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


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.

Related Articles:

  • Saudi Forces Accused of Killing Hundreds of Ethiopian Migrants — Human Rights Watch alleges in a 73-page report that Saudi border forces killed hundreds of Ethiopian migrants attempting to cross into the kingdom from Yemen, firing explosive weapons at them and in some cases asking migrants which limb they would prefer to be shot. Saudi Arabia hosts hundreds of thousands of Ethiopian workers.
  • How a Vast Demographic Shift Will Reshape the World — 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%.
  • Demography Is Destiny in Africa — Sub-Saharan Africa is projected to account for half of global population growth through 2050 and to hold a third of the world's people by the end of the century, up from 14%. Its population is growing 3x faster than the rest of the world, concentrating rapid growth in countries where nearly half have gross national income per person below $1,135.

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.

Related Articles:

  • Inflation in The *Very* Long Run — Japan's experience indicates an aging society is not inherently inflationary: despite decades of a shrinking working-age population, its total number of workers has risen as women entered paid employment and people in their 60s and 70s stayed in or returned to work. The US is projected to have more favorable demographics than most other rich countries and China.
  • 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.

Tuesday, September 19, 2023

AI Summary. U.S. high-propensity business applications — those more likely to become employers — ran 40% above their 2019 average, according to Census Bureau data, with the elevated pace persisting after the pandemic. Business deaths also rose, but the net effect still points to strong growth in business formation.

Anna Zhou and Taylor Bowley Bank of America
Date Posted:

New business applications by firms that are likely to hire workers remain elevated relative to pre-pandemic; in July 2023, they were 40% higher than the mean 2019 level. @BankofAmerica

Has new business formation remained elevated after the pandemic?

Core argument: High-propensity business applications, those more likely to become businesses with a payroll, ran 40% above their 2019 average in July, according to Census Bureau data, and the pandemic-era surge in new business formations has continued post-Covid.

The pandemic led to a surge in new business formations. What is striking to us is that this elevated level has continued post-Covid. According to data from the Census Bureau, in July, high-propensity business applications, which include all those that are more likely to become businesses with a payroll, were 40% higher than the average level in 2019. While not all of these businesses survive (the number of business deaths also rose in 2022 according to the Bureau of Labor Statistics), the net impact still points to strong growth in business formation. Business applications each year seem to be driven by a different sector. At the start of the pandemic, retail trade saw the biggest surge, driven largely by the growing demand for e-commerce, according to commentaries from the Census Bureau.

Takeaways by Macro Roundup® AI

  1. High-propensity business applications, those more likely to become businesses with a payroll, ran 40% above their 2019 average in July, according to Census Bureau data, and the pandemic-era surge in new business formations has continued post-Covid.
  2. Business deaths also rose in 2022 according to the Bureau of Labor Statistics, but the net impact still points to strong growth in business formation.
  3. Business applications each year appear driven by a different sector, with retail trade showing the biggest surge at the start of the pandemic, largely on growing e-commerce demand, according to Census Bureau commentaries.

Related Articles:

  • Surging Business Formation in the Pandemic: Causes and Consequences — US applications for new businesses dropped early in the COVID-19 pandemic and then rose to record levels, remaining historically elevated, including among applications with characteristics likely to result in hiring and growth. Business applications have historically tracked actual business formation closely.
  • The Startup Surge Continues: Business Applications on Track for Second-Largest Annual Total on Record — Americans filed nearly 2.7m business applications in the first half of the year, up 5% from the prior year and 52% above the same period in 2019. One-third were applications with a high likelihood of hiring employees, 36% above the comparable 2019 total.
  • and Creative Destruction After the Pandemic — US establishment closures spiked and then returned to normal levels, while new establishment openings reached record highs—peaking at 379,000 in a single quarter—and have since cooled but remain far above any pre-2020 level. Much of this may be new businesses replacing those that closed, and it is unclear whether the new entrants are more productive than the firms they replaced.

