April 2024 CPI Report: A Step in the Right Direction

The Consumer Price Index rose at a 3.4% annual pace in April 2024, and 3.6% for all items excluding food and energy. Three things stood out from this report.

1. Inflation softens, after stickiness to start off the year

Annual inflation, as measured in the CPI, started the year near a post-COVID low of 3.1% in January – far below its peak of 9% in June 2022 but still above the Federal Reserve’s 2% target. The path back to 2% hit a snag over the past few months, however. creeping back up ultimately to 3.5% in March. The tick down in April offers a welcome sign that inflation may be returning to its downward trajectory.

2. Continued Price Declines for Big-Ticket Items are Driving Down Inflation

The tick down in inflation in April was driven largely by a sharp decline in prices for durable goods, such as cars and household appliances. Inflation in that category reached nearly 20% in 2022, as pandemic-related supply chain shortages caused prices to spike. As those disruptions have eased, prices for durable goods have consistently declined and fell by 3.2% over the past year in April. Prices for new and used vehicles alone have fallen by 0.6% over the past month.

3. While this decline is welcome, inflation is still running hot

Inflation’s softening in April is a signal that the uptick over the previous few months may have come to an end. It will take more time, however, to get price increases closer to the Fed’s 2% target. If the pace of inflation over the last month – or over the past 6 months –  continues over the year, inflation would still come in at 3.6%, indicating that the next few months whether the economy can get out of this holding pattern of lower, but not low enough, inflation.

What this means:

With the job market strong, but on a glide path toward normal levels, policymakers are focused on inflation as they gauge when to lower interest rates. April’s CPI report offers a solid step in the right direction — but only after these numbers veered sharply off-track to start off 2024. As the end of the year comes into sharper focus, the next two or three reports will be crucial. Several more readings like this will be needed to build greater confidence that inflation is moving sustainably to 2%.

April 2024 Jobs Report: Steady-As-She-Goes Labor Market

The BLS estimated that the US economy added 175,000 jobs in February, with the unemployment rate ticking up from 3.7% to 3.9%. Three things stood out from this report.

1. Job Growth Ticks Down After Recent Strength
After a string of stronger-than-expected employment gains, job growth cooled down this month. The 175,000 jobs added fell below expectations of 240,000 and the average employment growth over the prior three-month fell from 269,000 to 242,000. Combined with the small negative revisions to the prior two months’ job numbers, these numbers should dispel any ideas that the labor market is re-accelerating.

2. Wage Growth Taps on the Brakes
Average hourly earnings for all workers grew by 3.9% over the past year, down from 4.1% last month and far from its post-pandemic peak of 5.9%. Wage growth has been on a slow but steady glide path down since it peaked in 2022, but the slowdown has been sharper in recent months: pay gains over the past three months have come in at an annual rate of 2.8%, the smallest growth rate at any point since the pandemic. These cooling wage dynamics should make policymakers more comfortable that wage growth will not stoke further inflation in the near term.

3. Unemployment Rate Remains Within a Narrow Range
The unemployment rate rose to 3.9% in April, returning back to its February level after falling to 3.8% in March. This rate has remained within a narrow (and historically low) range of 3.7-3.9% since August. While these recent numbers are a shift up from the post-pandemic low of 3.4% seen a year ago, April’s number marks the 27th month the unemployment rate has remained below 4% – a sign that workers who have lost their jobs or people just entering the labor force are still having a relatively easy time finding employment.

What this means:
The recent string of strong jobs growth, in combination with other strong economic data reports, brought new questions about whether the economy was heating up just as the Fed had reached the last mile in its efforts to tamp down inflation. This month’s report should make it clear that labor market dynamics are not standing in the way of a soft landing. If these trends continue to play out in the job market, all eyes will be on the next several inflation prints to dictate when the Fed will begin to lower interest rates.

In Brief: The Recent Rise in US Labor Productivity


US labor productivity has enjoyed a period of renewed growth over the past year, interrupting a nearly twenty-year decline: the 2.7 percent productivity growth in 2023 outpaces the 1.5 percent annual average since 2004, and it nearly matches the 2.9 percent pace seen during the country’s last productivity surge in the 1990s. While the post-pandemic shift to remote and hybrid work as well as technological advances in Generative AI tools tend to dominate the debate about long-term worker-productivity trends, a likelier driver of recent productivity growth is the renewed surge in new-business creation since 2020, reversing decades of declining business dynamism in the United States. Although it is unclear whether the past four quarters of stronger productivity growth signal a longer-term trend, policymakers have an array of options to increase the likelihood that this upswing turns into a period of sustained growth.


Rising worker productivity enables the economy to produce more with the same inputs.

Labor productivity measures the output produced per hour of work. Productivity growth is central to economic growth, as it enables workers to “do more with less,” in colloquial language. As workers produce more in a given set of hours, firms are able to raise pay without raising prices, fostering real wage growth and a rising standard of living. Indeed, a 2019 AESG policy paper by Michael Strain documented the tight link between labor productivity growth and real wage growth over many decades.

After decades of slow productivity growth, strong estimates over the past year suggest that period has come to an end.

