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the recession’s likely long-term impact on homelessness

Published by Anonymous (not verified) on Fri, 11/12/2020 - 2:59am in

I’ve just written a report for Employment and Social Development Canada on the current recession’s likely long-term impact on homelessness in Canada. An overview of the report can be found here.

the recession’s likely long-term impact on homelessness

Published by Anonymous (not verified) on Fri, 11/12/2020 - 2:59am in

I’ve just written a report for Employment and Social Development Canada on the current recession’s likely long-term impact on homelessness in Canada. An overview of the report can be found here.

Homelessness in canada could rise due to recession

Published by Anonymous (not verified) on Sat, 26/09/2020 - 2:50am in

I am currently writing a report for Employment and Social Development Canada looking at the long-term impact of the current recession on homelessness. It should be ready by early November.

In the meantime, a teaser blog post I’ve just written on the same topic is available here.

Homelessness in canada could rise due to recession

Published by Anonymous (not verified) on Sat, 26/09/2020 - 2:50am in

I am currently writing a report for Employment and Social Development Canada looking at the long-term impact of the current recession on homelessness. It should be ready by early November.

In the meantime, a teaser blog post I’ve just written on the same topic is available here.

Debt Relief and the CARES Act: Which Borrowers Benefit the Most?

Published by Anonymous (not verified) on Tue, 18/08/2020 - 9:00pm in

Rajashri Chakrabarti, Andrew Haughwout, Donghoon Lee, William Nober, Joelle Scally, and Wilbert van der Klaauw

 Which Borrowers Benefit the Most?

COVID-19 and associated social distancing measures have had major labor market ramifications, with massive job losses and furloughs. Millions of people have filed jobless claims since mid-March—6.9 million in the week of March 28 alone. These developments will surely lead to financial hardship for millions of Americans, especially those who hold outstanding debts while facing diminishing or disappearing wages. The CARES Act, passed by Congress on April 2, 2020, provided $2.2 trillion in disaster relief to combat the economic impacts of COVID-19. Among other measures, it included mortgage and student debt relief measures to alleviate the cash flow problems of borrowers. In this post, we examine who could benefit most (and by how much) from various debt relief provisions under the CARES Act.

Data and Definitions

In addition to direct stimulus to individuals and corporations, the CARES Act provides for debt forbearance (that is, a temporary break from debt service payments) for various types of loans. FHA- and GSE-backed mortgages are eligible for a 180-day forbearance period, which can be extended to 360 days, but the borrower needs to contact the mortgage servicer to request forbearance. There was also a moratorium on foreclosure for 60 days after March 18. Federal student debt borrowers can defer payments until September 30, with interest waived. This forbearance is administrative and does not have to be negotiated. The Act also suspends involuntary collections, which includes wage garnishment and the reduction of tax refunds or other federal benefits, for qualifying federal student debt borrowers who are in default. While private student debt makes up a small share (approximately 8 percent) of total outstanding student debt, our data do not enable us to differentiate between federal and private student debt. The small subset of the student debt borrowers who have only private student loans will not be eligible for CARES Act forbearance relief. For simplicity, we will consider all student debt borrowers as being eligible for student debt forbearance in this post.

To understand who may benefit (and by how much) from the mortgage and student debt relief proposed, we draw on the New York Fed’s Consumer Credit Panel—an anonymized, nationally representative sample of Equifax credit report data. Our data set for this post covers a representative 1 percent sample of the nation’s adults with credit records, showing payments, balances, and delinquencies for various types of debt, including student loans, mortgages, auto loans, and credit cards. We focus on mortgage and student debt in this post because the relief under the CARES Act pertained to these two kinds of consumer debt.

To understand who the potential beneficiaries of debt relief are, we examine differences in forbearance relief across income, age and racial lines. Specifically, we split zip codes into equal-population quartiles of median household income (pre-tax); we refer to the bottom quartile as “low income,” (with median income below $46,310) the two middle quartiles as “middle income,” and the top quartile as “high income” (with median income above $78,303). We also look at zip codes that are “majority Black,” “majority Hispanic,” “majority white,” and “mixed.” We define majority Black zip codes (neighborhoods) as those in which Black residents make up at least 50 percent of the population, and define majority Hispanic and majority white zip codes (neighborhoods) similarly. We group all other neighborhoods together into a fourth category, “mixed” neighborhoods. For all income and race data, we use the 2014-18 Five-Year American Community Survey. We investigate the extent of mortgage and student debt relief faced by each of these neighborhoods: low income, middle income, high income, majority Black, majority Hispanic, majority white, and mixed.

At the end of December 2019, the majority of borrowers (63 percent) in our sample have neither mortgage nor student debt, but 21 percent have a mortgage but no student debt and 12 percent have student debt but no mortgage. Only 4 percent of adults have both mortgage and student debt. The median student debt borrower is 34 years old while the median age of mortgagors is 51. Thus, while the student debt relief will potentially benefit younger borrowers, the mortgage relief will potentially benefit relatively older borrowers.

