Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, September 21, 2023

AI Summary. There is no good evidence that China has reduced its dollar exposure; accounting for the higher dollar share of its hidden reserves, China's dollar holdings have likely increased. Rather than shifting out of dollars, China has moved from US-custodied Treasuries to offshore custodians and risk assets such as agency bonds and equities.

Brad Setser @Brad_Setser
Date Posted:

.@Brad_Setser argues that there is little evidence that China has shifted reserves out of dollars since the start of the Russo-Ukrainian War; he writes that the dollar share of Chinese reserves has likely increased since 2014.

Is China actually reducing its dollar exposure?

Core argument: Setser contends China has shifted from US-custodied Treasuries to offshore custodians and risk assets such as Agencies and equities, rather than out of the dollar itself.

There is no good evidence that China has reduced its exposure to the dollar. In fact, if you account for the higher dollar share of China's hidden reserves, its USD likely has increased since 2014. I am pretty sure that over the last year China hasn't shifted its reserves out of the dollar. It has shifted from US custodied Treasuries to offshore custodians and risk assets (Agencies, equities). When China stops targeting 60% for the dollar share of its formal reserves, we will know. The interesting question is what is the dollar share of China's shadow reserves -- and I think the answer is that it is a lot higher than the dollar share of China's formal reserves.

Takeaways by Macro Roundup® AI

  1. Setser contends China has shifted from US-custodied Treasuries to offshore custodians and risk assets such as Agencies and equities, rather than out of the dollar itself.
  2. Setser argues that de-dollarization will be evident when China stops targeting a 60% dollar share of its formal reserves, and that the dollar share of China's shadow reserves is likely much higher than that of its formal reserves.
  3. Setser finds no good evidence that China has reduced its dollar exposure, and says that accounting for the higher dollar share of its hidden reserves, China's USD holdings have likely increased since 2014.

Related Articles:

  • Shadow Reserves — How China Hides Trillions of Dollars of Hard Currency — Institutions reporting to China's central government likely hold closer to $6tn in foreign assets than the $3.12tn officially reported as reserves, with the state banking system the main vehicle for holding these uncounted foreign currency assets. China remains a massive global creditor whose foreign exchange accumulation is felt worldwide.
  • Great Power Conflict Puts the Dollar’s Exorbitant Privilege Under Threat — Current account surpluses in China, Russia, and Saudi Arabia are being channeled less into traditional reserve assets such as US Treasuries, which offer negative real returns, and more into gold, commodities, geopolitical investments, and liquid bank deposits. Less dollar-invoiced trade and reduced recycling of surpluses into Treasuries could erode the dollar's reserve-currency privilege.
  • Pettis On Pozsar — China's record trade surplus makes it more, not less, dependent on the world's willingness to hold dollars, since currency dominance requires allowing transparent foreign ownership of domestic assets and giving up control of capital and trade accounts. Because China's reserve accumulation runs indirectly through state-bank dollar purchases, whether its dollar holdings have fallen is unclear.

AI Summary. About 45% of Americans ages 18 to 29, roughly 23m people, live with family, a share comparable to the 1940s. A Harris Poll survey of 4,106 US adults found nearly 90% say people shouldn't be judged for moving back home, viewing it as a pragmatic way to get ahead.

Paulina Cachero and Claire Ballentine Bloomberg
Date Posted:

45% of Americans (23mm) aged 18-29 are living with their families, the highest rate since the 1940s.

Do Americans still stigmatize young adults living with their parents?

Core argument: About 23 million Americans ages 18–29, or 45%, live with family, roughly the same share as in the 1940s, when women often stayed home until marriage and men lingered on family farms after the Great Depression.

Almost 90% of surveyed Americans say people shouldn’t be judged for moving back home, according to Harris Poll in an exclusive survey for Bloomberg News. It’s seen as a pragmatic way to get ahead, the survey of 4,106 adults in August showed. Covid-19 lockdowns in 2020 drove the share of young adults living with parents or grandparents to nearly 50%, a record high. These days, about 23 million, or 45%, of all Americans ages 18 to 29 are living with family, roughly the same level as the 1940s, a time when women were more likely to remain at home until marriage and men too were lingering on family farms in the aftermath of the Great Depression.

