Edward Conard

Top Ten New York Times Bestselling Author

  • “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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “…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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, March 25, 2019

AI Summary. The U.S. labor force participation rate for those aged 16 and over has stabilized near 63%, countering a decline that ran from 2001, and the number of people outside the labor force fell by 1m over six months. The gains are concentrated among 25-to-54-year-olds, including workers with disabilities and those previously discouraged from job-seeking.

Ernie Tedeschi Wall Street Journal
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Strong economy offsets demographic headwinds, defying predictions of continued labor force participation declines, according to @ErnieTedeschi of Evercore ISI.

Is a strong economy reversing the projected decline in labor force participation?

Core argument: The U.S. labor force participation rate for those aged 16 and over has stabilized near 63% since bottoming out in September 2015, countering a decline trend in place since 2001.

Since bottoming out in September 2015, the Labor Force Participation [LFP] rate for those aged 16 and over has stabilized around 63%, countering a decline trend since 2001. In the past six months, the number of people outside the labor force decreased by 1m, marking the largest such decline on record. This improvement is primarily driven by 25 to 54-year-olds, with participation rising by 0.6 percentage points for men and 1.5 points for women since 2014. Notably, higher participation rates among workers with disabilities or those previously discouraged from seeking employment have contributed significantly to this trend, as analyzed by Ernie Tedeschi of Evercore ISI. The strong economy has thus played a crucial role in offsetting demographic headwinds, defying earlier predictions of continued LFP declines.

Takeaways by Macro Roundup® AI

  1. The U.S. labor force participation rate for those aged 16 and over has stabilized near 63% since bottoming out in September 2015, countering a decline trend in place since 2001.
  2. The number of people outside the U.S. labor force fell by 1 million over the past six months, the largest such decline on record.
  3. The participation improvement is driven primarily by 25-to-54-year-olds, up 0.6 percentage points for men and 1.5 points for women since 2014, with higher rates among workers with disabilities and previously discouraged workers, per Ernie Tedeschi of Evercore ISI.

".... Since bottoming out in September 2015, the share of the population aged 16 and over working or looking for work has stabilized around 63%, cutting against an extended decline tracing back to 2001.Many economists had been predicting continued declines in the rate. In just the past six months, the number of people outside the labor force has fallen by 1 million, the largest such decline on record..... Most of the improvement comes from 25 to 54-year-olds. Among prime-age workers, participation has risen by around 0.6 percentage point for men and 1.5 points for women since 2014. Most of the increases have stemmed from higher participation rates by workers who reported that they had a disability or were discouraged, meaning they wanted to work but stopped actively seeking employment, according to an analysis by Ernie Tedeschi, an economist at Evercore ISI....."

Nick Timiraos and Sarah Chaney, "Fueled by Strong Economy, U.S. Labor Force Defies Projected Declines,"Wall Street Journal, March 23, 2019, https://www.wsj.com/articles/fueled-by-strong-economy-u-s-labor-force-defies-projected-declines-11553338801

Wednesday, March 27, 2019

AI Summary. A Gallup study drawing on input from nearly 2m employees and more than 300,000 business units finds that middle manager quality accounts for 70% of the variance in company productivity. The study reports that manager quality outweighs other factors such as pay levels and employees' perceptions of senior leadership.

Jim Clifton Wall Street Journal
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Middle managers play a critical role in driving team performance, with quality accounting for 70% of variance in company productivity, according to a Gallup study.

Does middle manager quality drive most of the variance in productivity?

Core argument: Gallup finds that middle manager quality accounts for 70% of the variance in company productivity, based on input from nearly 2m employees across more than 300,000 business units.

A comprehensive Gallup study involving input from nearly 2m employees and over 300,000 business units reveals that middle manager quality accounts for 70% of the variance in company productivity. This finding underscores the critical role middle managers play in driving team performance, surpassing other factors like compensation levels and senior leadership perception. The study highlights that hiring the right manager is nearly three-fourths of the battle in achieving superior team outcomes. This data-driven insight positions middle managers as pivotal to economic success, emphasizing their potential to significantly influence productivity and, by extension, macroeconomic stability.

