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Allison Schrager: Scrap the Dot Plot
Posted: February 2, 2024 at 01:32 PM (Friday)

The Fed should stop publishing its projections of future interest rates, which prove only that the economy is unpredictable—and undermine the central bank’s credibility. After each Federal Reserve meeting, market analysts, desperate to divine future monetary policy, scrutinize every aspect of the central bank's public statements–including its ...


Allison Schrager: Markets Don’t Know What to Expect Anymore, and That’s Good
Posted: February 2, 2024 at 07:00 AM (Friday)

A greater diversity of economic forecasts can lead to a richer discussion and help expose previously unseen risks and weaknesses. When it comes to financial markets, nothing is certain. For much of the last few decades, however, it was easy to convince yourself otherwise: Interest rates mostly went in one direction, down, and high inflation was ...


Allison Schrager: The Virtue Economy Is Over
Posted: January 16, 2024 at 06:00 AM (Tuesday)

The DEI and ESG movements are well-intentioned, but executing on the vision has always been a problem. The virtue bubble has not only peaked; it is starting to deflate.For the last few years, the ESG movement has affected both how people invest and what they buy. Now the acronym (it stands for environmental, social and governance) is becoming ...


Allison Schrager: 2024 Will Mark the End of the Post-Pandemic Economy
Posted: January 2, 2024 at 06:30 AM (Tuesday)

The trade-off between bringing down inflation and harming growth will come back with a vengeance. Economists did not believe it was possible, but they’ve been wrong a lot lately, and in their defense it has only ever happened once (or maybe twice) before: We may be witnessing that rare achievement known as a soft landing. The US Federal ...


Allison Schrager: Generation Z Is Getting a Bad Deal on Housing
Posted: December 14, 2023 at 06:30 AM (Thursday)

Cheap mortgages over the last decade have enabled millions of millennials to buy homes, but it’s harder for younger buyers. Becoming a financially secure adult is hard. Establishing yourself in your career, securing a home, starting a family … it’s a struggle as old as the modern economy, maybe even civilization itself. As is the lament of ...


Allison Schrager: Constitutional or Not, Wealth Taxes Are Bad Economics
Posted: December 6, 2023 at 06:00 AM (Wednesday)

A Supreme Court case about unrealized capital gains has implications for Biden’s proposed tax on the very wealthy. The US Supreme Court heard arguments on Tuesday over a dispute over a $14,279 tax bill — and the slightly more consequential question of what counts as income under the federal tax code, a definition the Biden administration ...


Allison Schrager: The Unshakeable Investor
Posted: November 29, 2023 at 03:44 PM (Wednesday)

In an industry of fads and algorithms, Charlie Munger never lost faith in a fundamental approach: buy good companies at a good price. Charlie Munger had an extraordinary life. He lived 99 years, had a way with language, fathered nine children, and made a fortune. But he's best known for being one of the finest investors of his generation. ...


Allison Schrager: Inflation Could Come Back When You Least Expect It
Posted: November 21, 2023 at 06:00 AM (Tuesday)

Expectations for gains in consumer prices are moderating, but there is a lot of anxiety among households. The latest inflation report, showing that price increases slowed in October, suggests that the US just might get the “immaculate disinflation” that everyone is hoping for: Inflation will fall to its pre-pandemic levels and remain there, ...


Allison Schrager: Consumer Spending Resilience Weakens
Posted: November 14, 2023 at 01:00 PM (Tuesday)

The American consumer demonstrated a shocking resilience the last few years. They just kept spending even as rates increased, and inflation returned. But signs of weakness are appearing. This figure from the New York Fed shows credit card delinquencies are up compared to pre-pandemic levels. They are highest for lower earners, but even top ...


Allison Schrager: What Is the Goal of the 60/40 Portfolio?
Posted: November 10, 2023 at 06:00 AM (Friday)

No one can agree whether the main purpose is to diversify or to reduce risk — and they aren’t quite the same thing. I am not a fan of one-size-fits-all financial strategies. Yes, I see the value of making investment as simple as possible, but the right balance of risk and reward is a personal decision, and the most common strategies are ...


Allison Schrager: Republicans Are Not Bad for Your Health
Posted: November 6, 2023 at 01:29 PM (Monday)

Economists claim that America has a lower life expectancy than other countries because of the GOP. According to economists Anne Case and Angus Deaton, voting Republican will kill you. In September, Case and Deaton released their findings at the Brookings Institution that life expectancy has plummeted for all Americans since the ...


Allison Schrager: The Tech Gold Rush Is Over. Where’s the Next One?
Posted: November 3, 2023 at 07:00 AM (Friday)

Ambitious young people in search of their fortune once went into finance, then they tried tech, and now they’re looking for a new industry. I remember the exact moment in 2007 when I knew the financial industry was headed for a reckoning. There was no data point that tipped me off, no great insight about the housing market. It was a ...


Allison Schrager: The Rise of the Shorter Workweek
Posted: October 30, 2023 at 08:08 PM (Monday)

Despite reports that people have never worked harder, data reveals that people in America and Europe have been working fewer hours per week since the 1960s. It may be technology, the move to services, or just richer societies that can afford to consume more leisure. This figure from The Wall Street Journal shows that working hours fell even ...


Allison Schrager: Why No Recession Yet? Thank the US Consumer
Posted: October 27, 2023 at 06:30 AM (Friday)

The question isn’t whether Americans will eventually cut back on their spending, but whether they’ll cause a recession when they do. The US economy is being kept afloat with lawnmowers, cars and vacations. US consumers have kept buying these things despite high inflation and the contractionary policy of the Federal Reserve, and they deserve ...


Allison Schrager: Fed Survey Shows Widened Inequality as Stock and Home Prices Rise
Posted: October 23, 2023 at 02:15 PM (Monday)

Last week, The Fed released its tri-annual Survey of Consumer Finances, a survey that offers a detailed look into American household finances. It shows that contrary to many reports, many households are struggling especially with inflation. This figure is the value of financial assets by income group. Despite stimulus checks and being stuck ...


Allison Schrager: Indebted By Nature
Posted: October 13, 2023 at 04:29 PM (Friday)

The arguments made by advocates of “climate swaps” don’t add up. This month, the Environmental, Social, and Governance investing movement got a hard reality check about one of its favorite financial tools. Known as debt-for-nature or climate swaps, that tool played a role in a recent coup in Gabon. The coup took place just a week after ...


Allison Schrager: The US Economy Is Dynamic Again, But Will It Last?
Posted: October 13, 2023 at 06:00 AM (Friday)

Americans are forming new businesses at an impressive rate, but it's hard to say how durable these startups will be. “I am begging for assistants!” my hairdresser complained when I last saw her. As an economist, I immediately made a note to myself: I need to check the latest numbers on business formation.As it turns out, they are way up since ...


Allison Schrager: Three Myths About the Bond Market
Posted: October 5, 2023 at 05:30 AM (Thursday)

The era of declining interest rates may have come to an end, and many investors don’t seem to realize it. For the last 40 years, interest rates have gone pretty much one way: down. In the last 18 months, however, rates have crept up, and many are worried they will stay high. In other words: Reality is catching up with the bond market — and ...


Allison Schrager: Flying Is Less Rewarding, But I Still Want My Points
Posted: September 28, 2023 at 12:00 PM (Thursday)

Changes are coming to airline and credit card rewards programs, but the quest for higher status is still worth it. My name is Allison, and I am a points addict. I plan trips based the flight schedule of my preferred airline. I regularly check my balance. I read all the blogs. I have a complex credit card strategy.I love it, and not just because ...


Allison Schrager: Private Equity Won’t Diversify Your Portfolio
Posted: September 22, 2023 at 06:00 AM (Friday)

Investing in such funds makes sense if you want more risk and illiquidity — and are willing to pay for it. Low interest rates can lead people to rationalize all sorts of bad ideas: investing in companies that will never make a profit, financing share buybacks with debt, spending billions on terrible streaming content, to name a few. But maybe ...


Allison Schrager: Union Blues
Posted: September 19, 2023 at 02:35 PM (Tuesday)

The UAW strike might represent labor’s last stand in the Midwest—but the union future might lie in service jobs in blue states, especially if California legislators get their way. The United Auto Workers' strike might seem to signal a resurgence of union power, but the strike is in part a product of the government's creating incentives ...


Allison Schrager: Government Jobs on the Rise
Posted: September 19, 2023 at 10:38 AM (Tuesday)

This figure from The Wall Street Journal illustrates where the jobs are. More and more of it is in government. Public sector jobs (federal, state, and municipal) account for nearly 20% of payroll gains. This is in part because of the government replacing teachers and public safety workers who quit their jobs during the pandemic. But it is ...


Allison Schrager: The Future of Unions Looks Very Different
Posted: September 14, 2023 at 07:30 AM (Thursday)

They should be less about collective bargaining and more like guilds that offer various kinds of insurance — for health, retirement and even wages. The labor movement is having a moment. In a tight employment market, there is money to be had — or profits to be more generously shared — and workers have gotten some big wins recently. Even reality ...


Allison Schrager: Ecommerce is Here to Stay
Posted: September 13, 2023 at 12:04 PM (Wednesday)

After the pandemic, at one point it seemed in-store shopping would come back, but working in the office would not. But as people slowly return to the office, online sales remains strong. Ecommerce sales as a share of retail sales shot up during the pandemic, fell a bit, and is rising back to pandemic highs. Our relationship with online ...


Allison Schrager: Costly Caps
Posted: September 8, 2023 at 02:06 PM (Friday)

The Biden administration’s plan to limit Medicare drug prices may cost us all more in the long run. When it comes to the cost of prescription drugs, the numbers are maddening. Just ten drugs account for nearly a quarter of Medicare's spending on prescription medicines. Meantime, Americans pay more than double the amount, on a per capita ...


Allison Schrager: The UAW Is Wrong About Pensions
Posted: September 6, 2023 at 06:30 AM (Wednesday)

The old-fashioned defined-benefit plan is not the best fit for the modern economy. Shawn Fain, the president of the United Auto Workers union, wants to bring back the old-fashioned pension. That would be a mistake — both for the auto industry and its workers. There are good reasons that defined-benefit plans are increasingly rare, and trying ...


Allison Schrager: The US Shouldn’t Repeat China’s Economic Mistakes
Posted: August 24, 2023 at 05:30 AM (Thursday)

Industrial policy never made much sense for America, and now it’s not even working for China. When President Joe Biden signed the CHIPS and Science Act a year ago, he did not talk just about how it would revive the US’s manufacturing base and enhance its national security, he also emphasized how it would help America compete with China. Back ...


Allison Schrager: Spread between Mortgage Rates and Bond Yields Is a Warning Sign
Posted: August 22, 2023 at 10:31 AM (Tuesday)

The hot question is when will rates go down? But by historical standards, rates are still not very high, especially after accounting for inflation. A 2% real yield is not so unusual, it may even be a little low. Add in higher deficits and a more uncertain inflation environment, rates may even go higher still. But what is unusual is the ...


