Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, March 29, 2023

AI Summary. Goldman Sachs estimates generative AI productivity gains based on how easily the technology applies to each occupation rather than where the largest untapped economic opportunities lie. The author argues gains in producing documents and emails are overstated, while gains in software production are far larger than Goldman anticipates.

Paul Kedrosky and Eric Norlin Irregular Ideas
Date Posted:

.@pkedrosky argues that Goldman’s new AI report understates potential for productivity-enhancing software development that was previously too expensive to develop, which implies lots of “low-hanging economic fruit.”

Are AI productivity gains misjudged by focusing on ease of application?

Core argument: Goldman's AI report scales prospective productivity gains to the ease of applying generative AI rather than to the availability of low-hanging economic fruit.

We caution that Goldman’s approach is fairly traditional, in that it treats the prospective productivity gains across various disciplines as a function of the ease of applying these generative AI technologies, as opposed to the availability of low-hanging economic fruit. We think the gains from making it easier to produce presentations and documents and emails are much less than touted. On other hand, we stand by our argument that the gains of generative AI in other occupations are large and larger than Goldman anticipates in this report. Again, and more specifically, we think that the gains from producing software are very large, given that, as we’ve argued, we have underproduced for decades, and software sits in the sweet spot with respect to its combination of a clean grammar and logical structure, and given that it has been too costly to produce for most of its existence, hence why it’s been so slow to “eat the world,” as has sometimes been said is happening.

Takeaways by Macro Roundup® AI

  1. Goldman's AI report scales prospective productivity gains to the ease of applying generative AI rather than to the availability of low-hanging economic fruit.
  2. Gains from using generative AI to produce presentations, documents, and emails are smaller than touted, while gains in other occupations are larger than Goldman's report anticipates.
  3. Software production likely offers very large generative AI gains, given decades of underproduction, software's combination of clean grammar and logical structure, and its high cost of production for most of its existence.

AI Summary. Banks' main vulnerability lies in their liabilities rather than their assets, as fiscal and monetary stimulus swelled deposits and pushed the bank loan-to-deposit ratio to a 50-year low of about 60%, according to Moody's. Social media and smartphone banking apps have made uninsured deposits less sticky, potentially pressuring small and midsize banks.

Greg Ip Wall Street Journal
Date Posted:

.@greg_ip argues that small and medium sized banks could face a “prolonged period of pressure on their deposits” that could reduce the supply of credit to the economy.

Have digital banking and social media made bank deposits less stable?

Core argument: The ratio of bank loans to deposits fell to a 50-year low of about 60% in September 2021, according to a Moody's Investors Service report, as pandemic-era Fed bond purchases and Treasury relief payments to household accounts ballooned deposits.

Compared with the past, the bigger problem for banks isn’t the asset side of their balance sheets but the liability side. That is in part due to the fiscal and monetary-policy response to the pandemic. The Federal Reserve restarted purchases of bonds, and the Treasury sent big stimulus and other relief payments directly to household bank accounts. As a result, deposits ballooned. The ratio of bank loans to deposits fell to a 50-year low of around 60% in September 2021, Moody’s Investors Service said in a report.  While a growing share of banks’ deposits were uninsured, they were assumed to be relatively “sticky,” or less prone to flee than other types of wholesale funding. But social media and smartphone banking apps seem to have changed that. Small and medium-size banks could be in for a prolonged period of pressure on their deposits, which could in turn force them to be acquired, or limit their lending.

Takeaways by Macro Roundup® AI

  1. The ratio of bank loans to deposits fell to a 50-year low of about 60% in September 2021, according to a Moody's Investors Service report, as pandemic-era Fed bond purchases and Treasury relief payments to household accounts ballooned deposits.
  2. Banks' larger problem lies on the liability rather than the asset side of their balance sheets, as social media and smartphone banking apps appear to have undermined the assumption that uninsured deposits are "sticky.".
  3. Small and medium-size banks could face a prolonged period of pressure on their deposits, which could force them to be acquired or limit their lending.

AI Summary. Commercial real estate valuations look stretched, but distress remains rare: regional banks' commercial real estate loans carry an average loan-to-value ratio near 66%, far below the dangerously high levels of the early-1990s bust. Outside offices, where vacancy rates are soaring, net operating income growth appears healthy.

