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


Friday, March 24, 2023

AI Summary. Foreign demand for US bonds remained strong on a trailing four-quarter basis, with mark-to-market losses on low-yielding bonds not appearing to impede total inflows, though official demand from foreign central banks and sovereign wealth funds fell and shifted toward agency debt. Overall demand for US assets tailed off faster than the goods deficit, a potential source of dollar weakness.

Brad Setser @Brad_Setser
Date Posted:

.@Brad_Setser notes that in 2022 foreign demand for American Treasury and Agency bonds was strong, though official demand fell off in Q4.

Is foreign demand for US bonds falling faster than the goods deficit?

Core argument: Brad Setser finds that foreign demand for "safe" U.S. bonds remained strong on a trailing four-quarter basis through full-year 2022, with mark-to-market losses on low-yielding bonds not impeding total foreign inflows, since new inflows earn the higher rate.

On a trailing 4q basis (so for the full year 2022) foreign demand for "safe" US bonds remained strong ... Bondmageddon (the mark to market losses on low yielding bonds) didn't seem to impede total foreign demand for US bonds (new inflows get the new higher rate.) Official demand (from foreign central banks and SWFs) did fall off in 2022 -- and clearly shifted toward Agencies (cough, China) But foreign demand for US bonds decoupled from reserve growth ... and that is reflected on the US side of the global data as well. Overall foreign demand for US bonds (which has been surprisingly strong in 2022 when judged relative to global reserve growth) from both public and private sources tailed off in q4 as well. It does seem that demand for US assets fell a bit faster than the goods deficit in q4 ... so a potential source of dollar weakness (then) is in the data.

Takeaways by Macro Roundup® AI

  1. Brad Setser finds that foreign demand for "safe" U.S. bonds remained strong on a trailing four-quarter basis through full-year 2022, with mark-to-market losses on low-yielding bonds not impeding total foreign inflows, since new inflows earn the higher rate.
  2. Official demand from foreign central banks and sovereign wealth funds fell in 2022 and shifted toward U.S. Agency bonds, with China cited, while overall foreign bond demand decoupled from reserve growth.
  3. Foreign demand for U.S. bonds from both public and private sources tailed off in the fourth quarter, falling somewhat faster than the goods deficit, which Setser reads as a potential source of dollar weakness visible in the data.

AI Summary. Historical comparisons of bank stock performance with the S&P 500 show that when banks fall badly relative to the rest of the market, the broader market tends to decline as well, since trouble at banks makes it harder for other firms to profit.

John Authers Bloomberg
Date Posted:

.@johnauthers notes declines in the KBW Bank index are historically associated with broader market declines and argues that “the combination of deeply troubled banks and strong performance for the rest of the stock market cannot persist much longer.”

Does bank stock weakness relative to the market signal broader declines?

Core argument: A log-scale chart of bank shares against the S&P 500 shows that when banks fall badly relative to the rest of the market, the broader market tends to decline as well.

The following chart, from the terminal, shows banks’ performance on one axis, and the S&P 500 on the other, both on a log scale. When banks fall badly relative to everyone else, the broader market tends to decline, as I’ve tried to mark with the colored rectangles. That’s because banks matter to the economy. When they’re in trouble, it’s much harder for anyone else to make a profit. So how to justify the continued strength of the market while bank investors are so obviously worried? Maybe there’s hope for a bailout in some form that will hurt banks’ shareholders but rescue everyone else. That’s not outlandish. Or possibly, everyone else thinks that the investors are unnecessarily panicking — in which case we should expect a banking rebound pretty quickly.

Takeaways by Macro Roundup® AI

  1. A log-scale chart of bank shares against the S&P 500 shows that when banks fall badly relative to the rest of the market, the broader market tends to decline as well.
  2. Banks matter to the economy because when they are in trouble it becomes much harder for anyone else to make a profit.
  3. Continued market strength alongside worried bank investors could reflect hope for a bailout that hurts bank shareholders while rescuing everyone else, or a view that bank investors are panicking unnecessarily, which would imply a quick banking rebound.