Who Can Benefit from CARES Act Debt Relief?

Borrowers who have student debt or mortgage debt (and hence may qualify for CARES Act debt moratoria) fall into three groups: those with student debt but no mortgage, those with mortgage but no student debt, and those with both types of debt. In the table below, we investigate what share of the adult (above 18) population in each type of neighborhood has student debt but no mortgage (column 1), mortgage but no student debt (column 2), and both mortgage and student debt (column 3), and hence will potentially be eligible for corresponding student debt and/or mortgage debt relief. Differentiating across neighborhoods by income, we find in column 1 that similar shares of the adult population will potentially be eligible for assistance from only the student debt relief provisions of the CARES Act across the three neighborhoods (18 percent), but a markedly higher share (more than double) can be eligible for mortgage relief in the high income neighborhoods relative to low income neighborhoods (column 2). The share of the adult population that may benefit from only mortgage relief is also considerably larger in middle income neighborhoods (1.6 times) than in low income neighborhoods. Column 3 reveals that the share of adult population respectively in high and middle income neighborhoods that can benefit from both the CARES Act mortgage and student debt relief is double the corresponding share in low income neighborhoods.

Differentiating by race, column 1 shows that a significantly larger share (20 percent) of the adult population in majority Black neighborhoods can be eligible for assistance from only the student debt relief provisions of the CARES Act compared to such shares in the majority Hispanic, majority white, and mixed neighborhoods. In contrast, columns 2 and 3 find that a substantially larger share in majority white neighborhoods will be potentially eligible for only mortgage relief or both mortgage and student debt relief compared to the shares in majority Black, majority Hispanic, and mixed neighborhoods.

 Which Borrowers Benefit the Most?

Is There Heterogeneity in the Expected Benefit from the CARES Act Student Debt Forbearance?

To further understand who may benefit and the extent of the potential cash flow assistance (driven by funds released by deferral of payments), we look at a neighborhood type in the table below and examine what share of the adult population in that neighborhood will be eligible for any student debt assistance and how much assistance they may receive based on their debt profile at the end of 2019. Differentiating by income, we find in the first column that a slightly higher share of the adult population in high and middle income neighborhoods can benefit from student debt relief than in the low income neighborhood. Unlike column 1 of the first table in this post, this column accounts for any student debt relief, regardless of whether the borrower holds both mortgage and student debt or holds student debt but no mortgage debt. The higher shares in this table (in contrast to the earlier table) are driven by increased incidence of borrowers who hold both student and mortgage debt in the high and middle income neighborhoods.

 Which Borrowers Benefit the Most?

Turning to the amount of potential forbearance, we find that the median scheduled monthly payments per borrower (those eligible for forbearance) in low income neighborhoods are markedly smaller than those in high income neighborhoods; at least half of the student loan borrowers in low income neighborhoods had a scheduled payment of zero before the onset of the pandemic. These may be due to a number of factors: smaller loan sizes in these neighborhoods, larger incidence of in-school deferment, or higher participation in income-driven repayment programs in these neighborhoods. In column 4, we find that the mean scheduled payment per adult (and hence the potential assistance per adult) in high income neighborhoods is more than double that in low income neighborhoods. Annualizing the payments and comparing mean scheduled payment to the median household income of the zip code the person lives in, we find that the relief is actually a higher share of median income in these low income neighborhoods, despite the smaller forbearance amount (column 5).

By race, we continue to find that majority Black zip codes have markedly higher concentrations of student debt borrowers relative to the other neighborhoods. 23 percent of the adult population of majority Black neighborhoods is eligible for student debt relief versus 14 percent in majority Hispanic and 17 percent in majority white and mixed neighborhoods. However, as in the case of low income neighborhoods, more than 50 percent of borrowers in majority Black zip codes have no regular monthly scheduled payment, and thus would not benefit from forbearance. We find in column 3 that the mean scheduled payment per borrower is higher in majority white neighborhoods and significantly lower in majority Black and majority Hispanic neighborhoods. In column 4, we find that the mean scheduled payment per adult is broadly similar across majority white, majority Black and mixed neighborhoods, while it is perceptibly lower in Hispanic neighborhoods. The difference in patterns between columns 3 and 4 is driven by the fact that majority white neighborhoods are considerably more populous than majority Black neighborhoods (column 4 of the first table in this post). Interestingly, we once again find in the last column that the potential forbearance amount will constitute a higher share of median household income in majority Black neighborhoods than in other neighborhoods. In summary, we find that larger shares of borrowers from majority Black neighborhoods can benefit from the student debt relief provision, although the expected per-borrower relief to these communities is smaller. Regardless, this relief will address a higher debt burden (as share of income) in these neighborhoods.

