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


Tuesday, July 11, 2023

AI Summary. Across advanced economies, core inflation is significantly positively associated with growth in government debt since the start of the pandemic, and the authors expect this decade's fiscal expansions to shift price levels permanently higher. They argue this differs from permanently higher inflation, projecting inflation to diminish as temporary deficits normalize, with medium-term inflation expectations still anchored near central bank targets.

Peder Beck-Friis and Richard Clarida PIMCO
Date Posted:
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Database

Peder Beck-Friis and Richard Clarida @PIMCO argue that fiscal policy has been a key driver of the current temporary inflationary episode, consistent with @JohnHCochrane fiscal theory of the price level.

Does rising government debt raise price levels without raising inflation?

Core argument: Across advanced economies, core inflation and sovereign debt growth show a significant positive relationship since the start of the pandemic, and the fiscal expansions delivered this decade will likely push price levels permanently higher.

In advanced economies, there’s a significant positive relationship between core inflation and sovereign debt growth since the start of the pandemic. The fiscal expansions delivered this decade will likely lead to price levels adjusting permanently higher. But this is not the same thing as permanently higher inflation: Our base case is that as temporary pandemic-related deficits gradually normalize, inflation is likely to diminish – and today’s restrictive monetary policies aim to accelerate this process. And unlike in the 1970s, monetary policy credibility appears intact, with medium-term inflation expectations still anchored around central bank targets.

Takeaways by Macro Roundup® AI

  1. Across advanced economies, core inflation and sovereign debt growth show a significant positive relationship since the start of the pandemic, and the fiscal expansions delivered this decade will likely push price levels permanently higher.
  2. A permanently higher price level differs from permanently higher inflation: the base case is that inflation diminishes as temporary pandemic-related deficits gradually normalize, a process today's restrictive monetary policies aim to accelerate.
  3. Unlike in the 1970s, monetary policy credibility appears intact, with medium-term inflation expectations still anchored around central bank targets.

Related Articles:

  • The Second Great Experiment Update — Newer macroeconomic theory using forward-looking rather than adaptive expectations holds that inflation is stable under an interest rate target and can fade on its own even when interest rates sit below the inflation rate. Under the fiscal theory of the price level, a burst of inflation devalues government debt and ends once the real value of that debt is restored.
  • Inflation and Debt Across Countries — Across countries there is little correlation between monetary expansion and inflation, and the fitted relationship depends heavily on one or two observations. Monetary and fiscal theories agree that money printed to finance deficits is inflationary, but disagree on whether a large bond-buying program without deficits would raise inflation.
  • Waining Inflation, Supply and Demand — Inflation appears to be waning, but this does not vindicate the view that inflation was purely supply shocks, since a supply shock raises prices only temporarily and cannot permanently raise the price level. Cumulative inflation has shifted the price level up by roughly 10–20%, and under the fiscal or demand view that shift is permanent absent fiscal retrenchment.

AI Summary. Across countries there is little correlation between monetary expansion and inflation, and the fitted relationship depends heavily on one or two observations. Monetary and fiscal theories agree that money printed to finance deficits is inflationary, but disagree on whether a large bond-buying program without deficits would raise inflation.

John Cochrane The Grumpy Economist
Date Posted:

.@JohnHCochrane argues that current conditions of trillion-dollar deficits with 3.6% unemployment are not consistent with a persistent decline in inflation.

Does monetary expansion across countries correlate with inflation?

Core argument: Cross-country data show little correlation between monetary expansion and inflation, and the regression slope depends heavily on one or two points, despite the large US M2 expansion that preceded US inflation and the subsequent large M2 decline.

There was a big expansion in M2 before the US inflation. Monetarists took a victory lap. M2 has since fallen a lot. There is not much correlation between monetary expansion and inflation across countries, however. The slope of the regression also clearly depends on one or two points. Money or debt, which is it? When governments print money to finance deficits (or interest-bearing reserves), fiscal theory and monetary theory agree, there is inflation. Printing money (helicopters) is perhaps particularly powerful, as debt carries a reputation and tradition of repayment, which money may not carry. A core issue separating monetary and fiscal theory is whether a big monetary expansion without deficits or other fiscal news would have any effects. Would a $5 trillion QE (buy bonds, issue money) with no deficit have had the same inflationary impact? Monetarists, yes; fiscalists, no.

