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This edition was written by Alex Conner, Tristan Loa, Georgia Nabors, and David Wessel.
Using data from the Health and Retirement Study, Nicolò Russo of Goethe University Frankfurt and co-authors identify significant racial disparities in frailty among older Americans, a measure that captures health deficits such as physical and mental impairments and medical diagnoses. They find that at age 55, Black men have frailty levels similar to white men who are 13 years older. Black women’s frailty at 55 is comparable to that of White women 20 years older. Hispanic men and women display the same frailty levels as white men and women who are 5 and 6 years older, respectively. These gaps are not specific to one condition—Black and Hispanic populations have worse health across most types of conditions. The authors also find evidence that many health conditions are underdiagnosed among Black Americans, suggesting that the true gaps in health are wider than data suggest. Frailty at age 55 contributes significantly to the lifespan gap between Black and white individuals. In addition, the authors find that older Black Americans spend twice as long on disability benefits and receive retirement benefits for a shorter period relative to their white counterparts. Frailty at midlife explains about half of these differences.
Alexander Bick from the Federal Reserve Bank of St. Louis, David J. Deming from Harvard, and Adam Blandin from Vanderbilt use data from the Real-Time Population Survey to estimate the speed and intensity of the adoption of generative artificial intelligence (AI). They find that 39% of the U.S. population aged 18-64 used generative AI in August 2024. More than 24% of workers used it at least once in the week prior to being surveyed, and nearly 1 in 9 used it every workday. This widespread use is evident across different sectors: nearly half the workers in computational and management occupations used generative AI, and nearly 1 in 4 blue-collar workers did as well. Generative AI has been adopted faster than computers and the internet, a trend attributed to its low cost and widespread availability. Because of its diversity of use across various fields and applications, the authors conclude that generative AI appears to be a general-purpose technology.
Andrea Ajello and co-authors of the Federal Reserve estimate the risks to year-ahead economic performance implied by current financial conditions. They show that the distribution of growth implied by financial conditions is similar to previous expansionary periods, if slightly shifted to the downside. The growth outlook has notably improved over the last year as the Fed signaled looser policy and financial conditions eased. The inflation outlook is elevated compared to normal times, although the distribution has shifted down over the last three years and is now centered near the Fed’s 2% target. Risks to employment have diminished over the last year but remain elevated.
“Central banks should be prepared to provide extensive liquidity support during a crisis. Banks should be familiar with the central bank’s operations and facilities and be ready to use them at short notice. Who can access central bank lending is also an important question as liquidity risks have partially moved away from the usual central bank counterparties. While widening the counterparty list could help central banks intervene more broadly in a crisis, it runs the risk of rewarding regulatory arbitrage, giving raise to difficult trade-offs and requiring careful assessment. Central banks may well have to lend against illiquid collateral in a crisis. In that context, prepositioning would help to ensure operational preparedness especially to ascertain the legal claim on the collateral and to calibrate appropriate haircuts.”
“Effective deposit insurance regimes are crucial. Banks typically fail when creditors lose confidence, even before their balance sheet reflects potential losses. Authorities in many countries need to strengthen deposit insurance regimes. New technology like 24/7 payments, mobile banking, and social media have accelerated deposit runs. Last year’s failures followed rapid deposit withdrawals, and deposit insurers and other authorities should be ready and able to act more quickly than many currently can.”
About the Hutchins Center on Fiscal and Monetary Policy at Brookings
