Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, January 4, 2023

AI Summary. The repricing of unprofitable companies is closer to its end than its beginning, as valuations have compressed to a fraction of their peak sales multiples. After the dot-com crash, tech companies that remained unprofitable continued to languish while the roughly 50% that became profitable rallied sharply to catch up with consistently profitable peers.

Michael Cembalest J.P. Morgan
Date Posted:

J.P. Morgan’s Michael Cembalest argues that there may be attractive investment opportunities following last year’s tech company repricing: ~50% of large-cap tech companies that were unprofitable in 2000 were eventually able to generate profits and healthy returns.

Is the repricing of unprofitable companies closer to its end?

Core argument: Peloton priced at 1x sales versus its peak of 19x sales at the end of 2020 marks the point, the author argues, to weigh whether unprofitable companies can become profitable.

After last year’s selloff, we’re much closer to the end of the young unprofitable companies/mega-valued unprofitable companies repricing than the beginning. By the time Peloton is priced at 1x sales rather than its peak level of 19x sales at the end of 2020, it’s time to start thinking about whether unprofitable companies can become profitable or not. Many unprofitable companies are in that position since the market did not require them to be profitable. The aftermath of the 2000-2002 dot-com crash is interesting in this regard: The chart above shows the performance of tech companies from 2000 to 2004 based on their initial and subsequent profitability.  Companies that remained unprofitable continued to languish. However, unprofitable companies that became profitable by 2004 rallied sharply, catching up to companies that had been profitable all along. This incorporates the benefit of perfect hindsight; still, it does indicate that for stock pickers that sift through the wreckage to try and identify survivors, there may be attractive opportunities. The size of ["unprofitable in 2000" cohort that became profitable by 2004] was roughly 50% of the “unprofitable in 2000” universe.

Takeaways by Macro Roundup® AI

  1. Peloton priced at 1x sales versus its peak of 19x sales at the end of 2020 marks the point, the author argues, to weigh whether unprofitable companies can become profitable.
  2. Roughly 50% of tech companies unprofitable in 2000 became profitable by 2004, and that cohort rallied sharply to catch up with companies profitable all along, while those that remained unprofitable languished.
  3. The author argues that many companies are unprofitable because the market did not require profitability, and that stock pickers sifting the wreckage for survivors may find attractive opportunities.

AI Summary. Employees of private technology companies are selling shares on secondary markets, where stakeholders in a private company sell to third parties, as firms including Klarna and Stripe cut costs, according to brokers and investors. Laid-off workers often must exercise shares within 60 days, forcing sales into a weak market.

Tabby Kinder Financial Times
Date Posted:

Shares of privately held tech firms traded on secondary markets have collapsed in price. Platforms such as Rainmaker Securities have facilitated private security transactions and have made the price declines of private companies more transparent. @ft

Are start-up employees selling shares as private valuations fall?

Core argument: Employees of tech companies including Klarna and Stripe are flooding secondary markets, where holders of private company shares sell to third parties, as the firms undertake aggressive cost-cutting, according to brokers and investors.

Employees of embattled tech groups are flooding secondary markets — where stakeholders in a private company sell shares to third parties — as the industry’s former darlings such as Klarna and Stripe have been forced into aggressive cost-cutting measures, according to brokers and investors. For many workers who have lost their jobs, their shares vest within 60 days, forcing them to sell during the worst downturn in a decade. Some companies are offering an extension on this timeframe, according to brokers, although some sellers want to get out of their holdings over fears the market rout will get worse next year. However, trading in many of these companies showed a return to, or an improvement on, pre-pandemic prices, following a significant jump in valuations during a VC fundraising boom in 2021.

Takeaways by Macro Roundup® AI

  1. Employees of tech companies including Klarna and Stripe are flooding secondary markets, where holders of private company shares sell to third parties, as the firms undertake aggressive cost-cutting, according to brokers and investors.
  2. Laid-off tech workers whose shares vest within 60 days are forced to sell into the worst downturn in a decade, though some companies are extending that timeframe, according to brokers.
  3. Trading in many of these private companies showed a return to or improvement on pre-pandemic prices, following the significant jump in valuations during the 2021 venture capital fundraising boom.

AI Summary. About 70 blank-check acquisition companies have liquidated and returned cash to investors in a single month, exceeding the total number of such liquidations in the market's history, according to data provider SPAC Research. Their creators have lost more than $600m on those liquidations and more than $1.1bn over the year.

Amrith Ramkumar Wall Street Journal
Date Posted:

Since the start of December over 70 SPACs have liquidated, generating losses for SPAC creators of over $600M for the month and driving total losses to $1.1B. @WSJ

Since the start of December over 70 SPACs have liquidated, generating losses for SPAC creators of over $600M for the month...

Is the blank-check company boom ending in mass liquidations?

Core argument: Roughly 70 special-purpose acquisition companies have liquidated and returned cash to investors since the start of December, more than the total number of SPAC liquidations in the market's history, according to SPAC Research.

Roughly 70 special-purpose acquisition companies have liquidated and returned money to investors since the start of December. That is more than the total number of SPAC liquidations in the market’s history, according to data provider SPAC Research. SPAC creators have lost more than $600 million on liquidations this month and more than $1.1 billion this year, the data show. There are still nearly 400 SPACs together holding about $100 billion that have yet to find deals, according to SPAC Research. There are another roughly 150 SPACs holding about $25 billion that have reached merger agreements but haven’t closed them.

Takeaways by Macro Roundup® AI

  1. Roughly 70 special-purpose acquisition companies have liquidated and returned cash to investors since the start of December, more than the total number of SPAC liquidations in the market's history, according to SPAC Research.
  2. SPAC creators have lost more than $600 million on liquidations in December and more than $1.1 billion over the year, according to SPAC Research data.
  3. Nearly 400 SPACs holding about $100 billion have yet to find deals, and another roughly 150 holding about $25 billion have reached merger agreements that have not closed, according to SPAC Research.

AI Summary. Across "normal" subperiods, personal consumption inflation of 1–3% accompanied real consumption growth of about 2–3%, with a positive relationship between the two, but high-inflation subperiods showed roughly 6% inflation alongside average consumption growth. This pattern suggests that high inflation reflected supply disruptions or other demand components rather than strong consumption growth.

Juan Sánchez Federal Reserve Bank Of St. Louis
Date Posted:

According to an analysis by @stlouisfed, tighter monetary policy did not impact consumption growth until November 2022.

Did high inflation coincide with unusually strong consumption growth?

Core argument: Annualized PCE inflation ran about 6% in both April 2021–February 2022 and March–July 2022 while real consumption growth was average, suggesting the high inflation came from something other than growing consumer demand.

The blue dots in the figure show three “normal” subperiods, in which [annualized PCE] inflation was between 1% to 3% and real consumption growth was about 2% to 3%. There is also a positive relationship between consumption growth and inflation. The red dots show two high inflation subperiods, from April 2021 to February 2022 and from March to July 2022. Although inflation was very high (about 6%) in both periods, consumption growth was average. This suggests the high inflation was because of something other than growing demand. In that case, inflation during these periods may be associated with supply disruptions, or other components of demand (e.g., government consumption), rather than high real consumption growth. Since March 2022, the Federal Reserve has raised interest rates, so the second period highlighted in red also corresponds to a period of tightening monetary policy. From March to July 2022, inflation continued at 6%, and consumption growth was slightly higher than in the previous months. This pattern suggests that monetary policy, at least during those months, didn’t yet reduce consumption growth. The last four months are depicted with green dots [with seasonally-adjusted monthly PCE and real consumption growth rates annualized.] Two patterns are clear. First, inflation is significantly lower in the four months and is now close to 1%. Second, real consumption growth was very high during August and October but finally decreased to an annual rate of just over 0% in November. Thus, only the data corresponding to November suggests that the monetary mechanism described above may be working.

Takeaways by Macro Roundup® AI

  1. Annualized PCE inflation ran about 6% in both April 2021–February 2022 and March–July 2022 while real consumption growth was average, suggesting the high inflation came from something other than growing consumer demand.
  2. From March to July 2022, after the Federal Reserve began raising interest rates, inflation continued at 6% and consumption growth was slightly higher than in prior months, suggesting monetary policy had not yet reduced consumption growth.
  3. In the final four months shown, annualized PCE inflation fell to close to 1%, while real consumption growth was very high in August and October before decreasing to an annual rate of just over 0% in November.

AI Summary. American manufacturing firms cite materials and labor shortages as major constraints on production at the highest levels in decades, with supply chains in disarray and demand exceptionally strong.

Joseph Politano Apricitas Economics
Date Posted:
Is Database:
Database

Independent analyst @JosephPolitano notes that the primary driver of capacity under-utilization for American manufacturing firms has shifted from insufficient orders to insufficient supply of labor and materials.