Understanding Heterogeneity in the CARES Act Mortgage Debt Forbearance Relief

We can repeat this analysis for mortgage debt. Remember, not all mortgages are FHA or GSE-backed and hence eligible for forbearance. The table below shows that the highest concentrations are in majority white and higher-income zip codes, as qualifying for a mortgage requires a relatively high credit score and steady stream of income. Mortgagors in high income zip codes also pay much more per month than those in other areas, indicating higher home value and mortgage balance on average. We find from column 3 that the monthly scheduled payment of mortgagors (and hence the potential forbearance amount per mortgagor) is higher for those from high income, mixed, and majority white neighborhoods, and smallest for those from low income and majority Black neighborhoods. Looking at mean scheduled payment per adult in the various neighborhoods, the indicator of average per-capita forbearance dollars to a neighborhood, once again we find that high income, majority white, and mixed neighborhoods can expect higher mortgage forbearance relief, while this relief is lowest for low income, majority Black, and majority Hispanic neighborhoods (column 4). Nevertheless, turning to the mean payment as a share of median income in the neighborhood, we find that this relief amount again constitutes higher relative debt burdens in low income, majority Black, and majority Hispanic neighborhoods, largely because of lower median income in these neighborhoods.

 Which Borrowers Benefit the Most?

To summarize, we have investigated who may benefit (and the expected forbearance amounts) from the various debt relief provisions in the CARES Act. We find that while student debt relief may be expected to reach a larger share of borrowers in majority Black neighborhoods, the dollar value of expected student debt relief per borrower will be perceptibly less in low income, majority Black, and majority Hispanic neighborhoods. Unlike student debt relief, mortgage relief may be concentrated in high income and majority white neighborhoods, both in terms of dollar amounts and share of borrowers that will be potentially assisted. It is worth emphasizing that in this post we have outlined who may benefit from the mortgage and student debt relief provisions of the CARES Act. In other words, we have focused on the supply of this relief to different neighborhoods. Who will actually benefit and the amount of relief obtained will be determined by a combination of supply and demand factors. Since, low income and majority minority neighborhoods have been affected more negatively by this pandemic, residents in these neighborhoods may have the highest take-up rate. Moreover, mortgage benefits are not automatic; mortgagors must actively seek out these benefits by contacting servicers and proving financial hardship. Thus, ultimately, who actually benefits and by how much will be determined by a combination of factors, a topic we will continue to study. This post starts the conversation by investigating the potential beneficiaries and the potential reach (in dollar terms) of the forbearance programs.

Rajashri Chakrabarti

Rajashri Chakrabarti is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Andrew Haughwout

Andrew F. Haughwout is a senior vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

Donghoon Lee

Donghoon Lee is an officer in the Bank’s Research and Statistics Group.

Joelle Scally

Joelle Scally is a senior data strategist in the Bank's Research and Statistics Group.

Wilbert van der Klaauw

Wilbert van der Klaauw is a senior vice president in the Bank’s Research and Statistics Group.

How to cite this post:

Rajashri Chakrabarti, Andrew Haughwout, Donghoon Lee, William Nober, Joelle Scally, and Wilbert van der Klaauw. “Debt Relief and the CARES Act: Which Borrowers Benefit the Most?" August 18, 2020,

Additional heterogeneity posts on Liberty Street Economics:

Heterogeneity: A Multi-Part Research Series


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

We ignore the fate of our young people at our peril.

If we value a better future for all, the secret will lie in asking them what sort of world they want to live in and using their talents to create it.

Student typing on a laptop computer with notes at her sidePhoto by Startup Stock Photos

“The secret message communicated to most young people today by the society around them is that they are not needed, that the society will run itself quite nicely until they – at some distant point in the future – will take over the reins. Yet the fact is that the society is not running itself nicely… because the rest of us need all the energy, brains, imagination and talent that young people can bring to bear down on our difficulties. For society to attempt to solve its desperate problems without the full participation of even very young people is imbecile.”
Alvin Toffler

This week emotions have been running high. Many of the students whose lives have been seriously disrupted by the Covid-19 pandemic were further battered when their A level exam results were not what they had been expecting. At such a stressful time it is profoundly distressing that results have been reduced to an impersonal algorithm which has favoured those in private education and left many in the state education sector reeling and without the university places they had been hoping for. Hopes and dreams shattered in an instant.

According to Boris Johnson, the system was ‘robust’ and ‘dependable’. Yet many students who were already disadvantaged by social, economic and geographic divides as well as 10 years of disastrous government policies which cut spending on education, health and social housing impoverishing their families and reducing their life chances, had to deal with the fall out of months of remote learning and, for too many, little or no access to adequate technology as well. Where did the promised laptops and broadband access get to?

Boris Johnson’s ‘levelling up’ promise has failed, at the first hurdle, to deliver for young people whose lives are still ahead of them and who face a future of uncertainty and further hardship, depriving them of life opportunities. They have been let down and not just by Gavin Williamson’s ineptitude. It will further split the generations, reinforce peer inequalities and create more angst and division across the board. Free appeals won’t cut it. Students should not be in this situation in the first place!

