Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, November 9, 2023

AI Summary. The Census Bureau projects the U.S. population will peak at almost 370m before declining to 366m by the end of the century, with annual growth falling from 1.2% in the 1990s to 0.5% and to a projected 0.2% by 2040. Under its most likely scenario, deaths would exceed births by 2038.

Paul Overberg and Rosie Ettenheim Wall Street Journal
Date Posted:

According to new Census Bureau projections, the US population will stop growing by 2080 at 370mm and start to shrink by 2100. Nigeria and Pakistan are expected to be more populous than the US around mid-century.

Is the U.S. population projected to shrink this century?

Core argument: The Census Bureau projects the U.S. population will peak at almost 370 million before ebbing to 366 million in the final years of the century, with annual growth falling from 1.2% in the 1990s to 0.5% today and 0.2% by 2040.

Slowing growth would produce a peak U.S. population of almost 370 million before an ebb to 366 million in the final years of the century, according to the bureau. The projections outline a nation growing slowly compared with recent decades. Annual growth rates have fallen from 1.2% in the 1990s to 0.5% today and would fall to 0.2% by 2040. Small differences add up through compounding: The projected U.S. population in 2040 is 355 million, 25 million fewer than projected for that date in 2015. The difference is more than the current population of Florida. In 2022, preliminary data showed the U.S. birthrate was about 19% lower than in 2007. Death rates remain about 9% higher than 2019, the last year before the pandemic. By 2038, deaths would exceed births under the most likely scenario.

Takeaways by Macro Roundup® AI

  1. The Census Bureau projects the U.S. population will peak at almost 370 million before ebbing to 366 million in the final years of the century, with annual growth falling from 1.2% in the 1990s to 0.5% today and 0.2% by 2040.
  2. The Census Bureau's projected U.S. population for 2040 is 355 million, 25 million fewer than projected for that date in 2015, a gap larger than the current population of Florida.
  3. Preliminary data showed the U.S. birthrate in 2022 was about 19% lower than in 2007, while death rates remain about 9% above 2019, and under the most likely scenario deaths would exceed births by 2038.

Related Articles:

  • Why Americans Are Having Fewer Babies — Sociologists find that US women born in the late 1980s had, on average, about one child fewer by their early 30s than they had intended, roughly double the shortfall for women born two decades earlier. The median age at which women give birth is 30, three years older than in 1990.
  • 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%.
  • Millennials Aren’t Having Kids. Here Are The Reasons Why — Childlessness rose first among women in their early 20s and then at successively older ages, tracking the millennial generation as it aged; sources consulted pointed to the broader economic climate. Much of the rise could be erased if women follow through on delayed family plans, but time for a reversal may be running out.

AI Summary. Labor productivity in U.S. manufacturing has been in secular decline since 2011, the first decade-long fall in the available data, even as services drove overall output growth. More than a third of the manufacturing slowdown since 2011 is accounted for by computers and electronics, a sector whose gains had soared in the 1990s and 2000s.

Economist Staff The Economist
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Productivity in America’s manufacturing sector has been in decline since 2011. Fourteen out of nineteen manufacturing sub-sectors, from machinery to textiles, saw declines during the 2010s.

Why has U.S. manufacturing productivity declined while services drive growth?

Core argument: U.S. manufacturing labour productivity fell 0.2% at an annualised rate in the third quarter even as GDP grew 4.9% annualised, with services driving the growth boost.

America’s GDP jumped by 4.9% at an annualised rate in the third quarter of the year. Nearly 80% of output is now made up of services, but one might expect manufacturing at least to pull its weight, given its supposed powers. In fact, labour productivity in manufacturing fell by 0.2% at an annualised rate, meaning that the boost to growth was driven by services. To make matters worse, productivity in the manufacturing sector has been in secular decline since 2011—the first decade-long fall in the available data. During the 1990s and 2000s manufacturing productivity soared, with the production of computers and electronics, especially semiconductor chips, leading the way. Gains seem to have topped out at around the time things went wrong more broadly, in the early 2010s. All told, more than a third of the overall slowdown in manufacturing since 2011 is accounted for by computers and electronics.

