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


Wednesday, September 6, 2023

AI Summary. The authors estimate that unexpected monetary tightening has persistent effects: a 1% rise in interest rates leaves output about 5% lower after 12 years, with total factor productivity about 3% lower and capital about 4% lower. They find the effects are asymmetric, as interest rate cuts have mostly temporary effects that fade after a few years.

Òscar Jordà, Sanjay Singh and Alan Taylor Federal Reserve Bank of San Francisco
Date Posted:
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Researchers at @sffed find that an unexpected 1% rise in short-term interest rates reduces real GDP by 5% after 12 years, but no evidence that loose monetary policy increases potential output. @sanjayrajsingh

Does monetary tightening lower output and productivity for over a decade?

Core argument: A 1% unexpected increase in interest rates leaves output about 5% lower after 12 years than it would otherwise be, a more persistent slowdown in economic activity than commonly believed.

Unexpected changes in monetary policy can slow the pace of economic activity much more persistently than is commonly believed. In response to a 1% increase in interest rates, output would be about 5% lower after 12 years than it would otherwise be. To provide some context for these numbers, consider some data for the United States. In response to a similar 1% increase in interest rates, after 12 years TFP would be about 3% lower and capital would be about 4% lower. When we separate our interest rate experiments into those that resulted in rate hikes versus those that resulted in lower interest rates, we see that there is no free lunch. The blue line shows that lower interest rates have mostly temporary effects that vanish after a few years, as traditional theories predict.

Takeaways by Macro Roundup® AI

  1. A 1% unexpected increase in interest rates leaves output about 5% lower after 12 years than it would otherwise be, a more persistent slowdown in economic activity than commonly believed.
  2. In U.S. data, a comparable 1% interest rate increase is followed after 12 years by total factor productivity about 3% lower and capital about 4% lower.
  3. Separating the interest rate experiments into hikes versus cuts shows no free lunch, as lower interest rates have mostly temporary effects that vanish after a few years, consistent with traditional theories.

Related Articles:

  • Loose Monetary Policy and Financial Instability — Using data on 18 advanced economies since 1870, the authors estimate that a loose monetary policy stance causally raises the risk of financial crises over the medium term, against an unconditional 10.5% probability of a crisis in a 3-year window. Lower rates raise asset valuations, opening the door to collateral-driven credit booms.
  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.

AI Summary. Spending per Medicare beneficiary in the US has nearly leveled off over more than a decade, though total enrollment has grown as baby boomers age. Policy changes including cuts to hospital and private plan payments explain some savings, but the Congressional Budget Office attributes most of its lowered forecasts to "technical adjustments" in public health and medical practice.

Margot Sanger-Katz, Alicia Parlapiano and Josh Katz New York Times
Date Posted:
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The growth in Medicare spending per beneficiary leveled off nearly a decade ago. If spending had grown at the prior rate, spending since 2011 would have been at least $3.9 trillion higher.

Why has Medicare spending per beneficiary stopped growing?

Core argument: Medicare spending per beneficiary has nearly leveled off over more than a decade, a slowdown obscured by the growing number of enrollees as baby boomers age.

Spending per Medicare beneficiary has nearly leveled off over more than a decade. The trend can be a little hard to see because, as baby boomers have aged, the number of people using Medicare has grown. The reason for the per-person slowdown is a bit of a mystery. Some of the reductions are easy to explain. The Affordable Care Act in 2010 reduced Medicare’s payments to hospitals and to health insurers that offered private Medicare Advantage plans. Congress also cut Medicare payments as part of a budget deal in 2011. But most of the savings can’t be attributed to any obvious policy shift. Economists at the Congressional Budget Office described the huge reductions in its Medicare forecasts between 2010 and 2020. Most of those reductions came from a category the budget office calls “technical adjustments,” which it uses to describe changes to public health and the practice of medicine itself.

Takeaways by Macro Roundup® AI

  1. Medicare spending per beneficiary has nearly leveled off over more than a decade, a slowdown obscured by the growing number of enrollees as baby boomers age.
  2. The Affordable Care Act's 2010 cuts to Medicare payments to hospitals and Medicare Advantage insurers, plus payment cuts in a 2011 budget deal, explain only part of the per-person slowdown.
  3. Congressional Budget Office economists attributed most of the large reductions in its Medicare forecasts between 2010 and 2020 to "technical adjustments," the category it uses for changes in public health and the practice of medicine.

