Edward Conard

Top Ten New York Times Bestselling Author

  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard 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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, January 26, 2023

AI Summary. US gross domestic product is roughly in line with the Congressional Budget Office's pre-pandemic forecast, with consumer spending — more than two-thirds of the economy — running well ahead of that forecast, which likely reflects continued effects of large fiscal support. Offsetting this, residential investment has fallen for seven straight quarters, down 19.3% over four quarters.

Jason Furman @Jasonfurman
Date Posted:
Is Database:
Database

.@Jasonfurman notes GDP is “basically at CBO’s pre-pandemic forecast.” Consumer spending, which has enjoyed “huge fiscal support in 2020 and 2021,” is running well ahead of the CBO’s pre-pandemic forecast, while residential investment declined by 26.7%/yr.

Is strong consumer spending offsetting falling residential investment in GDP?

Core argument: Jason Furman notes US residential investment fell 26.7% at an annual rate in Q4 and 19.3% over the last four quarters, a seventh straight quarterly decline and the biggest since the financial crisis.

Overall GDP is basically at CBO's pre-pandemic forecast. The big story for economic growth was the consistent strength of consumer spending, which is more than two-thirds of the economy. It has been consistently running well ahead of CBO's pre-pandemic forecast. Likely continued impact of huge fiscal support in 2020 and 2021. The countervailing story is the collapse of residential investment. It has fallen for 7 straight quarters, fell 19.3% over the last four quarters, with a decline of 26.7% (annual rate) in Q4. Biggest since the financial crisis. And the third story is that over the pandemic recovery the huge increase in US demand was partly accommodated by rising imports and production shifted from exports to domestic consumption. But the large increase in the trade deficit has been narrowing.

Takeaways by Macro Roundup® AI

  1. Jason Furman notes US residential investment fell 26.7% at an annual rate in Q4 and 19.3% over the last four quarters, a seventh straight quarterly decline and the biggest since the financial crisis.
  2. Consumer spending, more than two-thirds of the economy, has consistently run well ahead of CBO's pre-pandemic forecast, which Furman attributes to the likely continued impact of the huge fiscal support of 2020 and 2021.
  3. Overall US GDP sits roughly at CBO's pre-pandemic forecast, with the pandemic-recovery surge in demand partly accommodated by rising imports and production shifted from exports to domestic consumption, though the enlarged trade deficit has been narrowing.

AI Summary. Research from the Bank for International Settlements finds that the young and the old are inflationary while the working-age population is disinflationary, because prime-age workers produce more supply than demand and dependents do the opposite. On this view, an ageing population and rising dependency will constrain supply and add to inflation.

Ethan Wu Financial Times
Date Posted:
Is Database:
Database

.@EthanYWu offers support to the Charles Goodhart and Manoj Pradhan view that population aging is inflationary as retirees create more demand than supply.

Does an ageing population push inflation higher by constraining supply?

Core argument: Mikael Juselius and Elod Takats of the BIS argue that the young and the old are inflationary while the working-age cohort is disinflationary, because prime-age workers create more supply than demand and their elders and juniors the opposite.

An ageing population, and the dependency it creates, will hamper supply and stoke inflation. Mikael Juselius and Elod Takats of BIS’s core insight: “The young and the old are inflationary, while the working-age cohort is disinflationary.” That is, prime-age workers create more supply than demand, while their elders and juniors do just the opposite.

Takeaways by Macro Roundup® AI

  1. Mikael Juselius and Elod Takats of the BIS argue that the young and the old are inflationary while the working-age cohort is disinflationary, because prime-age workers create more supply than demand and their elders and juniors the opposite.
  2. An ageing population, and the dependency it creates, will hamper supply and stoke inflation.

“…An ageing population, and the dependency it creates, will hamper supply and stoke inflation. Mikael Juselius and Elod Takats of BIS’s core insight: “The young and the old are inflationary, while the working-age cohort is disinflationary.” That is, prime-age workers create more supply than demand, while their elders and juniors do just the opposite….” Ethan Wu, “The forever labour shortage,” Financial Times, January 26, 2023, https://www.ft.com/content/3bbd5d97-47f7-4a51-9614-d7f0eddaa348

The forever labour shortage

Good morning. Ethan here; Rob’s out today. Meta is reinstating Donald Trump on Facebook and Instagram, after Elon Musk’s Twitter did the same in November. So far, though, Trump hasn’t chosen to return to any of the platforms, preferring his own Truth Social. Might this be bullish for DWAC, the financing vehicle trying to take Truth Social public? Its stock closed up 3 per cent yesterday. Email me: ethan.wu@ft.com.