Takeaways by Macro Roundup® AI

  1. Cross-country data show little correlation between monetary expansion and inflation, and the regression slope depends heavily on one or two points, despite the large US M2 expansion that preceded US inflation and the subsequent large M2 decline.
  2. Fiscal theory and monetary theory agree that inflation follows when governments print money or interest-bearing reserves to finance deficits, with helicopter money perhaps particularly powerful because debt carries a reputation and tradition of repayment that money may not.
  3. A core issue separating monetary and fiscal theory is whether a $5 trillion quantitative easing operation—buying bonds and issuing money with no deficit or other fiscal news—would be inflationary, which monetarists affirm and fiscalists deny.

Related Articles:

  • The Second Great Experiment Update, — Newer macroeconomic theory using forward-looking rather than adaptive expectations holds that inflation is stable under an interest rate target and can fade on its own even when interest rates sit below the inflation rate. Under the fiscal theory of the price level, a burst of inflation devalues government debt and ends once the real value of that debt is restored.
  • Waining Inflation, Supply and Demand — Inflation appears to be waning, but this does not vindicate the view that inflation was purely supply shocks, since a supply shock raises prices only temporarily and cannot permanently raise the price level. Cumulative inflation has shifted the price level up by roughly 10–20%, and under the fiscal or demand view that shift is permanent absent fiscal retrenchment.
  • Fiscal Arithmetic and the Global Inflation Outlook — Across advanced economies, core inflation is significantly positively associated with growth in government debt since the start of the pandemic, and the authors expect this decade's fiscal expansions to shift price levels permanently higher. They argue this differs from permanently higher inflation, projecting inflation to diminish as temporary deficits normalize, with medium-term inflation expectations still anchored near central bank targets.

AI Summary. The authors estimate that greater dispersion in productivity growth among an industry's input and idea suppliers has a strong negative effect on that industry's own productivity growth, using data on 462 US manufacturing industries and 42 non-manufacturing industries. Their evidence implies most of the US productivity slowdown can be explained by rising cross-industry variance in productivity growth.

Daron Acemoglu, David Autor and Christina Patterson National Bureau of Economic Research
Date Posted:

.@DrDaronAcemoglu @davidautor show that declining manufacturing productivity growth since the 1970s can be explained by “bottlenecks” where slowdowns in TFP growth of a sector’s suppliers undermine that sector’s productivity.

Does uneven productivity growth across supplier industries explain the productivity slowdown?

Core argument: The authors estimate that greater dispersion of total factor productivity growth among an industry's input and idea suppliers exerts a powerful negative influence on that industry's own growth opportunities.

The foundational idea of our approach is that innovation in any one industry relies on complementary innovations in—and subsequent productivity gains from—its input and idea suppliers. Our framework yields a simple estimating equation that links growth in sectoral TFP to both the average TFP and the dispersion (variance) of TFP among that sector’s inputs. We estimate this equation using 462 manufacturing industries between 1977 and 2007, and also for the entire US economy between 1987 and 2007 by combining our manufacturing data with 42 non-manufacturing industries. Our estimates indicate that greater dispersion of TFP growth among an industry’s suppliers exerts a powerful negative influence on its own growth opportunities. At face value, our evidence implies that the bulk of the productivity slowdown in the United States (and several other industrialized economies) can be explained by the sizable increase in the cross-industry variance of TFP growth and innovation.

Takeaways by Macro Roundup® AI

  1. The authors estimate that greater dispersion of total factor productivity growth among an industry's input and idea suppliers exerts a powerful negative influence on that industry's own growth opportunities.
  2. The authors' framework links growth in sectoral TFP to both the average TFP and the variance of TFP among a sector's inputs, estimated across 462 manufacturing industries from 1977 to 2007 and the whole US economy from 1987 to 2007 with 42 non-manufacturing industries added.
  3. At face value, the evidence implies that the bulk of the US productivity slowdown, and that of several other industrialized economies, can be explained by the sizable increase in cross-industry variance of TFP growth and innovation.

Related Articles:

AI Summary. In California public schools, the authors estimate that the arrival of one Asian student in a high-socioeconomic-status suburban district is associated with the departure of 1.5 white students, alongside rising academic performance. They suggest this reflects parental concerns about academic competition rather than housing market dynamics or direct racial animus.