Takeaways by Macro Roundup® AI

  1. About 23 million Americans ages 18–29, or 45%, live with family, roughly the same share as in the 1940s, when women often stayed home until marriage and men lingered on family farms after the Great Depression.
  2. Almost 90% of Americans surveyed say people shouldn't be judged for moving back home, with the arrangement seen as a pragmatic way to get ahead, according to a Harris Poll survey of 4,106 adults in August for Bloomberg News.
  3. Covid-19 lockdowns in 2020 drove the share of young adults living with parents or grandparents to nearly 50%, a record high.

Related Articles:

  • Millions of US Millennials Moved in With Their Parents This Year — A survey of 1,200 people found about one in four millennials—roughly 18m people aged 26 to 41—living with their parents, with more than half of those having moved back in within the past year. Rising rental costs were the most common reason given, and about 15% of millennial renters report spending more than half their after-tax income on rent.
  • Young Adults in the U.S. Are Reaching Key Life Milestones Later Than in the Past — Pew Research Center analysis of Census Bureau data finds 21-year-olds in the US are less likely than their counterparts four decades earlier to have a full-time job, be financially independent, live on their own, be married, or have a child. Among 21-year-olds, 39% worked full time versus 64% four decades earlier, and a quarter were financially independent versus 42%.
  • Americans’ Ideal Family Size Is Larger Than the Birthrate Suggests — The share of Americans saying the ideal family has three or more children rose to 44% from about one-third in the mid-1990s, while the share favoring two children fell to 51.7% from 62%, according to the University of Chicago's General Social Survey. This rise in stated ideal family size came as the actual number of births declined.

AI Summary. Democrats have won U.S. special elections by margins averaging 11 points better than their districts' underlying partisanship, across a wide range of districts. Lower-turnout special elections draw a more college-educated electorate that has shifted Democratic, but that realignment does not fully explain the size of the overperformance.

Nathaniel Rakich ABC News
Date Posted:

Democrats have been outperforming in special elections in 2023; their margins have been 11pp higher than the district’s partisan margins in the last two presidential elections. @baseballot

Does electorate composition explain Democrats' special-election overperformance?

Core argument: Democrats have won special elections this year by margins averaging 11 points higher than the weighted relative partisanship of their districts, with overperformances of that magnitude across all kinds of districts.

Democrats have been posting special-election overperformances of that magnitude all year long, in all kinds of districts. And on average, they have won by margins 11 points higher than the weighted relative partisanship of their districts. The types of people who vote in low-turnout special elections tend to be different from the types of people who vote in regularly scheduled elections: Lower turnout generally means a more college-educated electorate, and college graduates have gotten more Democratic in recent years. That could be why special-election overperformance has consistently been a couple of points more Democratic than the House popular vote over the past three cycles. However, college graduates were disproportionately Democratic in 2020 and 2022 too, and Democrats didn’t consistently do this well in special elections in those cycles. So something seems to be different this time that the education realignment doesn’t fully explain.

Takeaways by Macro Roundup® AI

  1. Democrats have won special elections this year by margins averaging 11 points higher than the weighted relative partisanship of their districts, with overperformances of that magnitude across all kinds of districts.
  2. Lower-turnout special elections generally draw a more college-educated electorate, and college graduates have become more Democratic in recent years, which could explain why special-election overperformance has run a couple of points more Democratic than the House popular vote over the past three cycles.
  3. College graduates were also disproportionately Democratic in 2020 and 2022, yet Democrats did not consistently perform this well in those cycles' special elections, so the education realignment does not fully explain the current pattern.

Related Articles:

  • Is a Trump-Biden Rematch Inevitable? — The author estimates an 80–85% chance the incumbent Democratic president wins his party's nomination and a 75% chance Donald Trump wins the Republican nomination. Trump's 25% risk is attributed to a 10% chance of a conventional primary defeat, a 5% chance of a health-related exit, and a 10% chance legal jeopardy ends his bid.
  • Trump’s Electoral College Edge Seems to Be Fading — Polling suggests the demographic basis of the Republican candidate's Electoral College advantage may be eroding, with relative Democratic resilience among white voters and Republican strength among nonwhite voters. Because nonwhite voters are underrepresented in the most critical battleground states, such gains would tend to boost the national vote more than the battlegrounds.
  • How to Interpret Polling Showing Biden’s Loss of Nonwhite Support — Since 1980, the gap between white and Black voter turnout has been related to the share of Black registered voters backing Democrats in pre-election polls, meaning Black voters who don't support Democrats tend not to vote. Polls showing weaker Democratic support among Black voters may therefore signal a smaller Black share of the electorate.

