Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, May 19, 2023

AI Summary. Updated estimates of the natural rate of interest—the inflation-adjusted rate consistent with a balanced economy—for Canada, the Euro Area, and the United States show no sign of a significant reversal of the decline seen in prior decades, with each economy's estimate within two-tenths of a percentage point of its pre-pandemic level.

John Williams Federal Reserve Bank of New York
Date Posted:

John Williams announces @NewYorkFed research that finds “there is no evidence that the era of very low natural rates of interest has ended.”

Has the long-run decline in the natural rate of interest reversed?

Core argument: The r-star estimates for Canada, the Euro Area, and the United States in 2022 are within two-tenths of a percentage point of their corresponding 2019 estimates, showing no signs of a significant reversal of the decline evident in prior decades.

Based on the new r-star estimates for Canada, the Euro Area, and the United States, we see no signs of a significant reversal of the decline in r-star estimates evident in prior decades. In fact, in all three economies, the r-star estimates in 2022 are within two-tenths of a percentage point of the corresponding estimate in 2019. The current Holston-Laubach-Williams model estimates of r-star in the United States are shown in Figure 3. For comparison, the figure also shows estimates using a version of the model that is not adjusted to take into account COVID or outliers and holds the parameter values fixed at estimates using data through the end of 2019. The two sets of estimates are very similar through 2019. They differ sharply during the acute period of the pandemic, however, when the estimates from the unmodified model exhibit large swings due to the presence of sizeable outliers. Interestingly, the two estimates are very close to each other at the end of the sample.

Takeaways by Macro Roundup® AI

  1. The r-star estimates for Canada, the Euro Area, and the United States in 2022 are within two-tenths of a percentage point of their corresponding 2019 estimates, showing no signs of a significant reversal of the decline evident in prior decades.
  2. The Holston-Laubach-Williams model's U.S. r-star estimates are very similar through 2019 to those from a version unadjusted for COVID or outliers, and the two sets of estimates are very close again at the end of the sample.
  3. The unmodified model, with parameter values held fixed at estimates using data through the end of 2019, exhibits large swings in U.S. r-star during the acute period of the pandemic due to sizeable outliers.

AI Summary. Nominal wage growth of 4–5% in the euro area and 3–4% in the United States is compatible with inflation coming within reach of 2%, provided import price growth slows and profit margins stabilise or shrink slightly. The disinflation path of domestic prices and nominal wages falls within the range of past disinflations in both economies.

Benoît Mojon, Gabriela Nodari and Stefano Siviero Bank for International Settlements
Date Posted:

Analysts at @BIS_org argue that the current pace of deflation is consistent with reaching the Fed’s target within the next 18 months. @HyunSongShin

Is current nominal wage growth compatible with reaching 2% inflation?

Core argument: Nominal wage growth of 4–5% in the euro area and 3–4% in the United States this year and next is compatible with bringing inflation within reach of 2% by end-2024, provided import price growth slows and profit margins stabilise or slightly shrink.

Nominal wage increases of 4–5% in the euro area and 3–4% in the United States this year and next year are compatible with bringing inflation within reach of 2% by end-2024, provided that import price growth slows and profit margins stabilise or slightly shrink. From a historical perspective, the 2023–24 disinflation path of domestic prices and nominal wages are within the range of past disinflations in both economies (Graph 1, left-hand and centre panels). However, two observations are in order. First, while US real wages always tend to decline around the time when US inflation peaks, the 2022 decline in euro area real wages was unprecedented (upper right-hand panel).

Takeaways by Macro Roundup® AI

  1. Nominal wage growth of 4–5% in the euro area and 3–4% in the United States this year and next is compatible with bringing inflation within reach of 2% by end-2024, provided import price growth slows and profit margins stabilise or slightly shrink.
  2. The 2023–24 disinflation path of domestic prices and nominal wages in both the euro area and the United States falls within the range of past disinflation episodes.
  3. US real wages tend to decline around the time US inflation peaks, while the 2022 decline in euro area real wages was unprecedented.