Related Articles:

  • America’s Entitlement Programmes Are Rapidly Approaching Insolvency — The trust fund for Medicare hospital insurance for the elderly is projected to be exhausted by 2031 and the Social Security old-age benefits fund by 2033. These mandatory programs cost $2.2tn, or 8.6% of GDP, exceeding total discretionary federal spending including housing, education, and defense.
  • Why Medicare and Social Security Are Sustainable — Growth in U.S. health spending above GDP growth has slowed considerably, and the Congressional Budget Office projects social insurance spending will eventually rise by about 5 percentage points of GDP, half of that from assumed health cost increases. The author argues better incentives for medically effective care could hold cost growth well below those projections.
  • Interest Costs Will Grow the Fastest Over the Next 30 Years — The Congressional Budget Office projects federal spending will reach 29.1% of GDP over three decades, with net interest on the national debt rising from 1.9% of GDP to 6.7%, or $5.4tn. Under that projection, interest becomes the largest single federal budget line item, surpassing Social Security, Medicare, and Medicaid.

AI Summary. The estimated 12-month US recession probability has been cut to 15%, matching the postwar unconditional average implied by a recession occurring roughly once every seven years, and far below the 60% Bloomberg consensus. The authors expect interest rates to fluctuate in a higher range than in the post-2008 period.

Jan Hatzius Goldman Sachs
Date Posted:

Jan Hatzius @GoldmanSachs lowered his 12-month recession probability to 15% which is equal to the postwar mean. He also expects the Federal funds rate to be closer to 1991-2007 level of just over 4% relative to the post-crisis level of just under 1%.

Is the US recession risk now no higher than average?

Core argument: Continued positive inflation and labor market news prompted a cut in the estimated 12-month US recession probability to 15%, down 5 percentage points from the prior estimate.

The continued positive inflation and labor market news has led us to cut our estimated 12-month US recession probability further to 15%, down 5pp from our prior estimate and equal to the unconditional average recession probability of 15% calculated from the fact that a recession has occurred roughly once every seven years since WW2. Our estimate is far below the Bloomberg consensus, which remains stuck at 60%. Our expectation is that the 1991-2007 period, when the nominal funds rate fluctuated between 1% and 6½%, will prove to be a better template than the post-2008 period when the Fed found it difficult to get much above 2%.

Takeaways by Macro Roundup® AI

  1. Continued positive inflation and labor market news prompted a cut in the estimated 12-month US recession probability to 15%, down 5 percentage points from the prior estimate.
  2. The 15% estimate equals the unconditional average recession probability implied by a recession occurring roughly once every seven years since World War II, and sits far below the Bloomberg consensus of 60%.
  3. The 1991–2007 period, when the nominal federal funds rate fluctuated between 1% and 6.5%, is expected to prove a better template than the post-2008 period, when the Fed found it difficult to get much above 2%.

Related Articles:

  • 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.
  • Has the Fed Tightened Enough? Guideposts to Consider — Wage growth of about 2.5% would be consistent with 2% inflation given low recent-trend productivity growth, but wage growth is running near 4.5%. On this view inflation is more likely to level out at its current rate than keep falling, pushing the Federal Reserve toward further tightening through rate rises or holding rates high.

AI Summary. 31% of outstanding US government debt, roughly $7.6tn in bonds, matures within the next 12 months, which the author identifies as a source of upward pressure on US interest rates.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal notes that 31% of US government debt outstanding will mature over the next 12 months, putting upward pressure on US rates.

Does near-term government debt maturing push up US interest rates?

Core argument: Torsten Sløk of Apollo Global notes that 31% of US government debt outstanding, some $7.6 trillion in Treasury bonds, matures over the next 12 months.

One source of upward pressure on US rates is the $7.6 trillion in US government bonds that will mature over the coming 12 months.

Takeaways by Macro Roundup® AI

  1. Torsten Sløk of Apollo Global notes that 31% of US government debt outstanding, some $7.6 trillion in Treasury bonds, matures over the next 12 months.
  2. Torsten Sløk identifies the $7.6 trillion of US government bonds maturing over the coming 12 months as one source of upward pressure on US rates.

