Macro Roundup

“…Ladd made one criticism that will have a familiar ring today: “In recent years, election polls have frequently overestimated the Democratic share of the vote. Since the 1980s, exit pollsters have tended to overstate Democratic candidates’ strengths.” “Frequently” may have been too strong, but the problem was and is significant. A Pew Research Center analysis of 2020 polls conducted after September 15, 2020, found that “93 percent of national polls overstated the Democratic candidate’s support among voters.” Eighty-eight percent of polls did so in 2016….”

Karlyn Bowman, "The pollsters’ Waterloo,"Forbes, November 18, 2021, https://www.aei.org/articles/the-pollsters-waterloo/

The pollsters’ Waterloo

Twenty-five years ago today, The Wall Street Journal excerpted an article written by the political scientist Everett Carll Ladd with the title, “The Pollsters’ Waterloo.” Ladd didn’t pull any punches. “Election polling,” he said, “had a terrible year in 1996. The entire enterprise should be reviewed...” The reaction to the article from some pollsters was swift and severe. Some clearly saw his criticisms as a threat to their livelihood, while others said his description of final poll results on which he based his criticism was erroneous. A quarter century later, however, the pollsters are thriving, but the criticisms Ladd raised continue to cast a shadow over their work.

Ladd made one criticism that will have a familiar ring today: “In recent years, election polls have frequently overestimated the Democratic share of the vote. Since the 1980s, exit pollsters have tended to overstate Democratic candidates’ strengths.” “Frequently” may have been too strong, but the problem was and is significant. A Pew Research Center analysis of 2020 polls conducted after September 15, 2020, found that “93 percent of national polls overstated the Democratic candidate’s support among voters.” Eighty-eight percent of polls did so in 2016.

Ladd urged the pollsters to convene a blue-ribbon commission like their predecessors did after the polling debacle in the 1948 election. After all, as the late Andrew Kohut, one of the giants in the field who was a principal at both Gallup and Pew said, the survey business should not be judged solely on the performance of election polls, but these polls are the “most visible expression of the validity of the survey research method.” In both 2016 and 2020, under the auspices of the American Association for Public Opinion Research (AAPOR), a distinguished group of practitioners and academics reviewed publicly available national and state-level results. The big takeaway from the new report: the polling error in 2020 “was the highest in 40 years for the national popular vote and the highest in at least 20 years for state-level estimates of the vote in presidential, senatorial, and gubernatorial contests.” The polling error that favored Biden over Trump was consistent across different survey modes.

In 1948, the reviewers concluded that the pollsters stopped conducting their polls too early, and that voters made up their minds late in that campaign. In 2016, the AAPOR task force pointed to several factors: a large number of late deciders who broke disproportionately for Donald Trump and incorrect weighting for voter education levels in many key states. The 2020 report ruled out those factors and a number of others.

The 2020 task force could not say with certainty given available data why polls overstated the Democratic margin. But they advanced a number of possible explanations. One is that Trump’s strongest supporters simply chose not to respond to pollsters, while those who did voted more Democratic, thereby skewing results. They speculated that nonresponse could have contributed, as could weighting measures and a large infusion of new voters.

If it is a key explanation, the nonresponse problem may be specific to Trump. His criticisms were harsh, but they certainly weren’t new. Others have tried to undermine the poll participation as well. In 1984, the popular Chicago Tribune columnist Mike Royko urged his readers to join him in what he called a “noble pursuit,” to “lie” to the pollsters in the Illinois primary that year. And after the 2000 election, a blue-ribbon panel, with honorary cochairs Gerald Ford and Jimmy Carter, “strongly encourage citizens not to participate in exit polling.”

Ladd lodged other criticisms as well: he believed the sheer volume of pre-election polling activity and relentless media coverage of the horse race distorted elections. As a friendly critic, I would add other criticisms. With the possible exceptions of Gallup and Pew, pollsters incessant chasing of headlines and focus on polarization has caused them to abandon many old questions that gave us a fuller sense of who we are. They have given short shrift to ordinary life in favor of politics, politics, politics and the negativity it conveys. Pollsters shouldn’t abandon political coverage. It is essential. But other subjects should be given their due.

Ladd was a long-time friend and mentor. Despite his criticism, it was always clear to me that he wanted the survey business, which he loved and thought vital to our understanding of America and democracy, to perform better. He would no doubt appreciate the impressive efforts of the 2016 and 2020 task forces. He would applaud the extraordinary work pollsters have done on COVID. But he would be saddened that there is neither a clear answer to a problem he identified a quarter century ago, nor an obvious way to fix it, nor an effort to provide a fuller picture of American life.

"... The value of merchandise goods exported from China to America was 5% greater in the first six months of 2021 compared with 2019, before the pandemic. In September and October it was 19% higher than two years earlier. The result is that shipping rates are not coming back to earth. A set of benchmark spot rates from Freightos, a digital freight marketplace, between China and America’s west coast are below a recent peak. But at around $15,000 per feu (40-foot equivalent unit), they are ten times pre-pandemic levels (see chart 1). The outsize appetite for goods in America has had a knock-on effect elsewhere. A shortage of vessels, drawn by high rates to the trans pacific routes, has pushed the cost of sending boxes between China and Europe to record levels. That raises costs for businesses that rely on shipping firms. Small items such as smartphones or sports shoes can be packed by the tens of thousands into a container. But a rough estimate of the average value of goods in a box travelling between China and America is around $50,000. Another $15,000 makes a significant difference....The big question is how much new capacity is in the offing. As world trade boomed in the years before the financial crisis of 2007-09, order books were roughly equivalent to 60% of the existing fleet. They now stand at a little over 20%. Restraint is due in part to uncertainty over the technology needed to make vessels which have a 25-year lifespan compliant with tougher carbon-emissions rules that the industry is expecting. Still, capital discipline may have its limits. Orders have begun to swell again (see chart 2). But it will take two to three years before ships ordered today start rolling down slipways. The era of pricey shipping could well last for another Christmas or two...."

Economist Staff, "Why supply-chain snarls still entangle the world,"The Economist, December 16, 2021, https://www.economist.com/business/a-return-to-container-shippings-pre-pandemic-days-is-a-long-way-off/21806844

Why supply-chain snarls still entangle the world

Father christmas and the global container-shipping industry have similar objectives, though the timescales differ. Santa’s world-spanning logistics operation aims to deliver presents all in one night. Shipping firms step theirs up around September to ensure that gifts and other seasonal goods join a vast global supply chain. But a system that usually operates unnoticed (and unremarked upon) is still in chaos. For months a covid-induced maelstrom of delays and sky-high shipping rates has left goods lingering at sea and shop shelves bare around the world. Politicians insist that the snarls will disappear. But survey the horizon and there is little sign of smoother sailing.

