Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, July 17, 2023

AI Summary. In East Asia and Europe, growing numbers of retirees will depend on a shrinking working-age population, and some Asian countries are aging before becoming rich — China hit its peak working-age population at 20% of US income levels at the same point, Vietnam at 14%.

Lauren Leatherby New York Times
Date Posted:

In 27 years, people aged 65+ will make up 40% of the population in some parts of East Asia and Europe, almost 2X the share of 65+ adults currently living in FL.

Will aging populations weigh less on the US than Asia and Europe?

Core argument: China reached its peak working-age population at 20 percent of the income level the United States had at the same point, and Vietnam at 14 percent, illustrating that some Asian countries are becoming old before they become rich.

In East Asia and Europe, extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them. Not only are Asian countries aging much faster, but some are also becoming old before they become rich. While Japan, South Korea, and Singapore have relatively high income levels, China reached its peak working-age population at 20 percent the income level that the United States had at the same point. Vietnam reached the same peak at 14 percent the same level. Slightly higher fertility rates and more immigration mean the United States and Australia, for example, will be younger than most other rich countries in 2050. In both the United States and Australia, just under 24 percent of the population is projected to be 65 or older in 2050, according to U.N. projections — far higher than today, but lower than in most of Europe and East Asia, which will top 30 percent.

Takeaways by Macro Roundup® AI

  1. China reached its peak working-age population at 20 percent of the income level the United States had at the same point, and Vietnam at 14 percent, illustrating that some Asian countries are becoming old before they become rich.
  2. U.N. projections show just under 24 percent of the population in both the United States and Australia will be 65 or older in 2050, below most of Europe and East Asia, which will top 30 percent.
  3. Slightly higher fertility rates and more immigration mean the United States and Australia will be younger than most other rich countries in 2050, while East Asia and Europe face extraordinary numbers of retirees dependent on shrinking working-age populations.

Related Articles:

  • The Forever Labour Shortage — Research from the Bank for International Settlements finds that the young and the old are inflationary while the working-age population is disinflationary, because prime-age workers produce more supply than demand and dependents do the opposite. On this view, an ageing population and rising dependency will constrain supply and add to inflation.
  • Fully Grown – European Vacation! — Europe's growth slowdown reflects a widespread drop in productivity growth rather than changes in physical capital accumulation, with human capital growth also mattering but varying by country. The productivity decline is larger than in the US: in countries such as the UK and France, productivity growth fell from about 2% to near zero or negative.

AI Summary. Nominal consumer spending has slowed only modestly, from roughly 7% annualized to about 6%, a negligible change compared with the slowdown in inflation. The author argues most disinflation so far reflects improvements in businesses' ability to produce the real goods and services consumers want rather than a shift in monetary policy.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein notes the credit contraction hasn’t slowed down the real economy as it’s been offset by strong nominal income growth.

Is disinflation driven by improved production rather than tighter monetary policy?

Core argument: Nominal consumer spending is rising about 6% annualized so far this year, down modestly from roughly 7% annualized at the end of 2021 and start of 2022.

At the end of 2021 and the beginning of 2022, nominal consumer spending was rising about 7% annualized. So far this year, nominal PCE is rising about 6% annualized. The change in spending has been negligible compared to the slowdown in inflation, which suggests that improvements in the match between real production and demand have been more important than any shift in monetary policy. None of this is to suggest that interest rates should have stayed at zero, but it does suggest that the bulk of the disinflation that we have experienced so far can be attributed to benign developments in businesses’ ability to produce the real goods and services that consumers want.

Takeaways by Macro Roundup® AI

  1. Nominal consumer spending is rising about 6% annualized so far this year, down modestly from roughly 7% annualized at the end of 2021 and start of 2022.
  2. The negligible change in nominal spending relative to the slowdown in inflation suggests improvements in the match between real production and demand mattered more than any shift in monetary policy.
  3. The bulk of the disinflation so far can be attributed to benign developments in businesses' ability to produce the real goods and services consumers want, which does not imply interest rates should have stayed at zero.

AI Summary. The New Tenant Repeat Rent Index tracks price changes only for units where new tenants have signed leases, using the same underlying data as the Consumer Price Index, and tends to lead official rent measures by about a year. It currently points to significant rent disinflation over the next three quarters.