Are shortages constraining manufacturing production at the highest levels in decades?

Core argument: American manufacturing firms cite materials and labor shortages as major constraints on production at the highest levels in decades.

American manufacturing firms are also citing materials and labor shortages as major constraints to production at the highest levels in decades. Everywhere you look, supply chains seem to be in disarray—and demand seems to be off the charts.

Takeaways by Macro Roundup® AI

  1. American manufacturing firms cite materials and labor shortages as major constraints on production at the highest levels in decades.
  2. Supply chains appear to be in disarray while demand runs exceptionally high, raising the question of how monetary policy should operate in a shortage economy.

AI Summary. Google and Facebook parent Meta together accounted for 48.4% of U.S. digital advertising spending, their combined share falling below 50% for the first time in nearly a decade, according to estimates from research firm Insider Intelligence. The firm projects that share will decline further to 44.9%.

Patience Haggin Wall Street Journal
Date Posted:
Is Database:
Database

According to data from Insider Intelligence, Google and Facebook’s share of digital advertising was 48.4% in 2022, and is expected to decline to 44.9% in 2023, as Amazon, TikTok, and digital streamers gain share. @WSJ

Is the largest online ad duopoly's US market share shrinking?

Core argument: Google and Meta together accounted for 48.4% of U.S. digital-ad spending in 2022, their first combined share below 50% since 2014, according to estimates from Insider Intelligence.

For the first time in nearly a decade, the two largest players in online advertising are no longer raking in the majority of U.S. digital-ad dollars, a decline that industry insiders expect to continue in years to come. Alphabet Inc.’s; Google and Facebook parent Meta Platforms Inc. accounted for a combined 48.4% of U.S. digital-ad spending in 2022, according to estimates from research firm Insider Intelligence Inc. Their combined U.S. market share hadn’t been under 50% since 2014, said Insider Intelligence, which expects that number to drop to 44.9% this year.

Takeaways by Macro Roundup® AI

  1. Google and Meta together accounted for 48.4% of U.S. digital-ad spending in 2022, their first combined share below 50% since 2014, according to estimates from Insider Intelligence.
  2. Insider Intelligence expects Google and Meta's combined U.S. digital-ad market share to fall to 44.9% this year, a decline industry insiders expect to continue in years to come.
  3. TikTok and streaming services are emerging as competitors for U.S. digital-ad dollars as Google and Meta's advertising dominance fades.

According to data from Insider Intelligence, Google and Facebook’s share of digital advertising was 48.4% in 2022, and is expected to decline to 44.9% in 2023, as Amazon, TikTok, and digital streamers gain share.

“…For the first time in nearly a decade, the two largest players in online advertising are no longer raking in the majority of U.S. digital-ad dollars, a decline that industry insiders expect to continue in years to come. Alphabet Inc.’s; Google and Facebook parent Meta Platforms Inc. accounted for a combined 48.4% of U.S. digital-ad spending in 2022, according to estimates from research firm Insider Intelligence Inc. Their combined U.S. market share hadn’t been under 50% since 2014, said Insider Intelligence, which expects that number to drop to 44.9% this year….”

Patience Haggin, “Google and Meta’s Advertising Dominance Fades as TikTok, Streamers Emerge,” Wall Street Journal, January 4, 2023, https://www.wsj.com/articles/google-and-metas-advertising-dominance-fades-as-tiktok-netflix-emerge-11672711107

Google and Meta’s Advertising Dominance Fades as TikTok, Streamers Emerge

For the first time in nearly a decade, the two largest players in online advertising are no longer raking in the majority of U.S. digital-ad dollars, a decline that industry insiders expect to continue in years to come.

Alphabet Inc.’s Google and Facebook parent Meta META Platforms Inc. accounted for a combined 48.4% of U.S. digital-ad spending in 2022, according to estimates from research firm Insider Intelligence Inc. Their combined U.S. market share hadn’t been under 50% since 2014, said Insider Intelligence, which expects that number to drop to 44.9% this year.

The ad businesses of Google and Meta are still growing, but Insider’s data suggest the pace is slower than the rest of the U.S. digital-advertising market. Insider forecasting analyst Zachary Goldner said the erosion of their combined market share was the result of brands having access to more advertising formats.

“All marketers want more options,” Mr. Goldner said.

Google and Meta each faced headwinds in 2022, as people spent less time online than in the early days of the pandemic; marketers concerned about a possible economic downturn reined in ad spending; Amazon and ByteDance Ltd.’s TikTok continued their emergence as a force in digital advertising; and more streaming services started to embrace advertising.

Meta and other social-media companies including Snap Inc. also suffered from Apple Inc.’s 2021 decision to require apps on its devices to ask users if they wanted to be tracked. The majority of iPhone users opted not to be, hitting the heart of Meta’s business: its ability to target ads at users with precision and prove to marketers that the ads generate sales.

Google wasn’t as affected by Apple’s move, because its flagship search-ad business relies on customer intent—users’ search terms immediately reveal what they are interested in—rather than data collected from app and web tracking. Its U.S. digital-advertising market share slightly rose to 28.8% in 2022, Insider Intelligence said, but is expected to fall to 26.5% this year.

Google didn’t respond to a request for comment. On the company’s most recent earnings call in October, executives talked about how search-based advertising tends to do well during challenging economic times.

Meta had no comment. In its most recent earnings call, Meta said the tracking restriction continued to affect its ad business but noted the effect had diminished.

Apple’s tracking restriction had an impact for emerging e-commerce companies, which are important to Meta’s ad business. Supergut Chief Executive Marc Washington said the maker of gut-health products used to spend about 80% of its ad budget on Meta’s Facebook and Instagram platforms, with the rest going to Google. In early 2022, he noticed that the cost of bringing in new customers through advertising on Meta’s platforms was twice as high as it was before Apple’s privacy changes. Supergut shifted about half of what it spent on Meta to TikTok, a short-form video platform popular with younger audiences.

Mr. Washington said Meta remained Supergut’s most efficient advertising platform, but said there are early indications of “TikTok ads performing as well and in some cases better than some of our Meta campaigns.”

TikTok’s command of the U.S. digital-ad market more than doubled in 2022, Insider Intelligence said, thanks to its nearly 100 million U.S. monthly active users, the virality of the platform and its hold over Gen Z, millennials and influencers. Still, its overall share remains small, accounting for 2% of U.S. digital-ad spending, according to Insider Intelligence, which expects that number to grow to 2.5% this year.

The gains came as TikTok has received increased scrutiny from Washington, D.C., over national-security concerns U.S. officials say the Chinese-owned app poses—accusations that TikTok has disputed. The company also faces competition from Google’s YouTube and Meta’s Instagram, which have launched offerings that mimic its short-form video-recommendation format.

One already large digital-advertising player that gained market share in the U.S. last year was Amazon, whose ad business is powered by its ability to target users by their purchase and browsing history. The e-commerce giant accounted for 11.7% of U.S. digital-ad spending last year and is poised to grow to 12.4% in 2023, Insider said.

“Our advertising is at the point where consumers are ready to spend,” Amazon Chief Financial Officer Brian Olsavsky said on the company’s October conference call.

Sam Bloom, chief executive of digital-ad agency Camelot Strategic Marketing and Media, said some of its clients that had withheld selling on Amazon started doing so last year, using Amazon ads to promote their products on the platform.

Other retailers have followed in Amazon’s footsteps by building digital-ad businesses based on their consumer data, known as retail media networks. Combined, Walmart Inc., eBay Inc., Etsy Inc. and Instacart took in about 1.4% of digital-ad dollars spent in the U.S. last year, according to Insider.

Edwin Fu, chief executive of Placements.io Inc., a tech company that works with digital- publishers and online retailers on billing systems for their ad inventory, described the rise of retail media networks as a “massive race to do what Amazon did.”

Streaming services also are commanding a larger slice of the digital-advertising pie. Mr. Bloom said many of its clients are shifting their spending away from traditional television and toward video platforms in an effort to reach younger viewers.

Insider said Roku Inc., Walt Disney Co.’s Hulu, Paramount Global’s Pluto TV and Paramount+, Fox Corp.’s Tubi and Comcast Corp.’s Peacock accounted for about 3.6% of U.S. digital-ad spending last year. The trend is expected to accelerate now that the streaming industry’s two-largest players, Netflix Inc. and Disney+, have launched ad-supported versions.

Vincent Létang, executive vice president of global market research at Magna, a media- investment firm that is part of Interpublic Group of Cos.‘ Mediabrands, called Netflix and Disney’s entry into the market “a game-changing moment” for ad-supported streaming. “They bring a potentially huge number of viewers,” he said, and a wealth of premium video content.