AI Summary. Amid bank stress, corporate bond issuance stalled, with investment-grade sales of $59.9bn versus a five-year monthly average of $179bn and junk-bond sales of about $5bn versus an average of $24bn. Goldman Sachs' base case is that tighter lending standards will subtract 0.25 to 0.5 percentage points from US GDP growth.

Jack Pitcher Wall Street Journal
Date Posted:

Capital markets have been closed since the SVB failure with the highest rated borrowers issuing debt at only 33% of the 5-year avg for March. Goldman Sachs estimates that tighter lending standards will reduce US growth by 25 to 50 basis points in 2023.

How much does bank stress reduce corporate borrowing and growth?

Core argument: No investment-grade-rated company sold new bonds over the seven business days from March 9 through March 17, the first week in March without a new high-grade bond sale since 2013, following Silicon Valley Bank's collapse.

The capital markets have been on ice since the collapse of Silicon Valley Bank two weeks ago. No companies with investment-grade credit ratings sold new bonds over the seven business days from March 9 through March 17, the first week in March without a new high-grade bond sale since 2013. The market for new junk-bond sales has largely stalled this month. Those with the highest ratings have sold $59.9 billion in new bonds this month, compared with March’s five-year average of $179 billion. Companies have raised some $5 billion of junk bonds this month versus the five-year average of $24 billion. In the base case for Goldman Sachs Group Inc., tighter lending standards will subtract one-quarter to one-half of a percentage point from U.S. GDP growth in 2023, equivalent to the impact of Fed rate increases of the same size.

Takeaways by Macro Roundup® AI

  1. No investment-grade-rated company sold new bonds over the seven business days from March 9 through March 17, the first week in March without a new high-grade bond sale since 2013, following Silicon Valley Bank's collapse.
  2. Highest-rated companies sold $59.9 billion of new bonds this month against March's five-year average of $179 billion, while junk-bond issuance reached roughly $5 billion versus a $24 billion five-year average.
  3. Goldman Sachs Group's base case holds that tighter lending standards will subtract one-quarter to one-half of a percentage point from U.S. GDP growth in 2023, equivalent to the impact of Fed rate increases of the same size.

AI Summary. A randomized study of a two-year unconditional monthly cash transfer to below-subsistence households in Barcelona, averaging about €500 ($792 in purchasing-power terms) or nearly 50% of the national minimum wage, estimates households were 14% less likely to have a member working and main recipients 20% less likely, with effects persisting at least six months after the final payment.

Timo Verlaat, Federico Todeschini and Xavier Ramos Institute of Labor Economics
Date Posted:
Is Database:
Database

A Spanish antipoverty program that gave recipients a cash transfer equivalent to almost 50% of the national minimum wage had strong negative labor market effects, with primary recipients 20% less likely to work relative to the control group. @iza_bonn

Does unconditional cash support reduce employment among poor households?

Core argument: Households receiving an unconditional monthly cash transfer in Barcelona were 14 percent less likely to have at least one member working after two years than control households, and main recipients were 20 percent less likely to work.

In this paper, we studied the employment effects of an antipoverty program that does not include any such conditions. The two-year program, implemented in Barcelona (Spain), consisted of a monthly cash transfer to households with income below the subsistence level. The benefit level depended on the household income, size, and composition. On average, households received roughly e500 ($792 PPP) per month, equivalent to nearly 50 percent of the national minimum wage. Although the benefit was household-based, transfers were made to the account of a designated household member, the main recipient. Our findings for overall impacts can be summarized in four parts. First, we find strong evidence for sizeable negative labor supply effects. After two years, households assigned to the cash transfer were 14 percent less likely to have at least one member working compared to households assigned to the control group; main recipients were 20 percent less likely to work. Second, negative employment effects persisted until at least six months after the last payment. Third, we find tentative evidence that effects are mainly driven by households with care responsibilities. Fourth, there is no evidence of effects on social participation and education-related activities.

Takeaways by Macro Roundup® AI

  1. Households receiving an unconditional monthly cash transfer in Barcelona were 14 percent less likely to have at least one member working after two years than control households, and main recipients were 20 percent less likely to work.
  2. The Barcelona program paid roughly €500 ($792 PPP) per month on average to households with income below the subsistence level, equivalent to nearly 50 percent of Spain's national minimum wage, with benefits scaled to household income, size, and composition.
  3. Negative employment effects of the two-year transfer persisted until at least six months after the final payment, with tentative evidence that effects were mainly driven by households with care responsibilities and no evidence of effects on social participation or education-related activities.