Joseph Politano Apricitas Economics
Date Posted:

.@JosephPolitano argues that newly-signed rents show rapidly declining rent inflation which suggests significant disinflation over the next three quarters.

Do new tenant rents signal significant rent disinflation ahead?

Core argument: The New Tenant Repeat Rent Index, built from the same microdata as the CPI but limited to units with newly signed leases, tends to lead official CPI rent components by one year and currently points to significant disinflation over the next three quarters.

The New Tenant Repeat Rent (NTRR) Index uses the same underlying microdata as the CPI to look at price changes for only the subset of units where new tenants have signed leases. That gives a much better picture of where the housing market is right now, and by proxy where official rent inflation is headed. Critically, the NTRR tends to lead the official CPI rent components by one year—and right now, it is saying we should expect significant disinflation over the next three quarters. Inflation is now mostly a housing phenomenon—rising rents are the single-largest contributor to the CPI by a wide margin, and outside of shelter headline inflation has completely flatlined over the last year.

Takeaways by Macro Roundup® AI

  1. The New Tenant Repeat Rent Index, built from the same microdata as the CPI but limited to units with newly signed leases, tends to lead official CPI rent components by one year and currently points to significant disinflation over the next three quarters.
  2. Rising rents are the single-largest contributor to the CPI by a wide margin, making inflation mostly a housing phenomenon.
  3. Excluding shelter, headline inflation has flatlined over the last year.

Related Articles:

  • New Tenant Repeat Rent Index — Immigrants represent 16% of US inventors but produced 23% of total innovation output as measured by patent counts, citations, and the economic value of patents. The authors estimate immigrants account for 36% of aggregate innovation, two-thirds of which comes from their spillover effects on native-born collaborators.

AI Summary. Measured in dollars, the eurozone economy grew about 6% over 15 years versus 82% for the U.S., leaving the average European Union country poorer per person than every U.S. state except Idaho and Mississippi. Inflation-adjusted private consumption fell about 1% in the eurozone since late 2019 while rising nearly 9% in the U.S.

Tom Fairless Wall Street Journal
Date Posted:

Since 2019, adjusted for PPP and inflation, wages are down 3% in Germany, 3.5% in Italy and Spain, and 6% in Greece. Over that same period, US wages were up 6%.

How far have European living standards fallen behind America's?

Core argument: The eurozone economy grew about 6% over the past 15 years measured in dollars versus 82% for the U.S., according to IMF data, leaving the average EU country poorer per head than every U.S. state except Idaho and Mississippi.

The eurozone economy grew about 6% over the past 15 years, measured in dollars, compared with 82% for the U.S., according to International Monetary Fund data. That has left the average EU country poorer per head than every U.S. state except Idaho and Mississippi. Private consumption has declined by about 1% in the 20-nation eurozone since the end of 2019 after adjusting for inflation. In the U.S., where households enjoy a strong labor market and rising incomes, it has increased by nearly 9%. The European Union now accounts for about 18% of all global consumption spending, compared with 28% for America. Fifteen years ago, the EU and the U.S. each represented about a quarter of that total.

Takeaways by Macro Roundup® AI

  1. The eurozone economy grew about 6% over the past 15 years measured in dollars versus 82% for the U.S., according to IMF data, leaving the average EU country poorer per head than every U.S. state except Idaho and Mississippi.
  2. Inflation-adjusted private consumption in the 20-nation eurozone has fallen about 1% since the end of 2019, while U.S. consumption rose nearly 9% amid a strong labor market and rising incomes.
  3. The EU accounts for about 18% of global consumption spending compared with 28% for the U.S., after each represented about a quarter of that total 15 years ago.

Related Articles:

  • From Strength To Strength — The US produced $25.5tn in GDP, about 25% of the world total—roughly its 1990 share—while China's share stands at 18%; the US share of the G7's nominal GDP rose from 40% in 1990 to 58%. Income per person is now about 30% above western Europe and 54% above Japan, adjusted for purchasing power.
  • The Economics Of Inequality In High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Inflation-adjusted average hourly wages in the US rose 1.2% year over year, a second straight month of seasonally adjusted gains after two years in which price increases erased workers' elevated raises. Wage gains outpacing inflation complicate the Federal Reserve's efforts to tame price increases.

