Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…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 offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, October 6, 2023

AI Summary. The US economy added 336K jobs with labor force participation remaining high and average job gains of 266K over the prior three months, well above the pace needed to absorb population growth. Nominal wage growth moderated for a second consecutive month, with a 3-month annualized rate of 3.4% that the author argues is consistent with inflation in the 2–3% range.

Jason Furman @jasonfurman
Date Posted:

.@jasonfurman was shocked by news of 336,000 jobs created in August, but noted that average hourly earnings are consistent with inflation “in the 2-3% range.”

Can strong job growth coexist with wage growth consistent with 2–3% inflation?

Core argument: The U.S. economy added 336K jobs, with three-month average job growth of 266K, which Jason Furman notes is well above replacement and above the pace earlier in the year, despite widespread expectations of moderation.

336K jobs, participation remains high, wage growth moderated further. We could be in the middle of a sustainable increase in labor supply. Just about everyone expected job growth to moderate. Moreover, we had had a series of downward revisions and good reason to expect more. But instead, we have 266k jobs on average over the last three months. Way above replacement and what was happening earlier this year. The market is pricing in a higher chance of future hikes. But frankly, I wouldn't. This is the second month in a row of lower nominal wage growth. Doesn't make it a new trend but still the 3-month annualized growth rate is 3.4%, fully consistent with inflation in the 2-3% range.

Takeaways by Macro Roundup® AI

  1. The U.S. economy added 336K jobs, with three-month average job growth of 266K, which Jason Furman notes is well above replacement and above the pace earlier in the year, despite widespread expectations of moderation.
  2. Furman points to continued high labor force participation in suggesting the U.S. could be in the middle of a sustainable increase in labor supply.
  3. Nominal wage growth moderated for a second consecutive month, with the 3-month annualized rate at 3.4%, which Furman calls fully consistent with inflation in the 2–3% range, and he would not price in higher odds of future hikes as the market has.

AI Summary. States that ended expanded pandemic unemployment benefits early saw the flow of unemployed workers into employment rise by roughly 12-14 percentage points and unemployment rates fall, according to difference-in-difference estimates. The authors also find early termination reduced the share of households reporting no difficulty meeting expenses, leaving welfare implications ambiguous.

Michael Strain, Glenn Hubbard, and Harry Holzer American Enterprise Institute
Date Posted:

.@MichaelRStrain Glenn Hubbard and @HolzerHarry find that in states that terminated pandemic-era UI benefits early, the flow of unemployed workers into employment increased by around 12-14pp following early termination. @AEIecon

Did ending expanded unemployment benefits early raise employment?

Core argument: Difference-in-difference estimates using CPS data indicate that the flow of unemployed workers into employment rose by roughly 12–14 percentage points in states that terminated pandemic UI benefits (FPUC and PUA) early in 2021, relative to states that did not.

We provide estimates of the impacts of the early termination of pandemic-era UI benefits in several states in 2021 that had expanded their generosity (FPUC) and the groups of workers eligible for benefits (PUA), relative to those that did not terminate those benefits early. Using CPS data, we present difference-in-difference estimates that the flow of unemployed workers into employment increased by around 12-14pp following early termination. Among prime-age workers, the effect is about two-thirds the size of the unemployed-to-employed flow among control states during the February–June 2021 period. We show that state-level unemployment rates fell following early exit from FPUC and PUA. Finally, we present evidence that early termination reduced the share of households that had no difficulty meeting expenses. The welfare implications of the early termination of FPUC and PUA are therefore ambiguous.

Takeaways by Macro Roundup® AI

  1. Difference-in-difference estimates using CPS data indicate that the flow of unemployed workers into employment rose by roughly 12–14 percentage points in states that terminated pandemic UI benefits (FPUC and PUA) early in 2021, relative to states that did not.
  2. Among prime-age workers, the estimated effect is about two-thirds the size of the unemployed-to-employed flow in control states over February–June 2021, and state unemployment rates fell following early exit from FPUC and PUA.
  3. Evidence indicates that early termination of FPUC and PUA reduced the share of households reporting no difficulty meeting expenses, leaving the welfare implications of ending the benefits ambiguous.

