Archive for the ‘Federal Reserve Board’ Category

In the Shadow of the Great Recession: Experiences and Perspectives of Young Workers

December 19, 2014 Comments off

In the Shadow of the Great Recession: Experiences and Perspectives of Young Workers (PDF)
Source: Federal Reserve Board

Young adults in the United States have experienced higher rates of unemployment and lower rates of labor force participation than the general population for at least two decades. The Great Recession exacerbated this phenomenon. Despite a substantial labor market recovery from 2009 through 2014, vulnerable populations—including the nation’s young adults—continue to experience higher rates of unemployment.

Meanwhile, changes in labor market conditions, including globalization and automation, have reduced the availability of well-paid, secure jobs for less-educated persons, particularly those jobs that provide opportunity for advancement. Furthermore, data suggest that young workers entering the labor market are affected by a long-running increase in the use of “contingent” work arrangements, characterized by contracted, part-time, temporary, and seasonal work.

In light of these trends, in 2013, the Federal Reserve Board’s Division of Consumer and Community Affairs began exploring the experiences and expectations of young Americans entering the labor market. Staff reviewed existing research and engaged external research and policy experts to identify the potential economic implications of these labor market trends on young workers.

This initial exploration raised several questions about the experiences of young workers that were not fully explained by existing data. In response, the Federal Reserve conducted a survey, the Survey of Young Workers, in December 2013 to develop a deeper understanding of the forces at play.

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Federal Reserve issues FOMC statement (December 17, 2014)

December 17, 2014 Comments off

Federal Reserve issues FOMC statement
Source: Federal Reserve Board

Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced. The Committee expects inflation to rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.

See also: Federal Reserve Board and Federal Open Market Committee release economic projections from the December 16-17 FOMC meeting

Student Loan Debt and Economic Outcomes

December 16, 2014 Comments off

Student Loan Debt and Economic Outcomes
Source: Federal Reserve Bank of Boston

This policy brief examines the impact of student loan debt on individuals’ homeownership status and wealth accumulation, employing a rich set of financial and demographic variables that are not available in many of the existing studies that use credit bureau data. It is important to understand whether and, if so, how student loan debt affects households’ economic decisions because student loan debt has now surpassed credit card debt to become the second largest amount of household debt outstanding after mortgage debt.

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) plans

December 11, 2014 Comments off

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) plans (PDF)
Source: Federal Reserve Board

This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven.

Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States

December 9, 2014 Comments off

Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States
Source: Federal Reserve Bank of Boston

Key Findings

+ A new payment technology like FPS could benefit participants in the payment system by reducing float, improving information flows, and helping to avoid late fees, for example. The FPS may also yield benefits beyond speeding up individual payments, including facilitating business-to-business payments, mobile payments, payment security, 24/7/365 availability, person-to-person payments, and/or faster international payments via standards such as ISO 20022.

+ The cost to U.K. banks of building, installing, and maintaining the British FPS was relatively modest. According to sources at the entity that operates the system’s infrastructure, it cost less than ₤200 million (0.014 percent of U.K. GDP, or $307 million) spread over seven years, plus investment costs borne by each participating bank to connect to the FPS, yielding an estimated maximum total cost of less than 0.06 percent of U.K. GDP in 2008.

+ U.K. decision-makers chose to build a new system to achieve their objective of faster payments rather than speeding up existing payment systems. A decision to separate the settlement stage from the authorization and clearing stages of the payment process and to allow banks to continue to settle three times daily via the Bank of England made it possible to build and implement the U.K. FPS so cost effectively. With this simplification, the cost of constructing a new payment network did not differ very much from the cost of enhancing an existing system.

Gains from Offshoring? Evidence from U.S. Microdata

December 1, 2014 Comments off

Gains from Offshoring? Evidence from U.S. Microdata (PDF)
Source: Federal Reserve Board

We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output (38.5 per cent) and capital (28.8 per cent) relative to their industry peers. We find no significant change in average wages or in total factor productivity measures for offshoring firms. These results are consistent across two separate difference-in-differences (DID) approaches, an instrumental variables approach, and a number of robustness checks. Thus, we find offshoring to be a strong substitute for domestic activity in this large sample of offshoring events.

Does Enforcement of Employee Noncompete Agreements Impede the Development of Industry Clusters?

November 28, 2014 Comments off

Does Enforcement of Employee Noncompete Agreements Impede the Development of Industry Clusters? (PDF)
Source: Federal Reserve Bank of Richmond

Employee noncompete agreements are widespread among technical workers and managers in technology companies. Policies regarding the enforcement of these agreements vary among states, however. The rise of the technology industry cluster in Silicon Valley and the car industry cluster in the Detroit region occurred during periods when California and Michigan courts did not enforce noncompete agreements. Research has sought to determine the extent to which enforcement of noncompetes may suppress the formation of industry clusters by restricting labor mobility and entrepreneurship.


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