Amara Omeokwe and Megan Tagami Wall Street Journal
Date Posted:

As inflation comes down, American workers have seen real wage gains since May.

Are wage gains now outpacing inflation?

Core argument: Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department, the first time in two years that growing paychecks surpassed inflation.

Americans’ growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers, while complicating the Federal Reserve’s efforts to tame price increases. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department, the first time in two years that growing paychecks surpassed inflation.
  2. The June figure marked the second straight month of seasonally adjusted real wage gains, following two years in which workers' historically elevated raises were erased by price increases.
  3. Real pay gains provide some financial relief to American workers while complicating the Federal Reserve's efforts to tame price increases.

Related Articles:

  • US Job and Wage Growth Beat Expectations, Making the Fed’s Job Harder — Most US workers are seeing their real wages decline as wage growth falls short of consumer price increases. Wages are growing fastest in leisure and hospitality, information, and transportation and warehousing—between 6.5% and 9% over 12 months, above inflation—sectors representing about 20% of employment.
  • Low Earners in the US Enjoy Fastest Wage Growth — Inflation-adjusted wages for the lowest-earning 10% of US workers rose 6.4% and have returned to pre-pandemic levels, outpacing wage growth for top and middle earners, who have lost ground once price growth is taken into account.

AI Summary. Money market funds buying Treasury bills lets bank reserves be replenished as cash moves from the Federal Reserve's overnight reverse repo facility into the Treasury's account and back out through government spending. The author argues reserves should stay abundant, allowing the Federal Reserve's balance sheet runoff to continue about two more years.

Joseph Wang Fed Guy Blog
Date Posted:

Money market funds are once again the marginal buyer of Treasuries. The replenishment of the Treasury General Account allows further quantitative tightening. @FedGuy12

Can bank reserves stay abundant while balance sheet runoff continues?

Core argument: Money funds' return as major buyers of Treasury bills provides a mechanism to replenish banking system reserves, removing a significant obstacle to quantitative tightening.

The return of money funds as major investors in bills provides a mechanism where banking system reserves can be replenished and removes a significant obstacle to QT. While the recent bout of bill issuance was largely used to replenish the Treasury General Account (TGA), future bill issuance will be used to finance ongoing government spending. This means that money will flow out of the RRP, into the TGA, and then be spent into the banking system through fiscal spending. Bank reserves can remain abundant for an extended period of time, and net deposit outflows will be smaller than expected. QT can continue for the expected two more years given that bank reserves are likely to remain abundant.

Takeaways by Macro Roundup® AI

  1. Money funds' return as major buyers of Treasury bills provides a mechanism to replenish banking system reserves, removing a significant obstacle to quantitative tightening.
  2. Future bill issuance will finance ongoing government spending rather than rebuild the Treasury General Account, moving money out of the reverse repo facility, into the TGA, and then into the banking system through fiscal spending.
  3. Bank reserves are likely to remain abundant for an extended period, keeping net deposit outflows smaller than expected and allowing quantitative tightening to continue for the expected two more years.

Related Articles:

  • Probing LCLoR — Bank reserves stand around $3.2t versus a common Federal Reserve estimate of roughly $2.2t (8% of GDP) for the lowest comfortable level, and reserves are on track to approach that level within months. Growth in reverse repo balances and rebuilding of the Treasury's cash account would draw reserves down.
  • How Was the U.S. Current Account Deficit Financed In 2022? — As the Federal Reserve allowed some bonds to mature under quantitative tightening, new buyers of Treasury debt were needed, and money-market funds shifted from Treasury bills and coupons into reverse repurchase agreements with the Federal Reserve. The entire net issuance was absorbed by two opaque sectors: households and nonprofit organizations, and the rest of the world.

AI Summary. A Pew Research Center analysis of verified voters finds that partisan differences in turnout, rather than voters switching parties, account for most Republican gains in House voting. 71% of Trump's 2020 voters turned out in the midterms versus 67% of Biden's, and just 6% crossed party lines.

Hannah Hartig, Andrew Daniller, Scott Keeter, and Ted Van Green Pew Research Center
Date Posted:

.@pewresearch reports people who voted for Trump in 2020 turned out for the 2022 midterms at a 71% rate in 2022, vs. 67% for 2020 Biden voters.

Are midterm election gains driven by turnout rather than vote switching?