AI Summary. Restoring the pre-pandemic 12% vacancy rate would require 2.7m new housing units left entirely empty, or more than 18m additional units if 75% of new units are filled on net. Construction of 1.4m units in the first half of 2023 failed to keep up with demand, pushing unoccupied housing rates lower.

Joseph Politano Apricitas Economics
Date Posted:

Residential vacancy rates are at multi-decade lows. Raising unoccupied inventory rates back to pre-pandemic levels would require building 2.7mm units (vs. current pacing of 1.4 million units for 2023).@JosephPolitano

How many new housing units would restore pre-pandemic vacancy rates?

Core argument: Restoring the U.S. vacancy rate to its 12% pre-pandemic level would require 2.7 million new housing units left entirely empty—more than Maryland's entire housing stock, or over 1.5 years of construction at 2022 rates.

To get rates back up to the 12% pre-pandemic level would require adding 2.7 million new housing units—more than the entire housing stock of the state of Maryland or more than 1.5 years of construction at 2022 rates—and leaving them all empty. Assume half occupancy and America needs 6.2 million new units—more than currently exist in Pennsylvania. If you assume that 75% of units will get filled on net then America needs more than 18 million additional housing units—roughly as many as exist in California and Washington state combined. Actual construction stood at only 1.4 million in the first half of 2023, failing to keep up with demand and leading to further declines in unoccupied housing rates—in other words, the structural shortage of housing is keeping prices high and vacancies down.

Takeaways by Macro Roundup® AI

  1. Restoring the U.S. vacancy rate to its 12% pre-pandemic level would require 2.7 million new housing units left entirely empty—more than Maryland's entire housing stock, or over 1.5 years of construction at 2022 rates.
  2. Assuming half of new units get occupied, the U.S. needs 6.2 million additional homes, more than exist in Pennsylvania; at 75% net occupancy the requirement rises above 18 million units, roughly the combined stock of California and Washington state.
  3. U.S. construction reached only 1.4 million units in the first half of 2023, failing to keep up with demand and leading to further declines in unoccupied housing rates, with the structural shortage keeping prices high and vacancies low.

Related Articles:

  • Repeat After Me: Building Any New Homes Reduces Housing Costs For All — 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.
  • 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.
  • Have Rising Mortgage Rates Frozen the Housing Market? — 42% of American homeowners own their homes outright with no mortgage, and among those with mortgages the median housing debt is 52% of the home's value. Homeowners with large equity cushions should be less affected by "lock-in" from low pandemic-era mortgage rates.

AI Summary. Areas with the highest shares of people working from home are mostly central cities of metropolitan areas or places hosting large corporate headquarters, including Cupertino, California and Redmond, Washington, home to Apple and Microsoft. Working from home appears most popular in places close to concentrations of offices and other workplaces.

Justin Fox Bloomberg
Date Posted:

.@foxjust notes that two-thirds of America’s top 20 “work from home” neighborhoods in 2022 are within commuting distance to major cities’ central business districts.

Is working from home most common near dense job centers?

Core argument: Most of the top-50 U.S. places by work-from-home share are central cities of metropolitan areas, designated as such based on population and the number of people commuting to jobs there.

All these areas clearly do have much higher WFH shares than the nation as a whole. What else do they have in common? One striking characteristic, which I highlighted in the top-50 table, is that most are located in central cities of metropolitan areas, which are designated as such based on population and how many people commute to jobs there. What’s more, two non-central cities on the list — Cupertino, California, and Redmond, Washington — happen to be home to the headquarters of the two most valuable companies in the world, Apple and Microsoft, and several others are also home to large corporate headquarters. Working at home seems to be most popular in places close to lots of offices and other places of employment.