Related Articles:

  • Unemployment Is Low, Welfare High. What Gives? — Welfare enrollment continued growing even as unemployment fell from a 14.7% peak to 3.7%, with food-stamp recipients up 1.4m and Medicaid recipients up 18.5m. One major reason is that eligibility rules excluded over $1tn in pandemic stimulus checks, expanded child tax credits, and enhanced unemployment benefits from counting as income.
  • Calomiris on Gramm Ekelund and Early on Income Distribution — Transfer benefits phase out so quickly that the effective marginal tax rate in the lowest three income quintiles approaches 100%, meaning an extra dollar earned can cost roughly a dollar of benefits. Hours worked in the lower quintiles have plummeted, though the authors stop short of asserting a causal link.

AI Summary. The federal government is 43% larger than four years earlier, and more than a third of the surge in investment spending traces to government subsidies, credits, and handouts. The author argues the supply of Treasury securities needed to fund deficits will be substantially larger than official estimates, pushing buyers to demand higher yields.

Kevin Warsh Wall Street Journal
Date Posted:

Noting the federal government has grown 43% over the past four years, Kevin Warsh forecasts higher Treasury yields until the business cycle turns.

Noting the federal government has grown 43% over the past four years, Kevin Warsh forecasts higher Treasury yields until the...

Will rising Treasury supply force bond buyers to demand higher yields?

Core argument: The U.S. federal government is 43% larger than it was four years ago, and its reach is expanding.

The U.S. is courting trouble. The federal government is 43% larger than it was four years ago, and its reach is expanding mightily. More than a third of the surge in investment spending can be traced to government subsidies, credits, and handouts. The coming supply of Treasury securities required to fund U.S. government deficits will likely be substantially larger than official estimates. And purchasers of Treasury debt will demand higher yields, at least until something breaks in the economy.

Takeaways by Macro Roundup® AI

  1. The U.S. federal government is 43% larger than it was four years ago, and its reach is expanding.
  2. More than a third of the surge in U.S. investment spending traces to government subsidies, credits, and handouts.
  3. The supply of Treasury securities needed to fund U.S. deficits will likely be substantially larger than official estimates, and purchasers of Treasury debt will demand higher yields, at least until something breaks in the economy.

Related Articles:

  • Maxing Out — Hedge funds became a major buyer of US Treasuries after the Federal Reserve and commercial banks stepped back, financing those purchases through dealer repurchase agreements that grew rapidly and then stalled. If these leveraged buyers are hitting financing limits set by dealer balance sheet costs, a new marginal buyer must emerge to absorb upcoming issuance.
  • 23% Increase in Treasury Auction Sizes in 2024 — US Treasury auction sizes are projected to rise an average of 23% across maturities under the Treasury Borrowing Advisory Committee's neutral issuance scenario, including 37% for 3-year notes and 28% for 5-year notes. The analysis argues this growth in government debt supply pulls investor dollars away from other fixed-income assets such as investment grade credit.
  • The Real Stakes of the Debt-Ceiling Fight — Average inflation-adjusted transfer payments to the lowest-income 20% of US households have grown from $9,677 to $45,389, while the share of prime working-age adults in that group who worked fell from 68% to 36%. Congressional Budget Office estimates put discretionary spending 10% higher in real terms than pre-pandemic projections, with nondefense outlays up 18.8% and defense down 0.28%.

AI Summary. Interest is the fastest-growing part of the federal budget, and at current rates it is projected to exceed defense spending and the net cost of Medicare within a few years and reach a record share of the economy. Projections put interest costs above $13tn over a decade, or $1.9tn annually.

CFRB Staff Committee For A Responsible Federal Budget
Date Posted:

According to a @BudgetHawks analysis, if long-term interest rates remain at their current level, interest will be the second-largest expense by 2026.

Will interest costs soon exceed defense and Medicare spending?

Core argument: Assuming interest rates remain near record highs and absent corrective action, federal interest costs would total more than $13 trillion over the next decade and reach $1.9 trillion per year by 2033.

