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AI Summary. The Federal Reserve has raised its estimate of the long-run federal funds rate, which suggests it sees the cost of capital as durably higher. A lasting increase in the risk-free rate carries significant implications for investors.
Core argument: The Federal Reserve has begun raising its estimate of the long-run federal funds rate.
The Fed has started to increase its estimate of the long-run Fed funds rate. The implication is that the Fed is beginning to see the costs of capital as permanently higher. A permanent increase in the risk-free rate has important implications for investors.AI Summary. Nominal wage growth remains restrained partly because wage-setting norms carry over from the low-inflation era, but that could shift quickly as households seek to recover purchasing power eroded by the inflation surge. Pass-through from prices to wages has been higher when labor markets are tight.
Core argument: The Annual Economic Report argues that moderate nominal wage growth should not be reassuring, since wage adjustments still reflect the lingering norms of the low-inflation regime and this could change quickly.
While nominal wage growth has not been exceptionally strong so far, this should not provide too much comfort. Wage adjustments are still influenced by the lingering effects of the norms prevalent in the low-inflation regime, but this could change quickly. The inflation surge has severely eroded the purchasing power of households (Graph 14.A), even more than in past disinflation episodes (Graph 14.B). Some catch-up is on the cards, particularly given the strength of labour markets. While labour’s bargaining power declined significantly over the years of low inflation, recent strikes and calls for unionisation suggest that the environment is evolving. What’s more, the pass-through from prices to wages has been somewhat higher when labour markets have been tight.AI Summary. Whether high inflation marks an enduring shift in the monetary environment or a temporary one is unknown, depending on how far it reflects supply shocks, whether societies find disinflation too painful, economic fragmentation's effect on supply, and whether ultra-low real interest rates are over. If they are, higher real rates would make current debt levels hard to sustain.
Core argument: The author disagrees with the Bank for International Settlements over whether "low for long" could have been avoided, noting that the Bank of Japan tried in the early 1990s and the European Central Bank in 2011, and both failed.
Where I disagree with the BIS is over whether “low for long” could have been avoided. The Bank of Japan tried in the early 1990s and the European Central Bank in 2011. Both failed. Will what we are now experiencing prove an enduring shift in the monetary environment or just a temporary one? We just do not know. It depends on how far high inflation has been just the product of supply shocks. It depends, too, on whether societies, long unused to inflation, decide that bringing it back down is too painful, as happened in so many countries in the 1970s. It depends, as well, on how far the fragmentation of the world economy has permanently lowered elasticities of supply. It depends not least on whether the era of ultra-low real interest rates is over. If it is not, this could indeed be a blip. If it is, then significant stresses lie ahead, as higher real interest rates make current levels of indebtedness hard to sustain.AI Summary. Inflation in services excluding energy services and housing — the Federal Reserve's preferred gauge — has run 2–3 percentage points faster than its pre-pandemic pace with little volatility. That pattern is consistent with the argument that the remaining excess inflation will not be eliminated without significant disruption to the real economy.
Core argument: Inflation in services excluding energy services and housing — the Fed's preferred measure — has run 2–3 percentage points faster than its pre-pandemic pace, with remarkably little volatility.
The Fed’s preferred inflation measure is services excluding energy services and housing. That inflation rate has consistently been 2-3 percentage points faster than it was before the pandemic, with remarkably little volatility. The combined picture is not terrible, in the grand scheme of things, but it is also consistent with the claim that the last bit of excess inflation will not be squeezed out without some significant disruption to the real economy. I still hope that a truly immaculate disinflation can be achieved, but I am increasingly skeptical that it is the likeliest outcome.AI Summary. China announced export curbs on gallium and germanium, metals used in chipmaking that the US government classifies among dozens of minerals critical to economic and national security.
Core argument: Beijing said it would impose curbs on exports of gallium and germanium, metals used in chipmaking, in the latest escalation of the US-China technology battle.
Trade officials were assessing the fallout from the latest escalation in the US-China technology battle after Beijing said it would impose curbs on exports of metals used in chipmaking. Gallium and germanium are among dozens of minerals classified by the US government as critical to economic and national security. The US state department did not respond to a request for comment.AI Summary. Most rare earth elements are relatively abundant but not always easy to extract, and China accounts for an estimated 70% of global output according to the United States Geological Survey. China also holds the world's largest reserves at 44m tonnes of rare-earth-oxide equivalent, roughly double those of Vietnam, Brazil, or Russia.
Core argument: China accounted for an estimated 70% of global rare earth output last year, according to the United States Geological Survey, and is the world's largest producer by far after a decades-long effort to develop the industry.
