“…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
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…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
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…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
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
AI Summary.Of roughly 1,900 startups valued at $1bn or more in a Stanford-maintained database, 332 had raised money at or below their peak valuation and 383 had disclosed no new funding in the prior three years. Research firm Pitchbook expects net valuation cuts of $500bn–$1tn as these firms reprice, seek buyers, or fail.
Economist StaffThe Economist
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As of May of this year, 17% of unicorns in a Stanford database had raised funds at a valuation at or below their peaks; ~ half the firms in the database were valued under their peak valuation, implying significant write-downs going forward.
How many billion-dollar startups are struggling to justify their valuations?
Core argument: By May 2026, 332 of the 1,900 unicorns in Ilya Strebulaev's Stanford database had raised money at or below their peak valuation, and 212 of those were valued at under $1bn.
By May 2026, 332 of the 1,900 unicorns in a database maintained by Ilya Strebulaev of Stanford University had raised money at a valuation at or below their peak. Of those, 212 were valued at under $1bn. As many as 383 had disclosed no new funding in the previous three years; 41 of these had lost unicorn status. As Mr Strebulaev notes, data on startups are notoriously noisy. Some unicorns may have raised no money because they did not need it. But others may be struggling to justify mythical valuations. It seems that a fair proportion of unicorns have joined the undead. Nearly half of the firms in Mr Strebulaev’s database valued at less than their peak raised money in 2021. From late next year, their investors will start demanding results. Pitchbook expects net cuts in valuations of between $500bn and $1trn as firms reprice, scramble to find a buyer, or go bust. That is quite a cull: Pitchbook puts the total value of unicorns below the ten most valuable at around $5trn.
Takeaways by Macro Roundup® AI
By May 2026, 332 of the 1,900 unicorns in Ilya Strebulaev's Stanford database had raised money at or below their peak valuation, and 212 of those were valued at under $1bn.
As many as 383 unicorns in Strebulaev's database had disclosed no new funding in the previous three years, and 41 of them had lost unicorn status, though Strebulaev notes startup data are notoriously noisy and some firms may not have needed capital.
Pitchbook expects net valuation cuts of between $500bn and $1trn as firms reprice, scramble to find a buyer, or go bust, against roughly $5trn in total value for unicorns below the ten most valuable.
Related Articles:
Trampled Underfoot by a Stampede of Unicorns— A database trawl counts 1,727 private companies valued above $1bn globally, and if private market valuations are accurate, the largest of them have outperformed public markets since the pandemic. Several, led by SpaceX and OpenAI, plan initial public offerings, which can signal trouble ahead since insiders are choosing to sell.
The Deep End: 2025 Alternative Investments Review— In venture capital, only consistently investing with top-quartile managers outperformed the S&P 500, while the median manager at best matched public equity markets and fourth-quartile managers destroyed value relative to equities. Fees are part of the issue: an 11.7% annualized NASDAQ 100 return falls to 7.4% under a 2%/20% fee structure.
Valuing AI: Extreme Bubble, New Golden Era, or Both— By the investment firm's definition of a bubble — a price two standard deviations above an asset class's long-term real trend — U.S. equities are in bubble territory and extremely overpriced on historically effective valuation metrics, with a cyclically adjusted price-earnings ratio of 40 and a record share of the market trading above 10x sales.
AI Summary.The direct lending market is roughly $2tn, or about 3% of total US household and business debt outstanding, compared with mortgages accounting for about 60% of total household and corporate debt at the peak of the housing bubble.
Torsten SløkApollo
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Torsten Sløk notes the direct lending market is ~$2T or 3% of household and non-financial debt outstanding. To provide context, he shows that in 2006, on the eve of the crisis, mortgages accounted for ~60% of such debt.
Is direct lending too small to threaten the financial system?
Core argument: The direct lending market totals roughly $2 trillion, about 3% of total debt outstanding for US households and businesses.
