Household income risk over the business cycle

Evidence suggests that household income risk is an important factor in the propagation of macroeconomic shocks and the transmission of economic policy. An analysis using survey data on income from the euro area suggests that the nature of household income risk in the euro area is comparable with the United States, in that (i) individual earnings risk is closely linked to the performance of the labour market, and (ii) in a downturn it increases much more for some groups of workers than for others. These insights are useful for assessing the current economic outlook and the role of income risk in amplifying macroeconomic shocks. JEL Classification: E20, E21, E24