At the end of May, the LSE published a report entitled Covid-19 and Social Mobility which looked specifically at the how both the economic and educational shocks caused by the pandemic could wreak long term damage to young people’s prospects in life. It noted its concerns that the pandemic would ‘push young people into a dark age of declining social mobility because of rising economic and educational inequalities.’ However, it also pointed out that even before the crisis younger generations had already been facing declining mobility with falling wages, fewer opportunities and stagnant or declining living standards.

It is therefore not a new phenomenon and quite rightly we should be concerned about the likelihood of such rising inequality becoming even further entrenched as opportunities for young people are reduced by the combined consequences of 10 years of harmful government policies and the fallout from the pandemic.

This week the headlines have focused on the fact that the UK had plunged into recession for the first time in 11 years, with the economy shrinking by an unprecedented 20.4% between April and June. However, even before this, figures from the ONS showed that the economy was already displaying signs of decline with economic growth in the final quarter of 2019 at 0.0%.

Damaging economic fallout from this pandemic was predictable, but we cannot ignore that it has been the politically derived and cumulative effects of austerity which has made things much worse. The public and social infrastructure has been damaged beyond all recognition.

George Osborne said in 2012 of his austerity policies ‘You will hear those arguing that we should abandon our plan and spend and borrow our way out of debt… You hear that argument again today… A credible plan to deal with our debts is an anchor of stability and a pre-requisite of recovery.’

Whilst the deficit hawks cheered him on, the results of spending cuts have been predictable. Dealing with our debts has not provided an ‘anchor of stability,’ rather it has proved to be a ball and chain around society’s ankles. And it certainly hasn’t been the ‘pre-requisite of recovery’ promised.

As mentioned earlier, society was already paying a heavy price for the government’s reckless obsession with cutting spending and now the very real cost is being revealed in human terms, even more so during the pandemic.

  • Both national and local public services in a state of decay
  • Rising numbers of people on zero-hours or part-time or fixed-term contracts,
  • Low wages, insecure work, rising private debt, poverty and inequality
  • A social security system unfit for purpose and based on blame and punishment, not real support.
  • Improvement in life expectancy has slowed since 2010
  • Health inequalities have increased
  • A record rise in the use of food banks and increased homelessness.
  • The highest excess mortality in Europe during the pandemic
  • Social inequalities revealed in the higher rates of death in deprived areas and amongst ethnic communities

All have combined to leave a society fractured with an unprecedented crisis of confidence, both before and after the pandemic struck.

And yet whilst Rishi Sunak took the only course of action open to him to stem the tide of unemployment and economic decline – a programme of fiscal spending – we had him yet again intimating this week that there will be difficult choices ahead. It echoed George Osborne responding to the publication of public sector borrowing figures by the ONS (Office for National Statistics) which was £51.1bn higher than the same month last year who warned that there would be ‘hard choices’ ahead for Boris Johnson and his colleagues on tax and spending.

Household budget rhetoric lives on in the corridors of power, in public institutions and disappointingly in the minds of the public as GIMMS has noted many times before. If we are to address the fallout, which will be considerable if left to the deficit hawks, we need to break the cycle in the latter.

It was regrettable again this week that the household budget narrative was reinforced in an article in the Guardian which referred to the report mentioned earlier in this blog in which the authors Stephen Machin and Lee Elliot suggested quite rightly that it was time to redress the balance as the pandemic threatened to further exacerbate the longstanding divisions in society. But its preferred mechanism for doing so was imposing a one-off progressive wealth tax on the top 1% richest people in Britain ‘to help repair government finances battered by recession and… repay all the extra government debt incurred by the pandemic’. They suggested that ‘failure to take action would ensure that the coronavirus crisis ushers in a dark age for social mobility.’

It is shameful that economists from a prestigious Russell Group university are still promoting the ‘tax funds spending’ trope. To be frank, it is the greatest scam ever; the deliberately created and reinforced illusion that tax of any sort pays for government spending. Equally inexcusable is the suggestion that the lives of future generations will depend on such an approach.

The simple truth is that governments with sovereign currency-issuing powers don’t need tax before they can spend, and they certainly can’t ‘repair the finances.’ As Deborah Harrington, an advisor to GIMMS and director of the NGO Public Matters, put it so succinctly in a comment on social media:

‘The debate we have around taxation is to treat it as if we were wholly dependent on extracting tax from the wealth of the rich in order to fund public services and social security benefits. As if it were a charitable concern rather than publicly funded. We behave as if tax was actually the income of government and that its spending is tightly constrained by it and that we have to go and borrow from the private sector when we can’t tax the private sector enough to pay for everything. These formulations entirely ignore the reality that the only creator of net financial assets into the economy (i.e. additional money) is the government itself. The government is more powerful and has deeper pockets than the private sector will ever have. We end up with a story that makes deficits into the enemy of ‘responsibility for the economy’. From this perspective, high taxation is ‘left-wing’ and tightly controlled and reduced public spending is ‘right-wing’. Yet both put deficit reduction and/or running surpluses on a pedestal, both are neoliberal perspectives.’

