Edward Conard

Top Ten New York Times Bestselling Author

  • “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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, January 4, 2024

AI Summary. Using French employer-employee and tax data, the authors find that workers entering the information and communications technology sector during its boom earned 5% higher entry wages but 6% lower wages 15 years later than similar peers starting elsewhere. Larger capital flows to firms are associated with greater human capital depreciation among their workers.

Johan Hombert and Adrien Matray National Bureau of Economic Research
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French workers who joined the technology sector from 1994-2002 earned 6% lower wages 15 years out relative to similar workers starting in other sectors, presumably driven by faster skill obsolescence. @johanhombert @AdrienMatray

Do workers who join booming tech sectors earn less long-term?

Core argument: Workers entering France's ICT sector during the late 1990s boom earned 5% higher entry wages on average but ended up with 6% lower wages 15 years later than same-cohort workers with the same characteristics who started in other sectors.

We study the late 1990s boom in the Information and Communications Technology (ICT) sector. We use annual French administrative matched employer-employee data for the period 1994–2015, which we link to the universe of firms’ financial statements from tax filings. The data contain high-quality, longitudinal information on workers’ wages and career paths and on firms’ financial statements. We find that workers who enter in the ICT sector during the boom earn 5% higher entry wages on average but end up with 6% lower wages 15 years out relative to workers from the same cohort with the same characteristics starting in other sectors. Larger capital flows during the boom are indeed associated with larger labor flows in the cross-section of firms. Then, we show that larger capital flows for firms are associated with higher human capital depreciation for these firms’ workers, indicating that capital flows can worsen long-term aggregate human capital during episodes of intense technological change since it both increases the number of workers exposed to a depreciation of their human capital and amplifies the depreciation each worker experiences.

Takeaways by Macro Roundup® AI

  1. Workers entering France's ICT sector during the late 1990s boom earned 5% higher entry wages on average but ended up with 6% lower wages 15 years later than same-cohort workers with the same characteristics who started in other sectors.
  2. Larger capital flows during the boom are associated with larger labor flows across the cross-section of French firms, and with higher human capital depreciation for those firms' workers.
  3. The authors argue that capital flows can worsen long-term aggregate human capital during episodes of intense technological change by both increasing the number of workers exposed to human capital depreciation and amplifying the depreciation each worker experiences.

Related Articles:

  • Why Do Wages Grow Faster for Educated Workers? — College graduates sort into professional, non-routine occupations where wages rise much more with job tenure, and the author estimates this occupational sorting explains at least half of the life-cycle growth in the college wage premium. That premium is estimated at 22% at age 26, 49% at age 40, and 56% at age 60.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Bank of America found that Sun Belt cities such as Phoenix, Miami, Tampa, and Atlanta experienced a stronger housing boom, with rents and mortgage costs rising more than in the Northeast and West. Potential explanations include domestic migration driven by affordability, above-average employment gains, and a growing share of higher-paid jobs.

Liz Everett Krisberg, David Michael Tinsley, Anna Zhou, Vanessa Cook and Taylor Bowley Bank of America
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Internal @BankofAmerica data shows that migration to the Sunbelt has driven surging rent and mortgage payments. Phoenix median rents rose 26% y/y for the first 6 months of 2023. Tampa rents were up 23%.

Why have Sun Belt housing costs risen faster than other regions?

Core argument: Bank of America found that Sun Belt cities including Phoenix, Miami, Tampa, and Atlanta experienced a stronger housing boom in February, driving up rents and mortgages more than cities in the Northeast and the West.

Domestic migration during the pandemic has helped shape the housing market today, and housing remains a focal point in the economy as it constitutes the biggest monthly outlay for consumers. While rising borrowing costs have dampened home sales over the last year, shelter costs continued to rise at record pace, and the differences we found across regions were striking. Earlier this year Bank of America found that cities in the Sun Belt region such as Phoenix, Miami, Tampa, and Atlanta, experienced a stronger housing boom, driving up rents and mortgages more than those in the Northeast and the West in February. The underlying reasons may be complex, but we proposed some potential explanations: domestic migration driven by affordability, above-average employment gains, and an increasing share of higher-paid jobs. Digging further into regional migration, we also considered factors that are driving these moves. A main motivator of a family move is often career-driven, and we found that when workers switched jobs, they received a bigger jump in compensation than those who didn’t.

