I’ve just published Chapter 8 of my open access textbook. This new chapter focuses on women’s homelessness.

An English summary of the new chapter can be found here: https://nickfalvo.ca/womens-homelessness/

A French summary of the new chapter is here: https://nickfalvo.ca/litinerance-chez-les-femmes/

All material related to the textbook can be found here: https://nickfalvo.ca/book/

Though I’m certainly not the first to make this observation, it looks like the “vibecession” is over. The term was coined in June 2022 by multimedia economic analyst Kyla Scanlon (drawing on Keynes but also the poetry of Charles Bukowski), who defined it as “a disconnect between consumer sentiment and economic data. So basically, the economy is doing fine, but people are absolutely not feeling fine.” By recent measures, people are starting to feel somewhat finer, if not bounce-off-the-walls fine.

The Conference Board’s consumer confidence index rose 6.8 points in January to its highest level since December 2021. The index is the summary of a monthly survey the organization has conducted since 1967 that asks people questions about the state of the economy, the job market, and their personal finances, both in the present and their expectations for the future. Separate indexes for the present and expectations questions are computed, and then averaged into a composite. The history is graphed below.

January’s rise in the composite was led by its “present conditions” component, up 14.1 points to the highest level since March 2020. Driving the rise were improving evaluations of the job market, as the gap between those reporting “job plentiful” and those reporting them “hard to get” expanded 8.4 points to 35.7 in favor of plentiful—very high by historical standards (higher than 94% of all the months in its 57-year history). Expectations, alas, are more muted. 

Gallup agrees on the improvement, though not on its degree. The present component of their economic confidence index rose to its highest level since November 2021 in January, but it’s still negative on balance. (It’s computed as the difference between the share of respondents calling the economy excellent or good and the share calling it poor. Just 5% of respondents in the January survey called it “excellent,” and 22% “good.” Far more, 45%, called it poor. for a net of -18%.) The expectations side, while also net negative, is at its least negative level since September 2021. There’s no graph of these because there are often long stretches between surveys and such a graph would be ugly.

And another: the University of Michigan’s consumer sentiment measure (graph below) was up 9.1 from December on its preliminary January reading, reaching its highest level since July 2021. It was also led by evaluations of the present, though expectations were somewhat loftier than the Conference Board’s counterpart. Sentiment had really been plumbing the depths: in June 2022, the month Scanlon coined the term, the index hit 50.0, its all-time low in over seven decades of history—below the depths of the Great Recession. Not coincidentally, it was also the month of peak inflation.* The sentiment index’s full-year 2023 average was 8 points below the long-term recession average. January’s improved reading was nonetheless still almost 10 points below the average of all business cycle expansions since 1952.

inflation down

Much of this improvement in outlook is the result of the decline in inflation, from 8.9% in June 2022 to 3.3% in December 2023, a fall of almost two-thirds. We hadn’t seen 8.9% in 42 years. December’s 3.3% is above the 1990–2019 average of 2.5%, but not profoundly so. 

Along with the decline in actual inflation has come a decline in expected inflation. I’ve long thought that instruments that measure “expectations” are mostly about the present and recent past and have little or no prognostic content. (As the graph below shows, expectations for price increases over the next twelve months generally track the experience of the previous twelve.) Instead, expectations can be read as a measure of a subjective state—in this case, how established inflation feels as a part of life, what the current norm is.

By this measure, inflation’s psychological grasp looks to be slipping. As the graph shows, expectations for the next year have come down along with actual inflation, from over 5% in mid-2022 to 2.9% in January. 

That matters a lot—people hate inflation! Liberals and leftists tend to dismiss inflation as a concern of anal-retentive reactionaries, but that badly misreads popular opinion. I made this argument at some length in my long Jacobin article on inflation, but here’s another piece of evidence to add to that: Scanlon cites a Morning Consult poll that found 63% of consumers prefer prices going down to their income going up. Economists natter on about “real” (inflation-adjusted) income, but they may not be giving enough weight to the price part. 

partisan coda

Speaking of the Michigan sentiment numbers, the improvement in outlook over the last couple of months crosses partisan lines, but the gap between Democrats and Republicans widened. Partisan gaps have long been visible in the survey, but they were much less dramatic than they’ve been since January 21, 2017. During the Obama years, Dems’ consumer sentiment ratings were about 18 points higher than Republicans’. During the Trump years, the gap more than doubled to 39 points, though it switched parties to favor Republicans. For first three of the Biden years, the parties flipped again, as Dems’ evaluations exceeded Reps’ by 35 points, even though nothing had changed by conventional economic measures. Independents, not surprisingly, split these differences.