The pandemic has hit shipping firms’ operations along the supply chain. Labour shortages have been worsened by workers forced to isolate. China’s zero-tolerance measures have closed port terminals after the discovery of one or two covid-19 cases. The spread there of the new Omicron variant makes more closures likely. But the most significant impact of the pandemic has been to ignite demand for goods from self-isolating shoppers, particularly Americans eager to buy Chinese products using stimulus money. The value of merchandise goods exported from China to America was 5% greater in the first six months of 2021 compared with 2019, before the pandemic. In September and October it was 19% higher than two years earlier.

To eye-watering costs add lengthy delays. Ports, unused to such volumes of traffic, face long queues of ships waiting weeks to unload. In a system already stretched to the limit by lack of lorry drivers and warehouse space, up to 15% of the global container fleet is currently sitting at anchor outside the world’s ports.

Apparent signs of improvement are illusory. A widely watched indicator, the armada waiting to offload goods at the twin ports of Los Angeles and Long Beach, America’s main entry points for Chinese imports, now numbers some 30-40 vessels, down from 70-80 in October. However, that is mostly because a recent change to the queuing system means that ships are now asked to wait far out at sea (some even linger off the Chinese coast). The real queue is over 100 ships.

Relief from this congestion does not look imminent, and the longer it builds the longer it will take to unwind. Most pundits see little hope of improvement until after Chinese new year in February. Disruptions may last all of 2022. Though rates may have hit a peak, they are unlikely to fall much in the next six months and are set to remain elevated into 2023, thinks Lars Jensen of Vespucci Maritime, a consultancy. Only then will new vessels ordered in response to high rates start to hit the waves.

Even if spot rates have peaked most customers will face higher bills in 2022. The long-term contracts that govern the bulk of container traffic are currently far lower than spot rates—perhaps $2,500-3,000 per feu between China and America. But as David Kerstens of Jefferies, a bank, points out, spot rates inform contract rates. In 2021 two-thirds of the contracts signed by Maersk, the world’s biggest container-shipping firm, which controls a fifth of the global market, have been long-term ones. As Maersk’s contracts and those of its rivals roll over, the rates could double. And with customers more concerned about securing scarce capacity than haggling over price, some are signing contracts for two years rather than one.

Fears that a trend for “near-shoring” might hit demand seem unwarranted for now. Soren Skou, boss of Maersk, sees little evidence of it so far. Many firms that source supplies from China are having doubts about relying on one country. A “China plus one” policy of adding a supplier in another part of Asia, such as Vietnam or Thailand, needs more ships to transport these goods directly to America or to giant Chinese hub ports for their onward trip.

The industry’s response to the crunch reflects changes to its structure that predate covid-19. In the words of Rahul Kapoor of the Journal of Commerce, a sectoral must-read, “The era of cheap shipping is behind us.” Shifting goods around the world has been inexpensive because the response to high rates has historically been a frenzy of orders. That, in turn, has led to a flood of vessels that arrive just as economic conditions worsen and trade slows.

But bloody price wars over market share may be gone for good. Since 2016, when a previous ship-ordering binge collided with slowing trade, collapsing rates and big losses, the industry has consolidated—20 big firms have become seven bigger ones in three global alliances. This has helped them manage capacity more ruthlessly. As a result, the cyclical industry may suffer shallower and shorter downturns, says Parash Jain of hsbc, another bank.

The strange result of the pandemic is that the industry is awash with cash. Simon Heaney of Drewry, a consultancy, says that profits could reach $200bn in 2021 and $150bn in 2022, an unimaginable bonanza beside the cumulative total of around $110bn for the previous 20 years. As well as returning cash to shareholders, Maersk may acquire more firms in e-commerce fulfilment and air-freight as part of its effort to build an end-to-end logistics business that ferries goods by sea, land and air, taking on dhl and FedEx. Other big container-shipping companies such as China’s cosco and France’s cma-cgm are doing the same.

Economist Staff, "Has the pandemic shown inflation to be a fiscal phenomenon?"The Economist, December 18, 2021, https://www.economist.com/finance-and-economics/2021/12/18/has-the-pandemic-shown-inflation-to-be-a-fiscal-phenomenon

Has the pandemic shown inflation to be a fiscal phenomenon?

Here is a potted history of recent economic policy and inflation. In the 2010s central banks created vast amounts of money through their quantitative-easing (qe) schemes, while governments enacted fiscal austerity. Inflation in the rich world was mostly too low, undershooting central banks’ targets. Then the pandemic struck. There was plenty more qe. But the truly novel economic policy was the $10.8trn in fiscal stimulus implemented worldwide, equivalent to 10% of global gdp. The result was high inflation. The rich country that has splurged the most, America, has had the most inflation. With consumer prices rising at an annual pace of 6.8%, the Federal Reserve on December 15th was forced to acknowledge that inflation had become a big threat.

At first glance, this apparent supremacy of fiscal policy is awkward for fans of Milton Friedman’s view that inflation is “always and everywhere a monetary phenomenon”. Central banks, not governments, are charged with hitting inflation targets. But does the experience of the pandemic show that inflation is really fiscal?

One way in which fiscal stimulus boosts inflation is by strengthening households’ and firms’ balance-sheets, making them more likely to spend. Suppose the government raises cash from investors, who receive bonds in exchange. Then it hands out the money to households, returning it into circulation. Netting off, it is as if the government has just given out new bonds. Whether those bonds truly constitute new wealth for the private sector is the subject of an old theoretical debate. When the government runs up debts the public could also expect to pay higher taxes in the future—a liability that offsets their newly created assets. Yet in reality it is clear that fiscal stimulus leads to more spending.

Now introduce a new step into the thought experiment. The central bank, implementing qe, creates new money with which it buys the bonds that the government has given out. So when you net everything off, the government is not giving out bonds. It is giving out cash. This is not far off the policy mix during the pandemic. The tsunami of fiscal stimulus was accompanied by bond-buying of almost equal magnitude: central banks in America, Britain, the euro zone and Japan have together bought more than $9trn in assets. The result has been a surge in deposits at commercial banks. In America they have risen from around $13.5trn in early 2020 to around $18trn today. As early as the spring of 2020 some monetarist economists, such as Tim Congdon of the University of Buckingham, pointed to surging measures of broad money, which includes bank deposits, and warned of inflation to follow.