Two views on the post-Covid labour pool If you wanted to make the case that the US labour market was softening, say, four months ago, you had to really know your government data. Take Charles Schwab’s Liz Ann Sonders. In a very nice FT op-ed written in September, she looked at several lower-profile indicators, such as the share of multiple job holders and number of part-time workers, to make the point that “the labour market may be less tight than conventionally believed”. Since then, the case has become easier to make, but only a bit. Marquee data sets like job openings and payrolls have cooled and the NFIB small business survey shows plans to hire falling quickly. From Macquarie:

Take a step back, though, and the story remains as it has been for months: a tight labour market that is only getting a little looser on the margins. The Federal Reserve is worried about this, arguing it will keep services inflation hot. High but falling inflation, a hawkish Fed, resilient employment data, an economic slowdown. This is a cyclical story which Unhedged has rattled on about many times. But the cyclical story can’t be separated from a separate structural story — the ageing US population — and the two exogenous shocks that have worsened it, namely Covid-related early retirements and a sharp drop in migration. All told, the labour force has lost some 3mn workers since 2019, as these charts from Deutsche Bank show:

The fundamental driver is the drip-drip of an ageing population. As Preston Mui of Employ America has argued, about two-thirds of labour force shrinkage has come from predictable demographic effects, though you can see some impact from early retirements in the older age bands below:

These trends are well-known, but what they will ultimately mean is less clear. Here are two views worth considering on where the labour market might go from here.

An ageing population, and the dependency it creates, will hamper supply and stoke inflation.

This one comes from a 2018 Bank for International Settlements paper, sent along by our regular correspondent, Dec Mullarkey of SLC Management. The authors, Mikael Juselius and Elod Takats, examine the impact of demography on inflation from 1870 to 2016. Their core insight: “The young and the old are inflationary, while the working-age cohort is disinflationary.” That is, prime-age workers create more supply than demand, while their elders and juniors do just the opposite.

In the coming decades, the old will increasingly outnumber the working-aged across the developed world, Juselius and Takats project, inverting the steady deflationary pressures of 1970-2010:

The inflationary backdrop could transform central bank policymaking. Inflation targets may have to rise as central banks make concessions to the new reality. It’s an idea the Fed firmly rejects now, but which is already winning converts, like Olivier Blanchard. Mullarkey adds:” While central banks obsess about inflation expectations, they may be better informed by extrapolating the current population mix to determine tipping points that may trigger inflation. For the US in particular, the evolution of the baby boomer cohort seems like a leading indicator. While the research highlights baby boomers helped contain inflation as they swelled the workforce, they will structurally put pressure on inflation as they retire. Japan’s example is constructive as it’s a contrarian case to the idea that ageing drives inflation. Despite an ageing population, they have struggled to spark inflation for decades. But Juselius and Takats address this. They find that Japan’s failure to ignite inflation came from a significant drop in the birth rate that offset the ageing effect. However, as ageing intensifies, Japan’s central bank may get its wish of inflation closer to target.”

Workers’ power will grow relative to employers’, and tighter corporate margins will keep inflation in check.

The above is how William Spriggs, an economics professor at Howard University and chief economist at the AFL-CIO union federation, likes to think about it. He points to a growing literature documenting employers’ lopsided power in labour markets, letting them impose terms on workers. But a sparser labour pool is flipping that balance, and Spriggs argues fiercer competition for workers will make for a more efficient economy.

You can see what he means in, for example, how disabled workers or those with a criminal history have found it easier to get hired in today’s tight labour market. A looser one, where companies felt no pressure to hire aggressively, might leave those workers out in the cold.

