Did the Value of a College Degree Decline during the Great Recession?
The authors have previously explored the impact of choices regarding school and major on employment, earnings, and upward economic mobility. In this post they extend their work with an investigation into whether these labor market effects were preserved across the last business cycle: Did students with certain types of educational attainment weather the recession better?
Metro Business Cycles
We construct monthly economic activity indices for the 50 largest U.S. metropolitan statistical areas (MSAs) beginning in 1990. Each index is derived from a dynamic factor model based on twelve underlying variables capturing various aspects of metro area economic activity. To accommodate mixed-frequency data and differences in data-publication lags, we estimate the dynamic factor model using a maximum- likelihood approach that allows for arbitrary patterns of missing data. Our indices highlight important similarities and differences in business cycles across MSAs. While a number of MSAs ...
Hot Money Credits to Kick-Start a Stalled Economy?
Stimulus checks that must be spent within a certain amount of time could help trigger spending if the economy continues to stall.
Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?
It is a remarkable fact about the historical US business cycle that, after unemployment reached its peak in a recession, and a recovery began, the annual reduction in the unemployment rate was stable at around 0.55 percentage points per year. The economy seems to have had an irresistible force toward restoring full employment. There was high variation in monetary and fiscal policy, and in productivity and labor-force growth, but little variation in the rate of decline of unemployment. We explore models of the labor market's self-recovery that imply gradual working off of unemployment ...
Social Distancing and Supply Disruptions in a Pandemic
Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and the economic cost they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced ...
Machine Learning, the Treasury Yield Curve and Recession Forecasting
We use machine learning methods to examine the power of Treasury term spreads and other financial market and macroeconomic variables to forecast US recessions, vis-à-vis probit regression. In particular we propose a novel strategy for conducting cross-validation on classifiers trained with macro/financial panel data of low frequency and compare the results to those obtained from standard k-folds cross-validation. Consistent with the existing literature we find that, in the time series setting, forecast accuracy estimates derived from k-folds are biased optimistically, and cross-validation ...
The Great Recession and a Missing Generation of Exporters
The collapse of international trade surrounding the Great Recession has garnered significant attention. This paper studies firm entry and exit in foreign markets and their role in the post-recession recovery of U.S. exports using confidential microdata from the U.S. Census Bureau. We find that incumbent exporters account for the vast majority of the decline in export volumes during the crisis. The recession also induced a missing generation of exporters, with large increases in exits and a substantial decline in entries into foreign markets. New exporters during these years tended to have ...
The Rise of US Earnings Inequality: Does the Cycle Drive the Trend?
We document that declining hours worked are the primary driver of widening inequality in the bottom half of the male labor earnings distribution in the United States over the past 52 years. This decline in hours is heavily concentrated in recessions: hours and earnings at the bottom fall sharply in recessions and do not fully recover in subsequent expansions. Motivated by this evidence, we build a structural model to explore the possibility that recessions cause persistent increases in inequality; that is, that the cycle drives the trend. The model features skill-biased technical change, ...
Discretionary Services Expenditures in This Business Cycle
The pronounced weakness in personal consumption expenditures (PCE) for services has been an unusual feature of the 2007-09 recession and the slow recovery from it. Even in 2010:Q4, when real PCE increased at a relatively robust 4.1 percent annual rate, real PCE on services rose at only a 1.4 percent rate. This weakness has been especially evident in “discretionary” services (to be defined below), which fell more in the recent recession than in previous recessions and since have rebounded more sluggishly. In this post, I suggest that the continued sluggishness in these expenditures lends a ...
Fiscal Stimulus and Consumer Debt
In the aftermath of consumer debt-induced recession, policymakers have questioned whether fiscal stimulus is effective during the periods of high consumer indebtedness. This study empirically investigates this question. Using detailed data on Department of Defense spending for the 2006-2009 period, we document that the open-economy relative fiscal multiplier is higher in geographies with higher consumer indebtedness. The results suggest that fiscal policy can mitigate the adverse effect of consumer (over)leverage on real economic output during a recession. We then exploit detailed microdata ...