AI Summary. The authors argue that roughly 15 years of money printing produced little gain in economic growth but inflated asset prices, so the main correction will come in asset prices rather than the broader economy. With inflation at 5%, above the Federal Reserve's 2% target, they expect capital costs to stay elevated.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal argues the recession associated with this hiking cycle will impact asset prices more than the “real” economy.

Will the coming correction hit asset prices rather than the economy?

Core argument: The author argues that nearly 15 years of money printing never had any major positive effect on GDP growth and instead created a significant bubble in asset prices.

What makes the coming recession so unusual is that it is happening after almost 15 years of money printing, which never really had any major positive effect on GDP growth. Instead, the 15 years of money printing created a significant bubble in asset prices. As a result, the big correction during this recession will not be in the economy but in asset prices as the Fed continues to deflate the buy-everything bubble created due to global easy money. A mild economic recession with a big recession in asset prices is what we call a non-recession recession. With inflation currently at 5%, well above the Fed’s 2% inflation target, the ongoing correction in asset prices will continue as the costs of capital will stay elevated well into 2024.

Takeaways by Macro Roundup® AI

  1. The author argues that nearly 15 years of money printing never had any major positive effect on GDP growth and instead created a significant bubble in asset prices.
  2. With inflation at 5%, well above the Federal Reserve's 2% target, the author expects the cost of capital to stay elevated well into 2024 and the correction in asset prices to continue.
  3. The author characterizes the coming downturn as a "non-recession recession," in which the economic recession is mild but the correction in asset prices is large as the Fed deflates the buy-everything bubble.

AI Summary. Analyzing 51,937 neighborhoods across 222 US metropolitan areas, the authors find that residential segregation among 25- to 29-year-olds rose over the 2010s, reversing an earlier decline: the average neighborhood segregation index for that age group fell from 19 to 16 over the 2000s, then climbed to 22.

Josh Zumbrun Wall Street Journal
Date Posted:

Despite being more diverse, younger millennials live in significantly more segregated neighborhoods than older cohorts of Americans did at the same age.

Is residential segregation among young adults rising again?

Core argument: The average segregation index for neighborhoods inhabited by 25- to 29-year-olds fell from 19 in 2000 to 16 in 2010, then rose to 22 by 2019, according to findings from Noli Brazil and Jennifer Candipan.

Residential segregation among young people increased, rather than decreased, from 2010 to 2019, according to the new findings from Noli Brazil at the University of California, Davis, and Jennifer Candipan at Brown University. Brazil and Candipan parse the data for 51,937 neighborhoods (or census tracts) in 222 metropolitan areas. In 2000, the average segregation index of the neighborhoods inhabited by 25- to 29-year-olds was 19. By 2010, the average index of people of that age (older millennials) had dropped to 16. By 2019, the average index of people of that age (young millennials) had risen to 22.

Takeaways by Macro Roundup® AI

  1. The average segregation index for neighborhoods inhabited by 25- to 29-year-olds fell from 19 in 2000 to 16 in 2010, then rose to 22 by 2019, according to findings from Noli Brazil and Jennifer Candipan.
  2. Residential segregation among young people increased rather than decreased from 2010 to 2019, according to Noli Brazil of the University of California, Davis, and Jennifer Candipan of Brown University.
  3. Brazil and Candipan parse data covering 51,937 neighborhoods, or census tracts, across 222 metropolitan areas.

AI Summary. China's government reported that 20.4% of job-seekers ages 16 to 24 were unemployed, the highest level since it began publishing the statistic in 2018. The youth jobless rate has stayed high even as the overall unemployment rate declined for two consecutive months.

Claire Fu New York Times
Date Posted:

11.6M new Chinese graduates are entering the labor market in June. Currently 20% of Chinese between the ages of 16-24 are out of work.