Related Articles:

  • Is a U.S. Debt Crisis Looming? Is it Even Possible? — A debt spiral requires the interest rate on government debt to exceed the economy's growth rate; with inflation-protected 10-year U.S. bond yields near 1.83%, close to most estimates of sustainable growth, any spiral would be slow-moving. Stabilizing debt at 100% of GDP would require a 2% primary surplus.
  • Rising Rates Slowing Growth Through Higher Debt Servicing Costs — US government annual debt servicing costs are close to $1tn, with net interest expense as a share of total government revenues near all-time highs. Higher interest rates act as a drag on growth through debt servicing costs for the government as well as for consumers and corporations, making it harder for elevated rates to persist when government debt is high.
  • US Fiscal Alarm Bells Are Drowning Out a Deeper Problem — The Congressional Budget Office projects US federal debt held by the public at 98% of national income, within 7.6 percentage points of its 1946 wartime peak and on track to exceed it by 2028. International Monetary Fund forecasts show US debt surpassing Italy's by 2028 and Greece's by the end of the decade.

AI Summary. A Wall Street Journal analysis estimates banks' total commercial real-estate exposure at $3.6tn—about 20% of their deposits—including indirect lending, foreclosed properties, commercial mortgage-backed securities, and loans to nonbank mortgage lenders. Losses on these loans risk triggering a doom loop in which banks cut lending, pushing property prices down further and generating additional losses.

Shane Shifflett and Konrad Putzier Wall Street Journal
Date Posted:

US banks have total exposure to commercial real estate of $3.6T or 20% of deposits. They are facing the risk of a “doom loop” where loan losses trigger lending reductions and further price declines, this creates particular risk for regional banks.

How large is banks' commercial real-estate exposure relative to deposits?

Core argument: U.S. banks' total exposure to commercial real estate reaches $3.6 trillion once indirect lending, foreclosed properties and trading portfolios are included, equivalent to about 20% of their deposits, according to a Wall Street Journal analysis.

Indirect lending—along with foreclosed properties, trading portfolios and other assets linked to commercial properties—brings banks’ total exposure to commercial real estate to $3.6 trillion, according to a Wall Street Journal analysis. That’s equivalent to about 20% of their deposits. Holdings of CMBS and loans to mortgage REITs and other nonbank lenders accounted for about 18% of the nearly $3.6 trillion in commercial real-estate exposure in 2022, or nearly $623 billion. The first quarter of 2023 marked the first decline in banks’ commercial real-estate holdings since 2013. At that point, banks’ overall securities holdings had lost nearly $400 billion in value, largely due to higher interest rates. Banks don’t have to mark down the value of loans in most cases, so the real losses are likely greater. The banks are in danger of setting off a doom-loop scenario where losses on the loans trigger banks to cut lending, which leads to further drops in property prices and yet more losses.

Takeaways by Macro Roundup® AI

  1. U.S. banks' total exposure to commercial real estate reaches $3.6 trillion once indirect lending, foreclosed properties and trading portfolios are included, equivalent to about 20% of their deposits, according to a Wall Street Journal analysis.
  2. Holdings of commercial mortgage-backed securities and loans to mortgage REITs and other nonbank lenders made up about 18% of the nearly $3.6 trillion in commercial real-estate exposure in 2022, or nearly $623 billion.
  3. Banks' commercial real-estate holdings fell in the first quarter of 2023 for the first time since 2013, with overall securities holdings down nearly $400 billion in value largely due to higher interest rates, and real losses likely greater because most loans need not be marked down.

Related Articles:

  • Work From Home and the Office Real Estate Apocalypse — The authors estimate New York City office values fell 45% in 2020 and 39% in the longer run, a $453bn value destruction, with lower-quality buildings hit hardest as tenants shifted to higher-quality space. They argue this has implications for local public finances and financial sector stability.
  • Who’s Afraid of Commercial Real Estate? — Commercial real estate valuations look stretched, but distress remains rare: regional banks' commercial real estate loans carry an average loan-to-value ratio near 66%, far below the dangerously high levels of the early-1990s bust. Outside offices, where vacancy rates are soaring, net operating income growth appears healthy.
  • Rates Are Up. We’re Just Starting to Feel the Heat — U.S. companies have $600bn in corporate debt maturing this year, a total Goldman Sachs data show rising to more than $1tn a year from 2025 through 2028. Those debt loads, combined with higher financing costs, may cut into corporate profits, investor returns, innovation spending, and hiring, with some analysts expecting credit-rating downgrades.

