Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Friday, September 15, 2023

AI Summary. Spending at stores, restaurants, and online excluding grocery stores and gas stations has been rising at an average annual rate of 7%, versus 4% a year before the pandemic. That pace is consistent with underlying wage growth still running about 2 percentage points faster than pre-pandemic, despite normalized job-market churn and slower growth in posted wages.

Matt Klein The Overshoot
Date Posted:

Underlying wage growth is rising 2pp faster than before the pandemic which is inconsistent with the Fed’s target. @M_C_Klein

Does strong consumer spending signal wage growth above pre-pandemic rates?

Core argument: Spending at stores, restaurants, and online excluding grocery stores and gas stations has risen at a 7% yearly rate each month on average since the spring, compared with 4% a year in 2017–2019.

Meanwhile, spending at stores, restaurants, and online excluding grocery stores and gas stations has been rising at a yearly rate of 7% each month on average since the spring, compared to 4% a year in 2017-2019. That is consistent with underlying wage growth, which is still rising about 2 percentage points faster than before the pandemic, despite the normalization in job market churn, the declining wage bump for people switching jobs, and the slowdown in the growth of posted wages on job boards.

Takeaways by Macro Roundup® AI

  1. Spending at stores, restaurants, and online excluding grocery stores and gas stations has risen at a 7% yearly rate each month on average since the spring, compared with 4% a year in 2017–2019.
  2. Underlying wage growth is still rising about 2 percentage points faster than before the pandemic, a pace consistent with that spending growth.
  3. The faster underlying wage growth persists despite normalization in job market churn, a declining wage bump for job switchers, and slower growth in posted wages on job boards.

Related Articles:

  • Breaking Down the Sources of US Economic Resilience — The US government has funded essentially all of its increased deficit by issuing short-term Treasury bills and drawing down cash reserves rather than selling longer-dated debt, limiting the effect on market liquidity so far. The authors expect that pressure is delayed rather than eliminated, with issuance shifting toward longer maturities as the deficit stays elevated.
  • 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.
  • 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.

AI Summary. The United Auto Workers union struck all three Detroit automakers simultaneously for the first time, with about 12,700 workers walking out in targeted stoppages at plants in Michigan, Ohio, and Missouri. The targeted approach preserves the union's $825m strike fund relative to a full walkout of all 146,000 workers while disrupting production planning.

Nora Eckert and Ryan Felton Wall Street Journal
Date Posted:

The United Auto Workers strike against the Big Three is underway. The firms had offered 17.5-20% wage increases over four years, less than the UAW’s mid-30% demand.

Does a targeted strike strategy strengthen the auto union's leverage?

Core argument: About 12,700 United Auto Workers members walked out shortly after midnight Friday at plants in Michigan, Ohio, and Missouri, the union's first simultaneous strike against General Motors, Ford, and Stellantis.

The United Auto Workers union for the first time ever went on strike at all three Detroit car companies, with about 12,700 workers hitting the picket lines shortly after midnight Friday in targeted work stoppages at plants in Michigan, Ohio, and Missouri. The UAW’s plans for targeted work stoppages would bring only a fraction of the overall workforce off assembly lines. That strategy would help preserve the union’s $825 million fund more than a full strike of all 146,000 workers, but stymie output and disrupt automakers’ production planning. It also could prove risky, because employees who remain on the job likely would be working without a contract, a prospect that has sparked concern among some members.

Takeaways by Macro Roundup® AI

  1. About 12,700 United Auto Workers members walked out shortly after midnight Friday at plants in Michigan, Ohio, and Missouri, the union's first simultaneous strike against General Motors, Ford, and Stellantis.
  2. The UAW's targeted work stoppages idle only a fraction of its 146,000 workers, preserving more of the union's $825 million strike fund than a full walkout while stymieing output and disrupting automakers' production planning.
  3. Workers who remain on the job under the UAW's targeted strategy likely would be working without a contract, a prospect that has sparked concern among some members.