Allison Schrager: Wealthy Americans Are Anxious About the Economy, Too
Posted: August 17, 2023 at 06:45 AM (Thursday)

As the cost of services has risen, the financial position of the affluent has weakened — and that makes the overall economy more fragile. It’s curious: Even as America’s economic trends are improving, Americans’ economic anxieties are worsening — including those of many who have no apparent reason to be worried. Not only are there are polls ...


Allison Schrager: Consumer Pessimism Persists Despite Fed Optimism
Posted: August 16, 2023 at 10:03 AM (Wednesday)

Each day that goes by it seems more likely the Fed will achieve its soft landing. Inflation is coming down, the labor market is tightening but is still strong, and GDP is up. Yet American consumers aren't buying in on the optimism. The figure is from the New York Fed Survey of Consumer Expectations and it reflects persistent gloom. Many ...


Allison Schrager: To Bring Back the Office, Bring Back Lunch
Posted: August 11, 2023 at 07:30 AM (Friday)

Enough with the sad desk salads. Office workers need to have a proper lunch — in a restaurant, like the French do — and their employers should pay for it. It has been nearly two years since corporate America reopened, and employers are still struggling to get people back into the office. Just ask Jamie Dimon, CEO of JP Morgan Chase, who has ...


Allison Schrager: Actually, Most Americans Can Come Up With $400 in an Emergency
Posted: August 3, 2023 at 09:00 AM (Thursday)

The misleading idea that so many US households are so financially precarious feeds the perception that the economy is much riskier than it actually is. It is almost impossible to keep track of all the misleading economic statistics that get bandied about for political purposes. My personal favorite, by which I mean the most disingenuous, is ...


Allison Schrager: Does It Really Matter Who Gets Into Harvard?
Posted: July 27, 2023 at 07:00 AM (Thursday)

College admissions procedures should be less biased toward the elite, but there are better ways to reduce inequality. Too many Americans – and too many American economists in particular – have an unhealthy obsession with the 1%: how much money they make, how much wealth they have, how they got there, how to join their ranks, and so on. ...


Allison Schrager: Our Pensions Shouldn't Be Used to Juice the Economy
Posted: July 20, 2023 at 05:30 AM (Thursday)

Efforts to increase the share of private equity investment in retirement funds are misguided and dangerous. The UK has landed on private equity as its answer to lackluster economic growth and inadequate retirement savings. Perhaps taking a page from the US, where retirement funds have long made significant equity investments, the UK is ...


Allison Schrager: Recession? Yes, It Is Still a Possibility
Posted: July 13, 2023 at 06:00 AM (Thursday)

Predictions of a "soft landing" seem both premature and hard to square with some of the data. Call me superstitious or contrarian – or maybe just a procrastinator – but I only started worrying about a recession last week. That was when one prominent commentator stated flatly that "there will be no recession in the next six months," while ...


Allison Schrager: Bidenomics Won’t Cure Inequality. It May Prolong It.
Posted: July 7, 2023 at 07:00 AM (Friday)

The benefits of new technology will slowly spread throughout the economy, even without government intervention.Is inequality turning around on its own? A Biden administration official recently described the philosophy of Bidenomics as caring less about the growth rate of the economy than about growth being widely shared. The need for ...


Allison Schrager: It’s Not Just About You, Elon. It’s the $8 Fee.
Posted: April 28, 2023 at 06:00 AM (Friday)

Twitter, Netflix and other tech companies are finding out that “free” was never a good business model. An interesting and revealing thing happened on Twitter in recent weeks. The infamous blue check mark, once a status symbol among people in media and others who spend time too much time online, took on a negative connotation. There are ...


Allison Schrager: The Death of Dining Out
Posted: April 25, 2023 at 04:11 PM (Tuesday)

Anyone who has dined out lately has probably been shocked when they got their check. Inflation may be falling for goods, but labor-intensive service prices remain high, including dining out. It is putting pressure on the restaurant industry that is finally recovering from the pandemic. The figure below from OpenTable shows the change in ...


Allison Schrager: When Did Risk Become a Bad Word in the US?
Posted: April 24, 2023 at 06:30 AM (Monday)

Playing it safe with economic polices threatens America's claim to global leadership. If the US ceases to be the world's economic leader, it can only blame itself. In the last few weeks international institutions and prominent economists have warned that the global economy, especially the US, is facing the prospect of lower growth — not just ...


Allison Schrager: World Bank Shift to Climate Change Isn’t What We Need
Posted: April 14, 2023 at 08:14 AM (Friday)

The original mission conceived during World War II to promote global economic cooperation and growth is more important than ever. There was a downer vibe at the IMF/World Bank meetings this week. The World Bank Group told the international community to brace for low growth and the possibility of a lost decade. The International Monetary ...


Allison Schrager: Uncertainty and Inflation
Posted: April 11, 2023 at 10:59 AM (Tuesday)

Policy markers take comfort that longer term inflation expectations still hover around 2%. That seems to suggest that eventually the pre-pandemic low inflation/low interest rate world will soon return and the Fed still has the credibility it needs to conduct monetary policy. But in finance it is not just the level of inflation or interest ...


Allison Schrager: AI-Proofing Your Career Starts in College
Posted: April 7, 2023 at 06:30 AM (Friday)

Students must take it on themselves to make their education more flexible, integrating practical skills with the critical-thinking abilities that will be more highly valued in the age of robots. The job market has never offered any guarantees. Mechanization wiped out once-secure careers in manufacturing. Now artificial intelligence (AI) is ...


Allison Schrager: Hope in the Midst of a Tight Labor Market
Posted: April 4, 2023 at 11:00 AM (Tuesday)

The latest data on job openings and quit rates came out today and it appears to show that the labor market is finally cooling. Job openings are down to their lowest level since June 2021. Quit rates are also trending down. But inflation doves should not get too excited. Job openings are still much higher than they were before the pandemic. ...


Allison Schrager: Even a Recession Might Not Tame Inflation
Posted: April 3, 2023 at 05:30 AM (Monday)

There are a lot of moving parts to the economy, and as the last three years have demonstrated, things don’t always work as you expect. The market has spoken: It's expecting that the Federal Reserve's fight against inflation is just about over. Fed Chairman Jay Powell has hinted that rate increases are nearly at an end. But inflation was still ...


Allison Schrager: Too Small to Survive?
Posted: March 31, 2023 at 12:52 PM (Friday)

Steep challenges lie ahead for small- and medium-size banks. Small banks were not supposed to cause this much trouble. In 2008, it was the big banks that went down and nearly took the economy with them. The problem appeared to be too much market concentration, which was said to be the chief problem with the American economy. Now, following ...


Allison Schrager: A Slow Recovery for the Subways
Posted: March 28, 2023 at 11:17 AM (Tuesday)

If you go into bars or restaurants it seems like New York is back. Even midtown and downtown office districts are crowded during the day. But public transportation has still not recovered. Subway, bus, and train ridership is still only about 65% of its pre-pandemic levels. The data is from the MTA based on ridership on March 22 in 2021, 2022, ...


Allison Schrager: Biden Has to Learn the Same Lesson as SVB
Posted: March 28, 2023 at 06:31 AM (Tuesday)

The US government has been borrowing and spending as if interest rates would be low forever. Now the Piper wants a word. In hindsight, it was obvious it wouldn't last. Low interest rates — the result of shifts in the global economy, economic stability, low inflation and monetary policy — couldn't stay at zero forever. But many people behaved ...


Allison Schrager: Interest Rates and Real Estate: An Approaching Storm
Posted: March 21, 2023 at 11:19 AM (Tuesday)

Rising interest rates are causing dislocations in many parts of the economy and finanical sector. One worry is that commercial real estate, under pressure since pandemic-related vacancies, is the next shoe to drop. A research note from Goldman Sachs last week illustrates why small and medium size banks are so important to this part of the ...


Allison Schrager: A Looming Debt Crisis
Posted: March 15, 2023 at 09:16 AM (Wednesday)

The Fed's worst nightmare is coming true. It still needs to fight inflation, but higher rates are exposing vulnerabilities in the financial sector and threatening stability. How well the economy weathers any financial shock will depend on how resilient households are. And data from the NY Fed shows they are getting weaker after a few years ...


Allison Schrager: Can Silicon Valley Remake Itself?
Posted: March 14, 2023 at 04:30 PM (Tuesday)

Rising interest rates and the end of easy money threaten the tech mecca’s current model. At economic development conferences over the last 20 years, the conversation frequently turned to the same question: How can we create our own Silicon Valley? And many countries and cities claimed that they had. One thinks of Silicon Glen (Scotland), ...


Allison Schrager: How the Federal Reserve Became Too Big to Fail
Posted: March 5, 2023 at 08:00 AM (Sunday)

A conversation with Jeanna Smialek, author of Limitless, on how a succession of crises expanded the central bank’s powers in ways the public has yet to understand. Allison Schrager: Your new book, Limitless: The Federal Reserve Takes on a New Age of Crises, is a modern history of the Fed that focuses on the extraordinary expansion of the ...


Allison Schrager: Fed’s Credibility Can’t Take a Soft Landing
Posted: March 1, 2023 at 06:00 AM (Wednesday)

If it doesn’t want to push the economy into recession, the central bank will probably have to abandon its 2% inflation target. Someone is in denial over inflation — either investors or Federal Reserve policymakers. But no matter how things play out, the disconnect suggests the Fed has lost its credibility. Or perhaps it never had it to begin ...


Allison Schrager: The Rise of Gambling in Post Pandemic America
Posted: February 28, 2023 at 11:08 AM (Tuesday)

Spending in many categories increased since the pandemic. But one notable area is personal gambling, according to data from the St. Louis Fed. In the early days of the pandemic, people at home with money in their pockets turned to gambling apps. This was in addition to other forms of risk taking, like day trading or investing in crypto ...


Allison Schrager: Biden Can’t Pay for Everything by Just Taxing the Wealthy
Posted: February 23, 2023 at 06:00 AM (Thursday)

Everyone — not just the highest earners — will need to ante up more if we want to pay for all the new government Democrats envision. The Biden administration has big plans to expand the government's role in the economy. It's also promising that no one who earns less than $400,000 will pay more in taxes. We can't have both. Even paying for ...


Allison Schrager: How to Hedge Life
Posted: February 21, 2023 at 12:01 PM (Tuesday)

Often criticized, risk-management tools remain the best defense from panic, superstition, and the politicization of public policy. A few years ago, a bail bondsman in Hawaii named Nick Lindblad e-mailed me. He had just read my book on financial economics and noted that he used some of the same data-driven strategies when deciding who should, ...