Leah Platt Boustan, Christine Cai, and Tammy Tseng National Bureau of Economic Research
Date Posted:
Is Database:
Database

Evidence from CA shows that between 2002-2016 Asian immigration is associated with a decline in white student enrollment in public schools. @leah_boustan

Do white families leave suburban school districts when Asian students arrive?

Core argument: The arrival of one Asian student in a high-socioeconomic-status suburban California school district leads on average to the departure of 1.5 white students, a rate somewhat lower than but not dissimilar to flight from Black/Hispanic populations documented in other settings.

We find substantial white flight from Asian students entering high-socioeconomic status suburban districts: on average, the arrival of one Asian student in a suburban school district leads to the departure of 1.5 white students, a rate of white flight that is somewhat lower but not too dissimilar from flight from Black/Hispanic We find substantial white flight from Asian students entering high-socioeconomic status suburban districts: on average, the arrival of one Asian student in a suburban school district leads to the departure of 1.5 white students, a rate of white flight that is somewhat lower but not too dissimilar from flight from Black/Hispanic populations documented in different settings. Academic performance also rises with Asian entry to high-SES suburban districts. After ruling out correlated patterns of Black/Hispanic entry and direct racial animus, and confirming that housing market dynamics cannot account for the observed departure rate, we suggest that white flight from high-SES districts may be due to parental concerns about academic competition, particularly in a state like CA where entry to public colleges and universities is determined in part by relative high school performance. This pattern is consistent with qualitative sociological evidence about white-Asian encounters in suburban settings.

Takeaways by Macro Roundup® AI

  1. The arrival of one Asian student in a high-socioeconomic-status suburban California school district leads on average to the departure of 1.5 white students, a rate somewhat lower than but not dissimilar to flight from Black/Hispanic populations documented in other settings.
  2. Academic performance in high-socioeconomic-status suburban California districts rises with Asian student entry.
  3. After ruling out correlated Black/Hispanic entry, direct racial animus, and housing market dynamics as an explanation for the departure rate, the authors suggest white flight may stem from parental concerns about academic competition, since California public college entry depends in part on relative high school performance.

Related Articles:

  • Can Democrats Survive the Looming Crisis in New York City’s Outer Boroughs? — Just over a third of the decline in the Democratic margin of victory came from the suburbs, with New York City voters—through a mix of defection and abstention—accounting for most of the rest. Precincts that are at least three-quarters Hispanic or Asian swung 58 and 52 points toward Republicans, versus 32 points in white and 8 points in black precincts.
  • Where New York’s Asian Neighborhoods Shifted to the Right — Voters in Asian neighborhoods across New York City shifted 23 percentage points toward Republicans in a governor's election compared with the prior one, though these areas remained Democratic overall. A New York Times precinct-level analysis finds this was the largest electoral shift in the city's Asian neighborhoods between 2006 and 2022.

AI Summary. NATO's defence expenditure figures for member countries may diverge considerably from those quoted by media, published by national authorities, or given in national budgets, reflecting differences in economic data sources and in NATO's definition of defence expenditure versus national definitions.

NATO Staff North Atlantic Treaty Organization
Date Posted:

According to @NATO 11 of 31 member nations will hit the 2% spending target this year, up from 3 in 2014. Germany will only spend 1.57%.

Why do NATO defence spending figures differ from national ones?

Core argument: NATO's report on defence expenditure of member countries for 2014–2023 draws economic and demographic information from the European Commission's Directorate-General for Economic and Financial Affairs (DG ECFIN) and the OECD.

In the figures and tables that follow, NATO also uses economic and demographic information available from the Directorate-General for Economic and Financial Affairs of the European Commission (DG ECFIN), and the Organisation for Economic Co-operation and Development (OECD). In view of differences between both these sources and national GDP forecasts, and also the definition of NATO defence expenditure and national definitions, the figures shown in this report may diverge considerably from those which are quoted by media, published by national authorities, or given in national budgets. Equipment expenditure includes expenditure on major equipment as well as on research and development devoted to major equipment. Personnel expenditure includes pensions paid to retirees.