Economist Robert Gordon has documented that the United States enjoyed a “special century” of productivity growth from just around the Civil War until the 1970s. Innovations during that time—including electricity, railroads, and the automobile—dramatically raised the productive capacity of US businesses. During the tail end of that century, from 1950 to 1970, worker productivity was growing at an average annual rate of 2.7 percent. Since then, the economy has experienced three distinct phases of productivity growth: a slowdown in the quarter-century from 1970 to 1994, when growth averaged 1.8 percent; a decade of faster growth from 1994 to 2004, when the internet revolution sped business productivity growth to a 2.9 percent rate; and finally a return to slower growth of 1.5 percent from 2004 to 2022. In the four quarters of 2023, however, productivity growth has experienced a renewed surge, averaging 2.7 percent—equal or similar to those prior waves of productivity growth.

Figure 1: US labor productivity growth, 1950-2023

Source: Author’s calculations based on Bureau of Labor Statistics data.
Note: Productivity growth rates here are averages of quarterly estimates within each period.

The post-pandemic surge in new-business creation is a major factor contributing to rising productivity.

The entry and growth dynamics among young firms—whereby a small portion survive and mature into tomorrow’s large, well-known companies—is a significant driver of job creation, innovation, and productivity growth. These firms create new innovations and generate greater competition, driving less productive firms out of the market. As documented in an AESG paper by Ufuk Akcigit and Sina T. Ates, the US has experienced a broad-based slowdown in business dynamism from 1970 through 2020, which was characterized by a steadily falling share of business entry: the portion of all US firms less than one year old fell from 14 percent in 1978 to 9 percent in 2020. Economists using Census data on the universe of nonfarm business in the U.S. have causally linked this “startup deficit” to a 3.1 percent drag on aggregate productivity since 1980. 

Since 2020, however, there has been a reversal in this trend of declining business dynamism. According to the Census Bureau’s Business Formation Statistics, 5.4 million new-business applications were filed in 2023, greater than the 3.4 million in 2019 and more than in any year since the Census began tracking this data in 2004. New business applications through the first quarter of 2024 have outpaced 2019 levels by 54%. Economists have found that this growth in new business applications is strongly associated with the entry of new business establishments and with job growth – indicating that the US economy is beginning to see the real effects of this surge. Recent analysis also noted that high tech sectors such as information and business services, which disproportionately contribute to aggregate productivity growth, have seen particularly elevated levels of new business application and establishment entry. These signs, along with the historically causal relationship noted above, point to entrepreneurship as a key driver of productivity growth.

Figure 2: Monthly number of business applications, in thousands, seasonally adjusted, January 2015–January 2024

Source: Author’s calculations using the Census Bureau Business Formation Statistics.
Note: “Likely-Employer” business applications are those identified as having a high likelihood of employing workers within four quarters of application.

Generative artificial intelligence (GenAI) is likely not a driver of this recent upswing in productivity growth.

Over the long term, GenAI could raise productivity both by helping workers to do their jobs better today and by, eventually, enabling the discovery of new innovations. However, recent innovations have likely not been a driver of observed increases in worker productivity to date. The introduction of GenAI tools such as ChatGPT and Copilot is exciting, but it will take time for their potential to be effectively incorporated into work processes at scale. For instance, positive effects of GenAI in specific industries have been documented recently: one study of over 5,000 customer support agents found that the use of an AI-based assistant raised agent productivity (issues resolved per hour) by 14 percent on average and by 34 percent for new and low-skilled workers. But widespread adoption of such tools across the economy remains low: the Census Bureau’s Business Trends and Outlook Survey found that just 4 percent of firms are using AI currently. Furthermore, as AESG member Erik Brynjolfsson has noted, such technologies also require investments of both resources and time to take effect—meaning that these advances might be a temporary drag on productivity before reaping significant benefits over the long term.

The effect of remote work on employee productivity remains uncertain.

The rise of remote and hybrid work arrangements has been one of the most significant shifts in the post-pandemic labor market. In the US, the share of paid days spent working from home has settled at about 28 percent in 2023, up from 7 percent in 2019. While some have cited this shift as a possible driver, and while employees often perceive themselves as more productive when working from home—largely because the average American saves 55 minutes per day in commuting time alone—the rise of remote work is not likely to have driven the recent increase in measured productivity (output per paid hour of work). In fact, a recent study of call center workers at a Fortune 500 company found that the shift to remote work during COVID-19 caused a productivity decline of 4 percent. Furthermore, economists studying engineers at a large technology firm found that remote work resulted in less feedback for the most junior engineers, which could ultimately reduce their skill development and long-term productivity. To be sure, however, the net effect of remote work on productivity will take time to play out, as workers learn better ways to collaborate in this new environment and as supervisors adopt better management practices for remote workers.

Policymakers have evidence-based options to accelerate productivity growth by supporting America’s renewed business dynamism.

