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Do Consumers Rely More Heavily on Credit Cards While Unemployed?
Leading up to the Great Recession, households increased their credit card debt by over 16 percent ($121 billion) during the five-year period from 2004 to 2009. The unemployment rate simultaneously began to rise in 2008, increasing from 5.0 percent in January 2008 to a high of 10.0 percent in October of 2009. During the recovery, from 2009 to 2014, credit card debt fell by more than 25 percent, as the unemployment rate returned to near prerecession levels. These coincident developments have led to speculation that consumers facing unemployment or job uncertainty may have increased their ...
Report
Do consumers rely more heavily on credit cards while unemployed?
Leading up to the Great Recession, households increased their credit card debt by over 16 percent ($121 billion) during the five-year period from 2004 to 2009. The unemployment rate simultaneously began to rise in 2008, increasing from 5.0 percent in January 2008 to a high of 10.0 percent in October of 2009. During the recovery, from 2009 to 2014, credit card debt fell by more than 25 percent, as the unemployment rate returned to near prerecession levels. These coincident developments have led to speculation that consumers facing unemployment or job uncertainty may have increased their ...
Working Paper
Recent Employment Growth in Cities, Suburbs, and Rural Communities
This paper uses a comprehensive source of yearly data to study private-sector labor demand across US counties during the past five decades. Our focus is on how employment levels and earnings relate to population density—that is, how labor markets in rural areas, suburbs, and cities have fared relative to one another. Three broad lessons emerge. First, the longstanding suburbanization of employment and population in cities with very dense urban cores essentially stopped in the first decade of the 21st century. For cities with less dense cores, however, the decentralization of employment ...
Working Paper
Assessing the Change in Labor Market Conditions
This paper describes a dynamic factor model of 19 U.S. labor market indicators, covering the broad categories of unemployment and underemployment, employment, workweeks, wages, vacancies, hiring, layoffs, quits, and surveys of consumers? and businesses? perceptions. The resulting labor market conditions index (LMCI) is a useful tool for gauging the change in labor market conditions. In addition, the model provides a way to organize discussions of the signal value of different labor market indicators in situations when they might be sending diverse signals. The model takes the greatest signal ...
Working Paper
Estimating the Trend Unemployment Rate in the Fourth Federal Reserve District
We estimate trend unemployment rates for Ohio, Pennsylvania, Kentucky, and West Virginia, states that span parts of the Fourth District of the Federal Reserve System. Our estimated unemployment rate trend for the District as a whole stood at 5.7 percent in 2020:Q1 compared to a 4.7 percent observed unemployment rate within the District, implying a tight labor market by historical standards.
Working Paper
On the Importance of Household versus Firm Credit Frictions in the Great Recession
Although a credit tightening is commonly recognized as a key determinant of the Great Recession, to date, it is unclear whether a worsening of credit conditions faced by households or by firms was most responsible for the downturn. Some studies have suggested that the household-side credit channel is quantitatively the most important one. Many others contend that the firm-side channel played a crucial role. We propose a model in which both channels are present and explicitly formalized. Our analysis indicates that the household-side credit channel is quantitatively more relevant than the ...
Working Paper
Wage Adjustment in Efficient Long-Term Employment Relationships
We present a model in which efficient long-term employment relationships are sustained by wage adjustments prompted by shocks to idiosyncratic productivity and the arrival of outside job offers. In accordance with casual and formal evidence, these wage adjustments occur only sporadically, due to the presence of renegotiation costs. The model is amenable to analytical solution and yields new insights into a number of labor market phenomena, including: (1) key features of the empirical distributions of changes in pay among job stayers; (2) a property of near-“memorylessness” in wage ...
Working Paper
The Fatal Consequences of Brain Drain
We examine the welfare consequences of reallocating high-skilled labor across national borders. A labor demand shock in Norway—driven by a surge in oil prices—substantially increased physician wages and sharply raised the incentive for Swedish doctors to commute across the border. Leveraging linked administrative data across the two countries and a difference-in-differences design, we show that this shift doubled commuting rates and significantly reduced Sweden’s domestic physician supply. The result was a persistent rise in mortality in Sweden, with no corresponding health gains in ...
Working Paper
Factor Specificity and Real Rigidities
We develop a multisector model in which capital and labor are free to move across firms within each sector, but cannot move across sectors. To isolate the role of sectoral specificity, we compare our model with otherwise identical multisector economies with either economy-wide factor markets (as in Chari et al. 2000) or firm-specific factor markets (as in Woodford 2005). Sectoral specificity induces within-sector strategic substitutability and across-sector strategic complementarity in price setting. Our model can produce either more or less monetary non-neutrality than those other two ...
Working Paper
Unemployment Dynamics in the OECD
We provide a set of comparable estimates for the rates of inflow to and outflow from unemployment using publicly available data for fourteen OECD economies. We then devise a method to decompose changes in unemployment into contributions accounted for by changes in inflow and outflow rates for cases where unemployment deviates from its flow steady state, as it does in many countries. Our decomposition reveals that fluctuations in both inflow and outflow rates contribute substantially to unemployment variation within countries. For Anglo-Saxon economies we find approximately a 15:85 ...