AI Summary. China's demographic path trails Japan's by roughly 15–20 years: China's working-age population began falling in 2015 versus 1995 in Japan, and its total population began declining in 2022 versus 2008 in Japan. Analysts note China's current population structure resembles Japan's around 1990, when Japan entered a long-term decline.

Pak Yiu, Grace Li, Ck Tan and Mitsuro Obe Nikkei Asia
Date Posted:

.@NikkeiAsia notes demographic parallels between China and Japan. Japan’s population peaked in 2008, relative to 2022 in China.

Does China's aging population mirror Japan's path toward long-term decline?

Core argument: Experts place China 15–20 years behind Japan in demographic maturation: China's working-age population began falling in 2015 versus 1995 in Japan, and its total population began declining in 2022 versus 2008 in Japan.

Experts point out a lag of only 15-20 years between Japan and China in terms of demographic maturation: the working-age population started falling in 2015 in China vs. in 1995 in Japan; the population decline began in 2022 in China vs. 2008 in Japan. At the time the population began moving toward decline, the median age of the Japanese population was 37, the same median age as China's population in 2020. "China's population structure [now] is similar to Japan's around 1990, when Japan entered a long-term decline," points out Chi Hung Kwan, senior fellow at Nomura Institute of Capital Markets Research.

Takeaways by Macro Roundup® AI

  1. Experts place China 15–20 years behind Japan in demographic maturation: China's working-age population began falling in 2015 versus 1995 in Japan, and its total population began declining in 2022 versus 2008 in Japan.
  2. China's median age reached 37 in 2020, the same median age Japan had when its population began moving toward decline.
  3. Chi Hung Kwan, senior fellow at Nomura Institute of Capital Markets Research, says China's population structure resembles Japan's around 1990, when Japan entered a long-term decline.

AI Summary. In continental Europe millennials have drifted gradually rightward like earlier generations, but in the UK, US, Canada, Australia and New Zealand they have not, which the author argues points to cultural rather than purely economic disillusionment. Younger adults are now far more pro-immigration and more liberal on LGBT issues than their elders.

John Burn Murdoch Financial Times
Date Posted:

.@jburnmurdoch argues the leftward swing of Anglophone millennials relative to their peers in other advanced economies suggest culture war issues will only benefit the right in the short term.

Why have millennials in English-speaking countries not shifted rightward with age?

Core argument: Millennials in continental Europe continue to drift gradually rightward like prior generations, while those in the UK, US, Canada, Australia and New Zealand have veered off that path, which the author calls a smoking gun.

Across continental Europe, millennials continue to follow their ancestors gradually rightward, but from the UK and US to Canada, Australia and New Zealand, they have veered away from the traditional path. This is a smoking gun. Continental multi-party systems allow voters to switch their allegiances away from anti-immigrant parties while still staying within the right or leftwing bloc in a way that the predominantly two-party Anglosphere system does not. If millennials were being alienated solely by economic injustice, we might see the same desertion of the right in Europe as in the English-speaking world. A growing cultural disillusionment makes more sense. In 2009, views on immigration were not delineated according to party or age divides. But 10 years and several culture battles later, younger adults are now far more pro-immigration than their elders, and those on the left are far less anti-immigration than the right. The same is true with attitudes to LGBT issues, where a divide between progressives and conservatives now neatly maps on to age. In both cases, conservatives successfully drove a wedge between one generation and the rest — but the cohort they discarded is growing steadily larger.

Takeaways by Macro Roundup® AI

  1. Millennials in continental Europe continue to drift gradually rightward like prior generations, while those in the UK, US, Canada, Australia and New Zealand have veered off that path, which the author calls a smoking gun.
  2. Continental multi-party systems let voters shift away from anti-immigrant parties while remaining within the right or left bloc, an option the predominantly two-party Anglosphere system does not offer.
  3. Views on immigration were not divided by party or age in 2009, but a decade and several culture battles later younger adults are far more pro-immigration than their elders, with the same pattern on LGBT issues.