Given the emergence of new digital-advertising alternatives, Google and Meta’s declining market share is hardly surprising, said digital ad consultant Ratko Vidakovic. The surprise was actually their 2021 performance, an aberration that he said was caused by the pandemic.

U.S. digital-ad spending grew by a whopping 41% in 2021, according to media and data giant GroupM, part of WPP PLC. That growth number dipped to 10.7% last year and is expected to slip to 9.2% this year. GroupM expects overall ad spending in the U.S.—excluding political advertising—to grow by 5.5% this year.

Despite the expectations of slowing growth, digital-advertising platforms will take in an ever-larger share of ad dollars this year, GroupM said: Nearly two-thirds of total U.S. ad spending is expected to go to digital advertising in 2023, compared with less than half in 2019, the last year before the pandemic.

AI Summary. In Pennsylvania's Senate race, the Democratic candidate won by about 5 percentage points, improving on the prior Democratic presidential margin across nearly the whole state. His gains averaged 7 points in counties at least 60% white without a college degree, versus 3 points elsewhere.

Geoffrey Skelley FiveThirtyEight
Date Posted:
Is Database:
Database

.@FiveThirtyEight analyst @geoffreyvs finds that Fetterman’s margin of victory was provided by non-college white voters: Fetterman polled 7pp better than Biden in counties dominated by non-college whites.

Did Democrats gain most among white voters without college degrees?

Core argument: John Fetterman defeated Republican Mehmet Oz by about 5 percentage points in Pennsylvania's Senate race, improving on Biden's margin across almost the entire state.

John Fetterman bettered Biden’s margin across almost the entire state on his way to defeating Republican Mehmet Oz by about 5 percentage points, his largest improvements over Biden tended to be in red-leaning counties with higher shares of white residents without a college degree. In counties with a population that’s at least 60 percent white without a college degree — which together produced about 36 percent of the state’s 2022 vote — Fetterman’s margin was 7 points better than Biden’s, on average, compared with just 3 points better elsewhere.

Takeaways by Macro Roundup® AI

  1. John Fetterman defeated Republican Mehmet Oz by about 5 percentage points in Pennsylvania's Senate race, improving on Biden's margin across almost the entire state.
  2. In Pennsylvania counties at least 60 percent white without a college degree, which together produced about 36 percent of the state's 2022 vote, Fetterman's margin averaged 7 points better than Biden's, compared with 3 points better elsewhere.
  3. Fetterman's largest improvements over Biden tended to come in red-leaning counties with higher shares of white residents without a college degree.

“…In counties with a population that’s at least 60 percent white without a college degree — which together produced about 36 percent of the state’s 2022 vote — Fetterman’s margin was 7 points better than Biden’s, on average, compared with just 3 points better elsewhere….”

Geoffrey Skelley, “The Voters Who Helped Democrats Keep the Senate,” FiveThirtyEight, December 19, 2022, https://fivethirtyeight.com/features/biden-coalition-2022-senate-democrats/

The Voters Who Helped Democrats Keep the Senate

Coming into the 2022 midterm elections, the Democratic Party wasn’t sure what to do with its standard-bearer. With his poor approval rating, President Biden wasn’t a hot commodity on the campaign trail, as Democrats — facing an electoral environment that history suggested would be unfavorable — feared losing both chambers of Congress.

But after all the votes were tallied, Democrats retained control of the Senate by winning the chamber’s four most important races, holding onto seats in Arizona, Georgia and Nevada and picking up an open seat in Pennsylvania. The candidates who won these races didn’t do so by remaking the Democratic coalition in their states. In fact, county-level data suggests that their performances mostly tracked along Biden’s performance in the 2020 presidential election, which saw him carry all four states by narrow margins.

Where these Democratic candidates did gain ground suggests that they largely replicated Biden’s coalition while also making some small but specific inroads. In Pennsylvania counties with lots of white voters without a college degree, in some heavily Hispanic parts of Arizona, in the Atlanta metropolitan area in Georgia — Democrats won Senate seats by exceeding the margins Biden used to win each state in 2020. And even in Nevada, where Democratic Sen. Catherine Cortez Masto’s margin of victory was smaller than Biden’s, her performance in more affluent areas with larger numbers of white voters with a college degree suggests that she made up enough ground to offset her slightly smaller margins in lower-turnout and more racially diverse areas.

To examine how these various trends played out in each state, we took a look at the county-level results and how the Democratic winners’ margins compared to Biden’s in 2020. We also dug into how these changes related to demographic and population data from the U.S. Census Bureau.1 County-level data can’t always provide a clear picture of how different groups voted, so we also spent some time looking beneath the county level — at congressional district- or precinct-level results — to explore some of the key factors that propelled Democrats to victory.

Out of this quartet, the one Democratic pickup was the open seat in Pennsylvania, which saw a striking reversion of a recent trend in American elections: white voters without a college degree increasingly opting for Republican candidates. Indeed, while Democratic Sen.-elect John Fetterman bettered Biden’s margin across almost the entire state on his way to defeating Republican Mehmet Oz by about 5 percentage points, his largest improvements over Biden tended to be in red-leaning counties with higher shares of white residents without a college degree, as the chart below shows.

This pattern proved vital to the result because white voters without a college degree make up a big chunk of the Keystone State’s electorate. Three in four Pennsylvanians are white, putting the state in the top half of the whitest states in the country, and almost two in three of them do not have a bachelor’s degree. Former President Trump won the state in 2016, in part due to gains among voters in this group, and came just shy of defeating Biden there in 2020.

But Fetterman’s improvement wasn’t an accident, as his campaign spent a lot of time and effort appealing to blue-collar white voters in places where Democrats have lost ground in recent years. In counties with a population that’s at least 60 percent white without a college degree — which together produced about 36 percent of the state’s 2022 vote — Fetterman’s margin was 7 points better than Biden’s, on average, compared with just 3 points better elsewhere. It’s hard to know how much Oz’s profile as a Hollywood-connected television celebrity also played into these results. Fact is, Oz may have been an especially weak candidate when it came to appealing to less affluent voters in more rural areas, where Fetterman made some of his most sizable gains compared to Biden. But overall, Fetterman’s improvement in farther-flung places mattered because it reduced the GOP’s ability to run up massive margins outside the state’s two major metropolitan areas, which Republicans need in order to have a path to victory in Pennsylvania.

This focus coupled successfully with Fetterman’s profile as a former mayor of a struggling post-industrial town in the Pittsburgh area, which produced especially strong results for Fetterman in the western part of the state. Not only is western Pennsylvania whiter than the eastern part of the state, but parts beyond Allegheny County (Pittsburgh) were once more Democratic-leaning before becoming much redder in recent years. Thanks to his campaign and background, Fetterman’s margin was 8.5 points better than Biden’s across the entire Pittsburgh metropolitan statistical area, including double-digit overperformances in some of the area’s more peripheral and red-leaning counties.3 Now, Fetterman didn’t flip any of these counties, but he significantly reduced the Republican margin across most parts of the state’s western half. For instance, Greene County in the state’s southwest corner still went for Oz by 30 points, but Trump won it by 43 points in 2020.

At the same time, Fetterman’s winning performance didn’t necessarily involve massive engagement from every part of the Biden coalition. Fetterman ran about even with Biden’s 2020 showing in the larger Philadelphia metropolitan area, which was partly due to reduced turnout among Black voters. Philadelphia proper saw notably lower participation compared with 2018, the previous midterm, whereas the total number of votes cast was up almost everywhere else in the state. Nevertheless, Fetterman also did almost 5 points better than Biden in areas of the state outside of the Philadelphia and Pittsburgh metropolitan areas, showing the wide breadth of his outperformance.

Similar to Fetterman, Sen. Mark Kelly of Arizona won his race by holding together most of Biden’s coalition while also making small gains elsewhere. His 5-point victory over Republican Blake Masters came in part because he won a high level of support among Latino voters, a Democratic-leaning group that shifted somewhat toward Republicans in the 2020 presidential election — a trend the GOP had hoped to build on in 2022. As the chart below shows, Kelly improved on Biden’s margins most everywhere, but there was no relationship between the share of a county’s Latino population and how much Kelly outperformed Biden.4 Take the two counties that have majority-Hispanic populations: Kelly performed 3 points better than Biden in Santa Cruz (which is 83 percent Hispanic) and ran about even with Biden in Yuma (65 percent).

But about three-fourths of the state’s voters live in Maricopa County (Phoenix) and Pima County (Tucson), so the topline numbers in those counties may not tell us much about the Latino vote specifically (the counties are 32 and 38 percent Latino, respectively). So we have to look within those counties to get a clearer understanding of how the state’s Latino population voted. For instance, in the Maricopa-based 3rd Congressional District — Arizona’s most heavily Latino seat (58 percent by voting-age population) — Kelly did about 4 points better than Biden did in 2020, according to Daily Kos Elections. This suggests that, at the very least, Kelly probably didn’t lose much — if any — ground among Latino voters.