11.6M new Chinese graduates are entering the labor market in June. Currently 20% of Chinese between the ages of 16-24 are...

Is youth unemployment in China rising even as overall joblessness falls?

Core argument: China's jobless rate for 16–24 year-olds reached 20.4% in April, the highest level since the government began publishing the statistic in 2018.

The government reported this week that 20.4 percent of people ages 16 to 24 looking for a job were out of work in April. That is the highest level since China started announcing the statistic in 2018. The government, facing rare public discontent as young professionals in major cities across China protested the “zero Covid” rules, abruptly announced in December that it would start easing the policies. But the youth jobless rate has remained high, even as the overall rate has ticked down two months in a row.

Takeaways by Macro Roundup® AI

  1. China's jobless rate for 16–24 year-olds reached 20.4% in April, the highest level since the government began publishing the statistic in 2018.
  2. China's youth unemployment rate has stayed elevated even as the overall jobless rate declined for two consecutive months, with millions more students set to graduate.
  3. China abruptly announced in December that it would begin easing its "zero Covid" rules, after young professionals in major cities protested the policy.

Monday, May 22, 2023

AI Summary. The Federal Reserve puts American households' net worth at nearly $140tn, an average of over $400,000 per person and over $1m per household of 2.5 people. Estimates of median wealth per adult in current US dollars across 170 countries and places allow this record to be compared with America's Cold War treaty allies in Europe and Asia.

Nicholas Eberstadt American Enterprise Institute
Date Posted:
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Nicholas Eberstadt @AEI argues that America’s seemingly dominant post-Cold War economic performance is clouded by the poor performance of the wealth trajectory of the median American.

How does American household wealth compare with that of allied democracies?

Core argument: The Federal Reserve puts U.S. household net worth at nearly $140 trillion at the end of 2022, an average of over $400,000 per person and over $1 million per household for a 2.5-person home.

Overall, post–Cold War America has been fantastically successful in wealth creation. By the reckoning of the Federal Reserve, the net worth of American households amounted to nearly $140 trillion at the end of 2022: an average of over $400,000 per person and over a million dollars per household (for a 2.5 person home).  America’s struggle for mass prosperity can also be placed in international perspective, thanks to the path-breaking research for the Credit Suisse Global Wealth Databook. Those estimates are still a work in progress for poorer societies, but they look fairly reliable for most affluent Western democracies. The Global Wealth Databook offers estimates for “median wealth per adult” in current US dollars for the years 2000–2021 for 170 countries and places.  Figures 2 and 3 show US estimated median wealth per adult for 2000–2021 in relation to America’s Cold War treaty allies in Europe and Asia.

Takeaways by Macro Roundup® AI

  1. The Federal Reserve puts U.S. household net worth at nearly $140 trillion at the end of 2022, an average of over $400,000 per person and over $1 million per household for a 2.5-person home.
  2. The Credit Suisse Global Wealth Databook estimates median wealth per adult in current U.S. dollars for 170 countries and places over 2000–2021, figures still a work in progress for poorer societies but fairly reliable for most affluent Western democracies.
  3. U.S. estimated median wealth per adult for 2000–2021 is set against that of America's Cold War treaty allies in Europe and Asia.

AI Summary. In a calibrated model, a one percentage point rise in real interest rates has only modest effects on credit spreads and output when the economy starts in a tranquil period, but produces much larger responses when the economy begins close to the financially unstable region. The authors attribute the difference to a financial accelerator mechanism.

Ozge Akinci, Gianluca Benigno, Marco Del Negro, Ethan Nourbash, and Albert Queralto Federal Reserve Bank of New York
Date Posted:

.@NewYorkFed defines a new metric, the financial stability interest rate r**, which is the rate above which the financial sector tends to see vicious cycle selling and therefore breaks down.

Does financial vulnerability amplify how interest rate increases hit output?