AI Summary. A Wall Street Journal-NORC poll found 44% of Americans say their finances are in worse condition than they expected at this stage of life, and more than a third are not at all satisfied with how they are getting along financially. Fewer than 3 in 10 said people like them have a good chance of improving their standard of living.

Janet Adamy Wall Street Journal
Date Posted:

In a recent @WSJ poll, 78% of adults said they don’t feel confident that their kid’s generation will be better off than they had been, the highest share since the survey began asking the question in 1990.

Do most Americans doubt their finances and their children's prospects?

Core argument: A plurality of respondents, 44%, in the WSJ-NORC poll of 1,019 adults said their finances are in worse condition than they expected for this stage in life.

The WSJ-NORC poll surveyed 1,019 adults from March 1 to 13, largely before the collapse of Silicon Valley Bank and subsequent turmoil in the financial industry. A plurality of respondents, 44%, said their finances are in worse condition than they expected for this stage in life, and more than a third said they are not at all satisfied with how they are getting along financially. Fewer than 3 in 10 agreed that people like them and their family have a good chance of improving their standard of living. For more than three decades, NORC has asked Americans whether life for their children’s generation will be better than it has been for their own using its General Social Survey. White respondents were more likely to say they are not confident than Black and Hispanic respondents.

Takeaways by Macro Roundup® AI

  1. A plurality of respondents, 44%, in the WSJ-NORC poll of 1,019 adults said their finances are in worse condition than they expected for this stage in life.
  2. Fewer than 3 in 10 respondents agreed that people like them and their family have a good chance of improving their standard of living, and more than a third said they are not at all satisfied with how they are getting along financially.
  3. White respondents in the WSJ-NORC poll, conducted March 1 to 13 largely before the collapse of Silicon Valley Bank, were more likely than Black and Hispanic respondents to say they are not confident about their children's generation.

AI Summary. A study of 394,378 U.S. adults in an online personality and ability assessment project found lower annual cognitive ability scores over 13 years, across education, gender, and age groups. The decline in scores was steeper among those without a four-year college degree.

Elizabeth Dworak, William Revelle and David Condon Intelligence
Date Posted:

Evidence from an online personality test suggests that the Flynn effect reversed in the United States between 2006-2018 for all levels of education attainment, with the most significant decline for individuals without a college degree.

Are U.S. adult cognitive ability scores declining over time?

Core argument: Across 394,378 U.S. adults in the SAPA Project from 2006 to 2018, composite cognitive ability scores measured by 35 items were lower each year regardless of education, gender, and age.

Thirteen years of cross-sectional data from a subsample of adults (n = 394,378) were obtained from the Synthetic Aperture Personality Assessment Project (SAPA Project) to examine if cognitive ability scores changed within the United States from 2006 to 2018.  Regardless of education, gender, and age, lower annual scores were observed for composite cognitive ability measured by 35 items, and the matrix reasoning and letter and number series scores measured across the 13 years of assessment. A reverse Flynn effect was also present across all levels of educational attainment, with the rate of decreasing scores being steeper for those with less than a 4-year college degree.

Takeaways by Macro Roundup® AI

  1. Across 394,378 U.S. adults in the SAPA Project from 2006 to 2018, composite cognitive ability scores measured by 35 items were lower each year regardless of education, gender, and age.
  2. Matrix reasoning and letter and number series scores also declined across the 13 years of SAPA Project assessment.
  3. A reverse Flynn effect was present at all levels of educational attainment, with steeper rates of decline among adults with less than a 4-year college degree.

Monday, March 27, 2023

AI Summary. Goldman Sachs estimates that in the decade after generative AI reaches half of employers, 7% of workers lose their jobs entirely, though most find nearly as productive work. It projects AI adds about 1.5 percentage points to US labor productivity and 1.4 points globally, nearly $7tn in extra annual world output.

Bryce Elder FT Alphaville
Date Posted:

.@FTAlphaville reports on a @GoldmanSachs note forecasting that AI could add 1.5pp to annual US labor productivity growth, or double the current pace, and that the “AI growth bonus” could add almost $7T to global GDP over 10 years.