Takeaways by Macro Roundup® AI

  1. Gallup finds that middle manager quality accounts for 70% of the variance in company productivity, based on input from nearly 2m employees across more than 300,000 business units.
  2. Gallup's study ranks manager quality above compensation levels and employee perception of senior leadership as a driver of team performance.
  3. Gallup concludes that hiring the right manager is nearly three-fourths of the battle in achieving superior team outcomes.

"...Five years ago, the Gallup organization embarked on one of the most ambitious deep dives it has ever conducted; an analysis of the future of work based on a decade of input from nearly 2 million employees and more than 300,000 business units. The results confirmed something Gallup had seen before:a company’s productivity depends, to a high degree, on the quality of its managers. What no one saw coming, however, was the sheer size of that correlation—something Gallup calls “the single most profound, distinct and clarifying finding” in its 80-year history. The study showed that managers didn’t just influence the results their teams achieved, they explained a full 70% of the variance.In other words, if it’s a superior team you’re after, hiring the right manager is nearly three-fourths of the battle. No other single factor, from compensation levels to the perception of senior leadership, even came close. “That blew me out of my chair,” says Jim Clifton, Gallup’s chief executive...."
Sam Walker, "The Economy’s Last Best Hope: Superstar Middle Managers,"Wall Street Journal, March 24, 2019, https://www.wsj.com/articles/the-economys-last-best-hope-superstar-middle-managers-11553313606

AI Summary. Automation can reduce labor demand even as it raises productivity, because displacement of workers comes with only modest productivity gains, lowering labor's share of industry value added and leaving wage growth behind productivity growth. The authors attribute stagnant labor demand to faster automation, particularly in manufacturing, alongside slower creation of new labor-intensive tasks.

Daron Acemoğlu National Bureau of Economic Research
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Automation technologies often reduce labor demand despite increasing productivity, as they displace workers with only modest productivity gains.

Does automation reduce labor demand even as it raises productivity?

Core argument: Automation technologies can reduce labor demand even while raising productivity, because displacing workers with technology only marginally better than cheap labor yields modest productivity gains, lowering labor's share of industry value added and slowing wage growth relative to productivity.

Automation technologies often reduce labor demand despite increasing productivity, as they displace workers with only modest productivity gains, especially when the automated technology is marginally better than cheap labor. This results in a reduced labor share in industry value added and slower wage growth compared to productivity growth. The recent stagnation in labor demand is attributed to accelerated automation, particularly in manufacturing, and a slowdown in new task creation, which has also contributed to sluggish productivity growth. The future of work hinges on the balance between automation and the creation of new tasks that enhance labor's role in production. This balance is influenced by factors such as innovation capabilities, skill supply, demographic changes, and policy interventions.

Takeaways by Macro Roundup® AI

  1. Automation technologies can reduce labor demand even while raising productivity, because displacing workers with technology only marginally better than cheap labor yields modest productivity gains, lowering labor's share of industry value added and slowing wage growth relative to productivity.
  2. The authors attribute stagnant labor demand to accelerated automation, particularly in manufacturing, combined with a slowdown in the creation of new tasks that reinstate labor in production, which has also contributed to sluggish productivity growth.
  3. The future of work depends on the balance between automation and new task creation, which is shaped by innovation capabilities, skill supply, demographic changes, and policy interventions.