The direct lending market is roughly $2 trillion, or about 3% of total debt outstanding for US households and businesses. By comparison, mortgages accounted for about 60% of total household and corporate debt at the peak of the housing bubble in 2006.
Takeaways by Macro Roundup® AI
The direct lending market totals roughly $2 trillion, about 3% of total debt outstanding for US households and businesses.
Mortgages accounted for about 60% of total US household and corporate debt at the peak of the housing bubble in 2006, compared with direct lending's roughly 3% share.
Related Articles:
JPMorgan Marking Down Loan Portfolios Of Private Credit Groups— JPMorgan has marked down the value of certain loans in private credit funds' portfolios that serve as collateral for the funds' borrowing from the bank, limiting how much it will lend against them. Unlike most banks, which require triggers such as missed interest payments, JPMorgan reserves the right to revalue those assets at any time.
Data Update 7 for 2026: Debt and Taxes— The author argues that companies are collectively over-investing in artificial intelligence and that markets will correct when that belief dissipates. Because debt, particularly private credit, now finances much of this investment, the author contends a correction would spread beyond equity holders and produce a banking-style crisis driven by non-bank lenders.
AI Summary.The widely cited estimate that the top 10% of US earners account for 45% of consumer spending comes from a method combining Federal Reserve survey and financial-accounts data. Its author says he is more confident in the trajectory—a significant, consistent rise in the top 10% and 20% shares over 30–35 years—than the level.
Justin FoxBloomberg
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Moody’s claim that the top 10% of Americans by income drove 45.8% of consumer spending in 2025 may be overstated. After taxes, the income share of the top 10% is only ~30–37%. But top earners also had big wealth gains, and “wealth effects are important.”
Has consumer spending grown more concentrated among top earners?
Core argument: Mark Zandi says he would not "die on the hill" of the estimate that the top 10% account for 45% of US consumer spending, but would fight hard that the top 10% and top 20% shares have risen significantly and consistently over the past 30–35 years.
“I feel more confident in the historical trajectory than I do in the actual levels,” said Mark Zandi, keeper of the spreadsheet that churns out its quarterly consumer spending estimates. “I wouldn’t die on the hill of the top 10% accounting for 45% of the spending, but I would fight hard that the share that’s going to folks in the top 10%, top 20% has risen significantly and consistently over the past 30, 35 years.” The method Zandi uses to estimate consumer spending combines data on asset holdings by income from the Federal Reserve’s triennial Survey of Consumer Finances with data on asset flows from its quarterly Financial Accounts of the US. The idea to merge the two originally came from then Fed Chairman Alan Greenspan in the late 1990s.“My understanding is he actually sketched it out on a napkin on an airplane flight,” said economist Dean Maki, who along with his Fed colleague Michael Palumbo was charged with making Greenspan’s idea operational and using it, in 2001, to estimate the “wealth effect” on consumer spending during the 1990s stock market boom. “One thing I learned from doing that research back when I was at the Fed was that wealth effects are important,” said Maki, now chief economist at asset manager Point72. “They were an important driver of consumer spending then and they still are today.”
Takeaways by Macro Roundup® AI
Mark Zandi says he would not "die on the hill" of the estimate that the top 10% account for 45% of US consumer spending, but would fight hard that the top 10% and top 20% shares have risen significantly and consistently over the past 30–35 years.
Zandi's consumer spending estimates combine asset holdings by income from the Federal Reserve's triennial Survey of Consumer Finances with asset flow data from its quarterly Financial Accounts of the US, an approach originally proposed by then-Fed Chairman Alan Greenspan in the late 1990s.
Dean Maki, who with Fed colleague Michael Palumbo operationalized Greenspan's idea in 2001 to estimate the wealth effect during the 1990s stock market boom, says wealth effects were an important driver of consumer spending then and remain so today.