This takeaway is confirmed by Equis Research, a Latino-focused political firm that compared their modeled race and ethnicity voter data to precinct-level results in Maricopa. Equis found that as the share of the Latino population in a precinct grew, Kelly’s performance improved at about the same rate as Biden’s had in 2020. And across majority Latino precincts in Maricopa, Equis calculated that Kelly did about 1 point better than Biden.

Kelly also made further inroads in competitive or red-leaning areas in Phoenix with larger white populations. Within Maricopa County, Kelly did 5 to 7 points better than Biden in the 1st, 4th, 5th and 8th congressional districts (all but the 5th are entirely in Maricopa). These districts vary quite a bit in terms of partisanship, too, as the 1st and 4th are both highly competitive and the 5th and 8th districts are both solidly red. Considering registered Republicans in Maricopa turned out at a slightly higher rate than registered Democrats, Kelly’s performance suggests he may have won over some right-leaning (or formerly right-leaning) voters to outperform Biden’s 2020 showing.

Staying in the Southwest, Nevada also provided another key hold for Democrats in the Senate. Unlike the Democratic winners in Pennsylvania, Arizona and Georgia, Cortez Masto didn’t outperform Biden’s 2020 numbers statewide, but she did just enough to come out on top against Republican Adam Laxalt by 0.8 points statewide after Biden carried the state by 2.4 points in 2020. She did this by holding onto similar levels of support in places with large Latino populations and by performing on par (or slightly better) in areas with more college-educated white voters, who have been moving toward Democrats nationally.

But as always, Nevada came down to the vote tallies in Clark County (Las Vegas) and Washoe County (Reno), and in the end, Cortez Masto managed to lose a little ground in the former while staying even with Biden in the latter. And because Clark and Washoe contributed the vast majority of the statewide vote, Cortez Masto didn’t benefit much — but also didn’t hurt her chances — by running a tad better than Biden in the rest of the state.

Nevada has very few counties with sizable populations, so analyzing the state’s vote means moving below the county level to some extent. The three largest cities in Nevada — Las Vegas, Henderson and North Las Vegas — are all based in Clark County, and using precinct-level data, we can see that Cortez Masto did a tad better than Biden in wealthier and whiter Henderson while losing a little ground in the more racially and ethnically diverse Las Vegas and North Las Vegas. While she lost Henderson, a more well-educated GOP-leaning city that’s 60 percent white, Cortez Masto actually did 1 point better than Biden. And though she easily carried Las Vegas (42 percent white) and North Las Vegas (just 24 percent), Cortez Masto’s margin of victory was 1 point lower than Biden in the former and 2 points lower in the latter.

These are small differences, to be sure, but given the closeness of the race, every little shift mattered. Moreover, Cortez Masto performed almost identically to Biden in Washoe County as a whole, which looks similar to Henderson, another sign that whiter, wealthier and more educated areas in the two major metropolitan centers of the state didn’t break for the GOP but instead helped Cortez Masto stay in office. Turnout was also part of the story, however, as Clark had the sharpest drop in vote share amongst all Nevada counties compared with 2020’s vote totals, and more diverse places like Las Vegas and North Las Vegas saw steeper declines than whiter and more affluent areas like Henderson.

Still, this doesn’t mean Latino voters, who make up close to 30 percent of the state’s population, weren’t vital to Cortez Masto’s reelection. Equis Research examined the precinct-level vote in Clark and found that, crucially, Cortez Masto’s support in heavily Latino precincts was almost identical to Biden’s backing in the same places. As we saw throughout the country in 2020, Biden underperformed 2018 and 2016 Democratic numbers among Hispanics in Clark, but Cortez Masto avoided letting things slip further, which could have cost her reelection.

In Georgia’s Dec. 6 runoff, Democratic Sen. Raphael Warnock defeated Republican Herschel Walker by nearly 3 points after neither candidate won an outright majority in November. While the urban and suburban counties in Arizona, Nevada and Pennsylvania were crucial to the Democratic wins in those states, Georgia may have provided the best demonstration for how a Democratic candidate’s strong performance in such places led to victory.

Using FiveThirtyEight’s urbanization index,5 we can see that the more densely populated a county, the better Warnock tended to do compared to Biden’s 2020 margin. Most notably, Warnock increased Democratic vote share across the Atlanta metro area, including running up margins in the city’s increasingly diverse suburbs — a national trend we’ve seen in major population centers and one that helped Biden win the presidency two years ago.

Warnock’s improvement speaks to the proliferation of parts of the Democratic coalition in the Atlanta area, including a growing base of Black voters and a shift among white college-educated voters toward the party, but also meaningfully large Latino and Asian communities in parts of the region, too. The results also demonstrate how increased diversity in formerly lily-white suburban counties like Cobb and Fayette has changed the politics of such places dramatically.

Warnock’s most impressive showing was in the 11 counties of the Atlanta Regional Commission, which constituted almost half of Georgia’s vote in the 2022 runoff. Warnock won this region by almost 34 points, a 6-point improvement on Biden’s performance. Most of the region’s vote came from four principal counties: DeKalb and Fulton, which contain the city of Atlanta, and Cobb and Gwinnett, which are big suburban counties that sit north of Atlanta. Warnock outperformed Biden’s marks in each county by 5 to 7 points, despite a fair bit of variation in the racial and ethnic makeup of these places: DeKalb and Fulton have majority and plurality Black populations, respectively; Gwinnett’s population is roughly one-third white, one-quarter Black and one-fifth Latino; and Cobb’s population is half white and a quarter Black.

But his improvement over Biden showed up elsewhere in the Atlanta metro area, too. This included strong performances in two fairly different counties just south of the city: Warnock outperformed Biden by 7 points in Clayton County, which is 69 percent Black, but he also outdid Biden by 6 points in Fayette, a majority white and increasingly competitive county next door.

Outside of Atlanta and its environs, Warnock’s improvement over Biden was spottier, but he still tended to do better in counties surrounding other smaller cities in the state, such as Augusta, Columbus, Macon and Savannah, which are also comparatively more urban or suburban than much of the state. For his part, Walker did better than Trump in many places, but as the chart conveys, most of them were rural and less populous, which together couldn’t remotely make up for Walker’s losses in the more populous parts of the state.

The political environment will shift and change before we get to the 2024 election, but these performances show how Democrats can win if they maintain backing from the party base, gain support in increasingly diverse suburbs and campaign even in more rural and whiter places that have moved toward the GOP. It’s of course not all up to Democrats, as Republicans will need to pick stronger statewide candidates who can challenge Democrats’ ability to make inroads among more GOP-leaning constituencies. But at least in 2022, these four Democrats largely retained most of Biden’s coalition and at times added to it, which ensured Democrats continued control of the Senate in the next Congress.

AI Summary. Republicans won the national U.S. House popular vote 51% to 48% — a two-point edge after adjusting for races with only one major party on the ballot — and drew the most House votes in the four states where their Senate candidates fell short: Pennsylvania, Arizona, Georgia, and Nevada. Republicans backed by Trump in primaries ran far behind mainstream Republicans.

Nate Cohn New York Times
Date Posted:

.@Nate_Cohn of @NYT notes that Republicans won the national House vote 51% to 48% but lost statewide in key Senate races where they won the statewide House vote, as candidates backed by former President Trump ran far behind mainstream Republicans in PA, AZ, GA, and NV.

Why did popular-vote winners still lose key Senate races?

Core argument: Republicans won the national U.S. House popular vote by three points, 51 percent to 48 percent, and still led by two points after adjusting for races in which only one major party appeared on the ballot.

Republicans won the national House popular vote by three percentage points — 51 percent to 48 percent. They still won by two points after adjusting for races in which only one major party was on the ballot. Republican candidates won the most votes for U.S. House in all four of the crucial Senate states where Republicans fell short: Pennsylvania, Arizona, Georgia, and Nevada. The “MAGA” Republicans — as characterized by The Cook Political Report, based on their backing from Mr. Trump in the primaries — ran far behind the mainstream Republicans.

Takeaways by Macro Roundup® AI

  1. Republicans won the national U.S. House popular vote by three points, 51 percent to 48 percent, and still led by two points after adjusting for races in which only one major party appeared on the ballot.
  2. Republican U.S. House candidates won the most votes in all four crucial Senate states where Republicans fell short: Pennsylvania, Arizona, Georgia and Nevada.
  3. "MAGA" Republicans, as characterized by The Cook Political Report based on Donald Trump's backing in the primaries, ran far behind mainstream Republican candidates.

