Policy Points

05.11.2009 Policy Points Comments Off on Editor’s Note

Editor’s Note

Between November 5 and November 17, Policy Points will be updated on a reduced schedule. During that time, the blog will be updated once per weekday at approximately 8 AM. Posting will return to a three-per-weekday schedule on November 18.

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04.11.2009 Policy Points Comments Off on Around the Dial – Nov. 4

Around the Dial – Nov. 4

Economic policy reports, blog postings, and media stories of interest:

04.11.2009 Policy Points Comments Off on A National Mortgage Market

A National Mortgage Market

In a new Economic Letter, the Federal Reserve Bank of San Francisco analyzes changes in the national mortgage market following the bursting of the housing bubble. Concludes the Bank:

As the U.S. housing market has moved from boom in the middle of the decade to bust over the past two years, the sources of mortgage funding have changed dramatically. The government-sponsored enterprises—Fannie Mae, Freddie Mac, and Ginnie Mae—now own or guarantee an overwhelming share of originations. At the same time, non-agency mortgage securitization and loans retained in lender portfolios have largely dried up.

03.11.2009 Policy Points Comments Off on Around the Dial – Nov. 3

Around the Dial – Nov. 3

Economic policy reports, blog postings, and media stories of interest:

03.11.2009 Policy Points Comments Off on The Outlook for Consumer Spending

The Outlook for Consumer Spending

Personal consumer spending is the largest single contributor to the nation’s gross domestic product. While personal spending typically declines during a recession, the eventual rebound helps lead the economy out of recession.

Yet in today’s economy, a variety of factors make a robust rebound in consumer spending unlikely. In recent congressional testimony, scholar Karen Dynan of the Brookings Institution outlined the reasons why consumer spending growth will be muted in coming months. One of the factors likely to depress spending is a weak labor market recovery. Says Dynan:

One factor that will probably restrain consumption will be tepid growth in households’ labor income. As you know, the sharp decline in aggregate demand for output has led to one of the largest percent declines in employment since the Second World War. Payroll employment has fallen by more than 7 million since the recession began, and, although the rate of decline has abated in recent months, we are unlikely to see substantial gains in employment in the near future. When labor demand picks up again, firms are likely to increase workers’ average hours – which fell noticeably during the downturn – before increasing the number of workers they employ. Firms tend to pursue this strategy because raising hours is less costly and easier to reverse than hiring new workers if the recovery proves transient. Of course, longer workweeks would increase workers’ earnings, but the magnitude of this response is also likely to be muted.