Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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 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


Thursday, April 20, 2023

AI Summary. SpaceX's Starship, a nearly 400-foot rocket described as the most powerful ever launched, exploded after reaching an altitude of nearly 40km on its first launch, setting back the company's effort to build a spacecraft capable of flying to Mars.

Richard Waters Financial Times
Date Posted:

SpaceX’s Starship rocket, the most powerful ever launched, managed to take off but failed to reach orbit during its first test launch. @FT

SpaceX’s Starship rocket, the most powerful ever launched, managed to take off but failed to reach orbit during its first...

Does a failed first launch set back plans for Mars spacecraft?

Core argument: SpaceX's Starship, a nearly 400-foot-tall rocket described as the most powerful ever launched, reached an altitude of nearly 40km on its first flight before tumbling back toward Earth and exploding.

SpaceX’s giant Starship rocket exploded after its first launch on Thursday in a setback for Elon Musk’s company and its effort to build a spacecraft capable of flying to Mars. The nearly 400-foot-tall rocket, the most powerful ever launched, left its base along the Gulf coast in south Texas at about 8.30am local time. It rose on a ball of flame from its 33 Raptor engines and reached an altitude of nearly 40km before tumbling back towards Earth and exploding.  “It was partial success, it was not a large setback,” said Laura Forczyk, a former Nasa official and now a space consultant at Astralytical. “The most important part was that it launched—that is quite the accomplishment for a new rocket, particularly one as complex as Starship.”

Takeaways by Macro Roundup® AI

  1. SpaceX's Starship, a nearly 400-foot-tall rocket described as the most powerful ever launched, reached an altitude of nearly 40km on its first flight before tumbling back toward Earth and exploding.
  2. The Starship explosion is a setback for SpaceX's effort to build a spacecraft capable of flying to Mars, following a launch on 33 Raptor engines from its Gulf coast base in south Texas at about 8.30am local time.
  3. Laura Forczyk, a former NASA official and space consultant at Astralytical, called the flight a partial success rather than a large setback, saying the launch itself was the most important part for a rocket as complex as Starship.

AI Summary. The Congressional Budget Office estimates that Alabama's work requirement for cash welfare raises the employment rate of participating families by about 12 percentage points over the first year, lifting average income through higher earnings and tax credits. The requirement also cuts cash assistance, mainly by removing nonworking families, and increases how often families have neither earnings nor cash assistance.

Justin Falk Congressional Budget Office
Date Posted:

A new @USCBO analysis finds that in Alabama an expansion of the TANF work requirement increased the employment rate by ~ 12pp within a year of families entering the program.

Do welfare work requirements raise employment and income of participating families?

Core argument: CBO's Justin Falk estimates that Alabama's Temporary Assistance for Needy Families work requirement raises the employment rate by about 12 percentage points over the first year after families enter the program, elevating average income through higher earnings and tax credits.

CBO‘s Justin Falk finds that Alabama’s work requirement increases the employment rate by about 12 percentage points over the first year after families enter the program, which elevates average income by boosting earnings and tax credits. But the requirement reduces the amount of cash assistance families receive, primarily by removing nonworking families from the program. On net, my analysis suggests that average income increases, but so does the frequency with which families have neither earnings nor cash assistance. Those results are inferred from families whose youngest child is between 6 months and 11 months old, although I find suggestive evidence that the results generalize to families with older children.

Takeaways by Macro Roundup® AI

  1. CBO's Justin Falk estimates that Alabama's Temporary Assistance for Needy Families work requirement raises the employment rate by about 12 percentage points over the first year after families enter the program, elevating average income through higher earnings and tax credits.
  2. Falk finds that the work requirement reduces the cash assistance families receive, primarily by removing nonworking families from the program, so average income rises while the frequency of families with neither earnings nor cash assistance also increases.
  3. Falk infers the results from families whose youngest child is between 6 and 11 months old, with suggestive evidence that the findings generalize to families with older children.

AI Summary. The ratio of US household liabilities to net wealth has fallen 50% since the 2008 financial crisis, leaving household leverage at levels last seen in the early 1980s. A rise in unemployment would slow consumer spending, but households' starting position is strong.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal reports the American household balance sheets are strong; the ratio of liabilities to net worth is down 50% from the crisis.