"....This paper develops a task-based model to study the effects of different technologies on labor demand..... Our conceptual framework offers several lessons. First, the presumption that all technologies increase (aggregate) labor demand simply because they raise productivity iswrong. Some automation technologies may in fact reduce labor demand because theybring sizable displacement effects but modest productivity gains (especially when substituted workers were cheap to begin with and the automated technology is only marginallybetter than them). Second, because of the displacement effect, we should not expect automation to create wage increases commensurate with productivity growth. In fact, aswe noted already, automation by itself always reduces the labor share in industry valueadded and tends to reduce the overall labor share in the economy (meaning that it leadsto slower wage growth than productivity growth). The reason why we have had rapidwage growth and stable labor shares in the past is a consequence of other technological changes that generated new tasks for labor and counterbalanced the effects of automation on the task content of production. Some technologies displaced labor from automated tasks while others reinstated labor into new ones. On net, labor retained a key role in production. By the same token, our framework suggests that the future of work depends on the mixture of new technologies and how these change the task content of production..... At the center of our framework is the task content of production—measuring the allocation of tasks to factors of production. Automation, by creating a displacement effect, shifts the task content of production against labor, while the introduction of new tasks in which labor has a comparative advantage improves it via the reinstatement effect. These technologies are qualitatively different from factor-augmenting ones which do not impact the task content of production. For example, automation always reduces the labor share and may reduce labor demand, and new tasks always increase the labor share.We then show how changes in the task content of production and other contributors to labor demand can be inferred from data on labor shares, value added and factor prices at the industry level. The main implication of our empirical exercise using this methodology is that the recent stagnation of labor demand is explained by an acceleration of automation, particularly in manufacturing, and a deceleration in the creation of new tasks. In addition, and perhaps reflecting this shift in the composition of technological advances, the economy also experienced a marked slowdown in productivity growth, contributing to sluggish labor demand.Our framework has clear implications for the future of work too. Our evidence and conceptual approach support neither the claims that the end of human work is imminent nor the presumption that technological change will always and everywhere be favorable to labor. Rather, it suggests that if the origin of productivity growth in the future continues to be automation, the relative standing of labor, together with the task content of production, will decline. The creation of new tasks and other technologies raising the labor intensity of production and the labor share are vital for continued wage growth commensurate with productivity growth.Whether such technologies will be forthcoming depends not just on our innovation capabilities but also on the supply of different skills, demographic changes, labor market institutions, tax and R&D policies of governments, market competition, corporate strategies and the ecosystem of innovative clusters. We have also pointed out a number of reasons why the balance between automation and new tasks may have become inefficiently tilted in favor of the former, with potentially adverse implications for jobs and productivity and some directions for policy interventions to redress this imbalance.

Daron Acemoğlu and Pascual Restrepo, "Automation and New Tasks: How Technology Displaces and Reinstates Labor," National Bureau of Economic Research, March 5, 2019, https://www.nber.org/papers/w25684

AI Summary. Exurban housing markets are recovering, with rapid home-price growth in areas such as Phoenix, though prices remain below their pre-crisis 2006 peaks — just over 6% below in Phoenix and more than 22% below in Maricopa, where the bust erased nearly 65% of home values.

Laura Kusisto Wall Street Journal
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Exurban housing market shows signs of recovery, but home values in Phoenix remain 6% below 2006 peak, while Maricopa’s values are still 22% below. @LauraKusisto

Are exurban home prices recovering to pre-crisis peaks?

Core argument: Phoenix home values remain just over 6% below their 2006 pre-crisis peak even as the exurban housing market rebounds with rapid home-price growth.

The exurban housing market is showing signs of recovery, with areas like Phoenix experiencing rapid home-price growth. Despite this, home values in Phoenix remain just over 6% below their pre-crisis 2006 peak, while Maricopa's values are still more than 22% below their 2006 high. The housing bust had previously erased nearly 65% of home values in Maricopa. This resurgence is marked by genuine buyer interest, contrasting with the speculative exuberance of the past. The current market dynamics suggest a more sustainable growth trajectory, driven by real demand rather than speculative bubbles. This recovery, while significant, indicates that exurban housing prices have yet to fully return to their pre-crisis levels, highlighting ongoing challenges in achieving complete market stabilization.

