Boomerang Kids in the Pandemic: How High-Income Families Are Their Own Safety Net

In this Economic Commentary, we use the Current Population Survey to identify and examine the influx of young adults who moved in with their parents during the COVID-19 pandemic—the so-called boomerang kids—and how being in their family home influences their labor market decisions and sensitivity to occupational risk relative to that of other young adults. We find that most boomerang kids come from high-income families that can financially support them through nonemployment spells that are, on average, longer than those of young adults not living with their parents. Young adults living with their parents are also more responsive to the risk of COVID-19 exposure in the workplace and are less likely to work in occupations with high exposure risk.

Evaluating Homeownership as the Solution to Wealth Inequality

Homeownership presents an opportunity to accumulate wealth, making it an appealing vehicle for reducing wealth inequality. In this Commentary, we explore the investment side of homeownership. The opportunity for leveraged returns can lead to wealth gains among lower-income households; however, we note that homeownership for low-income homeowners carries three types of risk that are higher for them than for high-income homeowners: location, timing, and liquidity. Thus, policies that incentivize purchasing homes to reduce wealth inequality or close racial wealth gaps should be adopted only after great care has been taken to protect against these risks.

PPP Loans & State-level Employment Growth

In this Economic Commentary, we focus on the first round of Paycheck Protection Program (PPP) loans granted beginning in March 2020 until early August 2020, when turbulence in the labor market was pronounced, in order to demonstrate the PPP’s effects on local labor markets. We find that PPP loans helped mitigate the negative impact of the pandemic recession on state-level employment growth. States that received most of their funding early in the loan period had smaller employment declines than did states that received comparable funds later in the period.

Whose Inflation Expectations Best Predict Inflation?

We examine the predictive relationship between various measures of inflation expectations and future inflation. We find that the expectations of professional economists and of businesses have tended to provide more accurate predictions of future inflation than the expectations of households and of financial market participants. However, the forecasts coming from a relatively simple and popular benchmark inflation forecasting model have historically been roughly as accurate as the expectations of businesses and professional economists.

The Racial Wealth Gap and Access to Opportunity Neighborhoods

Some Black households live in neighborhoods with lower incomes, as well as higher unemployment rates and lower educational attainment, than their own incomes might suggest, and this may impede their economic mobility. We investigate reasons for the neighborhood sorting patterns we observe and find that differences in financial factors such as income, wealth, or housing costs between Black and white households do not explain racial distributions across neighborhoods. Our findings suggest other factors are at work, including discrimination in the housing market, ongoing racial hostility, or preferences by Black households for the strength of social networks or other neighborhood amenities that some lower-socioeconomic locations provide.

Semiconductor Shortages and Vehicle Production and Prices

Vehicle production has fallen since the beginning of the pandemic recession. We investigate reasons for this decline. Manufacturers in this industry cite insufficient materials, including a lack of semiconductors, as increasingly responsible. Demand seems to be less of an issue. In fact, demand has been strong, and together with accelerating prices and sharply declining inventories, it suggests an insufficient supply of new cars. Our best guess is that the materials shortages and their effects on new car prices will subside within the next six to nine months.

Why Has Durable Goods Spending Been So Strong during the COVID-19 Pandemic?

Consumers increased their purchases of durable goods notably during the COVID-19 pandemic. The pandemic may have lifted the demand for durable goods directly, by shifting consumer preferences away from services toward a variety of durable goods. It may also have stimulated spending on durable goods indirectly, by prompting a strong fiscal policy response that raised disposable income. We estimate the historical relationship between durable goods spending and income and find that income gains in 2020 accounted for about half of the increase in durable goods spending, indicating that the direct and indirect effects of the pandemic on durable goods spending were about equally important.

Why Wasn’t there a Nonbank Mortgage Servicer Liquidity Crisis?

In March 2020, in the early days of the COVID-19 pandemic, many were concerned about the liquidity of nonbank mortgage servicers. As it turned out, the vast majority of these servicers did not face a liquidity crisis. In this Commentary I detail the reasons why, including lower than expected take up rates of forbearance, the role played by mortgage origination income, and the actions taken by the government-sponsored enterprises, Ginnie Mae, and housing agencies.

How Well Did PPP Loans Reach Low- and Moderate-Income Communities?

We investigate the degree to which Paycheck Protection Program (PPP) loans reached small businesses in low- and moderate-income (LMI) communities. We use PPP loan data from the Small Business Administration that we geocode and link to census tracts. We assess the program’s reach in a few ways and focus on the number of loans, rather than the amount of funds, that went to different areas in order to capture the program’s impact on businesses with fewer than 50 employees—the vast majority of small businesses. We find evidence that the program did have a broad reach within LMI communities, but that it reached higher-income communities to a greater extent and areas with Black, Hispanic, and American Indian or Alaska Native majorities to a lesser extent.