How much productivity and job loss will generative AI bring?

Core argument: Goldman Sachs's base case has 7% of workers losing their jobs entirely in the decade after generative AI reaches half of employers, though most of those workers find something nearly as productive to do.

Goldman’s base case is for 7 percent of workers to lose their jobs entirely in the decade after generative AI reaches half of employers, but that most will find something nearly as productive to do. That’s set against broad improvements in workforce efficiency that can add around 1.5 percentage points to US labour productivity — which would be about double the current rate. The AI growth bonus globally may be 1.4 percentage points, representing almost $7tn in extra annual global GDP over 10 years, it estimates.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs's base case has 7% of workers losing their jobs entirely in the decade after generative AI reaches half of employers, though most of those workers find something nearly as productive to do.
  2. Goldman Sachs estimates broad improvements in workforce efficiency could add about 1.5 percentage points to US labour productivity, roughly double the current rate.
  3. Goldman Sachs estimates the global AI growth bonus at 1.4 percentage points, representing almost $7tn in extra annual global GDP over 10 years.

AI Summary. Both the mean and median worker saw wages fail to keep pace with prices in their consumption baskets, a decline in real wages affecting 54% of workers. Workers under 25 saw real wage growth of 4.3%, while older age groups saw declines that grew larger with age.

Victoria Gregory and Elisabeth Harding Federal Reserve Bank Of St. Louis
Date Posted:

.@stlouisfed finds that nominal wage growth did not keep pace with inflation for 54% of US workers.

Did most workers see their wages fall behind prices?

Core argument: 54% of workers experienced negative real wage growth in 2022, as wage growth failed to keep pace with price growth in their consumption baskets, and both the mean and median worker saw real wages decline.

Both the mean and median worker experienced negative real wage growth in 2022, meaning the growth of their wages did not keep up with the growth of prices in their consumption baskets. Altogether, this was the case for 54% of workers. Workers younger than 25 years old experienced a positive real wage growth rate of 4.3%, while other age groups experienced negative real wage growth rates.  In fact, the older the age group, the lower the real wage growth. Similarly, individuals with less than a high school diploma experienced smaller declines in their real wages than those in all other education groups.

Takeaways by Macro Roundup® AI

  1. 54% of workers experienced negative real wage growth in 2022, as wage growth failed to keep pace with price growth in their consumption baskets, and both the mean and median worker saw real wages decline.
  2. Workers younger than 25 posted positive real wage growth of 4.3% in 2022 while all other age groups saw negative real wage growth, with real wage growth lower for each older age group.
  3. Individuals with less than a high school diploma experienced smaller real wage declines in 2022 than workers in all other education groups.

AI Summary. Data from an online dating service covering 80,000 users across ten cities show women block 70% of potential matches versus 55% for men, largely by excluding shorter or younger users. Among both sexes, the 10% with the strictest filters like 11-13 percentage points fewer of their remaining candidates than the 10% with the broadest filters.

Economist Staff The Economist
Date Posted:

.@TheEconomist examines data from an American dating site aimed at educated professionals. They find that, when users do apply filters, they mostly reflect familiar dating preferences that long predate the internet.

Do online daters with stricter filters accept more of their remaining matches?

Core argument: Among 80,000 users of dating site The League across ten cities in January 2023, the 10% with the tightest filters liked 11-13 percentage points fewer of their prospects than the 10% with the broadest filters, for both sexes.

The League’s data cover 80,000 users across ten cities in January 2023. The site chooses pairs of users who pass each other’s filters and present them as “prospects”. If these users both “like” each other, they can chat. Users see a fixed number of candidates per day. This makes it possible to distinguish explicit dating desires (filters) from implicit ones, revealed by how often users like their prospects. Filtering choices follow demographic patterns. Women block 70% of potential matches, compared with 55% for men, mostly because they tend to exclude users who are shorter or younger. Because users with strict filters weed out most unsuitable people pre-emptively, you might expect them to like many of the remaining candidates. But the data show the opposite. For both sexes, the share of prospects liked by the 10% of users with the tightest filters is 11-13 percentage points lower than by the 10% with the broadest ones.