So far, so Friedmanite. But which leg of the policy matters more: the fiscal stimulus, which boosted aggregate household wealth, or qe, which ensured the infusion was of cash and not of bonds? There is probably something special about infusing households’ balance-sheets with cash, says Chris Marsh of Exante Data, a research firm. He has suggested that a “rediscovery” of monetarism could be in the offing after the pandemic.

Other economists, however, argue that qe is mostly ineffective, except in periods of acute financial stress, such as the “dash for cash” in spring 2020. Suppose that once that crisis had passed central banks had shrunk their balance-sheets quickly, but had still promised to keep interest rates at zero for a long time. It seems likely that America’s enormous fiscal stimulus would, by boosting household wealth, still have driven up spending and prices.

Yet believing in the impotence of qe compared with fiscal stimulus is in fact consistent with monetarism—if you expand the definition of money. Distinguishing the electronic money created by central banks from debt securities issued by governments is increasingly difficult. This is partly because when interest rates are close to zero, they are closer substitutes. It is also because most central banks now pay interest on the electronic money they create. Even if rates were to rise, so-called “interest on reserves” would still leave electronic money looking a bit like public debt.

The reverse is also true. Investors value government debt, especially America’s, for its liquidity, meaning they are willing to hold it at a lower interest rate than other investments—much like the public is willing to accept a low yield on bank deposits. As a result “it seems more accurate to view the national debt less as a form of debt and more as a form of money in circulation,” wrote David Andolfatto of the Federal Reserve Bank of St Louis in December 2020. He also warned Americans to “prepare themselves for a temporary burst of inflation” in light of the one-off increase in national debt during the pandemic. If money and debt are substitutes, just swapping one for another, as qe does, might provide little stimulus, consistent with the experience of the 2010s. But expanding their combined supply can be powerfully inflationary.

Right on the money

The logical extreme of this argument is known as the “fiscal theory of the price level”, created in the early 1990s (and in the process of being refreshed: John Cochrane of Stanford University has written a 637-page book on the subject). This says that the outstanding stock of government money and debt is a bit like the shares of a company. Its value—ie, how much it can buy—adjusts to reflect future fiscal policy. Should the government be insufficiently committed to running surpluses to repay its debts, the public will be like shareholders expecting a dilution. The result is inflation.

Explaining today’s high inflation does not require you to go that far, though. It is enough to look at recent deficits, rather than to peer into the future. Yet it is striking that economists like Mr Andolfatto who focused on the supply of government liabilities foresaw today’s predicament while most central bankers, whose eyes were fixed firmly on labour markets as a gauge of inflationary pressure, did not. The past decade has shown that when interest rates fall to zero, it takes more than just qe to escape a low-inflation world. Still, Friedmanism lives on.

"...But does the experience of the pandemic show that inflation is really fiscal? One way in which fiscal stimulus boosts inflation is by strengthening households’ and firms’ balance-sheets, making them more likely to spend. Suppose the government raises cash from investors, who receive bonds in exchange. Then it hands out the money to households, returning it into circulation. Netting off, it is as if the government has just given out new bonds. Whether those bonds truly constitute new wealth for the private sector is the subject of an old theoretical debate. When the government runs up debts the public could also expect to pay higher taxes in the future—a liability that offsets their newly created assets. Yet in reality it is clear that fiscal stimulus leads to more spending. Now introduce a new step into the thought experiment. The central bank, implementing qe, creates new money with which it buys the bonds that the government has given out. So when you net everything off, the government is not giving out bonds. It is giving out cash. This is not far off the policy mix during the pandemic. The tsunami of fiscal stimulus was accompanied by bond-buying of almost equal magnitude:central banks in America, Britain, the euro zone and Japan have together bought more than $9trn in assets. The result has been a surge in deposits at commercial banks. In America they have risen from around $13.5trn in early 2020 to around $18trn today.As early as the spring of 2020 some monetarist economists, such as Tim Congdon of the University of Buckingham, pointed to surging measures of broad money, which includes bank deposits, and warned of inflation to follow....But which leg of the policy matters more: the fiscal stimulus, which boosted aggregate household wealth, or qe, which ensured the infusion was of cash and not of bonds? There is probably something special about infusing households’ balance-sheets with cash, says Chris Marsh of Exante Data, a research firm. He has suggested that a “rediscovery” of monetarism could be in the offing after the pandemic...."

David Price from the FRBR interview Ed Glaeser who remains bearish on "place based policies""... I do think that the persistence of prime-age male joblessness is worrisome. If you look at the relationship in the Public Use Microdata Areas between joblessness in 2010 and joblessness in 1980, the correlation is over 80 percent.We have an enduring level of local economic dysfunction. I don't think that this makes the case for large-scale redistribution in these areas. I think there are many good reasons for being wary of that, but at the same time, I think it's necessary to think about policies that are more place-specific.....Likewise, if you're going to have a large-scale employment subsidy, it makes more sense to put that subsidy into places where it will actually encourage the most employment. That's much more likely in places that start with high levels of nonemployment, like the eastern heartland. Now, my own preference is that you make it feel relatively budget neutral and figure out other things to deliver more of to other areas. But I think we have to realize that the eastern heartland, particularly, has very specific circumstances that need distinct policies. So, when we're discussing a $15 national minimum wage, that's fine in Seattle; we've had a whole bunch of papers on this over the past five or six years that show it won't hurt employment much. If you have a $15 minimum wage in West Virginia, you're risking much more of an increased joblessness problem there because you're starting at a very different place...."

David Price, "Edward Glaeser," Federal Reserve Bank Of Richmond, December 2021, https://www.richmondfed.org/publications/research/econ_focus/2021/q4_interview

Edward Glaeser

Harvard University's Edward Glaeser, considered by many to be the foremost economist of cities and of the forces influencing their development, is known for defending the role of cities as places where businesses and residents can exploit the benefits of social and economic interactions.

As a teenager, he lived on the Upper East Side of New York during the Bonfire of the Vanities era. His eventual specialization in urban economics was influenced, he says, by his growing up in the city during its times of crisis and recovery. "My childhood was shaped by the arc of New York City during the '70s and '80s, first as a period of startling decline as crime rates exploded and the city teetered on the brink of bankruptcy, and then its remarkable comeback," he remembers. "And it was hard as a child not to wonder at this amazing variety of things that were happening in the city."

