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US unemployment rate falls again but little progress after accounting for recalls from temporary layoffs

The official unemployment rate continued to fall in June from 13.3 in May to 11.1. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 2.0 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 4.6 million people have left the labor force since February, more than would be expected even...

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The Wirecard debacle calls for a rethink of EU, not just German, financial reporting supervision

Wirecard AG, the Munich-based payments and financial services company that was a member of the DAX index of Germany’s 30 leading blue chip stocks, collapsed spectacularly and filed for insolvency on June 25, 2020. Among many lessons, this disaster has revealed major gaps in audit regulation and accounting enforcement in Germany and by extension in the European Union (EU). Like in other areas of financial supervision, having only national-level oversight of financial reporting in an integrated...

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How Europe is taking another page from US financial history

As the European Union begins to contemplate how its perhaps €500 billion new joint debt to help the economy recover from the pandemic will eventually be repaid, a profound fiscal question arises. Will new sources of direct EU revenues be agreed to repay the debts, or will member states be asked to contribute more funds to do so? Europe, ironically, can once again turn to US history, this time from the 19th and early 20th centuries, when the federal government had not yet acquired the right to...

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In South Korea, gender diversity has improved for economics degrees, but not as much in economics teaching

In recent years, the economics profession in the United States has been debating issues of gender and race diversity with increasing frequency. Gender diversity in economics has not been discussed in South Korea, however, despite an increasing share of women obtaining undergraduate or doctoral degrees in the subject in the last few decades. For all that progress, gender diversity among economics faculty members in South Korea still lag. Female students in South Korea earned more than 40...

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The Fed’s monetary stance is too tight given its economic forecast

The Federal Open Market Committee (FOMC or Fed) made no changes to its monetary policy stance at its June 2020 meeting. But the first update to its forecast since December showed inflation and employment below their goals for at least 2 1/2 years. An outlook that bad for that long is a clear sign that policy is too tight. The Fed announced that the federal funds rate would remain near 0 this year and most likely through the end of 2022. It also said that the pace of purchases of long-term...

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COVID-19 has not undermined the prospects for Europe’s Green Deal

Like the global financial crisis of 2008–10, the economic shock resulting from the COVID-19 pandemic has drastically reduced carbon emissions in advanced economies. The International Energy Agency (IEA) estimates that in Europe, where the most comprehensive lockdown measures have been implemented, total energy demand will drop by more than 11 percent in 2020, more than double the drop in energy demand in 2008–09. The question facing Europe is whether a recovery necessarily means a return to...

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The US unemployment rate is higher than it looks—and is still high if all furloughed workers returned

The official unemployment rate rose from 3.5 percent in February 2020 to 13.3 percent in May (down from its value in April). Even this very large official increase understates the increase in the unemployment rate from a historically-comparable perspective because it counts an extra 4.9 million people who were "not at work for other reasons" as employed and also because 6.3 million people have left the labor force since February, more than would be expected even conditional on this large...

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Adjusting monetary policy rules for temporary layoffs from COVID-19

Unemployment in the United States has rocketed up to nearly 15 percent in April and is heading even higher, confronting policymakers at the Federal Reserve with an unprecedented challenge. Since 1977, Congress has given the Fed a so-called dual mandate of maintaining both price stability and maximum employment. But what if the unemployment rate is only temporary, as many if not most workers believe? How should the Fed strike a balance under these circumstances? In the April household survey...

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Europe’s latest step toward fiscal integration

The elusive goal of establishing collective European responsibility for funding the battle against the COVID-19 pandemic got a big boost this week with an endorsement from German chancellor Angela Merkel and French president Emmanuel Macron. In a joint announcement on May 18, the two leaders stole the limelight from the European Commission, declaring their agreement on a far-reaching proposal for the new €500 billion EU Pandemic Recovery Fund backed by joint indebtedness. It was another step...

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The 2020 US private saving boom: An unexpected result of COVID-19

Federal cash transfers in the COVID-19 pandemic are going to millions of American families who cannot or will not spend all of that money in the current fraught environment. As a result, the US net private saving rate in 2020 will be the highest since World War II. The economic significance of this large amount of savings is unclear. But it could mean that, as restrictions on business and personal activities are relaxed in coming months, aggregate demand will rise, accelerating economic...

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