Tag: USA

US Inflation’s Bad Breadth May Help Contain Interest Rates

From Moody’s

Though US consumer price inflation is well contained, Fed policymakers cannot help but notice the potential threat to financial stability emanating from ongoing equity price inflation. As long as US equities become more richly priced relative to both current and prospective earnings, the Fed has more than enough reason to hike rates. A further swelling of the US equity bubble will increase Fed rate-hike risks.

Not too long ago, the high-yield bond spread swelled and the projected default rate soared. However, that intensification of credit stress would be quickly reversed mostly because debt repayment problems were largely confined to the oil and gas industry. In other words, the late 2015 and early 2016 worsening of corporate credit conditions lacked enough breadth to endanger both financial stability and the business cycle upturn.

Some still hold that inflation will come roaring back. For now, however, price inflation has been confined to housing, medical care, share prices, and industrial commodities (including energy). However, industrial commodity prices have softened of late. For example, Moody’s industrial metals price index was recently -7.2% under its latest 52-week high of November 28, 2016 and was down by a deep -31.1% from its record high of April 2011. Moreover, the price of WTI crude oil was recently off by -12.2% from its latest 52-week high of February 23, 2017.

Despite the plunge by the US unemployment rate from Q1-2012’s 8.3% to Q1-2017’s 4.7%, the accompanying annual rate of PCE price index inflation slowed from 2.5% to 2.0%. Moreover, even after excluding food and energy prices, core PCE price index inflation also decelerated from Q1-2012’s 2.1% to the 1.7% of Q1-2017.

Excluding food and energy products, the US core consumer price inflation has been skewed higher by shelter costs. For example, March’s 2.0% annual rate of core CPI inflation slowed to 1.0% after excluding a 3.5% annual jump by shelter costs that supply 42% of core CPI. And recent indications are that renters’ rent inflation may soon slow owing to an abundance of new housing units coming on line in some of the US’ largest metropolitan regions.

Today, some cite the recent climb by broad measures of price inflation as signaling the approach of significantly higher interest rates. With real GDP growth expected to sputter along in a range of 2% to 2.5% annually through 2018 how else can you explain expectations of a climb by the 10-year Treasury yield from its recent 2.35% to 3.3% by 2018’s final quarter?

Often, reference is made to a tighter labor market for the purpose of invoking a sense of danger regarding a possible imminent return of runaway price inflation. According to one highly-respected economics group, “ the U.S. economy has now reached full employment and is likely to overshoot meaningfully, a path that has often proven risky”.

Nevertheless, large numbers of labor force dropouts suggest that the unemployment rate may be overstating labor market tightness. For example, though the unemployment rate plunged by -3.6 percentage points from Q1-2012’s 8.3% to Q1-2017’s 4.7%, the ratio of payrolls to the working-age population rose by a smaller +2.2 points from Q1-2012’s 55.1% to Q1-2017’s 57.3%. Coincidentally, despite how 2005-2007 showed a much higher 59.5% ratio of payrolls to the working-age population, by no means did any overheating by the labor market prove risky.

Put simply, the Phillips Curve is not what it used to be. A lower unemployment rate now supplies less of a lift to price inflation compared to the past. In fact, sometimes consumer price inflation slows notwithstanding a substantially lower jobless rate.

 

Financial CHOICE Act Passage Would Be Credit Negative for US Banks

From Moody’s.

Last Wednesday, the US House of Representatives’ Financial Services Committee held a hearing on the Financial CHOICE Act of 2017, which was introduced on 19 April and aims to provide banks relief from various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010.

The proposed legislation envisions a broad reduction in regulatory and supervisory requirements that would be negative for banks’ creditworthiness, increasing the potential asset risk in the banking system and the likelihood of a disorderly unwinding of a failed systemically important bank.

Increased likelihood of a disorderly bank resolution.