Robert Armstrong and Ethan Wu Financial Times
Date Posted:

Commercial real estate (CRE) fundamentals are, outside of offices, “sturdy enough.” Loan-to-value ratios are relatively low, meaning that falling prices aren’t likely to translate into defaults. @rbrtrmstrng @EthanYWu

Do stretched commercial real estate valuations threaten widespread defaults?

Core argument: Regional banks' commercial real estate loans carry an average loan-to-value ratio of about 66 per cent, according to MSCI Real Assets, unlike the CRE bust of the early 1990s, when loan-to-value ratios were treacherously high.

Valuations look very stretched and a reversion to the mean suggests a harsh correction. Falling prices, however, are not nearly as worrisome as defaults. And outside of offices, fundamentals seem sturdy enough. Distress remains rare. Unlike in the CRE bust of the early 1990s, when loan-to-value ratios were treacherously high, regional banks’ CRE loans have an average LTV around 66 per cent, according to MSCI Real Assets. Offices’ soaring vacancy rates are not showing up elsewhere. With the possible exception of recession-exposed retail, net operating income growth looks healthy (though this is somewhat exaggerated by inflation).

Takeaways by Macro Roundup® AI

  1. Regional banks' commercial real estate loans carry an average loan-to-value ratio of about 66 per cent, according to MSCI Real Assets, unlike the CRE bust of the early 1990s, when loan-to-value ratios were treacherously high.
  2. Commercial real estate valuations look very stretched, and a reversion to the mean suggests a harsh correction, though falling prices are not nearly as worrisome as defaults, and distress remains rare.
  3. Soaring office vacancy rates are not appearing in other commercial real estate segments, where net operating income growth looks healthy, somewhat exaggerated by inflation, with the possible exception of recession-exposed retail.

AI Summary. Nationwide French protests against the government's plan to raise the retirement age drew smaller crowds than the previous union-led demonstration, with the CGT labour union counting 450,000 people in Paris versus 800,000 and police putting national turnout at 740,000 versus more than 1m. The government has rejected union mediation attempts and vowed to finalise the reform.

Leila Abboud, Sarah White, and Adrienne Klasa Financial Times
Date Posted:

Protests directed at Macron’s pension reform proposal were smaller Tuesday with the CGT labour union estimating 450,000 people protested in Paris down from 800,000 Thursday. @FinancialTimes

Protests directed at Macron’s pension reform proposal were smaller Tuesday with the CGT labour union estimating 450,000...

Are protests against raising the retirement age losing momentum?

Core argument: The CGT labour union estimated 450,000 protesters in Paris in France's tenth nationwide demonstration against raising the retirement age, down from 800,000 at the previous union-led protest, with declines also reported in Marseille, Rennes and Toulouse.

Smaller crowds turned out across France on Tuesday in the tenth nationwide protest held by labour unions against President Emmanuel Macron’s unpopular plan to raise the retirement age, while strikes disrupted transportation and shut down the Eiffel Tower and the palace of Versailles. The CGT labour union estimated that 450,000 people had turned out in Paris compared with 800,000 at the previous union-led demonstration on Thursday, with declines also reported in Marseille, Rennes and Toulouse. Police figures put the nationwide crowds at 740,000 people compared with more than a million last week. The lower turnout is a boost for Macron’s government, which has rejected union attempts at mediation to ease the crisis and vowed to hold firm on finalising the reform by mid-April once it has been reviewed by the constitutional court. But unions are also maintaining their position: another nationwide protest is set for April 6.

Takeaways by Macro Roundup® AI

  1. The CGT labour union estimated 450,000 protesters in Paris in France's tenth nationwide demonstration against raising the retirement age, down from 800,000 at the previous union-led protest, with declines also reported in Marseille, Rennes and Toulouse.
  2. Police put nationwide turnout at 740,000, compared with more than a million a week earlier, while strikes disrupted transportation and shut the Eiffel Tower and the palace of Versailles.
  3. Emmanuel Macron's government has rejected union mediation attempts and vowed to finalise the pension reform by mid-April after constitutional court review, while unions have called another nationwide protest for April 6.

AI Summary. Executive compensation remains overwhelmingly tied to shareholder value as measured by stock prices and financial performance, and while environmental and social metrics in pay have increased, the authors find the relationship small. Corporate statements of environmental, social, and governance goals are associated with supportive policies and programs but little evidence of improved measurable outcomes.

Raghuram Rajan, Pietro Ramella and Luigi Zingales National Bureau of Economic Research
Date Posted:

A review of shareholder letters from 1955 and 2020 finds that corporations “pick and choose the stakeholders they want to focus attention on, while emphasizing long-term shareholder value, especially in how they compensate.” @zingales

Do corporate social goals change executive pay and measurable outcomes?