Glaeser was promoted to chair of Harvard's economics department in July. He has authored scores of journal articles and book chapters and is a member of the editorial board of five journals of urban or regional economics. He is the author or editor of 12 books, many of them on the economics of cities or on housing policy. His most recent, Survival of the City: Living and Thriving in an Age of Isolation, written with Harvard colleague David Cutler, was published in September.

David A. Price interviewed Glaeser by phone in September 2021.

________________________________

EF: In your new book, Survival of the City, you argue that technological changes in the postwar period were mostly "centrifugal," leading people and companies to move away from urban cores, while technological changes in the 21st century have been "centripetal," leading to more concentration in urban cores. Please explain.

Glaeser: I see urban growth as almost uniformly a dance between technologies that pull us together and ones that push us apart.

Technologies of the 19th century, like the skyscraper — which is really the combination of a steel frame and an elevator — the streetcar, the steam engine, all of these things enabled the growth of 19th century cities. They brought people together. This was a centripetal age.

In the mid-20th century, we had technologies that were major jumps forward in transportation cost. In transportation technology, like the car, and in technology for transporting ideas and entertainment — television and radio — these were centrifugal forces that basically flattened the Earth and made it easier to live in far-flung suburbs or even rural areas.

Those centrifugal technologies were the backdrop for New York's decline during the 1970s. They were the backdrop for the exodus of people from dense cities that had been built around streetcars and subways and to suburbs that were built around the car.

But then in the late 20th century and early 21st century, the tides turned again. And it was somewhat surprising. With this shift came a vision in which the rise in these forms of information technology would lead the knowledge workers that still existed in cities to follow the path of industrial workers and essentially deurbanize. Knowledge workers would work remotely from electronic cottages.

But for most of the last 40 years, that hasn't been correct at all. That hasn't been happening in cities. We've started to see the electronic cottages become a force during the pandemic, and suburbanization has continued, but downtowns are vastly stronger than they were in the 1980s. And I think the primary reason is that globalization and new technologies have radically increased the returns to being smart, and we are a social species that gets smart by being around other smart people. That's why people are willing to pay so much to be in the heart of Silicon Valley and why they're willing to pay so much for downtown real estate in Chicago or New York or London.

EF: What does the future of small towns look like after the pandemic?

Glaeser: I think that's going to be a tale of two towns. If you are a small town like a college town, a place with high levels of amenities and beautiful scenery where rich people want to go, I think that the combination of the ability to do work remotely and perhaps some enduring pandemic fears means that you are as strong as you've ever been, if not more so. These places are poised to benefit.

Take your Silicon Valley startup with 15 smart, hungry young people. Do we truly think in five years these people are just going to be Zooming it in from their suburban bedrooms? That sounds totally implausible to me. That sounds like a totally different work model that will lack all the energy and high quality in-person connections you get from being in the same room as one another.

But on the other hand, are these 15 people going to decide, "Well we all love skiing, we're tired of paying Silicon Valley prices, should we relocate to Vail?" Or say, "We don't want to pay taxes, let's relocate to Austin." Or, "We want better surfing, let's relocate to Honolulu." That feels entirely plausible to me. The technology supports the mobility en masse of these groups to some different area. Places they're most likely to relocate to are high-amenity places that will appeal to them along one of these dimensions.

These would be probably the best index right now of whether or not a place is likely to benefit: Among small towns, is it a skilled place already? Prior to COVID-19, did it do a good job of attracting large numbers of college graduates or people who had advanced degrees?

On the other hand, if you're talking about small towns in relatively low-amenity places, places that are low density, farmland, low levels of education, these places have been declining for decades, and I see little reason why the decline would be reversed anytime soon.

EF: Place-based policies — that is, policies aimed at improving specific areas — are often criticized by economists. You've argued that they may be justified for some areas of the American heartland where men have low labor force participation. Why is that?

Glaeser: I still maintain my traditional aversion to place-based policies. I have not completely gone away from it.

But I do think that the persistence of prime-age male joblessness is worrisome. If you look at the relationship in the Public Use Microdata Areas between joblessness in 2010 and joblessness in 1980, the correlation is over 80 percent. We have an enduring level of local economic dysfunction. I don't think that this makes the case for large-scale redistribution in these areas. I think there are many good reasons for being wary of that, but at the same time, I think it's necessary to think about policies that are more place-specific.

Take housing. You really don't need to subsidize the production of low-income housing in most of Texas, because they have an unfettered market that does a great job of providing lots of low-cost housing to middle-income residents. If you have Detroit, you don't want to produce more low-cost housing, because they've got an abundance of low-cost housing there. But on the other hand, there's probably a good case for doing something about low-cost housing in San Francisco or New York or Boston.

That suggests to me, at least, that you want policies like the low-income housing tax credit that subsidizes new housing construction. You want that to be spatially limited. You want it to go in areas where there's a genuine dearth of low-income housing. At the same time, you could have more housing vouchers in the areas where housing supply is elastic. You can have the right policy for the right place, which is something that America has traditionally found very difficult to do. But it's just basic economics.

Likewise, if you're going to have a large-scale employment subsidy, it makes more sense to put that subsidy into places where it will actually encourage the most employment. That's much more likely in places that start with high levels of nonemployment, like the eastern heartland.

Now, my own preference is that you make it feel relatively budget neutral and figure out other things to deliver more of to other areas. But I think we have to realize that the eastern heartland, particularly, has very specific circumstances that need distinct policies. So, when we're discussing a $15 national minimum wage, that's fine in Seattle; we've had a whole bunch of papers on this over the past five or six years that show it won't hurt employment much. If you have a $15 minimum wage in West Virginia, you're risking much more of an increased joblessness problem there because you're starting at a very different place.

EF: What is your view of opportunity zones as a policy in this regard?

Glaeser: We have a paper on this that does try and compare them with truly comparable areas. We're focused mainly on the effect on housing prices, which we thought would be one measure of whether things are getting better in the area. We find almost no effect from these zones on prices.

I think in general that the needs of these places are really about human capital problems rather than a lack of entrepreneurship. But the opportunity zone structures are very oriented toward more investment in physical capital, including housing and apartments and such, which does not particularly seem like the right thing to do for these disadvantaged areas. When I think about what I would like to see in a zone, it's much more focused on the human capital than the physical side.

EF: Why have major investing institutions recently started buying single-family homes in large numbers?