Thursday, January 5, 2023

AI Summary. US consumers accumulated a peak $2.1tn in excess savings relative to the pre-pandemic trend and have since been drawing those savings down. Household debt payments equaled 9.8% of disposable personal income, below a peak of 13.2%.

JP Morgan Staff J.P. Morgan
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J.P. Morgan estimates consumers still have $900B of excess savings, down from a peak of $2.1B in August 2021.

Are consumers drawing down excess savings while debt burdens stay low?

Core argument: Consumers accumulated a peak $2.1 trillion in excess savings relative to the pre-pandemic trend between March 2020 and August 2021.

From March 2020 to August 2021, consumers amassed a peak $2.1 trillion in excess savings relative to the pre-pandemic trend. Since August 2021, consumers have drawn down on these excess savings. Household debt payments were 9.8% of disposable personal income in Q4 ’22 vs. a peak of 13.2% in Q4 of ’04.

Takeaways by Macro Roundup® AI

  1. Consumers accumulated a peak $2.1 trillion in excess savings relative to the pre-pandemic trend between March 2020 and August 2021.
  2. Consumers have drawn down these excess savings since August 2021.

J.P. Morgan estimates consumers still have $900B of excess savings, down from a peak of $2.1B in August 2021.

From March 2020 to August 2021, consumers amassed a peak $2.1 trillion in excess savings relative to the pre-pandemic trend. Since August 2021, consumers have drawn down on these excess savings. Household debt payments were 9.8% of disposable personal income in Q4 ’22 vs. a peak of 13.2% in Q4 of ’04.

JPM Staff, "Guide To The Markets," J.P. Morgan, January 2023, https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

AI Summary. Households aged 55–74 lost an average of over $100,000 in net worth amid falling asset returns, reversing part of their earlier gains, reflecting their large holdings of stocks and bonds. The authors estimate this decline in asset values may have drawn an extra 170,000 people aged 51–65 back into the labor force.

Miguel Faria e Castro and Sam Jordan-Wood Federal Reserve Bank of St. Louis
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.@mfariacastro at @stlouisfed estimates that the decline in asset values in 2022 drove 170,000 workers aged 51-65 back into the labor force. This represents 16% of the increase in LFP from Jan through Oct 2022.

Do falling asset values push older workers back into the labor force?

Core argument: Households headed by people aged 55–74 lost on average over $100,000 in net worth between January and October 2022, partly reversing gains from 2020–21 that were particularly high for these age groups.

The figure above plots the estimated average change in net worth per head of household age category during 2022. People between the ages of 55 and 74 lost, on average, over $100,000 in net worth due to falling asset returns between January and October 2022. This partly reverses some of the net worth gains in 2020-21, which were particularly high for these age groups. This is explained by the high exposure (in absolute terms) of people in these age groups to asset classes such as stocks and bonds, which performed reasonably well in 2020-21 but posted significant negative returns during 2022. Focusing on only people between the ages of 51 and 65, whose decision to participate in the labor force tends to be more sensitive to wealth effects, we find that the decline in asset values may have caused an extra 170,000 people to return to the labor force. This corresponds to an increase in the LFP rate of 0.06 percentage points, or about 16% of the total increase observed through October 2022.

Takeaways by Macro Roundup® AI

  1. Households headed by people aged 55–74 lost on average over $100,000 in net worth between January and October 2022, partly reversing gains from 2020–21 that were particularly high for these age groups.
  2. The decline in asset values may have caused an extra 170,000 people aged 51–65 to return to the labor force, an estimated increase of 0.06 percentage points in the labor force participation rate.
  3. That estimated wealth-driven return to work corresponds to about 16% of the total increase in labor force participation observed through October 2022.

FRBSL estimates that the decline in asset values in 2022 drove 170,000 workers aged 51-65 back into the labor force. This represents 16% of the increase in LFP from Jan through Oct 2022.

“…The figure above plots the estimated average change in net worth per head of household age category during 2022. People between the ages of 55 and 74 lost, on average, over $100,000 in net worth due to falling asset returns between January and October 2022. This partly reverses some of the net worth gains in 2020-21, which were particularly high for these age groups. This is explained by the high exposure (in absolute terms) of people in these age groups to asset classes such as stocks and bonds, which performed reasonably well in 2020-21 but posted significant negative returns during 2022. Focusing on only people between the ages of 51 and 65, whose decision to participate in the labor force tends to be more sensitive to wealth effects, we find that the decline in asset values may have caused an extra 170,000 people to return to the labor force. This corresponds to an increase in the LFP rate of 0.06 percentage points, or about 16% of the total increase observed through October 2022….”

Miguel Faria e Castro and Sam Jordan-Wood, “Retirements, Net Worth, and the Fall and Rise of Labor Force Participation,” Federal Reserve Bank Of St. Louis, January 5, 2023, https://www.stlouisfed.org/on-the-economy/2023/jan/retirements-net-worth-labor-force-participation

Retirements, Net Worth, and the Fall and Rise of Labor Force Participation

The uncertainty surrounding financial markets during the COVID-19 pandemic contributed to many atypical trends. A 2021 Economic Synopses essay discussed the retirement boom spurred by COVID-19, which may have contributed to a persistent decline in labor force participation (LFP). Labor force participation is the percentage of the civilian noninstitutional population age 16 and older that is employed or actively looking for work. At the same time, returns on some common asset classes—housing and stocks—were abnormally high. This led to large estimated increases in household net worth during 2020-21.

Standard economic theory offers a natural link between the two trends of rising wealth and declining labor force participation. We call this link the wealth effect on labor supply: Holding everything else constant, an increase in wealth tends to reduce labor supply both at the intensive (how many hours should I work?) and extensive (should I work at all?) margins.

The increase in wealth during 2020 and 2021 plausibly contributed to the fall in labor force participation: As cited in a 2022 Economic Synopses essay, through September 2021, about 15% of the observed drop in LFP could be attributed to rising asset valuations; when we updated those calculations to include all of 2021, rising valuations accounted for about 20% of the drop. Even if changes in net worth were not the primary driver of retirements and labor force exits in the previous period, they certainly compounded them.

More recently, during 2022, we observed a reversal of these two trends: The recovery of labor force participation seemed to accelerate somewhat, as seen in the first figure below; this was especially true among older workers. Additionally, we observed a stabilization or even reversal of the large real gains posted by asset classes such as stocks and housing observed in 2020-21, as shown in the second figure. In this blog post, we update our previous analysis to account for the recent period of falling and negative financial returns across asset classes.

Updating the Data to 2022: Falling Financial Returns

In this post, we update key figures using two different time periods: 2020-21 and 2022. COVID-19 obviously did not end in 2022, but it was much less of an issue than it was in 2020 or 2021.

In 2022, the Federal Reserve started tightening monetary policy, which may have affected asset prices. Thus, standard economic theory suggests that we should have seen the opposite effects in 2022—falling asset prices and returns should have contributed to people returning to the labor force. There are, naturally, other reasons why the LFP rate should have recovered: The risk of contracting serious illness from COVID-19 was plausibly lower in 2022 than it was in 2020, and labor markets were extremely tight. Tight labor markets mean that employers have to compete for workers, with many doing so by raising worker compensation.

Stocks, housing and bonds constitute the three major asset classes held (directly or indirectly) by U.S. households. For the years 2020 and 2021, the first two asset classes posted high real returns, with the third posting modest but positive returns. These trends clearly inverted in 2022. The real return on stocks, as measured by the S&P 500 Index, was -25% for the year through October 2022, while the real return on housing was essentially zero for the same period. The real return on corporate bonds was -24%.

We use data from the 2019 Survey of Consumer Finances to estimate the impact of these real returns on the net worth of a representative sample of U.S. households. The figure below plots the estimated average change in net worth per head of household age category during 2022. People between the ages of 55 and 74 lost, on average, over $100,000 in net worth due to falling asset returns between January and October 2022. This partly reverses some of the net worth gains in 2020-21, which were particularly high for these age groups. This is explained by the high exposure (in absolute terms) of people in these age groups to asset classes such as stocks and bonds, which performed reasonably well in 2020-21 but posted significant negative returns during 2022.

Effects of Declining Net Worth on Labor Force Participation

As previously mentioned, the LFP rate recovered slightly during 2022: from 61.9% in December 2021 to 62.2% in October 2022. The large declines in net worth shown in the last figure could have influenced the decision to return to the labor force by many who left during 2020-21.

We apply the same methodology as in our previous work to try to determine how much of this 0.3 percentage point increase in the LFP rate can be attributed to falling asset values. Focusing on only people between the ages of 51 and 65, whose decision to participate in the labor force tends to be more sensitive to wealth effects, we find that the decline in asset values may have caused an extra 170,000 people to return to the labor force. This corresponds to an increase in the LFP rate of 0.06 percentage points, or about 16% of the total increase observed through October 2022. If, instead, we consider all people age 51 and older, we find that falling asset values may have contributed to about 380,000 people joining the labor force, which would account for 36% of the increase in the number of people in the labor force.

