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Hutchins Roundup: Quantitative easing, upskilling, and more

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Studies in this week’s Hutchins Roundup find that only certain types of quantitative easing affect economic activity, the Great Recession accelerated the trend toward the use of higher-skilled workers, and more.

Not all central bank balance sheet expansions affect economic activity

Andrew Haldane, Matt Roberts-Sklar, and Chris Young of the Bank of England and Tomasz Wieladek of Barclays Capital find that central bank balance sheet expansions, also known as quantitative easing, affected economic activity in countries where this policy was implemented for the purpose of loosening monetary conditions (Japan, U.K. and U.S.) but not in countries where the purpose was providing liquidity (Canada and the ECB and Sweden prior to 2015). They also find evidence that quantitative easing may be more effective when the economy is weaker and financial markets more disturbed and that central bank balance sheet expansions have strong spillover effects across borders.

The Great Recession hastened the polarization of the labor market

Using a new data set of electronic job postings in the U.S. for 2007 and 2010-2015, Brad Hershbein of the W.E. Upjohn Institute for Employment Research and Lisa Kahn of Yale find that areas that were hit hardest by the Great Recession saw the greatest increase in the skills required for advertised jobs. In particular, ads posted in hard-hit areas were about 16 percent more likely to contain education and experience requirements and about 10% more likely to include requirements for cognitive and computer skills. The authors show that this “upskilling” away from middle-skilled jobs and toward higher-skilled jobs occurred within occupations and appeared to be driven by firms substituting routine-task workers with machines or outsourced labor. They conclude that the Great Recession served to accelerate the long-standing secular trends that have led to the hollowing out of the U.S. labor market. 

Georgia Tech’s online degree program increases educational attainment

In 2013, Georgia Tech’s computer science department, which is regularly ranked in the top ten in the U.S., started an online M.S. in Computer Science program that costs less than one-sixth of the equivalent in-person program for out-of-state students. Joshua Goodman and Amanda Pallais of Harvard and Julia Melkers of Georgia Tech find that this online program substantially increases enrollment in formal education by expanding the pool of students—primarily mid-career Americans—rather than substituting for other educational options. They estimate that this single program will raise the number of Americans with master degrees in computer science by about 7% per year. More generally, they conclude that low-cost, high-quality online options may open opportunities for populations who would not otherwise pursue education.

Chart of the week: Real rates of return on safe assets have been declining relative to the real return on capital in the U.S. for several decades

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Quote of the week: “[W]ith the current situation … with the pace of job growth, I expect to see … either unemployment come down or getting some of the discouraged people who have left the labor force to join back in,” says San Francisco Fed’s President John Williams.

“I think we are going to run this hot labor market for a while, and I think … that would be my forecast with unemployment around 4½ to 4¾. That’s below my estimate of the natural rate of unemployment. But we don’t want to go too far on this because I do think that creates risks down the road… [A] little bit hot labor market will push up wage growth, push inflation back to 2 percent a little bit faster, I just don’t want … us to get carried away.”

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