Are US household balance sheets strong by historical standards?

Core argument: The ratio of US household liabilities to net wealth has declined 50% since the 2008 financial crisis, leaving household leverage at levels last seen in the early 1980s.

US households are in excellent shape, the ratio of liabilities to net wealth has declined 50% since the 2008 financial crisis, and household leverage is currently at levels last seen in the early 1980s, see chart below. If the unemployment rate rises, consumer spending will slow down, but the starting point for US households is very strong.

Takeaways by Macro Roundup® AI

  1. The ratio of US household liabilities to net wealth has declined 50% since the 2008 financial crisis, leaving household leverage at levels last seen in the early 1980s.
  2. US household balance sheets are in excellent shape, providing a very strong starting point for consumers.
  3. A rise in the unemployment rate would slow consumer spending, though US households would enter that slowdown from a strong starting point.

AI Summary. US Census data show the millennial homeownership rate reached 51.5%, though by age 30 only 42% of millennials owned homes compared with 48% of Generation X and more than half of baby boomers. Ownership is concentrated in more affordable cities, with 63% of millennials in Grand Rapids, Michigan owning homes versus 27% in Los Angeles.

Alice Kantor Bloomberg
Date Posted:

Over half of millennials, 51.5%, now own homes. According to a survey from Apartment List, 25% of millennials plan to remain a renter, up from 14% three years earlier.

Are millennials reaching homeownership at lower rates than earlier generations?

Core argument: The millennial homeownership rate reached 51.5% in 2022, according to US Census data, though by age 30 only 42% of millennials owned homes versus 48% of Gen X and more than half of baby boomers.

The millennial homeownership rate hit 51.5% in 2022, US Census data show. It’s been a slog to get there for the generation that came of age during the financial crisis — by age 30, 42% of millennials owned their homes compared to 48% of Gen X and more than half of baby boomers. Those who’ve managed to buy a home are mostly in more affordable cities, with 63% of millennials in Grand Rapids, Michigan, owning homes, compared to just 27% in Los Angeles. Nearly one in four millennials plans to rent forever, up from one in seven just three years earlier, according to a survey from real estate site Apartment List.

Takeaways by Macro Roundup® AI

  1. The millennial homeownership rate reached 51.5% in 2022, according to US Census data, though by age 30 only 42% of millennials owned homes versus 48% of Gen X and more than half of baby boomers.
  2. Millennial homeowners are mostly in more affordable cities, with 63% of millennials in Grand Rapids, Michigan owning homes compared with 27% in Los Angeles.
  3. Nearly one in four millennials plans to rent forever, up from one in seven three years earlier, according to a survey from the real estate site Apartment List.

AI Summary. Presidential voting in rural and urban areas was roughly similar through the 1970s and 1980s, but the rural-urban divide has widened in every region since, growing 27 points in the South and 20 points in the Midwest between 1976 and 2020. Urban areas captured 97% of all employment growth between 2001 and 2016.

Trevor Brown, Suzanne Mettler and Samantha Puzzi The Forum
Date Posted:

Nationwide, the difference between Republican vote share in rural vs urban areas increased to 21 percentage points in 2020, up from 10 pp in 2000 and 2pp in 1996. @SuzanneMettler1

How wide has the rural-urban political divide grown since the 1970s?

Core argument: The rural-urban divide in U.S. presidential voting widened most in the South, by 27 points between 1976 and 2020, alongside 20 points in the Midwest, 18 points in the West, and seven points in the Northeast.

Throughout the mid-twentieth century and as recently as the 1970s and 1980s, presidential candidates received fairly equivalent support from rural and urban dwellers, nationwide. Since the 1990s, however, the rural-urban political cleavage has grown steadily as shown in Figure 1. Although the rural-urban political divide in presidential voting has increased the most in the South, by 27 points between 1976 and 2020, it has widened in all regions over the same period, by seven points in the Northeast, 18 points in the West, and a striking 20 points in the Midwest.  Urban areas captured a full 97% of all employment growth between 2001 and 2016.  As the economic conditions in rural and urban areas diverged, the rural-urban political divide emerged.