Takeaways by Macro Roundup® AI

  1. NATO's report on defence expenditure of member countries for 2014–2023 draws economic and demographic information from the European Commission's Directorate-General for Economic and Financial Affairs (DG ECFIN) and the OECD.
  2. NATO cautions that its published figures may diverge considerably from those quoted by media, published by national authorities, or given in national budgets, owing to differences between these sources, national GDP forecasts, and NATO versus national definitions of defence expenditure.
  3. In NATO's accounting, equipment expenditure covers major equipment as well as research and development devoted to major equipment, while personnel expenditure includes pensions paid to retirees.

Related Articles:

  • The Cost of the Global Arms Race — Global defence spending rose nearly 4% in real terms to over $2tn, and new commitments and forecast increases, if implemented, are estimated to add more than $200bn a year worldwide. If countries below 2% of GDP reached that level and others added half a percentage point, outlays would rise by close to $700bn annually.
  • The Age-Old Question: How Do Governments Pay For Wars? — Denmark abolished a centuries-old religious holiday, requiring people to work that day, partly to help pay for extra defence spending, a move 70% of Danes opposed in one poll. The Stockholm International Peace Research Institute calculates global defence spending rose 4% to a record $2.24tn and is set to keep rising even as higher interest rates raise governments' borrowing costs.

AI Summary. US Navy data show 18 of its 49 attack submarines — 37% — are out of commission for repairs because of naval shipyard delays, up from 28% and well above the 20% industry best practice. The report argues this leaves the US at a disadvantage against China's numerically larger fleet.

Anthony Capaccio Bloomberg
Date Posted:

37% of the Navy’s attack submarines (18 of 49) are out of commission and awaiting repairs, up from 28% in 2017.

37% of the Navy’s attack submarines (18 of 49) are out of commission and awaiting repairs, up from 28% in 2017.

Are shipyard repair delays sidelining a growing share of US attack submarines?

Core argument: 18 of the US Navy's 49 attack submarines — 37% — are out of commission for repairs amid delays at naval shipyards, according to previously undisclosed Navy data published by the Congressional Research Service.

Delays at naval shipyards mean that nearly 40% of US attack submarines are out of commission for repairs, about double the rate the Navy would like, according to new data released by the service. As of this year, 18 of the US Navy’s 49 attack submarines — 37% — were out of commission, according to previously undisclosed Navy data published by the Congressional Research Service. That leaves the US at a critical disadvantage against China’s numerically superior fleet. That’s up from 28% overall in 2017 and 33% in 2022, and below the industry best practice of 20%.

Takeaways by Macro Roundup® AI

  1. 18 of the US Navy's 49 attack submarines — 37% — are out of commission for repairs amid delays at naval shipyards, according to previously undisclosed Navy data published by the Congressional Research Service.
  2. The 37% out-of-commission rate for US attack submarines is up from 28% in 2017 and 33% in 2022, against an industry best practice of 20%.
  3. The share of US attack submarines sidelined for repairs is about double the rate the Navy would like, leaving the US at a disadvantage against China's numerically superior fleet.

Related Articles:

  • Weapons Makers Can’t Hire Enough Workers as Ukraine War Drives Demand — Weapons makers face a shortage of skilled workers needed to fulfill an influx of orders driven by higher arms demand, with US shipbuilding among the sectors hardest hit by pandemic-era retirements. General Dynamics, a large US Navy shipbuilder, hired 24,000 staff in a year but raised net head count only 3,400, to 106,500.
  • US Can’t Keep Up with China’s Warship Building, Navy Secretary Says — The US Navy says China's navy could field up to 400 ships in coming years, up from about 340, while the US fleet sits under 300. US naval shipyards cannot match Chinese output: China has 13 shipyards, and one reportedly has more capacity than all US shipyards combined.

AI Summary. A town in Canada's Northwest Territories about 300 miles from the Arctic Ocean reached 100°F, described by a climatologist as the farthest north reading of 37°C or higher in Canadian climate records. Canadian fire authorities report a record 22.7m acres burned, exceeding the previous high of 17.5m acres.

Ian Livingston Washington Post
Date Posted:

Towns 300 miles south of the Arctic Ocean are seeing temperatures of 100 degrees which could accelerate wildfires. A record 22.7 million acres of Canada have burned so far this year, up from a previous record of 17.5 million acres in 1995.

Has Canada set new records for northern heat and acres burned?

