ECONOMY
-
Federal Student Loan Defaults Return After Pandemic Pause
Zara Jacob, Donghoon Lee, Daniel Mangrum, Joelle W. Scally, and Wilbert van der Klaauw During 2026:Q1, household debt balances increased slightly, by $18 billion, to reach $18.8 trillion, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Amid upticks in mortgage, HELOC, and auto balances and a seasonal decline…
Read More » -
Do Job Postings Show Early Labor-Market Effects of AI?
Richard Audoly, Miles Guerin, and Giorgio Topa As generative AI tools become more widely used, a key issue is the technology’s impact on labor demand. Where might we find evidence of that impact? In this post, we examine whether early evidence of AI’s effect on the labor market appears in firms’ job postings. We combine an occupational measure of AI…
Read More » -
Will Mounting Supply Chain Strains Hamstring the AI Investment Boom?
Hunter L. Clark, Jeffrey B. Dawson, and Shad Turney The conflict in the Middle East has precipitated a global supply shock—the third in six years following the pandemic in 2020 and Russia’s invasion of Ukraine in 2022. The current shock raises the specter of spillovers to the U.S. through both prices and physical shortages of goods. A critical conduit for…
Read More » -
Stress and Strain from NBFIs to Banks
Viral V. Acharya, Nicola Cetorelli, and Bruce Tuckman Do the recent stresses in the NBFI space—notably the bankruptcies of Tricolor and First Brands, and the decision of Blue Owl Capital Corp II (OBDC II) to end its redemption program and return capital through a wind-down of the fund—create distress for banks? The general sentiment is that the recent stresses are…
Read More » -
In What Ways Has U.S. Trade with China Changed?
Hunter L. Clark and Gregory Simitian Over the past year, U.S. trade policy with China has undergone enormous changes, but with surprisingly little effect on overall trade balances. In fact, the U.S.’s twelve-month trade deficit, while highly volatile due to import front-running early in the year, ended 2025 at $1.2 trillion, almost unchanged from 2024. At the same time, China’s trade…
Read More » -
Explaining the K-Shaped Economy: What’s Behind the Divide?
Rajashri Chakrabarti, Thu Pham, Beck Pierce, and Maxim L. Pinkovskiy In our companion post, we used a new module of our Economic Heterogeneity Indicators (EHIs) to shed light on how recent retail spending growth has been driven by high-income households. This fact is consistent with the popular press’s idea of a “K-shaped economy” in which higher-income households experience faster growth…
Read More » -
What Millions of Homeowner’s Insurance Contracts Reveal About Risk Sharing
Hyeyoon Jung and Jaehoon (Kyle) Jung Housing is the largest component of assets held by households in the United States, totaling $48 trillion in 2025. When natural disasters strike, the resulting damage to homes can be large relative to households’ liquid savings. Homeowner’s insurance is the primary financial tool households use to protect themselves against property risk. Despite the economic…
Read More » -
The R*–Labor Share Nexus – Liberty Street Economics
Sophia Cho and John C. Williams Over the past quarter century, the U.S. economy has experienced significant declines in both the labor share of income and the natural rate of interest, referred to as R*. Existing research has largely analyzed these two developments in isolation. In this post, we provide a simple model that captures the joint evolution of the…
Read More » -
Bank Failures: The Roles of Solvency and Liquidity
Bank Failures in the United States, 1863–2024 Source: “Bank Failures: The Roles of Solvency and Liquidity,” Correia, Luck, and Verner (2026a). Bank Failures: The Theory Bank failures can stem from two related but distinct sources. Under the liquidity view, a sudden wave of withdrawals forces a bank to liquidate assets at fire-sale discounts, rendering it insolvent. Runs can thus trigger…
Read More » -
Use of Gen AI in the Workplace and the Value of Access to Training
Ali Hashim, Gizem Kosar, and Wilbert van der Klaauw The rapid spread of generative AI (AI) tools is reshaping the workplace at a remarkable rate. Yet relatively little is known about whether workers have access to these tools, how the tools affect workers’ daily productivity, and how much workers value the training needed to use the tools effectively. In this…
Read More »