Between November 2023 and January 2024, both parties saw strong increases in their evaluations of the economy, but Dems, up 17 points, were more enthusiastic than Reps, up just 15. So the gap widened to 44 points.

Much of the lift to the overall sentiment measure for Republicans—over three-quarters of it—came from expectations, not evaluations of the present; perhaps they’re hopeful about November’s election results.

Otherwise, the end of the vibecession might be good news for the hapless warmonger Biden, who needs some.

* In June 2022, when the sentiment measure was at its record low of 50.0, the unemployment rate was 3.6%. It was also the high for the recent inflation surge: 8.6%. In October 2009, when the unemployment rate was 10.0%, the worst reading of the Great Recession, the sentiment index was 70.6. But there was literally no inflation: for the year ending October 2009, the consumer price index was down 0.2%.

Rajashri Chakrabarti, Kasey Chatterji-Len, Dan Garcia, and Maxim Pinkovskiy

The New York Fed recently released its latest set of Equitable Growth Indicators (EGIs). Updated quarterly, the EGIs continue to report demographic and geographic differences in inflation, earnings (real and nominal), employment, and consumer spending (real and nominal) at the national level. This release also launches a set of national wealth EGIs (which will be examined more closely on Liberty Street Economics early next year). Going forward, EGI releases will also include a set of regional EGIs, which will present disparities in inflation, earnings (real and nominal), employment, and consumer spending (real and nominal) in our region. Drawing on the just released EGIs, in this post, we present recent gender gaps in the labor market at the national and regional levels. We provide a picture of how gender wage and employment disparities have evolved since the pandemic, examining and contrasting gaps at the national and regional level. We find that the gaps between the employment rates and earnings of men and women have declined steadily following the pandemic, but have declined perceptibly more so in our region than in the nation.

Data

We use monthly, seasonally adjusted data on average weekly earnings and employment for men and women aged sixteen and older from the Current Population Survey. Creating a national panel, we draw a data set from respondents in all fifty states and Washington, D.C. We also conduct an analysis at the regional level, which includes respondents residing in New York State and the New York Metropolitan Statistical Area, except for Pennsylvania. We consider the time period from January 2019 to October 2023.

Labor Market Disparities

Gender wage and employment gaps have long been a persistent feature of the U.S. economy. At the onset of the COVID-19 pandemic, there was much uncertainty over how the event would impact these disparities. The shuttering of daycare centers and schools introduced concerns about the disproportionate number of women leaving the workforce to care for their children.

A more permanent change to labor market paradigms has been the rise in popularity of remote work. As more and more companies offered remote work options, many people have wondered: whether the increased flexibility would improve women’s labor market participation; whether women disproportionately taking advantage of remote work would be penalized compared to men who work in-person; or if the decline in childcare provided by in-person schooling might hinder women’s labor force participation. We examine how the labor market trends have evolved in the nation and in the region.

Employment Disparities

The gender gap for the employment to population ratio (or employment rate) at the national and regional levels between January 2019 and October 2023 is shown in the chart below. The employment gap is defined as the percentage point difference between the employment rate for men and the employment rate for women. Before the March 2020 pandemic and recession, the national and regional gender employment gaps were roughly equal, 12 and 12.6 percentage points, respectively. However, during the pandemic recession, both the national and the regional gender gap increased sharply, with the national gap approaching 13 percentage points in June 2020 and the regional gap exceeding 14 percentage points in August 2020. Women were more likely to exit employment than men during the pandemic recession for a variety of reasons, including more tenuous attachment to the labor force, shorter tenure in their current job, and the absence of in-person schooling as a source of childcare.

The Gender Employment Gap Has Declined at the National Level since the Pandemic but Perceptibly More Sharply in the Region

Source: Federal Reserve Bank of New York, Equitable Growth Indicators.