Takeaways by Macro Roundup® AI

  1. Phoenix home values remain just over 6% below their 2006 pre-crisis peak even as the exurban housing market rebounds with rapid home-price growth.
  2. Maricopa home values are still more than 22% below their 2006 high, after the housing bust erased nearly 65% of home values there.
  3. The exurban recovery is marked by genuine buyer interest rather than the speculative exuberance of the prior cycle.

This time is different!

"....Homes in the Phoenix metropolitan area, including the suburbs, lost 55% of their value from the peak in 2006 to 2011, according to Zillow. Today Phoenix is experiencing some of the fastest home-price growth in the country. Home values are now just over 6% below their precrisis 2006 peak. The housing bust erased nearly 65% of the value of homes in Maricopa over the same period, according to Zillow. Home values there remain more than 22% below their 2006 high.... Jordan Rose, an attorney who represents many developers and home builders in the area, said during the last boom, she used to work in her car using a portable modem because she didn’t have time to make it back to the office between zoning meetings. She is even busier now. “It feels like 2006 without the fake high at the end of the rainbow,” she said. “There’s the same exuberance, but the buyer is real.”..."
Laura Kusisto, "A Decade After the Housing Bust, the Exurbs Are Back,"Wall Street Journal, March 26, 2019, https://www.wsj.com/articles/a-decade-after-the-housing-bust-the-exurbs-are-back-11553610771

AI Summary. Median annual household income reached $63,378, up 1.9% from a year earlier, 5.1% above the $60,287 level at the onset of the Great Recession and 15% above the post-recession low of $55,134. Adjusted for inflation, this pre-tax measure stands 3.9% above its level of $61,004 at the start of 2000.

Gordon Green Sentier Research
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Median annual household income reached $63,378 in February 2019, a 1.9% increase Y/Y from February 2018, according to @SentierResearch.

Is median household income rising above its pre-recession level?

Core argument: Median annual household income reached $63,378 in February 2019, up 1.9% from February 2018 and 5.1% above the $60,287 recorded in December 2007 at the onset of the Great Recession.

In February 2019, median annual household income reached $63,378, marking a 1.9% increase year-over-year from February 2018. This figure is 5.1% higher than the median income of $60,287 recorded in December 2007, the onset of the Great Recession, and 15% above the post-recession low of $55,134 in June 2011. Despite consistent monthly gains since the June 2011 trough, the February 2019 median income was only 3.9% higher than the January 2000 level of $61,004, after adjusting for inflation. These figures reflect pre-tax income and highlight the gradual recovery and growth in household income over the past decade, underscoring the resilience of the economy in the post-crisis period.

Takeaways by Macro Roundup® AI

  1. Median annual household income reached $63,378 in February 2019, up 1.9% from February 2018 and 5.1% above the $60,287 recorded in December 2007 at the onset of the Great Recession.
  2. February 2019 median household income stood 15% above the post-recession low of $55,134 in June 2011, with consistent monthly gains since that trough.
  3. Adjusted for inflation, February 2019 median household income was 3.9% higher than the January 2000 level of $61,004, with all figures measured pre-tax.

New Sentier numbers, median annual household income was $63,378 in February of this year. The February 2019 median was 1.9 percent higher y/y (February 2018.) Median household income for February 2019 was 5.1 percent higher than the median of $60,287 for December 2007, the official start of the Great Recession and 15.0 percent above the post-recession low point of $55,134 in June 2011. Despite numerous monthly increases following the June 2011 post-recession low for median income, the February 2019 median was just 3.9 percent above the January 2000 level of $61,004 (first year in this monthly series) after adjusting for changes in prices. Note all dollar figures are expressed in February 2019 purchasing power. Their income measure is before federal and state income taxes and mandatory payroll taxes.

Gordon Green and John Coder, "Household Income Trends February 2019," Sentier Research, March 26, 2019, http://www.sentierresearch.com/reports/Sentier_Household_Income_Trends_Report_February_2019_03_26_19.pdf