Core argument: Executive compensation remains overwhelmingly tied to shareholder value as measured by stock prices and financial performance, despite the proliferation of stated corporate goals, according to the authors' analysis of letters to shareholders.

In spite of the proliferation of corporate goals, we find that executive compensation remains overwhelmingly focused on shareholder value, as measured by stock prices and financial performance. While we do observe an increase in the use of environmental and social metrics in compensation, especially by firms that announce such goals, the magnitude of this relationship is still small. We also find corporate statements of ESG goals are associated with policies and programs that favor those goals, but there is little evidence that it improves the firm’s measurable ESG outcomes. These findings cast doubt on the hope that self-regulation would suffice to undertake a green transition. Firms seem very responsive to the public mood in words and programs. Better outcomes? Not yet! There is no evidence that a focus on shareholder value is detrimental (or beneficial) to the long-term health of a corporation, whether that health is measured with profits, dividends, or stock market returns.

Takeaways by Macro Roundup® AI

  1. Executive compensation remains overwhelmingly tied to shareholder value as measured by stock prices and financial performance, despite the proliferation of stated corporate goals, according to the authors' analysis of letters to shareholders.
  2. Corporate statements of ESG goals are associated with policies and programs favoring those goals and with a small increase in the use of environmental and social metrics in pay, but the authors find little evidence of improved measurable ESG outcomes.
  3. The authors find no evidence that a focus on shareholder value is either detrimental or beneficial to a corporation's long-term health, whether measured by profits, dividends, or stock market returns.

AI Summary. China's leadership has emphasized war readiness, announcing a 7.2% increase in the defense budget—which has doubled over the past decade—and plans to reduce dependence on foreign grain imports. China has also opened National Defense Mobilization recruitment offices across the country, while cities in Fujian Province opposite Taiwan build or upgrade air-raid shelters.

John Pomfret and Matt Pottinger Foreign Affairs
Date Posted:

Matt Pottinger and @JEPomfret note that Xi Jinping recently urged senior military leaders to “dare to fight.” China has also started building or upgrading air raid shelters and at least one “wartime emergency hospital.”

Is China preparing for war?

Core argument: China announced a 7.2 percent increase in its defense budget, which has doubled over the last decade, alongside plans to reduce the country's dependence on foreign grain imports.

Chinese leader Xi Jinping says he is preparing for war. At the annual meeting of China’s parliament and its top political advisory body in March, Xi wove the theme of war readiness through four separate speeches, in one instance telling his generals to “dare to fight.” His government also announced a 7.2 percent increase in China’s defense budget, which has doubled over the last decade, as well as plans to make the country less dependent on foreign grain imports. Since December, the Chinese government has also opened a slew of National Defense Mobilization offices—or recruitment centers—across the country, including in Beijing, Fujian, Hubei, Hunan, Inner Mongolia, Shandong, Shanghai, Sichuan, Tibet, and Wuhan. At the same time, cities in Fujian Province, across the strait from Taiwan, have begun building or upgrading air-raid shelters and at least one “wartime emergency hospital,” according to Chinese state media. In March, Fujian and several cities in the province began preventing overseas IP addresses from accessing government websites, possibly to impede tracking of China’s preparations for war.

Takeaways by Macro Roundup® AI

  1. China announced a 7.2 percent increase in its defense budget, which has doubled over the last decade, alongside plans to reduce the country's dependence on foreign grain imports.
  2. Xi Jinping wove war readiness through four separate speeches at the annual meeting of China's parliament and its top political advisory body, in one instance telling his generals to "dare to fight.".
  3. Since December, the Chinese government has opened National Defense Mobilization offices in Beijing, Fujian, Hubei, Hunan, Inner Mongolia, Shandong, Shanghai, Sichuan, Tibet, and Wuhan, while cities in Fujian have begun building or upgrading air-raid shelters, according to Chinese state media.

AI Summary. Deeper Western economic ties with China are unlikely because such co-dependence now carries large geopolitical risks, pushing the trend toward decoupling even though the process is neither easy nor welcome. China now aims to develop its own electric-vehicle industry rather than rely on foreign carmakers.

Orville Schell and Irena Grudzinska Gross Project Syndicate
Date Posted:

.@orvilleschell argues that business leaders in Europe and the United States are myopic not to move “ferociously in the direction of decoupling, even though that process is neither easy nor welcome” given the risk of war in the Western Pacific.