Allison Schrager: The Ever Expanding Cost of Housing
Posted: February 21, 2023 at 10:56 AM (Tuesday)

Housing prices have been rising almost everywhere. The figure below shows the inflation-adjusted house price index from the Dallas Fed, It shows how prices have gone up, with 2005 as the base year. House prices are certainly higher in the US, but they have soared many times over in Canada, Australia and Israel. It shows many countries may ...


Allison Schrager: Men Dropping Out of the Workforce Could Be Progress
Posted: February 21, 2023 at 06:30 AM (Tuesday)

After decades of gains in earnings and opportunity, economically empowered women are in a stronger position to support households with nonworking men. When I think of the working-age men I know who choose not to work, they all have something in common: a woman who earns enough to support them both. One of the big economic mysteries of our time ...


Allison Schrager: Persistent Inflation and Unhappy Consumers
Posted: February 14, 2023 at 09:41 AM (Tuesday)

Inflation may finally be coming down. The newest inflation report suggests inflation may have peaked, but inflation coming down and returning to 2% are two different things. The Fed has been adamant that they will raise rates or keep them high until inflation falls to 2%. Though talk is cheap when unemployment is at 50 year lows. And there ...


Allison Schrager: We’re Probably All Wrong About Interest Rates
Posted: February 9, 2023 at 05:30 AM (Thursday)

The widely accepted idea that rates will eventually fall back to pre-pandemic levels is based on economic theories that may turn out to be backward. It's frequently argued that once our economy gets past this burst of inflation, interest rates will fall back to their pre-pandemic lows — and perhaps go lower in the future. Central ...


Allison Schrager: A Convenient Political Target
Posted: February 8, 2023 at 01:55 PM (Wednesday)

President Biden’s proposed tax hike on stock buybacks is misguided. Finance professor Ken French once said about stock buybacks: "Buybacks are divisive. They divide people who do understand finance from those who don't" Put Joe Biden and his administration in the "those who don't" category. In last night's State of the Union, the ...


Allison Schrager: Wealth Taxes Have Always Been a Terrible Idea
Posted: February 2, 2023 at 06:00 AM (Thursday)

A rash of new proposals by US states reveal the folly of tax-the-rich schemes, which are wasteful, damaging to the economy and almost impossible to execute fairly. There is a good reason we don't tax wealth directly. Actually, there are many good reasons. But that's not stopping some states from giving it a try. The best thing to be said ...


Allison Schrager: Are You the Next Steve Jobs? Good Luck Raising Money in 2023
Posted: January 31, 2023 at 06:00 AM (Tuesday)

Rising interest rates, and lessons learned, will make investors think twice before taking big risks on unproven founders. Another season rounds the corner with another young tech founder accused of fraud. This time it's Charlie Javice, who like others before her graced magazine covers and 30 under 30 lists with a compelling origin story and ...


Allison Schrager: Fiscal Fault Lines
Posted: January 26, 2023 at 09:26 AM (Thursday)

A risk-based case for taking inflation and the national debt more seriously. I'm not ashamed to admit it: I am a card-carrying debt hawk. I also worried about inflation long before it returned, enduring years of mockery and an exasperated editor who condescendingly explained that inflation and interest rates would never again rise. Alas, I ...


Allison Schrager: Gen Z, It’s Not Good to Have Your Boss Hate You
Posted: January 25, 2023 at 05:30 AM (Wednesday)

For any young worker who needs to hear this, your power in the labor market won’t last and quietly quitting could be setting you up to get loudly fired. Every generation faces a skeptical reception in the labor force. Baby boomers were called self-centered, Gen X was lazy and millennials were considered entitled. For Gen Z, it's the same — ...


Allison Schrager: The One True Secret to Successful Investing
Posted: January 5, 2023 at 06:30 AM (Thursday)

After 2022’s stomach-churning roller-coaster ride, we clearly need to be reminded of the most basic rule in finance — the one investors forget most often. There's only one thing you really need to know about investing in 2023, and it's both stunningly obvious and invariably forgotten: There's no free lunch. Sure, everybody knows that with ...


Allison Schrager: Unsecure, The Spending Bill's Misguided Retirement Changes
Posted: December 23, 2022 at 11:38 AM (Friday)

The omnibus spending bill puts our retirement system on an even less sustainable basis.
Any $1.7 trillion spending bill passed just before the Christmas holiday is bound to have some wastefulness and policies with unintended consequences. But as a retirement economist, I find the changes to the retirement system, called Secure 2.0, to be the ...


Allison Schrager: We’ll Return to the Office in 2023 But Not to Stores
Posted: December 21, 2022 at 08:00 AM (Wednesday)

Three years after Covid-19 panicked the world, we’re beginning to see that many of the painful changes the pandemic made to our lives will be permanent. Certain events change the course of history, or at least the trajectory of the global economy. To name a few: the Black Death, the invention of the steam engine and World War II, and now ...


Allison Schrager: Government Checks and Higher Debt
Posted: December 20, 2022 at 12:25 PM (Tuesday)

Keeping Americans at home and sending them checks seemed to do wonders for their balance sheets. For more than a year they had higher savings and a drop in their debt burdens. But eventually those same policies also sparked 40-year high inflation. And now household are falling further into debt, according to data from the NY Fed. Especially ...


Allison Schrager: We’ll All Pay for Uncle Sam’s Cheap Debt Fantasies
Posted: December 6, 2022 at 06:30 AM (Tuesday)

By financing ballooning spending with short-term debt, the government failed to lock in record-low interest rates while it could. Now the piper has come to call. All the talk lately about the size of the national debt is obscuring the real problem: The US government made the wrong bet on interest rates, and that will cost taxpayers for years ...


Allison Schrager: Is Stagflation Coming?
Posted: December 6, 2022 at 05:30 AM (Tuesday)

The great resignation was good for workers while it lasted. The latest data from Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics reveals that quits have fallen over the last year after peaking during the pandemic. The number of job openings has also declined. This suggests a labor market that remains very ...


Allison Schrager: An E-Commerce Boom This Holiday Season
Posted: November 29, 2022 at 02:14 PM (Tuesday)

The holiday shopping season is underway. And if past trends in the last two years are any indication, it seems that much of the shopping will be done online. Gone are the days when people line-up for deals. The data here shows that the pandemic created a big spike in consumers buying things online. It has not gone away and even increased ...


Allison Schrager: Big Tech Has Failed to Live Up to Its Promise
Posted: November 29, 2022 at 06:00 AM (Tuesday)

Recent layoffs are a sign not just of over-investment in the sector, but of deeper, structural issues that may take many years to resolve. It's tempting to dismiss the mass layoffs and collapsing stock prices in the tech sector as just another blip in the tech boom-and-bust cycle. Technology firms may make up 36% of the S&P 500, but they ...


Allison Schrager: An Unexpected Holiday Gift: Crude Oil Prices Have Fallen
Posted: November 22, 2022 at 11:41 AM (Tuesday)

The Biden administration is quick to take credit when oil prices fall, but blames "greedy" oil companies when prices rise. It seems greed has taken a holiday; Brent crude prices have fallen to below $90 a barrel. There are many reasons why this might be that have nothing to do with greed, including falling demand in anticipation of a ...


Allison Schrager: It’s Now Clear That QE Was a Colossal Policy Mistake
Posted: November 22, 2022 at 07:49 AM (Tuesday)

There’s no convincing evidence that central banks’ purchases of trillions of dollars of bonds and other financial assets helped any economy. The great quantitative easing experiment was a mistake. It's time central banks acknowledge it for the failure it was and retire it from their policy arsenal as soon as they're able. Since the ...


Allison Schrager: Growth Is Still Our Best Hope
Posted: November 21, 2022 at 09:33 AM (Monday)

The idea that stopping economic expansion will solve any of our global problems is deeply misguided. During a meeting several years ago, as I started to explain to my colleagues how different economic policies could boost growth, a young staffer interrupted me. He announced–quickly, so he could get it all out in one breath–that growth should ...


Allison Schrager: The Market Turns on Tech Stocks
Posted: November 15, 2022 at 03:48 PM (Tuesday)

Amazon joined other big tech firms this week when it announced significant layoffs of its staff. Buoyed by low interest rates big technology firms have dominated the stock market and grown in size. But now the market is turning on them. The figure below shows the FANG+ index an index of the biggest publicly traded tech firms, over the last 3 ...


Allison Schrager: Gen Z Really Does Have It Harder Than Millennials
Posted: November 14, 2022 at 06:00 AM (Monday)

Covid, technology and the economy have made new college graduates an angsty bunch, but now is the time they should be taking more risk, not less. Every generation thinks it has it harder than anyone else, but Generation Z — the young people who are now graduating from college and entering the labor market — may actually have a point. A few ...


Allison Schrager: Burned by Crypto? Don’t Learn the Wrong Lesson
Posted: November 11, 2022 at 05:30 AM (Friday)

It’s not that the market for digital currencies was rigged, it’s that no financial market can offer those kinds of staggering gains without huge risk. I must admit I've been rooting for the crypto market to crash and burn. Not because I never invested in it and was resentful to see so many people get rich from it (though there were moments). ...


Allison Schrager: High Mortgage Rates and High Inflation
Posted: November 8, 2022 at 12:44 PM (Tuesday)

Mortgage rates have not been this high since before the housing crisis. And while the housing market is slowing, prices are still high. One reason why is that inventory is also falling, many people have cheap mortgages and are not looking to sell. The figure below plots the house price index and inventory in New York state. It shows prices ...


Allison Schrager: The Job Market and Inflation
Posted: November 1, 2022 at 12:19 PM (Tuesday)

Some economists think the Fed has increased rates enough and needs to slow down or even reverse rate increases. But inflation remains high and the labor market is still very tight. The figure below is the quits and jobs opening rate from JOLTS. It shows that openings and quits have fallen in the last few months. But they are still much higher ...


Allison Schrager: We Should Just Accept We’re Going to Have a Blah Economy
Posted: October 28, 2022 at 06:30 AM (Friday)

We’re in unprecedented times, and it’s just as likely we’ll slog along full of uncertainty as it is that inflation will lead to a deep recession. This economy can't go on forever. GDP may still be growing, but it's at an anemic rate. And other indicators are piling up that suggest a recession is imminent: The yield curve is inverting, hiring ...


Allison Schrager: Federal Debt and Interest Rate: A Complicated Story
Posted: October 25, 2022 at 09:46 AM (Tuesday)

Real interest rates have been on the decline for decades. There are many reasons why, but a big one is there have been many captive buyers of US federal debt. Foreign governments and investors bought US bonds to manage their currency and because it was seen as a safe asset. But their appetite soured in the last few years, as inflation ...


Allison Schrager: Biden Hasn’t Helped the Economy. He’s Made It Worse.
Posted: October 24, 2022 at 06:30 AM (Monday)

The president’s policies didn’t cause inflation or the energy crunch, but they’ve undermined any hope for dynamism and growth. The really bad news is Republicans don’t have much better ideas. To President Joe Biden's credit, his policies didn't cause many of the economic problems we face today. But they did make them worse. Even more ...