Related Articles:
Top 10% of Earners Drive a Growing Share of US Consumer Spending— An analysis of Federal Reserve data found the top 10% of US earners accounted for 49.2% of total consumer spending, up from 48.5% the prior quarter and the highest share in data going back to 1989. Spending by the bottom 80%, those making under roughly $175,000, has merely kept pace with inflation.
K-Shaped Economy?— Available spending data does not support the narrative of a bifurcated "K-shaped" consumer economy: surveys show households earning under $50,000 reported spending growth of 5%, versus 4.6% for those earning over $100,000. Government data show the top income decile's share of aggregate spending at 22.8%, down from 23.4% a year earlier.
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.
AI Summary.Investment in information processing equipment, software, research and development, and data centers contributed 0.97 percentage points to real GDP growth over the first three quarters of 2025, or 39% of total growth, compared with 0.81 percentage points and 28% during the dot-com investment boom of 2000.
Hannah Rubinton and Bontu Ankit PatroFederal Reserve Bank Of St. Louis
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Investment spending on information processing equipment, software, data centers and R&D drove 39% of American GDP growth in the first 3Q of 2025. Those same categories were responsible for 28% of GDP growth in 2000, during the dot-com boom.
How much of real GDP growth does AI-related investment contribute?
Core argument: AI-related investment categories — information processing equipment, software, R&D and data centers — contributed 0.97 percentage points to real GDP growth over the first three quarters of 2025, above the 0.81 percentage points contributed in 2000.
The table provides the contributions of identical categories [Information Processing Equipment, Software, R&D and Data Centers] of investment to real GDP growth for the years 2000 and 2025. The tables are calculated by taking the average of data available over the first three quarters of 2025 and over the four quarters of 2000, during the height of the dot-com era’s investment boom. IPE’s contribution is similar across the two periods: 0.58 percentage points (20% of GDP growth) in 2000 versus 0.42 percentage points (17%) in the first nine months of 2025. However, the contribution of software is significantly higher in 2025 at 0.35 percentage points (14%) compared with 0.11 percentage points (3.7%) in 2000. Together, the AI categories contributed 0.97 percentage points to real GDP growth in the first three quarters of 2025 (0.90 percentage points, excluding data centers, for which data were not available in 2000), higher than the 0.81 percentage points in 2000. Through the third quarter of 2025, these categories made up 39% (36% excluding data centers) of total GDP growth versus 28% in 2000.
Takeaways by Macro Roundup® AI
AI-related investment categories — information processing equipment, software, R&D and data centers — contributed 0.97 percentage points to real GDP growth over the first three quarters of 2025, above the 0.81 percentage points contributed in 2000.
Software's contribution to real GDP growth reached 0.35 percentage points (14% of growth) in the first nine months of 2025 versus 0.11 percentage points (3.7%) in 2000, while information processing equipment contributed 0.42 percentage points (17%) versus 0.58 points (20%).
Information processing equipment, software, R&D and data centers accounted for 39% of total GDP growth through the third quarter of 2025 — 36% excluding data centers, for which 2000 data were unavailable — compared with 28% in 2000.
Related Articles:
Financing The AI Boom: From Cash Flows To Debt— Spending on semiconductor plants and data centers, negligible before recent years, has averaged 0.4 percentage points of US GDP growth, and total IT-related investment has reached 5% of GDP, exceeding its dot-com-era peak. Unlike that earlier boom, which was driven by firms using IT products, the current one is driven by IT producers.
OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities— U.S. real GDP grew at a 1.1% annualized rate over the first half of 2025, but excluding booming AI-related investment output contracted 0.1%, with non-AI investment weakening. The OECD identifies a correction in equity markets lifted by expectations of high AI returns as a key downside risk to its projections.
Honey, AI Capex is Eating the Economy— Capital spending on AI data centers is around 20% of railroads' peak spending as a share of GDP and is rising quickly, having already surpassed the dot-com era peak in telecom investment. Unlike long-lived rail infrastructure, data centers are short-lived assets requiring frequent hardware replacement, and the capital is being reallocated from other sectors.
