An Update on the Reservation Wages in the SCE Labor Market Survey
![](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/08/LSE_2024_SCE-reservation-wage_kosar_460.jpg?w=920)
The Federal Reserve Bank of New York’s July 2024 SCE Labor Market Survey shows a year-over-year increase in the average reservation wage—the lowest wage respondents would be willing to accept for a new job—to $81,147, but a decline from a series’ high of $81,822 in March 2024. In this post, we investigate how the recent dynamics of reservation wages differed across individuals and how reservation wages are related to individuals’ expectations about their future labor market movements.
How Large Are Inflation Revisions? The Difficulty of Monitoring Prices in Real Time
![decorative: us dollar folded into a question mark with penny as the dot at the bottom on a turquoise background.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/09/LSE_2023_inflation-revision_audoly_460.jpg?w=920)
With prices quickly going up after the COVID-19 pandemic, inflation releases have rarely been as present in the public debate as in recent years. However, since inflation estimates are frequently revised, how precise are the real-time data releases? In this Liberty Street Economics post, we investigate the size and nature of revisions to inflation. We find that inflation estimates for a given month can change substantially as subsequent data vintages are released. As an example, consider March 2009. With the economy contracting amid the Global Financial Crisis, the twelve-month inflation rate for personal consumption expenditures (PCE) excluding food and energy dropped from an initial estimate of 1.8 percent to 0.8 percent in the current series. The difference is dramatic and points to the difficulty of monitoring inflation in real time. Our results suggest that there is significant uncertainty in measuring inflation, and the key features of the recent spike and subsequent moderation of inflation may look quite different in hindsight once further revisions have taken place.
Not Just “Stimulus” Checks: The Marginal Propensity to Repay Debt
![Decorative image: Man holding a piece of paper working on a calculator.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/06/LSE_2023_stimulus_melcangi_460.jpg?w=920)
Households frequently use stimulus checks to pay down existing debt. In this post, we discuss the empirical evidence on this marginal propensity to repay debt (MPRD), and we present new findings using the Survey of Consumer Expectations. We find that households with low net wealth-to-income ratios were more prone to use transfers from the CARES Act of March 2020 to pay down debt. We then show that standard models of consumption-saving behavior can be made consistent with these empirical findings if borrowers’ interest rates rise with debt. Our model suggests that fiscal policy may face a trade-off between increasing aggregate consumption today and assisting those with the largest debt balances.
A Turning Point in Wage Growth?
![](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/02/LSE_2023_wage-inflation_almuzara_460.jpg?w=920)
The surge in wage growth experienced by the U.S. economy over the past two years is showing some tentative signs of moderation. In this post, we take a closer look at the underlying data by estimating a model designed to isolate the persistent component—or trend—of wage growth. Our central finding is that this trend may have peaked in early 2022, having experienced an earlier rise and subsequent moderation that were broad-based across sectors. We also find that wage growth seems to be moderating more slowly than the trend in services inflation.
What Have Workers Done with the Time Freed up by Commuting Less?
![](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2022/10/LSE_2022_commute-time_melcangi_460.jpg?w=920)
The COVID-19 pandemic has dramatically changed the way Americans spend their time. One of the most enduring shifts has occurred in the workplace, with millions of employees making the switch to work from home. Even as the pandemic has waned, more than 15 percent of full-time employees remain fully remote and an additional 30 percent work in hybrid arrangements (Barrero, Bloom, and Davis). These changes have substantially reduced time spent commuting to work; in the aggregate, Americans now spend 60 million fewer hours traveling to work each day. In this post, we investigate how people spend this saved time on other activities. Using detailed data from the American Time Use Survey (ATUS), we find that employed individuals allocate their saved commute time toward leisure activities and sleeping, while reducing overall work hours.
Who’s Ready to Spend? Constrained Consumption across the Income Distribution
![](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2021/05/6a01348793456c970c0282e101d344200b-500wi.jpg?w=500)
Spending on goods and services that were constrained during the pandemic is expected to grow at a fast pace as the economy reopens. In this post, we look at detailed spending data to track which consumption categories were the most constrained by the pandemic due to social distancing. We find that, in 2019, high-income households typically spent relatively more on these pandemic-constrained goods and services. Our findings suggest that these consumers may have strongly reduced consumption during the pandemic and will likely play a crucial role in unleashing pent-up demand when pandemic restrictions ease.
Many Small Businesses in the Services Sector Are Unlikely to Reopen
![](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2021/05/6a01348793456c970c02788027a0e8200d-500wi.jpg?w=500)
The services sector was hit hard during the COVID-19 pandemic. Small businesses were particularly affected, and many of them were forced to close. We examine the state of these firms using micro data from Homebase (HB), a scheduling and time tracking tool that is used by around 100,000 businesses, mostly small firms, in the leisure and hospitality and retail industries. The data reveal that 35 percent of businesses that were active prior to the pandemic are still closed and that most have been inactive for twenty weeks or longer. We estimate that each additional week of being closed reduces the probability that a business reopens by 2 percentage points. Moreover, an additional week of business closure lowers the share of workers that are rehired at reopening. Our estimates imply that only about 4 percent of the workers that are still laid off from the currently closed businesses will eventually be rehired.