Allison Schrager: Ecommerce Boom During Covid
Posted: October 18, 2022 at 10:34 AM (Tuesday)

Two years of the pandemic has changed many aspects of our lives. One thing that may be forever changed is how we shop. Before the pandemic ecommerce made up only about 12% of sales. And it had been rising steadily over time. By April of 2020 it shot up to more than 16%. And it has barely budged since then. It could be people have come ...


Allison Schrager: The Fed Is Giving Americans a Harsh Lesson in Lag Time
Posted: October 18, 2022 at 06:00 AM (Tuesday)

Monetary policy isn't like flipping a switch. Inflation has seeped into the economy’s bones, and interest rates will need to go higher for longer to turn the tide. To state what is now especially obvious, there's still a lot we don't know about how monetary policy works, and perhaps more crucially, when it will work. The Federal Reserve has ...


Allison Schrager: Enjoy the Social Security Bump Now. You'll Pay Later.
Posted: October 13, 2022 at 06:00 AM (Thursday)

Retirees’ big inflation raise may mean they’ll face bigger cuts sooner if something isn’t done to restore adequate funding. Social Security is known as the third rail of politics. President Joe Biden has pounced on all who dare even think about curtailing the retirement program. In fact, this week cash-strapped retirees will get the ...


Allison Schrager: Biden's Union Push Faces Structural Challenge
Posted: October 12, 2022 at 10:42 AM (Wednesday)

The Biden administration would like to bring back unions. At their peak in the 1950s, about 33% of workers were union members, today it is barely more than 10%. The administration believes unions will be better for workers and the economy. And it blames the fall of unions for rising inequality. This is one reason why the Department of ...


Allison Schrager: If You Think US Pensions Are Safe, Just Wait
Posted: October 10, 2022 at 06:30 AM (Monday)

The US economy has been built around low interest rates. As rates rise, so will the fallout. You never know where the next crisis will arise but last week it came from a particularly unlikely place: defined-benefit pensions. The UK government bond market (gilts) went wild as rates spiked and pension funds failed to meet their margin calls. ...


Allison Schrager: World's Economy Needs a Supply-Side Revolution
Posted: October 6, 2022 at 05:00 AM (Thursday)

After shoveling money at people to increase demand, inflation has refocused developed nations on the need to increase supply — but no one agrees on how to do that. There's a new religion in economic policymaking. It's a more modern view of supply-side economics with converts on both the right and the left. But what that means and how to achieve ...


Allison Schrager: A Wild UK Debt Market
Posted: October 4, 2022 at 12:51 PM (Tuesday)

The UK debt market has had a wild few months. The turmoil was set off last week by the new budget that promised to deliver growth with deficit-financed tax cuts and deregulation. Rates shot up and leveraged pension funds could not make their margin calls, pushing rates higher until the Bank of England intervened. It serves as a reminder that ...


Allison Schrager: Hardly a Surprise: Pension Funds Stoked the UK Rout
Posted: September 30, 2022 at 07:00 AM (Friday)

An outsized portion of British government debt is owned by pensions, so when those money managers misjudged risk, the turmoil spread quickly. The UK's economic troubles appear to be a story of fiscal recklessness that's forced the nation's central bank to step in to stabilize crashing financial markets by buying up government bonds. Are we ...


Allison Schrager: Is the Fed Responsible for Our Economic Turmoil?
Posted: September 28, 2022 at 10:17 AM (Wednesday)

Yes, in part—because of what it didn’t do earlier, not because of what it is doing now. The history of inflation, and of how policymakers and pundits responded to it, reveals plenty of motivated reasoning. For decades, people have argued that inflation is not so bad, that it happens because of greed, or that the best solution is price ...


Allison Schrager: Optimism Aside, Inflation Is Here to Stay
Posted: September 27, 2022 at 10:13 AM (Tuesday)

Last week markets finally priced in the fact that inflation is not going away easily or soon. Consumers are feeling inflation, but may also be overly optimistic about the future. The most recent Survey Data from the New York Fed shows consumers' 1 year inflation expectation fell from 6.8 to 5.7% last month and they expect inflation to be back ...


Allison Schrager: Norman Rockwell's Economy Is Never Coming Back
Posted: September 26, 2022 at 06:00 AM (Monday)

Lawmakers are too focused on returning to the days when manufacturing ruled while the goal should be reducing the barriers to entrepreneurship. Promising a return to a Norman Rockwell-esque past where everyone had great jobs, financial stability and a shot at the American dream makes for great politics, but terrible economic policies. The ...


Allison Schrager: The End of a Pandemic but Not of Remote Work
Posted: September 20, 2022 at 09:41 AM (Tuesday)

President Biden has declared the pandemic over. And after Labor Day, many bosses told their employees to come back on the office. But the workers aren't listening. Midtown Manhattan has gotten busier, but based on data from the MTA commuting is not close to back to normal. The figure below shows ridership on subways, busses, and commuter ...


Allison Schrager: Men Are Missing from the Recession Recovery
Posted: September 13, 2022 at 11:18 AM (Tuesday)

If you look at the unemployment rate, it seems like the job market fully recovered from the recession in 2020. But after each recession many prime age men, age 25 to 54, leave the labor force and don't come back. The hope is this time would be different because the economic recovery and the labor market recovery was very strong, and ...


Allison Schrager: 'The Rise of the Rest’ Review: Startups Across America
Posted: September 11, 2022 at 04:30 PM (Sunday)

An AOL co-founder travels by bus on a series of tours around the country in search of local entrepreneurship. Steve Case, a co-founder of AOL, was one of the early internet pioneers. But he is not a creature of Silicon Valley. AOL, he points out in “The Rise of the Rest: How Entrepreneurs in Surprising Places Are Building the New American ...


Allison Schrager: Free College in America Is a Bad Idea. Just Look at Europe.
Posted: September 9, 2022 at 06:00 AM (Friday)

It’s nice to think that removing the burden of tuition would allow more low-income students to benefit from higher education, but the opposite is true. Even fans of student debt relief will admit it doesn't solve the core problem of crushing higher education costs. For that, debt-forgiveness proponents such as Bernie Sanders and ...


Allison Schrager: Rejection of Socialism Shines Brightly for Chile
Posted: September 6, 2022 at 12:52 PM (Tuesday)

On Sunday Chileans rejected a new constitution that would've undermined many of their existing property rights and transformed its economy. The left argues that the existing constitution, which has evolved over the years, did not serve lower income Chileans and their current economic system worsened inequality. But compared to other Latin ...


Allison Schrager: Pensions Aren’t the Answer to Your Retirement Anxiety
Posted: September 3, 2022 at 08:00 AM (Saturday)

It’s tempting to think of a steady payout from your employer as the ideal way to fund your golden years, but private investment accounts like 401(k)s are better at securing a nest egg — for those who take advantage of them. The market is down, inflation is up and your retirement prospects aren't looking so good. It's tempting to pine for the ...


Allison Schrager: The ESG Bubble Is Bursting
Posted: August 30, 2022 at 02:09 PM (Tuesday)

Politicizing investment decisions was never a good idea—especially for public pensions. The current market and political turmoil have now thrown cold water on two investment trends that never made much sense: cryptocurrency, and environmental, social, and governance (ESG) funds. But while crypto's future remains unclear, ESG is losing fans by ...


Allison Schrager: Student Debt and Homeownership
Posted: August 30, 2022 at 11:22 AM (Tuesday)

We are often told that student debt is crushing young borrowers and keeping them from the trappings of adulthood like owning a home. But in fact, graduates with student debt are not much less likely to own a home than graduates with no debt. The people who are shutout of home ownership are the ones who didn't go to college and can't afford ...


Allison Schrager: A Distorted Housing Market
Posted: August 24, 2022 at 10:28 AM (Wednesday)

The housing market is weird. Sales are slowing, and home builders are calling it a recession. Prices stayed high, but are now starting to buckle. The figure is the Case-Schiller index, it tracks US home prices. They grew at an unprecedented rate during the pandemic when the Fed's QE program aimed to bring mortgage spreads down. It may have ...


Allison Schrager: The Fed’s Damage to the Housing Market May Last Years
Posted: August 11, 2022 at 06:00 AM (Thursday)

The central bank created major distortions in a market where many Americans have most of their wealth. Why? With interest rates now hovering around 5%, existing-home sales are down more than 14% from last year. Some potential buyers are sitting on the sidelines until rates or prices or both decline, while sellers are hoping the market picks ...


Allison Schrager: The Fatal Flaw in Your Retirement Plan’s Target Date Funds
Posted: August 3, 2022 at 06:00 AM (Wednesday)

The life-cycle portfolios that have become so common in 401(k)s will leave retirees unprotected from inflation and short on income in the long run. There was a major development in 2006 that transformed how Americans invest for retirement. It solved one problem, but created another that will be causing extra pain to people who retire in ...


Allison Schrager: Globalization Is Just Getting Started
Posted: July 25, 2022 at 06:00 AM (Monday)

Greater integration of the world’s financial and political interests has improved our lives and will inevitably continue despite current discourse to the contrary. Like it or not, we live in a globalized economy. How you define or measure globalization can vary, but it tends to just mean greater financial integration among countries, as well ...


Allison Schrager: Inflation Beast Won't Lie Quietly Again for a Long Time
Posted: July 18, 2022 at 08:55 AM (Monday)

If the pandemic taught us anything about monetary policy, it's that the Fed's success with rate targets has always been an illusion. We woke the beast, and now we may have to learn to live with it. After more than 20 years of low, stable inflation, it's come roaring back — at more than 9% — and it may never return to pre-pandemic levels. ...


Allison Schrager: Big Data's Past Is Messing With Our Future
Posted: July 6, 2022 at 06:00 AM (Wednesday)

The pandemic and inflation have dramatically changed our lives, which makes calculations that rely on historical patterns less reliable than ever. There is an inconvenient open secret that lurks behind many decisions we make every day. We live in a data-empowered era. When we plan a trip, Google estimates our travel time and recommends ...


Allison Schrager: Nip Inflation Now to Avoid a Worse Recession Later
Posted: July 5, 2022 at 09:35 AM (Tuesday)

The choice between inflation or recession is a false one—we must deal with the first to prevent both from growing worse. Americans find themselves presented with a question: Should we suffer a recession to get rid of inflation? The question has been framed as a choice because of fear that the Fed, either out of necessity or by accident, will ...


Allison Schrager: America’s MBAs Are the Latest Skeptics of Capitalism
Posted: June 28, 2022 at 06:00 AM (Tuesday)

The foundation of the US economic system no longer gets automatic approval at the nation’s elite business schools. You might expect to find skeptics of capitalism in sociology or anthropology departments — and let's be honest, capitalism doesn't have so many fans lately. But you would think the basis for our great American economic system could ...