Core argument: In the authors' calibrated model, a one percentage point increase in real interest rates has only modest effects on output and credit spreads during a tranquil period, when r** sits nearly 1.5 percentage points above r before the shock.

The chart below shows the responses of credit spreads and output to a one percentage point increase in real interest rates in our calibrated model. The blue solid lines display the responses when the economy is in a tranquil period (r** is almost 1.5 percentage points above r before the shock hits). The one percentage point shock is by construction not large enough to push the economy into the crisis region, with the r**–r gap staying positive throughout. As a consequence, the shock has only modest effects on output and spreads. The red dashed lines display the responses when the economy is much closer to the financially unstable region (r** is only 0.5 percentage points above r before the shock). In this case, the increase in interest rates is enough for the financial accelerator mechanism to kick in, and the response of both spreads and output to the shock is much larger.

Takeaways by Macro Roundup® AI

  1. In the authors' calibrated model, a one percentage point increase in real interest rates has only modest effects on output and credit spreads during a tranquil period, when r** sits nearly 1.5 percentage points above r before the shock.
  2. When r** begins only 0.5 percentage points above r, the same one percentage point rate shock sets off the financial accelerator mechanism, and the responses of both credit spreads and output are much larger.
  3. The one percentage point shock is constructed so that it does not push the tranquil economy into the crisis region, with the r**–r gap staying positive throughout.

AI Summary. Foreign-born workers made up 18.1% of the U.S. labor force, up from 17.4% a year earlier and the highest share in 27 years of Labor Department records. The number of immigrants working or looking for work rose by 1.8m, or 6.3%, to 29.8m.

Gabriel Rubin and Rosie Ettenheim Wall Street Journal
Date Posted:
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Foreign-born worker’s share of the US labor force is at its highest level in 27 years with persons born outside the US making up 18.1% of the US workforce. Foreign-born black, white and Asian workers earned more than their native-born counterparts.

Has the immigrant share of the labor force hit a record?

Core argument: Foreign-born workers made up 18.1% of the U.S. labor force in 2022, up from 17.4% the prior year and the highest share in Labor Department data back to 1996.

Foreign-born workers’ share of the U.S. labor force rose last year to the highest level in 27 years of records, as labor demand surged, and the pandemic faded. People born outside the U.S. made up 18.1% of the overall labor force, up from 17.4% the prior year and the highest level in data back to 1996, the Labor Department said in its annual report on foreign-born workers. The number of immigrants in the labor force—those working or actively looking for jobs—rose by 1.8 million, or 6.3%, to 29.8 million in 2022.

Takeaways by Macro Roundup® AI

  1. Foreign-born workers made up 18.1% of the U.S. labor force in 2022, up from 17.4% the prior year and the highest share in Labor Department data back to 1996.
  2. The number of immigrants working or actively looking for work rose by 1.8 million, or 6.3%, to 29.8 million in 2022, according to the Labor Department's annual report on foreign-born workers.

AI Summary. United Nations population figures for India exceed India's own census counts, which put the population at 1.03bn in 2001 and 1.21bn in 2011 versus UN figures of 1.08bn and 1.26bn. India's National Family Health Survey also reported a fertility rate of 1.99, below the UN's 2.1 estimate.

Yi Fuxian Project Syndicate
Date Posted:

.@fuxianyi argues that UN population projections overstate both China and India’s current and projected populations.

Are UN population estimates for India too high?

Core argument: India's census counted 1.03 billion people in 2001 and 1.21 billion in 2011, while the UN's 2022 World Population Prospects put those years at 1.08 billion and 1.26 billion, roughly 50 million higher in each case.