Will persistently tight labour markets fuel inflation? Spriggs doubts it. He thinks the current bout of price increases comes down to post-Covid ripple effects and the massive surge in corporate margins. To illustrate, he contrasts two consumer price index components: food at home (8.5 per cent of headline CPI) and food eaten out (5 per cent). Even as restaurant workers were getting some of the biggest percentage wage increases in the US, prices for at-home food have risen faster than restaurant prices:

But he fears that the Fed, on dubious fears of a wage-price spiral, risks killing off an important transition as margins compress: “When you take graduate macroeconomics, you’re supposed to be able to [model] paths from one equilibrium to the next. And clearly there are going to be discontinuities if you’re moving from an inefficient economy dominated by these monopsony labour market practices to a more efficient labour market that is truly responding to market forces . . .  Given that the labour force is smaller, all the more reason you need all [workers] working! Or else we’re going to have a much smaller economy. There’s no reason to not have them working.”

Spriggs does agree that a different monetary policy framework will be needed in the future. The Fed, he says, will have to think more rigorously about how to respond to cost-push inflation from supply-side shocks, like wars or shipping disruptions. If supply shocks become more regular, as Spriggs suspects, the Fed cannot keep resorting to the blunt tool of crushing demand via higher interest rates any time prices go up. What do we think? Big topics like this are hard for a markets column. We can’t proclaim too loudly on them, but we can’t ignore them, either. In the past we’ve been sympathetic to the line from economists Charles Goodhart and Manoj Pradhan that ageing, driving a scarcity of labour, will both worsen inflation and help workers. That is broadly in line with what Juselius and Takats forecast. We agree with Spriggs that recent margin expansion has been extraordinary, but are less sure that tighter margins can do the heavy lifting in bringing down inflation. What brings margins down is customers who stop spending, forcing an end to oversized mark-ups. But until wage growth slows a bit, consumption will probably stay strong. If Juselius and Takats are right, then the zero-rates, low-inflation world of the 2010s probably isn’t coming back. Employers will have little choice but to pay workers more, keeping inflation hotter and rates higher. Of course, plenty could still happen in the meantime: perhaps a supply-expanding productivity bump or a breakthrough in immigration politics. But it is a very different base case than many investors were contemplating just years ago. One good read Hindenburg Research’s big short against the “largest con in corporate history”.

AI Summary. China faced capital flight of roughly $150bn a year from citizens traveling overseas before the pandemic, estimated from unexplained gaps in global tourism data, with about 10,800 wealthy Chinese migrating in 2022. One private banker reports the cost of moving money offshore rose to 12 cents on the dollar from 1 cent.

Bloomberg Staff Bloomberg
Date Posted:

The cost of moving money out of China has surged to 12 cents on the dollar relative to 1 cent prior to the pandemic. Nevertheless, Natixis SA estimates capital flight in 2023 will be greater than the pre-pandemic level of $150B per year. @Bloomberg

Are wealthy Chinese moving money and themselves abroad as travel resumes?

Core argument: Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, estimates China faced capital flight of about $150 billion annually before the pandemic from travelers leaving funds abroad permanently, and expects a higher figure in 2023 after three years of restricted travel.

Before the pandemic, China faced capital flight of about $150 billion annually from people going overseas, but the amount is likely to be higher in 2023 since they haven’t been able to travel for the last three years, according to Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis SA. Her calculation — worked out by looking at unexplained differentials in global tourism data — is an estimate of funds left abroad permanently by Chinese nationals who travel. About 10,800 rich Chinese migrated in 2022, the most since 2019 according to New World Wealth, a global data intelligence partner of investment migration consultant Henley & Partners. According to one private banker, wealthy individuals told him the cost of moving money offshore has risen to 12 cents on the dollar late last year from 1 cent in the years before the pandemic, as the government clamped down on money transfers.

Takeaways by Macro Roundup® AI

  1. Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, estimates China faced capital flight of about $150 billion annually before the pandemic from travelers leaving funds abroad permanently, and expects a higher figure in 2023 after three years of restricted travel.
  2. About 10,800 wealthy Chinese migrated in 2022, the most since 2019, according to New World Wealth, a global data intelligence partner of investment migration consultant Henley & Partners.
  3. One private banker says wealthy clients told him the cost of moving money offshore rose to 12 cents on the dollar late last year from 1 cent before the pandemic, as the government clamped down on money transfers.

