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This edition was written by Sarah Ahmad, Georgia Nabors, Jack Spira, and David Wessel.
Since 1950, the share of prime-age men who are out of the labor force has increased from 3% to 11%. Using data from 1976 to 2023, Leila Bengali of the Federal Reserve Bank of San Francisco and co-authors find that non-participation rates among prime-age men have risen with each successive generation at each age. Baby Boomers, for example, had much lower rates of non-participation at age 30 than Millennials do today. The authors attribute this increase in non-participation to both “push factors” (things that force individuals to exit the labor force) and “pull factors” (choices made available to workers that draw them out of the labor force). The gap in non-participation between 20- to 30-year-old Millennials and previous generations at the same age is explained in large part by higher rates of postsecondary education enrollment (a pull factor). Skill mismatches (a push factor) and caretaking responsibilities (a pull factor) drive the gap between generations across all age groups. Increasing disability is also an important contributor to rising non-participation.
Karsten Müller of the National University of Singapore and co-authors compile the largest historical database of annual macroeconomic variables to test the long-run effects of financial crises and of global temperature shocks. The database integrates recent data and forecasts from contemporary sources, such as the International Monetary Fund and the World Bank, with several historical datasets, harmonizing them for methodological consistency, and comprises 46 macroeconomic variables across 243 countries, reaching back, in some cases, to the 13th century and beyond. The authors find that the shortfall in output relative to trend following a financial crisis is most pronounced only after 30 years, at a magnitude of 15% to 20%. Output gaps following global temperature shocks persist for at least 25 years, reach a similar magnitude, and dwarf the effects of local temperature shocks.
In recognition of the systemic risks posed by Global Systemically Important Banks (GSIBs), the Financial Stability Board and Basel Committee imposed additional capital requirements in 2016 under the Basel III framework—known as the GSIB surcharge—to internalize the external costs these firms may generate in times of stress. The surcharge requires banks to hold more capital when their risk scores cross specific thresholds. Marco Migueis and Sydney Peirce of the Federal Reserve Board find that banks adjust some, though not all, activities to avoid triggering higher GSIB surcharges. For international banks, proximity to the surcharge threshold is associated with decreased growth in intra-financial system liabilities, underwriting activities, and holdings of trading and available-for-sale securities. U.S. GSIBs near threshold scores show reduced growth in trading and available-for-sale securities. Conversely, banks near the lower bound of thresholds tend to expand total exposures and securities outstanding.
"America First does not mean America alone. To the contrary, it is a call for deeper collaboration and mutual respect among trade partners. Far from stepping back ... America First seeks to restore fairness to the international economic system," says Treasury Secretary Scott Bessent.
"Nowhere is the imbalance...more obvious than in the world of trade. That’s why the United States is taking action now to rebalance global commerce. For decades, successive administrations relied on faulty assumptions that our trading partners would implement policies that would drive a balanced global economy. Instead, we face the stark reality of large and persistent U.S. deficits as a result of an unfair trading system.
Intentional policy choices by other countries have hollowed out America’s manufacturing sector and undermined our critical supply chains, putting our national and economic security at risk. President Trump has taken strong action to address these imbalances and the negative impacts they have on Americans. This status quo of large and persistent imbalances is not sustainable. It is not sustainable for the United States, and ultimately, it is not sustainable for other economies.
... Of course, trade is not the only factor in broader global economic imbalances. The persistent over-reliance on the United States for demand is resulting in an evermore unbalanced global economy. Some countries’ policies encourage excess saving, which holds back private sector-led growth. Others keep wages artificially depressed, which also suppresses growth. These practices contribute to global dependence on U.S. demand to spur growth. They also lead to a global economy that is weaker and more vulnerable than it should be.”