Takeaways by Macro Roundup® AI

  1. Among 80,000 users of dating site The League across ten cities in January 2023, the 10% with the tightest filters liked 11-13 percentage points fewer of their prospects than the 10% with the broadest filters, for both sexes.
  2. Women on The League block 70% of potential matches versus 55% for men, mostly by excluding users who are shorter or younger.
  3. The League's design, which shows users a fixed number of pre-filtered prospects each day, makes it possible to distinguish explicit dating desires expressed in filters from implicit ones revealed by how often users like their prospects.

AI Summary. A Wall Street Journal-NORC poll found 38% of Americans call patriotism very important and 39% say the same of religion, down from 70% and 62% in 1998. Money was the only tested priority to grow in importance, cited as very important by 43% versus 31% in 1998.

Aaron Zitner Wall Street Journal
Date Posted:

Over the past 25 years the number of Americans reporting “patriotism” was “very important” to them declined from 70% to 38% and “having children” declined from 59% to 30%. The number reporting “money” climbed from 31% to 43%. @WSJ

Are Americans placing less importance on patriotism and religion than money?

Core argument: In the Wall Street Journal-NORC poll, 38% of Americans said patriotism was very important to them, down from 70% when the Journal first asked the question in 1998.

Patriotism, religious faith, having children and other priorities that helped define the national character for generations are receding in importance to Americans, a new Wall Street Journal-NORC poll finds. Some 38% of respondents said patriotism was very important to them, and 39% said religion was very important. That was down sharply from when the Journal first asked the question in 1998, when 70% deemed patriotism to be very important, and 62% said so of religion. The only priority the Journal tested that has grown in importance in the past quarter-century is money, which was cited as very important by 43% in the new survey, up from 31% in 1998.

Takeaways by Macro Roundup® AI

  1. In the Wall Street Journal-NORC poll, 38% of Americans said patriotism was very important to them, down from 70% when the Journal first asked the question in 1998.
  2. Religion was rated very important by 39% of respondents in the Wall Street Journal-NORC poll, compared with 62% in 1998.
  3. Money was the only priority tested by the Journal that grew in importance over the past quarter-century, cited as very important by 43%, up from 31% in 1998.

AI Summary. Private equity and venture capital deal activity in aerospace and defence companies totalled $20bn in one year and $34bn the prior year, up from an average of $10.4bn annually in the five years before the pandemic, according to data compiled by PitchBook. European private equity deal activity in defence-focused companies reached €3.8bn, the second highest in a decade.

Leila Abboud and Sylvia Pfeifer Financial Times
Date Posted:

Between 2015-19 private equity and venture capital investment into aerospace and defence averaged $10.4B annually. Investment reached $20B in 2022 after peaking at $34B in 2021. @FT

Is private equity investment in defence companies rising?

Core argument: Global private equity and venture capital deal activity in aerospace and defence companies reached $20bn in 2022 and $34bn in 2021, up from an annual average of $10.4bn during 2015–2019, according to PitchBook data compiled for the FT.

Global deal activity in aerospace and defence companies by private equity and venture capital investors stood at $20bn in 2022 and $34bn in 2021, according to data compiled by PitchBook for the FT. That represents an uplift from before the pandemic when money flowing into the sector averaged $10.4bn annually from 2015 to 2019. European private equity deal activity in defence-focused companies reached €3.8bn in 2021, according to data from PitchBook, the second highest over the past decade after €5.3bn in 2019. The two top PE defence deals by value were done by Advent International, which bought UK-listed groups Cobham for £4bn in 2019 and Ultra Electronics for £2.8bn in 2022.

Takeaways by Macro Roundup® AI

  1. Global private equity and venture capital deal activity in aerospace and defence companies reached $20bn in 2022 and $34bn in 2021, up from an annual average of $10.4bn during 2015–2019, according to PitchBook data compiled for the FT.
  2. European private equity deal activity in defence-focused companies hit €3.8bn in 2021, the second highest of the past decade behind €5.3bn in 2019, according to PitchBook.
  3. Advent International completed the two largest private equity defence deals by value, buying UK-listed Cobham for £4bn in 2019 and Ultra Electronics for £2.8bn in 2022.