Interest was already the fastest-growing part of the budget. Assuming these higher rates, interest costs would exceed defense spending by 2025 and exceed the net cost of Medicare by 2026. Under this scenario, interest would reach a record share of the economy within three years, at which point it would become the second-largest federal program. Although most of our national debt was issued when interest rates were low, that debt is quickly rolling over into a high-rate debt environment, and further borrowing continues. Without corrective action, interest costs could total more than $13 trillion over the next decade and $1.9 trillion per year by 2033.

Takeaways by Macro Roundup® AI

  1. Assuming interest rates remain near record highs and absent corrective action, federal interest costs would total more than $13 trillion over the next decade and reach $1.9 trillion per year by 2033.
  2. Under this rate scenario, interest costs would exceed defense spending by 2025 and the net cost of Medicare by 2026, reaching a record share of the economy within three years and becoming the second-largest federal program.
  3. Most U.S. national debt was issued when interest rates were low but is rolling over into a high-rate environment while further borrowing continues, with interest already the fastest-growing part of the budget.

Related Articles:

  • Increase in Treasury Auction Sizes in 2024 — US Treasury auction sizes are projected to rise an average of 23% across maturities under the Treasury Borrowing Advisory Committee's neutral issuance scenario, including 37% for 3-year notes and 28% for 5-year notes. The analysis argues this growth in government debt supply pulls investor dollars away from other fixed-income assets such as investment grade credit.
  • Interest Expense: A Bigger Impact on Deficits than Debt — The US is running a primary deficit—excluding interest costs—much larger than its historical norm, at a point in the business cycle when deficits would normally be smaller than usual. The average interest rate on federal debt is projected to remain at or below the rate of nominal GDP growth over the next decade.
  • 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.

AI Summary. Domestic demand for major US crops and livestock is projected to grow 2–10% over the next decade, with rising meat consumption—requiring over 4x the acreage of a vegetarian diet—adding pressure on feed crops. With global population projected to rise by about 2bn by 2050, agriculture must produce more food in 30–40 years than in the past 8,000.

Taylor Bowley and Vanessa Cook Bank of America
Date Posted:

Demand for American agricultural products is forecasted to grow between 2-10% over the next ten years according to @BankofAmerica. The sector currently exports 20% of production.

How much more food must agriculture produce as demand grows?

Core argument: Domestic demand for major US crops and livestock is expected to grow 2–10% over the next decade, with rising meat consumption — requiring more than 4x the acreage of a vegetarian diet — adding pressure on feed crops.

Domestic demand for the US’ major crops and livestock is expected to grow between 2-10% over the next decade. Increasing consumption of meat, which requires >4x more acreage than a vegetarian diet, will further increase the demand pressure on feed crops. The US agricultural sector exports more than 20% of the value of its production, meaning that the sector will be impacted by the growing global population and increased demand for diversified diets and protein. The global population, which is expected to grow by an additional ~2 billion people by 2050 will require the global agriculture industry to produce more food in the next 3-4 decades than was produced in the last 8,000 years.

Takeaways by Macro Roundup® AI

  1. Domestic demand for major US crops and livestock is expected to grow 2–10% over the next decade, with rising meat consumption — requiring more than 4x the acreage of a vegetarian diet — adding pressure on feed crops.
  2. The US agricultural sector exports more than 20% of the value of its production, tying it to global population growth and increased demand for diversified diets and protein.
  3. The global population is expected to grow by roughly 2 billion people by 2050, requiring global agriculture to produce more food in the next 3–4 decades than was produced in the last 8,000 years.

Related Articles:

AI Summary. US states with the largest increases in the income share of the top 10% of earners also tended to see the largest declines in small-firm job creation relative to large firms; the authors estimate a 10pp rise in the top 10% share is associated with a 1.6pp lower net job creation rate at small firms.

Donggyu Lee, Thomas Drechsel, and Sebastian Doerr Federal Reserve Bank of New York
Date Posted:

The increase in income inequality is associated with a decline in the employment share of small firms. @NewYorkFed

Does rising income inequality reduce job creation at small firms?

Core argument: The authors estimate that a 10pp increase in the top 10% income share is associated with a 1.6pp decline in the net job creation rate of small firms relative to large firms.