Takeaways by Macro Roundup® AI

  1. U.S. manufacturing labour productivity fell 0.2% at an annualised rate in the third quarter even as GDP grew 4.9% annualised, with services driving the growth boost.
  2. U.S. manufacturing productivity has been in secular decline since 2011, the first decade-long fall in the available data, after soaring through the 1990s and 2000s.
  3. More than a third of the overall slowdown in U.S. manufacturing since 2011 is accounted for by computers and electronics, the sector that led earlier gains, especially semiconductor chips.

Related Articles:

  • The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends? — Total factor productivity is the main factor accounting for differences in labor productivity growth across countries and over time, and its growth has been lackluster across large advanced economies since the mid-2000s. The authors find this slowdown appears in both manufacturing and market services, with U.S. productivity growth slowing before the Great Recession.
  • Bottlenecks: Sectoral Imbalances and the US Productivity Slowdown — The authors estimate that greater dispersion in productivity growth among an industry's input and idea suppliers has a strong negative effect on that industry's own productivity growth, using data on 462 US manufacturing industries and 42 non-manufacturing industries. Their evidence implies most of the US productivity slowdown can be explained by rising cross-industry variance in productivity growth.
  • American Labor’s Real Problem: It Isn’t Productive Enough — U.S. manufacturing output per hour has grown about 0.2% a year since 2009, below the overall economy and peer economies in Europe and Asia except Japan, with motor vehicle manufacturing productivity falling 32% from 2012 through last year. Unlike warehouses and hospitals, manufacturers face foreign competition and cannot pass higher labor costs to customers.

AI Summary. Comparing successive Congressional Budget Office projection vintages shows US federal debt surged during the Great Recession and the COVID-19 pandemic, and both the level of debt and its projected path remained higher after each episode even though deficits shrank considerably as the economy normalized.

Karen Dynan Aspen Economic Strategy Group
Date Posted:

Assuming that real GDP growth of 2% continues, balancing the primary budget would require spending reductions and revenue increases equal to 3.3% of GDP between 2027-2052. @KarenDynan

Does US federal debt stay higher after recessions end?

Core argument: US federal debt surged during the Great Recession period and during the COVID-19 pandemic, according to CBO data shown alongside successive vintages of the agency's debt projections.

Figure 5 shows different vintages of CBO’s federal-debt projections to offer additional perspective on how those downturns (as well as other factors) affected federal debt. Looking at just the actual realizations of debt to date, shown by the solid portion of the red line, one can see the surges in debt that occurred during the Great Recession period and during the COVID-19 pandemic. The other lines in Figure 5 show CBO’s projections just prior to these episodes. The level of federal debt and its projected trajectory remained higher after each episode, even though, in both cases, the deficit (not shown) shrank considerably as the economy normalized.

Takeaways by Macro Roundup® AI

  1. US federal debt surged during the Great Recession period and during the COVID-19 pandemic, according to CBO data shown alongside successive vintages of the agency's debt projections.
  2. The level of US federal debt and its projected trajectory remained higher after both the Great Recession and the COVID-19 pandemic than in CBO's projections made just prior to each episode.
  3. Deficits shrank considerably as the economy normalized after the Great Recession and after the COVID-19 pandemic, yet federal debt stayed above its previously projected path in both cases.

Related Articles:

  • If Markets Are Right About Long Real Rates, Public Debt Ratios Will Increase For Some Time. We Must Make Sure That They Do Not Explode — Stabilizing public debt ratios would require cutting primary deficits to zero, which the author argues no government can do quickly without risking recession and boosting support for populist parties. With a US primary deficit around 4% and a dysfunctional budget process, the debt ratio is likely to keep rising for some time.
  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • 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. The six largest US deficit reduction deals since 1983 were scored at enactment as saving between 0.52% and 1.72% of GDP, with the 1985 Gramm-Rudman-Hollings Act the largest. Many of the cuts were later reversed, and the 1985 law was invalidated by the Supreme Court and replaced in 1987.

Brian Riedl Manhattan Institute
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Discretionary spending is not driving federal deficits: defense spending is at its lowest share of GDP since World War 2, and @Brian_Riedl projects discretionary spending will likely soon start falling as a % of GDP.

How much have the largest deficit reduction deals actually saved?

Core argument: The 1985 Gramm-Rudman-Hollings Act was the largest deficit reduction deal since 1983, scored at savings of 1.72% of GDP at enactment, followed by the 1990 Bush "Andrews Air Force Base" deal at 1.45%.