In April, the United Nations estimated that India had overtaken China as the world’s most populous country. While the announcement received a great deal of media attention, India’s 2024 census will likely reveal that the UN’s projections have been vastly overestimated. According to India’s most recent census data, the country’s population stood at 1.03 billion in 2001 and 1.21 billion in 2011. The UN’s 2022 World Population Prospects (WPP) report, however, put these figures at 1.08 billion and 1.26 billion, respectively. Moreover, India’s National Family Health Survey indicated a fertility rate of 1.99 in 2017-19, in contrast to the WPP’s estimate of 2.1.

Takeaways by Macro Roundup® AI

  1. India's census counted 1.03 billion people in 2001 and 1.21 billion in 2011, while the UN's 2022 World Population Prospects put those years at 1.08 billion and 1.26 billion, roughly 50 million higher in each case.
  2. India's National Family Health Survey indicated a fertility rate of 1.99 in 2017-19, below the World Population Prospects estimate of 2.1.
  3. The United Nations estimated in April that India had overtaken China as the world's most populous country, though India's 2024 census will likely show the UN's projections to be vastly overestimated.

AI Summary. Arizona, California, and Nevada agreed to cut their withdrawals from the drought-strained Colorado River by about 13% of total lower-basin water use, with the federal government paying roughly $1.2bn to irrigation districts, cities, and Native American tribes that temporarily use less. The reductions are likely to require significant residential and agricultural water restrictions.

Christopher Flavelle New York Times
Date Posted:

Arizona, California, and Nevada have reached a three-year deal that will reduce water use from the Colorado River by ~13% through 2026.

Can federal payments persuade states to cut their river water use?

Core argument: Arizona, California, and Nevada agreed to reductions amounting to about 13 percent of total water use in the lower Colorado Basin, among the most aggressive ever experienced in the region.

Arizona, California, and Nevada have agreed to take less water from the drought-strained Colorado River, a breakthrough agreement that, for now, keeps the river from falling so low that it would jeopardize water supply for major Western cities like Phoenix and Los Angeles as well as for some of America’s most productive farmland. The agreement, announced Monday, calls for the federal government to pay about $1.2 billion to irrigation districts, cities and Native American tribes in the three states if they temporarily use less water. The states have also agreed to make additional cuts beyond that amount to generate the total reductions needed to protect the collapse of the river. Taken together, those reductions would amount to about 13 percent of the total water use in the lower Colorado Basin — among the most aggressive ever experienced in the region, and likely to require significant water restrictions for residential and agricultural uses.

Takeaways by Macro Roundup® AI

  1. Arizona, California, and Nevada agreed to reductions amounting to about 13 percent of total water use in the lower Colorado Basin, among the most aggressive ever experienced in the region.
  2. The federal government will pay about $1.2 billion to irrigation districts, cities, and Native American tribes across the three states if they temporarily use less water, with the states agreeing to additional cuts beyond that amount.
  3. The agreement, for now, keeps the Colorado River from falling so low that it would jeopardize water supplies for Phoenix, Los Angeles, and some of America's most productive farmland, and is likely to require significant residential and agricultural water restrictions.

AI Summary. Average inflation-adjusted transfer payments to the lowest-income 20% of US households have grown from $9,677 to $45,389, while the share of prime working-age adults in that group who worked fell from 68% to 36%. Congressional Budget Office estimates put discretionary spending 10% higher in real terms than pre-pandemic projections, with nondefense outlays up 18.8% and defense down 0.28%.

Phil Gramm and Mike Solon Wall Street Journal
Date Posted:
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Phil Gramm and Mike Solon argue that even if the House GOP’s budget proposal was enacted in whole, inflation-adjusted discretionary spending would still be 2.4% greater than the CBO’s 2020 projection.

Phil Gramm and Mike Solon argue that even if the House GOP’s budget proposal was enacted in whole, inflation-adjusted...

Have rising transfer payments coincided with less work among low-income adults?

Core argument: Average inflation-adjusted transfer payments to households in the bottom 20% rose from $9,677 in 1967 to $45,389, while the share of prime working-age adults in that bottom quintile who worked fell from 68% to 36%.