In 1980, the average income share of earners in the top 10% was around 30%. However, by 2015, it had surpassed 45%. The employment share of small firms has also declined, with a decrease of approximately 5pp over the same period. We use variation across states to show a correlation between these two developments, with states having the greatest increase in the upper-income share also tending to be those with the biggest job creation declines in small firms compared to large firms. One explanation for this correlation is that the increase in the income share of the highest income earners reduced deposits in small and medium-sized banks from what they otherwise would have been. In doing so, this shift in income reduced the available credit for small firms, putting them at a disadvantage relative to large firms. A 10pp increase in the top 10% income share results in a decline of 1.6pp in the net job creation rate of small firms compared to large firms.

Takeaways by Macro Roundup® AI

  1. The authors estimate that a 10pp increase in the top 10% income share is associated with a 1.6pp decline in the net job creation rate of small firms relative to large firms.
  2. The average income share of the top 10% of earners rose from about 30% in 1980 to above 45% in 2015, while the employment share of small firms fell roughly 5pp over the same period.
  3. The authors offer as one explanation that the shift of income toward top earners reduced deposits at small and medium-sized banks, curtailing credit available to small firms relative to large firms.

Monday, October 9, 2023

AI Summary. Gallup survey data across 73 countries finds an average of 20% of workers thriving and engaged, 15% actively disengaged, and the remaining 65% disengaged but still employed. Among large economies, the US and India had the highest shares of thriving workers at roughly one-third, while Italy and Japan had the lowest at 5%.

Economist Staff The Economist
Date Posted:

Almost 35% of Americans are engaged at work relative to just 5% of Japanese, 7% of French workers, 10% of Britons, and 17% of Germans.

How many workers worldwide are actually engaged at work?

Core argument: Gallup's data across 73 countries show an average of 20% of workers thriving and 15% loud quitting, leaving 65% quietly dragging their feet.

Gallup suggests that remarkably few people, just about anywhere, are happily engaged with their work. The average of the 73 countries in our filtered version showed that 20% were thriving and 15% were loud quitters. The remaining 65% were quietly dragging their feet. Among big economies, America and India had the highest share of thrivers, though that was only around one-third. In Italy and Japan just 5% were thriving, the lowest shares in the sample.

Takeaways by Macro Roundup® AI

  1. Gallup's data across 73 countries show an average of 20% of workers thriving and 15% loud quitting, leaving 65% quietly dragging their feet.
  2. Among large economies, the United States and India had the highest shares of thriving workers in Gallup's sample, at around one-third.
  3. Italy and Japan recorded the lowest shares of thriving workers in Gallup's 73-country sample, at 5% each.

Related Articles:

AI Summary. Analysts estimate that tighter financial conditions from higher interest rates imply a roughly ½ percentage point drag on GDP growth over the following year — meaningful but not enough to threaten recession. They also estimate that if the equity risk premium fell to its historical median, growth would take a 1 percentage point hit.

David Mericle and David Mericle Goldman Sachs
Date Posted:

A @GoldmanSachs analysis argues that, if equity valuations were to fall towards historical norms, there would be a large hit to GDP growth.

How much do higher interest rates drag on growth?

Core argument: Goldman Sachs' financial conditions index growth impulse model implies a roughly -0.5pp hit to GDP growth over the next year, meaningful but much less than last year and too little to threaten recession.

The main implication of the further tightening in financial conditions led by rising rates is that the drag on GDP growth will last longer. Our financial conditions index (FCI) growth impulse model now implies a roughly -½pp hit to growth over the next year, meaningful but much less than last year and too little to threaten recession. In financial markets, the key risk is that valuation measures that are benchmarked to interest rates are now higher for some assets, most importantly stocks. We estimate that if the equity risk premium fell to its 50th historical percentile, the hit to GDP growth over the following year would be 1pp. If it fell to its average level in the pre-GFC years, the hit would be 0.75pp.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs' financial conditions index growth impulse model implies a roughly -0.5pp hit to GDP growth over the next year, meaningful but much less than last year and too little to threaten recession.
  2. The main implication of the further tightening in financial conditions led by rising rates is that the drag on GDP growth will last longer.
  3. If the equity risk premium fell to its 50th historical percentile, the estimated hit to GDP growth over the following year would be 1pp, and 0.75pp if it fell to its average level in the pre-GFC years.