Yes, we can tax the wealthy in one way or another for the purposes of equity by removing their purchasing power and to reduce the enormous political influence that their excessive wealth affords them. That is the conversation that we should be having, not how we can collect more tax to ‘repair the finances’ or fund public services. Taxation does neither in the normal course of events.

A political world where the wealthy are seen as the wealth creators who should, by dint of being so, pay less tax thus causing wealth to trickle down (or so the narrative goes) has been shown to be political propaganda to justify government’s market-driven policies which have distorted the economy and impoverished many. With such a false household budget narrative, one can only imagine who will be made to pay in the future for this round of vital government spending to protect the economy.

On this basis, Johnson’s promise for increased spending not just to ‘level up’ and deal with the huge inequalities which have arisen (not just on his government’s watch) but also to invest in public infrastructure would appear arguable, indeed downright misleading, when the conversation is turning to how it is to be paid for. They seem to contradict his own Chancellor’s message that hard times are coming and there will be a price to pay.

It is vital that we knock this narrative on the head before many more people get hurt by the acceptance that there is no alternative.

There is one.

This week GIMMS shared a just-published video called ‘The Power of the Pound‘ which explains, in a very easy to understand format, how the UK can afford the things it needs for its citizens, like the NHS, social care, social security, education and pensions. We recommend our readers to check it out and pass it on.

We don’t have to accept the narratives pushed by politicians and institutions which frame government spending in household budget terms and make the claim that spending is constrained by a finite pot of money.

Our nation’s values should not be determined by the question of whether we can or cannot afford to pay for the things that improve society. Our values should be determined by how we share a finite pot of real resources more fairly and equitably to improve people’s lives and create an economy that works for everyone – including our young people who need all the support they can get to be a light for the future.




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The post We ignore the fate of our young people at our peril. appeared first on The Gower Initiative for Modern Money Studies.

The Monkees Play ‘Randy Scouse Git’

Published by Anonymous (not verified) on Thu, 13/08/2020 - 3:30am in

Here’s something to cheer you all a bit after the news that Boris Johnson and his cronies have created Britain’s biggest recession ever, that they still don’t have any proper advice for parents on whether it’s safe to send their children back to school – but want them there anyway, so they can get their parents back to work no matter that there’s a second wave of Coronavirus coming. And that they’re trying to whip up hatred against a handful of desperate asylum seekers to distract us all from the real poverty, starvation and despair they’ve created.

This is a bit of fun I found on YouTube. It’s of the Monkees, the manufactured American rivals to the Beatles, playing a song I’ve only heard about in rumours: ‘Randy Scouse Git’. Going from the comments to the video, it’s actually about meeting his wife, Samantha, during a visit to the UK in the 1970s. He gave the song its title because he didn’t know it was an insult. Hence, apparently, it also has an inoffensive alternative name. It’s from Nickstranger999’s channel on YouTube.

In his piece about the song, Nickstranger writes

My next favorite Monkees song. The only other copy of this I could find here was sped up, so probably from a UK print. Excellent, and brilliantly written song written by Micky Dolenz. Some additional info cobbled together from various sources: In his book Micky explains the lyrics as a kind of free-association song about his experience of visiting England for the first time. The Beatles are “The Four Kings of E.M.I.” who threw a welcoming party for The Monkees. “Wonderful lady” is his first wife, Samantha Juste. The “girl in yellow dress” is a reference to ‘Mama’ Cass Elliot who was also there. After that heavy night of fun Mickey woke the next day to someone shouting “Randy, Scouse, Git” on the television and thought it would be a cool name. Randy Scouse Git was the term used by Alf Garnet about his Liverpudlian son-in-law in the sitcom “To Death Do Us Part”. Prior to it’s U.K. release the record company informed Mickey of the meaning behind the title and suggested he give them an ‘alternate title’ – hence the U.K. release name of the title.

I’d only heard about this in rumour, where I was told that it the title little Donny Osmond wanted to give one of his songs after hearing the phrase used by Alf Garnet. After he was told that it was an insult, the song instead became ‘Long-Haired Love from Liverpool’. Or perhaps it’s also true of him as well. Who knows?

Anyway, enjoy the song.






























Tracking the COVID-19 Economy with the Weekly Economic Index (WEI)

Published by Anonymous (not verified) on Wed, 05/08/2020 - 4:58am in



Daniel Lewis, Karel Mertens, and James Stock

Tracking the COVID-19 Economy with the WEI

At the end of March, we launched the Weekly Economic Index (WEI) as a tool to monitor changes in real activity during the pandemic. The rapid deterioration in economic conditions made it important to assess developments as soon as possible, rather than waiting for monthly and quarterly data to be released. In this post, we describe how the WEI has measured the effects of COVID-19. So far in 2020, the WEI has synthesized daily and weekly data to measure GDP growth remarkably well. We document this performance, and we offer some guidance on evaluating the WEI’s forecasting abilities based on 2020 data and interpreting WEI updates and revisions.