Related Articles:

  • Autoworkers Have Good Reason to Demand a Big Raise — 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.
  • The Q4 Pothole: Student Loans, Shutdown, and Strikes — The authors estimate that resuming student loan payments will subtract 0.5 percentage point from quarterly annualized GDP growth, with a government shutdown cutting roughly 0.2pp and an auto workers' strike 0.05–0.10pp for each week it lasts. They project growth slowing to +1.3% before rebounding to +1.9% as these temporary drags fade and income growth reaccelerates.
  • 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.

AI Summary. A declining union share of the electorate and weaker Democratic performance among union households have made Michigan, Pennsylvania, and Wisconsin more competitive, with white voters without college degrees making up majorities of the electorate in all three states. Unionized white non-college voters were less likely to back Trump than their non-union counterparts.

Michael Baharaeen The Liberal Patriot
Date Posted:

As the UAW strike gets underway @mbaharaeen notes that union households will play a significant role in the 2024 election. In 2020 union households made up 21% of the electorate in MI, 18% in PA, and 14% in WI.

How does union membership shape swing-state voting among white non-college voters?

Core argument: White, non-college voters made up a majority of the 2020 electorate in Michigan (54%), Pennsylvania (53%), and Wisconsin (58%), and unionized members of this group were less likely to back Trump than their non-union counterparts.

Unions’ declining vote share combined with less dominant Democratic performances with union household voters have made all three Blue Wall states more competitive: after voting reliably Democratic from 1992 to 2012, each narrowly broke for Trump in 2016. Although Biden won all of them back in 2020, he did so by far smaller margins than Obama earned in 2012. In 2020, white, non-college voters constituted a majority of the electorate in Michigan (54%), Pennsylvania (53%), and Wisconsin (58%). While this demographic is still likelier than not to vote Republican, non-college white voters who are unionized were less likely to back Trump in 2020 compared to those who were not. And while these voters are often more culturally moderate or even conservative, many embrace economic populism and highly approve of unions, giving Biden and Democrats an opportunity to make greater inroads.

Takeaways by Macro Roundup® AI

  1. White, non-college voters made up a majority of the 2020 electorate in Michigan (54%), Pennsylvania (53%), and Wisconsin (58%), and unionized members of this group were less likely to back Trump than their non-union counterparts.
  2. Unions' declining vote share and weaker Democratic margins among union households have made all three Blue Wall states more competitive, each breaking narrowly for Trump in 2016 after voting Democratic from 1992 to 2012.
  3. Biden won Michigan, Pennsylvania, and Wisconsin in 2020 by far smaller margins than Obama earned in 2012, and economic populism and high approval of unions among non-college white voters offers Democrats an opportunity for greater inroads.

Related Articles:

  • Flanked by Union Allies, Biden Touts $36 Billion Pension Bailout — The U.S. government allocated $36bn to the Central States Pension Fund, one of the country's largest multi-employer plans, aiding 350,000 union workers and retirees who otherwise faced benefit cuts estimated at 60%.
  • The ‘Summer of Strikes’ Isn’t Living Up to the Hype — Recent strike waves differ in composition: earlier ones were dominated by teachers and other state and local government workers, while current strikers are mostly private-sector employees, often organizing location-by-location in stoppages too small to appear in Bureau of Labor Statistics counts. The Cornell-ILR Labor Action Tracker recorded 224,000 workers in stoppages versus the Bureau's 120,600.

AI Summary. The International Energy Agency projects a carbon-neutral world in 2050 will need 35m tonnes of green metals annually, with demand by 2030 rising 50-70% for copper and nickel, 150% for cobalt and neodymium, and six- to sevenfold for graphite and lithium. Industry forecasters anticipate copper supply gaps of 2m-4m tonnes and a lithium shortfall of 50,000-100,000 tonnes by 2030.

Economist Staff The Economist
Date Posted:

Meeting decarbonization goals will require significant investments in mining and refining. Industry leaders estimate a copper supply gap of 2m-4m tonnes, 6-12% of demand by 2030.

How large will green-metals demand and supply shortfalls be by 2030?