Again, it should be noted that falling asset values may be just one among several reasons why people are returning to the labor force. Lower risk of contracting severe illness, tight labor markets and potentially more attractive working arrangements (such as the flexibility to work from home) may be other primary reasons.

AI Summary. The authors estimate that the persistent component of core personal consumption inflation declined after a long stretch of high, essentially constant persistence. Core goods and core services excluding housing have been moderating, while housing inflation continued to rise on a sector-specific trend and accounts for a sizable share of the increase.

Martín Almuzara, Marek Jarocinski, and Argia Sbordone Federal Reserve Bank of New York
Date Posted:

.@NewYorkFed notes evidence of an ongoing decline in core PCE inflation starting in September 2022, with the exception of housing costs.

Has the persistent component of core inflation declined?

Core argument: The authors find the persistent component of core PCE inflation began declining in September 2022, following a long stretch of high and essentially constant inflation persistence.

We find evidence of a decline in the size of the persistent component of core PCE inflation starting in September 2022. The decline follows a long period of high and essentially constant inflation persistence. Dissecting the layers of aggregate inflation provides further insights: core goods and core services ex-housing have been moderating since early 2022, reflecting the evolution of the common component, while housing has continued to move up, driven by its own sector-specific trend. The chart below shows a sectoral decomposition of the increase in inflation from its pre-pandemic average. The chart shows that the persistent component of housing represents a fair amount of the overall increase in trend, comparable to the contribution of core goods and core services ex-housing.

Takeaways by Macro Roundup® AI

  1. The authors find the persistent component of core PCE inflation began declining in September 2022, following a long stretch of high and essentially constant inflation persistence.
  2. Core goods and core services excluding housing have been moderating since early 2022 in line with a common component, while housing inflation has continued to rise on its own sector-specific trend.
  3. A sectoral decomposition shows housing's persistent component accounts for a share of the increase in inflation trend above its pre-pandemic average comparable to the contributions of core goods and core services ex-housing.

AI Summary. Chinese researchers claim to have found a method to break RSA encryption, the most common form of online encryption, using current-generation quantum computers, far earlier than the technology was expected to pose a threat. Security experts question the claim, noting the researchers did not show how fast the algorithm would run.

Richard Waters Financial Times
Date Posted:

Chinese computer scientists claimed to have used quantum computing to break the RSA algorithm that underpins the vast majority of online encryption. However, the algorithm may not be fast enough to be relevant. @FT

Chinese computer scientists claimed to have used quantum computing to break the RSA algorithm that underpins the vast...

Can current quantum computers break the most common online encryption?

Core argument: Chinese researchers claim to have found a way to break the RSA algorithm, the most common form of online encryption, using the current generation of quantum computers, years before the technology was expected to pose a threat.

Computer security experts were struggling this week to assess a startling claim by Chinese researchers that they have found a way to break the [RSA algorithm,] the most common form of online encryption, using the current generation of quantum computers, years before the technology was expected to pose a threat. Peter Shor, the Massachusetts Institute of Technology scientist whose 1994 algorithm proving that a quantum machine could defeat online encryption, noted that the Chinese researchers had “failed to address how fast the algorithm will run”, and said that it was possible it “will still take millions of years”. He said: “In the absence of any analysis showing that it will be faster, I suspect that the most likely scenario is that it’s not much of an improvement.”

Takeaways by Macro Roundup® AI

  1. Chinese researchers claim to have found a way to break the RSA algorithm, the most common form of online encryption, using the current generation of quantum computers, years before the technology was expected to pose a threat.
  2. Peter Shor, the MIT scientist whose 1994 algorithm proved a quantum machine could defeat online encryption, noted the Chinese researchers "failed to address how fast the algorithm will run" and said it was possible it "will still take millions of years".
  3. Computer security experts were struggling to assess the Chinese claim, with Shor saying that absent analysis showing the method is faster, the most likely scenario is that it is "not much of an improvement".

AI Summary. About 79% of workers hired after a tech-company layoff or termination found their new job within three months of starting their search, just below the 83% share among all laid-off workers, according to a survey of new hires. Nearly four in ten previously laid-off tech workers found jobs in under a month.

Sarah Chaney Cambon and Gwynn Guilford Wall Street Journal
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According to recent surveys, recently laid-off tech workers are quickly finding new employment with 40% accepting a new position within 30 days. @WSJ

Do laid-off tech workers find new jobs quickly?

Core argument: About 79% of workers hired after a tech-company layoff or termination found their new job within three months of starting their search, according to a ZipRecruiter survey of new hires.

About 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search, according to a ZipRecruiter survey of new hires. That was just below the 83% share of all laid-off workers who were re-employed in the same time frame. Nearly four in ten previously laid-off tech workers found jobs less than a month after they began searching, ZipRecruiter found in the survey.

Takeaways by Macro Roundup® AI

  1. About 79% of workers hired after a tech-company layoff or termination found their new job within three months of starting their search, according to a ZipRecruiter survey of new hires.
  2. The 79% re-employment share for laid-off tech workers was just below the 83% share of all laid-off workers re-employed within the same three-month window, ZipRecruiter found.
  3. Nearly 40% of previously laid-off tech workers landed jobs less than a month after beginning their search, according to the ZipRecruiter survey.

According to recent surveys, recently laid-off tech workers are quickly finding new employment with 40% accepting a new position within 30 days.

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“…About 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search, according to a ZipRecruiter survey of new hires. That was just below the 83% share of all laid-off workers who were re-employed in the same time frame. Nearly four in ten previously laid-off tech workers found jobs less than a month after they began searching, ZipRecruiter found in the survey…”

Sarah Chaney Cambon and Gwynn Guilford, “Laid Off Tech Workers Quickly Find New Jobs,” Wall Street Journal, December 27, 2022, https://www.wsj.com/articles/laid-off-tech-workers-quickly-find-new-jobs-11672097730

Laid Off Tech Workers Quickly Find New Jobs

Most laid off tech workers are finding jobs shortly after beginning their search, a new survey shows, as employers continue to scoop up workers in a tight labor market.

About 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search, according to a ZipRecruiter survey of new hires. That was just below the 83% share of all laid-off workers who were re-employed in the same time frame.

Nearly four in 10 previously laid off tech workers found jobs less than a month after they began searching, ZipRecruiter found in the survey.

“Despite the widespread layoffs, hiring freezes, and cost-cutting taking place in tech, many tech workers are finding reemployment remarkably quickly,” said Julia Pollak, chief economist at ZipRecruiter. “They’re still the most sought-after workers with the most in-demand skills.”

https://www.staging4.edwardconard.com/wp-content/uploads/2024/03/image002-24.png

Job openings across the economy—at 10.3 million—are down from record highs but far exceed the number of unemployed Americans, providing opportunities for workers who lose their jobs and those who choose to seek another.

Workers previously employed in other industries, including entertainment and leisure, transportation and delivery, and manufacturing, also found new jobs quickly, the ZipRecruiter data showed.

The job market for tech workers is slowing as the broader economy falters under the pressure of Federal Reserve interest rate increases and high inflation. Layoffs and hiring freezes are occurring at startups and large tech companies such as Amazon.com Inc. and Facebook parent Meta Platforms Inc. that hired aggressively early on in the pandemic. The cuts are hitting workers in tech jobs—such as software engineers—and other corporate roles including recruiters.

Still, tech firms making cuts are outnumbered by those that are hiring.

A smaller share of tech workers is spending long periods searching for work after a layoff. About 5% of laid off tech workers who found jobs from April to October had spent more than six months hunting for work, down from 26% of those hired between August 2021 and February 2022, ZipRecruiter said.

Wen Huber, age 23, was laid off from a videographer job at a real estate tech startup in late July. Mr. Huber, who lives near Seattle, thought it would take awhile to land a new position, given he didn’t have a four-year-college degree and many other job seekers were flooding the tech job market.

“When I was applying, to be honest, I didn’t feel very confident because there was such an influx of competition with a lot of people also being laid off,” he said.

Mr. Huber had built up a savings buffer, allowing him to be more selective in his job hunt as he sought to pivot into social media. He documented his unemployment experience in a series of videos on LinkedIn. The videos helped him land an interview—and ultimately an offer—for a social media manager job at a software startup, Mr. Huber said. He started in September.

“I was surprised at how quickly I was able to secure an offer for a job,” he said.

Short job searches in tech have become slightly less common as the labor market slows from earlier in the year. Among people who recently lost a job and worked in tech previously, 37% found a new position within one month of starting to look, according to ZipRecruiter. That compared with 50% in February’s survey.