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. Real interest rates have risen by almost 10 percentage points, compared with 4 points during the 2004–2006 tightening, yet activity has held up because households entered the episode with large savings accumulated during the pandemic. As those surplus savings are used up and borrowers refinance at higher rates, the full impact of tightening has not yet been felt.

Jesper Rangvid Rangvid's Blog
Date Posted:

Jesper Rangvid argues the hiking cycle hasn’t catalyzed a recession yet due to the accumulation of savings, but notes that “surplus savings will soon be used up.”

Have pandemic savings delayed the full impact of higher interest rates?

Core argument: Real interest rates have risen by almost 10 percentage points in this tightening episode, compared with a rise of "only" 4 percentage points during the 2004–2006 episode.

Real interest rates have risen even more than nominal. Real interest rates have risen by almost 10pp. In comparison, real interest rates rose by “only” 4pp during the 2004-2006 episode. The main reason that economic activity has held up so well is that households entered this tightening episode with large savings that they had accumulated during the pandemic. Therefore, the pandemic caused both inflation and the flare-up in interest rates and led to this amazingly resilient economy. However, surplus savings will soon be used up, and at some point people will have to take out new mortgages at higher interest rates. Moreover, central banks have continued to raise interest rates in 2023 and will keep them high for longer. All this means that the full impact of this tightening episode has not yet been felt.

Takeaways by Macro Roundup® AI

  1. Real interest rates have risen by almost 10 percentage points in this tightening episode, compared with a rise of "only" 4 percentage points during the 2004–2006 episode.
  2. The main reason economic activity has held up so well is that households entered this tightening episode with large savings accumulated during the pandemic, which caused both inflation and the flare-up in interest rates.
  3. Surplus savings will soon be used up, borrowers will eventually have to take out new mortgages at higher rates, and central banks will keep rates high for longer, so the full impact of tightening has not yet been felt.

Related Articles:

  • Soft Landing Summer — The estimated 12-month US recession probability has been cut to 15%, matching the postwar unconditional average implied by a recession occurring roughly once every seven years, and far below the 60% Bloomberg consensus. The authors expect interest rates to fluctuate in a higher range than in the post-2008 period.
  • Excess No More? Dwindling Pandemic Savings — Research on U.S. household savings after the pandemic recession points to rapid accumulation and then drawdown of excess savings, with cumulative drawdowns exceeding $1.9tn and less than $190bn of excess savings remaining in the aggregate economy. The authors estimate that if recent drawdown rates persist, aggregate excess savings would be depleted.
  • The Trickling Up of Excess Savings — The authors argue that excess savings created by debt-financed government transfers do not disappear as households spend them down; instead they "trickle up" to wealthier households with lower propensities to spend, so the boost to aggregate demand fades only slowly. Their benchmark estimate puts this at roughly 5 years rather than a few quarters.

AI Summary. Market pricing repeatedly resisted the Federal Reserve's "higher for longer" path, betting on low terminal rates and aggressive cuts, which eased financial conditions and made further rate hikes more likely. Pricing now aligns with Federal Reserve guidance for one more hike, while rising long-dated yields and a stronger dollar raise the prospect of overly tight financial conditions.

Joseph Wang Fed Guy Blog
Date Posted:

.@FedGuy12 argues that the hiking cycle may be done, as recent market moves such as the move up in long rates and a strengthening dollar have tightened financial conditions, negating the need for further Fed hikes.

Does market pushback against central bank guidance make rate hikes more likely?

Core argument: Market pricing over the past two years has persistently resisted the Federal Reserve's "higher for longer" path, pricing relatively low terminal rates and aggressive rate cuts, which eased financial conditions and in effect stimulated the economy, paradoxically making further rate hikes more likely.

