“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
AI Summary.The authors estimate that more than half of the rise in the top 1% income share since 1985 — 5.8 of 10.5 percentage points — flowed through pass-through businesses, counting roughly 3m wealthy private business owners with average net worth near $25m running law firms, dealerships, and medical practices.
Torsten SløkApollo
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More than half the increase in the top 1% income share since 1985 flowed through pass-through businesses to ~ 3mm private business owners with a mean net worth of ~$25mm.
Did most of the top 1% income gain come from private businesses?
Core argument: Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
The income that lifted America's top 1% did not come mainly from tech or Wall Street, according to Owen Zidar and Eric Zwick. More than half of the rise in the top 1% income share since 1985, 5.8 of 10.5 percentage points, flowed through pass-through businesses. Zidar and Zwick, counted roughly 3 million wealthy private business owners, with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains, the kind of businesses that make their owners wealthy and well known in their own communities without ever making them nationally famous.
Takeaways by Macro Roundup® AI
Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
Zidar and Zwick count roughly 3 million wealthy private business owners with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains.
The income that lifted America’s top 1% did not come mainly from tech or Wall Street, according to Zidar and Zwick, but from businesses whose owners are well known locally without becoming nationally famous.
Related Articles:
What’s Missing in the Fed’s Data about Ultrarich Portfolios— The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
They’re Rich but Not Famous—and They’re Suddenly Everywhere— An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
AI Summary.Wage gains have trailed inflation for five months, and consumer prices are 27% higher than at the start of 2021. The "misery index," the sum of the inflation and unemployment rates, stands at 7.5, up from 6.7 a year earlier.
David Uberti, Justin Lahart and Aaron ZitnerWall Street Journal
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Over the past five months, real wages as measured by average hourly earnings have declined. Okun’s “misery index” is now 7.5, just above its October 2024 level of 6.7.
Are wage gains falling behind rising consumer prices?
Core argument: Consumer prices are 27% higher than in January 2021, when Biden took office, and wage gains have failed to keep pace with inflation for five months.
For five months, wage gains haven’t kept pace with inflation and, especially with the sharp increase in gasoline prices over the past few weeks, they aren’t likely to keep up this month. University of Chicago Booth School of Business economist Christina Patterson said employees who achieve pay bumps often bear a burden. “You negotiate. You get an outside offer. You switch jobs. You threaten to leave,” she said. “All of those actions are costly. They disturb employer-employee relationships. You lose co-workers. You have to move.” Consumer prices are now 27% higher than they were in January 2021. One long-popular benchmark of economic conditions is the “misery index,” a simple summing up of the inflation and unemployment rate, it now stands at 7.5, higher than the 6.7 it was at in October 2024, just before Harris lost the presidency to Trump.
Takeaways by Macro Roundup® AI
Consumer prices are 27% higher than in January 2021, when Biden took office, and wage gains have failed to keep pace with inflation for five months.
The “misery index,” a summing of the inflation and unemployment rates devised by economist Arthur Okun, stands at 7.5, above the 6.7 recorded in October 2024 before Kamala Harris lost to Trump.
University of Chicago Booth School of Business economist Christina Patterson said workers who win pay bumps often bear a burden through negotiating, obtaining outside offers, switching jobs, or threatening to leave, actions that disturb employer-employee relationships and can require moving.
Related Articles:
The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly— Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
Sticky Wage Norms and the Real Wage Cost of Unexpected Inflation— Firms set nominal wage increases by round-number rules—about 42% of increases below 6% fell within 0.01 percentage points of a whole or half number—and these rules rose only from about 2.7% to 3.5% as inflation peaked near 7%, contributing to falling real wages for job stayers.
Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections— An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.
AI Summary.Census data show the number of U.S. families with inflation-adjusted incomes above $150,000 grew from under 3m in 1967 to over 31m in 2025, while families earning under $75,000 fell by almost 3m in absolute terms. The share of families with multiple earners has not increased much over that period.
Jeremy HorpedahlEconomist Writing Every Day
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In 1967, just 5.5% of American families had an inflation adjusted income of $150,000 or more. In 2025, 35.7% did. During that timeframe, the share of families with a real income less than $75,000 declined from 63.4% to 32.8%.
Are more American families reaching higher inflation-adjusted income levels?