Takeaways by Macro Roundup® AI

  1. The rural-urban divide in U.S. presidential voting widened most in the South, by 27 points between 1976 and 2020, alongside 20 points in the Midwest, 18 points in the West, and seven points in the Northeast.
  2. Urban areas captured 97% of all U.S. employment growth between 2001 and 2016, and the rural-urban political divide emerged as economic conditions in the two areas diverged.
  3. Presidential candidates drew roughly equivalent support from rural and urban voters nationwide through the mid-twentieth century and into the 1970s and 1980s, with the cleavage growing steadily since the 1990s.

Friday, April 21, 2023

AI Summary. Bond yields are too low relative to cash and market-implied inflation is well below current and projected inflation, leaving no risk premium in bonds, while equities carry a roughly normal premium over bonds based on current earnings. If a recession brings inflation down, earnings would be about 20% lower, making stocks and bonds unattractive relative to cash.

Bob Prince, Greg Jensen, Karen Karniol-Tambour Bridgewater Associates
Date Posted:

.@Bridgewater argues that we are in a moment of “Bearish Disequilibrium,” as Fed policy has made short rates too attractive relative to bonds and stocks.

Are stocks and bonds unattractive relative to cash?

Core argument: The CIOs argue that a recession sufficient to bring inflation to the desired rate would cut earnings by about 20%, leaving the earnings yield too low relative to bonds while bond yields are too low relative to cash.

With respect to the markets, bond yields are too low in relation to cash and discounted inflation rates are well below current and projected inflation rates, so there is no risk premium in bonds. There is a roughly normal risk premium in equities relative to bonds based on current earnings and the current bond yield. But if you get a recession as needed to get the desired inflation rate, earnings would be about 20% lower, making the earnings yield too low in relation to bonds at the same time as the bond yield is too low in relation to cash. In other words, in order to deal with today’s economic disequilibriums, central banks are having to make cash very attractive, which is making bonds and stocks unattractive in relation to cash.

Takeaways by Macro Roundup® AI

  1. The CIOs argue that a recession sufficient to bring inflation to the desired rate would cut earnings by about 20%, leaving the earnings yield too low relative to bonds while bond yields are too low relative to cash.
  2. Bond yields are too low relative to cash and discounted inflation rates sit well below current and projected inflation, leaving no risk premium in bonds, according to the CIOs.
  3. Central banks addressing today's economic disequilibriums are having to make cash very attractive, which makes bonds and stocks unattractive relative to cash, even though equities carry a roughly normal risk premium versus bonds on current earnings.

AI Summary. Employment-to-population ratios for out-of-school young Black and Latino adults declined by 0.5 and 1.5 percentage points over a one-year span. These workers also earn less than workers overall, averaging $15.34 an hour in inflation-adjusted terms versus $24.87 for all workers, with out-of-school young Black adults lowest at $14.50.

William Rodgers III and Sophia Scott Federal Reserve Bank of St. Louis
Date Posted:

Citing a decline in the employment-population ratios for out-of-school young Black and Latino adults @stlouisfed notes marginal workers are starting to be impacted by the tightening cycle.

Are young Black and Latino workers losing jobs and earning less?

Core argument: Employment-population ratios for out-of-school young Black and Latino adults fell 0.5 and 1.5 percentage points from February 2022 to February 2023, smaller declines than the drops of more than 5 percentage points for both groups through August 2022.

In particular, the employment-population ratios for out-of-school young Black and Latino adults showed a decline from February 2022 to February 2023 but not as severe as initially seen at the end of last summer. Specifically, the ratios of Black and Latino young adults have fallen by 0.5 and 1.5 percentage points as compared with declines of more than 5 percentage points for both groups through August 2022. out-of-school young adults also face the pinch of earning less on average than other workers. The inflation-adjusted (February 2023 dollars) average hourly earnings for all workers from March 2021 to February 2023 was $24.87 per hour. The average for all out-of-school young adults was $15.34 per hour. Out-of-school young Black adults had the lowest average real hourly earnings among all vulnerable worker groups, sitting at $14.50 per hour. On balance, the most recent BLS jobs report and Census Bureau’s Household Pulse Survey suggest a squeezing of the economic prospects for low- to moderate-income families and out-of-school young adults.