Core argument: Pew Research Center's analysis of verified voters finds that partisan differences in turnout, rather than vote switching between parties, account for most Republican gains in 2022 House voting.

A new Pew Research Center analysis of verified voters and nonvoters in 2022, 2020, 2018, and 2016 finds that partisan differences in turnout – rather than vote switching between parties – account for most of the Republican gains in voting for the House last year. Overall, 68% of those who voted in the 2020 presidential election turned out to vote in the 2022 midterms. Former President Donald Trump’s voters turned out at a higher rate in 2022 (71%) than did President Joe Biden’s voters (67%). Relatively small shares of voters defected from their partisan affiliation or 2020 presidential vote. Among those who voted for both president in 2020 and for a House representative in 2022, just 6% crossed party lines between elections or voted for third-party candidates in either election.

Takeaways by Macro Roundup® AI

  1. Pew Research Center's analysis of verified voters finds that partisan differences in turnout, rather than vote switching between parties, account for most Republican gains in 2022 House voting.
  2. Trump's 2020 voters turned out at 71% in the 2022 midterms versus 67% of Biden's voters, against an overall 68% turnout rate among 2020 presidential voters.
  3. Among those who voted for president in 2020 and for a House representative in 2022, just 6% crossed party lines or voted for third-party candidates in either election, according to Pew Research Center.

Related Articles:

  • What Happened In 2022 — 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.
  • Millennials Are Not an Exception. They’ve Moved to the Right — Millennials have shifted toward the Republican party, with the move largest among the oldest millennials, who came of age in a different political era. The issues that drew young voters to Democrats, such as the Iraq War and same-sex marriage, may no longer be live issues.

AI Summary. US energy exports of $420bn accounted for 13.5% of total US exports of $3,108bn. Energy's $143bn increase comprised more than 25% of the $541bn rise in total US exports.

Gregor MacDonald The Gregor Letter
Date Posted:

Energy exports were $420 billion in 2022 (13.5% of American exports). It is the fifth year in a row the US has been a net energy exporter. @GregorMacdonald

How large a share of US export growth is energy?

Core argument: US energy exports totaled $420 billion last year, 13.5% of the $3,108 billion in total US exports.

The value of US energy exports is now a significant component of total US exports. US exports last year hit $3,108 billion, making energy’s $420 billion 13.5% of the total. The growth contribution from energy is even more impressive. US exports jumped $541 billion last year from 2021’s level of $2,567 billion, which means the energy export advance of $143 billion easily comprised more than 25% of total export growth.

Takeaways by Macro Roundup® AI

  1. US energy exports totaled $420 billion last year, 13.5% of the $3,108 billion in total US exports.
  2. Total US exports rose $541 billion last year from 2021's $2,567 billion, with energy's $143 billion advance comprising more than 25% of that growth.

Related Articles:

  • Portfolio Nuclear — The US is in its fifth year of net energy independence, with domestic oil and gas production at all-time highs across four consecutive administrations. Wind and solar now supply 15% of the grid, allowing more coal and liquefied natural gas to be exported.
  • Energy and the Presidents — US coal production fell from about 775m short tons to 535m short tons and coal consumption fell over 33%, from roughly 717m to 477m short tons, despite expectations of support for the industry. No major federal legislation has curtailed US oil and gas output, both of which have reached all-time highs.

AI Summary. The authors estimate that U.S. life insurers' aggregate climate transition risk exposure rose by more than $150bn, about 28% of their market value, during a fossil fuel price collapse, with more than $85bn attributable solely to climate stress. The ten largest U.S. property and casualty insurers mostly showed excess reserves, indicating no sign of undercapitalization under physical climate stress.

Hyeyoon Jung, Robert Engle, Shan Ge, and Xuran Zeng Federal Reserve Bank of New York
Date Posted:

As of 2020, @NewYorkFed finds life and property and casualty insurance firms were well capitalized for the climate risk they are bearing.

How large is insurers' climate risk exposure?

Core argument: Aggregate transition climate risk exposure (CRISK) for U.S. life insurers rose by more than $150bn during the 2019–20 fossil fuel price collapse, equivalent to about 28% of their market capitalization.