Core argument: The International Energy Agency predicts a carbon-neutral world in 2050 will need 35m tonnes of green metals a year, with copper and nickel demand rising 50–70% by 2030, cobalt and neodymium 150%, and graphite and lithium six- to seven-fold.

By 2030 copper and nickel demand could rise by 50-70%, cobalt and neodymium by 150%, and graphite and lithium six- to seven-fold. All told, a carbon-neutral world in 2050 will need 35m tonnes of green metals a year, predicts the International Energy Agency. Industry oracles asked by The Economist predict copper-supply gaps of 2m-4m tonnes, or 6-12% of potential demand, by 2030. They also foresee a shortfall of lithium of 50,000-100,000 tonnes, a 2-4% deficit. Nickel and graphite—plentiful in theory—could cause problems because batteries require pure material. There are too few smelters to refine bauxite into aluminum. Outside China, next to no one produces neodymium.

Takeaways by Macro Roundup® AI

  1. The International Energy Agency predicts a carbon-neutral world in 2050 will need 35m tonnes of green metals a year, with copper and nickel demand rising 50–70% by 2030, cobalt and neodymium 150%, and graphite and lithium six- to seven-fold.
  2. Industry oracles surveyed by The Economist predict copper-supply gaps of 2m–4m tonnes by 2030, or 6–12% of potential demand, plus a lithium shortfall of 50,000–100,000 tonnes, a 2–4% deficit.
  3. Nickel and graphite, plentiful in theory, could cause problems because batteries require pure material, while too few smelters exist to refine bauxite into aluminium and next to no one outside China produces neodymium.

Related Articles:

  • Glencore Says This Time Is Different for Coming Copper Shortage — Glencore estimates a cumulative gap between projected copper demand and supply of 50m tons through 2030, against current world demand of about 25m tons a year, and argues the industry will not lift supply as it has in previous cycles. The company says copper prices do not yet reflect the coming deficit.
  • Lithium Discovery in US Volcano Could be Biggest Deposit Ever Found — An estimated 20–40m tonnes of lithium metal lie within a volcanic crater in the US, larger than the deposits beneath a Bolivian salt flat previously considered the world's largest. Planned extraction would remove clay with water, centrifuge out lithium-bearing grains, and leach the clay in sulfuric acid.
  • 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. Studies from the US, Sweden, and Finland find that new market-rate housing triggers chains of moves that free up homes for lower-income residents, with 100 new US units associated with up to 70 people leaving below-median-income neighborhoods, regardless of the new units' price point.

John Burn-Murdoch Financial Times
Date Posted:
Is Database:
Database

Recent studies in the US, Sweden, and Finland demonstrate that new unsubsidized housing construction enhances overall affordability by freeing up housing for people with lower incomes. @jburnmurdoch

Does building market-rate housing lower costs for lower-income residents too?

Core argument: A US study finds that building 100 new market-rate dwellings ultimately leads to up to 70 people moving out of below-median income neighbourhoods and up to 40 out of the poorest fifth, with those figures unchanged when the new housing is priced at the top end.

Recent studies from the US, Sweden, and Finland all demonstrate that although most people who move directly into new unsubsidised housing may come from the top half of earners, the chain of moves triggered by their purchase frees up housing in the same cities for people on lower incomes. The US study found that building 100 new market-rate dwellings ultimately leads to up to 70 people moving out of below-median income neighbourhoods, and up to 40 moving out of the poorest fifth. Those numbers don’t budge even if the new housing is priced towards the top end of the market. It’s a similar story in the American Midwest, where Minneapolis has been building more housing than any other large city in the region for years, and has abolished zones that limited construction to single-family housing. Adjusted for local earnings, average rents in the city are down more than 20% since 2017, while rising in the five other similarly large and growing cities.