AI Summary.Wage growth is slowing more for lower-paid workers than for higher earners, limiting those households' ability to keep spending, while hiring is concentrated in select industries such as healthcare and among larger firms as small private firms shed workers. Layoffs remain low, but the number of workers unemployed for 27 weeks or more has only rarely been higher.
Tom Porcelli et. al.Wells Fargo
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1.9mm American workers have been out of work for at least half a year. Long-term unemployment at this level is an outlier, as it’s generally seen late in a recession or in its aftermath.
Is the labor market slowdown hitting lower-paid workers hardest?
Core argument: Wage growth for lower-paid workers is slowing more than for higher earners, limiting the ability of these households to keep spending.
The job market moderation isn't even. Lower-paid workers are seeing wage growth slow more than higher-earning peers, which is limiting the ability for these households to keep spending. While hiring has been disproportionately supported by select industries this year, like healthcare, it's also being driven by larger firms. Small private firms are outright shedding workers. Layoffs remain low, but it's getting increasingly challenging to find a new job for those who find themselves out of work. In fact, the number of workers who are unemployed for 27 weeks or more has only rarely been higher.
Takeaways by Macro Roundup® AI
Wage growth for lower-paid workers is slowing more than for higher earners, limiting the ability of these households to keep spending.
Hiring has been disproportionately supported by select industries such as healthcare and by larger firms, while small private firms are shedding workers.
Layoffs remain low, but finding a new job has grown increasingly challenging, and the number of workers unemployed for 27 weeks or more has only rarely been higher.
Related Articles:
U.S. Wages Still Rising Briskly, Employment Holding Up, and Inflation Still Sticky (Probably)— The U.S. job market looks no less healthy than a few months earlier: the rise in unemployment to 4.56% has coincided with more people actively looking for work, while the share of Americans aged 25-54 with a job held near 80.6%. Wages rising about 4% a year can explain inflation running about 1 percentage point above pre-pandemic rates.
The Economic Divide Between Big and Small Companies Is Growing— High inflation, more cautious consumers, and tariffs are weighing on small-business earnings and prompting cutbacks, as smaller firms are less able than larger ones to withstand economic headwinds. Private firms with fewer than 50 workers have steadily shed jobs over the past six months.
Jobless Growth— Labor demand growth may be too weak to keep pace with even modest labor supply growth: the labor market is somewhat weaker than before the pandemic, job growth has turned negative outside healthcare, and firms are focused on using AI to cut labor costs. Economists estimate most employment losses in routine manual occupations since the 1970s occurred during recessions.
AI Summary.The US economy grew at an annualised rate of 4.3% in the third quarter, exceeding economists' expectations of 3.2%. Growth was boosted by consumer spending on healthcare and computing, higher government defense spending, and exports, while business investment slowed and imports fell.
Myles McCormick and Kate DuguidFinancial Times
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The first official release of the BEA data for Q3 shows US GDP growth of 4.3% at an annualized rate, well above Bloomberg’s read of economists’ consensus prediction of 3.2%.
Is US economic growth outpacing economists' expectations?
Core argument: The US economy grew at an annualised 4.3% rate in the third quarter, according to the Bureau of Economic Analysis, exceeding the 3.2% expected by economists polled by Bloomberg and marking the strongest reading since the third quarter of 2023.
The US economy grew at an annualised rate of 4.3% in the third quarter, according to official data released on Tuesday that far surpassed economists’ expectations and was well ahead of previous quarters. The rise in GDP, which was boosted by consumer spending on healthcare and computing, compared with estimates of 3.2% among economists polled by Bloomberg and was the strongest reading since the third quarter of 2023. The figure from the Bureau of Economic Analysis was also helped by increases in government defence spending and exports. Business investment slowed, while imports fell.