Insurance companies can be exposed to climate-related physical risk through their operations and to transition risk through their $12T of financial asset holdings. We assess the climate risk [CRISK] exposure of property and casualty [P&C] and life insurance companies in the U.S. In terms of transition risk for life insurers, we observe a notable increase in their transition climate beta during the 2019-20 fossil fuel price collapse. The aggregate transition CRISK for life insurers in the U.S. also significantly rose by more than $ 150B, equivalent to around 28% of their market cap. Excluding concurrent undercapitalization, the marginal CRISK attributed solely to climate stress increased by more than $ 85B during the same period. In terms of physical risk for P&C insurers, we find that the top ten P&C insurers mostly had negative CRISK values [excess reserves], indicating no sign of potential systemic under-capitalization under physical climate stress. As of the end of 2020, their aggregate marginal CRISK stood at $15B, equivalent to approximately 7% of their market cap.

Takeaways by Macro Roundup® AI

  1. Aggregate transition climate risk exposure (CRISK) for U.S. life insurers rose by more than $150bn during the 2019–20 fossil fuel price collapse, equivalent to about 28% of their market capitalization.
  2. Excluding concurrent undercapitalization, the marginal CRISK attributed solely to climate stress for U.S. life insurers increased by more than $85bn over the same period, alongside a notable rise in their transition climate beta.
  3. The top ten U.S. property and casualty insurers mostly showed negative CRISK values, or excess reserves, with aggregate marginal CRISK of $15bn at the end of 2020, roughly 7% of their market capitalization.

Related Articles:

  • Farmers Insurance Limits Sales in Florida, California Amid Storm, Wildfire Risks — Farmers Insurance is limiting homeowners policy sales in Florida and California, hurricane- and wildfire-prone states, joining other large insurers in pulling back. In Florida it is ending sales of home, auto, and umbrella policies under its own brand — about 30% of the policies it sells there, affecting roughly 89,000 policies.
  • 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.
  • Florida Ocean Temperatures At ‘Downright Shocking’ Levels — 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.

Tuesday, July 18, 2023

AI Summary. The positive association between extreme heat and U.S. county population growth weakened over recent decades and disappeared entirely in the 2010s, as hot counties grew hotter. Projected climate change is predicted to shift population from the Southeast and parts of the Southwest toward the North, Mountain West, and Pacific coast.

Sylvain Leduc and Daniel Wilson Federal Reserve Bank of San Francisco
Date Posted:

.@wilson_daniel_j @sffed argues that rising temperatures between now and 2050 will drive a shift in population and employment away from the Sunbelt and toward the North and Mountain West.

Will rising heat reverse population growth in hot U.S. counties?

Core argument: The U.S. county at the 90th percentile of heat averaged about 62 days per year above 80°F daily average temperature over 1951–1980, rising to 72 days over 1991–2020.

The link between extreme heat and population growth was strongly positive in the 1980s. That relationship weakened substantially over the subsequent two decades and vanished entirely over 2010-2020. The projections for the decades ahead show a continuation of this pivot. “Hot” climate counties have gotten considerably hotter - to a point where they are no longer as tolerable. The 90th percentile county over 1951-1980 averaged about 62 days per year of daily average temperatures above 80◦F. That number grew to 72 days from 1991-2020. The projected climate changes are predicted to cause a general shifting of population from the Southeast and parts of the Southwest to the North, the Mountain West, and most of the Pacific coastline.

Takeaways by Macro Roundup® AI

  1. The U.S. county at the 90th percentile of heat averaged about 62 days per year above 80°F daily average temperature over 1951–1980, rising to 72 days over 1991–2020.
  2. The strongly positive link between extreme heat and U.S. population growth in the 1980s weakened substantially over the following two decades and vanished entirely over 2010–2020.
  3. Projected climate changes are predicted to shift U.S. population from the Southeast and parts of the Southwest toward the North, the Mountain West, and most of the Pacific coastline.

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.
  • Young Families Have Not Returned to Large Cities Post-Pandemic — 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.

AI Summary. Artificial intelligence could exert downward pressure on consumer prices if it delivers a large, sustained boost to productivity growth, by lowering production costs and improving goods and services in qualitative ways. A technology-led productivity boom previously allowed the Federal Reserve to tolerate a historically tight labor market without an inflation problem.

David Mericle and Ronnie Walker Goldman Sachs
Date Posted:

David Mericle and Ronnie Walker @GoldmanSachs make the case that artificial intelligence, like the deflationary impact of the 1990s tech boom, might help offset inflationary drivers such as deglobalization and the green transition.