As Ben Jones argues in his recent AESG paper, policymakers should take a portfolio approach to investing in innovation, making small bets on a wide range of opportunities—each with great potential but also risk. The federal government can embrace this philosophy to support today’s cohort of new businesses by expanding proven funding models. The Small Business Innovation Research program runs a competitive grant program aimed at helping startups find a path to commercialize their innovations. Research looking at the last three decades of program data has found that businesses that received these small ($150,000) early-stage grants applied for more patents, reported higher revenue, and were twice as likely to receive subsequent private capital investments when compared to similar applicants who did not receive funding. Importantly, these positive effects are not a result of investors seeing these grants as some sort of “government certification”; rather, they arise because this funding gives founders resources to prototype ideas they then bring to market. Historically, new-business creation has driven productivity growth when the small share of high-impact startups begin scaling their ideas—expanding such proven models of support can help to remove the financial frictions that prevent many high-potential startups from making it to the stage where America’s deep capital markets can then step in.


Growth in labor productivity is a key mechanism through which the US economy can grow without consuming more resources and stoking inflation, making the decades-long decline in productivity growth troubling and the recent upswing all the more encouraging. A primary driver of the recent upswing has been the reversal in decades of declining business dynamism, as seen in the surge in new-business creation. While the past four quarters of productivity growth have been welcome, policymakers can take steps to turn this recent upswing into a long-term rise in productivity growth—and with it, workers’ wages and Americans’ living standards.

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April 2024 Jobs Report: A Best-Case Scenario for the Fed?

The BLS estimated that the US economy added 303,000 jobs in February, with the unemployment rate ticking down from 3.9% to 3.8%. Below are three key takeaways from this report – and what it means for interest rates.

1. Job Growth Continues to Defy Expectations

Overall nonfarm employment grew by 303,000 in March, blowing past market expectations of 187,000 jobs added. The monthly gains over the first three months of 2024 have averaged 276,000 jobs, well above the 190,000 averaged before the pandemic. This strength has in part been driven by the recovery of two industries hard-hit by post-pandemic labor shortages: job growth in the Construction sector in March doubled its prior year’s average, and employment in Leisure and Hospitality has finally returned to its pre-pandemic level in February 2020.

2. Wage Growth Slows, Despite Strong Employment

Yearly growth in workers’ average hourly earnings ticked down from 4.3% to 4.1% in March. While the top-line jobs number was much stronger than economists predicted, the slowdown in wage growth was in line with expectations. The continued moderation in wages growth should be the focus of attention in this report, as it continues to build the case that the economy can tolerate strong jobs growth without putting the Fed’s goal of bringing down inflation at risk.

3. Labor Force Participation Flatlines

These twin dynamics of strong job growth with moderating wage gains were enabled by growth in the supply of workers in March. After three months at a standstill, the labor force participation rate – the share of adults employed or looking for work – ticked up from 62.5% to 62.7%. As potential workers come off the sidelines and look for work, businesses are able to add jobs without bidding up wages and fueling inflation. While the US economy is still a ways away from the 63.3% participation rate seen just before the pandemic, a further tick up next month would match the highest rate since 2020.

What this means:

This job report should not change the picture too much for policymakers with their eyes on a soft landing. In Chair Powell’s last press conference, he noted that strong job growth itself is not a reason to hold off on cutting interest rates, particularly if that strength comes from a further increase in labor supply – exactly the dynamic we see in this month’s report. Several more jobs reports similar to this one will continue to build the case for lowering interest rates later this year.

The Small Role of Ivy League Schools in US Higher Education

The conversation about higher education admissions in the US is often dominated by developments at the eight Ivy League institutions. While there are good reasons to debate admissions at these elite schools (because, for instance, economists have found that their graduates hold a disproportionately large share of leadership positions in business and politics), this post aims to make clear the relatively small role these eight schools play in both the overall college landscape and in the process of intergenerational economic mobility in America.

The most recent data collected by the US Department of Education indicate that the eight Ivy League schools accounted for less than 1 percent of total undergraduate enrollment in Fall of 2022. A far greater share of students are served by other private (non-for profit) institutions (25.6%), and 70.2% undergraduate students are enrolled in a public college or university. 

Schools in the Ivy League served 65,285 undergraduates in 2022. By contrast, the State University of New York (SUNY) system alone served more than four times as many undergraduates (273,102) and the City University of New York (CUNY) system enrolled over three times as many (197,022). 


Public institutions such as the SUNYs and the CUNYs deserve far more attention and more resources not only due to their relative size, but more importantly because they are the engines of broad-based economic mobility in America. Research by economists at Harvard’s Opportunity Insights Lab ranked US colleges according to how well they foster economic mobility – that is, by the fraction of that college’s students who come from the bottom 20% of the income distribution and later in life reach the top 20%. Among the 1,815 colleges examined by this measure, no Ivy League school ranked in the top ten – but SUNY-Stony Brook ranked third and the CUNY system sixth. At SUNY-Stony Brook, for instance, 16.4% of its students come from the bottom income quintile and then 51% of those low-income students reach the top quintile of earners in adulthood.

America’s elite institutions can certainly take steps to play a larger role in the higher education landscape – most prominently perhaps is expanding access, something done by only a few of these schools very recently. In fact, while America’s colleges and universities awarded nearly 1 million more bachelor’s degrees in 2022 compared to 1990, Ivy League schools accounted for just 3,539 (or 0.35 percent) of that increase. Until these universities do play a larger role in higher education by serving more students, policymakers are better served focusing attention and resources on the schools that are in fact educating the vast majority of students – and helping them rise up the income ladder.