Takeaways by Macro Roundup® AI

  1. Employment-population ratios for out-of-school young Black and Latino adults fell 0.5 and 1.5 percentage points from February 2022 to February 2023, smaller declines than the drops of more than 5 percentage points for both groups through August 2022.
  2. Out-of-school young adults averaged $15.34 per hour in inflation-adjusted February 2023 dollars from March 2021 to February 2023, against $24.87 for all workers, with out-of-school young Black adults lowest among vulnerable worker groups at $14.50.
  3. The most recent BLS jobs report and the Census Bureau's Household Pulse Survey suggest a squeezing of economic prospects for low- to moderate-income families and out-of-school young adults.

AI Summary. Corporate mentions of labor shortages have declined but remain well above pre-pandemic levels, as the Federal Reserve seeks to slow hiring to ease upward pressure on wage and price inflation. Cooling the labor market takes time.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal notes mentions of labor shortages on earnings calls have fallen significantly since their peak in Q4 2021 but are still elevated relative to pre-pandemic levels.

Are companies still reporting labor shortages above pre-pandemic levels?

Core argument: Corporate worries about labor shortages have declined but remain well above pre-pandemic levels.

The Fed is trying to slow down hiring to dampen the upward pressure on wage and consumer price inflation, but cooling down the labor market takes time, and while corporate worries about labor shortages have declined, they are still well above pre-pandemic levels.

Takeaways by Macro Roundup® AI

  1. Corporate worries about labor shortages have declined but remain well above pre-pandemic levels.
  2. The Federal Reserve is seeking to slow hiring in order to dampen upward pressure on wage and consumer price inflation.
  3. Cooling down the labor market takes time.

AI Summary. The U.S. national median existing-home price fell 0.9% year over year to $375,700, the biggest annual decline since January 2012 and the second straight month of annual declines, according to the National Association of Realtors. Median prices were down 9.2% from a record $413,800, with the fastest declines in the western U.S.

Nicole Friedman Wall Street Journal
Date Posted:

National housing prices have now fallen for two consecutive months for the first time in 11 years. The average 30-year fixed mortgage was 6.39% this week, up from 5.11% a year ago.

Are home prices falling on an annual basis?

Core argument: The U.S. national median existing-home price fell 0.9% year over year in March to $375,700, the biggest annual drop since January 2012, according to the National Association of Realtors.

The housing market’s slowdown is now starting to weigh on prices, which have fallen on an annual basis for two consecutive months for the first time in 11 years. The national median existing-home price decline of 0.9% in March from a year earlier to $375,700 was the biggest year-over-year price drop since January 2012, NAR said. Median prices, which aren’t seasonally adjusted, were down 9.2% from a record $413,800 in June. Home prices in the western half of the U.S. experienced some of the biggest gains for many years but are now falling the fastest. Mortgage rates have fluctuated in recent months since hitting 20-year highs above 7% in the fall. The average rate for a 30-year fixed mortgage was 6.39% this week, up from 5.11% a year earlier and the first increase after five straight weeks of declines, according to Freddie Mac.

Takeaways by Macro Roundup® AI

  1. The U.S. national median existing-home price fell 0.9% year over year in March to $375,700, the biggest annual drop since January 2012, according to the National Association of Realtors.
  2. Median existing-home prices, which are not seasonally adjusted, were down 9.2% from the record $413,800 reached in June, with annual declines in two consecutive months for the first time in 11 years.
  3. The average rate for a 30-year fixed mortgage stood at 6.39%, up from 5.11% a year earlier and the first increase after five straight weeks of declines, according to Freddie Mac.

AI Summary. Falling US gasoline consumption could paradoxically raise pump prices, because oil prices are set by global supply and demand while cutbacks in US refining capacity widen refiner profit margins. On the West Coast, where electric vehicle market share is highest, refining capacity has fallen faster than gasoline consumption, bringing higher and faster-rising prices than elsewhere in the country.