Core argument: The number of U.S. families with incomes above $150,000 in 2025 inflation-adjusted dollars rose from fewer than 3 million in 1967 to over 31 million in 2025, according to Census data.
In 1967 there were fewer than 3 million families with incomes over $150,000 (in 2025 inflation-adjusted dollars). By 2025, that had grown to over 31 million families. If we look at the highest income threshold in this Census data — over $200,000 — the number of families has grown from just 1 million in 1967 to over 20 million in 2025. And there are fewer lower-income families too: the number of families under $75,000 shrunk, not just as a proportion of the total but even in absolute terms by almost 3 million families from 1967 to 2025. Of course, some of these families do have more earners than in 1967, though we shouldn’t overstate that too much. Using other data from Census, we can see that the share of families with multiple earners hasn’t increased much since 1967, and especially hasn’t since the mid-1990s.
Takeaways by Macro Roundup® AI
The number of U.S. families with incomes above $150,000 in 2025 inflation-adjusted dollars rose from fewer than 3 million in 1967 to over 31 million in 2025, according to Census data.
Families earning over $200,000, the highest income threshold in the Census data, grew from about 1 million in 1967 to over 20 million in 2025.
Families with incomes under $75,000 declined by almost 3 million in absolute terms from 1967 to 2025, while Census data show the share of families with multiple earners has not increased much since 1967, and especially not since the mid-1990s.
Related Articles:
Income in the United States: 2025— Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.
The Middle Class Is Shrinking Because of a Booming Upper-Middle Class— Analyses showing a shrinking middle class typically use relative income thresholds that rise with median income, so they can register decline even when living standards rise across the distribution. Using an absolute definition, the authors find the core middle class shrank because the upper-middle class grew from 10% of families to 31%, doubling its income share.
Who Sees Themselves as Working Class?— Survey data indicate 60% of U.S. adults say the term "working class" describes them well, including half of those with a bachelor's degree and half of upper-income Americans. Identification is highest among blue-collar workers at 77%, versus 61% in other occupations, and ranges from 52% of Asian adults to 62% of White adults.
AI Summary.Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.
Melissa Kollar and Zach SchererU.S. Census Bureau
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Real US median household income increased 2.6% year over year in 2025 to a record high of $87,460.
Has median U.S. household income reached its highest level on record?
Core argument: Median U.S. household income reached $87,460 in 2025, up 2.6% from $85,210 in 2024 and the highest on record in data dating back to 1967.
In 2025, median household income was $87,460, an increase of 2.6% from the 2024 estimate of $85,210. Household income in 2025 was the highest on record dating back to 1967. For all demographic characteristics of the householder the median household income estimates in 2025 were either higher than the 2024 estimates or were not statistically different from 2024. Median household income increased by 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households. Median income did not change significantly for Asian or Hispanic households.
Takeaways by Macro Roundup® AI
Median U.S. household income reached $87,460 in 2025, up 2.6% from $85,210 in 2024 and the highest on record in data dating back to 1967.
Median household income rose 4.8% for Black households, 3% for White households, and 2.9% for non-Hispanic White households in 2025, while Asian and Hispanic households saw no statistically significant change.
Across all demographic characteristics of the householder, 2025 median household income estimates were either higher than or not statistically different from 2024 estimates.
Related Articles:
Income in the United States: 2024— U.S. median household income was $83,730, not statistically different from the prior year's $82,690, according to Census Bureau estimates. Across most demographic subgroups, median household income was higher or not statistically different from the prior year, with the exception of Black households, which saw a decline.
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
The College Wage Premium in the Generative AI Era— The U.S. college wage premium fell from 0.626 to 0.575 after four decades of expansion, implying the first sustained negative growth in relative demand for college-educated labor. The authors estimate that weaker wage growth in occupations highly exposed to artificial intelligence accounts for roughly 28% of that decline, though the patterns are not causal.
AI Summary.Firms set nominal wage increases by round-number rules—about 42% of increases below 6% fell within 0.01 percentage points of a whole or half number—and these rules rose only from about 2.7% to 3.5% as inflation peaked near 7%, contributing to falling real wages for job stayers.
Erik Hurst, Christina Patterson, Nela Richardson, and Ye Liv WangUniversity of Chicago
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ADP microdata from 2016–25 suggest firms set wages according to “wage norms” ~ invariant to inflation. The 2020–21 inflation surge mechanically reduced real wages. By the end of 2025, 34% of incumbent workers’ real wages were lower than in 2020.
