Technology introduction, online education and more

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MIT’s Daron Acemoglu and co-authors use novel data on 300,000 companies from the Census Bureau’s 2016-2018 annual business survey and find that companies using advanced technologies such as artificial intelligence, robotics, and specialized software tend to be larger and employ more workers than others in their industry. Although only 2% to 40% of US companies use advanced technologies, 12% to 64% of US employees are exposed to such technologies. The authors estimate that the use of advanced technology is associated with 11.4% higher labor productivity and can explain 16% to 30% of the labor productivity gap between small and large firms in a given industry. Smaller and older companies are less likely to adopt advanced technologies, likely reflecting the high fixed costs and organizational barriers associated with adoption. The authors also note that advanced technologies increase demand for skilled labor but have limited effects on overall employment.

Lisa Barrow, Wesley Morris, and Lauren Sartain of the Chicago Federal Reserve Bank find that the expansion of online courses in the University of North Carolina’s system had a mixed impact on student outcomes. Virtual learning gave flexibility to students whose budgets, work schedules, and childcare duties prevented them from attending in person, and was most commonly used by first-generation students, Pell Scholars, the elderly, and women. Despite this added flexibility, students who took a higher proportion of their classes online had lower graduation rates and took fewer credit hours than their on-site counterparts. Additionally, students in online courses received both more As and more Fs than students who attended in person. The authors point to the high demand for online education as evidence that it “is here to stay,” but warn that additional guidance and support may be needed for non-traditional college students to transition online learning to one to make viable educational alternatives.

Stanford University’s Nicholas Bloom and co-authors use a new survey that measures manager expectations and find that a two standard deviation increase in uncertainty about future sales is associated with a 6% decline in investment. Uncertainty is also negatively correlated with job growth and sales. The authors show that increased uncertainty is associated with higher rental capital commitments, and suggest that this practice allows firms to meet deliveries while hedging against low demand. Finally, the team compared their results to aggregate measures of uncertainty in the previous literature and concluded that “industry-level stock volatility can provide a good indicator of uncertainty in both public and private companies.”

Line chart showing quarterly observations of the US personal savings rate from Q1 2015 to Q2 2022 alongside the logarithmic linear trend line for the data from 2015 to 2019.  The savings rate stayed close to 7 or 8% through the second quarter of 2020, when interest rates rose to 26.4%.  2021 Q1 had another peak of 20.4%.  After that second peak, rates quickly fell to their current level of 3.4%, well below trend.

Chart courtesy of Aditya Aladangady, David Cho, Laura Feiveson, and Eugenio Pinto of the Federal Reserve; Bureau of Economic Analysis data

“Japan’s economy is still on track to recover from the pandemic and the output gap remains in negative territory. The Bank [of Japan] expects the output gap to turn positive sometime in the second half of this fiscal year as the economy recovers. However, the inflation rate has not risen from the demand side at the moment. Although currently above 2 percent due to the pass-through of cost increases due to import price increases to consumer prices, the rate is expected to decrease to below 2 percent from fiscal 2023, with the impact of this pass-through fading. as I mentioned earlier,” says Haruhiko Kuroda, Governor of the Bank of Japan.

“In addition … there was extremely high uncertainty about economic and price developments in Germany and abroad, as well as about the development of the financial markets. The Bank [of Japan] will closely review the outlook for economic activity and prices, as well as the upside and downside risks to the outlook. Based on the assessments, it will conduct an appropriate monetary policy. Currently, the bank believes that it should continue monetary easing, thereby providing sustained support to economic activity. This is intended to create a favorable environment for companies to increase wages and achieve the price stability objective in a sustainable and stable manner, accompanied by wage increases.”

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