AI Summary. Consumer spending in central business districts remains below pre-pandemic levels in northern and western US cities while southern city centers show strong growth, a gap attributed largely to migration patterns rather than differences in working from home. Cities with population gains show spending roughly 20% above pre-pandemic levels, while those with population losses are down about 20%.

Taylor Bowley and David Michael Tinsley Bank of America
Date Posted:

Changes in spending in cities’ central business districts are now largely being driven by changes in population, not differences in work from home according to a @BankofAmerica analysis.

Does migration explain the gap in downtown spending recovery?

Core argument: Cities with net population losses — New York, Boston, San Francisco and Atlanta — show central business district spending down roughly 20% from pre-pandemic levels, while Tampa, Phoenix, Orlando, Nashville, Jacksonville, Columbus, Charlotte and Austin are up around 20%.

Central business districts (CBDs) in the northern and western US continue to see consumer spending below pre-pandemic levels. However, there is a glimmer in New York City and Seattle that the situation is not continuing to deteriorate. Cities in the south are seeing strong growth in their city centers. The difference in performance is largely driven by migration patterns as working from home doesn't necessarily vary across cities. For example, southern cities with increased population growth also seem to be capturing more of the increasing spend in their city centers. Cities with population gains %YoY as of 2Q 2023 (Tampa, Phoenix, Orlando, Nashville, Jacksonville, Columbus, Charlotte and Austin) are seeing spending relative to pre-pandemic up around 20%. On the other hand, cities with net population losses over this period (New York, Boston, San Francisco and Atlanta) have spending down around 20%.

Takeaways by Macro Roundup® AI

  1. Cities with net population losses — New York, Boston, San Francisco and Atlanta — show central business district spending down roughly 20% from pre-pandemic levels, while Tampa, Phoenix, Orlando, Nashville, Jacksonville, Columbus, Charlotte and Austin are up around 20%.
  2. The divergence in central business district spending is largely driven by migration patterns rather than working from home, which does not necessarily vary across cities, with New York City and Seattle showing signs that conditions are no longer deteriorating.

Related Articles:

  • On the Move: Which Cities Have The Biggest Housing Shortage? — An analysis finds San Antonio, Dallas, and Orlando have the most constrained housing supply as strong labor markets attract residents, while St. Louis, Detroit, and Miami have the highest housing stock relative to population. Cities with lower housing supply are already seeing higher construction trends.
  • Remote Work, Three Years Later — Remote work has reduced office utilization but not yet office occupancy, because most firms are locked into long-duration leases. Baseline estimates suggest remote work will exert 0.8 percentage points of upward pressure on the office vacancy rate near-term, 2.3 more over the following five years, and 1.8 thereafter.
  • A $100 Billion Wealth Migration Tilts US Economy’s Center of Gravity South — Six fast-growing Southern states — Florida, Texas, Georgia, North and South Carolina, and Tennessee — now contribute more to US GDP than the Northeast, including the Washington-New York-Boston corridor. The Southeast accounted for more than two-thirds of US job growth since the pandemic began, nearly double its pre-pandemic share, and housed 10 of the 15 fastest-growing large American cities.

Thursday, September 7, 2023

AI Summary. U.S. job churn has returned to normal, but it remains unclear whether that is enough to slow wage growth to a pace consistent with the Federal Reserve's inflation target. A high-frequency measure of underlying wage growth for nonsupervisory workers outside retail, leisure, and hospitality has fallen from around 5% to 4%.

Matt Klein The Overshoot
Date Posted:

Job churn has normalized, however, it’s unclear whether recent growth in average hourly worker pay is consistent with the Fed’s 2% target. @M_C_Klein

Has normalized job churn slowed wage growth enough for the inflation target?