Among the CHOICE Act’s most notable provisions is the repeal of Title II of Dodd-Frank, including the orderly liquidation authority (OLA) to resolve highly interconnected, systemically important banks. Although the bill calls for a new section of the bankruptcy code to accommodate the failure of large, complex financial institutions, we believe that dismantling the OLA increases the likelihood of a disorderly wind-down of a failed systemically important bank with greater losses to creditors. Additionally, although the aim of repealing Title II is to end “too big to fail,” without the enactment of a credible replacement bank resolution framework, the actual effect could be the opposite.

A credible operational resolution regime (ORR) to replace OLA would require provisions specifically intended to facilitate the orderly resolution of failed banks and would provide clarity around the effect of a bank failure on its depositors and other creditors, its branches and affiliates.

The intent of OLA is to resolve failed banks as going concerns, preserving bank franchise value so as to limit losses to bank creditors and counterparties. If, under the new legislation, failed banks are liquidated instead of being resolved as going concerns, loss rates suffered by creditors would increase.

A disorderly resolution would also have greater repercussions for the broader financial markets and the economy. This suggests that although the intent of eliminating OLA may be to reduce the likelihood of future bank bailouts, absent an ORR we believe that the likelihood of a US government bailout of a systemically important US bank could actually increase.

A return to greater risk-taking, only partly offset by improved profitability prospects. The CHOICE Act would also ease restrictions on risk-taking by eliminating the Volcker Rule and rolling back the supervisory function of the US Consumer Financial Protection Bureau (CFPB), limiting it instead to the enforcement of specific consumer protection laws. Eliminating the Volcker Rule restrictions on proprietary trading could reverse the decline in banks’ trading inventories and private equity and hedge fund investments since the financial crisis. That decline in trading inventories has contributed to a decline in risk measures such as value at risk. How far inventories rebound and proprietary trading pick up will take time to become evident, but increased risk seems likely. Changes to the CFPB could also add risk by lifting the regulatory scrutiny that has caused banks to scale back or eliminate some riskier consumer lending products (such as payday advances).

The CHOICE Act also imposes a variety of restrictions and requirements on US banking regulators that could erode the robustness of US banking regulation. More generally, weakened supervision and oversight create the potential for increased asset risk in the banking system. From a credit risk standpoint, the resulting uptick in credit costs and tail risks from increased risk-taking would outweigh the potential boost to bank profitability from reduced compliance expenses and new revenue opportunities.

Less robust capital supervision and stress-testing.

The CHOICE Act calls for a reduction in the frequency of regulatory stress testing, and an exemption from enhanced US Federal Reserve supervision, including stress-testing, for banks with a Basel III supplementary leverage ratio of at least 10%. These measures would undermine the post-crisis Dodd-Frank Act Stress Test (DFAST) and Comprehensive Capital Analysis and Review (CCAR) regimes, which have driven both an increase in capital ratios and a more conservative approach to capital management.

We believe that DFAST and CCAR have been successful tools in reducing the risk of bank failures, not only improving capital and placing beneficial restrictions on shareholder distributions but, more importantly, stimulating vast improvements in banks’ internal risk management and capital planning processes. The DFAST and CCAR results are a useful, independent and public tool to analyze banks’ stress capital resilience over time. The public disclosures from these exercises are an important data point for creditors, the market and our own stress-testing analysis, and provide a strong incentive for bank management teams to closely manage and fully resource their stress-testing and capital-planning processes.

Treasury Yields May Fall Short of Consensus Views

From Moody’s

Once again, the 10-year Treasury yield confounds the consensus. As of early April, the consensus had predicted that the benchmark 10-year Treasury would average 2.6% during 2017’s second quarter. To the contrary, the 10-year Treasury yield has averaged a much lower 2.29% thus far in the second quarter, including a recent 2.30%. Moreover, the 10-year Treasury yield has moved in a direction opposite to what otherwise might be inferred from March 14’s hiking of fed funds’ midpoint from 0.625% to 0.875%. For example, April 27’s 10-year Treasury of 2.30% was less than its 2.62% close of March 13, just prior to the latest Fed rate hike.

The latest decline by Treasury bond yields since March 14’s Fed rate hike stems from a slower than anticipated pace for business activity that has helped to rein in inflation expectations. March’s unexpectedly small addition of 98,000 workers to payrolls increases the risk of lower than expected household expenditures that could bring a quick end to the ongoing series of Fed rate hikes.