AI Summary. Just over a third of the decline in the Democratic margin of victory came from the suburbs, with New York City voters—through a mix of defection and abstention—accounting for most of the rest. Precincts that are at least three-quarters Hispanic or Asian swung 58 and 52 points toward Republicans, versus 32 points in white and 8 points in black precincts.

Matt Thomas Vulgar Marxism
Date Posted:

.@MattThomasNYC argues the GOP’s performance in New York in last year wasn’t driven by suburban voters but by minority voters in NYC who accounted for 2/3 of the decline in democratic margins btw 2018-2022.

Are Hispanic and Asian city voters driving Democrats' declining margins?

Core argument: New York City's Hispanic and Asian racial enclaves swung 58 and 52 points toward the GOP between 2018 and 2022, compared with 32 points in white enclaves and 8 points in black enclaves.

The suburbs account for just over a third of the decline in the Democratic margin of victory between 2018 and 2022. The people of New York City, through a combination of defection and abstention, account for most of the rest. Narrowing our focus to only those precincts where at least three-quarters of residents share the same racial identity – which I’ll refer to as racial enclaves – the trends are even more pronounced. Between 2018 and 2022, Hispanic and Asian enclaves swung fifty-eight and fifty-two points toward the GOP, respectively. Their turn to the right was far more decisive than that of white enclaves, which swung thirty-two points toward the GOP. For their part, black enclaves moved just eight points to the right over the same period. Between 2014 and 2022, the swings were as follows: six points in black enclaves, forty-two points in white enclaves, fifty-six points in Hispanic enclaves, and fifty-eight points in Asian enclaves. Now that’s what I call a revolt.

Takeaways by Macro Roundup® AI

  1. New York City's Hispanic and Asian racial enclaves swung 58 and 52 points toward the GOP between 2018 and 2022, compared with 32 points in white enclaves and 8 points in black enclaves.
  2. Between 2014 and 2022, precincts where at least three-quarters of residents share a racial identity swung 58 points toward the GOP in Asian enclaves, 56 in Hispanic enclaves, 42 in white enclaves, and 6 in black enclaves.
  3. Suburbs account for just over a third of the decline in the Democratic margin of victory between 2018 and 2022, with New York City residents, through defection and abstention, accounting for most of the rest.

AI Summary. The author estimates that a contractionary monetary policy surprise raising mortgage rates by 1 percentage point reduces the share of home purchase loans going to low- and moderate-income borrowers by 2.1 percentage points (7.5%) in the following weeks, and the share to low-income borrowers by 1.1 percentage points (16%).

Daniel Ringo Federal Reserve Board
Date Posted:

New @FedResearch finds that a 1pp policy-induced increase in mortgage rates lowers the presence of low-income households in the population of home buyers by 16%, and of low- and moderate-income households by 7.5%.

Does tighter monetary policy reduce home buying by lower-income borrowers?

Core argument: A contractionary monetary policy shock raising mortgage rates by 1 percentage point would reduce the share of home purchase loans going to low- and moderate-income borrowers by 2.1 percentage points (7.5%) in the weeks after the FOMC announcement, the author estimates.

I identify the effects of monetary policy by exploiting the timing of high-frequency observations of mortgage rate locks around unanticipated monetary policy shocks conveyed in Federal Open Market Committee (FOMC) announcements. I find that a contractionary policy shock which increases mortgage rates by 1 percentage point would reduce the share of home purchase loans going to low- and moderate-income (LMI) borrowers by 2.1 percentage points (or 7.5%) in the weeks following the announcement. The share going to low-income borrowers alone would fall by 1.1 percentage points (16%). While low-wealth households may not experience an immediate appreciation of financial assets when the stance of monetary policy is expansionary, that stance can allow them to get their foot in the door of homeownership.

Takeaways by Macro Roundup® AI

  1. A contractionary monetary policy shock raising mortgage rates by 1 percentage point would reduce the share of home purchase loans going to low- and moderate-income borrowers by 2.1 percentage points (7.5%) in the weeks after the FOMC announcement, the author estimates.
  2. The share of home purchase loans going to low-income borrowers alone would fall by 1.1 percentage points, or 16%, after a policy shock raising mortgage rates by 1 percentage point, the author estimates.
  3. The author identifies these effects from the timing of high-frequency mortgage rate locks around unanticipated policy shocks in FOMC announcements, and argues expansionary policy can help low-wealth households enter homeownership even absent immediate appreciation of financial assets.