Glaeser: Traditionally, single-family homes were overwhelmingly owner-occupied in the U.S. More than 85 percent, I think, of homes were owner-occupied. The usual view of the housing economics community was that the agency problems involved in renting them out were huge. There are estimates that suggest that renting out for a year involves a 1 percent decline in the value of the house, or something like that, because the renter just doesn't treat it properly.

By contrast, traditionally more than 85 percent of multi-family housing was rented, at least once you get to over five stories. It's much easier to manage a multi-unit building when you have one owner. One roof, one owner, because otherwise you've got the problems of coordination of the condo association or the co-op board, which can be more fractious.

So those were the things, I think, that were responsible for tying ownership type and structure type so closely together. We are starting to see that break down, which is quite interesting. I don't know if these buyers have fully internalized their difficulties with the maintenance that goes into rental houses as a long-run issue. Or if technology has changed in such a way that they think that they can actually solve that agency problem and that they can figure out ways to deal with the maintenance costs in some efficient fashion.

I'm happy to see an emergence of a healthy rental market in single-family detached housing, but I'm keenly aware of the limitations and difficulties of doing that. So, we'll have to see how this plays out. I can't help thinking some part of it just has to be that investors are simply searching for new investment products.

EF: In Survival of the City, you write about development restrictions as favoring insiders, by which you mean homeowners. Homeowners might say, "Don't we want local government to be responsive to local interests?" Is this a good thing as well as a bad thing?

Glaeser: I certainly don't want local government to be nonresponsive to local interests. The problem is that local majorities are not necessarily going to take into account everyone. They won't necessarily take into account minorities, and they certainly won't take into account people who are not in the locality right now.

As always in the case of democracy, we want something that empowers the majority, but also slightly restrains it in different ways. We want the Bill of Rights as well as the grants of power in the Constitution. And in the case of localities, I think that the idea of placing some restriction on what localities can do is quite reasonable to me.

For example, in the area of housing, you have Massachusetts Chapter 40B, which basically enables developers to work around local zoning if the locality has almost no affordable housing and if the developer is providing some low-cost units to buyers. They're able to take advantage of the state process rather than the local process for getting approval. So, you're not getting rid of all local power over zoning. But if your local power means that you produce nothing that's affordable, we're going to maintain a way for the builders of affordable housing to basically bypass you. That sort of hybrid model seems like a good one to me.

The new California law, SB 9, on speedy permitting of two-unit buildings will also be a state restriction on local power. This was the first time in many years we've had a victory for the "Yes In My Back Yard" movement — the YIMBYs. It may be a small victory, but you know, when I started thinking about this stuff in 2001, there was nothing. There was no popular movement of any form to reduce the local straitjacket on building.

EF: The famous 1961 book by Jane Jacobs, The Death and Life of Great American Cities, has been influential over the years in people's thinking about urban development. What was she right about, and what was she wrong about?

Glaeser: It's a wonderful, wonderful book. It's so wise in its understanding of urban neighborhoods and the street life and the ability of neighborhoods to just work and the dangers of trying to engage in planning. All of that stuff is fantastic.

Where she kind of screws up is when she gets into a discussion of how cities need old buildings. It's not that she's totally wrong, not at all. It's great for cities to have some form of inexpensive space. And in most cities, that inexpensive space comes from older buildings that have not yet been upgraded. The way that affordability is supposed to work is that you build new buildings, which are usually not that cheap, and that reduces the pressure to gentrify old buildings. So that's where affordability comes from.

But that led her to the policy view that you actually want to prevent tearing down old buildings and replacing them with new buildings. Now, if the two buildings are exactly the same size, I agree that replacing the old building with the new building will not promote affordability.

But that's not typically what developers want to do. Typically, they want to take a short building and replace it with a tall building. And if you stop that process, as she was so instrumental in doing in the Greenwich Village historic preservation district — which was part of a great popular wave of opposition to rebuilding New York — you aren't promoting affordability, you are freezing a neighborhood in amber. In the case of Greenwich Village, you have created a situation in which townhouses start, at least before the pandemic, at over $7 million. That's no recipe for affordable urban space that scrappy startups and young families can buy, which is how she was thinking about it.

That was, I think, the thing that she got most wrong. She was right in many of her ground-level observations, but economics is really helpful for thinking through the long-run implications of a policy intervention.

EF: You wrote in your book that the 1970s were a catastrophic decade for much of urban America. Why were the 1970s catastrophic for cities?

Glaeser: It's that combination of the centrifugal technologies — the fact that container ships and highways made it easy for factories to relocate to places where land and labor were cheaper, and highways made it possible for wealthier urbanites to leave for suburbs.

That process collided with the dreams of progressive mayors, like New York's John Lindsay or Detroit's Jerome Cavanagh, who were trying to fix the very visible woes of cities. What that meant was that just at the time cities were asking businesses to pay more, asking the rich to pay more, it was becoming easier for the rich and for businesses to get out. And that's exactly what happened.

On top of that, of course, there was an inability to deal with the crime problem. That's something that I worry about today. There is a totally understandable desire to try and deal with the terrible inequities of urban life. There's a totally understandable desire to want to do something about policing and the experience that many people have with the police. But if the changes that occur either end up targeting the taxpaying members of the urban community or end up leading to a significant deterioration in the quality of life — for example, with an increase in crime rates — that risks replaying the 1970s.

One of the reasons why I wrote the book was to emphasize that we had paths to try to reduce those inequities and could make those cities not just more functional but more humane. But at the same time, cities have to do that in a way that respects the need to continue to attract the taxpayers who ultimately fund things.

EF: You wrote that court-ordered school busing and the reaction to it played a role. In what way?

Glaeser: The way that busing got implemented was the court requirement getting rid of segregation in cities. But there was also a court ruling saying that you could not force desegregation across city boundaries.

For example, the Supreme Court decision in Milliken v. Bradley in 1974 said essentially that federal courts could not require desegregation across school districts. What that meant was that if you wanted to avoid busing, either for racist reasons or for some other reasons, you could get that only by leaving the school districts — by leaving the city. And so, for thousands and thousands of parents, that's when they moved, sometimes just outside the city's school district.

If you had metropolitan-area-level desegregation efforts, that would not have created the same incentive. Or if you had something that was more like a charter school system or like a voucher school system. Anything that breaks the link between where you live and where you go to school would've been less harmful for cities. But as it was, this was yet another huge incentive for parents to get out. And a harmful one.