March 2024 Jobs Report: Three Things to Know

The BLS estimated that the US economy added 275,000 jobs in February, with the unemployment rate ticking up from 3.7% to 3.9%. Three things stood beneath the headlines of this report.


  1. Revisions Take Some Heat of the Economy

While the top-line number today beat the consensus market forecasts, the BLS also revised down their estimates for December and January by a combined 167,000 jobs. The estimated number of jobs added in January alone was revised down from 353,000 down to 229,000. While these monthly gains remain above pre-pandemic levels, indicating a labor market that has remained strong, they do not indicate the kind of blistering job growth last month’s report suggested. 

Job Growth Slows, Remains Above Pre-Pandemic Levels


  1. Wage Growth Resumed Its Steady Moderation

Average hourly earnings for all workers grew by 4.3% over the past year, down from it’s post-pandemic peak of 5.9% growth. Last month, wages ticked up by an unexpected 4.4%, stoking concerns that the still-hot economy was fueling wage growth that would, in turn, contribute to further inflation. While wage growth among all workers and among those in production and non-supervisory roles remains above the pre-pandemic average of 3%, the tick down this month signals a return in the trend of slower wage growth.


  1. Labor Force Participation Flatlines

One concerning development in this report is the continued stallout in the rate of workers entering the labor force. The share of the population 16 or older that is either employed or looking for work has remained at 60.5% for the past three months, below the pre-pandemic rate (in January 2020) of 63.3%. While this lower rate is in part naturally due to the aging of the population, this lower share of adults in the labor force will contribute to a tight job market over the near term and the long term.


What this means:

The combination of slower job growth and slower wage growth in this month’s report strikes a solid balance between an economy that was overheating and one at risk of falling into recession. If last month’s jobs report brought a fresh wave of concern that the economy remained too hot for the Federal Reserve to consider lowering interest rates, this report should ease those fears. Just as analysts began to wonder if the still-hot economy would lead the Fed to hold off on any rate cuts in 2024, the data released today should bring the conversation back to when we will see the first cut in 2024, rather than if.

Aspen Economic Strategy Group Welcomes Five New Members

WASHINGTON, DC, JANUARY 22, 2024 – The Aspen Economic Strategy Group (AESG) today announced five new members have joined the sixty-five-member, bipartisan group of distinguished leaders and thinkers who share the goal of promoting evidence-based solutions to significant challenges confronting the American economy. 

Established in 2017 and co-chaired by former U.S. Secretaries of the Treasury Henry M. Paulson, Jr. and Timothy F. Geithner, the AESG fosters the exchange of economic policy ideas while promoting bipartisan relationship-building among current and future generations of policy leaders in Washington. 

The five new members joining the AESG are:

John H. Cochrane – Rose-Marie and Jack Anderson Senior Fellow, Hoover Institution, Stanford University

Blair W. Effron – Cofounder, Centerview Partners

Steven Rattner  Chairman and CEO, Willett Advisors LLC

Natasha Sarin – Associate Professor of Law, Yale University

Minouche Shafik – President, Columbia University

“We are thrilled with the addition of these new members, whose experience and expertise will bring new, valuable perspectives to the AESG,” said AESG director Melissa S. Kearney. “AESG members share a commitment to advancing evidence-based, bipartisan solutions to our nation’s most pressing economic challenges. This mission is more important than ever as the US continues to face a number of challenges that threaten the country’s economic resilience.” 

The full list of AESG members can be viewed here.

New Member Biographies:

John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow of the Hoover Institution at Stanford University. His publications include the books The Fiscal Theory of the Price Level and Asset Pricing. He has written articles on monetary policy, inflation, dynamics in stock, bond, option, and foreign exchange markets, and their relation to business cycles, macroeconomics, health insurance, time-series econometrics, financial regulation, and other topics. He writes occasional Op-eds, mostly in the Wall Street Journal, blogs as “the Grumpy Economist” at https://www.grumpy-economist.com/ and as part of the Hoover Goodfellows video/podcast with H.R. McMaster and Niall Ferguson.  Cochrane is also a Senior Fellow of the Stanford Institute for Economic Policy Research (SIEPR), Professor of Finance and Economics (by Courtesy) at Stanford GSB, a Research Associate of the National Bureau of Economic Research and former director of its Asset Pricing program, and an Adjunct Scholar of the CATO Institute. He is a past President and Fellow of the American Finance Association, and a Fellow of the Econometric Society. He has been an Editor of numerous journals including the Journal of Political Economy. Awards include the Bradley Prize, the TIAA-CREF Institute Paul A. Samuelson Award for Asset Pricing, the Chookaszian Endowed Risk Management Prize, the Faculty Excellence Award for MBA teaching and the McKinsey Award for Outstanding Teaching. Previously, Cochrane was the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, and before that at its economics department. Cochrane earned a Bachelor’s degree in Physics at MIT, and a Ph.D. in Economics at the University of California at Berkeley.  Outside of academic and economic pursuits, Cochrane is a competition sailplane pilot, and enjoys cycling, windsurfing, skiing, and other outdoor activities. 

