Editor’s note: The DFA data upon which this post was based show a decline in the aggregate real wealth of Black households after 2019, as reported here. The authors are currently reviewing the data to determine whether a similar pattern exists for the typical Black household. (March 1, 3:47 pm)
Wealth is unevenly distributed across racial and ethnic groups in the United States. In this first post in a two-part series on wealth inequality, we use the Distributional Financial Accounts (DFA) to document these disparities between Black, Hispanic, and white households from the first quarter of 2019 to the third quarter of 2023 for wealth and a variety of asset and liability categories. We find that these disparities have been exacerbated since the pandemic, likely due to rapid growth in the financial assets more often held by white individuals.
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?
The enormous increase in remote work that occurred during the pandemic was a response to a temporary public health crisis. Now that the pandemic has passed, just how much remote work will persist and how much are businesses comfortable with? Results from our August regional business surveys indicate that more than 20 percent of all service work and 4 percent of all manufacturing work is currently being done remotely, nearly identical to what was reported a year ago, and this amount of remote work is expected to persist in the year ahead. However, on average, service sector businesses would prefer that about 15 percent of work be done remotely. Indeed, nearly a quarter of service firms have increased requirements for employees to work on-site over the past year and about one in six plan to make further adjustments toward in-person work next year. Ultimately, the degree and persistence of remote work will largely depend on the tightness of the labor market, as businesses report that while remote work does have its downsides, it has been particularly helpful for attracting and retaining workers.
Daily investment at the Federal Reserve’s Overnight Reverse Repo (ON RRP) facility increased from a few billion dollars in March 2021 to more than $2.3 trillion in June 2022 and has stayed above $2 trillion since then. In this post, which is based on a recent staff report, we discuss two channels—a deposit channel and a wholesale short-term debt channel—through which banks’ balance-sheet costs have increased investment by money market mutual funds (MMFs) in the ON RRP facility.
Non-bank financial institutions (NBFIs) have grown steadily over the last two decades, becoming important providers of financial intermediation services. As NBFIs naturally interact with banking institutions in many markets and provide a wide range of services, banks may develop significant direct exposures stemming from these counterparty relationships. However, banks may be also exposed to NBFIs indirectly, simply by virtue of commonality in asset holdings. This post and its companion piece focus on this indirect form of exposure and propose ways to identify and quantify such vulnerabilities.
Settlement fails in corporate securities increased sharply in 2022, reaching levels not seen since the 2007-09 financial crisis. As a fraction of trading volume, fails that involve primary dealers reached an all-time high in the week of March 23, 2022. In this post, we investigate the 2022 spike in settlement fails for corporate securities and discuss potential drivers for this increase, including trading volume, corporate issuance, fails in bond ETFs, and operational problems.
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.
In the United States, most commercial and industrial (C&I) lending takes the form of revolving lines of credit, known as revolvers or credit lines. For decades, like other U.S. C&I loans, credit lines were typically indexed to the London Interbank Offered Rate (LIBOR). However, since 2022, the U.S. and other developed-market economies have transitioned from credit-sensitive reference rates such as LIBOR to new risk-free rates, including the Secured Overnight Financing Rate (SOFR). This post, based on a recent New York Fed Staff Report, explores how the provision of revolving credit is likely to change as a result of the transition to a new reference rate.
During the height of the COVID-19 pandemic, the Federal Reserve placed restrictions on large banks’ dividends and share repurchases. These restrictions were intended to enhance banks’ resiliency by bolstering their capital in light of the very uncertain economic environment and concerns that banks might face very large losses should bad-case scenarios come to pass. When it became clear that the outlook had improved and that the losses banks experienced were unlikely to threaten their stability, the Federal Reserve removed these restrictions. In this post, we look at what happened to large banks’ dividends and share repurchases during and after the pandemic-era restrictions, tracking these shareholder payouts relative to bank profits to understand how these payments impacted large banks’ capital during this period.
The Federal Reserve Bank of New York’s November 2022 SCE Labor Market Survey shows a rise in the average reservation wage—the lowest wage respondents would be willing to accept for a new job—to $73,667, its highest level since the series began in 2014. Respondents’ satisfaction with wage compensation, non-wage benefits, and promotion opportunities at their current job all improved in November compared to July. Regarding expectations, the average expected wage offer (conditional on receiving one) also increased and reached a new high.