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This edition was written by Elijah Asdourian, Sam Boocker, Alex Conner, and Louise Sheiner.
Using data on employment and mortality, Amy Finkelstein of MIT and co-authors find that higher unemployment during the Great Recession decreased mortality rates over at least the subsequent 10 years. Mortality only declined for the non-college educated population, but within that cohort, mortality declined for all demographic groups and all causes of death other than cancer, where no effect was measured. The authors find that reduced economic activity has positive health effects, with declines in air pollution alone accounting for a third of the decrease in mortality. They conclude that there is a potential tradeoff between welfare and economic growth, writing that the mortality declines during the Great Recession were large enough that “recessions may be welfare-improving for older people.”
Kevin Corinth of the American Enterprise Institute and Jeff Larrimore of the Federal Reserve Board construct a comprehensive income measure for American households between 1963 and 2022, finding that real median income at ages 36 to 40 has risen for every generation born after 1945. Progress for Millennials and Gen-X – cohorts born after 1980 – was slower than for previous generations, which the authors attribute to a flattening out in women’s labor force participation. Holding work hours constant, Millennials and Gen-X enjoyed larger increases than Baby Boomers. Black Americans enjoy somewhat larger intergenerational income gains than non-Black Americans, although the difference has been narrowing.
“An open question looking ahead… is how spending momentum will evolve this year, which may either help or hinder this disinflationary process. I expect consumer spending to grow more slowly this year than last—which should help with disinflation. Large balances of excess savings accumulated early in the pandemic have supported household spending during the past few years. By now, these excess savings are likely exhausted, at least for households in the bottom half of the income distribution. And we have begun to see signs that some households have come under increased stress, such as rising delinquency rates on credit cards… Business spending growth is also likely to be a bit slower this year, since the widely discussed boom in factory construction may level off, albeit at a high level… And I closely watch developments in broader financial markets as well. Some measures of financial conditions have become a bit less restrictive in recent months but remain relatively tight,” says Adriana Kugler of the Federal Reserve Board of Governors.
“…So I am pleased with the disinflationary progress thus far and expect it to continue. I must emphasize, however, that the Committee's job is not done yet. Consumer spending was surprisingly strong last year. Gross domestic product grew at a nearly 5% rate in the third quarter, led by consumption. And even though spending and output growth moderated some in the fourth quarter, consumption contributed nearly 2 percentage points to fourth-quarter GDP growth. So consumers could surprise us again this year, and that could slow progress on inflation. Last week's employment report was also surprisingly strong amidst the broader cooling trend. It is important that supply and demand in both product and labor markets broadly continue moving into better balance.”
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