And ex post, if you look at the Opportunity Atlas data created by my colleague Raj Chetty and his co-authors, there was a clear and discernable break in upward mobility at the border of central city school districts across America. Opportunity jumps up if you're just outside the central city school districts as opposed to just inside it. This is a cohort that was born between 1978 and 1983, and you can see it in their adult earnings. They are also significantly less likely to be incarcerated as an adult.

EF: Winston Churchill said in 1943, "We shape our buildings and afterwards our buildings shape us." Was he right? And if he was, what are the trade-offs in regulating architecture?

Glaeser: Yes, he was right. It's one of the greatest of all lines about architecture, absolutely.

The regulation of architecture is probably the most straightforward element of this in some sense. I have a paper with Nikhil Naik, who is a computer scientist, where we look at the connection between the appearance of your neighbor's home and your housing value. We find significant effects, and the effects are much stronger if you are on the same street as opposed to being, say, half a block away outside of the sightline. People value having nicer homes to look at, and that creates at least some scope for benefits from regulating architecture.

On the other hand, I believe people are willing to pay for architecture. Moreover, as the son of an architectural historian, I continue to be skeptical about the abilities of states to regulate architecture well.

There are special cases. The vista of a city or the elegance or the magic of, for example, some streets of Barcelona or the Place des Vosges in Paris — these are magical urban spaces. And certainly, I am OK with protecting those pieces of architecture that are widely accepted to be part of the patrimony of the city.

But when it comes to building new buildings, we have to be aware that very rarely does great architecture happen by committee. And very rarely will a zoning board be the best judge of what design is going to create joy in people for decades to come. It doesn't take much to convince me that there's a market failure in many cases, that cities are chock full of externalities, but saying that the government is actually going to make it better is a much heavier lift. I'm not sure it's here in this case.

In terms of how buildings shape us, I certainly believe that the structure of our offices shapes who we interact with and end up shaping our lives. There is evidence to show that people who are physically proximate to each other end up influencing each other. I think about, say, Bruce Sacerdote's work at Dartmouth on randomized roommates. There's an older MIT study that suggests that if you are randomly put closer to each other, you are more likely to form friendships. Plenty of evidence suggests that human proximity shapes interactions. None of this is surprising, but it is powerful and reminds us that physical proximity continues to be highly important.

For those younger economists who are reading this, I think that would be a great place to think about using, say, randomized controlled trials or something else to figure out to what extent Churchill is correct when it comes to day-to-day office life and street life and how our buildings are shaping us.

"....The personal saving rate—the share of disposable income households sock away each month, at an annual rate—hit an all-time high of 33.8% in April 2020, up from 8.3% in February 2020, and remained elevated through this summer, Commerce Department data show. While the rate has since dropped, households have nonetheless built up a $2.7 trillion stock of “excess savings”—the amount above what they would have had there been no pandemic—as of Sept. 30, 2021, according to Moody’s Analytics. For households that earned between roughly $45,000 and $69,000, the typical family’s checking account rose by more than half between January 2020 and this spring to above $3,000, according to the JPMorgan Chase Institute....Some economists believe the extra cash is one reason for this. In part, that is based on research showing declines in wealth seem to have had the opposite effect. Falling housing and stock values from 2006 and 2010 led many who otherwise would have fallen out of the labor force to stay in, according to the Federal Reserve Bank of Chicago. The study found that participation was 0.7 percentage point higher than otherwise as a result. Families that win at least $30,000 in the lottery tend to earn less in the next five years, according to a National Bureau of Economic Research working paper released in July by four University of Chicago scholars. The more a person wins, the bigger the effect that the award has on earnings and employment, the paper found. Upper-income winners are more likely to reduce their hours, while lower-income winners are more likely to drop out of the labor market entirely, the paper found. In Austria, workers who received severance payments worth two months of pay were far less likely to find a job within 20 weeks compared with those who received no such lump sum, according to a 2006 paper released by the NBER. The researchers also found a similar effect among workers whose unemployment benefits were extended from 20 weeks to 30 weeks....Nonetheless, Felipe Schwartzman, a senior economist at the Federal Reserve Bank of Richmond, wrote in November that the pandemic aid has likely led many workers to stay out of the labor market. That isn’t necessarily because the aid directly discouraged work, since most of the aid didn’t depend on whether people worked. Instead, the wealth likely relieved some people of the need to work, giving them the option to hold out for a better job or stay home. Citing links identified in past research,Mr. Schwartzman concluded that the roughly $2 trillion in pandemic assistance—about $16,000 per household—accounts for a 0.58 percentage-point decline in the share of the working-age population with jobs. That ratio fell 2.6 percentage points between February 2020 and August 2021, the period that Mr. Schwartzman studied....But those effects may be about to fade. The personal saving rate recently fell below its pre-pandemic level, reaching 7.3% in October. The JPMorgan Chase Institute data shows that checking-account balances have fallen quickly in recent months among households in the bottom half of the income distribution...."

Josh Mitchell, "Vast Household Wealth Could Be a Factor Behind U.S. Labor Shortage,"Wall Street Journal, December 19, 2021, https://www.wsj.com/articles/vast-household-wealth-could-be-a-factor-behind-u-s-labor-shortage-11639926006

Vast Household Wealth Could Be a Factor Behind U.S. Labor Shortage

The great American savings boom is coming to an end. Will the great American labor shortage now ease?

That is one of the puzzles facing the labor market this winter.

Federal Reserve Chairman Jerome Powell said last week that booming stock markets, home prices and savings are probably leading some people to stay home rather than return to work, with perhaps some couples moving from dual- to single-income households. That is consistent with past research showing that willingness to work depends on one’s finances. If so, then the labor force may get a boost as those savings are whittled down.

After the Covid-19 pandemic hit the U.S. in March 2020, Congress responded with three separate rounds of stimulus checks of as much as $1,200, $600 and $1,400 per person; enhanced jobless benefits of as much as $600 extra per week; and a boost in the 2021 child tax credit by as much as $1,600 per child. The government also suspended monthly student-debt payments for households from March 2020 through early next year.

The personal saving rate—the share of disposable income households sock away each month, at an annual rate—hit an all-time high of 33.8% in April 2020, up from 8.3% in February 2020, and remained elevated through this summer, Commerce Department data show.

While the rate has since dropped, households have nonetheless built up a $2.7 trillion stock of “excess savings”—the amount above what they would have had there been no pandemic—as of Sept. 30, 2021, according to Moody’s Analytics. For households that earned between roughly $45,000 and $69,000, the typical family’s checking account rose by more than half between January 2020 and this spring to above $3,000, according to the JPMorgan Chase Institute.