AI Summary. The Pentagon is offering suppliers multiyear contracts and sending teams to resolve supply bottlenecks as procurement budgets grow, while abandoning post-Cold War cost-cutting practices such as just-in-time delivery and consolidation of the defense industry. The Defense Production Act is also being used to accelerate new missile programs, including hypersonic weapons.

Eric Lipton New York Times
Date Posted:

The Pentagon has abandoned some of the cost-cutting changes embraced at the end of the Cold War, and President Biden has invoked the Defense Production Act to accelerate development of several hypersonic weapons systems. @NYT

The Pentagon has abandoned some of the cost-cutting changes embraced at the end of the Cold War, and President Biden has...

How is the Pentagon trying to expand weapons production capacity?

Core argument: The Pentagon is offering suppliers multiyear contracts to encourage investment in manufacturing capacity and dispatching teams to resolve supply bottlenecks as procurement budgets grow.

Procurement budgets are growing. The military is offering suppliers multiyear contracts to encourage companies to invest more in their manufacturing capacity and is dispatching teams to help solve supply bottlenecks. More generally, the Pentagon is abandoning some of the cost-cutting changes embraced after the end of the Cold War, including corporate-style just-in-time delivery systems and a drive to shrink the industry. President Biden has also turned to the Defense Production Act — used during the pandemic to speed up the manufacturing of respirators and vaccines — to move ahead with new missile programs faster, including a number of hypersonic weapons being developed for the Air Force, the Army and the Navy.

Takeaways by Macro Roundup® AI

  1. The Pentagon is offering suppliers multiyear contracts to encourage investment in manufacturing capacity and dispatching teams to resolve supply bottlenecks as procurement budgets grow.
  2. The Pentagon is abandoning some cost-cutting practices adopted after the Cold War ended, including corporate-style just-in-time delivery systems and a drive to shrink the defense industry.
  3. President Biden has turned to the Defense Production Act, used during the pandemic to speed production of respirators and vaccines, to advance missile programs including hypersonic weapons for the Air Force, Army and Navy.

AI Summary. Establishment-level U.S. Census data on roughly 35,000 manufacturing plants show that those using robots tend to be larger, pay higher earnings per worker, employ a larger share of production workers, and spend more on capital including information technology. Robots are highly concentrated geographically even after accounting for industry mix.

Erik Brynjolfsson, Cathy Buffington, et al National Bureau of Economic Research
Date Posted:

Evidence from investment in robots suggests robots are complementary to production workers and their adaptation is concentrated in hubs. @erikbryn @CathyBuffington @ngoldschlag @jmirandal

How do manufacturing plants using robots differ, and where are they concentrated?

Core argument: Using data on roughly 35,000 U.S. manufacturing establishments from the Census Bureau's 2018 Annual Survey of Manufactures, the authors provide the first establishment-level analysis of robot use in U.S. manufacturing.

We present results on the distribution of robots in U.S. manufacturing by establishment characteristics and geography using new establishment-level data collected by the U.S. Census Bureau’s Annual Survey of Manufacturers for reference year 2018. This is the first establishment-level analysis of the use of robots in U.S. manufacturing, leveraging data on approximately 35,000 establishments. We find that establishments with robots tend to be larger, have higher earnings per worker, have a larger share of production workers, and spend more on capital expenditures, including IT, than establishments without robots. We also find that the distribution of robots is highly skewed across locations, even after accounting for the different mix of industry and manufacturing employment across locations. Some locations, which we call Robot Hubs, have far more robots than one would expect after accounting for industry mix.

Takeaways by Macro Roundup® AI

  1. Using data on roughly 35,000 U.S. manufacturing establishments from the Census Bureau's 2018 Annual Survey of Manufactures, the authors provide the first establishment-level analysis of robot use in U.S. manufacturing.
  2. The authors find that establishments with robots tend to be larger, pay higher earnings per worker, employ a larger share of production workers, and spend more on capital expenditures, including IT, than establishments without robots.
  3. The distribution of robots across U.S. locations is highly skewed even after accounting for differences in industry mix and manufacturing employment, with some locations, termed Robot Hubs, holding far more robots than industry mix would predict.