As inferred from the CME Group’s FedWatch tool, the fed funds futures contract assigns a negligible 4.3% probability to a Fed rate hike at the May 3 meeting of the FOMC. However, the likelihood of a rate hike soars to 70.6% at June 14’s FOMC meeting. Thus, do not be surprised if the policy statement of May 3’s FOMC meeting strongly hints of a June rate hike. Nevertheless, a June rate hike probably requires the return of at least 140,000 new jobs per month, on average, for April and May.

Unlike the Treasury bond market’s more sober view of business prospects since the March 14 rate hike, equities have rallied and the high-yield bond spread has narrowed. Incredibly, the VIX index sank to 10.6 on April 27, which was less than each of its prior month-long averages. The closest was the 10.8 of November 2006, or when the high-yield bond spread averaged 330 bp. Thus, if the VIX index does not climb higher over the next several weeks, the high-yield bond spread is likely to narrow from an already thin 385 bp.

Market value of common stock nears record percent of revenues

As equity market overvaluation heightens the risk of a deep drop by share prices, Treasury bonds become a more attractive insurance policy in case the equity bubble bursts. This is especially true if the next harsh equity-market correction is triggered by a contraction of profits, as opposed to an inflation-inspired jump by interest rates.

Equities are now very richly priced relative to corporate gross-value-added, where the latter aggregates the value of the final goods and services produced by corporations. Basically, gross value added nets out the value of the intermediate materials and services from which final products are produced.

The market value of US common stock now approximates 226% of the estimated gross value added of US corporations, where the latter is a proxy for corporate revenues. During the previous cycle, the ratio peaked at the 185% of Q2-2007 and then bottomed at the 103% of Q1-2009. The ratio is now the highest since the 231% of Q1-2000. Not only was the latter a record high, but it also coincided with a cycle peak for the market value of US common stock.

All else the same, the fair value of equities should decline as bond yields increase. Thus, the overvaluation implicit to Q1-2000’s atypically high ratio of the market value of common stock to corporate gross value added was compounded by Q1-2000’s relatively steep long-term Baa industrial company bond yield of 8.28%. Even if the market value of US common stock now matched Q1-2000’s 231% of corporate gross value added, Q1-2000’s equity market appears to be much more overvalued largely because the April 26, 2017 long-term Baa industrial company bond yield of 4.65% was well under the 8.28% of Q1-2000. (Figure 1.)

Consensus implicitly foresees record-long business upturn

Be it the Blue Chip or the Bloomberg survey, the consensus long-term outlook for interest rates suggests a great deal of confidence in the longevity of the current business cycle upturn. April’s consensus projects a steady climb by fed funds and the 10-year Treasury yield into 2021, by which time the forecast looks for yearlong averages of 2.88% for the fed funds’ midpoint and 3.6% for the 10-year Treasury yield.

Thus, the consensus implicitly expects that the current economic recovery (which is about to finish its eighth year in July 2017) will reach an exceptional 12th year in 2021. The implied expectation of a record long business cycle upturn is derived from the observation that each previous recession since 1979 has prompted significant declines by both fed funds and the 10-year Treasury yield. The absence of any predicted drop by the 10-year Treasury yield’s yearlong average between now and the end of 2022 is tantamount to forecasting an economic recovery of record length. (Figure 2.)

The current record-holder among economic recoveries is the upturn of April 1991 through February 2001 that lasted about 9.75 years. In a distant second place is the upturn of December 1982 through June 1990 that covered roughly 7.5 years. If the consensus proves correct about the duration of the ongoing upturn, a seemingly overvalued equity market is far from exhausting its upside potential.