Takeaways by Macro Roundup® AI

  1. Bank of America found that Sun Belt cities including Phoenix, Miami, Tampa, and Atlanta experienced a stronger housing boom in February, driving up rents and mortgages more than cities in the Northeast and the West.
  2. Housing remains a focal point in the economy as the biggest monthly outlay for consumers, with rising borrowing costs dampening home sales over the past year while shelter costs continued to rise at a record pace.
  3. Proposed explanations for the regional housing divergence include domestic migration driven by affordability, above-average employment gains, and an increasing share of higher-paid jobs, and workers who switched jobs received a bigger jump in compensation than those who did not.

Related Articles:

  • Southern Comforts — Migration into southern metropolitan areas such as Austin, San Antonio, Jacksonville, and Tampa has continued, and the South also has a higher birth rate than other census regions. Growth has been uneven: Florida's GDP rose 20% and Texas and Tennessee 15% against a US average of 11%, while Oklahoma and Louisiana contracted.
  • A $100 Billion Wealth Migration Tilts US Economy’s Center of Gravity South — Six fast-growing Southern states — Florida, Texas, Georgia, North and South Carolina, and Tennessee — now contribute more to US GDP than the Northeast, including the Washington-New York-Boston corridor. The Southeast accounted for more than two-thirds of US job growth since the pandemic began, nearly double its pre-pandemic share, and housed 10 of the 15 fastest-growing large American cities.
  • Movers And Money: Mapping the Flow of Income During the Pandemic — Manhattan recorded the largest county-level income outflow to other states at $16.5bn, with 27.7 cents of every dollar leaving—$4.6bn—going to Florida, including $2.9bn to Miami-Dade County and $1.1bn to Palm Beach County. California had the largest state-level losses, while Florida was the biggest beneficiary with a net gain of $39bn.

AI Summary. Arizona uses 3% less water than in 1957 despite population growth of more than 555%, and the state may be better positioned to adapt to climate change than many U.S. coastal areas. The Center for Climate Integrity estimates sea walls for U.S. coastal regions will cost at least $400bn, far more than conserving water in a desert.

Tom Zoellner New York Times
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Concerns about climate change’s impact on the US Southwest are overstated: Arizona uses 3% less water than it did in 1957 despite the population growing 555% argues @tomzoellner.

Concerns about climate change’s impact on the US Southwest are overstated: Arizona uses 3% less water than it did in...

Is the desert Southwest better positioned to adapt than coastal regions?

Core argument: Arizona uses 3% less water than it did in 1957 even as its population has grown more than 555% over that period.

Arizona now uses 3% less water than it did in 1957, despite having a population that’s mushroomed more than 555% since then. In some crucial ways, Arizona will actually be better able to adapt to climate change than many coastal areas of the country. For instance, the cost of building sea walls for U.S. coastal regions will be at least $400 billion, according to the Center for Climate Integrity, while squeezing water out of a desert landscape is relatively cheap in comparison. The only necessary ingredient is political willpower.

Takeaways by Macro Roundup® AI

  1. Arizona uses 3% less water than it did in 1957 even as its population has grown more than 555% over that period.
  2. The Center for Climate Integrity estimates that building sea walls for U.S. coastal regions will cost at least $400 billion, against which squeezing water out of a desert landscape is relatively cheap.
  3. Arizona will in some crucial ways be better able to adapt to climate change than many U.S. coastal areas, with political willpower the only necessary ingredient.

Related Articles:

  • Arizona Is Running Out of Cheap Water. Investors Saw It Coming — Phoenix-area suburbs are paying sharply higher prices for water rights from a basin west of the city, with one suburb approving $80m for 6,000 acre-feet — more than double the per-acre-foot price another suburb paid earlier. Arizona's groundwater replenishment assessments rose from $154 to $768 per acre-foot.
  • Climate Change and the Geography of the U.S. Economy — The positive association between extreme heat and U.S. county population growth weakened over recent decades and disappeared entirely in the 2010s, as hot counties grew hotter. Projected climate change is predicted to shift population from the Southeast and parts of the Southwest toward the North, Mountain West, and Pacific coast.
  • America Is Using Up Its Groundwater Like There’s No Tomorrow — An analysis of 84,544 groundwater monitoring wells across the United States found that nearly half declined significantly over the past 40 years as more water was pumped out than nature replenished. Four of every 10 sites hit all-time lows in the past decade.