Blair W. Effron is cofounder of Centerview Partners, a leading independent investment banking and advisory firm with offices in New York, London, Los Angeles, Palo Alto, Paris, and San Francisco. The firm’s 75 partners and six hundred professionals provide assistance on mergers and acquisitions, financial restructurings, general advisory, valuation, and capital structure to companies, institutions, and governments. Since its founding in 2006, the firm has advised on nearly $4 trillion in transactions and ranks among the most active banking firms globally in strategic advisory. The firm works with public and private companies across a range of sectors including the consumer, energy, financial, general industrial, health care, media, retail, technology, and telecommunications industries. Mr. Effron serves on the boards of trustees of the Council on Foreign Relations (vice chairman), Lincoln Center, the Metropolitan Museum of Art, New Visions for Public Schools, the Partnership for New York City, and Princeton University. He also sits on the advisory board of the Hamilton Project, an economic policy initiative affiliated with the Brookings Institution, and is a Member of the President’s Intelligence Advisory Board.  Effron holds a BA from Princeton University and an MBA from Columbia Business School.  He resides in New York with his wife Cheryl and has three children.

Steven Rattner is Chairman and Chief Executive Officer of Willett Advisors LLC, which manages the personal and philanthropic investment assets of Michael R. Bloomberg. In addition, he is a Contributing Writer for the Op-Ed page of The New York Times and the Economic Analyst for MSNBC’s Morning Joe. Previously, Mr. Rattner served as Counselor to the Secretary of the Treasury and led the Obama Administration’s successful effort to restructure the automobile industry, which he chronicled in his book, Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry. Until February 2009, Mr. Rattner was Managing Principal of Quadrangle Group LLC, a private investment firm that under his leadership, had more than $6 billion of assets under management. Before forming Quadrangle in 2000, Mr. Rattner was with Lazard Frères & Co., where he served as Deputy Chairman and Deputy Chief Executive Officer. Mr. Rattner joined Lazard Frères in 1989 as a General Partner from Morgan Stanley, where he was a Managing Director. Before beginning his investment banking career in 1982 with Lehman Brothers, Mr. Rattner was employed by The New York Times for nearly nine years, principally as an economic correspondent in New York, Washington and London. Mr. Rattner has served as a board member or trustee of a number of public and philanthropic organizations including the Educational Broadcasting Corporation (Chairman), Metropolitan Museum of Art, Brown University (Fellow), Mayor’s Fund to Advance New York City (Chairman), Brookings Institution and the New America Foundation.  He is a member of the Council on Foreign Relations. Mr. Rattner graduated in 1974 from Brown University with honors in economics and was awarded the Harvey Baker Fellowship.  Mr. Rattner is married to Maureen White, who is a Senior Fellow at the Johns Hopkins School of Advanced International Studies, and they have four children.

Natasha Sarin is an Associate Professor of Law at Yale Law School with a secondary appointment at the Yale School of Management in the Finance Department. Previously, she served as Deputy Assistant Secretary for Economic Policy and later as a Counselor to Treasury Secretary Janet Yellen at the United States Treasury Department, where her work focused on narrowing the gap between the taxes owed by the American public and those collected by the Internal Revenue Service. Before joining the Biden Administration, she was a Professor at the University of Pennsylvania Carey Law School and the Wharton School. Her work has received both academic and popular press attention and has been covered by various media outlets, including The New York Times, The Economist, and the Financial Times, among other publications. She is currently a contributing columnist for The Washington Post. Prior to joining the faculty at Penn, she earned a JD from Harvard Law School; a PhD in Economics from Harvard University; and a BA in Ethics, Politics, and Economics from Yale University.

Minouche Shafik is the 20th President of Columbia University in the City of New York and Professor of International and Public Affairs at the School of International and Public Affairs. She is an economist, policymaker, and higher education leader who has spent over three decades in leadership roles across a range of prominent international and academic institutions.  From 2017 to 2023 she was President and Vice Chancellor of the London School of Economics and Political Science (LSE), a world-leading center for research and teaching in the social sciences. Before her tenure at LSE, Shafik served as Deputy Governor of the Bank of England, where she led work on fighting misconduct in financial markets and managed a balance sheet of about $600 billion; Deputy Managing Director of the International Monetary Fund, navigating turbulence surrounding the European debt crisis and the Arab Spring; Permanent Secretary of the United Kingdom’s Department for International Development, where she helped secure the UK’s commitment to giving 0.7% of GDP in aid and focused on fighting poverty in the poorest countries in the world; and the youngest-ever Vice President of the World Bank, where she worked on the institution’s first-ever report on the environment, led work on infrastructure and private sector investment, and advised governments in post-communist Eastern Europe. She is a trustee of the Bill & Melinda Gates Foundation. Shafik received her BA from the University of Massachusetts Amherst, MSc from LSE, and DPhil from St Antony’s College, Oxford.  She holds a life peerage and membership of the House of Lords, a damehood for services to the global economy, an honorary fellowship of the British Academy, and several honorary degrees. She is married to Raffael Jovine, a molecular biologist, with whom she has two college-aged children and three adult stepchildren.