AI Summary. U.S. patent ownership has grown more concentrated over recent decades, a pattern that can affect how innovation spreads, alongside a rise in patent litigation. Annual litigation cases per 100 granted patents rose from about 1.2 in the early 1990s to roughly 1.5 in 1995–2010 and above 1.8 in 2010–2015.

Ufuk Akcigit, Sina Ates and Craig Chikis Economic Innovation Group
Date Posted:

A new paper documents weaker technological diffusion in the economy and relates that to higher concentration of patents and a rise in patent litigation, factors that benefit incumbents and harm new entrants. @ProfUfukAkcigit @UChi_Economics

Has U.S. patent ownership grown more concentrated alongside rising patent litigation?

Core argument: U.S. patent litigation cases filed per 100 granted patents rose from about 1.2 in the early 1990s to roughly 1.5 between 1995 and 2010, then above 1.8 between 2010 and 2015, receding only marginally since.

Patent concentration, which can affect diffusion, has risen over the past several decades with a concurrent surge in patent litigation cases. In the post-1980 period, a parallel trend concerning patents in the U.S. has been the dramatic increase in the number of patent cases filed, which some authors have dubbed the “patent litigation explosion.” The annual number of litigation cases filed per 100 granted patents rises from about 1.2 in the early 1990s to an average of about 1.5 between 1995 and 2010, before rising again to more than 1.8 between 2010 and 2015 and only receding marginally since then.

Takeaways by Macro Roundup® AI

  1. U.S. patent litigation cases filed per 100 granted patents rose from about 1.2 in the early 1990s to roughly 1.5 between 1995 and 2010, then above 1.8 between 2010 and 2015, receding only marginally since.
  2. Patent concentration in the U.S. has risen over the past several decades alongside a surge in patent litigation, a post-1980 trend some authors have dubbed the "patent litigation explosion.".
  3. Rising patent concentration can affect the diffusion of innovation.

Related Articles:

Friday, September 22, 2023

AI Summary. Stabilizing US federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over three decades, assuming no new spending, tax cuts, or crises. Taxing the rich cannot close more than a small fraction of this gap.

Brian Riedl Manhattan Institute
Date Posted:
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Stabilizing US federal debt at 100% of GDP will require increased tax revenue and non-interest spending cuts of 5% of GDP going forward. @Brian_Riedl suggests that increasing tax rates on the rich could yield at most 2% of GDP and likely less.

Can taxing the rich close the gap needed to stabilize federal debt?

Core argument: Stabilizing federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over the next three decades, with interest savings from a smaller debt supplying the rest.

Stabilizing the federal debt at 100% of GDP over the long term—which would far exceed the post-1960 average of 45% of GDP—would require non-interest savings beginning at 2% of GDP and ramping up to 5% of GDP over the next three decades. (The resulting interest savings from a smaller debt would provide the rest of the savings.) These figures assume the renewal of the 2017 tax cuts (as there is strong bipartisan support for extending the tax cuts for the bottom-earning 98% of earners) but do not assume any additional spending expansions, tax cuts, or economic crises—all of which would also have to be fully offset to meet this debt target. In short, the non-interest savings required to stabilize the debt will almost surely rise past 5% of GDP when accounting for additional spending and tax-cut legislation. Taxing the rich cannot close more than a small fraction of this gap.

Takeaways by Macro Roundup® AI

  1. Stabilizing federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over the next three decades, with interest savings from a smaller debt supplying the rest.
  2. The 100% of GDP debt target would far exceed the post-1960 average of 45% of GDP, and its savings estimates assume renewal of the 2017 tax cuts but no additional spending expansions, tax cuts, or economic crises.
  3. Required non-interest savings will almost surely rise past 5% of GDP once additional spending and tax-cut legislation are accounted for, and taxing the rich cannot close more than a small fraction of that gap.

Related Articles:

  • Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy — The authors estimate that US billionaires move to states without estate taxes as they age, with $80.7bn of Forbes 400 wealth escaping estate taxation as a result. They find that for the average state the added estate tax revenue exceeds forgone income tax revenue by 31%, with California a notable exception.
  • American Gothic — US tax increases since 1950 of 2% of GDP or more occurred when overall tax receipts were a much smaller share of GDP than today. Restoring the ratio of entitlement to non-defense discretionary spending to its earlier level of 2.2x would require tax increases larger than those historical precedents.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. The US 10-year Treasury yield rose above 4.5% for the first time since 2007, and the 30-year yield reached its highest level since 2011, amid concern that bonds face a combination of large US federal deficits and persistent inflation. Pershing Square Capital Management is short bonds, arguing 5.5% is an appropriate yield for 30-year Treasuries.