Takeaways by Macro Roundup® AI
The US economy grew at an annualised 4.3% rate in the third quarter, according to the Bureau of Economic Analysis, exceeding the 3.2% expected by economists polled by Bloomberg and marking the strongest reading since the third quarter of 2023.
Consumer spending on healthcare and computing boosted third-quarter US GDP, alongside increases in government defence spending and exports.
Business investment slowed and imports fell in the third quarter, according to Bureau of Economic Analysis data.
Related Articles:
OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities— U.S. real GDP grew at a 1.1% annualized rate over the first half of 2025, but excluding booming AI-related investment output contracted 0.1%, with non-AI investment weakening. The OECD identifies a correction in equity markets lifted by expectations of high AI returns as a key downside risk to its projections.
2026 Outlook: The Year Ahead In 14 Sparks— Slowing US growth — attributed to trade frictions, immigration restrictions and risks from a K-shaped economy — combined with inflation stuck near 3% amounts to a stagflation environment, even as the medium-term outlook looks strong. Real business investment growth is concentrated in information processing equipment such as computers, data centers and software, while non-AI capital spending growth is roughly zero.
SF FedViews: Solid Growth, but Small Cracks Have Emerged— Since the second half of 2023, four-quarter US productivity growth has averaged nearly 2.5%, well above the pre-pandemic trend of about 1% to 1.25%, supporting real GDP growth. It remains unclear whether this reflects a higher productivity regime fostered by rising AI use or a temporary post-pandemic reorganization surge.
AI Summary.Prices fell for 51 of 67 consumer items tracked over a two-year period in China, while the broader GDP deflator, which includes upstream sectors, declined for 10 straight quarters, indicating deflation is more entrenched in industry. The share of "zombie" firms whose profits cannot cover debt interest rose from 19% to 34% over five years.
BloombergBloomberg Staff
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A Bloomberg analysis finds that prices dropped on 51 of 67 products and services in China over the past two years. 34% of Chinese firms are unable to cover interest on their debt – a 25-year high – as China’s deflationary spiral worsens.
How deeply has deflation taken hold in China's industrial sector?
Core argument: Prices fell on 51 of 67 items tracked by Bloomberg News over the last two years, while China's GDP deflator, which includes upstream sectors, has declined for 10 straight quarters, indicating deflation is more entrenched in industry.
Among 67 items tracked by Bloomberg News, prices on 51 dropped over the last two years. A broader gauge that includes upstream sectors, known as the GDP deflator, has been steadily declining for 10 quarters, indicating that deflation is much more entrenched in the industrial sector. Polysilicon, the raw material for solar panels, saw prices drop to less than a fifth of its peak in 2022. Prices for steel rebar, widely used in construction, fell to an eight-year low in May. Across the market, company results show the same pressures: the share of “zombie” firms — those whose profits can’t cover interest payments on their debt — rose from 19% to 34% over the past five years; capital and R&D spending fell for most companies, a first in a decade; and more than a third of companies across industries cut jobs in 2024.
Takeaways by Macro Roundup® AI
Prices fell on 51 of 67 items tracked by Bloomberg News over the last two years, while China's GDP deflator, which includes upstream sectors, has declined for 10 straight quarters, indicating deflation is more entrenched in industry.
Polysilicon, the raw material for solar panels, has fallen to less than a fifth of its 2022 peak price, and steel rebar used in construction hit an eight-year low in May.
The share of Chinese "zombie" firms whose profits cannot cover debt interest payments rose from 19% to 34% over five years, capital and R&D spending fell for most companies for the first time in a decade, and over a third cut jobs in 2024.
Related Articles:
How NOT To Negotiate With China— Trade diversion signals deep distress in China's export sector, and the author argues a sustained 10% tariff hike would be more credible than larger ones and could counter China's rare earths leverage. Easing up on Chinese exporters instead signals weakness and discourages Europe from coordinating with the US.