Understanding the WEI

As detailed in our March post (and associated Staff Report), the WEI is the first principal component of a collection of daily and weekly series covering consumer behavior, labor market conditions, and industrial production. It is scaled to track four-quarter GDP growth, so that a reading of -5 percent means that if the given week’s conditions persisted for a full quarter, then we would, on average, expect GDP to shrink by 5 percent that quarter relative to a year prior. Since March, we have expanded the WEI to include continuing claims for unemployment insurance (UI), federal income tax withholding, and railroad traffic. The table below describes the series included. In April, we began publishing bi-weekly updates of the WEI on the New York Fed website. We recently transitioned to an interactive version of the site, allowing readers to manipulate plots of the time series to their needs.


The WEI during COVID-19

Much has happened in the U.S. economy since March. Weekly initial UI claims surpassed one million for the first time, before hitting six million by the end of the month. Continuing claims peaked at nearly twenty-three million, with many more receiving assistance through pandemic relief programs. Reflecting such unprecedented developments, the chart below shows how the WEI fell rapidly to -11.5 percent, nearly three times lower than the trough of the Great Recession (-4.0 percent). The downturn in the WEI was also driven by factors beyond the labor market, as retail sales, fuel sales, the staffing index, and tax withholding all fell further than during the Great Recession.


The WEI started to point to recovery in the week of May 2 after states began to reopen in late April. Much talk has focused on the shape of any recovery, with optimists searching for a quick return to pre-COVID levels. The WEI has so far told a more cautious story, with a modest pickup in activity for eleven consecutive weeks, through July 11.

As some states were forced to scale back reopening efforts in the wake of surging coronavirus cases, speculation began that economic conditions would reverse course, particularly owing to fears that government relief programs would expire. The WEI offered some evidence of this in the week of July 18. It remains to be seen whether that week represents an isolated blip or the beginning of a broader stall.

The WEI’s Performance in 2020

The WEI's prediction for the four-quarter GDP growth rate is simply the average of the WEI over the weeks of the quarter. The table below reports the quarterly average WEI from 2018 to the present and the latest values of four-quarter GDP growth. In general, the WEI has anticipated four-quarter GDP growth very well. This is particularly true so far in 2020, with the predicted values for Q1 and Q2 almost spot on.

It is also possible to use WEI readings to infer growth over the previous quarter. Specifically, quarterly growth can be computed using the formula:


where WEIq is the average WEI for the quarter, ĝq is implied annualized quarterly growth, and gq-1 etc. are annualized quarterly growth in the previous three quarters. Applying this formula to the 2020 data (using the third revision values for growth in previous quarters, which were available in “real time”), the WEI has done surprisingly well. For Q1, we obtain -5.44 percent, less than 50 basis points from the latest value, -4.96 percent. For Q2, we estimate -33.10 percent, less than 20 basis points from the advance release, -32.90 percent. The formula works less well when the prior GDP values used as inputs are subject to sizable revisions.


Interpreting WEI Revisions

As analysts and the public alike pore over the data for evidence of recovery or renewed deterioration, it can be tempting to interpret every turn in the data as a signal of a broader trend. We endeavor to provide guidance on how to interpret the fluctuations when we post initial estimates and subsequent revisions for each week’s WEI. Essentially, the data available at different times can provide different signals about the economy. Sometimes these adjustments of the WEI give the impression of a turn in conditions, only to be subsequently revised away.

The chart below exhibits the pattern we have observed for the different WEI vintages since recovery began. For the most part, the WEI has increased from the initial estimate to the first revision, as additional data—which have tended to provide a more positive signal than the earliest releases—become available. For instance, electricity output has returned to pre-COVID levels, and fuel sales have recovered strongly. The second revision, incorporating the staffing index, has generally been upward during this period, since that series currently provides a more positive signal than other labor market series. However, that means that this update almost always overshoots, before being revised downward with the final estimate. As a further consequence, the second revision value is often higher than the initial estimate for the following week (released on the same day), potentially creating the false impression of a reversal. As we emphasize regularly in the commentary provided with the updates, it is best to refrain from scrutinizing fluctuations from one week to the next until at least the first revision on Thursday, or ideally, until the WEI is finalized the following Thursday. Alternatively, initial estimates (or second revisions, etc.) provide a better interim comparison from one week to the next, since they include the same set of data releases.


The WEI has provided a timely signal of shifting economic conditions as the U.S. economy has undergone an unprecedented period of contraction. A caveat is that the performance may turn out to be less impressive with GDP revisions. Still, the WEI is a useful tool to assess the economy’s progress as policymakers evaluate the timing and size of the recovery.

Daniel LewisDaniel Lewis is an economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Karel MertensKarel Mertens is a senior economic policy advisor at the Federal Reserve Bank of Dallas.