After these temporary increases, the national and regional gender employment gaps decreased at steady rates until mid-2022. Since then, the regional disparity declined perceptibly faster than the national gap. By October 2023, the gender employment gap had shrunk to around 10.9 percentage points at the national level and 8.7 percentage points at the regional level. Thus, employment gaps for women that initially widened at the onset of the pandemic have returned to a declining trend and fallen to well below pre-pandemic levels. The gender gap also declined faster in the region than in the nation as a whole. Although the regional and the national gap were very close in 2019, the regional gender gap is now over 2 percentage points less than the national gap.

Earnings Disparities

We now turn to looking at the gender gap in earnings, defined as the percentage difference between the earnings of men and women. The regional and national gender earnings gap trends, displayed in the chart below, are more volatile than the employment gaps. As the regional gaps are particularly volatile, we also present a smoothed regional gap to better appreciate the ways in which the regional gaps differ from the national gaps.

In 2019 and early 2020, both national and regional gender earnings gaps were decreasing, with disparities in our region substantially smaller than national ones. In December 2019, before the onset of the pandemic, gender earnings gaps hit a trough of 21.2 percent at the national level and 16.7 percent at the regional level, implying women earned 78.8 percent and 83.3 percent of what men earned, respectively. However, the declining trend was reversed as the pandemic brought on labor market changes, with women earning as much as 24 percent less than men at both the regional and national level in March 2020.

Part of the reason for this sharp reversal may have been selection: many lower-earning jobs mostly held by men, may have borne the brunt of layoffs during the very acute contraction of March 2020, leading to the men remaining employed being disproportionately those with higher earnings. Another reason may have been that women, who could afford to, dropped out of the labor force for childcare, as schools closed at the beginning of the pandemic.

Gender Earnings Gap Has Declined at the National Level since the Pandemic, but More So in the Region

Source: Federal Reserve Bank of New York, Equitable Growth Indicators.

As the pandemic eased, gender earnings gaps in both the nation and region declined. However, the regional gap flatlined between early 2022 and mid-2023, declining after that. In contrast, the national gap continued to decline slowly but steadily following the pandemic. The smoothed version of the regional gap shows more clearly that gender earnings disparities declined more sharply in the region than in the nation immediately following the pandemic, and generally remained lower than those in the nation. The national gap is less volatile, gradually decreasing to 18 percent by the end of October 2023. The regional gap did not decrease as rapidly for much of 2023, but has fallen to 16 percent in recent months.

Looking at the real earnings of men and women separately, as we do in this quarter’s EGIs, both in the nation as a whole and even more starkly in the region, women’s real earnings have tended to grow consistently faster than the real earnings of men. Overall, between January 2020 and October 2023, the national and regional gender earnings gap have decreased by more than 3 percentage points each. As of October 2023, men make 16 percent more than women do in our region, compared to 18 percent in the nation.

Conclusion

With the rise of remote work in recent years and the shock of the COVID-19 pandemic, it has been an open question how gender gaps in the labor market would evolve. We provide an analysis of trends in gender employment and earnings gaps at the national and regional level drawing on the New York Fed EGIs. We find that after initial increases during the COVID-19 pandemic, gender gaps at the national and regional level have decreased to below pre-pandemic levels for both employment rate and earnings. Although national and regional employment gaps were similar pre-pandemic, by October 2023 both employment and earnings gaps have become substantially lower in our region—which was particularly affected by the pandemic and its associated changes—compared to the national level.

Our findings are consistent with the increased incidence of work from home following the COVID-19 pandemic, which offered workers greater flexibility in balancing career and family. Women, especially more educated women, disproportionately took advantage of working from home, relative to before, which led to their increased: labor force participation, employment rate, and earnings relative to those of men. This effect may have been stronger in our region because of its relatively greater reliance on remote work, and because of its relatively more educated female workforce that was better positioned to take advantage of remote work. By making it easier to combine career and family, in the words of 2023 Nobel Laureate Claudia Goldin, remote work may have provided a “silver lining” to the effect of the pandemic on women.

National Earnings Report                  National Employment Report

Regional Earnings Report                  Regional Employment Report

Chart data

Rajashri Chakrabarti is the head of Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.  