Meanwhile, home prices and stocks have soared, in part because of stimulus from the Fed. From the start of 2020 through Sept. 30 this year, U.S. households’ total assets soared 22% to nearly $163 trillion, Fed data show.

At the same time, the labor-force participation rate fell sharply and has remained stubbornly low. At 61.8% in November, it was 1.5 percentage points below its pre-pandemic level. Many older workers retired early. But even among prime-age workers—those between 25 and 54—participation remains down more than a percentage point.

Families that win at least $30,000 in the lottery tend to earn less in the next five years, according to a National Bureau of Economic Research working paper released in July by four University of Chicago scholars. The more a person wins, the bigger the effect that the award has on earnings and employment, the paper found. Upper-income winners are more likely to reduce their hours, while lower-income winners are more likely to drop out of the labor market entirely, the paper found.

In Austria, workers who received severance payments worth two months of pay were far less likely to find a job within 20 weeks compared with those who received no such lump sum, according to a 2006 paper released by the NBER. The researchers also found a similar effect among workers whose unemployment benefits were extended from 20 weeks to 30 weeks.

Theoretically, enhanced unemployment insurance should have discouraged some unemployed workers from finding new work. Whether the expiration of those benefits had any impact on job finding is unclear. It may be difficult to disentangle the effect on job finding of unemployment insurance from the effect of savings and wealth.

Nonetheless, Felipe Schwartzman, a senior economist at the Federal Reserve Bank of Richmond, wrote in November that the pandemic aid has likely led many workers to stay out of the labor market. That isn’t necessarily because the aid directly discouraged work, since most of the aid didn’t depend on whether people worked. Instead, the wealth likely relieved some people of the need to work, giving them the option to hold out for a better job or stay home.

Citing links identified in past research, Mr. Schwartzman concluded that the roughly $2 trillion in pandemic assistance—about $16,000 per household—accounts for a 0.58 percentage-point decline in the share of the working-age population with jobs. That ratio fell 2.6 percentage points between February 2020 and August 2021, the period that Mr. Schwartzman studied.

“As those saving rates get drawn down, they’re going to have to find income to replace that to support their livelihoods,” said Joe Brusuelas, chief economist at consulting firm RSM US LLP. He predicts labor shortages will ease this winter as savings drop and workers resume the job search.

The labor force, after stalling much of this year and unexpectedly falling in September, has expanded the past two months, including by 594,000 in November. “These smaller buffers as we move into 2022 will likely be an incentive for these workers to return to the workforce,” said economist Gregory Daco of Oxford Economics.

Maximiliano Dvorkin and Maggie Isaacson on the pandemic's impact on the rate of retirement and the likely difficulty of drawing those workers back into our labor force, "...the proportion of retired people has been rising since 2006, increasing from about 15% in January 2006 to nearly 20% in October 2021. However, this increase was driven by the retirees from the two oldest age groups. The shares of people retired in the two youngest groups remained relatively constant from 2006 to 2021. The vertical dashed line in the figure indicates March 2020, which marks the beginning of the disruptions in U.S. labor markets due to the COVID-19 pandemic. The figure shows that the increase in the share of retired people accelerated during the pandemic, but once again, this is mainly due to retirement decisions of the oldest age groups.... The proportion of people retired has not changed much for those 65 and younger, but it has increased notably relative to the pre-pandemic period for the two oldest age groups: The share of people retired rose by nearly two percentage points among those ages 66-70 and one percentage point among those age 71 and older....To investigate this further, the table below shows the average proportion of people 55 and older who were not in the labor force and who were not looking for a job but wanted one. It examines three different periods: 2019, the year before the pandemic; 2020, the year when the effects of the pandemic were stronger; and 2021, the year when the effects of the pandemic on the labor market eased. The main message from the table is that older people who are not in the labor force have little interest in participating in the labor market. Thus, while retirement of older workers has increased due to the pandemic, this change seems more permanent, and thus it is unlikely the country will see a significant influx of older people into the ranks of the employed. If there is lost ground to be made in terms of drawing more people into the labor force, the attention should be put in the younger segments of the population...."

Maximiliano Dvorkin and Maggie Isaacson, "Retirements Surge for Older Workers during COVID-19," Federal Reserve Bank Of St. Louis, December 20, 2021, https://www.stlouisfed.org/on-the-economy/2021/december/retirements-surge-older-workers-covid19

Retirements Surge for Older Workers during COVID-19

The COVID-19 pandemic has affected the labor market in many ways. In March and April 2020, millions of jobs disappeared, and while employment made up much of the lost ground, levels are still below those of early 2020.

Though the unemployment rate currently is roughly 0.7 percentage points above the pre-pandemic lows, this measure understates the pandemic’s impact on the labor market. There are still 3.9 million fewer jobs since February 2020, and a big part of the “missing jobs” is explained by an increase of people not in the labor force, that is, those that are neither employed nor looking for a job.

While there are many reasons a person may not be interested in working, here we focus on how retirement changed during the pandemic. For this, we used data from the Current Population Survey (CPS), which is the official source of information for labor market participation decisions in the U.S.

Rate of Retirement

The chart below shows the evolution, since 2006, of the share of civilian population age 16 and older that is retired. To adjust for some seasonality and short-frequency volatility in the data, we show 12-month moving averages.

Retirement decisions differ greatly by age. It is rare for young individuals to be retired, while the opposite is true for older people. Because of this, the chart shows the evolution of retirement for four different age groups:

People ages 16-54: those far from typical retirement age
People ages 55- 65: those close to retirement
People ages 66-70: those that just entered typical retirement age
People age 71 and older: those deep into retirement age

Stacking all these groups together shows the evolution of the overall share of population that is retired.

The vertical dashed line in the figure indicates March 2020, which marks the beginning of the disruptions in U.S. labor markets due to the COVID-19 pandemic. The figure shows that the increase in the share of retired people accelerated during the pandemic, but once again, this is mainly due to retirement decisions of the oldest age groups.

Demographic Breakdown

To see this more clearly, the following table shows the proportion of those retired in each of these four age groups. The table’s columns show the average share during three different time periods: pre-pandemic (January 2018-February 2020), the first 16 months of the pandemic and the most recent months since July 2021.

The proportion of people retired has not changed much for those 65 and younger, but it has increased notably relative to the pre-pandemic period for the two oldest age groups: The share of people retired rose by nearly two percentage points among those ages 66-70 and one percentage point among those age 71 and older.

Retired for Good?