.@orvilleschell argues that business leaders in Europe and the United States are myopic not to move “ferociously in...

Are deeper Western economic ties with China still likely?

Core argument: The author argues that deeper economic ties with China are not in the offing because such co-dependence now carries huge geopolitical risks, even as many supply chains remain reliant on China.

My own view is that, whether you are from Blackstone or Morgan Stanley, you would have to be deluded not to see which way the wind is blowing. Despite ongoing reliance on China for many supply chains, deeper economic ties are not in the offing, because such co-dependence now comes with huge geopolitical risks. It is hard to imagine that even Elon Musk, who has made a fortune in China with his Tesla factory, will be able to maintain this success over the long term. China now wants to develop its own electric-vehicle industry, and it does not want to rely on Musk anymore. So, the wind is blowing more and more ferociously in the direction of decoupling, even though that process is neither easy nor welcome. Yes, some US and foreign companies – such as the stalwarts of Germany’s auto industry – have not yet reconciled themselves with the new reality. CEOs do not like to countenance gloomy and disruptive scenarios. But all they have to do is look at what has happened in Ukraine. If China were to move against Taiwan, it would make the fallout from the war in Eastern Europe look like child’s play.

Takeaways by Macro Roundup® AI

  1. The author argues that deeper economic ties with China are not in the offing because such co-dependence now carries huge geopolitical risks, even as many supply chains remain reliant on China.
  2. The author contends that Elon Musk is unlikely to sustain his Tesla success in China over the long term, since China wants to develop its own electric-vehicle industry rather than rely on him.
  3. The author holds that Chinese military action against Taiwan would make the fallout from the war in Ukraine look like child's play, a new reality some US and foreign companies, including Germany's automakers, have not yet accepted.

Thursday, March 30, 2023

AI Summary. Trade as a share of GDP has stalled since the financial crisis and declined in some cases, but capital and labor market trends point the other way, making it premature to describe the world economy as deglobalizing. While the US and China appear to be reducing reliance on global markets, other countries are not.

Pinelopi Goldberg and Tristan Reed Brookings Papers on Economic Activity
Date Posted:

Citing measures of trade, capital flows, and immigration, @PennyG_Yale argues there is evidence of a slowdown but not a reversal of globalization.

Is the global economy actually deglobalizing?

Core argument: Trade as a share of GDP has stalled since the financial crisis and declined in some cases, while trends in capital and labor markets point in a different direction, suggesting it is premature to speak of "deglobalization.".

First, it is clear that the growth of trade as percent of GDP has stalled since the financial crisis, and even declined in some cases. However, trends in capital and labor markets tell a different story. Taken together, these trends suggest that it is premature to talk of “deglobalization” – the slowdown of global trade seems a natural development following its earlier, fast growth and reflects partly the growth of the domestic markets of two large, formerly low-income countries, China and India. Second, deglobalization trends are highly heterogeneous across countries. While the United States and China – the world’s two largest economies which by virtue of their economic size drive aggregate trends – seem to be gradually decreasing their reliance on global markets, this is not true for the rest of the world.

Takeaways by Macro Roundup® AI

  1. Trade as a share of GDP has stalled since the financial crisis and declined in some cases, while trends in capital and labor markets point in a different direction, suggesting it is premature to speak of "deglobalization.".
  2. The slowdown in global trade follows an earlier period of fast growth and partly reflects the expansion of domestic markets in China and India, two large, formerly low-income countries.
  3. Deglobalization trends are heterogeneous across countries: the United States and China, the world's two largest economies, appear to be gradually reducing their reliance on global markets and drive aggregate trends by virtue of their size, while the rest of the world is not.

AI Summary. The U.S. combined federal, state, and local tax and transfer system is highly progressive: the bottom fifth of households faced a net rate of -127%, receiving $1.27 from government per dollar earned, while the top fifth paid a net 30.7%. The top fifth funded 90.1%, or $1.6tn, of all government transfers.

Tim Vermeer, Alex Durante, et al Tax Foundation
Date Posted:
Is Database:
Database

.@TaxFoundation analysis finds that for every dollar earned by the lowest quintile of American households, they receive an additional $1.27 from the government. @tevermeer @ericadyork @alex_durante_ @JaredWalczak

How progressive is the combined US tax and transfer system?