Friday, January 27, 2023

AI Summary. The share of subprime auto borrowers at least 60 days late on payments reached 5.67%, up from a seven-year low of 2.58%, exceeding the 5.04% peak reached during the Great Recession, according to Fitch Ratings. Average new auto loan rates rose to 8.02% from 5.15% a year earlier, with higher rates for subprime borrowers.

Claire Ballentine Bloomberg
Date Posted:

As rates rise the percentage of subprime auto borrowers who are delinquent on their bills rose to 5.7%, higher than the Great Recession peak of 5.0% in January 2009. Though repossessions are still under pre-pandemic levels. @Bloomberg

Are subprime auto borrowers falling behind on payments at record rates?

Core argument: Subprime auto borrowers at least 60 days late on payments reached 5.67% in December, up from a seven-year low of 2.58% in April 2021 and above the 5.04% Great Recession peak of January 2009, per Fitch Ratings.

In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. That compares to 5.04% in January 2009, the peak during the Great Recession. Higher interest rates are making it even more difficult to make the monthly payments. The average new auto loan rate was 8.02% in December, up from 5.15% a year earlier, according to Cox Automotive. The rate can be much higher for subprime borrowers. While the number of vehicle repossessions is rising, it’s still below pre-pandemic levels. At Manheim, an auto auction company, the number of repossessed cars increased 11% in 2022 compared to the prior year, but that was still down 26% from 2019.

Takeaways by Macro Roundup® AI

  1. Subprime auto borrowers at least 60 days late on payments reached 5.67% in December, up from a seven-year low of 2.58% in April 2021 and above the 5.04% Great Recession peak of January 2009, per Fitch Ratings.
  2. The average new auto loan rate was 8.02% in December, up from 5.15% a year earlier, according to Cox Automotive, and can be much higher for subprime borrowers.
  3. Repossessed cars at auction company Manheim rose 11% in 2022 from the prior year but remained 26% below 2019 levels.

AI Summary. Housing has two separate bottoms, one for activity and one for prices, and existing home sales may have already bottomed while residential investment is expected to decline further. The author argues house prices, especially inflation-adjusted, will remain under pressure for some time, guessing nominal national declines of 10%+ after a 2.4% seasonally adjusted drop.

Bill McBride Calculated Risk
Date Posted:

.@calculatedrisk argues housing prices in real terms will be under pressure for some time as the bottom in prices can lag the bottom in investment by years. He expects at least 10% decline in nominal prices from peak with 2.4% already having occurred.

Has housing activity bottomed even as home prices keep falling?

Core argument: The Case-Shiller National Index has already fallen 2.4% seasonally adjusted, and the author guesses nominal U.S. house prices will decline 10%+ nationally, while noting the timing and extent of nominal declines is difficult to predict.

My expectation is residential investment will decline further in 2023, although the largest percentage decline was in 2022. If we look at the most comparable period to the current cycle, the 1978 to 1982 period, we see that real house prices bottomed several years after activity bottomed. Activity bottomed in 1981 or early 1982, but house prices didn’t return to the previous peak (inflation adjusted) until mid-1986. The timing and extent of nominal price declines is difficult to predict. I’ve guessed that we will see 10%+ in nominal price declines nationally. We’ve already seen national price declines of 2.4% seasonally adjusted (Case-Shiller National Index) as sellers appear to be willing to give back some of the extraordinary gains over the last two years (not completely “sticky”). The bottom line is that there will be two bottoms for housing: one for activity and the other for prices. Existing home sales may have already bottomed, but we will see further declines in residential investment. Prices - especially in real terms - will be under pressure for some time.

Takeaways by Macro Roundup® AI

  1. The Case-Shiller National Index has already fallen 2.4% seasonally adjusted, and the author guesses nominal U.S. house prices will decline 10%+ nationally, while noting the timing and extent of nominal declines is difficult to predict.
  2. The author expects residential investment to decline further in 2023 even though the largest percentage decline came in 2022, and existing home sales may have already bottomed.
  3. In the 1978 to 1982 period, the most comparable to the current cycle, housing activity bottomed in 1981 or early 1982 but inflation-adjusted house prices did not return to their prior peak until mid-1986.