Kasey Chatterji-Len is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Dan Garcia is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Maxim Pinkovskiy is an economic research advisor in Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this post:
Rajashri Chakrabarti, Kasey Chatterji-Len, Dan Garcia, and Maxim Pinkovskiy, “Recent Disparities in Earnings and Employment,” Federal Reserve Bank of New York Liberty Street Economics, December 1, 2023, https://libertystreeteconomics.newyorkfed.org/2023/12/recent-disparities....

You may also be interested in:

Equitable Growth Indicators

The EGIs: Analyzing the Economy Through an Equitable Growth Lens

Economic Inequality: A Research Series

Disclaimer
The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).

The Canadian federal government has promised to modernize Employment Insurance for the 21st century and has been holding consultations to engage stakeholders and others. These have been full of suggestions for the expansion of coverage and benefits. But when it comes to financing the program the debate has been framed in terms of how to finance these suggestions, without a realization that the nature and structure of contributions are themselves also a part of the “modernization” of Employment Insurance.

There is a clear need to think not just about how to finance benefits by adjustments and tweaks to the existing contribution structure, but rather to also think about that structure and how it can itself be reformed to enhance program objectives.

The need for better insurance offers a guiding principle for reform and practical reforms

The challenges the Employment Insurance has faced during what is almost the first quarter of the 21st century, if not for even a decade longer back to the early 1990s, are calling for better insurance, and these imply changes not just to the structure of benefits but also to contributions.

The most fundamental role of Employment Insurance is to provide workers with income insurance during periods of job disruption, and it is the insurance part of Employment Insurance that needs upgrading and modernization. As a result, a guiding insurance principle for “Modernization” should be to align the structure of contributions to the underlying nature and causes of the risks being covered.

This implies that contributions should be structured to most efficiently and equitably to cover:

• Job risks associated with employer decisions to manage human resources, whether through changes in hours, layoffs, or even business closures;
• Family risks associated with household decisions about respite, care-giving, and skills development; and
• Collective risks associated with the interconnectedness and uncertainty of a global economy, but also with social choices, the costs of which are often disproportionately shouldered by the unemployed.

Aligning contributions with these risks, with the nature and causes of unemployment, implies three straightforward and feasible reforms.

1. Employer contributions should be used to finance Regular Benefits, and employee contributions should finance “Special” Benefits and some fraction of Part II benefits associated with skills development. The shares of total program expenditures of each of these benefits implies that the ratio of employer to employee contributions should rise from $1.40 for every dollar of employee contribution to about $1.90. But these contribution rates should also evolve gradually over time by being based on the ratio of program expenditures on Regular Benefits to those on Special Benefits. If Special Benefits become a larger share of total Employment Insurance outlays, the employee contribution share should rise accordingly.
2. Contribution rates should be relatively stable and set at a level to finance benefits associated with the underlying trend unemployment rate, evolving gradually in a way that roughly corresponds to the evolution of frictional and structural unemployment. An average of monthly unemployment rates over the past seven years, a horizon consistent with the current funding rules, would currently imply a trend unemployment rate of 7%. An average over the past five years, consistent with the usual mandate of a newly elected government, would imply the same. This is only slightly higher than the 6.5% that both rules implied in January 2020, before the onset of the pandemic, and suggests relatively constant rates even in the aftermath of a shock as big as the pandemic.
3. The program should be based on tripartite funding with Federal government contributions from the Consolidated Revenue Fund covering the expansion of benefits needed in the face of big unexpected shocks like business cycle downturns and broad-based regional shocks that take the unemployment rate above its trend, or to compensate for the trade-offs made in social choices like fighting inflation. At the same time, the Federal balance sheet should be strengthened by the surpluses associated with lower than trend unemployment rates.

[ This post is based upon a presentation I made to a workshop organized by the Institute for Research on Public Policy on June 29th, 2022. My presentation was called “Principles and Practicalities in aligning Employment Insurance Benefits and Contributions”.

You can download and read the full paper that summarizes the presentation, and upon which this post is based. You can also read short summaries published by the CD Howe Institute on October 11th, 2002 as “Insurance Principles Make the Case for Stable Contribution Rates as a Part of Employment Insurance Modernization,” and on October 12th, 2022 as “Reality-based Employer EI Contributions.”

A version of this post was also published by the CD Howe Institute on October 13th, 2022 as “Insurance principles offer three practical reforms for financing EI.” ]