Core argument: The lowest U.S. income quintile faced a combined tax and transfer rate of -127.0%, receiving an extra $1.27 from government per dollar earned, while the top quintile's rate was +30.7%, paying just under $0.31 per dollar earned.

The U.S. system of taxes and transfers is highly progressive. The lowest quintile experienced a combined tax and transfer rate of negative 127.0 percent, meaning that for each dollar they earned, they received an additional $1.27 from the government, netting transfers (gains) and taxes (losses), while the top quintile had a rate of positive 30.7 percent, meaning on net they paid just under $0.31 for every dollar earned. The top quintile funded 90.1 percent, or $1.6 trillion, of all government transfers in 2019. For each dollar of taxes paid, the top quintile received $0.11 in gross government transfers. Government transfers account for 59 percent of the bottom quintile’s comprehensive income. For each dollar of taxes paid by the bottom quintile, they received $6.17 in gross government transfers.

Takeaways by Macro Roundup® AI

  1. The lowest U.S. income quintile faced a combined tax and transfer rate of -127.0%, receiving an extra $1.27 from government per dollar earned, while the top quintile's rate was +30.7%, paying just under $0.31 per dollar earned.
  2. The top quintile funded 90.1%, or $1.6 trillion, of all government transfers in 2019, receiving $0.11 in gross transfers for each dollar of taxes paid.
  3. Government transfers account for 59% of the bottom quintile's comprehensive income, and that group received $6.17 in gross government transfers for each dollar of taxes paid.

AI Summary. Federal Reserve data show the 25 largest U.S. banks gained $120bn in deposits while all smaller U.S. banks lost $108bn, the largest weekly dollar decline in smaller banks' deposits on record. Banks with under $10bn in assets accounted for nearly 43% of outstanding small-business loans, versus under 23% for the 13 largest banks.

David Benoit, Rachel Louise Ensign, et al Wall Street Journal
Date Posted:

Banks with less than $120B in deposits have lost over $108B in deposits since SVB’s collapse, which should restrict credit availability. Banks with <$10B in deposits account for almost 43% of small business loans. @WSJ

Does a shift of deposits to big banks threaten small-business lending?

Core argument: The 25 largest U.S. banks gained $120 billion in deposits in the days after SVB's collapse while all smaller U.S. banks lost $108 billion, the largest weekly dollar decline in smaller banks' deposits on record, according to Federal Reserve data.

The 25 biggest U.S. banks gained $120 billion in deposits in the days after SVB collapsed, according to Federal Reserve data. All the U.S. banks below that level lost $108 billion over the same period. It was the largest weekly decline in smaller banks’ deposits in dollar terms on record. Meanwhile, more than $220 billion has flowed into money-market funds over the past two weeks, according to data from Refinitiv Lipper. Banks with less than $10 billion in assets accounted for nearly 43% of small loans to businesses outstanding at the end of 2022, according to Prof. Cole’s analysis of federal banking data. The 13 largest banks, by contrast, accounted for less than 23% of small- business loans, much of which represents credit-card balances, he said.

Takeaways by Macro Roundup® AI

  1. The 25 largest U.S. banks gained $120 billion in deposits in the days after SVB's collapse while all smaller U.S. banks lost $108 billion, the largest weekly dollar decline in smaller banks' deposits on record, according to Federal Reserve data.
  2. More than $220 billion flowed into money-market funds over two weeks, according to data from Refinitiv Lipper.
  3. Banks with less than $10 billion in assets accounted for nearly 43% of small loans to businesses outstanding at the end of 2022, versus less than 23% for the 13 largest banks, much of it credit-card balances, according to Prof. Cole's analysis of federal banking data.

AI Summary. The commercial-property industry owed $5.6trn to investors and financial institutions, with about half owed to banks and $2.2trn owed to banks holding under $250bn in assets. Even a scenario in which landlords default on half of those small banks' office loans implies roughly $140bn in losses, about 10% of small banks' equity capital, though unevenly distributed.

Economist Staff The Economist
Date Posted:

Back of the envelope math suggests banks should be able to weather the decline in offices values; small banks face losses of $140B on offices, which is only 10% of their equity capital. @TheEconomist

How large are potential commercial-property loan losses for small banks?

Core argument: The commercial-property industry owed $5.6trn in debt to investors and financial institutions at the end of 2022, half of it to banks, according to the data provider Trepp.