Core argument: The author's preferred measure of underlying wage growth—the three-month average monthly change in average hourly pay for nonsupervisory workers outside retail, leisure, and hospitality—fell to 4% in June–August after hovering near 5% since last summer.

It is unclear whether the normalization of churn that has already occurred will be sufficient to bring wage growth—and therefore consumer spending power—back in line with what would be consistent with the Fed’s inflation target. My preferred high-frequency measure of underlying wage growth has been the three-month average of the monthly change in average hourly pay for nonsupervisory workers outside of the retail, leisure, and hospitality industries. After hovering around 5% since last summer, it has come down sharply in the past three months to just 4% in June-August. That is encouraging news and seems to fit with the recent moves in the quit rate and the job openings rate.

Takeaways by Macro Roundup® AI

  1. The author's preferred measure of underlying wage growth—the three-month average monthly change in average hourly pay for nonsupervisory workers outside retail, leisure, and hospitality—fell to 4% in June–August after hovering near 5% since last summer.
  2. U.S. job churn has normalized while wage growth and underlying inflation have not, and it is unclear whether the normalization already achieved will bring wage growth into line with the Fed's inflation target.
  3. The recent deceleration in the author's underlying wage growth measure appears consistent with recent moves in the quit rate and the job openings rate.

Related Articles:

  • The Unresolved Tension Between Prices and Incomes — Persistent per-worker income growth of about 5% a year is difficult to reconcile with forecasts of 2% inflation, since inflation reflects the gap between nominal spending growth and real production, and wages are the largest source of financing for consumer spending. Interest rates may therefore fall more slowly than market prices imply.
  • Rate Cuts — The Federal Reserve might refrain from cutting interest rates if inflation does not fall enough, or if economic growth runs above potential, unemployment pushes below its 50-year low, and financial conditions ease further. In that case, policymakers could argue the short-run neutral rate is higher than common estimates, making current policy less restrictive than assumed.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — The authors estimate that post-pandemic labor market tightness compressed the US wage distribution, reducing the college wage premium and offsetting roughly one-quarter of the four-decade rise in 90-10 wage inequality. They attribute this in part to greater labor supply elasticity facing firms in low-wage markets, which reduced employer market power as young non-college workers moved to higher-paying jobs.

AI Summary. Inflation-adjusted average hourly pay for US production and nonsupervisory workers has risen 13% over 20 years, about 0.6% a year, while the average hourly wage for auto production-line workers has fallen 30%. General Motors, Ford and Stellantis earned a combined $42bn in net income over 12 months.

Justin Fox Bloomberg
Date Posted:
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The average hourly wage for auto workers has dropped 30% since 2003 and has converged with non-auto production workers. The UAW is attempting to arrest the trend, but the Big Three’s profits would be erased if they meet the UAW’s demands. @foxjust

Have autoworker wages fallen while other workers' pay rose?

Core argument: The average hourly wage for US production-line autoworkers has fallen 30% since 2003, even as inflation-adjusted average hourly pay for all US production and nonsupervisory employees rose 13% over the past 20 years, or 0.6% a year.

During the past 20 years, the inflation-adjusted average hourly wage of non-management US workers, also known as production and nonsupervisory employees, has risen 13%. That’s not exactly a rip-roaring pace — 0.6% a year. Then again, real hourly wages for production and nonsupervisory employees fell in the 1970s and 1980s and rose at only a 0.3% annual pace in the 1990s. The average hourly wage for autoworkers on the production line has dropped 30% since 2003. GM, Ford and Stellantis are all profitable, with a combined net income of $42B for the 12 months ended in June and the amount coming from their US operations probably adding up to somewhat less than $30B. Bloomberg reported last month that Ford and GM’s internal estimates of the costs of the UAW’s demands peg them at $80B per company over the next four years, which would wipe out all those profits and then some.

Takeaways by Macro Roundup® AI

  1. The average hourly wage for US production-line autoworkers has fallen 30% since 2003, even as inflation-adjusted average hourly pay for all US production and nonsupervisory employees rose 13% over the past 20 years, or 0.6% a year.
  2. Real hourly wages for US production and nonsupervisory employees fell during the 1970s and 1980s and rose at just a 0.3% annual pace in the 1990s.
  3. GM, Ford and Stellantis earned a combined $42 billion in net income for the 12 months ended in June, with US operations likely contributing somewhat less than $30 billion, while Ford and GM internally estimate the UAW's demands at $80 billion per company over four years, Bloomberg reported.