Can an AI productivity boom push consumer prices lower?

Core argument: Artificial intelligence would exert downward pressure on consumer prices if it delivers the large, sustained boost to productivity growth the authors expect, both by lowering production costs and by improving consumer goods and services in qualitative ways.

Artificial intelligence could exert downward pressure on consumer prices if it provides the sort of large, sustained boost to productivity growth that we expect. In the late 1990s and early 2000s, a similar productivity boom led by the technology sector enabled the Fed to let the labor market become quite tight by historical standards without running into an inflation problem. A future productivity boom should have similar effects. Artificial intelligence is likely to boost productivity by lowering production costs and improving consumer goods and services in more qualitative ways. These effects should also lower measured consumer prices.

Takeaways by Macro Roundup® AI

  1. Artificial intelligence would exert downward pressure on consumer prices if it delivers the large, sustained boost to productivity growth the authors expect, both by lowering production costs and by improving consumer goods and services in qualitative ways.
  2. In the late 1990s and early 2000s, a technology-sector-led productivity boom allowed the Federal Reserve to let the labor market become quite tight by historical standards without running into an inflation problem.
  3. The authors argue that a future productivity boom should have effects similar to the earlier technology-led boom, lowering measured consumer prices.

Related Articles:

  • Summers and Blanchard Debate the Future of Interest Rates — With expected inflation near 2.5%, a real interest rate of 1.5% to 2%, and some risk and term premium, short-term interest rates would average around 4%, one argument in a debate on the future of interest rates holds. If traditional spreads reassert themselves, longer-term rates would run about 1 percentage point higher, near 5%.
  • What Have We Learned About the Neutral Rate? — Analysts estimate that if inflation is brought down without a recession, the Federal Reserve's policy rate will stabilize nearer 3–3.25% than the 2.5% longer-run median projection of Federal Reserve officials. Projected shifts in government debt and demographics imply a roughly 0.5 percentage point net increase in the neutral rate over the next decade.

AI Summary. A study of France's amnesty program, which regularized undocumented workers making up 2.0% of workers in Paris and nearly 1% nationwide, finds positive effects on employment and wages, particularly for male, low-skill workers. The authors argue regularization reduces employers' wage-setting power in the undocumented labor market, and estimate a rise in total French GDP of around 1%.

George Borjas and Anthony Edo IZA Institute of Labor Economics
Date Posted:
Is Database:
Database

George Borjas finds that a 1981 French program giving legal status to undocumented workers who represented about 1% of all workers resulted in increased employment and wages for low-skill native and immigrant men and raised GDP 1%.

Does granting legal status to undocumented workers raise employment, wages, and output?

Core argument: France's July 1981 regularization program under President François Mitterrand covered undocumented workers making up 2.0% of workers in Paris and nearly 1% of all French workers, predominantly male, low-skill, and concentrated in the Paris region.

This paper documents the economic consequences of a large amnesty program implemented in France. In July 1981, the newly elected government of President François Mitterrand proposed to regularize all undocumented workers. The regularized workers were predominantly male, low-skill, and lived disproportionately in the Paris region. The regularized immigrants composed 2.0% of workers in Paris and nearly 1% of all workers in France. In short, by reducing monopsony power in the undocumented labor market, a regularization program improves labor market efficiency and can generate a substantial increase in output, a “regularization surplus.” Our empirical analysis of employment, wage, and output data in the French labor market confirms that the regularization program indeed had positive effects on the employment and wages of many groups, and particularly for male, low-skill workers. Moreover, there was a sizable jump in the growth rate of per-capita GDP in the affected region, suggesting an increase in total French GDP of around 1%.

Takeaways by Macro Roundup® AI

  1. France's July 1981 regularization program under President François Mitterrand covered undocumented workers making up 2.0% of workers in Paris and nearly 1% of all French workers, predominantly male, low-skill, and concentrated in the Paris region.
  2. The authors find the regularization had positive effects on employment and wages for many groups, particularly male low-skill workers, and attribute such gains to reduced monopsony power in the undocumented labor market.
  3. The authors document a sizable jump in the growth rate of per-capita GDP in the affected region, suggesting an increase in total French GDP of around 1%.