“We’ve definitely seen a slowdown in hiring, but the reason why is that the job creation level was beyond record highs because of the slingshot effect of the pandemic,” said Ryan Sutton, district president at Robert Half, a global recruitment firm. “From August 2020 to May 2022, it wasn’t red-hot. It was lava-hot.”

Usually when mass layoffs hit, there is an influx of tech candidates contacting his company to help with their job search, Mr. Sutton said.

“We have not seen it yet—we haven’t seen more candidates coming to market,” he said. “Our recruiters are having to hunt and hustle just as much as they had to in the last couple of years.”

Client firms in tech also haven’t mentioned any plans to cut jobs, Mr. Sutton said.

About 74% of workers recently hired after losing or leaving a job at a tech company remained in the industry, according to ZipRecruiter. Others who previously worked at tech companies switched to firms in industries such as retail, financial services and healthcare in the six months ending in mid-October.

Pinnacol Assurance, a 650-person workers’ compensation insurer, saw a 46% increase in job candidates from big tech companies including Meta, Microsoft and Twitter between September and mid-December, said Tim Johnson, the company’s chief human resources officer.

The influx of applicants has helped Pinnacol fill tech-related roles such as data scientist, machine-learning engineer and cloud architect in recent months. In mid-December, Pinnacol’s recruiting team made an offer to a job candidate from Google, Mr. Johnson said.

Ayanna Chapman, 42, started a systems-engineering job job at Pinnacol overseeing its computer systems in mid-November after she was laid off from another systems-engineer position this spring.

A generous severance package allowed her to take several months to freshen skills and study for certifications including in the Python programming language. When the Atlanta–area resident began looking for work in the second week of October, recruiters quickly reached out with interview opportunities, she said.

Ms. Chapman was keen on finding a job with stability and thought Pinnacol would fit. She received an offer from the Denver–based company about two weeks after beginning the interview process, much faster than previous experiences, she said.

“I literally cried tears of joy like, ‘Oh, my God, I got the job. I can’t believe it,’” Ms. Chapman said.

Employers broadly are responding to job candidates fast, likely for fear of losing them in a competitive market with a historically low jobless rate of 3.7%. Nine in 10 ZipRecruiter survey respondents said they heard back from a recruiter or hiring manager within a week of applying for a job.

ZipRecruiter’s most recent survey was drawn from 2,550 U.S. residents who had started a new job within the six months ending in mid-October. The data align with other job-market figures that signal the hot labor market is cooling.

Of the ZipRecruiter survey respondents who said they previously worked in tech, most of them likely worked for tech companies regardless of their occupation, Ms. Pollak said. In other words, a recruiter at Amazon would likely be classified as a tech-industry worker in the survey. But a data scientist at Home Depot would be a retail-industry worker.

Separate labor-market figures suggest employers across industries are still seeking to hire tech workers, though less so than earlier in the pandemic. Postings on job-site Indeed for tech occupations are still well above prepandemic levels, but have fallen steeply over the past year.

Software developer job ads on Indeed are down 34% from a year earlier, and ads for mathematics roles—which include data scientists—are 28% lower. Overall postings are down 7.7% from a year ago.

“With tech workers, it’s a much bigger pullback,” said Nick Bunker, an economist at Indeed Hiring Lab. “It’s still above prepandemic levels, but if the current trend keeps up, I don’t imagine that talking point will be true anymore at some point next year.”

The uncertain economic outlook is likely weighing on employers’ appetite for white-collar workers, since they tend to base hiring plans for higher-paid workers on the longer-term business outlook, said Mr. Bunker. By contrast, firms usually gear hiring for waiters, deliverers and other lower-paid jobs according to immediate business needs, he said.

Many companies with among the highest shares of new tech job postings on Indeed in late November were in industries such as consulting, financial services and aerospace.

“For tech jobs, it is still a relatively healthy economic climate and relatively healthy labor market,” said Scott Dobroski, Indeed career expert. “A lot of bright spots for tech workers currently lie outside of traditional tech companies.”

U.S. aerospace companies cut more than 100,000 workers during the pandemic, but have been hiring back at a fast clip and struggling for a year with staffing shortages that have crimped supply chains.

Raytheon Technologies Corp. CEO Greg Hayes said during the summer he was optimistic that layoffs among tech companies would start to ease his own hiring challenges. There are signs that is happening.

“We are starting to see an uptick in interest from the tech layoffs,” said Mike Dippold, chief financial officer of Leonardo DRS Inc., which is based Arlington, Va.

Mr. Dippold said the defense-sensor specialist, like many peers, still had more open positions than it would like, but the staffing situation was starting to improve.

AI Summary. Capital expenditures net of depreciation for Russell 3000 companies peaked at 6.9% of sales in 1988, averaged 1.8% over the past decade, and fell to 0.5% in 2020. Because depreciation is based on historical costs, rising prices mean replacement spending often exceeds depreciation, and technology can make assets obsolete sooner.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Capital expenditures net of depreciation for the Russell 3000 peaked at 6.9% of sales in 1988, but has since declined to 1.8% on average in the past decade, highlighting a shift in capital allocation strategies.

Have net capital expenditures declined as a share of company sales?

Core argument: Capital expenditures net of depreciation for the Russell 3000 peaked at 6.9% of sales in 1988, averaged 1.8% over the past decade, and fell to 0.5% in 2020 amid the pandemic.

Capital expenditures net of depreciation for the Russell 3000 peaked at 6.9% of sales in 1988, highlighting a period of robust investment. However, this figure has significantly declined over the years, averaging 1.8% in the past decade and reaching a low of 0.5% in 2020 amid the pandemic. This trend underscores a shift in capital allocation strategies, influenced by factors such as inflation and technological obsolescence. Rising prices, as seen in 2022, mean that capital expenditures to replace equipment often exceed depreciation, which is calculated on historical costs. Additionally, technological advancements can render assets obsolete faster than depreciation schedules account for, potentially overstating an asset's useful life. These dynamics suggest that businesses must carefully consider both current economic conditions and future technological changes when planning capital investments.

Takeaways by Macro Roundup® AI

  1. Capital expenditures net of depreciation for the Russell 3000 peaked at 6.9% of sales in 1988, averaged 1.8% over the past decade, and fell to 0.5% in 2020 amid the pandemic.
  2. Rising prices, as in 2022, mean capital expenditures to replace equipment often exceed depreciation, which is calculated on historical costs.
  3. Technological advances can render assets obsolete faster than depreciation schedules account for, potentially overstating an asset's useful life.

Michael Mauboussin and Dan Callahan shows capital expenditures net of depreciation as a percentage of sales peaked in 1988 at 6.9%. Over the past decade it has averaged 1.8% and fell to 0.5% in 2020 during the pandemic. (200)

Exhibit 25 shows capital expenditures minus depreciation for the population we studied. Using this measure, investment as a percentage of sales peaked in 1988 at 6.9% and bottomed in 2020 at 0.5 percent of sales. The average of the past decade was 1.8%. The two substantial limitations to using depreciation as a proxy for maintenance capital expenditures include inflation and the risk of technological obsolescence. In periods of rising prices (such as 2022), the capital expenditures required to replace new equipment will exceed depreciation because new expenditures reflect inflation whereas depreciation is based on historical costs. Technological obsolescence introduces the likelihood that depreciation overestimates an asset’s useful life.

Michael Mauboussin and Dan Callahan, "Capital Allocation: Results, Analysis and Assessment,"Morgan Stanley, December 15, 2022, https://www.morganstanley.com/im/publication/insights/articles/article_capitalallocation.pdf

AI Summary. A survey of recently laid-off tech workers found 40% secured new positions within 30 days and 79% within three months, slightly below the 83% three-month re-employment rate for all laid-off workers. The share of tech workers searching longer than six months fell to 5% from 26%, amid 10.3m job openings exceeding the number of unemployed Americans.

Gwynn Guilford Wall Street Journal
Date Posted:
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@GwynnGuilford 40% of recently laid-off tech workers accepted a new position within 30 days, according to a December 2022 survey, highlighting the resilience of tech employment despite economic challenges.

How quickly do laid-off tech workers find new jobs?

Core argument: A December 2022 survey found 40% of recently laid-off tech workers secured new positions within 30 days, and 79% within three months, slightly below the 83% re-employment rate for all laid-off workers.

In December 2022, a survey revealed that 40% of recently laid-off tech workers secured new positions within 30 days, highlighting the resilience of tech employment despite economic challenges. The survey also showed that 79% of these workers found jobs within three months, slightly below the 83% re-employment rate for all laid-off workers. This rapid reemployment is driven by a tight labor market with 10.3m job openings, exceeding the number of unemployed Americans. Despite layoffs and hiring freezes in tech, demand for skilled tech workers remains high, with many transitioning to roles in other industries such as retail and healthcare. The percentage of tech workers spending over six months job hunting dropped to 5% from 26% earlier, indicating improved job prospects. This trend underscores the ongoing demand for tech skills across various sectors, even as the broader economy faces headwinds from interest rate hikes and inflation.