Justin Fox Bloomberg
Date Posted:

Although American gasoline consumption has peaked, gas prices could rise due to a decline in refining capacity. @foxjust

Does falling US gasoline consumption raise prices at the pump?

Core argument: On the US West Coast, where EV market share is highest — 17.1% in California in 2022 — refinery capacity has fallen faster than gasoline consumption since 2010, translating into fatter refiner margins and higher, faster-rising gasoline prices than elsewhere in the country.

One side effect of the decline in consumption could be, paradoxically, higher gasoline prices. Worldwide supply and demand set oil prices, and peak oil demand has yet to arrive globally. Meanwhile, cutbacks in US refining capacity in the face of falling gasoline demand could bring bigger refiner profit margins. On the West Coast, where EV market share is highest (it was 17.1% in California in 2022), refinery capacity has fallen faster than gasoline consumption since 2010, which translates to fatter margins for refiners and higher and faster-rising gasoline prices in the region than elsewhere in the country.

Takeaways by Macro Roundup® AI

  1. On the US West Coast, where EV market share is highest — 17.1% in California in 2022 — refinery capacity has fallen faster than gasoline consumption since 2010, translating into fatter refiner margins and higher, faster-rising gasoline prices than elsewhere in the country.
  2. Falling US gasoline consumption could paradoxically raise prices, since cutbacks in US refining capacity in response to weaker demand could widen refiner profit margins.
  3. Oil prices are set by worldwide supply and demand, and peak oil demand has yet to arrive globally.

AI Summary. SpaceX says it is producing Super Heavy boosters and Starships at a healthy pace, though damage to the launch support structure may require a significant redesign and cause delays. A Starship launched by a Super Heavy would lift 100-150 tonnes to orbit, against 64 tonnes for Falcon Heavy and 24 for the space shuttle.

Economist Staff The Economist
Date Posted:

Despite Starship’s failure yesterday, once the identified problems are fixed Starship is likely to dramatically bring down the cost of putting payloads into orbit. @TheEconomist

How much more cargo could a fully reusable rocket lift to orbit?

Core argument: A Starship launched by a Super Heavy is designed to lift 100–150 tonnes of cargo to orbit, exceeding the 64 tonnes of SpaceX's Falcon Heavy and the 24 tonnes carried by the space shuttle.

The good news is that SpaceX says it is building Super Heavies and Starships at a healthy clip; it should in principle be possible to rerun the test reasonably soon once the nature of the problem becomes clear and a fix is found. The bad news is that the structure which supports the Super Heavy as it launches seems to have been damaged to an extent that may well require a significant redesign rather than simply repair. That could entail significant delays. If SpaceX puts right both the problems that struck today and the others that the test programme will surely uncover, the Starship system will not just be able to put larger payloads into orbit than any competitor, it will be able to do so at a cost per tonne far lower than any the industry has seen before. A Starship launched by a Super Heavy will be capable of lifting 100-150 tonnes of cargo to orbit. That far exceeds the capacity of today’s most powerful commercial launcher, SpaceX’s Falcon Heavy, which is basically three Falcon 9s strapped together so as to be able to lift up to 64 tonnes. The cargo which could be lifted with a space shuttle was just 24 Tonnes. That low cost is one of the advantages offered by a system with just two parts, both of which are fully reusable. Another is that a system which can take off, land, and take off again in short order opens up a new range of possibilities for flights beyond Earth orbit.

Takeaways by Macro Roundup® AI

  1. A Starship launched by a Super Heavy is designed to lift 100–150 tonnes of cargo to orbit, exceeding the 64 tonnes of SpaceX's Falcon Heavy and the 24 tonnes carried by the space shuttle.
  2. The structure supporting the Super Heavy at launch appears damaged to an extent that may require a significant redesign rather than simple repair, which could entail significant delays.
  3. SpaceX says it is building Super Heavies and Starships at a healthy clip, so rerunning the test should in principle be possible reasonably soon once the problem is understood and a fix is found.