Allison Schrager: Inflation Ate Your Free Lunch, But You’re Still Better Off
Posted: June 22, 2022 at 06:30 AM (Wednesday)

Americans are facing a painful drop in the higher living standards brought by ultra-low interest rates and a technology revolution. It had to end sometime. Believe it or not, we live in the best of times. It's been a crazy few decades, with a pandemic, rising inequality, slowing growth and productivity, and major changes in the economy. ...


Allison Schrager: Generation Z Is Getting a Harsh Lesson in Stock Risk
Posted: June 15, 2022 at 06:30 AM (Wednesday)

A whole new crop of investors is learning that bear markets are a fact of life and should adjust accordingly. The wealth destruction over the last few weeks has been brutal. Markets are down more than 20% from the start of the year; we are officially in a bear market. One estimate (from last week) said household net worth fell 0.4%. A bear ...


Allison Schrager: Waiting for Mortgage Rates to Fall? Don't Hold Your Breath.
Posted: June 9, 2022 at 08:30 AM (Thursday)

The days of freakishly cheap loans are probably gone for good, and rates might even go up some more before they fall again. I bought an apartment last year and if I were buying today, I wouldn't be able to afford it. The increase in mortgage rates would mean $1,000 more a month than I am paying now. It may be the only time in my life ...


Allison Schrager: The Biggest Threat to the US Economy Is Policy Makers
Posted: June 6, 2022 at 06:00 AM (Monday)

Inflation is painful, but policies that could undermine longer-term growth are far more worrying. Something still feels off in this economy. It's booming in many respects, with a strong labor market, healthy corporate and household balance sheets, and a lot of consumption. But some, like JPMorgan Chase & Co. CEO Jamie Dimon, are worried ...


Allison Schrager: The Virtue Bubble Is About to Burst. Good Riddance.
Posted: May 31, 2022 at 06:30 AM (Tuesday)

Making financial decisions based on your values wasn't making the world a better place. It may have even been making it worse. There are costs to living a virtuous life; It requires going without. This is true psychologically, because sacrifice gives virtue meaning. But it's also true mathematically. You pay a price when you constrain who you ...


Allison Schrager: Give Me Your Educated Migrant Workers, Not More Relatives
Posted: May 25, 2022 at 07:00 AM (Wednesday)

Increasing the number of temporary visas for jobholders is a sensible immigration policy that would help combat both labor shortages and rising prices. The solution to some of our biggest economic problems is staring us in the face. Or more accurately, it's beating on our door. Among the many aspects of US immigration policy that need ...


Allison Schrager: A Change in Direction for a Hot Housing Market
Posted: May 24, 2022 at 12:53 PM (Tuesday)

The pandemic housing market has been red hot. Many people moved, either to relocate or to look for more space, and very cheap mortgages produced high demand for a limited supply of housing. But now that interest rates are rising and the Fed is no longer buying mortgage-backed securities, mortgage rates are nearly double what they were a year ...


Allison Schrager: Inventory Shortages: A Growing Concern
Posted: May 17, 2022 at 03:34 PM (Tuesday)

During the pandemic many companies burned through their inventories. Now years later between shortages and high demand, means they still have not recovered. Industrial production may be up, but inventories still have a long way to go before they reach pre-pandemic levels. This suggests the US economy is still prone to shortages if anything ...


Allison Schrager: Elizabeth Warren’s Price-Gouging Bill Flunks Basic Economics Price Controls?!
Posted: May 13, 2022 at 02:16 PM (Friday)

Democrats look to resurrect a completely discredited economic policy. Senate Democrats, led by Elizabeth Warren, just released a bill that would make price-gouging unlawful. The proposal gives further life to price controls, one of the worst policy failures from the last period of high inflation, decades ago. According to the bill, "It shall ...


Allison Schrager: A Recession Won't Be as Scary as It Sounds
Posted: May 12, 2022 at 08:30 AM (Thursday)

While the Fed’s inflation fight could throw the economy into reverse, a mild slowdown now might help avoid a deeper downturn later. Inflation like this can't last forever. How it will end is now the more salient question. Often it takes a recession to break inflation. Economist Lawrence Summers observed that this has been the case every other ...


Allison Schrager: Inflation and Wages: Top Concerns for Voter
Posted: May 10, 2022 at 12:40 PM (Tuesday)

Some journalists and politicians are wondering why Americans aren't happier with the economy. But this chart says it all. It plots weekly American wages that have been adjusted for inflation. Inflation this high means most Americans get a big wage cut each week. The last time this happened was 40 years ago. Inflation also creates uncertainty, ...


Allison Schrager: It's a Long, Bumpy Road Back to 2% Inflation
Posted: May 5, 2022 at 06:00 AM (Thursday)

Part 2: Q&A with Dartmouth economist Andrew Levin about what it will take for the Fed to return the economy to “normal.” The Federal Reserve has finally started to get real. It increased the policy rate target Wednesday by 50 basis points. More rate hikes are expected as the Fed tries to bring down inflation. But will this be enough? ...


Allison Schrager: Bond Yields and Inflation
Posted: May 4, 2022 at 10:43 AM (Wednesday)

Bond yields are trending up. This is even true for inflation-protected bonds. The 5-year TIPS offered a -0.20% yield yesterday. Still a negative yield, but less negative than it was a few years ago. Yields could be rising because markets expect future rate hikes, the Fed is buying fewer TIPS, or rates are ending their 40-year bull run. In ...


Allison Schrager: Why the Federal Reserve Keeps Underestimating Inflation
Posted: May 2, 2022 at 06:30 AM (Monday)

A Q&A with Dartmouth economist Andrew Levin about the economic risks the U.S. is facing and why the central bank got it so wrong. The Fed messed up. Big time. After almost 40 years of low, predictable price growth, inflation is back: 8.5% at last count and it may go higher still. Some of the inflation is related to pandemic re-opening, but some ...


Allison Schrager: Preaching to the Choir
Posted: April 29, 2022 at 03:03 PM (Friday)

Economist Thomas Piketty’s new book is compelling in parts but marred by his dismissal of those who disagree with him as corrupt or ignorant. The overwhelming majority of economists agree on a few things: secure, well-defined property rights are a vital ingredient of growth; people respond to incentives; the economy is not zero-sum; ...


Allison Schrager: Uncertain Times for NYC and Suburban Transit
Posted: April 26, 2022 at 02:41 PM (Tuesday)

It has been more than two years and New York City still has not recovered from the pandemic. Restaurants, shows, and Time Square may be full but the New York as we knew it won't return until workers come back too. The figure shows the share of people riding subways, LIRR trains, and driving using bridges and tunnels compared to 2019. Even ...


Allison Schrager: Buck Up, Boomers, You'll Still Retire Richer Than Your Parents
Posted: April 25, 2022 at 06:00 AM (Monday)

There has never been a generation in better shape for retirement, even with soaring inflation and volatile markets. This is a hard time to retire. The market is down 7% from last year and the rate of inflation has risen to 8.5%. Both are brutal to your bottom line when you're on a fixed income. But buck up! As bad as things seem, odds are you ...


Allison Schrager: High Inflation Causes Housing Woe's
Posted: April 19, 2022 at 02:46 PM (Tuesday)

The cost of almost everything feels like it is going up. This is especially true for our biggest expense, housing. The graph below plots Americans' expectations of how much their hosing costs will increase in the next year. It is the mean expectation from a New York Fed survey. Renters expect a 9% increase this year, but even owners ...


Allison Schrager: This Is What Living With Long-Term High Inflation Feels Like
Posted: April 18, 2022 at 06:30 AM (Monday)

Americans are entering a period when consumer prices will continue to rise steadily, which will bring a whole different set of costs and benefits to a new generation. If you are under 45 and live in America or Europe, the odds are this past year has been your first real experience with inflation. Other than a blip in 2008, inflation has ...


Allison Schrager: Inflation’s New Normal Will Be 4%. Get Used to It.
Posted: April 13, 2022 at 06:00 AM (Wednesday)

Many of the forces keeping prices in check have started to reverse, but bigger gains in consumer prices won’t be bad for the economy as long as they’re predictable. Now that inflation is back, it's not going away anytime soon. The Federal Reserve expects it to fall below 3% next year and eventually go back to 2%. But there are reasons to ...


Allison Schrager: The Fed's Inflation Balancing Act
Posted: April 5, 2022 at 03:49 PM (Tuesday)

Inflation is at nearly 8%, unemployment is down to 3.6%, and the Federal Funds Rate (the Fed's main policy rate) is 0.33% or almost -8% in real (inflation adjusted) terms. If you asked any credible economist if such a thing were possible a year, or even 30 years ago they never would have believed it. The picture below plots the Fed Funds Rate ...


Allison Schrager: Five Days a Week in the Office? It’s Better for Everyone.
Posted: April 1, 2022 at 06:00 AM (Friday)

Career-building and company culture rely on co-workers being together as much as possible. It's time to go back to the office. No one wants to hear this, but eventually you'll be commuting five days a week. Perhaps, as someone who worked from home most of her career, I'm not the right messenger. Nevertheless, it's the truth. I recently spoke ...


Allison Schrager: Turnovers and Wages: An Unexpected Silver Lining
Posted: March 29, 2022 at 01:38 PM (Tuesday)

Yesterday the Bureau of Labor statistics released the latest data on job turnover. As expected, quit rates are the highest they've been in decades. But over-all turnover, while elevated, is not much higher than historical rates. It is about the same as it was around the Dot.com recession. That's because while quit rates are elevated, lay-offs ...


Allison Schrager: Dollar Dominance Isn’t Going Away
Posted: March 28, 2022 at 11:13 AM (Monday)

But its future looks less secure than it did a decade ago. It's not a question of "if" but "when." The dollar will not always be the world's reserve currency. Eventually something else will replace it–perhaps another country's currency or some other asset or commodity. But the dollar's dominance is not ending anytime soon, despite the rise ...


Allison Schrager: Higher Wages and Inflation: A Complicated Story
Posted: March 23, 2022 at 10:12 AM (Wednesday)

The question on everyone's mind is what will it take to lower inflation and how long will it last? Economist fear once wages start to reflect faster price growth it will become a spiral, with higher wages bidding up prices further. The New York Fed surveys individuals on what their wage expectations are for the next year. Their results show ...


Allison Schrager: The Fed Is Basically Just Guessing About Interest Rates
Posted: March 17, 2022 at 09:00 AM (Thursday)

Shifting the economy into neutral without reversing into a recession requires knowing where neutral is. Much as the world aspires to normal after two wrenching years of a pandemic, the Federal Reserve is reaching for a neutral monetary policy that will arrest inflation without triggering a recession. But finding neutral on the economy's ...


