Liberty Street Economics

Look for our next post on September 19.

August 24, 2022

How Much Did Supply Constraints Boost U.S. Inflation?

Julian di Giovanni

Photo: Man with COVID mask picking one of the last of the breads in the grocery aisle

What factors are behind the recent inflation surge has been a huge topic of debate amongst academics and policymakers. We know that pandemic-related supply constraints such as labor shortages and supply chain bottlenecks have been key factors pushing inflation higher. These bottlenecks started with the pandemic (lockdowns, sick workers) and were made worse by the push arising from increased demand caused by very expansionary fiscal and monetary policy. Our analysis of the relative importance of supply-side versus demand-side factors finds 60 percent of U.S. inflation over the 2019-21 period was due to the jump in demand for goods while 40 percent owed to supply-side issues that magnified the impact of this higher demand.

Posted at 7:00 am in Fiscal Policy, Inflation, Macroeconomics, Monetary Policy, Supply Chain | Permalink | Comments (3)

August 23, 2022

Pass‑Through of Wages and Import Prices Has Increased in the Post‑COVID Period

Mary Amiti, Sebastian Heise, Fatih Karahan, and Ayşegül Şahin

Photo: asian businesswoman holding a digital tablet working at a warehouse

Annual CPI inflation reached 9.1 percent in June 2022, the highest reading since November 1981. The broad-based nature of the recent inflation readings has increased concerns that inflation may run above the Federal Reserve’s target for a longer period than anticipated. In this post we use detailed industry-level data to examine two prominent cost-push-based explanations for high inflation: rising import prices and higher labor costs. We find that the pass-through of wages and input prices to the U.S. Producer Price Index has grown during the pandemic. Both the large changes in these costs and a higher pass-through into domestic prices have contributed toward higher inflation.

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

August 18, 2022

Remote Work Is Sticking

Jaison R. Abel, Jason Bram, and Richard Deitz

photo decorative: Businessman checking emails while on a video call from his home office

When the pandemic hit in early 2020, many businesses quickly and significantly expanded opportunities for their employees to work from home, resulting in a large increase in the share of work being done remotely. Now, more than two years later, how much work is being done from home? In this post, we update our analysis from last year on the extent of remote work in the region. As has been found by others, we find that some of the increase in remote work that began early in the pandemic is sticking. According to firms responding to our August regional business surveys, about 20 percent of all service work and 7 percent of manufacturing work is now being conducted remotely, well above shares before the pandemic, and firms expect little change in these shares a year from now. While responses were mixed, slightly more firms indicated that remote working had reduced rather than increased productivity. Interestingly, however, the rise in remote work has not led to widespread reductions in the amount of workspace being utilized by businesses in the region.

Posted at 7:00 am in Labor Market, Pandemic, Regional Analysis | Permalink | Comments (1)

August 17, 2022

The Disconnect between Productivity and Profits in U.S. Oil and Gas Extraction

Matthew Higgins and Thomas Klitgaard

U.S. oil and gas production boomed during the years leading up to the pandemic. From 2011 to 2019, oil production more than doubled and dry natural gas production rose by more than half. Remarkably, these gains occurred despite lackluster investment spending and hiring. Instead, higher production came largely from productivity gains, via wider adoption of fracking technologies. More recently, production recovered sluggishly from the pandemic downturn despite a quick recovery in prices. Our analysis in this post suggests that slower productivity growth and investors’ demand for higher returns have made U.S. firms willing to boost output only at a higher threshold oil price.

Posted at 7:00 am in Inflation, Macroeconomics | Permalink

August 9, 2022

Three Key Facts from the Center for Microeconomic Data’s 2022 Student Loan Update

Daniel Mangrum, Joelle Scally, and Crystal Wang

Photo: students in cap and gown graduation ceremony with dollars signs superimposed on the image.

Today, researchers from the Center for Microeconomic Data released the 2022 Student Loan Update, which contains statistics summarizing who holds student loans along with characteristics of these balances. To compute these statistics, we use the New York Fed Consumer Credit Panel (CCP), a nationally representative 5 percent sample of all U.S. adults with an Equifax credit report. For this update, we focus on individuals with a student loan on their credit report. The update is linked here and shared in the student debt section of the Center for Microeconomic Data’s website. In this post, we highlight three facts from the current student loan landscape.

Posted at 7:00 am in Household Finance, Pandemic, Student Loans | Permalink

August 4, 2022

Pandemic Wage Pressures

Gianluca Benigno and Serra Pelin

Woman cashier wearing a covid mask and shield checking out groceries for a man wearing a COVID mask who is paying at the counter behind a shield.