Related Articles:

  • EV Boom Remakes Rural Towns in the American South — Automakers have announced more than $110bn in electric-vehicle investments in the US, with about half directed to Southern states and most of the remainder to Great Lakes states including Michigan, Ohio and Indiana. Great Lakes auto employment, though still nearly double the South's, has fallen 34% over two decades to 382,000 workers.
  • Auto Union Boss Wants 46% Raise, 32-Hour Work Week in ‘War’ Against Detroit Carmakers — The United Auto Workers union has demanded a 46% raise, a return to traditional pensions, and a 32-hour work week from the three Detroit automakers. The companies say meeting those demands would raise labor costs by $80bn and lift total pay and benefit expenses to more than $150 an hour from about $64.

AI Summary. The nominal yield spread is negative and low by historical standards, implying a 65% probability of recession within 12 months, while the inflation-adjusted interest rate spread implies about 40%. Even taken at face value, probabilities in the 40–60% range leave a fair likelihood of a soft landing.

Christopher Neely Federal Reserve Bank of St. Louis
Date Posted:

The nominal yield curve spread predicts a 65% probability of a recession within a year, “unprecedentedly” high for a false recession signal. Real spreads imply a 40% probability, the highest in the history of the series. @stlouisfed

How likely is a recession according to yield spreads?

Core argument: The negative nominal yield spread, quite low by historical standards, implies a 65% probability of recession within 12 months, a level that would be unprecedentedly high for a false positive.

The nominal yield spread is currently negative—quite low by historical standards—and predicts a 65% probability of recession in 12 months. This recession probability would be unprecedentedly high for a false positive. The “real” interest rate spread implies a still elevated, but lower probability of recession in 12 months, of about 40%. This 40% probability is the highest in the history of the series, exceeding that even in any actual recession. Even if a model were literally correct instead of an approximation, these models predict 40%, 50%, and 60% probabilities of recessions, which means there is a fair likelihood of a soft landing.

Takeaways by Macro Roundup® AI

  1. The negative nominal yield spread, quite low by historical standards, implies a 65% probability of recession within 12 months, a level that would be unprecedentedly high for a false positive.
  2. The "real" interest rate spread implies a roughly 40% probability of recession within 12 months, the highest in the history of the series, exceeding readings in any actual recession.
  3. Because the yield-spread models predict 40%, 50%, and 60% recession probabilities, there remains a fair likelihood of a soft landing even if a model were literally correct rather than an approximation.

Related Articles:

  • Soft Landing Summer — The estimated 12-month US recession probability has been cut to 15%, matching the postwar unconditional average implied by a recession occurring roughly once every seven years, and far below the 60% Bloomberg consensus. The authors expect interest rates to fluctuate in a higher range than in the post-2008 period.
  • Has the Fed Tightened Enough? Guideposts to Consider — Wage growth of about 2.5% would be consistent with 2% inflation given low recent-trend productivity growth, but wage growth is running near 4.5%. On this view inflation is more likely to level out at its current rate than keep falling, pushing the Federal Reserve toward further tightening through rate rises or holding rates high.

AI Summary. Polling shows the Democratic presidential candidate's support among nonwhite voters running well below his prior election standing across racial groups, with leads of 72-11 among Black voters, 47-35 among Hispanic registrants, and 40-39 among other nonwhite voters. About 5% of his former nonwhite voters now back the Republican candidate, including 8% of Hispanic voters.

Nate Cohn New York Times
Date Posted:
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Racial polarization in voting has been declining since 2012 in the US. @Nate_Cohn finds Biden underperforming relative to 2020 in current polling with non-white voters; 5% of 2020 non-white Biden voters now say they support Trump.

Is Democratic support among nonwhite voters slipping across racial groups?

Core argument: Biden leads 72-11 among Black voters and 47-35 among Hispanic registrants, tallies well beneath his standing in the last election, according to the survey.