Since 1967, average inflation-adjusted transfer payments to low-income households—the bottom 20%—have grown from $9,677 to $45,389. During that same period, the percentage of prime working-age adults in the bottom 20% of income earners who actually worked collapsed from 68% to 36%. Before the pandemic, the Congressional Budget Office in January 2020 projected that total discretionary outlays in fiscal 2024 would grow to $1.549 trillion—which, adjusted for higher inflation, amounted to $1.694 trillion. The most recent CBO estimate projects that fiscal 2024 discretionary spending will clock in at $1.864 trillion—a 10% real increase from the pre-pandemic estimate. Nondefense outlays have risen 18.8% over the same period, while defense outlays have fallen 0.28% in after-inflation dollars. This growth in nondefense discretionary spending is the post-pandemic bow wave that Mr. McCarthy’s debt-limit plan seeks to mitigate. Even if the House GOP’s proposed reductions in discretionary-spending growth took effect, total discretionary spending would still be 2.4% more in inflation-adjusted dollars than the CBO’s 2020 projection for fiscal 2024.

Takeaways by Macro Roundup® AI

  1. Average inflation-adjusted transfer payments to households in the bottom 20% rose from $9,677 in 1967 to $45,389, while the share of prime working-age adults in that bottom quintile who worked fell from 68% to 36%.
  2. The Congressional Budget Office's most recent estimate projects fiscal 2024 discretionary spending at $1.864 trillion, a 10% real increase over the $1.694 trillion inflation-adjusted equivalent of its January 2020 projection of $1.549 trillion.
  3. Nondefense outlays have risen 18.8% in after-inflation dollars while defense outlays have fallen 0.28%, and even with the House GOP's proposed reductions, total discretionary spending would remain 2.4% above the CBO's 2020 projection for fiscal 2024.

AI Summary. Young voters aged 18–29 backed Democrats by 65%, and in heavily contested states turnout among those eligible in two consecutive elections rose 6%. Women voters, for whom abortion rights were often the top issue, favored Democrats in close races, while "MAGA" Republicans underperformed in contested Senate, gubernatorial, and congressional contests.

Yair Ghitza and Haris Aqeel Catalist
Date Posted:
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In an analysis of the 2022 midterms using voter file data, @Catalist_US finds younger voters exceeded their 2018 turnout by 6% with 65% of voters 18-29 supporting Democrats.

Did young and women voters drive Democratic wins in contested races?

Core argument: Young voters in heavily contested states exceeded their 2018 turnout by 6% among those eligible in both elections, part of exceptional turnout levels among Gen Z and Millennial voters.

Gen Z and Millennial voters had exceptional levels of turnout, with young voters in heavily contested states exceeding their 2018 turnout by 6% among those who were eligible in both elections. Further, 65% of voters between the ages of 18 and 29 supported Democrats, cementing their role as a key part of a winning coalition for the party. While young voters were historically evenly split between the parties, they are increasingly voting for Democrats. Many young voters who showed up in 2018 and 2020 to elect Democrats continued to do the same in 2022. Extreme “MAGA” Republicans underperformed. Across heavily contested Senate, Gubernatorial, and Congressional races, voters penalized “MAGA” Republicans.  Women voters pushed Democrats over the top in heavily contested races, where abortion rights were often their top issue.

Takeaways by Macro Roundup® AI

  1. Young voters in heavily contested states exceeded their 2018 turnout by 6% among those eligible in both elections, part of exceptional turnout levels among Gen Z and Millennial voters.
  2. 65% of voters aged 18 to 29 supported Democrats, continuing a shift away from the historically even partisan split among young voters and cementing them as part of a winning Democratic coalition.
  3. Extreme "MAGA" Republicans underperformed across heavily contested Senate, gubernatorial, and congressional races, while women voters, who often ranked abortion rights as their top issue, pushed Democrats over the top in those contests.