At the end of 2022, the commercial-property industry owed $5.6trn in debt to investors and financial institutions. According to Trepp, a data provider, half of this was to banks. Brookfield and funds of its size might need to repay big institutions, but the vast majority are on the hook to lenders with below $250bn in assets—ones which are already under severe stress after the collapse of Silicon Valley Bank. Even the worst-case scenario would have limited impact. Roughly a quarter of the $2.2trn of commercial-property loans owed to small banks are office loans. Imagine thatlandlords hand back the keys on half these loans this year—some $280bn in total. If banks could recover just half the value of the loans by selling off the assets at deep discounts (say, a third of their value three years ago) they would be wearing losses of $140bn. That is just 10% of the equity capital that small banks hold. The blow would be unevenly distributed, however, and could imperil some institutions.

Takeaways by Macro Roundup® AI

  1. The commercial-property industry owed $5.6trn in debt to investors and financial institutions at the end of 2022, half of it to banks, according to the data provider Trepp.
  2. The vast majority of commercial-property borrowers owe lenders holding less than $250bn in assets, banks already under severe stress after the collapse of Silicon Valley Bank.
  3. If landlords handed back the keys on half of small banks' office loans, some $280bn, and banks recovered half that value, the resulting $140bn of losses would equal 10% of small banks' equity capital, unevenly distributed.

AI Summary. The core counties of large U.S. metropolitan areas lost a net of more than 800,000 residents to other parts of the country, an improvement from a 1.2m net outflow the prior year. About 500,000 net arrivals from abroad, plus more births and fewer deaths, left those counties' combined population little changed.

Paul Overberg, John McCormick and Max Rust Wall Street Journal
Date Posted:

Suburbs of big and medium sized cities are driving the US’s population growth while the flight from big cities slowed. @WSJ

Is the population outflow from large urban counties slowing?

Core argument: Core counties of large U.S. metro areas lost an estimated net of more than 800,000 domestic movers in the year ended June 30, an improvement from a 1.2 million drop the prior year, according to a Wall Street Journal analysis.

The suburbs of big cities and small and medium-size metropolitan areas continued to claim most of the country’s growth, according to a Wall Street Journal analysis of population estimates released Thursday for the year that ended June 30. Rural areas and small towns collectively remained nearly flat. The core counties of large metro areas had an estimated net loss of more than 800,000 movers to the rest of the country, but that was an improvement from a 1.2 million drop in the preceding year, the Journal analysis shows. After a sharp falloff in immigration at the peak of the pandemic, the latest data shows a revival that has helped bolster large urban counties, with about 500,000 net arrivals from abroad last year. A rise in births and fewer deaths also helped offset moves out of urban counties, leaving their collective population little changed for the year.

Takeaways by Macro Roundup® AI

  1. Core counties of large U.S. metro areas lost an estimated net of more than 800,000 domestic movers in the year ended June 30, an improvement from a 1.2 million drop the prior year, according to a Wall Street Journal analysis.
  2. About 500,000 net arrivals from abroad, along with a rise in births and fewer deaths, offset moves out of large urban counties, leaving their collective population little changed for the year.
  3. Suburbs of big cities and small and medium-size metropolitan areas claimed most of U.S. growth, while rural areas and small towns collectively remained nearly flat, the Wall Street Journal analysis shows.

AI Summary. Total factor productivity is the main factor accounting for differences in labor productivity growth across countries and over time, and its growth has been lackluster across large advanced economies since the mid-2000s. The authors find this slowdown appears in both manufacturing and market services, with U.S. productivity growth slowing before the Great Recession.

John Fernald, Robert Inklaar, and Dimitrije Ruzic Federal Reserve Bank of San Francisco
Date Posted:
Is Database:
Database

John Fernald @sffed argues that slower total factor productivity growth is likely not a function of the business cycle or scarring due to the crisis, as growth slowed in advance of 2008 across advanced economies.

Why has productivity growth slowed across large advanced economies?

Core argument: Total factor productivity is the main factor accounting for differences in labor productivity growth across countries and over time, and TFP growth has been lackluster across the large economies analyzed since the mid-2000s.

TFP is the main factor accounting for differences in labor productivity growth across countries and over time. Since the mid-2000s, TFP growth has been lackluster across the large economies we analyze here. At the level of the market economy, productivity slowed because the productivity frontier (the U.S.) slowed, with similar slowdowns elsewhere. At a more disaggregated level, the frontier economy is sometimes different, but the pattern of slow TFP growth since the mid-2000s is evident in both manufacturing and market services. Qualitatively as well as statistically, the evidence suggests that, following that mid-1990s pickup, U.S. TFP growth slowed before the Great Recession.