AI Summary. BYD delivered 526,409 battery electric vehicles in a quarter versus Tesla's 484,507, and its total reaches 918,807 including trucks, buses, and plug-in hybrids. By owning its battery supply chain and using cheaper iron-phosphate cells instead of scarce cobalt and nickel, BYD has lifted margins even as materials costs rose.

David Fickling Bloomberg
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The Chinese EV manufacturer BYD has just overtaken Tesla as the largest producer of battery-powered cars and has nearly matched Tesla’s operating income. @davidfickling

How is BYD outselling Tesla while expanding margins?

Core argument: BYD delivered 526,409 battery electric vehicles in December versus Tesla's 484,507, and its total rises to 918,807 including trucks, buses, and plug-in hybrids that use gasoline engines to extend battery range.

BYD delivered 526,409 full battery electric vehicles in December [relative to] Tesla’s 484,507. This milestone if anything underplays BYD’s growing might. Throw in trucks, buses, and plug-in hybrids that use gasoline engines to extend their largely battery-powered range, and BYD’s sales total is 918,807. More importantly, on almost every financial metric, the Chinese company is either advancing on or overtaking its American rival. While many competitors have struggled amid the wave of discounting that’s hit the EV sector over the past year, BYD has prospered. In contrast to Tesla, which racked up years of losses before turning profitable in 2019, it has hardly ever posted negative operating income — and in the September quarter came within a whisker of the reinvigorated US company’s $1.76 billion result. By owning its own battery supply-chain and focusing on cheaper, less zippy cells that use abundant iron and phosphate instead of scarce cobalt and nickel, it’s managed to lift margins even as materials costs rose.

Takeaways by Macro Roundup® AI

  1. BYD delivered 526,409 battery electric vehicles in December versus Tesla's 484,507, and its total rises to 918,807 including trucks, buses, and plug-in hybrids that use gasoline engines to extend battery range.
  2. BYD's September-quarter operating income came within a whisker of Tesla's $1.76 billion, and unlike Tesla, which posted years of losses before turning profitable in 2019, BYD has hardly ever recorded negative operating income.
  3. BYD lifted margins even as materials costs rose by owning its battery supply chain and using cheaper, less zippy cells based on abundant iron and phosphate rather than scarce cobalt and nickel.

Related Articles:

  • Pettis On China’s Export Strategy — China is shifting investment from its weakened property sector toward manufacturing, which already accounts for 27% of Chinese GDP versus 14% elsewhere and is constrained by weak demand rather than scarce capital. Since China holds about 18% of global GDP but 30% of global manufacturing, added output must be absorbed abroad absent higher consumption.
  • China’s Auto Export Wave Echoes Japan’s in the ’70s — The shift from petroleum-fueled internal combustion vehicles to electric vehicles moves resource leverage from Persian Gulf oil producers to critical minerals, with China holding more than half of global processing capacity for lithium, cobalt, and graphite and about a third for nickel. Chinese companies have spent $4.5bn acquiring stakes in nearly 20 lithium mines, mostly in Latin America and Africa.
  • Danish Weight Loss Drugs vs. Chinese Cars: Two Models of Export Booms — Denmark's weight-loss drug exports illustrate a positive-sum export boom in which new products create both supply and demand, while Chinese car exports reflect firms with persistent overcapacity fighting for market share. The US preempted Chinese electric vehicles through legislation that boosts demand while reserving a share for local producers; Europe remains more exposed.

AI Summary. Chinese shipments to Russia of high-precision computer numerical control machine tools, which are vital to Russian military industries, have increased tenfold since the full-scale invasion of Ukraine. Chinese-origin devices have risen to 57% of Russian imports of these tools by value, up from 12% before the war.

Joe Leahy, Chris Cook, Max Seddon, and Max Harlow Financial Times
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Chinese exports of CNC machine tools to Russia have surged tenfold since the invasion of Ukraine in a demonstration of the relationship between industrial capacity and military power.

Is China now the dominant supplier of precision machine tools to Russia?

Core argument: Chinese-origin computer numerical control (CNC) devices made up 57% of Russia's imports of such machine tools by value in July, up from 12% before the full-scale invasion of Ukraine.