The Aspen Economic Strategy Group (AESG), a program of the Aspen Institute, is composed of a diverse, bipartisan group of distinguished leaders and thinkers with the goal of promoting evidence-based solutions to significant U.S. economic challenges. Co-chaired by Henry M. Paulson, Jr. and Timothy Geithner, the AESG fosters the exchange of economic policy ideas and seeks to clarify the lines of debate on emerging economic issues while promoting bipartisan relationship-building among current and future generations of policy leaders in Washington. More information can be found at https://economicstrategygroup.org/.

The Aspen Institute is a global nonprofit organization whose purpose is to ignite human potential to build understanding and create new possibilities for a better world. Founded in 1949, the Institute drives change through dialogue, leadership, and action to help solve society’s greatest challenges. It is headquartered in Washington, DC and has a campus in Aspen, Colorado, as well as an international network of partners. For more information, visit www.aspeninstitute.org.

IN BRIEF: Pandemic-Era Student Learning Loss and the Policy Response


The COVID-19 pandemic created not only a public health emergency but a youth education crisis as well. Decades of progress in math and reading among America’s students were wiped away in two years. The federal government passed three rounds of funding to help school districts mitigate the disruptions of the pandemic, but that aid is set to run out next year even as little progress has been made in returning student achievement to pre-pandemic levels. This In Brief examines the scope of student learning loss, what the federal government and districts have done thus far to help students, and what the federal government can do now to put America’s students on a better path forward.


  • Pandemic-induced learning loss has reversed two decades of progress in student achievement. Figure 1 charts student test score performance over time from the National Assessment of Educational Progress (NAEP), also called “TheNation’s Report Card.” The portion of students at or above “Basic” achievement levels in math and reading has fallen sharply since 2019 and is now below 2003 levels. Compared to 2019 results, the percentage of fourth graders at or above NAEP Basic levels in math and reading fell by 5 and 4 percentage points, respectively. The biggest decline is in eighth-grade math scores, where the share of students scoring at or above Basic levels declined from 69 percent in 2019 to 62 percent in 2022.

Figure 1: Percentage of students scoring at or above NAEP Basic level, by grade and subject, 2003–2022

Source: National Assessment of Educational Progress (NAEP).

  • The declines in student achievement were not uniform across the country. Figure 2 plots the changes in students performing at or above NAEP Basic levels by state. For instance, in eighth-grade math, 19 states experienced a decline greater than the 7 percentage point national drop (with declines as large as 14 percentage points), and 20 states saw smaller drops (with the smallest declines at 2 percentage points and no states seeing gains). Research finds that states that maintained access to in-person schooling during the pandemic saw smaller declines in math and reading progress, a relationship explored in more detail below.

Figure 2: Change in share of students scoring at or above NAEP Basic level, by grade and subject, 2019–2022

Source: National Assessment of Educational Progress (NAEP).

