To understand important economic concepts like full employment, financial security, productivity growth and the impact of education, it is vital to understand not just the average experience but rather how all cohorts of the population are faring. This understanding is important in and of itself, especially in evaluating the impact of critical trends affecting the economy, like technological innovation or demographics, as well as the policies intended to respond to the impacts of those trends. We cannot fully understand whether policies have improved social welfare unless we understand how the impact of those policies varies across individuals. But understanding heterogeneity is important even if we are just examining policy impact in the 1/2  BIS central bankers' speeches  aggregate. The most innovative macroeconomic models, those at the frontier of current economic work, recognize heterogeneity across consumers in assessing how monetary and fiscal policy changes are transmitted through the economy. These models incorporate individuals with different marginal propensities to consume, with different amounts of wealth or access to borrowing, or who face different risk exposures, such as the chance they become unemployed, over the business cycle. Incorporating these factors can yield quite distinct insights about how changes in monetary or fiscal policy can affect growth, employment, wages and inflation. For those who want to know more, we published a blog post on Monday of last week that describes the output of just such a model.
For instance, we sponsor the Consumer Credit Panel, or CCP, a quarterly report on household credit based on a large sample of credit data from Equifax. We have also developed the Survey of Consumer Expectations, or SCE, a monthly survey of consumer expectations about inflation, the labor market and household finance. These reports and summary data are available from the New York Fed’s Center for Microeconomic Data, which can be accessed on the Bank’s website, newyorkfed.org. Aside from producing these public reports, New York Fed researchers also use the underlying data to do detailed econometric analysis, some of which forms the basis of the blog series you’ll hear about today. In some cases, we are able to link the CCP, SCE and other data sets to derive insights into a wider set of factors affecting workers and consumers, such as educational attainment, student debt burden, job satisfaction, job transitions, access to credit and housing choices—and consumer expectations about many of these factors. Why do we do this? Why is it important to generate insights about individual workers rather than relying just on analysis of the aggregate data? The first, and most obvious, point is that the aggregate masks the experiences of individuals. Not all workers and consumers experience the economy in the same way. Employment, wage and income growth, housing, education, credit and a host of other outcomes vary significantly across different cohorts of individuals and these differences in turn can vary over the business cycle.