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Gordon Dahl of the University of California, San Diego and Matthew M. Knepper of the University of Georgia compare jobs at the same firms across states that reductions in state unemployment insurance (UI) generosity result in faster job growth, but lower wage growth. The authors find that after a 50% decline in North Carolina’s UI generosity in 2013, multi-state firms experienced 2.4% faster job growth and paid 7.2% lower starting salaries at their businesses in North Carolina than at their businesses in other states . Using data from online job postings, the authors also find that institutions in North Carolina offered 5.5% lower pay for the same job compared to colleagues in other states. The authors find similar results on a smaller scale for businesses across six additional states that had modest cuts in the benefits of state-of-the-art user interfaces compared to North Carolina. The findings suggest that reductions in UI benefits reduce workers’ bargaining power by making it more costly to remain unemployed. As such, the employment and tax benefits of less generous UI programs must be considered along with lower wage growth driven by “current job seekers who settle for lower jobs or the same jobs at lower wages,” the authors conclude.
Small and medium-sized enterprises are more likely to use “large technology” lenders to meet short-term liquidity needs than to obtain long-term financing, says Lei Liu of the Chinese Academy of Social Sciences and co-authors. The authors compare syndicated loans granted by MyBank, a subsidiary of the Chinese internet giant Alibaba, with conventional loans issued by a partner bank. In relation to the retail bank, the authors find that the large technology lender serves more first-time borrowers, younger borrowers and borrowers with limited access to credit. The authors also find that the large technology loans have smaller principal amounts, higher interest rates, faster repayment rates, higher default interest rates and lower collateral than the conventional loans. The authors argue that these differences between large technological and conventional loans are not driven by differences in the credit risk of borrowers, as they find similar trends in the group of borrowers with access to both services. They conclude that “big tech” loans – a growing market in the United States and globally – have the potential to provide credit to borrowers who are underserved by traditional banks.
The federal specialty nutrition program for women, infants and children (known as WIC) provides food for low-income pregnant women, postpartum and lactating women and their children up to the age of five. Marianne Bitler from the University of California at Davis and co-authors use the National Health and Nutrition Examination Study to evaluate what happens to family nutrition when a participating child turns five. The authors find that aging out of the program has no effect on the calorie or nutritional intake of children. However, women between the ages of 20 and 50 who live with their children (probably their mothers or caregivers) see a large increase in food insecurity and reduce their calorie intake by almost half. This suggests that mothers reduce their own consumption to protect their children from food insecurity, the authors conclude.
“Consumer and business sentiment is quite negative. In the latest Michigan survey, consumer sentiment fell to its lowest level ever. In addition, the proportion of small business owners who expect better conditions over the next six months fell to the lowest level in the survey’s history in May. Both surveys show that inflation drives this pessimism. Typically, this low sentiment is associated with a weakening in consumer spending and business investment, says Thomas Barkin, president of the Richmond Fed.
“At the same time, fiscal support from the pandemic is waning, and … inflation is causing the Fed to raise interest rates. Higher interest rates tend to slow the economy by increasing borrowing costs and hindering spending and investment. Historically, eight of the Fed’s last 11 tightening cycles have This change in policy may well make markets scary.It’s understandable: the Fed has not moved that fast in over 20 years.And forecasters predict that our current rate hike cycle will go higher than its predecessor’s relatively low 2.4 “Now the stock market is not the economy. But if the markets were to crash, it could slow down the economy by individuals and companies withdrawing expenses and investments.”
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