The 6 Largest Deficit Reduction Deals Since 1983 Were:1983 Social Security Deal (Saved 0.52% of GDP). The 1985 Gramm-Rudman Hollings Act (1.72%). The 1990 Bush “Andrews Air Force Base” Deal (1.45%). The 1993 Clinton Budget Deal (1.08%). The 1997 Balanced Budget Deal (0.72%). The 2011 Budget Control Act (1.01%) Savings scored at the time of enactment. Many cuts were later reversed, and the 1985 law was invalidated by the Supreme Court and replaced with a 1987 version.

Takeaways by Macro Roundup® AI

  1. The 1985 Gramm-Rudman-Hollings Act was the largest deficit reduction deal since 1983, scored at savings of 1.72% of GDP at enactment, followed by the 1990 Bush "Andrews Air Force Base" deal at 1.45%.
  2. The other largest deficit reduction deals since 1983 were the 1993 Clinton budget deal (1.08% of GDP), the 2011 Budget Control Act (1.01%), the 1997 balanced budget deal (0.72%), and the 1983 Social Security deal (0.52%).
  3. Savings from these six deals were scored at the time of enactment, and many of the cuts were later reversed, while the 1985 Gramm-Rudman-Hollings Act was invalidated by the Supreme Court and replaced with a 1987 version.

Related Articles:

  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • 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.
  • Did the U.S. Really Grow Out of Its World War II Debt? — Decomposing U.S. debt-to-GDP movements, the authors find the post-World War II decline from 106% to a trough of 23% was explained mostly by primary budget surpluses and interest-rate distortions from surprise inflation and pegged nominal rates; absent those, the ratio would have fallen only to 74%.

AI Summary. Survey data show 56% of Generation Z adults had a boyfriend or girlfriend as a teenager, compared with 69% of millennials, 76% of Generation X, and 78% of baby boomers. Similarly, 58% of Generation Z adults held a teenage part-time job, versus 70% of millennials, 79% of Generation X, and 82% of baby boomers.

Daniel Cox, Kelsey Eyre Hammond, and Kyle Gray American Enterprise Institute
Date Posted:
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An @AEI survey finds Gen Z is socially isolated relative to prior generations with only 56% of them reporting having had a romantic partner as a teenager, compared with 69% of Millennials and 78% of Baby Boomers.

Are younger adults less likely to have dated or worked as teenagers?

Core argument: 56% of Gen Z adults report having had a boyfriend or girlfriend as a teenager, compared with 69% of millennials, 76% of Generation Xers, and 78% of baby boomers, while 41% of Gen Z say they had no such experience.

American teenagers are increasingly less likely to have a romantic partner—a boyfriend or girlfriend—than they once were 56% of Gen Z adults report having had a boyfriend or girlfriend as a teenager, while 41% say they did not have this experience. Nearly seven in 10 (69%) millennials and more than three-quarters of Generation Xers (76%) and baby boomers (78%) say they had a boyfriend or girlfriend for at least some part of their teen years. Working a part-time or summer job was once a ubiquitous experience for cash-strapped teenagers, but today’s teens are less likely to take on these responsibilities. 58% of Gen Z adults say they had a part-time job at some point during their teen years. Close to four in 10 (38%) Gen Z adults say they did not have a part-time job as a teenager. For previous generations, part-time work was much more prevalent. Seven in 10 (70% ) millennials, nearly eight in 10 (79%) Generation Xers, and 82% of baby boomers worked in a part-time position as a teenager.

Takeaways by Macro Roundup® AI

  1. 56% of Gen Z adults report having had a boyfriend or girlfriend as a teenager, compared with 69% of millennials, 76% of Generation Xers, and 78% of baby boomers, while 41% of Gen Z say they had no such experience.
  2. 58% of Gen Z adults say they held a part-time job during their teen years, versus 70% of millennials, 79% of Generation Xers, and 82% of baby boomers.
  3. Close to four in 10 (38%) Gen Z adults say they did not have a part-time job as a teenager, an experience that was much more prevalent for previous generations.

Related Articles:

  • Is There Really a Generational Difference in Identifying as Lesbian, Gay, or Bisexual? — General Social Survey data show that increases among young American adults appear in same-sex sexual behavior as well as in identification, with 20% reporting a same-sex partner versus 18.5% identifying as lesbian, gay, or bisexual. The increases are larger among 27- to 41-year-olds.
  • Millennials are Shattering the Oldest Rule in Politics — British "silent generation" and baby boomers grew more conservative with age, and Gen X is following the same path, but millennials, born 1981-1996, diverged from that trajectory. The most likely explanation is a cohort effect, with US survey data showing millennials favoring greater redistribution from rich to poor than earlier generations.
  • 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%.