Allison Schrager: Gas Prices Spell Trouble for Consumers
Posted: March 15, 2022 at 04:51 PM (Tuesday)

There are many reasons why the price of oil went up and then went down a little. The figure below plots miles driven in America. While there was some drop off during the pandemic, miles driven has resumed its upward trend, as if the disruption never happened. This illustrates that there is very high demand for gas right now. If you layer in ...


Allison Schrager: How to Manage the Biggest Risk of All: Uncertainty
Posted: March 14, 2022 at 06:00 AM (Monday)

Technology and big data have allowed us to minimize risk in our lives, but nasty surprises like pandemics and war show us that flexibility is the real key. These are uncertain times, but we've never lived with less risk. That may sound crazy coming out of a pandemic that disrupted our lives in uncountable ways — and now we may be on the brink ...


Allison Schrager: Wheat Prices Spell Pain for Consumers
Posted: March 8, 2022 at 03:02 PM (Tuesday)

Oil prices are reaching record highs. This will, no doubt, add financial stress to consumers already struggling with inflation. Another commodity to watch is wheat prices. Russia and Ukraine account for 29% of global wheat exports. America's wheat production is about half of Russia's. It is no surprise that the price of wheat futures went ...


Allison Schrager: How Are Those Retirement Plans Going Now?
Posted: March 5, 2022 at 08:00 AM (Saturday)

The economy keeps getting more volatile, but it's not all bad. You just may need a different attitude about working in your golden years. Even before Russia invaded Ukraine the economy felt pretty dicey. There was inflation, a weird post-pandemic job market, and the prospect of a more hawkish Fed. Now markets are even more volatile as ...


Allison Schrager: Disempowered, Biden's Blinkered Energy Policy
Posted: March 4, 2022 at 11:08 AM (Friday)

The Biden administration’s policy on energy is as delusional as its policy on inflation. Inflation is proving more persistent than policymakers hoped. Now that gas prices are rising, it may go even higher. The Biden administration already threw fuel on the inflation fire by sending many Americans checks last year. And there may be more to ...


Allison Schrager: Can We Have Economic Growth Without Risk?
Posted: March 2, 2022 at 11:04 AM (Wednesday)

Don’t bet on it—though the Biden administration is doing just that. President Biden's State of the Union address was dense in economic fallacies. Perhaps the most glaring one was the idea that we can change the nature of American prosperity. Traditionally, it was driven by upstarts, from immigrants to clever people in Silicon Valley taking ...


Allison Schrager: Global Uncertainty: Beware Volatile Markets
Posted: March 2, 2022 at 10:00 AM (Wednesday)

The world became a very uncertain place in the last week. This means more risk in many aspects of our lives, especially markets. For the last decade or so markets seemed to only go up, but since the pandemic, risk became a bigger issue. The figure below is the 3-month implied volatility from the S&P 500; it shows how volatile investors ...


Allison Schrager: Unions Haven't Kept Up With the New Economy
Posted: March 1, 2022 at 11:00 AM (Tuesday)

Pressuring employers to provide stable jobs with uniform wages is holding workers back. To excel, individuals need a better safety net that encourages more risk-taking. Something still feels broken in the labor market. There are many jobs and wages are up. But there is also a sense of uncertainty and misery. Service jobs can be grueling, ...


Allison Schrager: Bring Back Risk
Posted: February 24, 2022 at 02:41 PM (Thursday)

Our increasing aversion to taking chances creates dangers of its own. June 24, 2013, was a clear day in the Arizona desert. Nik Wallenda walked carefully along the two-inch-thick high wire, suspended 1,500 feet (the height of the Empire State Building) above Hellhole Bend, a gorge near the Grand Canyon. Wallenda prayed as he slowly traversed ...


Allison Schrager: Inflation Stands to Test Many Americans
Posted: February 23, 2022 at 11:45 AM (Wednesday)

Many Americans are facing high and variable inflation for the first time in their lives. The question is how long it will last? Stable and low inflation has been a gift for central bankers since the 1980s. It gave them room to be more expansionary. But if inflation expectations change it means monetary policy has to be more aggressive to ...


Allison Schrager: New York’s Return to Normal: A Long Way to Go
Posted: February 16, 2022 at 09:51 AM (Wednesday)

There are some signs New York is returning to normal. But the data shows the city has a long way to go. The figure from MTA data shows the number of riders on various forms of public transportation last Wednesday. Subways, buses, and commuter trains all have about half the riders they did pre-pandemic. Commuting is at very low levels on LIRR ...


Allison Schrager: Gen Z Is Too Compliant to Achieve Greatness
Posted: February 14, 2022 at 06:00 AM (Monday)

Nations thrive when rebellion is based on curiosity and new ideas, and America's youth aren't living up to the challenge. The pandemic revealed many troubling trends that had been brewing for a long time without much notice. A big one is the curious lack of rebelliousness among young people. University and high school years used to be a time ...


Allison Schrager: Free-Lunch Economics
Posted: February 7, 2022 at 10:52 AM (Monday)

Policymakers are wishing away our economic troubles. A central lesson of economics is that there's rarely such a thing as a free lunch. Most policy choices involve trade-offs or benefit some people while incurring costs on others. Every so often, exceptions arise–cases of market failures owing to asymmetric information or incomplete ...


Allison Schrager: Long-Distance Trucking Reflects Broader Economy
Posted: February 2, 2022 at 10:55 AM (Wednesday)

For many Americans shortages and rising prices are a new and unsettling experience. It probably explains why, despite a tight job market, many have a dim view of economic conditions. Many parts of the supply chain have become slower and more expensive and we all feel the effects. We see this in the freight costs for long-haul trucking, which ...


Allison Schrager: Startup Boom Is the Kind of Risk-Taking Americans Need
Posted: January 31, 2022 at 06:30 AM (Monday)

A government that's too protective stifles innovation and productivity, when mostly it should just get out of the way. There is often an instinct after a big economic shock to retreat from risk. Usually that means government adopting policies that accept risk on behalf of individuals. The Great Depression was followed by the New Deal; the ...


Allison Schrager: Men Are Getting Left Behind in the Jobs Boom
Posted: January 24, 2022 at 06:30 AM (Monday)

Economic upheaval has been pushing a disproportionate number of men out of the workforce, and a growing number never come back. One solution lies in high school. Insights into the economy can be found in surprising places. In a brothel, for instance, how services are priced and who ends up working there can reveal a lot about the state of ...


Allison Schrager: The 2020 Recession and Unusual Recovery
Posted: January 19, 2022 at 07:00 AM (Wednesday)

It was a recession unlike any other. In 2020 the government purposely turned off the economy. It also sent people lots of money. So it should not be a surprise that America is experiencing an unusual recovery. The figure below shows household net worth and how it fared during the 2007-2008 recession and the one in 2020. Unlike most ...


Allison Schrager: How Safe Assets Became Investors' Biggest Risk
Posted: January 18, 2022 at 06:00 AM (Tuesday)

"Risk free" is the most important concept in financial markets because it's the baseline for setting the value of pretty much everything. Now the pandemic has drained it of meaning. Markets are weird right now. The value of risk-free assets has gone all out of whack, and if that doesn't seem scary, keep reading. Sri Lanka is facing a debt ...


Allison Schrager: FED Buys More TIPS Than Treasury Issues
Posted: January 12, 2022 at 07:00 AM (Wednesday)

When many economists advocated for the creation of inflation protected Treasury bonds (TIPS), it was for two reasons. It offered inflation protection and because it was traded there would be a market price for inflation protection. This would offer policy makers and investors an indication of expected inflation, the difference between nominal ...


Allison Schrager: A Bigger Child Tax Credit Isn't the Poverty Solution We Need
Posted: January 11, 2022 at 05:30 AM (Tuesday)

The U.S. should improve its welfare system instead of spreading more money to the middle-class at the expense of the poor. The enhanced child tax credit (CTC) has expired and I, for one, will not mourn it. Neither should you. Sure, it's been extremely popular — who doesn't like getting more money from the government? But it's not great ...


Allison Schrager: In 2022, Demand for Labor Remains Strong
Posted: January 5, 2022 at 10:15 AM (Wednesday)

The virus may still be raging, but it is not holding back the labor market. The figure below plots the % change in job listings at Indeed compared to February 1, 2020. In the spring of 2020 few firms were hiring, listings fell. But they rebounded in 2021 and continue to rise. There are now 60% more jobs being advertised than before the ...


Allison Schrager: There's Never a Good Time for Price Controls
Posted: January 4, 2022 at 03:00 PM (Tuesday)

I came of age as an economist during the Great Moderation, which lasted from the mid-1980s up to the financial crisis. It was a time of low, stable inflation and relatively mild recessions. I was taught in graduate school that this success had come because, after many stumbles and policy errors, economists finally knew what worked. We learned ...


Allison Schrager: Restaurant Industry's Covid Struggles: Is the Worst Over?
Posted: December 22, 2021 at 11:17 AM (Wednesday)

The pandemic was exceptionally hard on the restaurant industry. Many establishments barely held on during 2020 and were hoping to recover in 2021. Much of their money is made over the holidays. But the Omicron variant outbreak may put a damper on those plans. The figures below are from Opentable and track the number of diners in 2021 each ...


Allison Schrager: Federal Reserve Course Correction?
Posted: December 17, 2021 at 11:07 AM (Friday)

The Federal Reserve has announced a tighter monetary policy, but its stance remains accommodative. Next year will test whether the new approach to monetary policy recommended by advocates and embraced by central banks actually works. The stakes are high. The labor market appears to be recovering–unemployment is down to 4.2 percent–but ...


Allison Schrager: Reverse Repurchases Soar Amidst Pandemic
Posted: December 15, 2021 at 01:55 PM (Wednesday)

Since 2008 the Fed changed how it conducted monetary policy. It started paying interest on reserves and did more reverse repurchase agreements. This is when the Fed sells a security to an eligible party (often financial institutions that do not have a reserve account at the Fed) with the agreement to buy it back the next day for a different ...


Allison Schrager: Finding Your Power in a Higher-Priced World
Posted: December 15, 2021 at 05:30 AM (Wednesday)

Consumers have a lot more control than the last time the economy was plagued by inflation. On-the-spot comparison shopping is just one way to play defense. I am fairly compulsive about always having my keys with me. But after a series of mishaps, I got locked out of my apartment last week. It was after midnight so I had to call a 24-hour ...


Allison Schrager: American Personal Saving Rates Return to Pre-Pandemic Levels
Posted: December 8, 2021 at 09:27 AM (Wednesday)

Despite higher prices and lower rates of employment, American saving rates have finally returned to their pre-pandemic levels. When people were stuck at home and sent checks saving rates reached record highs, exceeding more than 25%. It is no surprise household balance sheets are in their strongest position in years. Higher saving can be a ...