Despite their name, most rare earths are relatively abundant -- although they are not always easy to extract. China is now the world's largest producer of rare earths by far, thanks to its decades long effort to develop the industry. Last year it accounted for an estimated 70% of output, according to the United States Geological Survey. China also has the world's largest reserves, totaling 44 million tonnes of rare-earth-oxide (REO) equivalent -- about double those of Vietnam, Brazil,, or Russia.AI Summary. The Indian states of Karnataka and Tamil Nadu amended labor laws to allow factory shifts to lengthen from eight to 12 hours, a change urged by investors including Apple and contract manufacturer Foxconn. After opposition from trade unions and opposition parties, Tamil Nadu put its legislation on hold, and Karnataka's opposition party pledged repeal.
Core argument: Karnataka and Tamil Nadu amended their laws to allow working shifts to rise from eight to 12 hours, a reform urged by investors including Apple and its contract manufacturer Foxconn.
Two of India’s most business-friendly southern states, Karnataka and Tamil Nadu, recently amended laws to allow an increase the length of working shifts from eight to 12 hours in a reform urged by investors, including Apple and its contract manufacturer Foxconn. No sooner than India appears to be heading down the same path of more business-friendly working hours, a backlash is forming. After an outcry from trade unions and opposition parties, Tamil Nadu’s chief minister MK Stalin announced on the May 1 Labour day public holiday in India that he was putting the state’s legislation on hold. In Karnataka, the opposition Indian National Congress last month trounced Modi’s Bharatiya Janata party in a state election. In its manifesto it said it would repeal the factories law amendment there too.AI Summary. Toyota says it has achieved a technological breakthrough resolving durability issues in solid-state batteries, enabling an electric vehicle range of 1,200km (746 miles) and charging times of 10 minutes or less. The company says cutting the number of processes needed to make battery materials could bring solid-state battery costs to levels similar to or below liquid-based lithium-ion batteries.
Core argument: Toyota claims a "technological breakthrough" in solid-state batteries that would give an EV a range of 1,200km (746 miles) with a charging time of 10 minutes or less.
Toyota claimed it had made a “technological breakthrough” to resolve durability issues and “a solution for materials” that would allow an EV powered by a solid-state battery to have a range of 1,200km [746 miles] and charging time of 10 minutes or less. By reducing the number of processes required to make battery materials, the cost of solid-state batteries could be lowered to similar or cheaper levels than liquid-based lithium-ion batteries, he added.AI Summary. The average worldwide temperature reached a record 17C (63F), surpassing the prior record of 16.9C, and then climbed to 17.2C a day later, according to data from the US National Centers for Environmental Prediction.
Core argument: The average worldwide temperature reached 17C (63F) on Monday, just above the previous record of 16.9C set in August 2016, according to data from the National Centers for Environmental Prediction.
The average worldwide temperature reached 17C (63F) on Monday, just above the previous record of 16.9C in August 2016, according to data from the National Centers for Environmental Prediction. The threshold only lasted a day. On Tuesday, the average temperature hit 17.2C.AI Summary. Chipmaker TSMC and its suppliers are in talks with the U.S. government on non-immigrant visas to dispatch more than 500 experienced workers to speed construction of its U.S. chip plants, according to chip supply chain executives. Executives said too few U.S. workers have hands-on experience building semiconductor facilities, causing installation delays.
Core argument: TSMC and its suppliers plan to dispatch more than 500 experienced workers to the U.S. as early as July to speed cleanroom construction, pipeline installation, and equipment setup, three chip supply chain executives told Nikkei.
TSMC and its suppliers are in talks with the U.S. government to assist with the application process for non-immigrant visas in a bid to dispatch more than 500 experienced workers as early as July to expedite the construction of cleanroom facilities and the installation of pipelines and other equipment, three chip supply chain executives said. One of the main aims is to "improve work efficiency and help make up for lost time" in the construction processes, they said. The U.S.-bound workers will include contract technicians and workers with hands-on experience in cleanroom setup, pipeline installation, mechanical and electrical systems for chip plants, and other specialized areas. "There are not enough U.S. workers who have good first-hand experience specifically on building semiconductor manufacturing facilities, and many are not familiar with the requirements for chipmaking plants," one executive told Nikkei. "That has caused delays in multiple installation works."AI Summary. Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
Core argument: Using a genealogical database of 422,374 people with rarer surnames in England, the paper finds status correlations decline by a constant factor of 0.79 with each step outward in a lineage, across different status measures and epochs from 1600 to 2022.
Using a large genealogical database of 422,374 people with rarer surnames in England the paper examines patterns of inheritance of social status in England. These correlations reveal four things. First status persists strongly across even very distant relatives, across all measures of status. Second the decline in status correlations with each step outward in the lineage is a constant 0.79, for different measures of status, and epochs from 1600 to 2022. Third of the correlations conform closely to those predicted by Ronald Fisher in 1918, for familial correlations in the presence of strong assortment in mating. In particular, the correlation in mating in the genetics underlying social outcomes [must] be 0.57 to generate the persistence rate of 0.79. Since these are observational data, there is no proof that additive genetic transmission causes social status. [Only] that whatever social processes are producing the observed outcomes have a form of transmission which mimics that of additive genetic effects, in the presence of the important social institution of strong assortative mating. [Fourth,] the constancy of status persistence across the interval 1600 to 2022 does suggest social interventions have surprisingly modest effects.”AI Summary. United Nations data show the U.S. remained the top destination for foreign direct investment even as inflows fell to $285bn from $388bn, driven mainly by a drop in foreign purchases of American companies. China recorded its highest-ever inflow at $189bn, a 5% increase, much of it from European businesses.
