Economic Review, Fourth Quarter 2013

To view an Economic Review article using a PDF reader, click on the article title. If you do not have a PDF reader, you can download a reader from this site.

  • The Demographic Shift From Single-Family to Multifamily Housing
  • By Jordan Rappaport

    The crash of the U.S. housing market triggered the worst U.S. recession since the 1930s. Beginning in late 2009, multifamily construction rebounded strongly. Beginning in mid-2011, single-family construction began to rebound as well. But during the first half of 2013, growth of both types of construction paused.

    Rappaport examines the demographic forces shaping demand for residential construction. At the end of 2012, the number of occupied single-family housing units was moderately below its demographic trend level and the number of occupied multifamily housing units was considerably below its demographic trend level. Hence residential construction of both types is likely to pick up in the near future.

    Over the longer term, slowing U.S. population growth is likely to put downward pressure on both types of construction. Downsizing by aging baby boomers will exacerbate this downward pressure on single-family construction but offset it for multifamily construction. Hence the long-term outlook is considerably stronger for multifamily construction.

  • The Impact of Debit Card Regulation on Checking Account Fees
  • By Richard J. Sullivan

    Starting in 2011, when new regulations capped the interchange fees paid to banks for debit card transactions, some news reports predicted banks might increase checking account fees. The cap reduced many banks' revenue and the concern was that they might offset their losses by charging more for checking accounts.

    Sullivan examines data from broad samples of banks and finds that many large banks raised fees—but among the thousands of smaller banks that had been exempted from the regulations, some raised fees while others lowered them. On net, consumer access to free checking actually increased.

    The author also explores data on factors that may have driven banks' decisionmaking, including banks' financial characteristics; aspects of the regional market in which they operate; and the degree of competition they face.

  • The Impact of an Aging U.S. Population on State Tax Revenues
  • By Alison Felix and Kate Watkins

    As the baby boom generation retires, the nation’s labor force participation rate is expected to decline. And since most people earn less and spend less during retirement, the aging of the U.S. population will likely reduce income and sales tax revenue per capita for state governments.

    Felix and Watkins draw from data on different age groups’ earning and spending patterns to assess how projected changes in the age distribution across the American population are likely to affect earning and spending—and therefore state revenue from income taxes and sales taxes.

    They find that demographic change will have a significant impact. Had the population’s age composition in 2011 already resembled what is projected for 2030—that is, having a greater proportion of retirees—state tax revenue would have been reduced by $8.1 billion, or 1.1 percent.

  • Has Durable Goods Spending Become Less Sensitive to Interest Rates?
  • By Willem Van Zandweghe and John Carter Braxton

    Despite record-low interest rates, the pace of the current economic recovery has been only moderate. One reason is that the positive impact of lowered interest rates on consumer purchases of durable goods has diminished.

    Comparing the current economic recovery with those that followed the recessions of 1981-82, 1990-91 and 2001, Van Zandweghe and Braxton explore the way movements in key interest rates have affected consumer spending on durable goods.

    They find that if the boost from lowered interest rates to durable goods spending in the current recovery had stayed as strong as it was on average in previous recoveries, durable goods spending from the beginning of 2012 to midway through 2013 could have contributed almost half a percentage point more to the United States’ quarterly GDP growth.