AI Summary. States relying on the shrinking Colorado River are unlikely to voluntarily agree to deep water-use reductions, which would force the federal government to impose cuts on supplies serving 40m Americans. Allocations assumed an average flow of 17.5m acre-feet a year, but actual flow has averaged under 15m.

Christopher Flavelle New York Times
Date Posted:

The Colorado’s River’s flow has averaged less than 10M acre-feet a year in the past three years vs. a long-term average of under 15M. The reduced flows may force the Federal government to impose water use restrictions affecting 40M Americans. @Cflav

Will the federal government have to impose water cuts on states?

Core argument: The Colorado River's annual flow averaged just over 12 million acre-feet from 2000 through 2022 and fell below 10 million acre-feet in each of the past three years.

The states that rely on water from the shrinking Colorado River are unlikely to agree to voluntarily make deep reductions in their water use which would force the federal government to impose cuts for the first time in the water supply for 40 million Americans. The Colorado River Compact apportioned the water among two groups of states. The so-called upper basin states would get 7.5 million acre-feet a year. The lower basin got a total of 8.5 million acre-feet. A later treaty guaranteed Mexico, where the river reaches the sea, 1.5 million acre-feet. The premise that the river’s flow would average 17.5 million acre-feet each year turned out to be faulty. Over the past century, the river’s actual flow has averaged less than 15 million acre-feet each year. From 2000 through 2022, the river’s annual flow averaged just over 12 million acre-feet; in each of the past three years, the total flow was less than 10 million.

Takeaways by Macro Roundup® AI

  1. The Colorado River's annual flow averaged just over 12 million acre-feet from 2000 through 2022 and fell below 10 million acre-feet in each of the past three years.
  2. States reliant on the Colorado River are unlikely to voluntarily accept deep water-use reductions, which would force the federal government to impose cuts for the first time on a supply serving 40 million Americans.

AI Summary. Japan and the Netherlands are set to join the United States in restricting China's access to advanced semiconductor manufacturing equipment, with Dutch limits extending to at least some of ASML's deep ultraviolet lithography machines and Japan imposing similar limits on Nikon. Such machines are essential to producing certain advanced chips.

Jenny Leonard Bloomberg
Date Posted:

Japan and the Netherlands are finalizing plans to join American exports controls designed to limit Chinese semiconductor production. @Bloomberg

Japan and the Netherlands are finalizing plans to join American exports controls designed to limit Chinese semiconductor...

Are US allies joining restrictions on China's access to chipmaking equipment?

Core argument: Japan and the Netherlands are poised to join the US in limiting China's access to advanced semiconductor manufacturing equipment.

Japan and the Netherlands are poised to join the US in limiting China’s access to advanced semiconductor machinery. The Netherlands will expand restrictions on ASML Holding NV, which will prevent it from selling at least some of its so-called deep ultraviolet lithography machines, crucial to making some types of advanced chips and without which attempts to set up production lines may be impossible. Japan will set similar limits on Nikon Corp.

Takeaways by Macro Roundup® AI

  1. Japan and the Netherlands are poised to join the US in limiting China's access to advanced semiconductor manufacturing equipment.
  2. The Netherlands will expand restrictions on ASML Holding NV, preventing it from selling at least some deep ultraviolet lithography machines that are crucial to making certain advanced chips.
  3. Japan will set limits on Nikon Corp. similar to the Dutch restrictions, and without deep ultraviolet lithography machines, attempts to set up chip production lines may be impossible.

AI Summary. An estimated 200mn unmarried Chinese face family pressure to marry, with young people marrying later and the pool of marriageable youth shrinking each year. The number of Chinese women of childbearing age, defined as 15 to 49, fell by more than 4mn in a year.

Eleanor Olcott Financial Times
Date Posted:

Between 2010 and 2010 the share of Chinese women 20-24 who were unmarried rose from 67.5% to 80.4% as young Chinese delay marriage. @ft

Are family pressure and a shrinking marriage pool reshaping China's population?