James Stock is the Harold Hitchings Burbank Professor of Political Economy, Faculty of Arts and Sciences of Harvard University and member of the faculty at the Harvard Kennedy School.

How to cite this post:

Daniel Lewis, Karel Mertens, and James Stock, “Tracking the COVID-19 Economy with the Weekly Economic Index (WEI),” Federal Reserve Bank of New York Liberty Street Economics, August 4, 2020,


The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

“Either you guarantee employment, or you guarantee there will be unemployment.” – Pavlina Tcherneva

Unemployed men wearing hats waiting in employment benefit linePhoto by The New York Public Library on Unsplash. 1938 – Unemployment benefits aid begins. Line of men inside a division office of the State Employment Service office at San Francisco, California, waiting to register for benefits on one of the first days the office was open. Photographer – Dorothea Lange

This week the Learning and Work Institute published its July briefing on employment. Stephen Evans, its chief executive, made it clear that there were signs of an employment crisis ahead with payroll employment down 650,000 and the claimant count over double the level seen in March with the biggest rises in areas where unemployment is already high.

According to its analysis, the number of hours worked have plummeted 17% since the start of the crisis – the lowest level since 1997. It also noted the OBR projections that 15% of furloughed workers (1.4 million people) will not be able to return to their previous jobs.

Pointing to the current 2.6 million claimant unemployment, which is almost at the levels of the 1980s, it said that that could rise further with the withdrawal of the Coronavirus Job Retention Scheme at the end of October, risking a second wave of unemployment and adding to the redundancies already announced in recent weeks.  Modelling by the Learning and Work Institute has also warned that without adequate government intervention unemployment could be on track to exceed four million, which would be an unemployment rate higher than at any point since 1938, following the Great Depression.

According to the Learning and Work Institute and very worryingly the youth claimant count has already exceeded the peak of the last recession reaching 508,000 in June. The Resolution Foundation suggested in its ‘Class of 2020’ report, published in May, that the pandemic could push youth unemployment over one million.  It also found that education leavers were most exposed to the increase in unemployment and that they are likely to face reduced pay and employment prospects even after the economy has recovered.

Prior to the pandemic, the consequences of 10 years of cuts to public spending and government policies had already left people in precarious employment and on low wages – in poverty. The future is now even more uncertain for many of those people who will be joined by many others fearing equally for their prospects. ‘Can I get a job?’Will I still have a job to go to?’ And for young people ‘What sort of future will I have?’  Those fears are translating into falling consumer confidence and spending.  Andy Haldane’s ‘V-shaped recovery’ is looking less and less likely as people worry about the prospect of redundancy and decide instead to save what they can (and if they can) just in case the worst happens.

Jonathan Haskell, who sits on the Central Bank’s interest rate-setting committee, was clear in his analysis ‘The path of recovery crucially depends on the fear of infection, which in turn depends on the mix of public (track and trace) and private (screens in shops) health measures… It also depends on the fear, or realisation, of unemployment, as weak activity and capacity constraints on the operation of surviving businesses, and insolvencies, translate into a fall in the demand for labour’.

With the slowdown in economic activity across the world and the prospect of a deep global recession, the steep fall in household consumption and businesses which have closed, the already massive response from the government in the initial stages of the pandemic has now translated into the job creation programme announced a few weeks ago by Rishi Sunak to mitigate the worst consequences of the economic slowdown as we emerge from lockdown.

Sunak announced increased capital funding and plans for better infrastructure from roads to schools and hospitals as well as the creation of green jobs along with a youth employment programme.  Whilst they are welcome, such plans will not be ‘shovel ready’ or provide an immediate solution to the expected rise in numbers of unemployment. Furthermore, the Kickstart scheme for young people may not be workfare but leaves many questions unanswered: Will these jobs be mandatory with the threat of Universal Credit being stopped if they opt-out? Will they lead to permanent jobs? And could they undermine existing employees if employers choose to replace them with government-funded labour?

As Ellen Clifford (a disabled activist and author of The War on Disabled People: Capitalism, Welfare and the Making of a Human Catastrophe’) notes in her article in Novara Media ‘Throughout the pandemic, the Conservatives’ primary economic concern has been how to support business with little to no regard for public well-being.’

This phenomenon is not new. It has been the modus operandi of successive governments and reflects ‘free market’ ideology which places businesses as wealth makers, forgetting the role of workers in that wealth creation.  At the same time, it has been allowing vast sums of public money to be poured into private profit. As has already been noted by GIMMS in previous MMT Lens blogs, under cover of Covid-19 this process has speeded up.

As reported recently by the RMT, the privatised rail companies have been handed hundreds of millions in extra subsidies to run trains during the lockdown and they are now demanding even more. Add to this the state contracts worth over £1bn that over the last few months have already landed in the laps of private companies without a tender process or accountability. Companies such as Deloitte, PriceWaterhouseCoopers and Ernst & Young have all been beneficiaries of public money under fast-track rules. In other words, just more of the same corporate welfare which has been a key feature of successive governments over decades.