AI Summary. Polls that correctly anticipated Democratic and abortion-rights victories also show voters disapproving of the Democratic president and Trump leading in battleground states; an Ohio exit poll found 39% approval for the president among voters who legalized abortion and marijuana there. Analysis attributes Democratic overperformance in special elections to a low-turnout advantage.

Nate Cohn New York Times
Date Posted:

High-propensity voters made up a disproportionate share of the electorate in this week’s Democratic wins. In Ohio, self-reported Biden voters outnumbered Trump voters by 2pp, in a state that Trump won by 8pp in 2020. @Nate_Cohn

Do off-year Democratic wins signal strength in the next presidential election?

Core argument: Ohio's exit poll showed Biden with a 39% approval rating among voters who legalized abortion rights and marijuana, and only 25% said he should run for re-election, below the 35% who said the same of Trump.

The polls showed the Democrat winning Kentucky. They showed abortion rights and marijuana legalization prevailing in Ohio — and showed them to be popular in many red states all over the country. They also show that voters disapprove of Mr. Biden and that Mr. Trump leads in the battleground states. If the polls were right about Ohio, Kentucky, and elsewhere, perhaps they’re right about the president as well. Tuesday night’s Ohio exit poll was a good example. Mr. Biden had a 39% approval rating among the voters who made abortion and marijuana legal in the state. Only 25% said he should even run for re-election, less than the 35% who said the same for Mr. Trump. Democratic advantage in low-turnout elections is a big deal. It probably explains the entire Democratic overperformance in special elections over the last year, based on an analysis of the nearly two dozen special elections with sufficient data for analysis, using a combination of Times/Siena polling and records from L2, a voter file vendor. The Ohio exit poll offers yet another piece of evidence: Self-reported Biden voters outnumbered Trump voters by two points, even in a state Mr. Trump won by eight points.

Takeaways by Macro Roundup® AI

  1. Ohio's exit poll showed Biden with a 39% approval rating among voters who legalized abortion rights and marijuana, and only 25% said he should run for re-election, below the 35% who said the same of Trump.
  2. Self-reported Biden voters outnumbered Trump voters by two points in the Ohio exit poll, in a state Trump won by eight points.
  3. An analysis of nearly two dozen special elections, combining Times/Siena polling with records from the voter file vendor L2, suggests the Democratic advantage in low-turnout elections probably explains the party's entire overperformance in those races.

Related Articles:

  • Why Biden Is Behind, and How He Could Come Back — Polling shows a broad decline in President Biden's standing across virtually every demographic group, with the steepest losses among young, Black, and Hispanic voters. Biden holds only a narrow lead among nonwhite voters under 45, a group that reported backing him by nearly 40 points in the prior election.
  • Why Less Engaged Voters Are Biden’s Biggest Problem — Times/Siena survey data indicate that Democrats and Biden voters were somewhat more likely than Republicans and Trump voters to skip the midterm election, implying the presidential electorate was more Democratic. Yet the same data indicate higher turnout would not help Biden now, even though it would bring more Democratic and Biden voters to the polls.
  • Buzzfeed’s Ben Smith on My Views About Trumponomics & The Future of the GOP — Buzzfeed’s Ben Smith on My Views About Trumponomics & The Future of the GOP

Friday, November 10, 2023

AI Summary. Oddities in China's official balance of payments statistics suggest its actual current account surplus may be nearly 3x the reported figure, which would make it about as large relative to world output as it has ever been. The likeliest explanation for simultaneous downward pressure on the yuan is capital flight of roughly $500bn a year.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein estimates that Chinese capital flight is at least $500b annually; he suspects that the official Chinese current account surplus is understated by a similar amount.

Is capital flight offsetting China's understated current account surplus?

Core argument: Oddities in China's official balance of payments data suggest its actual current account surplus may be nearly 3x the reported figure, which would make it the largest ever in absolute terms and about as large as ever relative to world output.