Long-term outlook on profits requires low long-term bond yields

The consensus also maintains positive views on the near- and long-term outlook for pretax profits from current production. April’s Blue Chip consensus not only expects pretax operating profits to grow by 4.9% in 2017 and by 4.2% in 2018, but March’s long-term outlook projected profits growth in each of the five-years-ended 2023 of 4.0% annually, on average. The realization of seven consecutive years of profits growth requires the avoidance of a possibly disruptive climb by interest rates. Thus, the 10-year Treasury might well have difficulty spending much time above 3%, if, as expected, corporate gross value added’s average annual growth rate is less than 4%. (Figure 3.)

Housing’s Echo Bubble Now Exceeds The 2006-07 Bubble Peak

From Of The Two Minds Blog.

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble.

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class.

Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

Is an asset bubble merely in the eye of the beholder? This is what the multitudes of monetary authorities (central banks, realty industry analysts, etc.) are claiming: there’s no bubble here, just a “normal market” in action.

This self-serving justification–a bubble isn’t a bubble because we need soaring asset prices–ignores the tell-tale characteristics of bubbles. Even a cursory glance at these charts reveals various characteristics of bubbles: a steep, sustained lift-off, a defined peak, a sharp decline that retraces much or all of the bubble’s rise, and a symmetrical duration of the time needed to inflate and deflate the bubble extremes.

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains.
Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities.

When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008.

The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector.

China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing.

About 15% of China’s GDP is housing-related. This is extraordinarily high. In the 2003-08 housing bubble, housing’s share of U.S. GDP barely cracked 5%.

Of even greater concern, local governments in China depend on land development sales for roughly 2/3 of their revenues. (These are not fee simple sales of land, but the sale of leasehold rights, as all land in China is owned by the state.)

There is no substitute source of revenue waiting in the wings should land sales and housing development grind to a halt. Local governments will lose a majority of their operating revenues, and there is no other source they can tap to replace this lost revenue.

Since China authorized private ownership of housing in the late 1990s, homeowners in China have only experienced rising prices and thus rising household wealth. The end of that “rising tide raises all ships” gravy train will dramatically alter China’s household wealth and local government income.If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”

Who is prepared for the inevitable bursting of the echo bubble in housing? Certainly not those who cling to the fantasy that there is no bubble in housing.

US weekly earnings increase 4.2 percent

According to the US Bureau of Statistics, weekly earnings of the nation’s 110.7 million full-time wage and salary workers were $865 (not seasonally adjusted) in the first quarter of 2017, an increase of 4.2 percent from a year earlier ($830).

From the first quarter of 2016 to the first quarter of 2017, median usual weekly earnings increased 4.2 percent for men who usually worked full time and 2.0 percent for women. In the first quarter of 2017, women who usually worked full time had median weekly earnings of $765, or 80.5 percent of the $950 median for men.

Among the major race and ethnicity groups, median weekly earnings for full-time wage and salary workers were $894 for Whites in the first quarter of 2017, $679 for Blacks or African Americans, $1,019 for Asians, and $649 for workers of Hispanic or Latino ethnicity.

These data are from the Current Population Survey.

Deutsche Bank Fined For Rigging FX Trading

The US Federal Reserve has announced two enforcement actions against Deutsche Bank AG that will require bank to pay a combined $156.6 million in civil money penalties.

The Federal Reserve on Thursday announced two enforcement actions against Deutsche Bank AG that will require the bank to pay a combined $156.6 million in civil money penalties. The bank will pay a $136.9 million fine for unsafe and unsound practices in the foreign exchange (FX) markets, as well as a $19.7 million fine for failure to maintain an adequate Volcker rule compliance program prior to March 30, 2016.

In levying the FX fine on Deutsche Bank, the Board found deficiencies in the firm’s oversight of, and internal controls over, FX traders who buy and sell U.S. dollars and foreign currencies for the organization’s own accounts and for customers. The firm failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions. The Board’s order requires Deutsche Bank to improve its senior management oversight and controls relating to the firm’s FX trading.

The Board is also requiring the firm to cooperate in any investigation of the individuals involved in the conduct underlying the FX enforcement action and is prohibiting the organization from re-employing or otherwise engaging individuals who were involved in this conduct.

Separately, the Board found gaps in key aspects of Deutsche Bank’s compliance program for the Volcker rule, which generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund.