At the same time as our public services have been starved of funds on the grounds of unaffordability, the private sector has done very well indeed from the public money tap.  Whilst public money has been poured into private healthcare organisations the UK, according to recent research by the Nuffield Trust the NHS is near the bottom of the league for health resources – short of staff, beds, equipment and buildings. The commercialisation of our public service sector means that private profit trumps public well-being whether it’s the NHS or social care. Even our education system has been reduced to serving the god of the market.

And as Rishi Sunak bigs up his generosity by praising the role of public sector workers and rewarding some, he is at the same time playing a nasty, divisive game by increasing the pay of teachers, police and prison officers, the judiciary, civil servants, doctors and dentists and the armed forces whilst ignoring other frontline workers including nurses, midwives, hospital porters and other NHS staff who will not be included in this pay round. The very people who were instrumental in saving thousands of lives whilst putting their own at risk. The same people who despite a three-year wage settlement still have not made up for the lost incomes which occurred during the previous public sector pay freeze.

The settlement did not include either the many thousands of brave and committed employees working for private care companies on low pay and with poor working conditions during the pandemic. This is a direct result of the brutal cuts to local government budgets which has left them between a rock and a hard place and having to drive hard bargains to buy care which in turn has a knock-on effect on workers’ pay. As an aside, isn’t it time for social care to be brought back into the public sphere rather than being open to abuse by big private companies obsessed with profit?

It is risible then that at the same time as recognising the ‘vital contribution’ made by our key workers, Rishi Sunak is now talking about the need to get the public finances back in shape and the possibility of further cuts to spending. This week he warned that public sector workers should expect further pay squeezes and has ordered government departments to find cost savings.  Suggesting that the money for the proposed public sector pay increases will have to come from existing budgets is likely smoke and mirrors code for the prospect of more cuts to public spending at some point in the future.

After a huge fiscal stimulus to keep the economy from tanking, which yet again has benefited businesses, the government is now rowing back and preparing us for the bad but false news that it will have to be paid for. And the media and economically illiterate journalists reinforce the household budget narrative to keep the public in line and compliant – ‘Covid-19 provoked a surge in borrowing’,…‘the UK public finances are on an ‘unsustainable path’‘tax rises are inevitable’ are dished out daily to subvert the truth about monetary reality. The desired response will be that the public accepts more austerity as the price to pay for government spending during the pandemic.

It’s time for the public to get ahead of the curve and stop bowing to the deficit hawks who spread misinformation which will deprive them of a better life.

Quite simply, such a strategy would further depress the economy at a time when it needs more spending, not less. Robbing Peter’s department to pay Paul’s is, in short, more austerity and more cuts to public spending based on the lie that there is a finite pot of public money. We should be clear here that it has nothing to do with the state of the public finances or modern monetary realities and is more to do with political choice and fulfilment of ideological narratives about the superiority of the market rather than the government recognising its role in serving the interests of the nation as a whole. The message of trickle-down has proved a lie, but they still try to promote it as a wealth equaliser.

If the Conservatives were really interested in really levelling up Britain and tackling poverty and inequality, then they would have to embark on a radical strategy which would include;

  • a central government paid for Job Guarantee serving the needs of local communities by providing useful, paid public sector work both to maintain economic activity in the real economy and mitigate the worse effects of the coming recession.
  • a permanent expansion of the public sector for education, healthcare and social care for the well-being of both the economy and its citizens.
  • Targeted government investment in training, education and re-skilling for the future and to transition towards a just green economy.

A Job Guarantee may not be a magic bullet in itself to solve all the problems we face but it is an essential framework upon which we can build a better society for all.  In the words of Pavlina Tcherneva, academic and author of The Case for a Job Guarantee:

“The guarantee part of the proposal is the promise, the assurance, that a basic job offer will always be available to those who seek it. The job part deals with another paradox, namely that while paid work in the modern world is life-defining and indispensable, it has, for many, become elusive, onerous, and punitive. The job component in the Job Guarantee aims to change all that by establishing a decent, living-wage job as a standard for all jobs in the economy, while paving the way for the transformation of public policy, the nature of the work experience, and the meaning of work itself.”

Hands up who doesn’t want a better life for themselves and their families?



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The post “Either you guarantee employment, or you guarantee there will be unemployment.” – Pavlina Tcherneva appeared first on The Gower Initiative for Modern Money Studies.

Unemployment Benefits Have Saved the US From Economic Calamity

Published by Anonymous (not verified) on Sat, 25/07/2020 - 3:35am in

Though limited in scope and time, the supplemental unemployment insurance benefits in the stimulus bill have seriously cushioned the blow of mass unemployment — which is why lots of employers and Republican politicians want the program to expire forever at the end of the month rather than see it renewed. Continue reading

The post Unemployment Benefits Have Saved the US From Economic Calamity appeared first on