Takeaways by Macro Roundup® AI

  1. Most of the top-50 U.S. places by work-from-home share are central cities of metropolitan areas, designated as such based on population and the number of people commuting to jobs there.
  2. Two non-central cities on the top-50 work-from-home list, Cupertino, California, and Redmond, Washington, host the headquarters of Apple and Microsoft, the two most valuable companies in the world, and several other places host large corporate headquarters.
  3. Working from home appears most popular in places close to large concentrations of offices and other places of employment, and the listed areas all have work-from-home shares much higher than the nation as a whole.

Related Articles:

  • 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.
  • 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.
  • Real-Estate Doom Loop Threatens America’s Banks — 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.

AI Summary. Bloomberg Economics finds that the global share of new-project foreign direct investment going to countries that declined to condemn Russia's invasion of Ukraine averaged 15%, down from 30% in the decade to 2019, with China and Hong Kong's share falling below 2% from nearly 11%.

Shawn Donnan and Enda Curran Bloomberg
Date Posted:

Citing a @IMFNews analysis, @sdonnan notes the global share of greenfield FDI has declined for countries that failed to condemn the Russian invasion of Ukraine as world trade balkanizes on geopolitical lines.

Is foreign investment shifting toward politically aligned countries?

Core argument: Bloomberg Economics found the global share of greenfield foreign direct investment going to countries that did not condemn Russia's invasion of Ukraine averaged 15% over the past two years, down from 30% in the decade to 2019.

Using UN votes to condemn Russia’s invasion of Ukraine as a filter, Bloomberg Economics found that the global share of greenfield foreign direct investment going to countries that didn't condemn the invasion averaged only 15% in the last two years, down from 30% in the decade to 2019. China's share, including Hong Kong, fell to less than 2% in 2022 from nearly 11% on average over 2010-19. The data point to US and other Western companies investing more in like-minded countries. Between the second quarter of 2020 and the first quarter of this year, US companies’ greenfield investments in China plunged 57.9% and those by European firms dropped 36.7% versus the five years leading up to the pandemic, an updated IMF analysis shared with Bloomberg found. Investments from the rest of Asia into China were down by more than two-thirds.

Takeaways by Macro Roundup® AI

  1. Bloomberg Economics found the global share of greenfield foreign direct investment going to countries that did not condemn Russia's invasion of Ukraine averaged 15% over the past two years, down from 30% in the decade to 2019.
  2. China's share of global greenfield foreign direct investment, including Hong Kong, fell to less than 2% in 2022 from nearly 11% on average over 2010–19, according to Bloomberg Economics.

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AI Summary. An analysis finds China's working-age population (16–65) grew from 600m to 1bn between 1982 and 2015 while labour-force participation fell from 85% to just over 70%, challenging the "demographic dividend" explanation of China's growth. The decline was concentrated among urban household-registration holders facing mandatory retirement at 55 for women and 65 for men, alongside expanded schooling and university enrolment.

Economist Staff The Economist
Date Posted:

Between 1982 to 2015 China’s working-age population grew from 600mm to 1bn; however, LFP dropped from 85% to 70% during the same period. This suggests that a “demographic dividend” didn’t drive Chinese growth.

Did a growing working-age population actually drive China's economic growth?

Core argument: Xin Meng of the Australian National University finds that China's working-age population (ages 16–65) grew from 600m in 1982 to 1bn in 2015, while labour-force participation fell from 85% to just over 70%.

Xin Meng of the Australian National University appears to refute the “demographic dividend” as an explanation for China’s economic success. Her analysis showed that between 1982 and 2015 China’s working-age population, defined as those aged between 16 and 65, grew from 600m to 1bn. During this same period, however, labour-force participation dropped from 85% to just over 70%. Much of the decline came from those with an urban hukou. Unlike holders of rural hukou, urbanites were subjected to mandatory retirement at the age of 55 for women and 65 for men. Compulsory education and greater university enrolment kept under-25s out of the workforce.

