The financial news these days is all about how fast prices are rising and how people are having a harder and harder time finding the things they need. Gas prices are still going up. Retailers are charging more. Mortgages are even finally getting more expensive, making it less appealing to buy homes with price tags that keep getting bigger (even if the speed of their growth has started to slow down.)
One saving grace for workers: their pay is also headed north. (If you’re unfamiliar with all the jargon being thrown around these days about increasing prices, our inflation dictionary is here to help.)
But if you were too busy calculating how the president’s latest spending proposals might impact your household’s bottom line, you might not have heard that it’s better to start college during a recession than an economic boom. Or that the U.S. has actually already returned to pre-pandemic unemployment levels, by one measure, but definitely shouldn’t be cheering?
To reach beyond the biggest headlines, we scoured the latest research, surveys, studies, and commentary to bring you the most interesting and relevant personal finance news you may have missed.
What We Found
Why It Pays to Enter College During Hard Times
When it comes to college, it turns out that timing is pretty important, since when you graduate influences how well you’ll do in your career. Multiple studies have shown that if you finish your degree during an economic boom, you’re headed for higher pay for decades. But if you have the bad luck to graduate during a downturn, like the one created by the pandemic, your earning potential over time is going to suffer.
Surprisingly, that picture is totally reversed if you look at when students enter college rather than when they graduate. That’s according to a recent working paper by Czech and British researchers who studied data from nearly 40 classes of American college students.
A state unemployment rate that’s 15 percentage points higher at the time of college enrollment would result in an annual earnings bonus of $3,100 for women and $2,800 for men on average, according to the study. The higher earnings for women come from higher hourly wages, more weekly hours of work, and more weeks worked, while the men’s increase is due mainly to an increase in hourly wages, the researchers said.
After ruling out economic conditions at the time of graduation as a factor in the difference—as well as the possibility of people choosing higher-paying majors during recessions—the paper’s authors were left with the conclusion that the higher earnings were the result of the students being inspired to work harder.
“Overall, our results show that economic downturns can have positive effects on future economic outcomes, at least for some individuals,” the researchers wrote. “This is consistent with previously documented evidence that economic shocks experienced during early adulthood lead to permanent changes in attitudes, values, and preferences. … Policymakers could leverage these behavioral changes by expanding college admissions during downturns, when demand is already high.”
Vaccine Refusers Often Cave in Face of Job Loss, Research Suggests
When a group of researchers at the University of Florida conducted a nationwide survey about COVID-19 vaccine hesitancy, they didn’t view the results as a red flag for the Biden administration vaccine mandate for large employers. (Companies employing 100 or more people will have to ensure that their workers are inoculated or are tested weekly.)
The survey found that nearly half of workers who described themselves as “vaccine hesitant”—hesitators made up almost a quarter of respondents—would quit if required to get the vaccine to keep their jobs. But rather than sounding alarm bells about vaccine mandates, the researchers contended that no matter what people say in polls, the vast majority will likely accept the vaccine rather than lose their jobs.
In a September article for The Conversation website, they pointed to several recent examples where employers imposed vaccine mandates and saw only tiny portions of their workforces choose vaccine refusal over their careers.
For example, when Houston Methodist Hospital imposed a vaccine mandate in June, just 153 of its more than 25,000 employees resigned or got fired over the issue, according to news reports. That’s less than 1%—a far cry from the 16% of the overall workforce who told the Florida researchers they would sacrifice their jobs or start looking for new ones rather than get immunized.
And just recently, well after the article was published, New York City police unions predicted “chaos,” staffing shortages, and 10,000 officers not reporting to work because of the city’s vaccine mandate that kicked in on Monday. But in the end, only 34 officers were suspended without pay for refusing to comply with the mandate, according to the New York City Police Commissioner, out of a uniformed force of 35,000.
So why do so many people threaten to quit, while so few actually do?
“It is easy and cost-free to tell a survey administrator that you will take a specific action. Yet the follow-through behavior in the real world is much more difficult,” said one of the article’s authors, Jack J. Barry, a research associate at the University of Florida, in an email. “This is the case with vaccine mandates because leaving one's job requires a lot of real-world impacts due to this behavior: loss of income, friends, status, etc.”
As the researchers wrote in The Conversation, “vaccine mandates are unlikely to result in a wave of resignations—but they are likely to lead to a boost in vaccination rates.”
Another indication (though it’s from a survey, too) that the amount of actual quitting over vaccines is minimal: Only about 5% of unvaccinated adults—or 1% of the overall adult population—reported leaving their jobs over vaccine mandates in a Kaiser Family Foundation poll released last week.
‘True’ Unemployment Is Below Pre-Pandemic Level, But Don’t Cheer
As the labor market slowly improves, the official unemployment rate in September was 4.8%, according to the Bureau of Labor Statistics (BLS)—a full 10 percentage points below the 14.8% peak brought on by the pandemic, but still not the 3.5% rate the month before COVID-19 hit. Measured in another way, however, the unemployment rate has actually been below its pre-pandemic level for a while now—but that measure also paints a less rosy picture of the labor market as a whole.
The official BLS unemployment rate measures the number of people in the workforce who don’t have jobs. But does that rate really capture the full extent of unemployment? What about those people who want a full-time job, but can only find part-time work? Or those who have jobs that pay practically nothing? The Ludwig Institute for Shared Economic Prosperity, a think tank focused on issues affecting low and middle-income Americans, has created an alternate unemployment measure called the “true rate of unemployment.” It’s derived from the same survey as the official one, but considers involuntarily part-time workers and those making less than $20,000 a year to be unemployed.
While the think tank’s “true unemployment rate” stood at a whopping 23.9% in September, it was still a touch below the 24% seen in February 2020, before the pandemic began. In fact, this alternate measure, which hit 32.4% at the peak of COVID-19 restrictions, has been below this pre-pandemic level since April of this year.
This alternate unemployment measure has improved because higher pay, especially for lower-income workers, has lifted the compensation for many to “living wage” levels, according to the institute’s analysis. High demand for workers has let them command higher earnings. The trend has especially helped Black workers, who saw their “true” rate of unemployment drop to 27.9% in September from 28.7% in August, keeping it to a touch below pre-pandemic levels for the second month running.
“We still have a long road ahead of us until there’s a full, equitable recovery, but it is encouraging to see signs that working families are making some gains,” said the institute’s chairman, Gene Ludwig, in a commentary.
How Much Do Low Rates Really Fuel Housing Prices?
When economists try to explain why home prices have risen so rapidly over the last year, they often point to today’s low mortgage interest rates as a major factor, since they allow buyers to purchase more expensive properties for the same monthly payment. But a recent analysis by economists at the Federal Reserve Bank of New York suggests there’s more to it than that.
The mortgage rate/price connection seems logical. After all, the average rate for a 30-year fixed mortgage fell from around 3.5% at the onset of the pandemic to a record low of 2.65% in January, and it’s only back up to 3.14%, according to statistics from mortgage giant Freddie Mac. At the same time, home prices have skyrocketed, with houses in September selling for 13.3% more than they did a year earlier.
Indeed, a widely accepted model of housing price dynamics predicts that a drop in mortgage rates from 3.5% to 3% would cause home prices to rise 14%, which is pretty close to what actually happened.
However, the New York Fed economists examined real-world economic data and determined that interest rates can only explain a low single-digit portion of the recent double-digit price increase. That’s consistent with some other recent research papers contending that interest rates aren’t the be-all and end-all when it comes to prices. The Fed economists didn’t explain what accounted for the recent price rises, if not interest rates alone, but other housing experts have pointed to the pandemic’s work-from-home trend as a major factor boosting demand.
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