Liberty Street Economics

Several states have recently capped consumer loan rates with the stated purpose of protecting borrowers. In a recent Staff Report , we study how these interventions have played out in three states. In our first post about that study , we showed that rate caps lead riskier borrowers to face rationing in the credit market. One question that naturally arises is what lenders do with the credit they u…

In imperial China, 3 percent was the maximum legal monthly loan rate; charging more was punishable by 40 to 100 blows with the “ light cane .” (Rockoff 2003 ) Centuries later, many U.S. states are imposing the same cap (without corporal penalties) on alternative credit providers, such as payday, installment, and auto-title lenders, with the goal of lowering credit costs and delinquency for the hi…

We recently updated the suite of indicators describing the performance of small businesses in the Second District (defined, for the purpose of this study, as New York, New Jersey, and Connecticut) and nationally with data from the 2025 edition of the Small Business Credit Survey (SBCS). In this post, we find that regional small businesses reported severe declines in employment and revenue growth …

Youth unemployment has risen dramatically since the pandemic—as has the prevalence of remote work. Our analysis suggests that these trends are related, with remote work making it more difficult for managers to train and mentor new employees. Accordingly, companies may be reluctant to hire less-experienced workers in distributed work arrangements. We estimate that remote work can explain 64 percen…

In this post, we use the inaugural release of our regional consumer spending indicators to ask whether these patterns hold for a significant portion of the Second District, and how regional spending patterns by income have been similar to or different from the national patterns we documented earlier . We find similar K‑shaped patterns in both retail and gas spending in our region as we do in the …

Current discussions regarding a bifurcated U.S. economy highlight the increasing economic divide between lower- and higher-income Americans in spending and earnings growth and wealth accumulation. While many households are doing fine and economic activity overall has been expanding at a solid pace, large segments of the population are facing high levels of economic insecurity and financial strain…

Economists often look at nominal wage growth to gauge labor market imbalances, price pressures, and households’ spending ability. But to use wage growth for these purposes, it is important to look through short-run fluctuations and retrieve underlying wage inflation. In this post, we use our own measure of wage growth persistence—called Trend Wage Inflation (TWIn in short)—to summarize what we le…

In the third quarter of 2025, America's largest tech firms for the first time spent more on capital investment than they earned from operations. The implication is that AI, a technology with the potential to make the economy more productive, is, for now, absorbing resources faster than it is generating returns. This post discusses how the tension between AI's long-run promise and its short-run co…

The global corporate nonfinancial bond market is both a large investment asset class and a vital source of funding for nonfinancial firms. With $19 trillion outstanding at the end of 2024, a broad portfolio of corporate bonds would be expected to be well diversified. Yet, in 37 percent of months between 1998 and 2024, more than 80 percent of bonds in the ICE Global Bond Indices—a portfolio with o…

Foreign holdings of U.S. financial assets are immense, with official estimates putting their current market value at $69 trillion. U.S. holdings of foreign assets are also impressive but much smaller, at $41 trillion. The shortfall in U.S. foreign assets relative to foreign liabilities has been mounting for decades. Yet U.S. investment income receipts—in profits, dividends, and interest—comfortab…

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 exposure with detailed U.S. job-posting data from Lightcast, which aggregates listings from co…

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 in credit card balances, student loan balances remained unchanged. However, the share of student l…

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 spillovers through these channels is via Asian supply chains, especially from middle- to lowe…

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 unlikely to amount to systemic concerns, although it does not mean there might not be …

In March 2026, energy prices surged to a four-year high, driven by the Iranian closure of the Strait of Hormuz amid the ongoing conflict in the Middle East. In this Liberty Street Economics post, we use the new consumer spending module of the Economic Heterogeneity Indicators to analyze recent changes in nominal and real gas consumption across different income groups. We find that households had …

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 surplus with the world actually increased from $1…

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 in spending than lower-income households. In this post, we dive deeper int…

Aggregate real consumer spending has risen solidly since 2023. However, it is less clear how widely shared this improvement has been across all segments of society. This is important because systematic heterogeneity may mask the dependence of aggregate growth on a relatively small group of households and thus conceal macroeconomic risks. In this post, we use consumer spending data recently added …

Do banks fail because of runs or because they become insolvent? Answering this question is central to understanding financial crises and designing effective financial stability policies. Long-run historical evidence reveals that the root cause of bank failures is usually insolvency. The importance of bank runs is somewhat overstated. Runs matter, but in most cases they trigger or accelerate failu…

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 labor share and R*, which we call the R*–labor share nexus. Our key fi…