Core argument: Norman Wells, in Canada's Northwest Territories about 300 miles from the Arctic Ocean, reached 100 degrees on Saturday, a mark climatologist Brian Brettschneider called easily the farthest north in the Canadian climate record for a reading of 37C (99F) or higher.

In the desolate and oil-rich region of the Northwest Territories, nestled in the wooded Taiga Plains about 300 miles from the Arctic Ocean, the small town of Norman Wells hit 100 degrees on Saturday. It was “easily the farthest north in Canada with a reading of 37C (99F) or higher in the Canadian climate record,” tweeted climatologist Brian Brettschneider, before the mercury ultimately ticked up to 100. The scorching temperatures over western Canada exacerbated the country’s unprecedented wildfire crisis. A record 22.7 million acres (9.2 million hectares) have burned so far, according to the Canadian Interagency Forest Fire Centre, blowing past the previous high mark of 17.5 million acres (7.1 million hectares) in 1995. There are months of the wildfire season to go.

Takeaways by Macro Roundup® AI

  1. Norman Wells, in Canada's Northwest Territories about 300 miles from the Arctic Ocean, reached 100 degrees on Saturday, a mark climatologist Brian Brettschneider called easily the farthest north in the Canadian climate record for a reading of 37C (99F) or higher.
  2. A record 22.7 million acres (9.2 million hectares) have burned in Canada, exceeding the previous high of 17.5 million acres (7.1 million hectares) set in 1995, according to the Canadian Interagency Forest Fire Centre.
  3. Scorching temperatures over western Canada exacerbated the country's wildfire crisis, with months of the wildfire season still to come.

Related Articles:

  • Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse — State Farm, California's largest homeowner insurer, stopped accepting applications for most new home insurance policies statewide, citing rapidly growing catastrophe exposure. Florida faced a similar retreat by national carriers after Hurricane Andrew and responded with a market of small insurers backed by a state-mandated company providing windstorm coverage to homeowners who cannot obtain private insurance.
  • Global Temperatures Have Broken Records Three Times In A Week — Average global air temperature set new records three times within a single week. Aside from global warming, the biggest influence on Earth's temperature is the El Niño-Southern Oscillation, and because past highs have typically come near the end of a strong El Niño, the recent switch to El Niño is unlikely to explain these records.

AI Summary. Much of Florida is recording its warmest year on record, with temperatures 3–5 degrees above normal and coastal waters in the Florida Keys reaching 92–96 degrees versus the more typical upper 80s. The National Oceanic and Atmospheric Administration reports about 40% of the world's oceans face a marine heat wave, the highest share on record.

Dan Stillman Washington Post
Date Posted:
Is Database:
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Coastal waters in Florida are currently between 92 and 96 degrees vs. typical averages in the upper 80s. About 40% of the world’s oceans are facing a marine heat wave according to @NOAA.

How warm have Florida's coastal waters and oceans worldwide become?

Core argument: Water temperatures in the Florida Keys have reached 92 to 96 degrees, which meteorologist Bob Henson called "downright shocking"; WFLA-TV chief meteorologist Jeff Berardelli said such waters are more typically in the upper 80s.

Much of Florida is seeing its warmest year on record, with temperatures running 3 to 5 degrees above normal. While some locations have been setting records since the beginning of the year, the hottest weather has come with an intense heat dome cooking the Sunshine State in recent weeks. That heat dome has made coastal waters extremely warm, including “downright shocking” temperatures of 92 to 96 degrees in the Florida Keys, meteorologist and journalist Bob Henson said Sunday in a tweet. “That’s boiling for them! More typically it would be in the upper 80s,” tweeted Jeff Berardelli, chief meteorologist and climate specialist at WFLA-TV in Tampa. The hot waters around Florida are connected to record-breaking ocean heat worldwide. About 40 percent of the world’s oceans are facing a marine heat wave, NOAA reported. That is the highest percentage on record, and it could reach 50 percent by September.

Takeaways by Macro Roundup® AI

  1. Water temperatures in the Florida Keys have reached 92 to 96 degrees, which meteorologist Bob Henson called "downright shocking"; WFLA-TV chief meteorologist Jeff Berardelli said such waters are more typically in the upper 80s.
  2. Much of Florida is seeing its warmest year on record, with temperatures running 3 to 5 degrees above normal and an intense heat dome bringing the hottest weather in recent weeks.
  3. NOAA reported that about 40 percent of the world's oceans face a marine heat wave, the highest percentage on record, and that share could reach 50 percent by September.