Core argument: China's population of women of childbearing age, defined as 15–49 years old, fell by more than 4mn last year, while the total pool of marriageable youth continues to shrink annually.

This week, an estimated 200mn unmarried Chinese returned home to celebrate the lunar new year greeted by relatives brimming with questions about when they plan to get married and start a family. The annual inquisition is such a predictable part of life for young Chinese that social media channels are filled with viral how-to guides coaching people on how to bat away pushy parents. “Everyone has their own technique,” said a Beijing teacher in her late 20s, who has been keeping her boyfriend a secret from her family for years as a pre-emptive strategy against demands for marriage. Young people who do get married are doing so later, while the total pool of China’s marriageable youth continues to shrink annually. The number of women of childbearing age, defined as those between 15 and 49 years old, fell by more than 4mn last year.

Takeaways by Macro Roundup® AI

  1. China's population of women of childbearing age, defined as 15–49 years old, fell by more than 4mn last year, while the total pool of marriageable youth continues to shrink annually.
  2. An estimated 200mn unmarried Chinese returned home for the lunar new year and faced relatives' questions about when they plan to marry and start a family.
  3. Young Chinese who marry are doing so later, and social media channels are filled with viral how-to guides coaching people on batting away pushy parents.

AI Summary. Fiscal conservatives could pursue several debt-limit negotiating goals: ending the Covid emergency designation and related pandemic spending, enacting the TRUST Act to create a congressional commission on Social Security and Medicare solvency, or freezing discretionary spending. In exchange for eliminating the debt limit, progressives could offer tools such as statutory fiscal targets to constrain mandatory spending.

Brian Riedl National Review
Date Posted:

.@Brian_Riedl notes that the eight largest deficit reduction bills since 1985 were attached to debt-limit bills and offers some plausible goals for the negotiation such as ending all pandemic related emergency spending.

What should fiscal conservatives seek in debt-limit negotiations?

Core argument: Fiscal conservatives could seek to end the Covid-emergency designation and terminate all pandemic-related emergency spending, which would also give Democrats a chance to declare victory over the pandemic.

There are several plausible policy goals. Conservatives could seek to end the Covid-emergency designation and end all pandemic-related emergency spending (a chance for Democrats to declare victory over the pandemic, too). Several Democrats have also expressed openness to the TRUST Act, which would create a congressional commission to extend Social Security and Medicare solvency. Conservatives could seek to freeze discretionary spending for the year (which may mean trimming domestic programs to accommodate any defense or veterans’ health hikes). If progressives want to eliminate the debt limit, they can make a deal to provide other tools to address unrestrained mandatory spending, such as statutory fiscal targets.

Takeaways by Macro Roundup® AI

  1. Fiscal conservatives could seek to end the Covid-emergency designation and terminate all pandemic-related emergency spending, which would also give Democrats a chance to declare victory over the pandemic.
  2. Several Democrats have expressed openness to the TRUST Act, which would create a congressional commission to extend Social Security and Medicare solvency.
  3. Freezing discretionary spending for the year may mean trimming domestic programs to accommodate defense or veterans' health increases, and progressives seeking to eliminate the debt limit could trade other tools for mandatory spending, such as statutory fiscal targets.

AI Summary. An aging US population accounts for a shortfall of 1.9m workers, with people 65 and older rising from under 16% to nearly 17% of the population. Labor force participation among older Americans has fallen from 20.7% to 19.3%, a further loss of 500,000 workers.

Elliott Morris and Simon Rabinovitch The Economist
Date Posted:
Is Database:
Database

The aging US population has resulted in a shortfall of 1.9m workers since 2019, with a decline in LFP among older Americans accounting for an additional 500,000 workers lost.

Is an aging population shrinking the American workforce?

Core argument: The aging US population has produced a shortfall of 1.9m workers since 2019, as Americans aged 65+ rose from under 16% to nearly 17% of the population.