The recovery since the onset of the pandemic has been characterized by a tight labor market and rising nominal wage growth. In this post, we look at labor market conditions from a more granular, sectoral point of view focusing on data covering the nine major industries. This breakdown is motivated by the exceptionality of the pandemic episode, the way it has asymmetrically affected sectors of the economy, and by the possibility of exploiting sectoral heterogeneities to understand the drivers of recent labor market dynamics. We document that wage pressures are highest in the sectors with the largest employment shortfall relative to their pre-pandemic trend path, but that other factors explain most of the wage growth differentials. We suggest that one key factor is the extent of physical contact that has had to be compensated for by offering higher wages. One implication of our analysis is that, as COVID-related factors recede, sectoral imbalances could be restored from the supply side as employment recovers back toward the pre-pandemic trend.

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

August 2, 2022

Historically Low Delinquency Rates Coming to an End

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

Total household debt increased by $312 billion during the second quarter of 2022, and balances are now more than $2 trillion higher than they were in the fourth quarter of 2019, just before the COVID-19 pandemic recession, according to the Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. All debt types saw sizable increases, with the exception of student loans. Mortgage balances were the biggest driver of the overall increase, climbing $207 billion since the first quarter of 2022. Credit card balances saw a $46 billion increase since the previous quarter, reflecting rises in nominal consumption and an increased number of open credit card accounts. Auto loan balances rose by $33 billion. This analysis and the Quarterly Report on Household Debt and Credit use the New York Fed Consumer Credit Panel, based on credit data from Equifax.

Posted at 11:00 am in Household Finance | Permalink | Comments (1)

July 29, 2022

The Transatlantic Economy Policy Responses to the Pandemic and the Road to Recovery Conference

Moreno Bertoldi, Paolo Pesenti, and Hélène Rey

Photo: transatlantic economy conference speakers images compiled on background.

The Federal Reserve Bank of New York, the European Commission, and the Center for Economic and Policy Research (CEPR) jointly organized the conference “Transatlantic Economic Policy Responses to the Pandemic and the Road to Recovery,” on November 18, 2021. The conference brought together U.S. and European-based policymakers and economists from academia, think tanks, and international financial institutions to discuss issues that transatlantic policymakers are facing. The conference was held before the Russian invasion of Ukraine and the global monetary tightening. Still, its medium to long-term focus provides interesting insights on economic policy challenges ahead.

Posted at 7:00 am in Euro Area, International Economics, Macroeconomics, Pandemic | Permalink

July 14, 2022

The Bond Market Selloff in Historical Perspective

Tobias Adrian and Michael Fleming

photo: The US Treasury building in Washington DC

Treasury yields have risen sharply in recent months. The yield on the most recently issued ten-year note, for example, rose from 1.73 percent on March 4 to 3.48 percent on June 14, reaching its highest level since April 2011. Increasing yields result in realized or mark-to-market losses for fixed-income investors. In this post, we put these losses in historical perspective and investigate whether longer-term yield changes are better explained by expectations of higher short-term rates or by investors demanding greater compensation for holding Treasury securities.

Posted at 7:00 am in Financial Institutions, Financial Markets, Inflation | Permalink | Comments (1)

July 13, 2022

Do Corporate Profits Increase When Inflation Increases?

Mathias Andler and Anna Kovner

When inflation is high, companies may raise prices to keep up. However, market watchers and journalists have wondered if corporations have taken advantage of high inflation to increase corporate profits. We look at this question through the lens of public companies, finding that in general, increased prices in an industry are often associated with increasing corporate profits. However the current relationship between inflation and profit growth is not unusual in the historical context.

Posted at 7:00 am in Corporate Finance, Inflation | Permalink | Comments (2)

Markets & Policy Implementation

Liberty Street Economics

How Much Did Supply Constraints Boost U.S. Inflation?

Pass‑Through of Wages and Import Prices Has Increased in the Post‑COVID Period

Remote Work Is Sticking

The Disconnect between Productivity and Profits in U.S. Oil and Gas Extraction

Three Key Facts from the Center for Microeconomic Data’s 2022 Student Loan Update

Pandemic Wage Pressures

Historically Low Delinquency Rates Coming to an End

The Transatlantic Economy Policy Responses to the Pandemic and the Road to Recovery Conference

The Bond Market Selloff in Historical Perspective

Do Corporate Profits Increase When Inflation Increases?

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