Do round-number wage rules cause real wages to fall during inflation?
Core argument: Roughly 42% of all nominal wage increases below 6% fell within 0.01 percentage points of a whole or half number.
Roughly 42% of all nominal wage increases below 6% were within 0.01 percentage points of a whole or half number [Figure 6]. Figure 9 plots the employment-weighted average modal wage change across firms (solid line) alongside inflation rate (dashed line) from 2016 through 2025. In the pre-pandemic period, firm-level wage rules were relatively stable at a median of 2.7%, modestly above the rate of inflation. Beginning in 2021, inflation rose sharply, peaking at approximately seven percent in 2022. The average modal wage change also rose, reaching a peak of 3.5% in 2022 and 2023. By 2025, the median firm had a wage rule granting increases of three percent, roughly in line with inflation. The stickiness of firms’ wage rules in the face of inflationary pressure contributed to the systematic fall in real wages for job stayers. Evidence from Belgium [which has strong wage indexation], suggests that declining real wages, rather than inflation itself, helps explain the persistence of depressed consumer sentiment during the 2021–2024 period.
Takeaways by Macro Roundup® AI
Roughly 42% of all nominal wage increases below 6% fell within 0.01 percentage points of a whole or half number.
Firm-level wage rules held near a median of 2.7% before the pandemic, and the employment-weighted average modal wage change peaked at 3.5% in 2022 and 2023 while inflation peaked near 7% in 2022; by 2025 the median firm granted 3%.
The stickiness of firms' wage rules amid inflationary pressure contributed to a systematic fall in real wages for job stayers, and evidence from Belgium, which has strong wage indexation, suggests falling real wages rather than inflation helps explain depressed consumer sentiment in 2021–2024.
Related Articles:
Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections— An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.
Real Wages Start To Shrink In Developed Countries— US annual inflation of 3.8% outpaced average hourly earnings growth of 3.6%, leaving prices rising faster than pay for the first time in two years, while Eurozone workers face a fresh energy-driven setback. JPMorgan attributes the real wage decline to Middle East conflict and expects growth to resume if energy prices retreat.
The Post‑COVID Decline in the Labor Share— The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
AI Summary.The average American worker earns enough to buy 10,215 Big Macs a year, the most of any country, followed by Switzerland and Australia. On an hourly basis, Switzerland leads at seven Big Macs per hour, ahead of America's six and Australia's five, reflecting longer American working hours.
Economist StaffThe Economist
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The Economist’s venerable Big Mac Index is indicative of significantly higher after-tax, PPP-adjusted wages for American workers than for their French and German counterparts.
Which country's workers can buy the most Big Macs?
Core argument: The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.
On an annual basis, America continues to top our McWages rankings. The average American worker earns enough to buy 10,215 Big Macs a year; Switzerland and Australia are in second and third place, respectively. But American working hours are supersized, too. On an hourly basis, Switzerland comes out on top: the average worker there earns the equivalent of seven Big Macs an hour, compared with America’s six. Australia ranks third, at five burgers for every hour worked.
Takeaways by Macro Roundup® AI
The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.
On an hourly basis Switzerland leads, with the average worker earning the equivalent of seven Big Macs an hour, compared with six in the United States and five in Australia.
American working hours are longer, which shifts the United States from first place on annual McWages to second on an hourly basis.
Related Articles:
The Big Mac Index At 40— The Big Mac index, which compares burger prices across countries converted into dollars, shows currency misalignments in either direction at their widest since the mid-1990s, with American inflation, an undervalued Chinese yuan, and a falling yen cited as contributors. Big Mac prices also reflect domestic supply and demand for nontradeable goods.
Why Do Americans No Longer Work So Much More Than Non-Americans?— About half of the 1990s gap between American and European hours worked had reversed by the end of the 2010s. The authors estimate US hours per person declined after the 2000s because of rising benefits for the non-employed—especially health benefits like Medicaid—while non-US hours rose with higher wages and lower work costs.