Allison Schrager: Where Are All the Gig Workers and What Are They Doing?
Posted: December 6, 2021 at 08:30 AM (Monday)

The pandemic has accelerated one of the biggest changes in our labor market since the industrial evolution: independent work. Now we need policy makers to embrace it. The Great Resignation is turning into the biggest economic puzzle of our time. Quits are up and hires are down, and employers from investment banks to McDonald's Corp. ...


Allison Schrager: Employment-to-Population Ratio Indicate Delayed Labor Market Recovery
Posted: December 1, 2021 at 07:00 AM (Wednesday)

If you look at some numbers the labor market appears to be recovering. Analysts expect a good jobs report this Friday and unemployment claims have fallen. But these numbers don't tell the full story. The figure below is the employment to population ratio of American men. The shaded areas indicate a recession. After each recession many leave ...


Allison Schrager: 10-Year Breakeven Rate Reaches All-Time High, Bond Market Takes Notice
Posted: November 24, 2021 at 07:00 AM (Wednesday)

Inflation doves often argue we needn't worry about inflation until the bond market starts sounding alarms. While it is certainly not on fire yet, the bond market does seem to be getting concerned. The 10-year breakeven rate, the difference between 10-year nominal and real bonds, reached an all-time high of 2.76% this month. Breakevens ...


Allison Schrager: A False Choice
Posted: November 19, 2021 at 11:46 AM (Friday)

Biden’s top labor economist suggests a trade-off between inflation and employment.
Count President Biden's top labor economist, Janelle Jones, as among the few who thinks that the Federal Reserve should keep its foot on the gas. At 6.2 percent, inflation is up to its highest rate in decades. Yet the Fed has not only set rates to near zero but ...


Allison Schrager: How to Stop Inflation From Wrecking Your Retirement
Posted: November 18, 2021 at 09:00 AM (Thursday)

Old rules, like spending 4% of your assets each year, were simple but wrong. Retirees need a more versatile strategy to provide a stable income. Inflation is why the 4% rule never made any sense. I've always found it strange that we put one of the most complex and difficult financial problems on senior citizens. After you retire it's very hard ...


Allison Schrager: The Labor Market Doesn’t Need Antitrust Protection
Posted: November 15, 2021 at 07:00 AM (Monday)

The DOJ is suing to stop Simon & Schuster’s merger deal, but industry consolidation can actually be a good thing for workers (and authors). A national labor shortage is an odd time to argue that some workers don't have enough job options. But that's what the U.S. Department of Justice is doing — specifically, they're worried about the prospects ...


Allison Schrager: MI Responds: The October Consumer Price Index
Posted: November 10, 2021 at 09:16 AM (Wednesday)

On The October Consumer Price Index The latest inflation number, 6.2%, should dispel any notion that higher inflation is transitory. Not only are prices higher, but also the increases are dispersed among many different kinds of goods. And with winter coming, surging energy prices, and continued supply shortages, it could get worse. The ...


Allison Schrager: Google Reveals US Mobility Trends
Posted: November 10, 2021 at 07:00 AM (Wednesday)

It has been more than 18 months since the start of the pandemic, but Americans are still not back to normal. The chart below is Google mobility trends. It shows the percent change in mobility compared to winter 2020. Americans are still spending more leisure time in parks. But time on trains and commuting to work remains low and did not ...


Allison Schrager: A Tapering US Debt Market
Posted: November 3, 2021 at 07:00 AM (Wednesday)

Interest rates have remained low (at least by historical standards) despite ballooning debt levels for several reasons. A big one is foreign investors and governments appeared to have an insatiable appetite for US treasuries. As we ponder adding to our entitlement state, it is important to consider if we can count on investors willing to buy ...


Allison Schrager: The Mystery of Inflation
Posted: October 27, 2021 at 08:46 AM (Wednesday)

Inflation is a mystery, is it transitory or just limited to a few different goods like energy and used cars? The picture below is median PCE inflation and its dispersion, or the price increases of goods whose increases are in the 90th and 10th percentile (or prices went up a lot or a little) from the San Francisco Fed. It is surprising that ...


Allison Schrager: Bad Managers Are Making the Labor Crisis Worse
Posted: October 25, 2021 at 07:45 AM (Monday)

With quit rates soaring, companies can’t afford to let lousy bosses be one more reason for workers to leave. It's being called the Great Resignation. Quits are at their highest rate in 20 years and no one seems to understand why. One thing is for sure: the labor market has gone weird. People are leaving their jobs without having a new one ...


Allison Schrager: New York Fed Survey Shows Adjusted Wage Expectations
Posted: October 20, 2021 at 07:00 AM (Wednesday)

Wages are up, but there is still an on-going labor shortage. Workers have adjusted their expectations. The figure below is from a survey from the New York Fed, shows the minimum wage people would need to accept a new job, a reservation wage. It increased for both men and women since the re-opening. But in last month fell a bit for women–though ...


Allison Schrager: Some Things Money Can’t Buy, For everything else, there’s deception.
Posted: October 18, 2021 at 02:25 PM (Monday)

What does it mean for a service or good to cost zero dollars? This was once a straightforward question: if you paid nothing for it, it was free. But "free" has apparently been redefined. In case you thought the days of triggering presidential tweets were behind us, the White House tweeted over the weekend: "The cost of the Build Back Better ...


Allison Schrager: The 60/40 Portfolio Isn't Dead, Just More Expensive
Posted: October 18, 2021 at 06:00 AM (Monday)

Split your investments any way you like, just be ready to pay a lot more to find safety in this market. Volatile, pandemic-riven markets for stocks and bonds has Wall Street ready — again — to declare the traditional 60/40 portfolio split a dead strategy. The prospect of a low-growth, high-inflation economy (stagflation) dims the prospects of ...


Allison Schrager: The Labor Market is Very Strange
Posted: October 13, 2021 at 09:01 AM (Wednesday)

Quitting your job for a better one is often how you advance your pay and career progression. So it could be good news that quit rates and pay are going up. But unemployment remains high and many jobs are unfilled. Normally quits and hires move together or with a slight lag. But an index of quits and hires from JOLTS show the correlation broke ...


Allison Schrager: Inflation Expectations Matter for Federal Reserve’s Clout
Posted: October 8, 2021 at 06:00 AM (Friday)

Faster price growth can become a self-fulfilling spiral and undermine the central bank’s credibility. After decades of rarely cracking 2%, inflation was up 5.3% year-over-year in August. This was unthinkable a few years ago, and it may get worse before it gets better. Ports, rails and trucks are backed up, and supply-chain shortages abound. ...


Allison Schrager: Data Dispels Shrinking Welfare State Myth
Posted: October 6, 2021 at 12:12 AM (Wednesday)

Democrats and Congress are debating how much to expand the welfare state. One argument being made is that the welfare state has been shrinking and we must restore it to historical levels. But this does not square with the data. The figure below is welfare and social spending per capita (at the state and federal level). It has been increasing ...


Allison Schrager: The People's Guide to Assessing Covid Risk
Posted: September 30, 2021 at 06:00 AM (Thursday)

There’s a way to view all those mathematical probabilities, assess potential peril and stop punishing yourself with unnecessary precautions. We’re often told that humans are lousy at judging risk, and the pandemic seems to have confirmed this in spades. What else can explain vaccine hesitancy or otherwise healthy people wearing two masks as ...


Allison Schrager: Europe and UK Gas Shortage May Accelerate Inflation
Posted: September 29, 2021 at 12:12 AM (Wednesday)

Europe and the UK are experiencing a gas shortage that threatens to undermine its goals, and wide-spread support, for a zero-emissions future. It also leaves them more dependent on Russia. Energy operates in global markets, which means gas prices in the US are also on the rise. This may prove to be a blip, but the decision to cut back on ...


Allison Schrager: Who Will Pay for the Elderly Is Now An Urgent Question
Posted: September 27, 2021 at 06:00 AM (Monday)

As the U.S. population skews older, long-term care will become a more urgent need for families. The pandemic showed the current system falls woefully short. The next few years are going to determine how you'll spend the most vulnerable years of your life, and who's going to pay for it. Pandemic excluded, the odds that you'll live to an ...


Allison Schrager: Mobility Data Shows U.S. and UK Workers Still Travel to Work Less Than Pre-Lockdowns
Posted: September 22, 2021 at 12:12 AM (Wednesday)

It has been more than 18 months since the start of the pandemic and many people have still not gone back to the office. There was hope the fall would bring people back, but according to Google mobility data travel to work the U.S., UK, Australia, and France is still down more than 20% from pre-pandemic levels. South Koreans are mostly back ...


Allison Schrager: Men Are Losing Their Grip in the New Economy
Posted: September 20, 2021 at 07:00 AM (Monday)

Job growth and education are putting women in a prime position to dominate. Should we rejoice or worry? It's no longer a man's world. Pundits have speculated for more than a decade about the end of men. After centuries of dominating the economy, most of the job growth is in industries where women traditionally work. And those jobs require ...


Allison Schrager: One Year Inflation Expectations and How Higher Prices May Affect Them
Posted: September 15, 2021 at 12:30 AM (Wednesday)

Economists and pundits remain divided on whether the current higher inflation is transitory or a new normal. But transitory inflation can become permanent if it alters expectations. If everyone expects higher inflation it can become self-fulling because they demand higher wages and raise their prices. So far, it seems higher prices are ...


Allison Schrager: 'Lie Flat’ If You Want, But Be Ready to Pay the Price
Posted: September 13, 2021 at 06:30 AM (Monday)

Upper-middle-class, well-educated young Americans are getting in on the "Lie Flat" protest movement started in China. But they may not understand what it will cost them.The new "lie flat" social protest movement seems to be catching on. It started among over-worked Chinese factory workers burned out from grueling 12-hour, six-day work weeks, ...


Allison Schrager: Biden's Vaccine Mandate Is More Bad News for the Labor Market
Posted: September 10, 2021 at 02:36 PM (Friday)

Workers have never had more power. If they quit rather than get a vaccine, or need to be fired, it will be expensive and difficult for a company to replace them. Good policy can be bad economics. The U.S. would be better off if as many adults as possible are vaccinated. But while President Joe Biden's mandate will lessen risk for Americans, ...


Allison Schrager: Enhanced Unemployment Benefits End May Test Labor Market Strength
Posted: September 8, 2021 at 09:01 AM (Wednesday)

This month enhanced unemployment benefits will end, some workers will be kicked off benefits entirely, and schools have mostly reopened. This will be the first big test of the labor market, how much damage was done by the pandemic and how the policies associated with it helped or harmed the economy. As of last month, the share of ...


Allison Schrager: The Welfare-State Reality Americans Aren’t Debating
Posted: September 3, 2021 at 06:00 AM (Friday)

Biden’s budget plan would create a vast new network of European-style government entitlements that would inevitably lead to European-style taxes. It may be in 2022­ that we transform the U.S. economy, but not for the better. House Democrats passed a $3.5 trillion budget resolution for its Build Back Better Agenda — a step in the ...