Chinese shipments to Russia of an important class of advanced machine tools have increased tenfold since the full-scale invasion of Ukraine, with the country’s producers now dominating trade in high-precision “computer numerical control” devices vital to Moscow’s military industries. Chinese-origin CNC devices made up 57% of Russian imports by value in July, up from just 12% before the war.

Takeaways by Macro Roundup® AI

  1. Chinese-origin computer numerical control (CNC) devices made up 57% of Russia's imports of such machine tools by value in July, up from 12% before the full-scale invasion of Ukraine.
  2. China's shipments to Russia of an advanced class of machine tools have risen tenfold since the full-scale invasion of Ukraine, with Chinese producers now dominating that trade.
  3. High-precision CNC devices are vital to Moscow's military industries.

Related Articles:

  • Why Xi Can No Longer Brag About the Chinese Economy — China's shipyards build 46% of the world's ships, letting it produce several warships and submarines a year, while the U.S. holds under 1% of capacity and its Navy faces late, over-budget deliveries from a few yards lacking workers. China is also the largest drone producer.
  • The Hamilton Index, 2023: China Is Running Away With Strategic Industries — An analysis of value-added output in 10 strategically important advanced industries, together accounting for over $10tn in global production, found China was the leading producer in seven and produced more than all other nations outside the top 10 combined. The authors argue China's gains came at the expense of the US and other advanced economies.
  • The West Badly Needs More Missiles—But The Wait To Buy Them Is Years Long — Each Nasams air-defense system, made by Norway's Kongsberg, takes two years to build and new buyers face a multiyear backlog, prompting the plant to run 24-hour, seven-day shifts. The defense industry faces a prolonged labor crunch, struggling to find workers with niche skills willing to undergo lengthy security checks.

Friday, January 5, 2024

AI Summary. Three independent datasets on U.S. taxes and transfers all show the tax system has become more progressive and redistributive over recent decades. The authors find this shift is driven mainly by a large increase in transfers to households in the bottom half of the income distribution, a change missed by analyses focused on the top 1%.

Thomas Coleman and David Weisbach University of Chicago
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Both PSZ and AS show the same trend in US redistribution: a dramatic increase over the past 60 years driven by transfers to the bottom half of the US population. @WeisbachD

Has the US tax and transfer system grown more progressive?

Core argument: Three publicly available datasets — Piketty, Saez, and Zucman (2018), Auten and Splinter (2023), and the Congressional Budget Office (2023) — all show the U.S. tax system has become more progressive and more redistributive over the last several decades.

We compare the results from three different publicly available datasets, those from Piketty, Saez, and Zucman (2018), Auten and Splinter (2023), and Congressional Budget Office (2023). All three datasets show that the tax system has become more progressive and more redistributive over the last several decades. This increase in redistribution is driven primarily by an increase in transfers to households in the bottom half of the income distribution which is missed by a focus on the top 1%. Figure 2 shows the tax rates for each of these groups from 1966 until 2019. Once we look at the bottom half of the population, the two datasets tell a similar story. Both show that the key change over the last 60 years has been a dramatic increase in transfers to the bottom half of the population. This increase swamps the changes in tax rates for the top half of the population. PSZ exclude Social Security from their definition of transfers (including it in their definition of pre-tax hybrid income) while AS treat Social Security as a transfer (as it is not included in national income). Regardless of this difference, however, both groups show that the increase in transfers to the bottom half of the population is the central story of the tax and transfer system over the last half century.

Takeaways by Macro Roundup® AI

  1. Three publicly available datasets — Piketty, Saez, and Zucman (2018), Auten and Splinter (2023), and the Congressional Budget Office (2023) — all show the U.S. tax system has become more progressive and more redistributive over the last several decades.
  2. The increase in redistribution is driven primarily by larger transfers to households in the bottom half of the income distribution, a shift missed by a focus on the top 1%.
  3. The rise in transfers to the bottom half of the population swamps changes in tax rates for the top half, a finding that holds even though Piketty, Saez, and Zucman exclude Social Security from transfers while Auten and Splinter treat it as one.