Mr. Biden’s weakness among nonwhite voters is broad, spanning virtually every demographic category and racial group, including a 72-11 lead among Black voters and a 47-35 lead among Hispanic registrants. The sample of Asian voters is not large enough to report, though nonwhite voters who aren’t Black or Hispanic — whether Asian, Native American, multiracial or something else — back Mr. Biden by just 40-39. In all three cases, Mr. Biden’s tallies are well beneath his standing in the last election. The survey finds evidence that a modest but important 5% of nonwhite Biden voters now support Mr. Trump, including 8% of Hispanic voters who say they backed Mr. Biden in 2020.

Takeaways by Macro Roundup® AI

  1. Biden leads 72-11 among Black voters and 47-35 among Hispanic registrants, tallies well beneath his standing in the last election, according to the survey.
  2. Nonwhite voters who are neither Black nor Hispanic — Asian, Native American, multiracial or other — back Biden by 40-39, with the Asian sample too small to report separately.
  3. The survey finds that 5% of nonwhite Biden voters now support Trump, including 8% of Hispanic voters who say they backed Biden in 2020.

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.
  • The Unsettling Truth About Trump’s First Great Victory — Swedish lottery data indicate that windfall wealth raises the short- and medium-run probability of marriage, an effect driven by male winners. When the winner is a married woman, the authors estimate that a 1M-krona windfall nearly doubles the short-run divorce rate, an effect that fades in the long run.
  • Five Reasons Why Biden Might Lose in 2024 — Working-class voters are projected to outnumber college-educated voters by roughly half again in the US presidential electorate, so slippage among them carries outsize weight. The author argues that if Republicans matched their 13-point national House margin among working-class voters, Democrats would need a college-educated advantage above 30 points to offset it.

AI Summary. The Pentagon plans to field thousands of air-, land- and sea-based artificial-intelligence systems, drones and autonomous platforms within two years to counter threats from China and other adversaries, spending hundreds of millions of dollars on systems intended to be "small, smart, cheap.

Nancy Youssef and Michael Gordon Wall Street Journal
Date Posted:

The US military intends to field thousands of “cheap” drones and autonomous systems within the next two years to counter threats from China and other adversaries.

The US military intends to field thousands of “cheap” drones and autonomous systems within the next two years to...

Will thousands of small, cheap autonomous systems counter China's military threat?

Core argument: The Pentagon plans to field thousands of air-, land- and sea-based AI systems, drones and autonomous platforms within the next two years to counter threats from China and other adversaries.

The Pentagon intends to field a vast network of AI-powered technology, drones and autonomous systems within the next two years to counter threats from China and other adversaries. Kathleen Hicks, the deputy secretary of defense, provided new details in a speech Wednesday about the department’s plans to spend hundreds of millions of dollars to produce an array of thousands of air-, land- and sea-based artificial-intelligence systems that are intended to be “small, smart, cheap.”

Takeaways by Macro Roundup® AI

  1. The Pentagon plans to field thousands of air-, land- and sea-based AI systems, drones and autonomous platforms within the next two years to counter threats from China and other adversaries.
  2. Deputy Secretary of Defense Kathleen Hicks said the department will spend hundreds of millions of dollars on artificial-intelligence systems designed to be "small, smart, cheap.".

Related Articles:

  • U.S. Weapons Industry Unprepared for a China Conflict, Report Says — A Center for Strategic and International Studies report argues the U.S. defense industrial base is not prepared for the current security environment and operates in a manner better suited to peacetime. The study recommends reassessing total munitions requirements and stockpile replenishment needs, creating a strategic munitions reserve, and setting a sustainable procurement plan.
  • Military Briefing: Ukraine War Exposes ‘Hard Reality’ of West’s Weapons Capacity — NATO members' defense ministries are finding that dormant weapons production lines cannot be restarted quickly, and that expanding capacity requires investment that depends on securing long-term production contracts. These countries had cut military spending, downsized defense industries, and shifted to lean "just-in-time" production with low inventories of munitions and other equipment.
  • Interest Costs Will Grow the Fastest Over the Next 30 Years — The Congressional Budget Office projects federal spending will reach 29.1% of GDP over three decades, with net interest on the national debt rising from 1.9% of GDP to 6.7%, or $5.4tn. Under that projection, interest becomes the largest single federal budget line item, surpassing Social Security, Medicare, and Medicaid.