Related Articles:

  • Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse — State Farm, California's largest homeowner insurer, stopped accepting applications for most new home insurance policies statewide, citing rapidly growing catastrophe exposure. Florida faced a similar retreat by national carriers after Hurricane Andrew and responded with a market of small insurers backed by a state-mandated company providing windstorm coverage to homeowners who cannot obtain private insurance.
  • Global Temperatures Have Broken Records Three Times In A Week — Average global air temperature set new records three times within a single week. Aside from global warming, the biggest influence on Earth's temperature is the El Niño-Southern Oscillation, and because past highs have typically come near the end of a strong El Niño, the recent switch to El Niño is unlikely to explain these records.

Wednesday, July 12, 2023

AI Summary. The number of U.S. child care workers was about 6% below pre-pandemic levels while child care costs were up 14%, and the share of parents of young children citing child care as the main reason for low work hours rose from about 15% to 18%. Even so, labor force participation among partnered women with young children surpassed its pre-pandemic level.

Alexander Bick, Victoria Gregory, and Oksana Leukhina Federal Reserve Bank Of St. Louis
Date Posted:

As of February 2023, the labor force participation rate of women with young children has rebounded, despite the cost of childcare rising by 14% vs. pre-pandemic. @stlouisfed @oksana_leukhina

Do higher child care costs hold back parents' labor force participation?

Core argument: As of February 2023, U.S. child care employment stood about 6% below its pre-pandemic level while child care costs were up 14%, factors deemed partly responsible for the lackluster rebound in labor force participation.

As of February 2023, the number of child care workers in the U.S. was about 6% below its pre-pandemic level while the cost of child care was up by 14%. The shortage of child care workers and rising child care prices have been deemed partly responsible for the lackluster rebound of labor force participation rates. Consistent with this hypothesis, a larger share of nonworking parents of young children and those working only part time currently report child care needs as the main reason for their low work hours. This fraction increased from about 15% prior to the pandemic to 18% in February 2023. Interestingly, women with a partner and young children—the group we expected to be most sensitive to child care prices—showed the strongest rebound with their LFP index having surpassed its pre-pandemic level. As a result, we do not see clear evidence for weaker labor supply rebounds among households with small children by early 2023.

Takeaways by Macro Roundup® AI

  1. As of February 2023, U.S. child care employment stood about 6% below its pre-pandemic level while child care costs were up 14%, factors deemed partly responsible for the lackluster rebound in labor force participation.
  2. The share of nonworking or part-time parents of young children citing child care needs as the main reason for low work hours rose from about 15% before the pandemic to 18% in February 2023.
  3. Women with a partner and young children showed the strongest rebound, with their labor force participation index surpassing its pre-pandemic level, leaving no clear evidence of weaker labor supply rebounds among households with small children by early 2023.

Related Articles:

  • Understanding The Missing Millions — A combined 7% of US survey respondents who were not working cited caregiving as the reason — 5% caring for children and 2% for elderly relatives. Daycare and preschool costs have risen more than 10% since the start of the pandemic, and Bank of America internal data show 7% fewer customers making childcare payments than at the start of 2020.

AI Summary. The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.

Connor O’Brien Economic Innovation Group
Date Posted:

Families with young children continue to migrate out of America’s large urban areas. The under-five population in large urban counties shrank 1.8% last year, vs. a 0.7% decline nationwide.

Are large cities losing young families faster than population overall?

Core argument: The under-five population in large urban U.S. counties fell 6.1% between April 2020 and July 2022, while those counties' overall population declined just 0.9%.

Since the beginning of the pandemic, the cumulative decline of under-five populations in large urban counties is now more than 6% —nearly twice the rate of decline nationally. Large urban areas are losing families with young children substantially faster than they are losing population overall. While the under-five population in such counties fell 6.1% between April 2020 and July 2022, the overall population declined by just 0.9%. In some of the country’s very largest counties, including New York, Cook County, IL, and Los Angeles, the population of young children is more than 10% smaller than in April 2020. Out-migration of young families from large and small urban counties has been more severe in the Mid-Atlantic and West Coast, while the under-five population actually grew in urban counties in the Southeast last year.

