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This edition was written by Elijah Asdourian, Alex Conner, Georgia Nabors, and Louise Sheiner.
Unemployment insurance (UI) can potentially mitigate the negative effects of robotization on employment. Using data from 2000 to 2007, Fernanda Brollo of the IMF finds that for each additional robot per 1,000 workers, an area’s employment-population ratio declined by 0.6 percentage point and average hourly wages fell by 0.8 percentage point. These impacts were felt primarily by workers without a college degree. About 2/3 of the decline in wages was offset by UI benefits in states with generous UI programs (those with higher benefits and longer duration of benefits) which give displaced workers time to search for jobs aligned with their skills. Increases in robot exposure raised poverty rates in areas with weak UI programs, but not in areas with strong ones. However, the long-term reduction in employment was no different in states with more generous UI, likely because UI benefits are temporary. The author concludes that strong UI and social assistance can help workers adjust to technological innovation.
The sustained increase in telework since the outbreak of the COVID-19 pandemic has reduced average time spent commuting for many. Using data on Americans’ time usage from 2016 to 2021, Yi Ji of the World Bank and co-authors find that households in which at least one adult worked remotely post-pandemic experienced significant welfare gains from this shift. In 2021, Americans in teleworkable jobs spent 40% less time commuting than pre-COVID, while Americans in non-teleworkable jobs saw less than a 10% decline in commute times. The time saved commuting was not fully offset with more hours of work. Across the board, Americans had more leisure time in 2021 than they did pre-pandemic. The authors also calculate welfare gains from saved commute time for married couples post-COVID, finding the largest increases when both spouses have teleworkable jobs, smaller but still substantial gains for couples where one spouse can work remotely, and nonexistent gains for households where neither spouse has a teleworkable job.
“While we saw rapid disinflation in the second half of 2023, that progress appears to have stalled in the most recent quarter…The question we now face is whether the disinflationary process is in fact still underway, merely taking longer than expected, or if inflation is instead settling to around a 3% level, suggesting that the FOMC has more work to do to achieve our dual mandate goals," says Neel Kashkari, President of the Federal Reserve Bank of Minneapolis.
"During this time, economic activity has continued to show remarkable strength….While the most recent headline GDP appears somewhat weaker than prior quarters, that slowdown was driven largely by inventories and net exports. Underlying domestic demand remained strong…"
"The FOMC has undeniably tightened policy meaningfully, both relative to the pre-pandemic period and to some prior tightening cycles. Nonetheless, it is hard for me to explain the robust economic activity that has persisted during this cycle. My colleagues and I are of course very happy that the labor market has proven resilient, but, with inflation in the most recent quarter moving sideways, it raises questions about how restrictive policy really is."
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