Allison Schrager: Stay in Your Lane
Posted: September 2, 2021 at 12:02 PM (Thursday)

The Fed is not the right institution to tackle economic inequality. Last Friday, the Kansas City Fed kicked off its annual Jackson Hole Economic Symposium (now held as a virtual event). Fed watchers tuned in to listen to Jerome Powell's speech, looking for clues about when the central bank will start winding down quantitative easing. But the ...


Allison Schrager: US Personal Savings Rate Spike with Stimulus
Posted: September 1, 2021 at 08:54 AM (Wednesday)

For the last few decades the US personal saving rate hovered around 5% before slowly creeping up the last few years. But everything changed with the pandemic when the government gave most Americans big checks and they had nowhere to spend it. Saving shot up to nearly 25%, an all-time high since the data was collected (the spikes correspond to ...


Allison Schrager: Behavioral Economics Doesn't Have to Be a Total Loss
Posted: August 27, 2021 at 06:30 AM (Friday)

Exploiting personal biases to influence people's behavior was always a bad idea. Instead, governments and companies should find better ways to communicate risks. Behavioral economics is facing a reckoning. For a few decades, the idea of applying human psychology to economics made a dry subject hip and relatable. Before, the field seemed out ...


Allison Schrager: The Fed’s Enormous Balance Sheet Is Here to Stay
Posted: August 25, 2021 at 10:05 AM (Wednesday)

This week the Fed will have its annual Jackson Hole meeting virtually. The markets will be looking for clues of a Fed taper, or it starting to shrink its purchases of long-dated and some private sector assets. But if history is any guide, the enormous Fed balance sheet is here to say. During the last two recessions the Fed bought an ...


Allison Schrager: Florida is America's Future: Old, Southern and Retired
Posted: August 21, 2021 at 08:00 AM (Saturday)

One of the most important trends to emerge from the 2020 Census didn't get much attention last weWhy we should be concerned that the fastest-growing cities in the U.S. are retirement villages in the South. ek, but it reveals more about how both the U.S. economy and its politics will look in the coming years than most other details focused on ...


Allison Schrager: No Home for Innovation
Posted: August 19, 2021 at 02:04 PM (Thursday)

Why China will never have the world’s preeminent economy. Being the world's preeminent economy means being on the vanguard of innovation–constantly coming up with new ideas that change the world, or at least having an economy that can recognize and adopt the latest and best technology. For more than a century, America has filled this role. ...


Allison Schrager: UK Wage Growth Hints to a Global Phenomena
Posted: August 18, 2021 at 09:17 AM (Wednesday)

Wages are going up in America, especially for low wage workers. No one knows why exactly. It could be unemployment benefits, inflation, or a higher reservation wage. The same thing is happening in the UK. Wages are up more than 8% compared to last year in the United Kingdom too, and have been rising all spring, even before the economy ...


Allison Schrager: To Curb Student Debt, Let Borrowers Declare Bankruptcy
Posted: August 12, 2021 at 09:00 AM (Thursday)

Lenders — whether private or government — would be more discerning about handing out loans for advanced degrees if they had to consider borrowers' creditworthiness. Education can be the best investment you make, unless it's for graduate school. Students seeking advanced degrees make up only 25% of student borrowers, yet they account for ...


Allison Schrager: Is Inflation Here to Stay?
Posted: August 11, 2021 at 03:36 PM (Wednesday)

Some conditions are right for a repeat of the persistent rising prices of the 1970s. Like many Americans, I am experiencing something new these days. Inflation is here: prices are up 5.4 percent from a year ago, according to the Labor Department's newest CPI numbers. This is more than just a statistic. We can see it in signs in a coffee ...


Allison Schrager: New Business Apps Signal Post-Covid Boom
Posted: August 11, 2021 at 11:54 AM (Wednesday)

The pandemic is expected to change the labor market, with more work from home and higher wages. But one unexpected change is the large increase in new business applications. The figure below from the Census shows a large pandemic increase. The increase is unusual; nothing like it happened during the last recession. Most of the new ...


Allison Schrager: 'Buy America' Was a Bad Idea Last Century. It's a Worse One Now.
Posted: August 6, 2021 at 06:30 AM (Friday)

Far from modernizing the economy, recycling these old rules in the new infrastructure plan won't create more jobs or make the U.S. more competitive. The infrastructure bill moving through the Senate takes more than 2,700 pages to lay out $1 trillion in spending. Many aspects of the plan will be popular. Americans love infrastructure; who ...


Allison Schrager: Lower Skilled Workers: Bolder, or Scarcer?
Posted: August 4, 2021 at 11:14 AM (Wednesday)

For more than a year, many employers have said they can't find workers. There are many sources of blame: high unemployment benefits, lack of childcare, and even a desire to change jobs. This figure from the NY Fed asks survey respondents how much they need to be paid to take a new job. We see a 22% increase since 2019 for non-college ...


Allison Schrager: How Behavioral Economics Views Mask Mandates
Posted: July 27, 2021 at 03:38 PM (Tuesday)

The risk calculation has changed with Covid; reverting to early-pandemic responses won’t help the U.S. get vaccinated. Just when we thought we were almost done, Covid-19 cases are surging. The world may have one of the most effective vaccines ever developed, but not everyone is taking it and so we remain susceptible to the delta variant. ...


Allison Schrager: The Dearth-of-Safe-Assets Era Is Over
Posted: July 26, 2021 at 06:30 AM (Monday)

Why a glut of Treasuries and other "risk-free" investments could be an even bigger problem for the economy. The safe-asset shortage is over. Should we worry? A safe asset is any asset that you can sell at any time and be sure to get your money back. That often means short-term government treasuries or bank deposits. Hence, when demand ...


Allison Schrager: Universal Basic Wealth?
Posted: July 21, 2021 at 02:01 PM (Wednesday)

If you want to reduce inequality, these new proposals aren’t the way to do it. Forget UBI, or universal basic income–the future could be universal basic wealth (or capital), according to a recent op-ed by California state senator Bob Hertzberg and tech titans Eric Schmidt and Evan Spiegel. They argue that California should use its budget ...


Allison Schrager: Americans Are Back on the Move
Posted: July 21, 2021 at 11:57 AM (Wednesday)

Despite rising cases and fears of the Delta variant, Americans are on the move. The figure below are mobility trends from Google of Americans in 2021 compared to early 2020 (before the pandemic). It appears that certain sectors have largely recovered, retail, residential, grocery, pharmacy, and time at home are back to their pre-pandemic ...


Allison Schrager: Generation Z Should Fear a Guaranteed Income
Posted: July 16, 2021 at 06:30 AM (Friday)

In a new study, a reliable flow of free money prompted people to take easier, lower-wage jobs, which would hurt our youngest workers most. It's a simple, utopian idea. If we give everyone a monthly check, we can eliminate poverty and do away with the inefficiencies of our cumbersome and flawed welfare state. Minneapolis is the latest city to ...


Allison Schrager: The Unequal Impact of Inflation
Posted: July 14, 2021 at 10:39 AM (Wednesday)

Income and wealth inequality has been rising since the 1980s. But what gets less attention is how much people consume. The following figure, using data from the Fed, shows who is buying consumer durables, which includes things like cars, washing machines, etc. And it shows that the bottom 50% is taking up a bigger share of consumer ...


Allison Schrager: No Taper in Sight
Posted: July 7, 2021 at 12:39 PM (Wednesday)

The economy grew 6.1% last quarter, unemployment continues to fall, and job openings are up. And the Fed continues stimulate the economy; its balance sheet continues to grow. As of June it exceeded $8 trillion, a once unthinkable sum. There is talk of talking about ending Quantitative Easing later this year. But even if it does, the Fed ...


Allison Schrager: Americans Should Quit Their Jobs More Often
Posted: July 7, 2021 at 10:46 AM (Wednesday)

The economy would be more dynamic if workers just learned to walk away from their employers. I recently caught up with a friend who has been working at the same company for more than a decade and was content enough. Other companies might pay more, make him feel more valued and offer room for advancement, but he didn't pay much attention to ...


Allison Schrager: Break Up Big Business?
Posted: July 5, 2021 at 01:30 PM (Monday)

President Biden’s contemplated executive order targeting large firms looks like a solution in search of a problem. American politics has a large cast of villains these days, but few cut across party lines as consistently as big business. The Biden administration is already considering using antitrust to break up big tech, and it may go a ...


Allison Schrager: How Americans Are Spending Their Money
Posted: June 30, 2021 at 10:14 AM (Wednesday)

After more than a year at home and with lots of money in their pockets, Americans are ready to spend. According to data from the Bureau of Economic Analysis, spending is up for all consumer goods, and for food at home in particular--which is still rising even months into the re-opening. Perhaps Americans learned to cook this past year and want ...


Allison Schrager: Some Cities Return to Normal While Others Struggle to Leave COVID-19 Behind
Posted: June 23, 2021 at 10:57 AM (Wednesday)

It feels like American cities are coming back to life. But some are coming back faster than others. The figure above plots the percent change in restaurant diners compared to the same week in 2019 from OpenTable. Overall, most Americans are back in force, restaurant traffic is up 40% for the United states as a whole and much higher in cities ...


Allison Schrager: Millennials, the Wealthiest Generation? Believe It
Posted: June 23, 2021 at 06:00 AM (Wednesday)

The world has changed since boomers were young adults, and so has the value of housing, education and a steady job. Millennials spent their early adulthood dogged by two large recessions, rising housing prices and exploding student debt. It's no wonder they're less likely, even as they approach 40, to have many of the traditional trappings ...


Allison Schrager: Here Comes the Tax Man
Posted: June 22, 2021 at 02:06 PM (Tuesday)

We need to raise more tax revenue, but how we do it matters. Like it or not, we need to raise more tax revenue. Both Democrats and Republicans spent the last few decades running up the debt, and it's getting worse. Despite a vigorous recovery, the Biden administration plans to exceed a 100 percent debt-to-GDP ratio for the next ten years and ...


Allison Schrager: Not Even Bond Traders Can Predict the Future
Posted: June 18, 2021 at 06:30 AM (Friday)

Falling yields should be a source of concern, not a sign that inflation is being held at bay. Consumer prices paid by city dwellers in the U.S. rose more than 7% last month and more than 9% in April on an annualized basis. If this keeps up the rest of the year, it will be the highest inflation rate the U.S. has experienced since the 1980s. ...


Allison Schrager: The Generational Divide on Inflation
Posted: June 16, 2021 at 10:00 AM (Wednesday)

1Annualized inflation was more than 7% last month, and 9% the month before. It is still unclear if this is temporary (as the Fed argues, or is hoping) or is more permanent. Economists think inflation is driven by expectations. If people expect inflation they increase prices and demand higher wages, and then expectations are realized. The ...

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