Market pricing over the past two years has persistently pushed back against the Fed’s “higher for longer” path and stubbornly priced both relatively low terminal rates and aggressive rate cuts. This paradoxically made rate hikes even more likely by easing financial conditions and in effect stimulating the economy. Market pricing is now largely in line with the September dot-plot, which guides towards one additional hike even as recent data has been very encouraging. The rise in longer dated yields and strengthening dollar do not appear to have been anticipated by Fed officials and raise the prospect of financial conditions becoming too tight.

Takeaways by Macro Roundup® AI

  1. Market pricing over the past two years has persistently resisted the Federal Reserve's "higher for longer" path, pricing relatively low terminal rates and aggressive rate cuts, which eased financial conditions and in effect stimulated the economy, paradoxically making further rate hikes more likely.
  2. Market pricing is now largely aligned with the Fed's September dot-plot, which guides toward one additional hike even as recent data has been very encouraging.
  3. The rise in longer-dated yields and the strengthening dollar do not appear to have been anticipated by Fed officials and raise the prospect of financial conditions becoming too tight.

Related Articles:

  • Rate Cuts — The Federal Reserve might refrain from cutting interest rates if inflation does not fall enough, or if economic growth runs above potential, unemployment pushes below its 50-year low, and financial conditions ease further. In that case, policymakers could argue the short-run neutral rate is higher than common estimates, making current policy less restrictive than assumed.
  • The Case for “Higher for Longer”: Prices are Disinflating, But Not Wages (Yet) — Occupations with the fastest pay gains have seen wage growth normalize while pay growth elsewhere remains persistently faster, with only modest deceleration from the peak. The author argues the neutral policy rate has risen as an investment drought ends, making 5.5% short-term rates unremarkable and 4% 10-year Treasury yields potentially too low.
  • 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. The U.S. said it would build an additional stretch of wall on the Mexican border in the Rio Grande Valley, using funds Congress appropriated for wall construction, and begin deporting thousands of Venezuelans. Venezuelans are the second-largest nationality group crossing the southern border, after Mexicans.

Miriam Jordan, Eileen Sullivan and Zolan Kanno-Youngs New York Times
Date Posted:

The Biden administration will start deportations and has waived federal regulations in an effort to speed up border wall construction as illegal immigration into the United States surges. 200,000 people were arrested at the border in September.

Is the U.S. expanding the border wall and deporting Venezuelans?

Core argument: A record 50,000 Venezuelans crossed the U.S. southern border in a single month, and Venezuelans now represent the second-largest nationality group among crossers, behind Mexicans.

The Biden administration said it would expand former President Donald Trump’s wall on the Mexican border and begin deporting thousands of Venezuelans in an effort to cut down on the migrant surge that shows no signs of abating. Last month alone, 50,000 Venezuelans crossed the southern border, a record number, and they now represent the second largest nationality group, dwarfed only by Mexicans. The U.S. Border Patrol in the Rio Grande Valley, where the new stretch of the wall is to be built, had encountered more than 245,000 migrants who had entered the country between ports of entry, or unlawfully, in the 2023 fiscal year that ended Sept. 30, the notice said. It added that construction would be built with funds appropriated by Congress in 2019 for wall construction in the Rio Grande Valley.

Takeaways by Macro Roundup® AI

  1. A record 50,000 Venezuelans crossed the U.S. southern border in a single month, and Venezuelans now represent the second-largest nationality group among crossers, behind Mexicans.
  2. The Biden administration said it would expand former President Donald Trump's wall on the Mexican border and begin deporting thousands of Venezuelans to curb a migrant surge that shows no signs of abating.
  3. U.S. Border Patrol in the Rio Grande Valley, the site of the planned wall segment, encountered more than 245,000 migrants who entered between ports of entry or unlawfully in the 2023 fiscal year, with construction funded by 2019 congressional appropriations.