Related Articles:

  • Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends — Using administrative tax data with the Survey of Consumer Finances, the authors estimate the top 1% pre-tax income share fell from 11.1% in 1962 to 9.4% in 1979, then rose to 13.8% by 2019, a 3 percentage point rise over the full period. Their after-tax measure shows increases of only 1.4 points since 1979 and 0.2 points since 1962.
  • Comment on Auten and Splinter (2023) — A critique argues that Auten and Splinter's methodology misallocates a large share of untaxed business and capital income to the bottom of the distribution, assuming the top 1% earns only about 15% of untaxed business income while tax data show they earn about 55% of business income overall.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. Since 1980, annual real income growth and consumer sentiment have generally peaked and troughed in step, and real personal income growth has run below its long-term average since early 2020, which may have weighed on sentiment. As inflation slowed and real income growth picked up, sentiment showed signs of improving.

Charles Gascon and Joseph Martorana Federal Reserve Bank of St. Louis
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The disconnect between strong employment numbers and consumer sentiment has likely been driven by real income growth being under its 1980-2019 average since Q1 2022; however real income growth has started to accelerate. @stlouisfed

Does weak real income growth explain falling consumer sentiment?

Core argument: Real personal income growth has run below its long-term average since the first quarter of 2022 and was negative in the final three quarters of 2022, as rapid consumer price increases eroded income gains.

Throughout most of the years since 1980, annual income growth and sentiment hit their peaks and troughs almost perfectly in step. Furthermore, except for a few quarters between 2001 and 2003, and again in 2016, sentiment never stayed elevated while real income growth remained below average for an extended period. Most importantly, since 2020, real personal income growth has been below its long-term average and quite significantly. Even though economic output and employment were both up in 2021, households began to experience a sharp increase in the cost of living. Rapid increases in consumer prices eroded income gains, causing real income growth to be negative in the final three quarters of 2022; more generally, real income growth has been below its long-term average since the first quarter of 2022. This run of lagging incomes may have put downward pressure on consumer sentiment starting in the second half of 2021. But, as inflation slowed and real income growth accelerated, consumer sentiment also showed signs of improving, with sentiment steadily increasing since headline inflation passed its peak in June 2022.

Takeaways by Macro Roundup® AI

  1. Real personal income growth has run below its long-term average since the first quarter of 2022 and was negative in the final three quarters of 2022, as rapid consumer price increases eroded income gains.
  2. Annual income growth and consumer sentiment hit their peaks and troughs almost perfectly in step through most years since 1980, with sentiment staying elevated alongside below-average real income growth only in a few quarters between 2001 and 2003 and again in 2016.
  3. Consumer sentiment has increased steadily since headline inflation passed its peak in June 2022, as inflation slowed and real income growth accelerated.

Related Articles:

  • Just How Bad Is the US Cost-of-Living Squeeze? We Did the Math — It now takes $119.27 to buy what $100 purchased before the pandemic, with prices rising about as much since early 2020 as in the preceding decade. Groceries and electricity are each up 25% since January 2020, used cars 35%, auto insurance 33%, and rents roughly 20%.
  • Digesting Inflation — The authors estimate that inflation's drag on consumer sentiment decays about 50% per year, with a 10% inflation shock cutting sentiment by 35 index points in the current year, 16 the next, and 8 the year after. On these estimates, inflation over the prior three years is holding sentiment down by 16 index points.
  • Asymmetric Amplification and the Consumer Sentiment Gap — Consumer sentiment surveys show Republican respondents' views swing about ±15 index points relative to predicted levels depending on which party holds the presidency, while Democrats' views swing only about ±6 points. The authors estimate that adjusting for this asymmetric amplification shrinks the gap between observed and predicted consumer sentiment by 30%.

AI Summary. Using US commuting zone data and the concentration of early prescription opioid marketing in cancer pain markets, the authors estimate that exposure to the opioid epidemic substantially increased the Republican vote share in congressional and presidential elections, with a one standard deviation rise in initial cancer mortality corresponding to 13.8 percentage points.

Carolina Arteaga and Victoria Barone Working Paper
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.@caroartc and @Viquibarone find that greater exposure to the opioid epidemic has continuously increased the GOP vote share starting around 2000.

Did exposure to the opioid epidemic increase Republican vote share?

Core argument: By the 2020 congressional elections, a one standard deviation rise in the 1996 cancer mortality rate corresponds to a 13.8 percentage point increase in the Republican vote share, based on a panel of U.S. commuting zones spanning 1982 to 2020.