The Board also found that the firm failed to properly undertake certain required analyses concerning its permitted market-making related activities. The consent order requires Deutsche Bank to improve its senior management oversight and controls relating to the firm’s compliance with Volcker rule requirements.

US CPI rose 2.4 percent over the 12 months ending March 2017

The US Bureau of Labor Statistics says from March 2016 to March 2017, the Consumer Price Index for All Urban Consumers (CPI-U) all items index rose 2.4 percent. This was smaller than the 2.7-percent rise for the year ending February 2017. The index for all items less food and energy rose 2.0 percent over the past year, the smallest 12-month increase since November 2015. The energy index rose 10.9 percent over the year, while the food index increased 0.5 percent.

These data are from the BLS Consumer Price Index program and are not seasonally adjusted.

A Profile of the Working Poor, 2015

In 2015, according to the U.S. Census Bureau, about 43.1 million people, or 13.5 percent of the nation’s population, lived below the official poverty level.

Although the poor were primarily children and adults who had not participated in the labor force during the year, 8.6 million individuals were among the “working poor” in 2015, according to data from the Bureau of Labor Statistics; the 8.6 million figure was down from 9.5 million in 2014. The working poor are people who spent at least 27 weeks in the labor force (that is, working or looking for work) but whose incomes still fell below the official poverty level. In 2015, the working-poor rate—the ratio of the working poor to all individuals in the labor force for at least 27 weeks—was 5.6 percent, 0.7 percentage point lower than the previous year’s figure.

Following are some highlights from the 2015 data:

  • Full-time workers continued to be much less likely to be among the working poor than were part-time workers. Among persons in the labor force for 27 weeks or more, 3.4 percent of those usually employed full time were classified as working poor, compared with 14.1 percent of part-time workers.
  • Women were more likely than men to be among the working poor. In addition, Blacks and Hispanics continued to be more than twice as likely as Whites and Asians to be among the working poor.
  • The likelihood of being classified as working poor diminishes as workers attain higher levels of education. Among those with less than a high school diploma, 16.2 percent of those who were in the labor force for at least 27 weeks were classified as working poor, compared with 1.7 percent of college graduates.
  • Individuals who were employed in service occupations continued to be more likely to be among the working poor than those employed in other major occupational groups.
  • Among families with at least one member in the labor force for 27 weeks or more, those with children under 18 years old were about 5 times as likely as those without children to live in poverty. Families maintained by women were almost twice as likely as families maintained by men to be living below the poverty level.

chart 1

Demographic characteristics

Among those who were in the labor force for 27 weeks or more in 2015, the number of women classified as working poor (4.5 million) was higher than that of men (4.1 million). The working-poor rate also continued to be higher for women (6.3 percent) than for men (5.0 percent). The working-poor rates for both women and men were down from a year earlier.

Blacks and Hispanics were more than twice as likely as Whites and Asians to be among the working poor. In 2015, the working-poor rates of Blacks and Hispanics were 11.2 percent and 10.1 percent, respectively, compared with 4.8 percent for Whites and 4.1 percent for Asians.

Chart2

US Industrial production increased 0.5 percent in March

Industrial production increased 0.5 percent in March after moving up 0.1 percent in February according to the US Federal Reserve.

The increase in March was more than accounted for by a jump of 8.6 percent in the output of utilities—the largest in the history of the index—as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February.

Manufacturing output fell 0.4 percent in March, led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts moved down 0.2 percent. The production at mines edged up 0.1 percent. For the first quarter as a whole, industrial production rose at an annual rate of 1.5 percent.

At 104.1 percent of its 2012 average, total industrial production in March was 1.5 percent above its year-earlier level.

Capacity utilization for the industrial sector increased 0.4 percentage point in March to 76.1 percent, a rate that is 3.8 percentage points below its long-run (1972–2016) average.

What Is the Informal Labor Market?

From The St.Louis Fed On The Economy Blog.

