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This edition was written by Sarah Ahmad, Emily Araujo, Chase Parry, Jack Spira, and Louise Sheiner.
Edward N. Wolff of New York University finds that the wealth gap between older and younger Americans has widened dramatically over the past four decades. In particular, from 1983 to 2022, the mean net worth of households under 35 fell from about one-fifth of the overall average level to about one-sixth, while the 75-and-older group rose from near-parity to almost one-and-a-half times it. Wolff attributes this widening gap to two major factors. First, extraordinary growth in stock holdings disproportionately benefitted the oldest Americans, especially after the 2007-2010 financial crisis. Second, housing equity among the young remained flat in absolute terms, reflecting stagnant homeownership and rising mortgage debt, but increased sharply among the old as their homeownership rate rose and house values appreciated.
Emma Harrington of the University of Virginia and Matthew E. Kahn of the University of Southern California find that the pandemic-driven rise in remote work increased mothers’ employment in high-paying but traditionally family-unfriendly careers like marketing and finance. Using data from the American Community Survey, they show that a 10% increase in the share of workers working from home is associated with a 0.78 percentage point rise in mothers’ employment rates relative to other women. The gains are concentrated among mothers with greater childcare responsibilities and younger children. The authors conclude that the expansion of family-friendly jobs in high-paying, high-growth fields reduces gender inequality in the labor market.
Determining the causes of inflation can be critical for timely and effective policy responses, but most measures of realized or expected price movements are only reported monthly. Maria Giulia Cassinis of the Bank of Italy and Massimo Ferrari Minesso and Ine Van Robays of the European Central Bank show that the real-time market rates of inflation-linked swaps (ILSs)—derivatives traded for gaining or hedging exposure to inflation—predict short-term inflation better than monthly surveys. Constructing an empirical model that links supply shocks to realized inflation through their effects on ILS rates, they find that energy price increases and domestic supply constraints such as labor shortages have short-lived effects on inflation that self-correct through their drag on economic growth, and that energy shocks do not tend to raise other consumer or producer prices. By contrast, global supply constraints, as measured by the New York Fed's Global Supply Chain Pressure Index, have larger, broader, and more persistent effects: a one-standard-deviation shock raises headline CPI by 0.6 percentage point two years later. The model allows inflation to be decomposed at a weekly frequency, providing policymakers with more timely information.
"The euro area economy proved resilient earlier this year in the face of a challenging global environment. This has largely been due to two factors. First, Europe’s export-oriented economy has benefited from the global frontloading, growing by more than expected in the first quarter of the year. Sectors with higher export exposure to the United States—such as pharmaceuticals, which account for over one-fifth of euro area exports to the United States—recorded strong output growth during this time. Of course, with tariff hikes now being implemented, this effect is now reversing and the expected slowdown in euro area growth was already evident in the second quarter of this year," says Christine Lagarde, President of the European Central Bank.
"The second factor underpinning the economy has been stronger private consumption and investment, which have contributed positively to growth. Moreover, the labor market remains robust. The unemployment rate—standing at 6.2% in June —has changed little over the past year, while the labor force has continued to grow."
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