Takeaways by Macro Roundup® AI

  1. Total factor productivity is the main factor accounting for differences in labor productivity growth across countries and over time, and TFP growth has been lackluster across the large economies analyzed since the mid-2000s.
  2. At the market-economy level, productivity slowed because the productivity frontier, the United States, slowed, with similar slowdowns elsewhere.
  3. The evidence suggests that, following the mid-1990s pickup, U.S. TFP growth slowed before the Great Recession, with slow TFP growth since the mid-2000s evident in both manufacturing and market services.

AI Summary. The authors estimate that adjusting for population aging raises the labor force participation rate by 0.9 percentage point, enough to account for the entire participation gap, because the large baby boomer cohort sits at the age around 65 where retirement rates climb steeply. Undoing aging and excess retirements together would lift participation by 1.1 percentage point, from 62.5% to 63.6%.

Mary Amiti, Sebastian Heise, et al Federal Reserve Bank of New York
Date Posted:

An analysis from the @NewYorkFed shows that adjusting the labor force participation rate for population aging and excess retirements raises “the LFPR by 1.1 percentage point from 62.5% to 63.6%, more than making up for the participation gap.”

Does population aging explain the entire labor force participation gap?

Core argument: Adjusting for population aging alone raises the labor force participation rate by 0.9 percentage point in February 2023, which the authors find can explain the entire participation gap.

The gold line in the chart below shows this age-adjusted participation rate. Removing the effect of aging can explain the entire participation gap, lifting LFPR by 0.9 percentage point in February 2023. This big effect arises because the large baby boomer cohort is right at the retirement cutoff. As the chart above shows, the retirement share rises dramatically with age around the age of 65. Consequently, the aging of the baby boomers between 2020 and 2022 led to a significant rise in retirements, reducing participation. We analyze the effect of excess retirements on participation, in addition to the effect of aging. To do so, we analyze how the overall age-adjusted retirement share would change if we went back to the retirement shares in each age group of 2018-19. Overall, our results imply that undoing the effects of population aging and excess retirements would raise the LFPR by 1.1 percentage point from 62.5 percent to 63.6 percent, more than making up for the participation gap.

Takeaways by Macro Roundup® AI

  1. Adjusting for population aging alone raises the labor force participation rate by 0.9 percentage point in February 2023, which the authors find can explain the entire participation gap.
  2. Undoing the effects of population aging and excess retirements would raise the labor force participation rate by 1.1 percentage points, from 62.5 percent to 63.6 percent, more than making up for the participation gap, according to the authors' analysis.
  3. The retirement share rises sharply with age around 65, and the large baby boomer cohort sits at that cutoff, so its aging between 2020 and 2022 led to a significant rise in retirements that reduced participation.

AI Summary. Adolescent anxiety, depression, self-harm, and psychiatric hospitalization rates rose in all five Anglosphere countries beginning in the early 2010s, with larger absolute increases for girls than boys and for the youngest generation. The authors argue the shift from flip phones to smartphones and a phone-based childhood explains this common timing.

Zach Rausch and Jon Haidt After Babel
Date Posted:

.@JonHaidt reports the deterioration in teens mental health across the Anglosphere is seemingly following the same basic pattern which he suspects is being driven by smartphones and social media.

Did smartphones drive rising teen mental illness across English-speaking countries?

Core argument: All five Anglosphere countries show the same pattern beginning in the early 2010s: substantial increases in adolescent anxiety and depression alongside rising rates of self-harm or psychiatric hospitalization.

n sum, all five Anglosphere countries exhibit the same basic pattern: A) A substantial increase in adolescent anxiety and depression rates begins in the early 2010s. B) A substantial increase in adolescent self-harm rates or psychiatric hospitalizations begins in the early 2010s. C) The increases are larger for girls than for boys (in absolute terms). D) The increases are larger for Gen Z than for older generations (in absolute terms). At this point, there is only one theory we know of that can explain why the same thing happened to girls in so many countries at the same time: the rapid global movement from flip phones (where you can’t do social media) to smartphones and the phone-based childhood. The first smartphone with a front-facing camera (the iPhone 4) came out in 2010, just as teens were trading in their flip phones for smartphones in large numbers. (Few teens owned an iPhone in its first few years). Facebook bought Instagram in 2012, which gave the platform a huge boost in publicity and users.