Takeaways by Macro Roundup® AI

  1. The under-five population in large urban U.S. counties fell 6.1% between April 2020 and July 2022, while those counties' overall population declined just 0.9%.
  2. In some of the country's very largest counties, including New York, Cook County, IL, and Los Angeles, the population of young children is more than 10% smaller than in April 2020.
  3. Out-migration of young families from large and small urban counties has been more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.

Related Articles:

  • Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets — An assessment of about 380 U.S. metro areas ranked Nashville, Tennessee as the country's hottest job market, followed by Austin, Texas and Jacksonville, Florida. The rankings were based on five factors: the unemployment rate, labor-force participation rate, changes in employment levels, labor-force size, and wages.

AI Summary. Headline consumer price inflation fell to 3.0%, largely reflecting a 17% drop in energy prices over the past year, while core inflation registered its lowest reading of the inflationary period as service price growth gradually slowed and goods price growth turned back down.

Jason Furman @JasonFurman
Date Posted:

.@JasonFurman notes headline CPI inflation fell to an annual rate of 3% year-over-year. He cautions that “Fed should still do more.”

Is falling headline inflation driven by energy prices rather than underlying moderation?

Core argument: Headline CPI inflation fell to 3.0%, which Jason Furman attributes mostly to the large June 2022 reading dropping out and an almost certainly transitory 17% fall in energy prices over the past year.

The headline is CPI inflation fell to 3.0%. But mostly this is the huge June 2022 # dropping out & what is almost certainly a transitory 17% fall in energy prices over the last yr. But underneath the #s show moderation, with the lowest core reading of the inflationary period. Overall what is happening is that service price growth is gradually slowing--as was predictable and predicted given the lags in the shelter measure. And goods price growth which was unusually (and likely transitorily) high in recent months turned back down again. The collapsing of "supercore," which excludes food, energy, shelter, and used cars (the narrowest category BLS publishes) is even more dramatic. Overall, core PCE inflation is still running well above Fed's target. Economy is very strong. Interest rates are not that high & most of the relevant increases happened a while ago. The banking sector stabilized. Fiscal policy may be mildly expansionary. Fed should still do more.

Takeaways by Macro Roundup® AI

  1. Headline CPI inflation fell to 3.0%, which Jason Furman attributes mostly to the large June 2022 reading dropping out and an almost certainly transitory 17% fall in energy prices over the past year.
  2. Furman notes core inflation posted the lowest reading of the inflationary period, with service price growth gradually slowing given shelter measure lags and goods price growth turning back down after unusually high recent months.
  3. Furman argues the Fed should do more, citing core PCE inflation still running well above the Fed's target, a very strong economy, interest rates that are not that high, a stabilized banking sector, and possibly mildly expansionary fiscal policy.

AI Summary. A simulation using a variant of the Federal Reserve's FRB/US model of the US economy estimates that a 5% increase in the federal funds rate lowers the level of gross domestic product with a lag of 12 to 18 months. The author argues this lagged drag makes a recession a more likely outcome than a soft landing.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal argues that the impact of monetary policy will peak in Q3 of next year.

How long do rate hikes take to slow growth?

Core argument: A simulation on a variant of the Fed's FRB/US model shows a 5% increase in the Fed funds rate depressing the level of GDP, with monetary policy transmission taking 12 to 18 months.

The Fed has raised the Fed funds rate to 5%, and the lagged effects of Fed hikes will continue to drag down growth over the coming 12 months. See chart above, which shows a simulation with the impact of a 5% increase in the Fed funds rate on the level of GDP done on a variant of the Fed’s FR/BUS model of the US economy. In other words, the transmission mechanism of monetary policy takes time, and the drag on growth from lagged Fed hikes over the coming year will be significant. That is why a recession is a more likely outcome than a soft landing, no matter what happens to inflation.

Takeaways by Macro Roundup® AI

  1. A simulation on a variant of the Fed's FRB/US model shows a 5% increase in the Fed funds rate depressing the level of GDP, with monetary policy transmission taking 12 to 18 months.
  2. With the Fed funds rate raised to 5%, the lagged effects of the hikes will continue to drag down growth significantly over the coming 12 months.
  3. Because of the lagged drag from prior Fed hikes, recession is a more likely outcome than a soft landing, no matter what happens to inflation.