There are enough oddities within China’s official balance of payments statistics to suggest that the country’s actual current account surplus may be nearly 3x the official figure. If so, that would make China’s current account surplus not just the largest that it has ever been in absolute terms, but about as large as it has ever been relative to the rest of the world’s economy. Perhaps surprisingly, the emergence of this massive surplus has coincided with downward pressure on the Chinese yuan, with the People’s Bank of China (PBOC) selling $43 billion in foreign exchange reserves in 2023 Q3. The likeliest explanation is that the Chinese are now pulling about $500 billion/year out of the country. In other words, capital flight pressures have intensified over the past few years, perhaps in response to the Chinese government’s increasingly arbitrary exercises of power against its subjects.

Takeaways by Macro Roundup® AI

  1. Oddities in China's official balance of payments data suggest its actual current account surplus may be nearly 3x the reported figure, which would make it the largest ever in absolute terms and about as large as ever relative to world output.
  2. China's current account surplus has coincided with downward pressure on the yuan, with the People's Bank of China selling $43 billion in foreign exchange reserves in 2023 Q3.
  3. The likeliest explanation is capital flight of roughly $500 billion a year out of China, pressure that has intensified in recent years, perhaps in response to the Chinese government's increasingly arbitrary exercises of power.

Related Articles:

  • Net Outflow of Funds from China Hits 7-Year High in September — China's State Administration of Foreign Exchange reported a net outflow of $53.9bn in monthly international financial transactions handled by domestic banks for businesses and households, the largest since a $55.8bn outflow tied to a sudden yuan devaluation. Outflows linked to direct investment, such as building manufacturing plants, were notable.
  • The Rise & Fall of Foreign Direct Investment in China — Net foreign direct investment into China has been negative for four consecutive quarters, as foreign investors shifted from reinvesting earnings from their Chinese operations to repatriating them. Whether this reflects cash management or signals a future slowdown in foreign direct investment is unclear, but the repatriation of profits is negative for China's currency.
  • China’s Age Of Malaise — More than 300,000 Chinese people emigrated in a single year, more than double the pace of a decade earlier, with some traveling overland through a half-dozen countries to reach the US. US authorities at the southern border recorded 17,894 encounters with Chinese migrants over ten months, a thirteenfold increase from the prior year.

AI Summary. In a randomized study, Boston Consulting Group consultants given access to GPT-4 completed tasks 25% faster, finished 12% more tasks, and produced work rated 40% higher in quality than colleagues without the tool. Gains appeared across the skill distribution but were largest among less highly skilled employees.

John Burn-Murdoch Financial Times
Date Posted:

.@jburnmurdoch cites evidence from separate studies showing that AI Tools boost performance most for less-skilled workers and that the introduction of ChatGPT negatively impacted opportunities for freelancers.

How does generative AI affect white-collar productivity and quality?

Core argument: Boston Consulting Group staff randomly assigned to use GPT-4 completed consulting tasks 25% faster, finished 12% more tasks, and produced work assessed as 40% higher in quality than colleagues without access to the tool.

Boston Consulting Group staff randomly assigned to use GPT-4 when carrying out a set of consulting tasks were far more productive than their colleagues who could not access the tool. Not only did AI-assisted consultants carry out tasks 25% faster and complete 12% more tasks overall, their work was assessed to be 40% higher in quality than their unassisted peers. Employees right across the skills distribution benefited, but in a pattern now common in generative AI studies, the biggest performance gains came among the less highly skilled in their workforce. This makes intuitive sense: large language models are best understood as excellent regurgitators and summarisers of existing, public-domain human knowledge. The closer one’s own knowledge already is to that limit, the smaller the benefit from using them.

Takeaways by Macro Roundup® AI

  1. Boston Consulting Group staff randomly assigned to use GPT-4 completed consulting tasks 25% faster, finished 12% more tasks, and produced work assessed as 40% higher in quality than colleagues without access to the tool.
  2. Employees across the skills distribution benefited from GPT-4 access in the Boston Consulting Group experiment, with the largest performance gains among the less highly skilled, a pattern common in generative AI studies.
  3. Large language models are best understood as regurgitators and summarisers of existing public-domain human knowledge, so the closer a worker's own knowledge is to that limit, the smaller the benefit from using them.

Related Articles:

  • Centaurs and Cyborgs on the Jagged Frontier — 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.
  • 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.
  • The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market — Freelancers in occupations most exposed to generative AI saw employment and earnings decline, with the authors estimating a 2% drop in jobs and a 5.2% drop in monthly earnings on an online labor platform. Offering high-quality service did not mitigate the effect, and top-rated freelancers appear disproportionately hurt.