Takeaways by Macro Roundup® AI

  1. All five Anglosphere countries show the same pattern beginning in the early 2010s: substantial increases in adolescent anxiety and depression alongside rising rates of self-harm or psychiatric hospitalization.
  2. The increases in adolescent anxiety, depression, and self-harm across the Anglosphere are larger in absolute terms for girls than boys, and larger for Gen Z than for older generations.
  3. The authors argue the only theory explaining why the same shift hit girls in so many countries at once is the rapid move from flip phones to smartphones, noting the iPhone 4's 2010 front-facing camera and Facebook's 2012 purchase of Instagram.

AI Summary. Republicans receive more votes from working-class (non-college) Americans than Democrats, carrying the nationwide working-class House vote by 13 points and the working-class presidential vote by 4 points. Modeled estimates from the States of Change project indicate the Republican presidential candidate won the working-class vote in 35 of 50 states.

Ruy Teixeira The Liberal Patriot
Date Posted:

Ruy Teixeira @AEI notes that “Republicans are, in a strict quantitative sense, the party of the American working class. That is, they currently get more working-class (noncollege) votes than the Democrats”

Ruy Teixeira @AEI notes that “Republicans are, in a strict quantitative sense, the party of the American working class. That...

Do Republicans now win more working-class votes than Democrats?

Core argument: Republicans carried the nationwide working-class (noncollege) House vote by 13 points in 2022, and Trump carried the nationwide working-class presidential vote by 4 points over Biden in 2020.

Republicans are, in a strict quantitative sense, the party of the American working class. That is, they currently get more working-class (noncollege) votes than the Democrats. That was true in 2022 when Republicans carried the nationwide working-class House vote by 13 points. That was true in 2020, when Trump carried the nationwide working-class presidential vote by 4 points over Biden. Moreover, modeled estimates by the States of Change project indicate that Trump carried the working-class vote in 35 out of 50 states, including in critical states for the Democrats like Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin, as well as in states that are slipping away from the party like Florida, Iowa, Ohio and Texas.

Takeaways by Macro Roundup® AI

  1. Republicans carried the nationwide working-class (noncollege) House vote by 13 points in 2022, and Trump carried the nationwide working-class presidential vote by 4 points over Biden in 2020.
  2. Modeled estimates from the States of Change project indicate Trump carried the working-class vote in 35 of 50 states, including Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin.
  3. States of Change estimates indicate Trump also carried the working-class vote in Florida, Iowa, Ohio and Texas, states described as slipping away from the Democrats.

AI Summary. The Hutchins Center's Fiscal Impact Measure, which approximates fiscal policy's contribution to quarterly real GDP growth, spiked during 2020 largely because of expanded transfer programs, but was a significant drag on growth in 2022. Using Congressional Budget Office baseline projections, the measure is projected to remain negative for the following two years.

CEA Staff The Council of Economic Advisers
Date Posted:

.@WhiteHouseCEA draws a connection between fiscal policy in 2020 and the uptick in inflation in 2021.

Is fiscal policy projected to drag on real GDP growth?

Core argument: The Hutchins Center's Fiscal Impact Measure spiked in 2020:Q2, mainly due to an expansion of transfer programs, and remained positive in two of the following three quarters.

Figure 2-15 plots the Hutchins Center’s Fiscal Impact Measure (FIM), which uses information on the Federal Government’s spending on goods and services, sate and local government spending on goods and services, and taxes and benefit programs to approximate the contribution of fiscal policy to total real GDP growth each quarter. A positive fiscal impulse means that the contribution of fiscal policy to real GDP is larger than it was the quarter before. Figure 2-15 shows that the FIM spiked in 2020:Q2, mainly due to an expansion of transfer programs, and was positive for two of the next three quarters, but was a significant drag throughout 2022 and is projected to remain negative in 2023 and 2024, using projections for fiscal policy by the Congressional Budget Office in its current baseline.

Takeaways by Macro Roundup® AI

  1. The Hutchins Center's Fiscal Impact Measure spiked in 2020:Q2, mainly due to an expansion of transfer programs, and remained positive in two of the following three quarters.
  2. The Fiscal Impact Measure shows fiscal policy as a significant drag throughout 2022, with projections based on the Congressional Budget Office's current baseline indicating it remains negative in 2023 and 2024.
  3. The Fiscal Impact Measure approximates fiscal policy's contribution to quarterly real GDP growth using federal spending on goods and services, state and local spending on goods and services, taxes, and benefit programs.