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This edition was written by Sarah Ahmad, Chase Parry, Tristan Loa, and Louise Sheiner.
In 2021, Colorado enacted the first pay transparency law in the U.S., requiring all online job postings to include salary information. David Arnold of the University of California, San Diego, Simon Quach of the University of Southern California, and Bledi Taska of SkyHive find that the law increased the share of postings with salary information by 30 percentage points within a year and raised self-reported earnings in Colorado by 1.3% relative to other states. The wage gains appeared for both incumbent workers and new hires, indicating that the policy affected workers beyond those directly covered by the posting requirement. Extending the analysis to all states and municipalities that adopted pay transparency policies through July 2024, the authors find similar wage increases. Importantly, the policy did not affect the number of job postings or their education or skill requirements. The authors conclude that increased transparency intensified competition between firms, raising wages without reducing overall employment.
Wenli Li of the Federal Reserve Bank of Philadelphia and Yichen Su of Southern Methodist University find that migration during and after the COVID-19 pandemic, driven by remote work, moderated the rise in average housing cost burdens in the U.S. Starting in 2020, net out-migration from densely populated urban cores increased, largely driven by high-income individuals, while many lower-income residents remained. This raised housing prices in destination markets while also increasing job accessibility there for lower-income individuals as local demand for goods and services rose. Smaller, suburban housing markets, where housing supply was more elastic, saw new construction respond more strongly to demand, blunting some of the price effects of net in-migration. In origin markets, decreasing housing demand alleviated some housing cost pressures; low-income individuals in both large and small urban areas saw larger welfare gains relative to high-income counterparts.
Analyzing tariff shocks from 1870 to 2018, Régis Barnichon and Aayush Singh of the Federal Reserve Bank of San Francisco find that a tariff hike raises unemployment and lowers inflation—similar to a negative aggregate demand shock. This runs counter to the expectation that tariffs are cost-push shocks that raise prices. The channels through which this effect is transmitted, the authors argue, are uncertainty and wealth. Tariffs create an uncertain economic environment that depresses consumer and investor confidence and reduces asset prices, thereby placing downward pressure on employment and inflation. Using stock market volatility and stock prices as proxies for these channels, the authors find evidence supporting both mechanisms, with increased volatility and declining valuations following tariff shocks. The authors note that if tariffs operate primarily through an aggregate demand channel rather than a cost-push channel, this could have important implications for the optimal monetary policy response to tariff shocks.
"I like analogies, so I’ve been describing operating with limited data as trying to bring a boat to shore in the pitch black and having the lighthouse go dark. You can assume you’re on the same course for a short while. You can try to navigate by lantern. But you can’t ignore the fact that you don’t have much visibility, you might lose your bearings and there may be hazards up ahead," says Tom Barkin, President of the Federal Reserve Bank of Richmond.
"The good news is that we aren’t navigating blind. We have other ways to keep a pulse on the economy. Private sector data help. For the most part, they aren't as definitive nor as calibrated, but they can highlight big shifts in economic conditions...
If you build data centers, or provide energy, or sell to higher-income customers, or trade on Wall Street, or build pharmaceutical plants, or live in the Carolinas, your economy is hot. But if you’re a farmer, or a realtor, or a manufacturer hurt by tariffs, or are dependent on lower-income consumers, you are struggling. In the D.C. metro part of my district, the government shutdown has exacerbated an already challenging situation for federal workers, local businesses, and institutions dependent on government funding...
If you ask businesses how they see the labor market today, they say, “balanced.” But as they describe that “balance” in more detail, it doesn’t seem so. With the exception of skilled trades, labor feels quite available with plenty of quality applicants per opening. Recent layoff announcements by sizable firms like Amazon, Verizon, and Target give additional cause for caution."
About the Hutchins Center on Fiscal and Monetary Policy at Brookings