  • Shifts to virtual learning and a concomitant rise in chronic absenteeism have driven declines in student achievement. The shift from in-person to remote or hybrid instruction during the pandemic had profoundly negative consequences for student achievement. Hallaron et al. (2021) estimates that the decline in test scores from 2019 to 2021 was on average 10 percentage points larger in districts that did not maintain in-person instruction as compared to those that did, after adjusting for differences in district-level test-score trends and demographic differences across school districts. The shift to remote schooling also exacerbated educational inequality. An analysis of test scores from 2.1 million US students in 10,000 schools finds that Black and Hispanic students’ performance dropped significantly more than that of white students with similar baseline scores and school poverty levels—primarily because Black and Hispanic students were more likely to live in districts that shifted to remote schooling.
  • As districts around the country resumed in-person instruction, many students did not return to school. The number of public school students who are chronically absent—meaning they miss at least 10 percent of days in a school year—has nearly doubled, from about 15 percent in the 2018–2019 school year to around 30 percent in 2021–2022. The White House Council of Economic Advisors estimates that, based on the pre-pandemic association between absenteeism and test scores, the rise in absenteeism can account for a portion—though not all or most—of the post-pandemic decline in test scores: 16–27 percent of the drop in math scores and 36–45 percent of the decline in reading.
  • If declines in student learning are left unmitigated, millions of students—and the country—will be worse off in the future. While the decline in test scores itself is alarming, this problem will only compound itself over time. Research finds that school test scores are strongly predictive of later-life outcomes, even after controlling for differences in student characteristics and family backgrounds. Students who can’t read at grade level by third grade, for example, are four times less likely to graduate high school. Using the historical relationship between academic achievement, earnings, and economic growth, researchers estimate that pandemic-induced learning loss could reduce lifetime earnings by $49,000 to $61,000 per student. That reduction will cost the US approximately $128 billion to $188 billion each year as this cohort enters the labor force.
  • In 2020 and 2021, the federal government allocated $189.5 billion in temporary funding to school districts to address pandemic-related disruptions. Most of these funds are allocated to school districts through the Elementary and Secondary School Emergency Relief (ESSER) Fund, which was built up in three phases: initially in the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act; the 2021 Coronavirus Response and Relief Supplemental Appropriations Act; and in the American Rescue Plan (ARP) later in 2021. The law stipulates that districts are generally free to spend these funds as they choose— on teacher salaries or building upgrades, for instance—but they are required to be spent by September 2024, and at least 20 percent of funds allocated in the ARP phase must be allocated to overcoming pandemic-related learning loss. Although the roughly $190 billion effort appears to be a significant increase over the $757 billion spent on public schooling in the 2019–2020 school year, Jonathan Guryan and Jens Ludwig estimate in their recent AESG chapter that, after taking into account that these funds are intended to be spread out over four years, this support accounts for about a 6 percent increase in annual funding—and part of these funds are intended to offset drops in school district revenue during the pandemic.
  • School districts were slow to start spending this aid but are now on track to spend all funds by next year. The Georgetown University Edunomics Lab’s ESSER Expenditure Dashboard indicates that, despite delays in spending their allocations initially, schools nationally are on track to exhaust their allocations by the September 2024 deadline. In the 2020–2021 school year, states spent funds at a $1.9 billion per month rate, which has accelerated to $5.1 billion per month. A pace of $4.9 billion per month would exhaust funds by September 2024. However, districts vary significantly in the share of funds currently exhausted. Figure 3 displays the share of ESSER allocations spent (as of October 2023) for the 32 states that publish timely spending reports. The shares spent range from a low of 36 percent across Kansas schools to 92 percent across districts in Michigan. An obvious question is whether the spending of these funds has been associated with improvements in student outcomes. We consider this question with a simple correlation; figure 4 plots state-level changes in the share of students at or above NAEP Basic assessment levels from 2019 to 2022 against the share of allocated pandemic relief funds that a state has spent. While there is little relation between spending and student reading levels, states that spent a larger portion of their ESSER funds saw relatively smaller declines in the share of students at or above an NAEP Basic level on fourth- and eighth-grade math tests, a finding consistent with a positive effect of spending on learning-loss mitigation in math. This pattern of results is in line with prior evidence that student achievement in math is more sensitive to school inputs than achievement in reading is, perhaps because students spend more time building reading skills at home.

Figure 3: Percentage of ESSER funds spent, by state: October 2023

Source: Edunomics Lab ESSER Funds Dashboard.

Figure 4: Relationship between state ESSER spending and change in percentage of students scoring at or above NAEP Basic level, 2019–2022

Source: Achievement levels from NAEP; state spending shares from Edunomics ESSER Funds Dashboard.

  • District spending plans do not indicate an intention to increase the share of remaining ESSER funds spent on student academic needs, despite the size and persistence of learning losses. The latest spending reports to the Department of Education (from FY 2022) indicate that school districts have spent about 48 percent of ESSER funds on “Meeting Students’ Academic, Social, Emotional, and Other Needs” compared to 33 percent on “Operational Continuity,” 18 percent on “Physical Health and Safety,” and just 2 percent on “Students’ Mental Health Supports.” Based on how districts report the portion of remaining funds that they intend to spend on each activity, schools are planning to maintain that same share of spending on academic needs in their remaining set of funds. A 2023 McKinsey and Company survey of school district administrators found that only 30 percent of schools plan to spend significantly on educational supports to remedy learning loss—supports like high-dosage tutoring and intervention curricula–mainly because of the perceived high cost of these interventions at scale and because these interventions require ongoing funding that will not be available after ESSER funds expire in 2024.

Figure 5: Categories of ESSER funds already expended or allocated for use

Source: Department of Education ESSER Transparency Portal.

  • Districts need more time, more resources, and more accountability to alleviate pandemic-induced learning loss. Jens Ludwig and Jonathan Guryan make the case in their AESG chapter on pandemic learning loss that the federal government can do three things to effectively help students make up ground lost in academic progress since 2020. First, schools need more time to spend their funds. Districts were slow to start spending their allocations, and placing an arbitrary deadline of September 2024 to spend ESSER funds incentivizes districts to spend funds in ways that meet this deadline rather than in ways that most effectively help students over the long term. Second, schools need more resources. As noted above, ESSER funds represent a small share of K–12 schools’ annual funding, and even the latest ARP funds were appropriated before the magnitude of pandemic learning loss was fully appreciated. The federal government should offer support on a scale that matches the size of the problem students face. Finally, many steps districts need to take to effectively address learning loss may not be easy—such as changing HR models or the structure of school days—and the federal government should provide districts with accountability and other nudges to help schools make these choices that are difficult in the short run but beneficial to students over the long term.


The destruction to educational progress among America’s youngest students will be one of the most profound, long-lasting effects of COVID-19. If it is left unaddressed, as these students today reach adulthood, American families will be less economically secure, and the American economy will be less productive and less globally competitive. Yet, policies today are dictated by deadlines set years ago and funding allocated before the scope of the problem was fully known. Providing schools with more time, more resources, and more accountability to help students get back on track is one of the most important ways policymakers can help create a generation equipped to meet the challenges it will face.

