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February 5, 2013

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Latest Posts from Economist's View


Posted: 05 Feb 2013 12:06 AM PST
Posted: 04 Feb 2013 01:14 PM PST
The SF Fed's Rob Valletta is optimistic about the long-run prospects for the long-term unemployed:
Long-term Unemployment: What Do We Know?, by Rob Valletta: U.S. labor market conditions have improved over the past few years. But the average duration of unemployment has remained very high, suggesting that job prospects for the long-term unemployed have stagnated. However, a closer look at the data indicates that the incidence of long-term unemployment has declined over the past few years, and that job prospects for the long-term unemployed are not as downbeat as the average duration data suggest.
U.S. labor market conditions reached a low point in late 2009 and early 2010. Since then, the nation's economy has added 4¾ million payroll jobs and the unemployment rate has fallen by over two percentage points, from 10.0% in October 2009 to 7.8% in December 2012. At the same time though, the average duration of unemployment rose from about 28 weeks to a peak of nearly 41 weeks in late 2011. Since then, it has dropped only slightly, to 38 weeks. Persistently high unemployment duration in the face of an improving labor market raises the possibility that a significant share of current joblessness is structural, or essentially permanent, in nature.
This Economic Letter examines in detail unemployment duration, the characteristics of the long-term unemployed, and their prospects of finding a job. While unemployment duration remains near historical highs, the characteristics of the long-term unemployed and their recent job-finding rates suggest that a sustained cyclical recovery will largely eliminate long-term joblessness. ...
But we shouldn't take this as a reason to stand by and do nothing. If we can help the process along, or ensure against the chance that this analysis is wrong -- and we can -- we (meaning fiscal policymakers) should do it. Lack of demand + high unemployment + crumbling infrastructure + interest and other costs abnormally low = obvious solution.
Posted: 04 Feb 2013 10:19 AM PST
João Santos, vice president in the Research and Statistics Group of the Federal Reserve Bank of New York:
Did Securitization Lead to Riskier Corporate Lending?, by João Santos: There's ample evidence that securitization led mortgage lenders to take more risk, thereby contributing to a large increase in mortgage delinquencies during the financial crisis. In this post, I discuss evidence from a recent research study I undertook with Vitaly Bord suggesting that securitization also led to riskier corporate lending. We show that during the boom years of securitization, corporate loans that banks securitized at loan origination underperformed similar, unsecuritized loans originated by the same banks. Additionally, we report evidence suggesting that the performance gap reflects looser underwriting standards applied by banks to loans they securitize. ...
Our evidence that securitization led to riskier corporate lending is in line with similar findings unveiled by studies of the effects of securitization on mortgage lending. Taken together, these studies confirm an important downside of securitization.

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