China’s Youth Unemployment Soars To 2-Year High As Job Crunch Deepens— China's urban unemployment rate for 16- to 24-year-olds excluding students rose to 18.9% from 17.8%, the highest since the National Bureau of Statistics revised its calculation method for the series. A record 12.2m university students graduated into a job market strained by deflationary pressures and external uncertainties, with many struggling to find roles matching their education and skills.
Xi Overcapacity Fight Leaves Economy Vulnerable Without Stimulus— China's total debt has risen to over 300% of gross domestic product from a little over 200% a decade ago, and with the main policy rate at 1.4%, the central bank has limited room to cut. Price declines are more widespread than in past deflationary episodes, and large-scale stimulus remains off the table.
AI Summary.Bloomberg Economics projects the largest participants could pour as much as $4tn into artificial intelligence infrastructure by the end of the decade, with capital spending by hyperscalers such as Alphabet, Amazon, Meta, and Microsoft rising from almost $400bn to as much as $600bn. It expects AI's contribution to GDP growth could reach as much as 1.5 percentage points.
Shawn Donnan, Brooke Sutherland, Mark Niquette, and Alexandre TanziBloomberg
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As AI-related real private fixed investment has surged, non-AI-related investment’s contribution to US real private fixed investment has turned negative.
How much will AI infrastructure spending add to economic growth?
Core argument: Bloomberg Economics expects the largest participants to pour as much as $4 trillion into AI infrastructure through 2030, with hyperscaler spending rising from almost $400 billion this year to as much as $600 billion.
The AI investment surge invites comparisons to other historical buildouts (and bubbles), such as the construction of the railways in the 1870s and the late 1990s flood of capital into fiber-optic and wireless networks. Altogether, the largest participants are expected to pour as much as $4 trillion into AI infrastructure through 2030, according to Bloomberg Economics. Bloomberg Economics expects AI’s contribution to GDP growth could rise to as much as 1.5 percentage points next year as the so-called hyperscalers—Alphabet, Amazon.com, Meta Platforms, Microsoft and others—dial up their investments from almost $400 billion this year to as much as $600 billion. “If it weren’t for AI, we’d probably be looking at significantly slower growth or even a modest recession,” says Rebecca Patterson, former chief investment strategist at hedge fund Bridgewater Associates.
Takeaways by Macro Roundup® AI
Bloomberg Economics expects the largest participants to pour as much as $4 trillion into AI infrastructure through 2030, with hyperscaler spending rising from almost $400 billion this year to as much as $600 billion.
Bloomberg Economics expects AI's contribution to GDP growth could rise to as much as 1.5 percentage points next year as hyperscalers including Alphabet, Amazon.com, Meta Platforms and Microsoft increase their investments.
Rebecca Patterson, former chief investment strategist at Bridgewater Associates, says that without AI, growth would probably be significantly slower or in a modest recession.
Related Articles:
The Blob: Capital, China, Chips, Chicago and Chilliwack— Data center construction spending has eclipsed office construction, and the specialized power rates most data centers pay fall short of covering the cost of a new natural gas plant, leaving other customers to bear part of the bill. In the PJM grid region, data center demand accounted for 70% of the increase in electricity costs over the past year.
Fair Shakes— Technology-sector capital spending has accounted for 35%–45% of US GDP growth over three quarters, implying that without it growth would be near 1% given weak consumption. Among S&P 500 companies, capital spending rose 24% and research and development 10%, but the median stock grew both by only 3%–4%.
How America’s AI Boom Is Squeezing The Rest Of The Economy— About a sixth of America's 2% real GDP growth over the past year came from investment in computer and communications equipment and data centres, and one estimate puts the artificial intelligence boom's total contribution to growth at 40%. Average electricity bills rose 7%, attributed in part to data-centre demand, while housebuilding and non-AI business investment slumped and real consumption flatlined.