Related Articles:

  • Rebound in Immigration Comes to Economy’s Aid — 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.
  • U.S. Bound Migrants Surge at Darien Jungle Crossing in Panama — Panamanian immigration data show 49,291 migrants crossed the Darien Gap rainforest between Colombia and Panama en route to the U.S. over a two-month span, more than a fivefold increase from 8,964 in the same period a year earlier. Chinese nationals accounted for about 2,200 of those crossings, up from 71.
  • Immigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995 — U.S. labor force data show immigrants accounted for 49% of labor force growth over roughly the past three decades and their children another 21%, together about 70% of an increase of nearly 32.8m workers. Immigrants rose from about 10% to 18% of the labor force, and immigrants plus their children from 18% to 29%.

AI Summary. Exports from 15 of China's central and western provinces have risen 94% and now total $630bn over 12 months, exceeding India's $425bn, Mexico's $590bn, and Vietnam's $346bn. Over the same span, exports rose 41% from India, 43% from Mexico, and 56% from Vietnam.

Jason Douglas Wall Street Journal
Date Posted:

Exports from China’s western provinces are up 94% since 2018, reaching $630B in the year ending August, vs. India’s $425B, Mexico’s $590B, and Vietnam’s $346B.

Is China's manufacturing moving inland rather than to other countries?

Core argument: Exports from 15 of China's central and western provinces have risen 94% since the start of 2018, outpacing India's 41%, Mexico's 43%, and Vietnam's 56% over the same span, according to official figures compiled by CEIC.

Since the start of 2018, exports from 15 of China’s central and western provinces have rocketed 94%. In the 12 months through August, those provinces exported a combined $630 billion—more than India’s $425 billion, Mexico’s $590 billion, and Vietnam’s $346 billion over the same period, according to official figures compiled by data provider CEIC. Since the beginning of 2018, exports from India have risen 41%, exports from Mexico have risen 43%, and exports from Vietnam have increased 56%.

Takeaways by Macro Roundup® AI

  1. Exports from 15 of China's central and western provinces have risen 94% since the start of 2018, outpacing India's 41%, Mexico's 43%, and Vietnam's 56% over the same span, according to official figures compiled by CEIC.
  2. In the 12 months through August, China's 15 central and western provinces exported a combined $630 billion, exceeding Mexico's $590 billion, India's $425 billion, and Vietnam's $346 billion.

Related Articles:

  • How America Is Failing To Break Up With China — Research finds that countries with the strongest existing trade ties to China in a given industry have gained the most as direct Chinese exports to the US are redirected, suggesting Chinese supply chains remain central to American imports even in advanced-manufacturing goods officials most want to shield from China.
  • Mexico Seeks to Solidify Rank As Top U.S. Trade Partner, Push Further Past China — Mexico is the top U.S. trading partner, accounting for 15.4% of all U.S. goods trade versus 15.2% for Canada and 12.0% for China, with four-month bilateral trade of $263bn. Manufactured goods made up $234.2bn of that total, with $157bn of Mexican imports and $107bn of U.S. exports.
  • Global Supply Chains: The Looming “Great Reallocation” — Data point to a reallocation rather than deglobalization of US supply chains: direct US sourcing from China has declined while import shares from low-wage Vietnam and nearby Mexico have risen. China's import share in the EU, Mexico, and Vietnam has increased, and Chinese firms are expanding investment and production there.

AI Summary. Chinese individuals are normally permitted to wire only $50,000 a year overseas, and underground remittance networks fill the gap, with some private bankers passing contact information for such agencies to trusted clients. UBS estimated there were 6.2m Chinese with assets above $1m at the end of 2022.

Lulu Yilun Chen Bloomberg
Date Posted:

As Chinese have become more wealthy, they have increasingly sought to evade capital controls by moving money out of China through informal networks, often using Hong Kong as a conduit.

How do wealthy Chinese move money past strict capital controls?

Core argument: Chinese individuals are normally permitted to wire only $50,000 a year overseas, plus a one-time transfer when they emigrate, with underground remittance networks plugging the gap.

Opportunities to move cash legitimately from China are severely limited, with individuals normally allowed to wire only $50,000 a year overseas. They also have a one-time opportunity to move their money when they emigrate. Plugging the gap is where the underground networks come into play. Two other private bankers at different European banks say that while on the books they can’t help clients avoid capital controls, they do pass on contact information for underground remittance agencies for close and trusted customers. The explosion in wealth in China over the past decades means there’s plenty of potential demand. UBS Group AG, for example, estimated in its annual wealth report that there were 6.2 million Chinese with assets of more than $1 million at the end of 2022.