The aging US population has resulted in a shortfall of 1.9m workers since 2019, as those aged 65+ have increased from less than 16% to nearly 17% of the population. Labor Force Participation [LFP] among older Americans, which rose from 12.5% in 2000 to 20.7% in early 2020, has declined to 19.3%, matching 2016 levels. This decline in LFP accounts for an additional loss of 500,000 workers. While the LFP rate of prime-age workers (25-54) and the foreign-born workforce have nearly recovered, they do not explain the labor market squeeze. The demand for labor has increased by 3m positions, representing about 3% of all employed, contributing to significant nominal wage gains. Despite slower GDP growth potentially restoring balance, the aging population and early retirements during COVID-19 continue to challenge labor supply.

Takeaways by Macro Roundup® AI

  1. The aging US population has produced a shortfall of 1.9m workers since 2019, as Americans aged 65+ rose from under 16% to nearly 17% of the population.
  2. Labor force participation among older Americans climbed from 12.5% in 2000 to 20.7% in early 2020 before falling to 19.3%, matching 2016 levels and accounting for a further loss of 500,000 workers.
  3. Labor demand has risen by 3m positions, about 3% of all employed, contributing to nominal wage gains, while prime-age (25-54) and foreign-born participation have nearly recovered and do not explain the squeeze.

The aging of the American population has left the US short 1.9M workers relative to 2019. A decline in labor force participation of older workers is responsible for a drop of another 500,000 workers, “…The labor-force participation (LFP) rate of prime-age workers (aged 25-54) and the foreign-born workforce have almost fully recovered. Neither explains the current squeeze. The biggest shortfall comes from Americans getting older and leaving work behind. Since 2019 those aged at least 65 have gone from less than 16% of the population to nearly 17%. Moreover, unlike prime-age workers, many people who retired early as covid-19 struck have not come back to work. LFP among older Americans, which rose from 12.5% in 2000 to 20.7% in early 2020, has dipped to 19.3%, the same as in 2016. The aging of the population accounts for the loss of 1.9m workers (0.7% of people aged at least 16), while the overall drop in LFP, mainly among the old, is responsible for a further 0.5m (0.2%)….”

Elliott Morris and Simon Rabinovitch, "Where have all America’s workers gone?"The Economist, January 24, 2023, https://www.economist.com/graphic-detail/2023/01/24/where-have-all-americas-workers-gone

Where have all America’s workers gone?

Where have all Americas workers gone?: Extended Excerpt Image 1


For months economists have warned of recession in America, but in one crucial area the economy seems overheated: employers are still struggling to find workers. Why is the labour market so tight?

Companies’ hiring plans suggest that the economy remains robust for now. Total labour supply (people who have or are seeking jobs) is roughly back to pre-pandemic levels. By contrast, labour demand (filled plus open jobs) has increased by 3m positions. The excess demand represents about 3% of all those employed, which has contributed to big nominal wage gains. Slower gdp growth—whether a recession or not—will help restore balance.

The supply picture is more complex. During the pandemic, many workers took time off. Immigration, a key source of labour, also fell. Now, however, the labour-force participation (lfp) rate of prime-age workers (aged 25-54) and the foreign-born workforce have almost fully recovered. Neither explains the current squeeze.

Where have all Americas workers gone?: Extended Excerpt Image 2


Instead, the biggest shortfall comes from Americans getting older and leaving work behind. Since 2019 those aged at least 65 have gone from less than 16% of the population to nearly 17%. Moreover, unlike prime-age workers, many people who retired early as covid-19 struck have not come back to work. lfp among older Americans, which rose from 12.5% in 2000 to 20.7% in early 2020, has dipped to 19.3%, the same as in 2016. The ageing of the population accounts for the loss of 1.9m workers (0.7% of people aged at least 16), while the overall drop in lfp, mainly among the old, is responsible for a further 0.5m (0.2%).

Some think that a trend among younger people to scale back their working intensity, known as “quiet quitting”, may have caused the labour market to tighten. Recent research by scholars at Washington University in St Louis reveals a clear reduction in hours worked by those in jobs. But most quiet quitters are high-earning workers, whereas the biggest labour shortages have been in basic service jobs. That points to another factor: illness. In 2022 an average of 1.6m Americans missed at least one week of work per month to recuperate—whether from covid, flu or something else—up from 1m before covid.

Little by little, Americans will get back to better health. Unfortunately for employers, baby-boomers are unlikely to come out of retirement.