Takeaways by Macro Roundup® AI

  1. Xin Meng of the Australian National University finds that China's working-age population (ages 16–65) grew from 600m in 1982 to 1bn in 2015, while labour-force participation fell from 85% to just over 70%.
  2. Much of China's participation decline came from urban hukou holders, who faced mandatory retirement at 55 for women and 65 for men, unlike rural hukou holders.
  3. Compulsory education and greater university enrolment kept Chinese under-25s out of the workforce, part of the participation decline Meng cites in challenging the "demographic dividend" explanation of China's economic success.

Related Articles:

  • Population Aging and Economic Growth: From Demographic Dividend to Demographic Drag? — The authors estimate that a 1% increase in the working-age share of the population raises income per capita by about 1%, with an added 0.1–0.4% boost to growth in later periods. They project population aging will slow annual income per capita growth in advanced economies by 0.4–0.8 percentage points through 2050, while spurring growth in less developed countries.
  • The Chinese Century Is Already Over — The author projects that China's demographic decline will cap its rise: its prime-age labor force began shrinking in 2012 as growth slowed from about 10% annually to 3%, and by 2031-35 its growth rate will fall below America's with per capita income near 30% of the US level.
  • The Neoclassical Growth of China — China's per capita GDP growth path closely tracks those of Japan, South Korea, and Taiwan from similar starting income levels, indicating nothing unusual about its growth rate. The authors' model projects China's per capita GDP will level off at about 41% of the US level, reflecting a slowdown in productivity catch-up.

AI Summary. China's government has long encouraged university enrollment, raising higher-education student numbers from 22m to 383m and expanding graduate-school capacity, with master's candidates up 25% in one year. The author argues that boosting graduate numbers while restricting the services sector and subsidizing construction is bad economics and worse social policy.

Benn Steil and Elisabeth Harding Council on Foreign Relations
Date Posted:

.@BennSteil argues the disconnect between the number of Chinese college graduates and service jobs will “fuel discontent among an age cohort on which China will depend for its future national vitality.”

Does expanding graduate education while restricting services raise youth unemployment?

Core argument: China's higher-education enrollment rose from 22 million students in 1990 to 383 million in 2021, following decades of government encouragement of university attendance.

For decades now, the Chinese government has encouraged university enrollment, pushing the number of students in higher education from 22 million in 1990 to 383 million in 2021. During the pandemic, it pressed even harder, expanding graduate-school capacity. Master’s-degree candidates rose by 25 percent in 2021. China’s Ministry of Education estimated that 10.76 million college students would graduate in 2022, 1.67 million more than in 2021—and it expects a further large rise in 2023. The message for China’s policymakers is clear: boosting graduate numbers while throttling services and subsidizing buildings is bad economics and worse social policy.

Takeaways by Macro Roundup® AI

  1. China's higher-education enrollment rose from 22 million students in 1990 to 383 million in 2021, following decades of government encouragement of university attendance.
  2. China's Ministry of Education estimated that 10.76 million college students would graduate in 2022, 1.67 million more than in 2021, and expects a further large rise in 2023.
  3. China expanded graduate-school capacity during the pandemic, with master's-degree candidates rising 25 percent in 2021; boosting graduate numbers while throttling services and subsidizing buildings is, the article argues, bad economics and worse social policy.

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  • China Cannot Allow Jobless Young To ‘Lie Flat’ — China's job mix has shifted toward low-pay, low-skill, informal work at the expense of higher-paid, high-skill manufacturing and construction jobs, with the informal-to-formal ratio flipping from 40:60 to 60:40 over 15 years, according to a Stanford University estimate. Younger workers are over-represented in low-pay sectors and gig work.
  • China’s Defeated Youth — Urban Chinese unemployment among those aged 16 to 24 has run above 20%, about double the pre-pandemic level for that age group, with over 70% of unemployed youth in one year calculated to be graduates. Sentiment analysis of social media indicates the mood of young Chinese is growing darker.