TXKAP t1_j6y9d1s wrote
Over the past three years, most homeowners in my community have seen their home values increase by more than what they make at their place of employment, which means it's been more economical to own a housing asset than it has been to work a 40-hour week job...
Have elevated real estate values impacted employee participation rates? And if so, does this mean the Fed is actively trying to decrease RE values so that people return to the workforce?
wsj OP t1_j6yi5ig wrote
Research has shown that wealth, including housing wealth, has an impact on labor force participation decisions. In this recent data review from the Fed, they update previous research which suggested that 15% to 20% of the decline in labor force participation could have been caused by rising asset values (including for housing & financial assets). The latest data adjusts for falling real asset growth and finds that somewhere between 16% and 36% of the recent increase in labor force participation could be explained by these trends. So wealth has an impact, but it's not the only impact.
The Fed is focused on its dual mandate: price stability and full employment. And with the unemployment rate still near long-term lows and inflation well above target, price stability is the half of the mandate that has commanded more of the Fed's attention.
While wealth effects are important, it's also important to remember that if one spends housing wealth by using a mortgage to tap into equity, it has to be repaid.
-Danielle
Varsect t1_j6ya534 wrote
Why do you have four separate questions instead of just merging then all into one?
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