We collect data from multiple sources and construct a panel of commuting zones covering the United States from 1982 to 2020. Our approach exploits detailed features of the initial marketing of prescription opioids, [which] show that at the dawn of the opioid epidemic in 1996, pharmaceutical marketing efforts were concentrated in the cancer pain market with a plan to quickly expand to the much larger non–cancer pain market in those same geographic areas. Exposure to the opioid epidemic substantially increased the Republican vote share in congressional and presidential elections. We document that the relationship between cancer mortality and Republican vote share emerged soon after the onset of the opioid epidemic. After continuous years of increase, by the 2020 congressional elections, a rise of one standard deviation in the 1996 cancer mortality rate corresponds to an increase in the Republican vote share of 13.8 percentage points.

Takeaways by Macro Roundup® AI

  1. By the 2020 congressional elections, a one standard deviation rise in the 1996 cancer mortality rate corresponds to a 13.8 percentage point increase in the Republican vote share, based on a panel of U.S. commuting zones spanning 1982 to 2020.
  2. Exposure to the opioid epidemic substantially increased the Republican vote share in congressional and presidential elections, with the relationship between cancer mortality and Republican voting emerging soon after the epidemic's onset.
  3. The identification strategy exploits the initial 1996 marketing of prescription opioids, which concentrated on the cancer pain market with a plan to expand quickly into the much larger non–cancer pain market in those same geographic areas.

Related Articles:

AI Summary. Texas's real economic output rose $230bn over four years, making it the second-largest contributor to US growth behind California despite starting 30% smaller, and one in five new American jobs came from Texas. The Dallas metro contributed more to national growth than any other, and Texas surpassed New York in overall output.

Joseph Politano Apricitas Economics
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Since the start of the pandemic real economic output in Texas has increased $230B, close to the $270B growth in the larger California economy. @JosephPolitano

Is US economic growth shifting toward Texas?

Core argument: Texas' real economic output rose $230 billion over the last four years, ranking just behind California as the second-largest contributor to U.S. growth despite Texas' economy ending 2019 30% smaller than California's.

Texas’ growth has been among the most impressive given its size—its real economic output has increased by $230B over the last four years, putting it just barely behind California as the second-largest contributor to nationwide growth despite Texas’ economy ending 2019 30% smaller than California’s. Job growth in Texas has been so large that one in five new jobs in America come from Texas alone. The Dallas metro area, despite being less than 1/3 the size of the New York metro, has contributed more to nationwide economic growth over the last three years than any other. That impressive growth has allowed Texas to pull ahead of NY in overall GDP and in white-collar professional, scientific, and technical services output over the last four years.

Takeaways by Macro Roundup® AI

  1. Texas' real economic output rose $230 billion over the last four years, ranking just behind California as the second-largest contributor to U.S. growth despite Texas' economy ending 2019 30% smaller than California's.
  2. One in five new jobs in America come from Texas alone, and Texas has pulled ahead of New York in overall GDP and in professional, scientific, and technical services output over the last four years.
  3. The Dallas metro area, less than one-third the size of the New York metro, has contributed more to nationwide economic growth over the last three years than any other metro.

Related Articles:

  • Southern Comforts — Migration into southern metropolitan areas such as Austin, San Antonio, Jacksonville, and Tampa has continued, and the South also has a higher birth rate than other census regions. Growth has been uneven: Florida's GDP rose 20% and Texas and Tennessee 15% against a US average of 11%, while Oklahoma and Louisiana contracted.
  • A $100 Billion Wealth Migration Tilts US Economy’s Center of Gravity South — Six fast-growing Southern states — Florida, Texas, Georgia, North and South Carolina, and Tennessee — now contribute more to US GDP than the Northeast, including the Washington-New York-Boston corridor. The Southeast accounted for more than two-thirds of US job growth since the pandemic began, nearly double its pre-pandemic share, and housed 10 of the 15 fastest-growing large American cities.
  • Movers And Money: Mapping the Flow of Income During the Pandemic — Manhattan recorded the largest county-level income outflow to other states at $16.5bn, with 27.7 cents of every dollar leaving—$4.6bn—going to Florida, including $2.9bn to Miami-Dade County and $1.1bn to Palm Beach County. California had the largest state-level losses, while Florida was the biggest beneficiary with a net gain of $39bn.