Takeaways by Macro Roundup® AI

  1. A US study finds that building 100 new market-rate dwellings ultimately leads to up to 70 people moving out of below-median income neighbourhoods and up to 40 out of the poorest fifth, with those figures unchanged when the new housing is priced at the top end.
  2. Studies from the US, Sweden, and Finland find that although most people moving directly into new unsubsidised housing come from the top half of earners, the resulting chain of moves frees up housing in the same cities for people on lower incomes.
  3. Minneapolis, which has built more housing than any other large Midwestern city for years and abolished zones restricting construction to single-family housing, has seen average rents adjusted for local earnings fall more than 20% since 2017, while rents rose in five comparable cities.

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.
  • 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.
  • 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.

Monday, September 18, 2023

AI Summary. Futures-market pricing of policy rates in major advanced economies moved closer to central banks' cautious messaging, with higher expected rates for 2024 and a higher, later expected peak. Investors still anticipated rate cuts beginning in the second quarter of 2024, deeper in the US than the euro area.

Claudio Borio, Stijn Claessens, Benoît Mojon, Hyun Song Shin and Nikola Tarashev Bank for International Settlements
Date Posted:

In their quarterly report, @BIS_org notes investors now expect policy rates to stay higher for longer. @HyunSongShin

Have market expectations for policy rates aligned with central banks' cautious messaging?

Core argument: Futures markets in both the US and the euro area priced in higher policy rates for 2024 than they had a few months earlier, with the expected peak in policy rates pushed both higher and later, according to the BIS Quarterly Review.

The path of policy rates priced into futures markets in major Advanced Economies became more in line with the cautious tone of central banks. The Federal Reserve and the ECB raised policy rates further in July, and emphasized in their communications that future decisions would be data-dependent. Officials also indicated that, while rates might not rise much more, they could stay at their current levels for a prolonged period if inflation remained above target. In accordance with these messages, futures markets in both in the US and the euro area priced in higher rates for 2024 than they had just a few months before. And the expected peak in policy rates was pushed higher and later. That said, investors still seemed to anticipate rate cuts as early as the second quarter of 2024, and much deeper in the US than the euro area.

Takeaways by Macro Roundup® AI

  1. Futures markets in both the US and the euro area priced in higher policy rates for 2024 than they had a few months earlier, with the expected peak in policy rates pushed both higher and later, according to the BIS Quarterly Review.
  2. The Federal Reserve and the ECB raised policy rates further in July and stressed that future decisions would be data-dependent, with officials indicating rates could stay at current levels for a prolonged period if inflation remained above target.
  3. Investors still appeared to anticipate rate cuts as early as the second quarter of 2024, and much deeper cuts in the US than in the euro area, according to the BIS Quarterly Review.

Related Articles:

  • Adrift at Sea — Market pricing of future inflation expectations and longer-dated real yields has been creeping up, potentially reflecting some probability of both a higher inflation target and a higher neutral interest rate. This implies today's higher nominal rates are here to stay and may trend higher.
  • 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.
  • Measuring the Natural Rate of Interest After COVID-19 — Model estimates for the United States, Canada, and the Euro Area place the natural rate of interest within a few tenths of a percentage point of pre-pandemic estimates, with the main longer-term consequence of the pandemic a reduction in the natural rate of output. The authors find no evidence that the era of historically low natural rates has ended.

AI Summary. U.S. Treasuries remain the world's most liquid security, but daily cash trading volumes have not kept pace with the growth in issuance, leaving the market structurally less liquid. Principal trading firms account for 20% of cash market volumes yet withdraw when volatility rises, making their liquidity provision illusory.

Joseph Wang Fed Guy Blog
Date Posted:
Is Database:
Database

.@FedGuy12 writes that Treasury liquidity is low as dealer balance sheets have not scaled up with Treasury issuance. The average daily volume of Treasuries has increased very slowly over the past decade despite a flood of issuance.

Is the Treasury market becoming structurally less liquid as issuance grows?

Core argument: Average daily cash Treasury volumes have risen to about $700bn, but that growth has not come close to scaling with the overall growth in issuance, leaving Treasuries structurally less liquid even as they remain the world's most liquid security.