Garfield Reynolds and Ruth Carson Bloomberg
Date Posted:

The 10-year Treasury yield went above 4.5% for the first time since 2007. The 30-year yield is at the highest level since 2011.

Are large deficits and persistent inflation pushing long-term Treasury yields higher?

Core argument: The US 10-year Treasury yield rose above 4.5% for the first time since 2007 after a more hawkish Federal Reserve added to concern that bonds face large US fiscal deficits and persistent inflation.

Treasury 10-year yields rose above 4.5% for the first time since 2007 as a more hawkish Federal Reserve adds to concern the bonds face a toxic mix of large US fiscal deficits and persistent inflation. Bill Ackman of Pershing Square Capital Management says he remains short bonds because he expects long-term rates to rise further. “The long-term inflation rate plus the real rate of interest plus term premium suggests that 5.5% is an appropriate yield for 30-year Treasurys.” The yield on 30-year debt climbed as much as one basis point Friday to 4.59%, adding to the 13 basis-point jump on Thursday that took it to the highest since 2011.

Takeaways by Macro Roundup® AI

  1. The US 10-year Treasury yield rose above 4.5% for the first time since 2007 after a more hawkish Federal Reserve added to concern that bonds face large US fiscal deficits and persistent inflation.
  2. The 30-year Treasury yield climbed as much as one basis point Friday to 4.59%, following Thursday's 13 basis-point jump that took it to its highest level since 2011.
  3. Bill Ackman of Pershing Square Capital Management remains short bonds, expecting long-term rates to rise further, and argues that long-term inflation, the real rate of interest and term premium suggest 5.5% is an appropriate 30-year Treasury yield.

Related Articles:

  • 31% of All US Government Debt Outstanding Matures within 12 Months — 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.
  • 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.
  • 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. In a world of 2% real growth, 2% inflation, and healthy private sector balance sheets, it is unclear why interest rates would need to fall much. Real yields on 5-year inflation-protected Treasury securities sit about 0.5pp above 5-year real yields five years forward, versus roughly 1pp below forward rates before the pandemic.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein notes that the spot 5-year yield on TIPS is at levels not seen since before the financial crisis. He suggests that if term premia revert to historical levels, there would be negative implications for all asset prices.

Do steady growth and healthy balance sheets keep interest rates elevated?

Core argument: Real yields on 5-year TIPS sit about 0.5 percentage point above 5-year real yields starting five years forward, a reversal of the roughly 1pp discount that prevailed from 2003 until the pandemic.

Even if wage growth did normalize, it is not clear why interest rates would need to fall much, if at all, in a world of 2% real growth, 2% inflation, and healthy private sector balance sheets. Real yields on 5-year Treasury inflation-protected securities (TIPS) are currently about 0.5 percentage point higher than 5-year real yields starting five years from now. But from 2003 until the pandemic, spot 5-year real rates were about 1pp lower than forward rates. (This includes the flat curve years of 2006-7 and 2018-2019, when the spread was more or less zero.) If further-forward real yields were poised to revert to this longer-term average, then that would have implications for a range of asset prices.

Takeaways by Macro Roundup® AI

  1. Real yields on 5-year TIPS sit about 0.5 percentage point above 5-year real yields starting five years forward, a reversal of the roughly 1pp discount that prevailed from 2003 until the pandemic.
  2. In a world of 2% real growth, 2% inflation, and healthy private sector balance sheets, it is not clear why interest rates would need to fall much, if at all, even if wage growth normalized.
  3. A reversion of further-forward real yields to their longer-term average would carry implications for a range of asset prices.

Related Articles:

  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.
  • 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.
  • BIS Quarterly Review — 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.

AI Summary. US households have purchased $1.5tn in Treasury securities since the Federal Reserve began raising interest rates, and US pension funds and insurers have also become buyers while the Federal Reserve has been a net seller. The pattern indicates households and long-term investors find current US yields attractive.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal notes that since the start of the hiking cycle, American households have bought $1.5 trillion in Treasuries.

Are households absorbing Treasuries as the central bank sells?