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Aspen Economic Strategy Group Releases 2023 Annual Policy Volume: Building a More Resilient US Economy

Washington, DC, November 8, 2023The Aspen Economic Strategy Group (AESG) today released its sixth annual policy volume, Building a More Resilient US Economy. The book’s publication comes as the US faces historically high levels of debt that threaten the resiliency of the nation’s economy, including the ability to invest in key priorities and adapt to changing global economic conditions. Last month, the Congressional Budget Office (CBO) estimated a $1.7 trillion gap between government spending and revenues in 2023, nearly double the annual budget deficit from last year. The volume’s eight papers offer policy solutions to the federal budget situation (namely, the debt and deficits, tax policy, Social Security and prescription drug prices), investing in children and mitigating pandemic-induced learning loss, and navigating global economic shifts (supply chain resilience and China’s economic outlook).

“Though the US economy has proven to be remarkably resilient in recent years, the nation’s fiscal trajectory is bleak, leaving little space to address our long-term challenges,” said AESG director Melissa S. Kearney. “This year’s AESG policy volume presents evidence-based, bipartisan policy solutions to improve our fiscal situation, develop our workforce,  and build a stronger, more resilient US economy.” 

“How the United States navigates ongoing economic challenges in the coming years will have significant consequences for decades to come,” write AESG co-chairs and former Secretaries of the Treasury Henry M. Paulson Jr. and Timothy F. Geithner in the book’s foreword.  “Policymakers will need to make difficult spending and tax policy decisions to bring the US fiscal situation into better balance and to maintain our ability to invest in key priorities like national security, health care, and addressing climate change.”

The book outlines various evidence-based solutions to some of America’s biggest economic questions: Given demographic and fiscal trends, to what extent will Medicare, Social Security, and other key safety net programs need to be reformed? How should the government raise more revenue to address the federal government’s fiscal imbalance? What are priority investments that we should make to ensure the future workforce to grow the US economy?  How can we navigate shifts in the global economy?

The policy volume can be read in full here: Building a More Resilient US Economy

The papers fall under three major themes:


Karen Dynan’s paper, High and Rising US Debt: Causes and Implications, explains why the outlook for federal debt represents a major economic challenge for the US, particularly because, even under optimistic economic scenarios, debt will soon reach levels well above historical experience.

The Social Security trust fund is set to run out by 2033, which would likely force sudden and dramatic across-the-board cuts to benefits. Mark Duggan offers a proposal to reform Social Security and put the program on a more stable financial footing in his paper, Reforming Social Security for the Long Haul

US policymakers have proposed several solutions to curb rising drug prices, and included provision to allow Medicare to negotiate certain drug prices in the Inflation Reduction Act. Craig Garthwaite and Amanda Starc’s paper, Why Drug Pricing is Complicated, describes the opaque and complex process of pharmaceutical price setting in the US and proposes reforms to make these markets more competitive and efficient. 

Owen Zidar and Eric Zwick draw on lessons from the Tax Cuts and Jobs Act (TCJA) to suggest potential reforms to the US business tax regime, with a particular focus on reforming the business tax code, in their paper, The Next Business Tax Regime: What Comes After the TCJA?


National test scores revealed major learning loss among elementary school students due to the COVID-19 pandemic. Jens Ludwig and Jonathan Guryan’s paper, Overcoming Pandemic-Induced Learning Loss, discusses the pressing need to address this learning loss using American Rescue Plan funds that expire next year, and proposes high-impact tutoring as a concrete solution to address learning loss and equalize educational opportunities in the long term.

Melissa S. Kearney and Luke Pardue’s paper, The Economic Case for Smart Investments in America’s Youth, observes that the US spends relatively little on children and argues that investing in youth is one of the US’ greatest opportunities to build a more resilient economic future.


Mary Lovely’s paper, Manufacturing Resilience: The US Drive to Reorder Global Supply Chains, evaluates the US’ efforts to strengthen its supply chains through “reshoring,” “friendshoring,” and “derisking” and offers policy solutions to improve efforts to reduce supply risks.

Hanming Fang examines China’s future economic prospects and evaluates the main factors driving uncertainty around China’s economic future in his paper, Where is China’s Economy Headed?


The Aspen Economic Strategy Group (AESG), a program of the Aspen Institute, is composed of a diverse, bipartisan group of distinguished leaders and thinkers with the goal of promoting evidence-based solutions to significant U.S. economic challenges. Co-chaired by Henry M. Paulson, Jr. and Timothy Geithner, the AESG fosters the exchange of economic policy ideas and seeks to clarify the lines of debate on emerging economic issues while promoting bipartisan relationship-building among current and future generations of policy leaders in Washington. More information can be found at https://economicstrategygroup.org/.

The Aspen Institute is a global nonprofit organization whose purpose is to ignite human potential to build understanding and create new possibilities for a better world. Founded in 1949, the Institute drives change through dialogue, leadership, and action to help solve society’s greatest challenges. It is headquartered in Washington, DC and has a campus in Aspen, Colorado, as well as an international network of partners. For more information, visit www.aspeninstitute.org.