While Treasuries remain the most liquid security in the world, they are structurally becoming less liquid. The average daily cash transactions in Treasuries has not come close to scaling with the overall growth in issuance. Although average daily cash volumes have increased slightly in recent years to $700b, that increase is in part due to the activity of principal trading firms whose strategy is to profit from small intraday fluctuations in price. These firms account for 20% of cash market volumes, but they disappear when volatility picks up so their provision of liquidity is illusory. Excluding their participation, cash market activity would be progressively thinning relative to the steady growth in issuance.

Takeaways by Macro Roundup® AI

  1. Average daily cash Treasury volumes have risen to about $700bn, but that growth has not come close to scaling with the overall growth in issuance, leaving Treasuries structurally less liquid even as they remain the world's most liquid security.
  2. Principal trading firms account for 20% of Treasury cash market volumes, profiting from small intraday price fluctuations, but they disappear when volatility picks up, so their provision of liquidity is illusory.
  3. Excluding principal trading firms, Treasury cash market activity would be progressively thinning relative to the steady growth in issuance.

Related Articles:

  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
  • Raising Anchor — The Bank of Japan's low interest rate policy anchors global bond yields, and that anchor is set to move higher, making U.S. Treasury bonds less attractive to Japanese investors. With this marginal source of demand fading as Treasury supply is set to increase, U.S. yields are likely to drift higher.
  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.

AI Summary. High-yield borrowers have extended their debt maturities, cutting significant dollar-denominated bonds and loans coming due through 2025 by about 38%, from roughly $878.4bn to $542.3bn. That progress undercuts warnings that a wave of maturing high-yield debt would collide with higher interest rates and a weakening economy.

Jonathan Levin Bloomberg
Date Posted:

High yield spreads are falling as firms are able to find financing at a mean of 378bps above Treasuries, 200bps lower than the 2022 high. @JonathanJLevin

Have high-yield borrowers reduced their looming debt maturities?

Core argument: High-yield issuers have cut significant dollar-denominated bond and loan maturities due through 2025 by about 38%, from roughly $878.4 billion at the start of 2023 to $542.3 billion.

The hand-wringing about the Great Maturity Wall appears to have been wildly overdone. A year ago, the bear case held that interest rates were rising and the economy was deteriorating at the same time that a surfeit of high-yield debt was coming due. But ever since that point, companies have been quietly extending their debt calendars. At the start of 2023, high-yield issuers had about $878.4 billion in significant dollar-denominated bond and loan issues coming due through 2025. And since then, issuers have whittled the number down by about 38% to $542.3 billion. Most signs suggest they will continue to make plodding progress.

Takeaways by Macro Roundup® AI

  1. High-yield issuers have cut significant dollar-denominated bond and loan maturities due through 2025 by about 38%, from roughly $878.4 billion at the start of 2023 to $542.3 billion.
  2. The bear case a year ago held that rising interest rates and a deteriorating economy would coincide with a surfeit of high-yield debt coming due.
  3. High-yield companies have been extending their debt calendars, and most signs suggest they will continue that plodding progress, leaving concern over the Great Maturity Wall overdone.

Related Articles:

  • 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.
  • A Default Cycle Has Started — Default rates on high-yield bonds and leveraged loans are rising as more companies default under a higher cost of capital, with the Federal Reserve signaling interest rates will stay at these levels for a couple of years. Tighter financing conditions are the channel through which monetary policy restrains the economy and capital markets.
  • Credit Normalization — Excluding Treasury securities, more than $30tn of debt securities are outstanding, and credit spreads, while wider than their 2021 lows, remain within historical ranges. The recent slight deterioration in credit-quality metrics and the rise in bankruptcy filings from historically low levels most likely reflect normalization rather than emerging financial distress.

AI Summary. In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.

Ethan Mollick One Useful Thing
Date Posted:

Boston Consulting Group consultants using AI finished 12.2% more tasks on average, completed tasks 25.1% more quickly, and produced 40% higher quality results than a control group without AI. @emollick

Does AI boost consultants' output most for the lowest performers?

Core argument: In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without AI.

