The Mysterious Slowdown in U.S. Manufacturing Productivity
![Photo: assembly line with several men and women in blue overalls.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/07/LSE_2024_productivity_lashkari-pearce_460.jpg?w=920)
Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the manufacturing sector, which historically has been a leading sector in driving the productivity of the aggregate U.S. economy. What makes this slowdown particularly puzzling is the fact that manufacturing accounts for the majority of U.S. research and development (R&D) expenditure. Despite several recent studies (see, for example, Syverson [2016]), much remains to be uncovered about the nature of this slowdown. This post illustrates a key facet of the mystery: the productivity slowdown appears to be pervasive across industries and across firms of various sizes.
Deciphering the Disinflation Process
![Photo: stacked shipping containers with a few worked in hard hats walking along side.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/06/LSE_2024_disinflation_heise_460.jpg?w=920)
U.S. inflation surged in the early post-COVID period, driven by several economic shocks such as supply chain disruptions and labor supply constraints. Following its peak at 6.6 percent in September 2022, core consumer price index (CPI) inflation has come down rapidly over the last two years, falling to 3.6 percent recently. What explains the rapid shifts in U.S. inflation dynamics? In a recent paper, we show that the interaction between supply chain pressures and labor market tightness amplified the inflation surge in 2021. In this post, we argue that these same forces that drove the nonlinear rise in inflation have worked in reverse since late 2022, accelerating the disinflationary process. The current episode contrasts with periods where the economy was hit by shocks to either imported inputs or to labor alone.
Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves
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Global central banks and finance ministries held nearly $12 trillion of foreign exchange reserves as of the end of 2023, with nearly $7 trillion composed of U.S. dollar assets. Nevertheless, a narrative has emerged that an observed decline in the share of dollar assets in official reserve portfolios represents the leading edge of the dollar’s loss of status in the international monetary system. Some market participants have similarly linked the apparent increase in official demand for gold in recent years to a desire to diversify away from the U.S. dollar. Drawing on recent research and analytics, this post questions these narratives, arguing that these observed aggregate trends largely reflect the behavior of a small number of countries and do not represent a widespread effort by central banks to diversify away from dollars.
Do Exchange‑Traded Products Improve Bitcoin Trading?
![Decorative photo: Close-up financial trading chart on digital LCD display of BTC bitcoin.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_bitcoin-ETF_sarkar_460.jpg?w=920)
Spot bitcoin exchange-traded products (ETPs) began trading in the U.S. on January 11, 2024. For investors, these ETPs purport improved liquidity and price efficiency, and more convenient access to bitcoin trading compared to other means of trading bitcoin in spot markets. Proponents also cite bitcoin holdings as a portfolio diversification opportunity due to historically low correlation with traditional financial securities. Others argue that bitcoin remains a speculative asset and that ETPs increase its interconnections with the traditional financial system. In this post, we examine the initial performance, trading costs, and price efficiency of spot bitcoin ETPs in the U.S.
The Changing Landscape of Corporate Credit
![Photo: upward looking at tall glass skyscrapers that are corporate offices against a blue sky.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_landscape-corp-credit_elias_460.jpg?w=920)
Firms’ access to credit is a crucial determinant of their investment, employment, and overall growth decisions. While we usually think of their ability to borrow as determined by aggregate credit conditions, in reality firms have a number of markets where they can borrow, and conditions can vary across those markets. In this post, we investigate how the composition of debt instruments on U.S. firms’ balance sheets has evolved over the last twenty years.
Supply Chain Disruptions Have Eased, But Remain a Concern
![Photo: several yellow trucks backed into a loading dock](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_supply-chain-disruptions_deitz_460.jpg?w=920)
Supply chain disruptions became a major headache for businesses in the aftermath of the pandemic. Indeed, in October 2021, nearly all firms in our regional business surveys reported at least some difficulty obtaining the supplies they needed. These supply chain disruptions were a key contributor to the surge in inflation that occurred as the economy recovered from the pandemic recession. In this post, we present new measures of supply availability from our Business Leaders Survey and Empire State Manufacturing Survey that closely track the New York Fed’s Global Supply Chain Pressure Index (GSCPI). We will begin publishing these data on a monthly basis starting in June. These indexes indicate that supply availability had generally been improving since early 2023, but over the past couple of months, improvement has stalled. This trend is concerning since our May Supplemental Survey indicates that between a third and a half of businesses in the region are experiencing difficulties obtaining supplies, and many are reducing operations and raising prices to compensate, though to a lesser extent than a few years ago.
Delinquency Is Increasingly in the Cards for Maxed‑Out Borrowers
![Photo: man holding a wallet in one and a credit card in another with a bag next to him.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_utilization-blog_scally_460.jpg?w=920)
This morning, the New York Fed’s Center for Microeconomic Data released the Quarterly Report on Household Debt and Credit for the first quarter of 2024. Household debt balances grew by $184 billion over the previous quarter, slightly less than the moderate growth seen in the fourth quarter of 2023. Housing debt balances grew by $206 billion. Auto loans saw a $9 billion increase, continuing their steady growth since the second quarter of 2020, while balances on other non-housing debts fell. Credit card balances fell by $14 billion, which is typical for the first quarter. However, an increasing number of borrowers are behind on credit card payments. In this post, we explore the relationship between credit card delinquency and changes in credit card “utilization rates.”
The Post‑Pandemic Shift in Retirement Expectations in the U.S.
![Photo: woman riding her bike by the water. Text overlay 10 Years Measuring Consumer Behavior and Expectations](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_retirement-expectations_vanderklaauw_460a.jpg?w=920)
One of the most striking features of the labor market recovery following the pandemic recession has been the surge in quits from 2021 to mid-2023. This surge, often referred to as the Great Resignation, or the Great Reshuffle, was uncommonly large for an economic expansion. In this post, we call attention to a related labor market change that has not been previously highlighted—a persistent change in retirement expectations, with workers reporting much lower expectations of working full-time beyond ages 62 and 67. This decline is particularly notable for female workers and lower-income workers.
How Are They Now? A Checkup on Homeowners Who Experienced Foreclosure
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The end of the Great Recession marked the beginning of the longest economic expansion in U.S. history. The Great Recession, with its dramatic housing bust, led to a wave of home foreclosures as overleveraged borrowers found themselves unable to meet their payment obligations. In early 2009, the New York Fed’s Research Group launched the Consumer Credit Panel (CCP), a foundational data set of the Center for Microeconomic Data, to monitor the financial health of Americans as the economy recovered. The CCP, which is based on anonymized credit report data from Equifax, gives us an opportunity to track individuals during the period leading to the foreclosure, observe when a flag is added to their credit report and then—years later—removed. Here, we examine the longer-term impact of a foreclosure on borrowers’ credit scores and borrowing experiences: do they return to borrowing, or shy away from credit use and homeownership after their earlier bad experience?