How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?
In this post we analyze consumer beliefs about the duration of the economic impact of the pandemic and present new evidence on their expected spending, income, debt delinquency, and employment outcomes, conditional on different scenarios for the future path of the pandemic. We find that between June and August respondents to the New York Fed Survey of Consumer Expectations (SCE) have grown less optimistic about the pandemic’s economic consequences ending in the near future and also about the likelihood of feeling comfortable in crowded places within the next three months. Although labor market expectations of respondents differ considerably across fairly extreme scenarios for the evolution of the COVID pandemic, the difference in other economic outcomes across scenarios appear relatively moderate on average. There is, however, substantial heterogeneity in these economic outcomes and some vulnerable groups (for example, lower income, non-white) appear considerably more exposed to the evolution of the pandemic.
Delaying College During the Pandemic Can Be Costly
Many students are reconsidering their decision to go to college in the fall due to the coronavirus pandemic. Indeed, college enrollment is expected to be down sharply as a growing number of would-be college students consider taking a gap year. In part, this pullback reflects concerns about health and safety if colleges resume in-person classes, or missing out on the “college experience” if classes are held online. In addition, poor labor market prospects due to staggeringly high unemployment may be leading some to conclude that college is no longer worth it in this economic environment. In this post, we provide an economic perspective on going to college during the pandemic. Perhaps surprisingly, we find that the return to college actually increases, largely because the opportunity cost of attending school has declined. Furthermore, we show there are sizeable hidden costs to delaying college that erode the value of a college degree, even in the current economic environment. In fact, we estimate that taking a gap year reduces the return to college by a quarter and can cost tens of thousands of dollars in lost lifetime earnings.
Finally, Some Signs of Improvement in the Regional Economy
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.
Job Training Mismatch and the COVID‑19 Recovery: A Cautionary Note from the Great Recession
Displaced workers have been shown to endure persistent losses years beyond their initial job separation events. These losses are especially amplified during recessions. (1) One explanation for greater persistence in downturns relative to booms, is that firms and industries on the margin of structural change permanently shift the types of tasks and occupations demanded after a large negative shock (Aghion et al. (2005)), but these new occupations do not match the stock of human capital held by those currently displaced. In response to COVID-19, firms with products and services that complement social-distancing (like Amazon distribution centers) may continue hiring during and beyond the recovery, while workers displaced from higher risk industries with more stagnant demand (for example, airport personnel, local retail clerks) are left to adjust to unfamiliar job opportunities. As some industries reopen gradually while others remain stunted, what role might workforce development programs have in bridging the skill gap such that displaced workers are best prepared for this new reality of work?
U.S. Virgin Islands Struggle While Puerto Rico Rebounds
Almost two years after hurricanes Irma and Maria wreaked havoc on Puerto Rico and the U.S. Virgin Islands, the two territories’ economies have moved in very different directions. When the hurricanes struck, both were already in long economic slumps and had significant fiscal problems. As of mid-2019, however, Puerto Rico’s economy was showing considerable signs of improvement since the hurricanes, while the Virgin Islands’ economy remained mired in a deep slump through the end of 2018, though signs of a nascent recovery began emerging in early 2019. In this post, we assess the contrasting trends of these two economies since the hurricanes and attempt to explain the forces driving these trends.
Did the Value of a College Degree Decline during the Great Recession?
In an earlier post, we studied how educational attainment affects labor market outcomes and earnings inequality. In this post, we investigate whether these labor market effects were preserved across the last business cycle: Did students with certain types of educational attainment weather the recession better?
How Has Germany’s Economy Been Affected by the Recent Surge in Immigration?
Germany emerged as a leading destination for immigration around 2011, as the country’s labor market improved while unemployment climbed elsewhere in the European Union. A second wave began in 2015, with refugees from the Middle East adding to already heavy inflows from Eastern Europe. The demographic consequences of the surge in immigration include a renewed rise in Germany’s population and the stabilization of the country’s median age. The macroeconomic consequences are hard to measure but look promising, since per capita income growth has held up and unemployment has declined. Data on labor-market outcomes specific to immigrants are similarly favorable through 2015, but challenges are evident in how well the economy is adjusting to the second immigration wave.
Ten Years Later—Did QE Work?
By November 2008, the Global Financial Crisis, which originated in the residential housing market and the shadow banking system, had begun to turn into a major recession, spurring the Federal Open Market Committee (FOMC) to initiate what we now refer to as quantitative easing (QE). In this blog post, we draw upon the empirical findings of post-crisis academic research–including our own work–to shed light on the question: Did QE work?