For the last several months, I have been part of a team of social scientists working with Boston Consulting Group, turning their offices into the largest pre-registered experiment on the future of professional work in our AI-haunted age. For 18 different tasks selected to be realistic samples of the kinds of work done at an elite consulting company, consultants using ChatGPT-4 outperformed those who did not, by a lot. On every dimension. Every way we measured performance. Consultants using AI finished 12.2% more tasks on average, completed tasks 25.1% more quickly, and produced 40% higher quality results than those without. [AI] works as a skill leveler. The consultants who scored the worst when we assessed them at the start of the experiment had the biggest jump in their performance, 43% when they got to use AI. The top consultants still got a boost, but less of one.

Takeaways by Macro Roundup® AI

  1. In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without AI.
  2. Consultants who scored worst in the initial assessment improved 43% when given AI, while top-scoring consultants received a smaller boost, a pattern described as AI working as a skill leveler.
  3. The Boston Consulting Group experiment, run by a team of social scientists with the firm, found that consultants using AI outperformed those who did not on every dimension measured.

Related Articles:

  • Society’s Technical Debt and Software’s Gutenberg Moment — Every wave of technological innovation has been unleashed by something costly becoming cheap enough to waste, and large language models are collapsing the cost and complexity of producing software. The authors argue that decades of underproduced software have left society with immense technical debt that is poised to contract, releasing a wave of innovation.
  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.
  • AI, Mass Evolution, and Weickian Loops — Early consumer artificial intelligence applications have largely been wrappers around marketing copy, image generation, and office tasks like spreadsheets and presentations. In shared spaces such as the image generator Midjourney's Discord server, users can see each other's prompts and results and iterate on them in real time, producing rapid collective experimentation and greater sophistication.

AI Summary. Reported disability among people aged 25-54 has risen about 0.9 percentage points to 6.9%, nearly 1.3m additional people and a 16% increase in that population. Increases in reported cognitive difficulties have been concentrated among younger people, rising about 1.1 percentage points for ages 16-34 and 0.7 points for ages 35-44 — at least 25% increases in prevalence.

Kevin Rinz Briefing Book
Date Posted:

.@kevinrinz documents a 25% increase since February 2020 in the share of the prime-age US population having serious trouble with concentrating, remembering, or making decisions.

Is reported disability rising fastest among younger and prime-age workers?

Core argument: The prime-age (25–54) disability rate has risen about 0.9pp to 6.9% over the last three months, equal to nearly 1.3mm additional prime-age people with disabilities and a 16% increase in that population.

The increase in disability reporting has been especially pronounced among people aged 25-54 (the so-called prime-age population). This group has also seen its disability rate rise by about 0.9pp but from a lower base. This increase brings the prime-age disability rate to 6.9% over the last three months, corresponds to nearly 1.3mm additional prime-age people with disabilities, and represents a 16% increase in that population. Even though cognitive difficulties are more common among older people, the increases in cognitive difficulties seen since the onset of the pandemic have been driven by younger people. Since February 2020, rates of cognitive difficulties have increased by about 1.1 percentage points among people 16-24 and 25-34 and by 0.7 percentage points among people 35-44, in each case representing at least a 25 percent increase in prevalence.

Takeaways by Macro Roundup® AI

  1. The prime-age (25–54) disability rate has risen about 0.9pp to 6.9% over the last three months, equal to nearly 1.3mm additional prime-age people with disabilities and a 16% increase in that population.
  2. Since February 2020, rates of cognitive difficulties have risen about 1.1pp among people aged 16–24 and 25–34 and 0.7pp among those aged 35–44, each at least a 25% increase in prevalence.
  3. Cognitive difficulties are more common among older people, but the increases since the onset of the pandemic have been driven by younger people.

Related Articles:

  • The Teen Mental Illness Epidemic is International, Part 1: The Anglosphere — Adolescent anxiety, depression, self-harm, and psychiatric hospitalization rates rose in all five Anglosphere countries beginning in the early 2010s, with larger absolute increases for girls than boys and for the youngest generation. The authors argue the shift from flip phones to smartphones and a phone-based childhood explains this common timing.
  • Youth Risk Behavior Survey — The Youth Risk Behavior Survey reports that more than 40% of US high school students felt so sad or hopeless they could not engage in regular activities for at least two weeks in the previous year, with significant increases in seriously considering suicide, making a plan, and attempting suicide. Female students fare worse than male students across nearly all measures.