Takeaways by Macro Roundup® AI

  1. A December 2022 survey found 40% of recently laid-off tech workers secured new positions within 30 days, and 79% within three months, slightly below the 83% re-employment rate for all laid-off workers.
  2. The share of laid-off tech workers spending over six months job hunting fell to 5% from 26%, with many moving into roles in other industries such as retail and healthcare.
  3. Reemployment of tech workers came amid a tight labor market with 10.3m job openings exceeding the number of unemployed Americans, even as interest rate hikes and inflation weighed on the broader economy.

According to recent surveys, recently laid-off tech workers are quickly finding new employment with 40% accepting a new position within 30 days.

“…About 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search, according to a ZipRecruiter survey of new hires. That was just below the 83% share of all laid-off workers who were re-employed in the same time frame. Nearly four in ten previously laid-off tech workers found jobs less than a month after they began searching, ZipRecruiter found in the survey…”

Sarah Chaney Cambon and Gwynn Guilford, "Laid Off Tech Workers Quickly Find New Jobs,"Wall Street Journal, December 27, 2022, https://www.wsj.com/articles/laid-off-tech-workers-quickly-find-new-jobs-11672097730

Laid Off Tech Workers Quickly Find New Jobs

Most laid off tech workers are finding jobs shortly after beginning their search, a new survey shows, as employers continue to scoop up workers in a tight labor market.

About 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search, according to a ZipRecruiter survey of new hires. That was just below the 83% share of all laid-off workers who were re-employed in the same time frame.

Nearly four in 10 previously laid off tech workers found jobs less than a month after they began searching, ZipRecruiter found in the survey.

“Despite the widespread layoffs, hiring freezes, and cost-cutting taking place in tech, many tech workers are finding reemployment remarkably quickly,” said Julia Pollak, chief economist at ZipRecruiter. “They’re still the most sought-after workers with the most in-demand skills.”

Laid Off Tech Workers Quickly Find New Jobs: Extended Excerpt Image 1


Job openings across the economy—at 10.3 million—are down from record highs but far exceed the number of unemployed Americans, providing opportunities for workers who lose their jobs and those who choose to seek another.

Workers previously employed in other industries, including entertainment and leisure, transportation and delivery, and manufacturing, also found new jobs quickly, the ZipRecruiter data showed.

The job market for tech workers is slowing as the broader economy falters under the pressure of Federal Reserve interest rate increases and high inflation. Layoffs and hiring freezes are occurring at startups and large tech companies such as Amazon.com Inc. and Facebook parent Meta Platforms Inc. that hired aggressively early on in the pandemic. The cuts are hitting workers in tech jobs—such as software engineers—and other corporate roles including recruiters.

Still, tech firms making cuts are outnumbered by those that are hiring.

A smaller share of tech workers is spending long periods searching for work after a layoff. About 5% of laid off tech workers who found jobs from April to October had spent more than six months hunting for work, down from 26% of those hired between August 2021 and February 2022, ZipRecruiter said.

Wen Huber, age 23, was laid off from a videographer job at a real estate tech startup in late July. Mr. Huber, who lives near Seattle, thought it would take awhile to land a new position, given he didn’t have a four-year-college degree and many other job seekers were flooding the tech job market.

“When I was applying, to be honest, I didn’t feel very confident because there was such an influx of competition with a lot of people also being laid off,” he said.

Mr. Huber had built up a savings buffer, allowing him to be more selective in his job hunt as he sought to pivot into social media. He documented his unemployment experience in a series of videos on LinkedIn. The videos helped him land an interview—and ultimately an offer—for a social media manager job at a software startup, Mr. Huber said. He started in September.

“I was surprised at how quickly I was able to secure an offer for a job,” he said.

Short job searches in tech have become slightly less common as the labor market slows from earlier in the year. Among people who recently lost a job and worked in tech previously, 37% found a new position within one month of starting to look, according to ZipRecruiter. That compared with 50% in February’s survey.

“We’ve definitely seen a slowdown in hiring, but the reason why is that the job creation level was beyond record highs because of the slingshot effect of the pandemic,” said Ryan Sutton, district president at Robert Half, a global recruitment firm. “From August 2020 to May 2022, it wasn’t red-hot. It was lava-hot.”

Usually when mass layoffs hit, there is an influx of tech candidates contacting his company to help with their job search, Mr. Sutton said.

“We have not seen it yet—we haven’t seen more candidates coming to market,” he said. “Our recruiters are having to hunt and hustle just as much as they had to in the last couple of years.”

Client firms in tech also haven’t mentioned any plans to cut jobs, Mr. Sutton said.

About 74% of workers recently hired after losing or leaving a job at a tech company remained in the industry, according to ZipRecruiter. Others who previously worked at tech companies switched to firms in industries such as retail, financial services and healthcare in the six months ending in mid-October.

Pinnacol Assurance, a 650-person workers’ compensation insurer, saw a 46% increase in job candidates from big tech companies including Meta, Microsoft and Twitter between September and mid-December, said Tim Johnson, the company’s chief human resources officer.

The influx of applicants has helped Pinnacol fill tech-related roles such as data scientist, machine-learning engineer and cloud architect in recent months. In mid-December, Pinnacol’s recruiting team made an offer to a job candidate from Google, Mr. Johnson said.

Ayanna Chapman, 42, started a systems-engineering job job at Pinnacol overseeing its computer systems in mid-November after she was laid off from another systems-engineer position this spring.

A generous severance package allowed her to take several months to freshen skills and study for certifications including in the Python programming language. When the Atlanta-area resident began looking for work in the second week of October, recruiters quickly reached out with interview opportunities, she said.

Ms. Chapman was keen on finding a job with stability and thought Pinnacol would fit. She received an offer from the Denver-based company about two weeks after beginning the interview process, much faster than previous experiences, she said.

“I literally cried tears of joy like, ‘Oh, my God, I got the job. I can’t believe it,’” Ms. Chapman said.

Employers broadly are responding to job candidates fast, likely for fear of losing them in a competitive market with a historically low jobless rate of 3.7%. Nine in 10 ZipRecruiter survey respondents said they heard back from a recruiter or hiring manager within a week of applying for a job.

ZipRecruiter’s most recent survey was drawn from 2,550 U.S. residents who had started a new job within the six months ending in mid-October. The data align with other job-market figures that signal the hot labor market is cooling.

Of the ZipRecruiter survey respondents who said they previously worked in tech, most of them likely worked for tech companies regardless of their occupation, Ms. Pollak said. In other words, a recruiter at Amazon would likely be classified as a tech-industry worker in the survey. But a data scientist at Home Depot would be a retail-industry worker.

Laid Off Tech Workers Quickly Find New Jobs: Extended Excerpt Image 2


Separate labor-market figures suggest employers across industries are still seeking to hire tech workers, though less so than earlier in the pandemic. Postings on job-site Indeed for tech occupations are still well above prepandemic levels, but have fallen steeply over the past year.

Software developer job ads on Indeed are down 34% from a year earlier, and ads for mathematics roles—which include data scientists—are 28% lower. Overall postings are down 7.7% from a year ago.

“With tech workers, it’s a much bigger pullback,” said Nick Bunker, an economist at Indeed Hiring Lab. “It’s still above prepandemic levels, but if the current trend keeps up, I don’t imagine that talking point will be true anymore at some point next year.”

The uncertain economic outlook is likely weighing on employers’ appetite for white-collar workers, since they tend to base hiring plans for higher-paid workers on the longer-term business outlook, said Mr. Bunker. By contrast, firms usually gear hiring for waiters, deliverers and other lower-paid jobs according to immediate business needs, he said.

Many companies with among the highest shares of new tech job postings on Indeed in late November were in industries such as consulting, financial services and aerospace.

“For tech jobs, it is still a relatively healthy economic climate and relatively healthy labor market,” said Scott Dobroski, Indeed career expert. “A lot of bright spots for tech workers currently lie outside of traditional tech companies.”

U.S. aerospace companies cut more than 100,000 workers during the pandemic, but have been hiring back at a fast clip and struggling for a year with staffing shortages that have crimped supply chains.

Raytheon Technologies Corp. CEO Greg Hayes said during the summer he was optimistic that layoffs among tech companies would start to ease his own hiring challenges. There are signs that is happening.

“We are starting to see an uptick in interest from the tech layoffs,” said Mike Dippold, chief financial officer of Leonardo DRS Inc., which is based Arlington, Va.

Mr. Dippold said the defense-sensor specialist, like many peers, still had more open positions than it would like, but the staffing situation was starting to improve.