Ed Conard Debates Furman On “The Expected Value of Risk Taking”— A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
AI Summary.US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
Abiel ReinhartJ.P. Morgan
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US corporate profit margins rose ~250bp y/y in Q2 and are approaching an all-time high. Reinhart notes that tech and communications services drove ~58% of recent S&P 500 profit growth, even as the sectors have been “steadily losing employment since late 2022.”
Are wider margins driving surging corporate profits as labor's share falls?
Core argument: Higher margins were the key driver of profit growth, as 23% y/y domestic profit growth far exceeded the 8% rise in corporate value added.
Nominal pre-tax corporate profits in the national income and product accounts (NIPA) were very robust in both 2Q (41% [annual rate]) and over the last year (23%). Excluding post-recession spikes, we haven’t seen a year this strong since the mid-2000s. Higher margins [were] the key driver [of profit growth], as 23% y/y domestic profit growth was far in excess of the 8% increase in corporate value added. Profit margins (pre-tax profits divided by value added) increased close to 250bp over the last year, and are approaching all-time highs, whereas the labor share is hitting new lows.
Takeaways by Macro Roundup® AI
Higher margins were the key driver of profit growth, as 23% y/y domestic profit growth far exceeded the 8% rise in corporate value added.
Profit margins, measured as pre-tax profits divided by value added, increased close to 250bp over the last year and are approaching all-time highs, while the labor share is hitting new lows.
Related Articles:
US Corporate Profits Surge To Record As Worker Payouts Wilt— US pre-tax corporate profits reached an annualised $4.8tn, or 18% of national income, the highest share since the aftermath of World War II, according to Bureau of Economic Analysis data. Employees' share from wages and benefits fell to 60%, the lowest since the 1950s, with the decline gaining pace in recent years.
Are US Corporate Profit Margins Too High?— US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
The Record Divide Between Corporate Profits and Worker Pay— Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.
AI Summary.Business records show revenue scale varies widely across industries: of 21,622 new-car dealerships with employees, more than half are estimated to take in at least $5m a year, versus about a quarter of 4,742 beer, wine, and spirits wholesalers and roughly 4% of 780,257 construction businesses.
Owen Zidar and Eric ZwickThe Everywhere Millionaire
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Owen Zidar and Eric Zwick estimate that as of 2021, 4,075 American auto dealers, 479 beverage distributors, and 6,418 contractors generated at least $25mm in annual revenue
Which local businesses most often generate millions in revenue?
Core argument: Of the 21,622 new-car dealerships with employees in the Census's County Business Patterns, an estimated more than half take in at least $5 million a year; Dun & Bradstreet records show 13,826 dealer locations above $5 million and 4,114 above $25 million.
There are 21,622 new-car dealerships with employees, according to the Census’s County Business Patterns. We estimate that more than half of them take in at least $5 million a year; in the Dun & Bradstreet business records, 13,826 dealer locations clear $5 million and 4,114 clear $25 million. There are 4,742 beer, wine, and spirits wholesalers with employees, according to the Census’s County Business Patterns. We estimate that about a quarter of them take in at least $5 million a year; in the Dun & Bradstreet business records, 1,232 distributor locations clear $5 million and 491 clear $25 million. There are 780,257 construction businesses with employees, according to the Census’s County Business Patterns—building, heavy civil, and specialty trade contractors. Anyone with a truck and a license can enter. We estimate that only about 4% of them take in at least $5 million a year. In the Dun & Bradstreet business records, 33,752 contractor locations clear $5 million and 6,525 clear $25 million.
Takeaways by Macro Roundup® AI
Of the 21,622 new-car dealerships with employees in the Census's County Business Patterns, an estimated more than half take in at least $5 million a year; Dun & Bradstreet records show 13,826 dealer locations above $5 million and 4,114 above $25 million.
Among the 780,257 construction businesses with employees in the Census's County Business Patterns—building, heavy civil, and specialty trade contractors—an estimated 4% take in at least $5 million a year; Dun & Bradstreet records show 33,752 contractor locations above $5 million and 6,525 above $25 million.
Of the 4,742 beer, wine, and spirits wholesalers with employees in the Census's County Business Patterns, an estimated quarter take in at least $5 million a year; Dun & Bradstreet records show 1,232 distributor locations above $5 million and 491 above $25 million.
Related Articles:
What’s Missing in the Fed’s Data about Ultrarich Portfolios— The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
They’re Rich but Not Famous—and They’re Suddenly Everywhere— An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
