent literature on nonbank intermediation, with an emphasis on how it competes, or cooperates, with traditional banks.

Posted at 7:00 am in Banks, Nonbank (NBFI) | Permalink

May 20, 2025

Why Does the U.S. Always Run a Trade Deficit?

Thomas Klitgaard

Photo: Shipping container in the middle of the ocean.

The obvious answer to the question of why the United States runs a trade deficit is that its export sales have not kept up with its demand for imports. A less obvious answer is that the imbalance reflects a macroeconomic phenomenon. Using national accounting, one can show deficits are also due to a persistent shortfall in domestic saving that requires funds from abroad to finance domestic investment spending. Reducing the trade imbalance therefore requires both more exports relative to imports and a narrowing of the gap between saving and investment spending.

Posted at 7:00 am in International Economics | Permalink

May 15, 2025

The College Economy: Educational Differences in Labor Market Outcomes

Rajashri Chakrabarti, Thu Pham, Beckett Pierce, and Maxim Pinkovskiy

Photo: Split screen of Two women working, the first is a Housekeeper cleaning a hotel room. The second is thinking, laptop and typing businesswoman, bank consultant or working on research report, project or solution. Computer, administration analysis and professional person reading online account data.

It is intuitive that workers with higher levels of education tend to earn more than workers with less education. However, it is also true that workers with more education are much more likely to be employed, and this employment advantage of education has, if anything, grown in recent years. In this post, we document profound differences in labor market outcomes by educational attainment. Drawing on the Economic Heterogeneity Indicators, we find that the gap in employment rates between workers who have completed college and workers who have not is 12 percentage points—which is larger than the employment gaps between workers of different races/ethnicities or between men and women—and is wider than the pre-pandemic gap. Moreover, most of this gap and its recent movements are driven by differences in labor force participation rates rather than by differences in unemployment rates. Fostering higher labor force participation of workers without a college degree thus would be quite helpful in promoting maximum employment.

Posted at 7:00 am in Education, Employment, Labor Market | Permalink

May 13, 2025

Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble

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

This morning, the Center for Microeconomic Data at the New York Fed released the Quarterly Report on Household Debt and Credit updated through the first quarter of 2025. Over the first quarter, overall household debt rose by $167 billion. An increase of $199 billion in mortgage balances and modest increases in home equity lines of credit (HELOC) and student loans were offset by declines in auto loans and credit card debt of $13 billion and $29 billion, respectively. The decline in credit card balances is a typical seasonal pattern associated with consumers paying down holiday spending from the fourth quarter, but the auto loan decline was atypical, the first such decline since the third quarter of 2020. The rates at which auto loans and credit cards became seriously delinquent improved slightly, while mortgage and HELOC transition rates edged up but remained low. However, the delinquency rate for student loans stands out: it surged from below 1 percent to nearly 8 percent, as the pause on reporting delinquent federal student loans ended. In this post, we focus on student loan delinquency, including which borrowers are past due and what it might mean for their access to credit.

Posted at 11:00 am in Credit, Education, Student Loans | Permalink | Comments (2)

May 12, 2025

Who Finances Real Sector Lenders?

Nina Boyarchenko, Hyuntae Choi, and Leonardo Elias

Decorative Image: Internet Banking Technology concept

The modern financial system is complex, with funding flowing not just from the financial sector to the real sector but within the financial sector through an intricate network of financial claims. While much of our work focuses on understanding the end result of these flows—credit provided to the real sector—we explore in this post how accounting for interlinkages across the financial sector changes our perception of who finances credit to the real sector.

Posted at 7:00 am in Banks, Credit, Nonbank (NBFI) | Permalink

April 24, 2025

Gauging the Strength of China’s Economy in Uncertain Times

Jeffrey B. Dawson and Hunter L. Clark

People walking on Nanjing Road, Shanghai, China

Amid increasing pressure on the Chinese economy from China’s trade conflict with the U.S., assessing the strength of the Chinese economy will be an important watch point. In this post, we provide an update on China’s recent economic performance and policy changes. While China is likely to counter growth headwinds from the escalating trade tensions with additional policy stimulus, the country’s complex fiscal dynamics and the varying interpretations of the strength of its economic growth made judgments of the efficacy of China’s policy response challenging even in a more predictable environment. In this respect, we argue that aggregate credit is a simple and effective measure to gauge policy stimulus in China. At present, China’s “credit impulse”—the change in the flow of new aggregate credit to the economy relative to GDP—appears likely sufficient to allow it to muddle through with steady but not strong growth over the next year despite the intensifying trade conflict.

Posted at 7:00 am in International Economics, Tariffs | Permalink

April 23, 2025

Stablecoins and Crypto Shocks: An Update

Kenechukwu Anadu, Pablo D. Azar, Marco Cipriani, Thomas M. Eisenbach, Catherine Huang, Mattia Landoni, Gabriele La Spada, Marco Macchiavelli, Antoine Malfroy-Camine, and J. Christina Wang

Photo of USD Coin price ticker with up arrows on +2.6% 22.4.

Stablecoins are crypto assets whose value is pegged to that of a fiat currency, usually the U.S. dollar. In our first Liberty Street Economics post, we described the rapid growth of stablecoins, the different types of stablecoin arrangements, and the May 2022 run on TerraUSD, the fourth largest stablecoin at the time. In a subsequent post, we estimated the impact of large declines in the price of bitcoin on cumulative net flows into stablecoins and showed the existence of flight-to-safety dynamics similar to those observed in money market mutual funds during periods of stress. In this post, we document the growth of stablecoins since 2019, including the evolution of the reported collateral backing major stablecoins. Then, we estimate the impact on the stablecoin industry of large bitcoin price increases that occurred between 2021 and 2025.

Posted at 7:00 am in Cryptocurrencies, Financial Markets | Permalink

Markets & Policy Implementation

Liberty Street Economics

How Much Does Immigration Data Explain the Employment‑Gap Puzzle?

How Uncertain Is the Estimated Probability of a Future Recession?

Who’s Paying Those Overdraft Fees?

Nonbanks and Banks: Alone or Together?

Why Does the U.S. Always Run a Trade Deficit?

The College Economy: Educational Differences in Labor Market Outcomes

Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble

Who Finances Real Sector Lenders?

Gauging the Strength of China’s Economy in Uncertain Times

Stablecoins and Crypto Shocks: An Update

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