Core argument: US households have bought $1.5 trillion in Treasuries since the Federal Reserve began hiking rates.

Since the Fed started hiking rates last year, US households have bought $1.5 trillion in Treasuries, and over the past six months, US pension and insurance have also emerged as a buyer. Over the same period, the Fed has been doing QT and been a net seller of Treasuries. The bottom line is that US households and real money are finding current levels of US yields attractive.

Takeaways by Macro Roundup® AI

  1. US households have bought $1.5 trillion in Treasuries since the Federal Reserve began hiking rates.
  2. US pension funds and insurers have also emerged as Treasury buyers over the past six months.
  3. The Federal Reserve has been a net seller of Treasuries under quantitative tightening, while US households and real money find current US yield levels attractive.

Related Articles:

  • Demand for Treasuries — US households have been large buyers of US Treasury securities, while foreign demand has been more limited because of higher currency-hedging costs, with foreigners instead adding $3tn of equities during the pandemic. With a 5% budget deficit, the Federal Reserve shrinking its balance sheet, and the Treasury rebuilding its cash balance, attention will turn to who buys US government debt.
  • Trapped Liquidity — Changes in the financial system's underlying plumbing make it unlikely that the Federal Reserve's balance-sheet runoff can last its expected 2+ years, since an ideal runoff drains system-wide liquidity while keeping bank-sector liquidity above a minimum. Federal Reserve data show US households replaced money market funds as the marginal buyer of short-dated Treasuries, funding purchases from money held in banks.
  • 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.

AI Summary. Real interest rates have risen across the yield curve, and the flat real yield curve implies they are expected to stay near current levels of about 2%. Combined with inflation at the 2% target, that implies a long-run natural rate of 4–4.5%, above the highest estimate offered by any Federal Reserve policymaker.

Joseph Politano Apricitas Economics
Date Posted:

Real rates imply a long-run natural rate of between 4 and 4.5%, higher than the Fed’s projection. @JosephPolitano

Do market rates imply a higher long-run natural rate than policymakers expect?

Core argument: Real interest rates around 2% paired with inflation at the Fed's 2% target imply a long-run natural rate of 4–4.5%, after adjusting for the gap between CPI and PCE inflation measures.

Real interest rates have risen across the yield curve after stalling out between late 2022 and the first half of 2023. Importantly, the real yield curve remains relatively flat—implying that real interest rates are slated to remain at roughly their near-term levels for the foreseeable future. For real interest rates to stay around their current levels of about 2% and inflation to remain at the target of 2% would imply a long-run natural rate of between 4 and 4.5% (after accounting for the difference between CPI and the Fed’s preferred PCE inflation adjustments). Again, that is higher than even the highest estimate put forward by a FOMC participant yesterday.

Takeaways by Macro Roundup® AI

  1. Real interest rates around 2% paired with inflation at the Fed's 2% target imply a long-run natural rate of 4–4.5%, after adjusting for the gap between CPI and PCE inflation measures.
  2. The implied long-run natural rate of 4–4.5% exceeds even the highest estimate put forward by an FOMC participant.
  3. Real interest rates have risen across the yield curve after stalling between late 2022 and the first half of 2023, and the real yield curve remains relatively flat, implying real rates hold near current levels.

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.
  • 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.
  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.

AI Summary. Goldman Sachs analysis found average monthly growth in the US foreign-born labor force is about 65,000 higher than in 2022, with that labor force nearing 32m people. Foreign-born workers' share of the labor force reached a record 18% in 2022 and has averaged 18.5% this year.

Amara Omeokwe and Michelle Hackman Wall Street Journal
Date Posted:
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32mm foreign-born workers made up 18% of the American labor force last year, the highest level since the series was initially published in 1996.

Is the foreign-born share of the US labor force rising?

Core argument: Average monthly growth in the U.S. foreign-born labor force is running about 65,000 higher this year than in 2022 on a seasonally adjusted basis, according to a Goldman Sachs analysis.

This year, average monthly growth in the foreign-born labor force is about 65,000 higher compared with 2022 on a seasonally adjusted basis, a Goldman Sachs analysis found. After plunging at the start of the pandemic, the size of the foreign-born labor force has rebounded, nearing 32 million people in August. Foreign-born workers’ share of the labor force—those working or looking for work—reached 18% in 2022, the highest level on record going back to 1996, according to the Labor Department. It has climbed further this year to an average of 18.5% through August, not adjusted for seasonal variation.