AI Summary. Italy has appealed for greater European Union support as more than 12,000 people arrived from north Africa in a single week, most reaching the island of Lampedusa. Arrivals on Italian shores have surged to more than 128,600 so far this year, up from about 66,200 a year earlier.

Amy Kazmin and Giuliana Ricozzi Financial Times
Date Posted:

At least 12,000 African migrants have arrived on the Italian island of Lampedusa (population of 6,000). So far 128,600 migrants have reached Italy in 2023.

At least 12,000 African migrants have arrived on the Italian island of Lampedusa (population of 6,000). So far 128,600...

Are migrant arrivals from north Africa straining Italy's capacity?

Core argument: Migrant arrivals in Italy have reached more than 128,600 so far this year, up from around 66,200 at the same point last year.

Italian Prime Minister Giorgia Meloni has appealed for greater European support as her country confronts a surge of people fleeing north Africa, amid growing tensions between Rome and other EU capitals over migration policy. More than 12,000 people have reached Italy in the past week, mostly to the island of Lampedusa, authorities said, with thousands more awaiting to make the relatively short journey from Tunisia’s port city of Sfax to the Italian island. The increased influx is a political headache for Meloni, who was elected on a promise to stop the flow of illegal migration to Italy. Instead, the number of those arriving on Italian shores has surged to more than 128,600 so far this year, up from around 66,200 at the same time last year.

Takeaways by Macro Roundup® AI

  1. Migrant arrivals in Italy have reached more than 128,600 so far this year, up from around 66,200 at the same point last year.
  2. More than 12,000 people reached Italy in the past week, mostly on the island of Lampedusa, with thousands more waiting to cross from Tunisia's port city of Sfax.
  3. Italian Prime Minister Giorgia Meloni, elected on a promise to stop illegal migration to Italy, has appealed for greater European support amid tensions between Rome and other EU capitals over migration policy.

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AI Summary. People aged over 80 account for more than 10% of Japan's population for the first time, and those over 65 reached a record 29.1%, making Japan the world's oldest country by that measure. The overall population fell by about half a million to 124.4m and is projected to drop below 109m by 2045.

Isabel Reynolds Bloomberg
Date Posted:

Persons aged over 80 now account for 10% of Japan’s population; almost 30% of the population is over 65.

How old is the world's oldest country's population becoming?

Core argument: People aged over 80 exceeded 10% of Japan's population for the first time, according to a government report.

The over-80s for the first time accounted for more than 10% of Japan’s population, according to a government report. Japan’s persistently low birthrate and long lifespans have made it the oldest country in the world in terms of the proportion of people aged over 65, which this year hit a record of 29.1%. Japan’s overall population fell by about half a million to 124.4 million, according to the report. It’s expected to tumble to less than 109 million by 2045.

Takeaways by Macro Roundup® AI

  1. People aged over 80 exceeded 10% of Japan's population for the first time, according to a government report.
  2. Japan's share of people aged over 65 reached a record 29.1%, the highest proportion in the world, amid a persistently low birthrate and long lifespans.
  3. Japan's overall population fell by about 500,000 to 124.4 million and is expected to drop below 109 million by 2045, according to the government report.

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  • Japan Demographic Woes Deepen as Birthrate Hits Record Low — Japan's fertility rate fell for a seventh consecutive year to a record low of about 1.26 children per woman, far below the 2.07 rate considered necessary to maintain a stable population. Births fell 5% to 770,747, a record low, while deaths rose 9% to a record 1.57m.
  • More Than 40% of Japanese Women May Never Have Children — Japan's National Institute of Population and Social Security Research projects that up to 42% of Japanese women may never have children, with a midpoint estimate of one-third and a more optimistic scenario of a quarter of women born in 2005. The institute projects childlessness as high as 50% among men.