Although often associated with developing countries, illicit activities or undocumented workers, the informal labor market is much broader than many would imagine. In fact, people from all walks of life participate in a wide array of legitimate business ventures that are part of the informal economy. So, how big is the U.S.’s informal labor market, and who participates in it?

What Is the Informal Labor Market?

There is no unique definition for informal employment. However, a generally accepted way to define it is by considering individuals (and their employers) who engage in productive activities that are not taxed or registered by the government.1

Though this type of work has always existed—picture the fruit vendor at the farmers’ market who only accepts cash for payment—the expansion of online platforms that facilitate these arrangements has increased their visibility and fueled their popularity.

Measuring the Informal Labor Market

Numerous surveys have surfaced lately in an effort to better understand the fringes of the U.S. labor market. Though methodologies differ (as do the specific questions these surveys attempt to answer), comparing the results helps shine a light on the sometimes elusive nature of the informal labor market.

Survey of Informal Work Participation

For example, the Survey of Informal Work Participation within the Survey of Consumer Expectations revealed that about 20 percent of non-retired adults at least 21 years old in the U.S. generated income informally in 2015.2 The share jumped to 37 percent when including those who were exclusively involved in informal renting and selling activities.

When breaking down the results by the Bureau of Labor Statistics (BLS) employment categories, about 16 percent of workers employed full time participated in informal work. Not surprisingly, the highest incidence of informal work was among those who are employed part time for economic reasons, with at least 30 percent participating in informal work. Also, at least 15 percent of those who are considered not in the labor force by the BLS also participated in informal work.

Enterprising and Informal Work Activities Survey

Another example is the Enterprising and Informal Work Activities (EIWA) survey, which revealed that 36 percent of adults in the U.S. (18 and older) worked informally in the second half of 2015.3 Of these informal workers, 56 percent self-identified as also being formally employed, and 20 percent said they worked multiple jobs (including full-time and part-time positions).

Survey Differences

The difference in methodologies between these two surveys is clear simply from looking at the basic results. Despite pointing in similar directions, the results on the extent of the informal labor market cannot be directly compared to each other. But when we look at the demographic breakdown of contingent and informal workers, the results are quite consistent.

The EIWA survey showed that informal workers were distributed across all income categories. For example:

  • 30 percent of respondents reported having an annual income of $100,000 or greater.
  • 18 percent reported earning less than $25,000.

There were slightly more women than men among informal workers, though the share of women was much larger in lower income categories.

The majority of informal workers were white, non-Hispanic (64 percent), while the share of Hispanic workers tended to be slightly higher than that of African-Americans (16 and 12 percent, respectively). The racial breakdowns were consistent across most income categories, with a higher incidence of informal work among minorities in the lowest income categories.

Finally, most informal workers had at least a college degree (31 percent) or some college (30 percent), but high school graduates were also a sizeable share (26 percent).4

Impact on the Labor Market as a Whole

Capturing the extent of the informal labor market in the U.S. may help improve the measures of employment and labor market slack, as well as better measure the effects that informal employment activities have on the U.S. economy.

Moreover, it would help improve policies to incentivize workers in the informal sector to participate fully in the formal sector and by consequence take advantage of benefits that are in place for formal-sector jobs.

Notes and References

1 Demetra Smith Nightingale and Stephen Wandner provide other definitions of informal employment and associate different types of workers with the formality of their employment arrangements. See Smith Nightingale, Demetra and Wandner, Stephen A. “Informal and Nonstandard Employment in the United States: Implications for Low-Income Working Families.” The Urban Institute, Brief 20, August 2011.

2 See Bracha, Anat and Burke, Mary A. “Who Counts as Employed? Informal Work, Employment Status, and Labor Market Slack.” Federal Reserve Bank of Boston Working Paper No. 16-29, December 2016.

3 See Robles, Barbara and McGee, Marysol. “Exploring Online and Offline Informal Work: Findings from the Enterprising and Informal Work Activities (EIWA) Survey.” Finance and Economics Discussion Series 2016-089. Washington: Board of Governors of the Federal Reserve System, October 2016.

4 Appendix D in Robles and McGee (2016) shows these demographic characteristics are consistent across different surveys.