Core argument: Foreign direct investment into the U.S. fell to $285 billion in 2022 from $388 billion in 2021, mainly due to a sharp drop in foreign purchases of American companies, according to United Nations data.
The U.S. was the top destination for businesses looking to expand internationally last year but the inflow of capital fell as companies around the world cut foreign investment amid rising uncertainty and borrowing costs. Foreign investment in the U.S. fell to $285 billion in 2022 from $388 billion in 2021, mainly due to a sharp fall in foreign purchases of American companies, according to United Nations data. While still behind the U.S., China registered its highest-ever inflow at $189 billion, an increase of 5%. Much of that increase came from European businesses.AI Summary. US investors financed 3,011 startup funding deals in a quarter, about a third fewer than a year earlier, and spent $39.8bn, down by nearly half. The steepest decline came in angel and seed deals, an early-stage category considered critical to the venture ecosystem, where the number of deals halved.
Core argument: US venture capital investors spent $39.8 billion across 3,011 startup funding deals last quarter, with dollars down by nearly half and deal count down about a third from a year earlier, according to PitchBook.
In the US, investors financed 3,011 startup funding deals last quarter, about a third fewer than a year ago. And they spent less cash: $39.8 billion, down by nearly half from the same period last year. Take out the more than $6.5 billion investors spent on payments company Stripe, and the total looks even worse, said PitchBook analyst Kyle Stanford. The biggest drop came in angel or seed deals. In that category, there were half as many funding deals as there were a year earlier. Those early funding rounds — when young companies are either nurtured or starved — are generally considered to be critical to the health of the venture ecosystem.AI Summary. A boom in US domestic chipmaking construction has raised demand for semiconductor manufacturing equipment that cannot be met domestically, pushing US equipment imports near an all-time high, with Japan, the European Union, and Singapore as the major sources. This helps explain why the market for semiconductor equipment has not contracted alongside the market for chips.
Core argument: US semiconductor equipment imports have run near an all-time high in recent months, with Japan, the EU, and Singapore the major sources, as domestic chipmaking construction outpaces what US suppliers can meet.
The boom in domestic US chipmaking construction has been coupled with rising demand for semiconductor equipment that can’t be met domestically. The pace of US semiconductor equipment imports over the last few months has been near an all-time high, with Japan, the EU, and Singapore being the major sources. This is part of the reason why the market for semiconductor equipment hasn’t contracted alongside the market for chips themselves. Supercharged domestic investment is perhaps the US’s greatest asset in the current trade war—buying up scarce chipmaking equipment gives America leverage to encourage compliance among its would-be customers and trade partners.AI Summary. Catalist data show a nationwide shift among Latino voters toward Republicans, with the Democratic margin among this group falling 18 points; Cubans moved 26 points, Puerto Ricans 18, Dominicans 16 and Mexicans 12. Latino men gave Trump 44% of their two-party vote.
Core argument: Catalist data show the Democrats' margin among Latino voters fell 18 points in 2020 relative to 2016, a nationwide shift.
Catalist data confirm a nationwide shift among Latinos in 2020. The Democrats’ overall margin among this group dropped by 18 points relative to 2016. Cubans had the largest shift of 26 points, but Puerto Ricans moved by 18 points to Trump, Dominicans by 16 points and Mexicans by 12 points. An overall weak spot for Democrats was among Latino men who gave Trump a shocking 44 percent of their two-party vote in 2020. And in a recent Washington Post-ABC poll, Hispanics preferred the way Trump handled the economy when he was in office to Biden’s performance so far by 55 to 36 percent.AI Summary. The number of white Americans without college degrees, a group that backed Donald Trump by 67% to 32%, has fallen by 2.1m, while the number of white college graduates, a constituency that narrowly favored Joe Biden, has grown by 13.3m. These demographic shifts work against Republican candidates.
Core argument: The number of white Americans without college degrees, the core of Donald Trump's support, fell by 2.1 million from 2016 to 2022, while white college graduates, an increasingly Democratic constituency, grew by 13.3 million.
One of the most significant developments in the run-up to the 2024 presidential election has emerged largely under the radar. From 2016 to 2022, the number of white people without college degrees — the core of Donald Trump’s support — has fallen by 2.1 million. Over the same period, the number of white people who have graduated from college — an increasingly Democratic constituency — has grown by 13.3 million. These trends do not bode well for the prospects of Republican candidates, especially Trump. President Biden won white people with college degrees in 2020, 51 to 48 percent, but Trump won by a landslide, 67 to 32 percent, among white people without degrees, according to network exit polls.