AI Summary. Freelancers in occupations most exposed to generative AI saw employment and earnings decline, with the authors estimating a 2% drop in jobs and a 5.2% drop in monthly earnings on an online labor platform. Offering high-quality service did not mitigate the effect, and top-rated freelancers appear disproportionately hurt.

Xiang Hui, Oren Reshef, and Luofeng Zhouu Working Paper
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.@xianghui90 @oren_reshef and @Zhou_Yu_AI find that the release of ChatGPT led to a 2% drop in the number of jobs of freelancers’ on the Upwork platform and a 5.2% drop in their monthly earnings.

Does generative AI reduce freelancers' employment and earnings?

Core argument: The authors find that ChatGPT's release led to a 2% drop in the number of jobs and a 5.2% drop in monthly earnings for freelancers in the online labor market occupations most affected by AI.

Across the board, we find that freelancers who offer services in occupations most affected by AI experienced reductions in both employment and earnings. The release of ChatGPT led to a 2% drop in the number of jobs on the platform and a 5.2% drop in monthly earnings. The results are robust to several alternative tests, including a similar reduction in the employment outcomes of freelancers offering design and image-editing services following the introduction of image-focused generative AI. In addition, we find that offering high-quality service does not mitigate the negative effect of AI on freelancers, and in fact, present suggestive evidence that top employees are disproportionately hurt by AI.

Takeaways by Macro Roundup® AI

  1. The authors find that ChatGPT's release led to a 2% drop in the number of jobs and a 5.2% drop in monthly earnings for freelancers in the online labor market occupations most affected by AI.
  2. Freelancers offering design and image-editing services experienced a similar reduction in employment outcomes following the introduction of image-focused generative AI, one of several robustness tests the authors report.
  3. Offering high-quality service does not mitigate the negative effect of AI on freelancers, and the authors present suggestive evidence that top employees are disproportionately hurt by AI.

Related Articles:

  • Here’s What We Know About Generative AI’s Impact On White-Collar Work — In a randomized study, Boston Consulting Group consultants given access to GPT-4 completed tasks 25% faster, finished 12% more tasks, and produced work rated 40% higher in quality than colleagues without the tool. Gains appeared across the skill distribution but were largest among less highly skilled employees.
  • Centaurs and Cyborgs on the Jagged Frontier — 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.
  • 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 Summary. Card spending per household for those earning under $50k slowed to near zero year-over-year, down from +1.75% the prior month, while spending by households earning above $125k fell 0.2% year-over-year. Bank of America's internal data show after-tax wages and salaries up 2.6% year-over-year for lower-income households versus 0.4% for higher-income ones.

David Michael Tinsley, Anna Zhou, Taylor Bowley, and Liz Everett Krisberg Bank of America
Date Posted:

According to @BankofAmerica microtransaction data, consumer spending moderated in October with lower-income households seeing the biggest slowdown.

Is spending growth slowing across income groups?

Core argument: Card spending per household for those earning below $50k was close to zero Y/Y in October, down from +1.75% Y/Y in September, the biggest slowdown across income cohorts.

Lower-income households showed the biggest slowdown in Y/Y spending growth with card spending per household close to zero Y/Y for those with a household income below $50k, down from +1.75% Y/Y in September. In contrast, spending growth for higher-income households (above $125k) fell 0.2% Y/Y in October. from -0.1% Y/Y in the prior month. Some of this narrowing reflects falling gasoline prices, which tend to benefit lower-income cohorts relatively more as they have a higher weight of gasoline in their overall spending. One possible explanation for the narrowing gap between lower- and higher-income spending growth may be the converging after-tax wages and salary growth for these two cohorts. According to Bank of America's internal data, after-tax wages and salaries were up 0.4% Y/Y in October for higher-income households and grew by 2.6% Y/Y for lower-income households.

Takeaways by Macro Roundup® AI

  1. Card spending per household for those earning below $50k was close to zero Y/Y in October, down from +1.75% Y/Y in September, the biggest slowdown across income cohorts.
  2. Spending growth for households earning above $125k fell 0.2% Y/Y in October, compared with -0.1% Y/Y in the prior month.
  3. Bank of America's internal data show after-tax wages and salaries up 2.6% Y/Y in October for lower-income households versus 0.4% Y/Y for higher-income households, a possible explanation for the narrowing spending gap.

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