Related Articles:

  • Immigration to Drive All US Population Growth Within Two Decades — The Congressional Budget Office projects that immigration will account for all US population growth within two decades, with the population reaching 373m by 2053. Much of the growth is projected among prime-age adults aged 25 to 54, the core of the workforce, rising about 1.1m or 0.9% each year.
  • Immigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995 — U.S. labor force data show immigrants accounted for 49% of labor force growth over roughly the past three decades and their children another 21%, together about 70% of an increase of nearly 32.8m workers. Immigrants rose from about 10% to 18% of the labor force, and immigrants plus their children from 18% to 29%.

AI Summary. Excess deaths in the US have fallen almost to zero across three separate measures, after exceeding 30% above normal during Covid's worst phases and staying above 10% for long stretches. The Human Mortality Database estimates slightly fewer Americans than normal have died, while The Economist and the Centers for Disease Control put excess deaths below 1%.

David Leonhardt New York Times
Date Posted:

Excess deaths in the United States have returned to pre-pandemic levels. According to the CDC, the weekly excess death level is less than 1%. @DLeonhardt

Have US excess deaths returned to normal levels?

Core argument: U.S. excess deaths have fallen almost to zero across three separate measures, after daily deaths from all causes ran more than 30% above normal during Covid's worst phases.

The total number of Americans dying each day — from any cause — is no longer historically abnormal. During Covid’s worst phases, the total number of Americans dying each day was more than 30% higher than normal, a shocking increase. For long stretches of the past three years, the excess was above 10%. But during the past few months, excess deaths have fallen almost to zero, according to three different measures. The Human Mortality Database estimates that slightly fewer Americans than normal have died since March, while The Economist magazine and the Center for Disease Control both put the excess-death number below 1% percent.

Takeaways by Macro Roundup® AI

  1. U.S. excess deaths have fallen almost to zero across three separate measures, after daily deaths from all causes ran more than 30% above normal during Covid's worst phases.
  2. The Human Mortality Database estimates slightly fewer Americans than normal have died since March, while The Economist and the CDC both put excess deaths below 1%.
  3. For long stretches of the past three years, total daily U.S. deaths from any cause exceeded normal levels by more than 10%.

Related Articles:

  • Our Model Suggests That Global Deaths Remain 5% Above Pre-Covid Forecasts — A model estimates global deaths remain about 5% above pre-Covid forecasts, though its confidence interval for the current excess-death rate stretches from near zero to mid-2020 levels. Relative to people aged 65 and over, excess-death rates in rich countries are three times lower than elsewhere, but older populations leave overall mortality rates similar.

AI Summary. Between 40% and 60% of US initial public offerings generate negative returns even in favorable periods, so average IPO returns far exceed median returns and depend on a small set of large winners. Excluding just the top 3% of IPOs turns average net returns negative and cuts average absolute returns by more than half.

Michael Ceblalest J.P. Morgan
Date Posted:
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Database

Michael Cembalest @jpmorgan notes the 2020/20221 IPO class has performed extremely poorly relative to the overall equity market. IPO returns since 2010 were highly skewed; if the top 5% were removed, returns were strongly negative vs the market.

Do a small number of winners drive all IPO returns?

Core argument: Between 40% and 60% of IPOs generate negative returns even in good times, so the value proposition depends on a small subset of winners offsetting all the losers.

Since 40%-60% of IPOs generate negative returns even in good times, their value proposition is whether a small subset of winners offsets all the losers. A highly skewed investment universe is characterized by average returns that are much higher than median. As shown below, IPOs are an example of that; in many years, average net returns were positive while median net returns were close to zero. But these positive average returns are highly skewed: look how quickly they decline when excluding the best 3%, 5%, and 7% of IPOs. Even when only excluding the top 3%, average net returns become negative, and average absolute returns fall by more than half. In other words, long-term IPO survival odds are low and skewed to a small number of mega-winners.

Takeaways by Macro Roundup® AI

  1. Between 40% and 60% of IPOs generate negative returns even in good times, so the value proposition depends on a small subset of winners offsetting all the losers.
  2. Excluding only the top 3% of IPOs turns average net returns negative and cuts average absolute returns by more than half.
  3. In many years, average net IPO returns were positive while median net returns were close to zero, a characteristic of a highly skewed investment universe.