Takeaways by Macro Roundup® AI

  1. Chinese individuals are normally permitted to wire only $50,000 a year overseas, plus a one-time transfer when they emigrate, with underground remittance networks plugging the gap.
  2. UBS Group AG estimated in its annual wealth report that 6.2 million Chinese held assets of more than $1 million at the end of 2022, indicating substantial potential demand.
  3. Two private bankers at different European banks say that while on the books they cannot help clients avoid China's capital controls, they pass contact information for underground remittance agencies to close and trusted customers.

Related Articles:

  • China Notes, July ’23: On Technological Momentum — China's political environment poses a threat to its technological momentum, with Chinese undergraduates in the US reporting that their parents urge them not to return to the mainland. China retains strengths independent of slowing growth and demographic drags, chiefly an entrenched workforce that continues to advance manufacturing complexity.
  • Rich Chinese Eye Australia Homes as 700,000 to Leave by 2025 — A real estate firm estimates about 712,000 people will migrate from China to the US, Canada, and Australia over a three-year period, a sustained exodus likely to keep driving Chinese property purchases abroad. Capital flight from mainland China could reach $150bn in a year as people move money offshore.
  • Singapore Asks Banks to Keep Quiet on Wealth Inflows During China Boom — Singapore's central bank has asked major banks to minimize public discussion of the origins of large inflows of money into the city-state, much of it from wealthy Chinese, an issue that has become politically sensitive domestically. Lawyers and industry groups estimate Singapore hosts roughly 1,500 family offices, a large share of them Chinese.

AI Summary. China's headline goods trade surplus is about 5% of its GDP, with the underlying surplus in manufactured goods close to 10% of GDP. The author argues that if China relies on interest rate cuts, exchange rate liberalization, and a weak yuan to offset its property downturn, its trade surplus could reach record levels relative to trading partners' output.

Brad Setser Council on Foreign Relations
Date Posted:

Noting China’s trade surplus is already very large, @Brad_Setser worries that Chinese policymakers will seek to offset the property slump by doubling down on external balances.

Can China offset its property downturn without enlarging its trade surplus?

Core argument: China's headline goods trade surplus stands at about 5% of GDP, while the underlying surplus in manufactures is close to 10% of GDP.

China’s trade surplus is already very large. The headline goods surplus is about 5% of China's GDP, and the underlying surplus in manufacturers is close to 10% of GDP. I certainly worry that if China relied entirely on interest rate cuts, exchange rate liberalization, and a weak yuan to offset the property slump, China's external trade surplus could increase to record levels relative to the GDP of its trade partners. China, far more than other large economies, relied on net exports to sustain its economy during the pandemic. It would be placing a significant further burden on its trading partners if it ends up relying on an even bigger manufacturing surplus to offset the slack created by its property downturn over the next few years.

Takeaways by Macro Roundup® AI

  1. China's headline goods trade surplus stands at about 5% of GDP, while the underlying surplus in manufactures is close to 10% of GDP.
  2. If China offsets its property slump entirely through interest rate cuts, exchange rate liberalization, and a weak yuan, its external trade surplus could rise to record levels relative to trading partners' GDP.
  3. China relied on net exports to sustain its economy during the pandemic far more than other large economies, and relying on an even bigger manufacturing surplus to offset property-driven slack would place a significant further burden on its trading partners.

Related Articles:

  • Can China’s Long-Term Growth Rate Exceed 2–3 Percent? — China invests roughly 42–44% of its GDP, while more mature, capital-intensive economies typically invest about 15–20%. Modeling a ten-year path that lowers China's investment share to 30% of GDP, the author argues the resulting growth rate depends mainly on how fast consumption grows.
  • How China Can Avoid the Japan Trap — China's high savings, concentrated among controllers of capital, now exceed what can be productively invested, so income needs to shift toward those who will spend it. The risk is chronically weak demand rather than a financial crisis, since China is a creditor country whose debts are in its own currency.
  • 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.