Takeaways by Macro Roundup® AI

  1. Average monthly growth in the U.S. foreign-born labor force is running about 65,000 higher this year than in 2022 on a seasonally adjusted basis, according to a Goldman Sachs analysis.
  2. The foreign-born labor force neared 32 million people in August, rebounding after plunging at the start of the pandemic.
  3. Foreign-born workers' share of the U.S. labor force reached 18% in 2022, the highest on record back to 1996 per the Labor Department, and averaged 18.5% through August this year, unadjusted for seasonal variation.

Related Articles:

  • Immigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995 — U.S. labor force data show immigrants accounted for 49% of labor force growth over roughly the past three decades and their children another 21%, together about 70% of an increase of nearly 32.8m workers. Immigrants rose from about 10% to 18% of the labor force, and immigrants plus their children from 18% to 29%.
  • Immigration Playing a Key Role in the Labor Market — Immigration into the US labor market has added 4 million workers, returning the working-age immigrant population to its pre-pandemic trend. High immigration contributes to solid job growth, a higher participation rate, and limits upside pressure on wages, helping the Federal Reserve cool the labor market and slow inflation.
  • Immigration and U.S. Labor Market Tightness: Is There a Link? — The U.S. was missing an average of about 1.39m foreign workers relative to the pre-pandemic trend, a shortfall that has since recovered. Across industries and states, the authors find no statistically significant relationship between the number of missing foreign workers as a share of employment and changes in job vacancy rates.

AI Summary. Florida's average home insurance premium reached about $6,000, over 3x the national average and up 42% year-on-year, yet insurers are exiting, leaving the state-backed insurer of last resort with the largest market share and $608bn of insured assets. In California, consumer-protection rules prevent premiums from covering rising wildfire and reinsurance costs.

Economist Staff The Economist
Date Posted:

In Florida, the state-backed insurer of last resort is now the largest home insurer. California’s state-backed insurer almost doubled its policy count between 2018 and 2021.

Are private insurers withdrawing from high-risk housing markets despite rising premiums?

Core argument: Florida's average home insurance premium reached roughly $6,000 in 2023, more than three times the national average and up 42% year-on-year, yet insurers are leaving the state rather than expanding.

In Florida the average home insurance premium in 2023 is around $6,000, more than three times the national average and up 42% year-on-year. Yet rather than drooling over juicy profits, insurers are fleeing. With 1.3m policies, the state-backed insurer of last resort now has the highest market share in Florida and is insuring assets worth $608bn. The Golden State is following the Sunshine State into market failure, but for different reasons. Though California is a pricey place to live, property insurance is relatively cheap thanks to strict consumer-protection laws. Regulations prevent insurers from raising premiums high enough to cover inflation, increasing wildfire risk and rising reinsurance rates.

Takeaways by Macro Roundup® AI

  1. Florida's average home insurance premium reached roughly $6,000 in 2023, more than three times the national average and up 42% year-on-year, yet insurers are leaving the state rather than expanding.
  2. Florida's state-backed insurer of last resort holds the highest market share in the state, with 1.3m policies covering assets worth $608bn.
  3. California property insurance remains relatively cheap under strict consumer-protection laws, with regulations preventing insurers from raising premiums enough to cover inflation, increasing wildfire risk and rising reinsurance rates.

Related Articles:

  • Analyzing State Resilience to Weather and Climate Disasters — The real annual cost of U.S. weather and climate disasters has risen from about $20bn per year in the 1980s to nearly $95bn per year in 2010–19, reaching roughly $153bn in one year. Property insurers absorbed 48% of these costs, uninsured or underinsured homeowners, businesses and farms 37%, the federal government 11%, and state and local governments 4%.
  • How a Small Group of Firms Changed the Math for Insuring Against Natural Disasters — Reinsurance prices rose as much as 40% year over year, according to a report by brokerage Gallagher Re, prompting insurers to change where and what they cover. State Farm and Allstate cited reinsurance market conditions and costs in curtailing some California business, and agricultural reinsurers announced exits from Iowa.
  • Rising Insurance Costs Start to Hit Home Sales — A survey of house builders found that 31% in Florida and 29% in Southern California said buyers' home insurance concerns were somewhat slowing sales, versus 9% nationally. Researchers estimate that pricing in flood risk would reduce U.S. residential property values by at least $121bn, including over $50bn of overvaluation in Florida flood zones.