To investigate this further, the table below shows the average proportion of people 55 and older who were not in the labor force and who were not looking for a job but wanted one. It examines three different periods: 2019, the year before the pandemic; 2020, the year when the effects of the pandemic were stronger; and 2021, the year when the effects of the pandemic on the labor market eased.

Core findings, "....The generosity of Unemployment Insurance (UI) benefits was expanded during the pandemic(FPUC), along with the groups of workers eligible for benefits (PUA). These two programs were set to expire in September 2021, but 18 states opted out of both in June 2021. Using Current Population Survey data, we present difference-in-difference and event study estimates that the flow of unemployed workers into employment increased by around two-thirds following early termination. We construct a counterfactual scenario that implies the national unemployment rate in each of July and August would have been around 0.3 percentage point lower than they were, and the employment-population ratio would have been around 0.1-0.2 percentage point higher than it was, had all states ended FPUC and PUA in June.Expanded eligibility and generosity of UI may have both slowed transitions from unemployment to employment. We also present some suggestive evidence that households with relatively high confidence in their ability to meet expenses may have been less sensitive to the termination of expanded benefits. Finally, we present evidence that early termination reduced the share of households that had no difficulty meeting expenses by five percent. The welfare implications of the early termination of FPUC and PUA are therefore ambiguous..."

“…The possibility that unemployment-to-employment flows were on separate trajectories among states that did and did not withdraw early from pandemic-era UI benefit programs is a potential threat to the validity of our estimates. To explore this possibility, in Figure 1 we present event study evidence for each of these four sample groups. For each, the monthly coefficients from February through May are centered around or close to zero, and are imprecisely estimated. This pattern mitigates concerns about divergent “pre-period” trends and supports a causal interpretation of our estimates. It is also reassuring that the magnitude of the September coefficient falls closer to zero and that the coefficient is statistically insignificant. Since both the “treatment” and “control” states had ended pandemic-era UI programs in September, this finding strengthens confidence in our results for July and August….”

The Evidence

"...Table A1 presents summary data on the relevant characteristics of these two sets of states. This table shows means and standard deviations on the variables we use in the analysis for states that did and did not terminate FPUC and PUA, and during time periods of February-June and July-August 2021, both before and after the early terminations went into effect respectively. These data indicate a sharp rise in transitions from unemployment to employment in the states ending extended benefits after the early withdrawal was implemented, while no such rise is observed in the states that maintained such benefits until September. We also note several other differences between the two sets of states that could likely affect these transition rates, including: higher stringency levels in the earlier period in states not ending benefits, but also declining stringency of restrictions in both sets of states (and especially those not ending benefits); increases in new Covid cases in July and August, especially in states ending extended benefits; and higher education levels in the states not ending FPUC and PUA...."

"...We offer further evidence on transitions from unemployment to employment and their determinants, in these states and time periods, in Table 2. Here, we again present the mean transitions in these states and time periods among the unemployed, as well as the means of social-distancing stringency, new Covid cases, and the share of respondents in the HPS reporting having no difficulty meeting expenses in the previous week. We also present the changes over time in these measures (Column 3), the “unadjusted differences in differences” between these states and time periods in such transitions (Column 4), and the percent changes relative to baseline in these differences (Column 5). The goal of Table 2 is to be as transparent as possible with the data. The summary data indicate a fairly sharp increase of over 13 percentage points in transitions from unemployment to employment in the states ending extended benefits, but not in those allowing them to remain in place. Relative to baseline transitions, the increase is about 60 percent in the states ending benefits, and a four percent decrease those not ending them..... Our results indicate a 13.8 percentage point increase in transitions from unemployment to employment among prime-age workers before controlling for stringency and new cases, rising to 14.4 percentage points after controlling for them. We estimate an 11.6 percentage point increase in transitions among prime-age workers without college degrees (and with controls), and an 11.4 percentage point increase among prime-age workers who last worked in the leisure and hospitality and retail industries. Among workers ages 16-64, the results indicate a 13.3 percentage point increase in transitions, again including control variables. Six of the eight estimates are statistically significant; both estimates on the leisure/hospitality and retail sample are not...."

Harry Holzer, Glenn Hubbard and Michael Strain, "Did Pandemic Unemployment Benefits Reduce Employment? Evidence from Early State-Level Expirations in June 2021," National Bureau Of Economic Research, December 2021, https://www.nber.org/papers/w29575

Impact of education, "... The magnitude of the effect is slightly smaller when we estimate our models on samples of unemployed workers ages 25-54 with less than a college degree (12 percentage points) and of workers ages 16-64 (13 percentage points). Among these samples, the coefficient of interest is statistically significant. Among workers ages 25-54 who last worked in the leisure and hospitality and retail industries, the coefficient magnitude is also smaller (11 percentage points) and the coefficient is statistically insignificant...."

"... We extend this exercise to determine what the national unemployment rate and employment-population ratios would have been if all states opted out of pandemic-era UI programs in June. We estimate that the national unemployment rate in July would have been around 0.3 percentage point lower and the aggregate employment rate in July would have been 0.2 percentage point higher. In August, the unemployment rate would have been around 0.3 percentage point lower and the employment rate about 0.1 percentage point higher. The differences between the actual and counterfactual unemployment and employment rates using estimates from workers ages 16-64 are larger..."

"... Our counterfactual estimates that FPUC and PUA added 0.3 percentage point to the national unemployment rate in each of July and August are quite modest when compared to the likely effect of Covid-19 itself. Data from the September 15-27 Household Pulse Survey (HPS), administered by the U.S. Census Bureau, report that 4 million people were home sick with Covid symptoms or caring for someone in the same situation and 3 million weren’t working because they were worried about Covid. Our estimates may also be modest when compared with the labor market effect of unstable school and day cares. The HPS reported 5 million people were at home looking after kids not in school or day care...."

"...Finally, we note that the welfare implications of the early termination of FPUC and PUA are ambiguous. Decreases in unemployment and increases in employment may be welfare enhancing in many cases. But we also present evidence that early termination increased financial stress. Using HPS data, we find that the share of respondents who report that they had no difficulty meeting expenses in the past seven days dropped by slightly more than two percentage points, or about five percent of the average share from February-June 2021...."

Factoids, "... Among unemployed workers ages 25 to 54, we find that early termination is associated with a 14 percentage point increase in the unemployment-to-employment flow. This effect is over two-thirds the size of the unemployed-to-employed (U-to-E) flow among control states during the February-June 2021 “pre period” (21 percent)...."