AI Summary. The author describes "slow burn Minsky moments" as unsustainable processes or systemic vulnerabilities that accumulate during good times and either collapse of their own accord or amplify external shocks. A private-sector-debt-to-GDP ratio above 150% has been proposed as an important threshold, and the US has been at or above that level for most of the past 20 years.

James Montier GMO
Date Posted:

James Montier of GMO argues that elevated debt levels in the US over the past 20 years have created a cascading “slow burn Minsky moments.”

How do vulnerabilities built up in good times amplify later shocks?

Core argument: Richard Vague suggests that private sector debt exceeding 150% of GDP is an important threshold, and the U.S. has spent most of the last 20 years at or above that level, a period marked by a litany of financial crises.

The late, great Rudi Dornbusch once opined, “The crisis takes a much longer time in coming than you think, and then it happens much faster than you would have thought.”. This idea got me thinking about what I am calling “slow burn Minsky moments.” Recall that Minsky’s financial instability hypothesis holds that stability begets instability. In essence, I am referring to situations characterized by economically unsustainable processes or systemic vulnerabilities that build up during “good times” but carry within them either the seeds of their own destruction or create fragilities that exacerbate any external shock far beyond what may have been commonly expected. Richard Vague suggests that a ratio of private sector debt to GDP in excess of 150% is an important threshold. As Exhibit 1 shows, the U.S. has spent most of the last 20 years at or above this level! No wonder we have experienced a litany of financial crises over this period.

Takeaways by Macro Roundup® AI

  1. Richard Vague suggests that private sector debt exceeding 150% of GDP is an important threshold, and the U.S. has spent most of the last 20 years at or above that level, a period marked by a litany of financial crises.
  2. "Slow burn Minsky moments" describe economically unsustainable processes or systemic vulnerabilities that build during good times and either carry the seeds of their own destruction or amplify external shocks far beyond what was commonly expected.
  3. Minsky's financial instability hypothesis holds that stability begets instability, while Rudi Dornbusch opined that a crisis takes much longer to arrive than expected and then happens much faster than anticipated.

AI Summary. Retail employment in New York City is down 38,000 jobs (11%) from its pre-pandemic level of 340,000, with Manhattan off 20% and clothing stores down 34%, according to the Center for an Urban Future. The sector's struggles are cited as a key reason for the city's 12.2% Black unemployment rate.

Greg David The City
Date Posted:

Manhattan has 20% fewer store employees than before the pandemic and NYC overall is down 11%. Subsectors facing the stiffest online competition are hardest-hit: clothing employment is down 34%, and department stores down 20%.

Manhattan has 20% fewer store employees than before the pandemic and NYC overall is down 11%. Subsectors facing the stiffest...

Are retail job losses holding back a recovering city economy?

Core argument: New York City retail employment stood 38,000 jobs (11%) below its pre-pandemic level of 340,000 as of February with no gain since, according to the Center for an Urban Future, after peaking at 360,000 jobs in 2015.

As of February, retail employment in New York City sagged 38,000 jobs (11%) from its pre-pandemic level of 340,000 with no gain since, according to the Center for an Urban Future. The sector has declined since peaking at 360,000 jobs in 2015. Manhattan has been hardest hit, with a 20% decline. The other boroughs had single-digit declines. Subsectors facing the stiffest online competition have been hardest hit, with clothing employment down 34%, department stores off 20%, and general merchandise declining about 13%. The sector’s struggles are a key reason for the city’s high Black unemployment rate of 12.2%, compared to just over 1% for white workers. Workers of color account for 7 of 10 retail employees in the city.

Takeaways by Macro Roundup® AI

  1. New York City retail employment stood 38,000 jobs (11%) below its pre-pandemic level of 340,000 as of February with no gain since, according to the Center for an Urban Future, after peaking at 360,000 jobs in 2015.
  2. Manhattan posted a 20% retail employment decline, versus single-digit declines in the other boroughs, while subsectors facing the stiffest online competition fell hardest: clothing down 34%, department stores down 20%, and general merchandise down about 13%.
  3. The Center for an Urban Future identifies retail's struggles as a key reason for New York City's 12.2% Black unemployment rate, compared with just over 1% for white workers, with workers of color accounting for 7 of 10 city retail employees.