AI Summary. US venture capital firms raised $67bn, a six-year low and a 60% drop from the $173bn peak, while value created by US start-up exits fell to $61.5bn from a peak of $797bn, according to private markets data provider PitchBook and the National Venture Capital Association. Roughly one in six start-ups raising cash cut their valuations.

George Hammond Financial Times
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Fundraising by US venture capital firms declined 60% y/y in 2023 to $67B, the lowest level since 2017.

Is US venture capital fundraising falling sharply from its peak?

Core argument: US venture capital firms raised $67bn in 2023, the lowest annual total since 2017 and a 60% drop from the $173bn peak raised in 2022, according to PitchBook and the National Venture Capital Association.

Fundraising by US venture capital firms hit a six-year low in 2023, an ominous sign for start-ups with dwindling cash reserves and fledging businesses reliant on such backing for survival. The $67bn raised by US VCs in 2023 is the lowest annual total since 2017 and represents a 60% drop from the $173bn raised in 2022, the peak year for fundraising, according to analysis by private markets data provider PitchBook and the National Venture Capital Association. The value created by start-up exits in the US last year was just $61.5bn, compared to a 2021 peak of $797bn, according to PitchBook and the NVCA. Roughly one in six start-ups raising cash last year cut their valuations, according to PitchBook. That move is typically anathema for founders and investors who prioritise growth above all else, but Stanford expects that proportion to increase dramatically in 2024 as founders run out of other options.

Takeaways by Macro Roundup® AI

  1. US venture capital firms raised $67bn in 2023, the lowest annual total since 2017 and a 60% drop from the $173bn peak raised in 2022, according to PitchBook and the National Venture Capital Association.
  2. Value created by US start-up exits was $61.5bn in 2023, against a 2021 peak of $797bn, according to PitchBook and the National Venture Capital Association.
  3. Roughly one in six US start-ups raising cash in 2023 cut their valuations, according to PitchBook, and Stanford expects that proportion to increase sharply in 2024 as founders run out of other options.

Related Articles:

  • Data Update 2 for 2023: A Rocky Year for Equities — The implied equity risk premium on the S&P 500 rose from 4.24% to 5.94% over the course of 2022, placing it near the top of its range since 1960, while the expected return on stocks of 9.82% is its highest since 1995. Whether the market is fairly valued turns on whether that risk premium is too high or too low.
  • Mr. Toad’s Wild Ride: The Impact Of Underperforming 2020 and 2021 US IPOs — Between 40% and 60% of US initial public offerings generate negative returns even in favorable periods, so average IPO returns far exceed median returns and depend on a small set of large winners. Excluding just the top 3% of IPOs turns average net returns negative and cuts average absolute returns by more than half.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. Even with three rate cuts, the federal funds rate would end the year between 4.5% and 4.75%, far above the near-zero level at the start of tightening, and the authors expect the Federal Reserve to keep policy restrictive until inflation returns to its 2% target. Long-term rates are also high, reflecting a rising term premium.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal argues that investors should expect rates to remain elevated citing the rise in the term premium driven by widening Federal deficits, the loosening of Japan’s yield curve control campaign, and reduced foreign demand.

Will rate cuts leave monetary policy restrictive?

Core argument: Three Fed rate cuts in 2024, as signaled on December 13, would leave the Fed funds rate at 4.5%–4.75%, far above the virtually zero level when the Fed began tightening in March 2022.

Even if the Fed does cut rates three times in 2024, as signaled on December 13, the Fed funds rate would end the year between 4.5% and 4.75%, still much higher than the virtually zero level when the Fed started its tightening campaign in March 2022. We believe the Fed will keep policy restrictive until it tames inflation back to its 2% annual target, a job that it has yet to fully accomplish. Additionally, long-term rates are high as well, and largely for reasons that aren’t directly tied to the Fed’s ongoing tight monetary policy. The so-called “term premium” has been rising due to a variety of factors including higher borrowing needs by the US Treasury, the loosening of yield-curve control in Japan, and reduced buying and diminished inventory of US sovereign debt held by China and other foreign nations.

Takeaways by Macro Roundup® AI

  1. Three Fed rate cuts in 2024, as signaled on December 13, would leave the Fed funds rate at 4.5%–4.75%, far above the virtually zero level when the Fed began tightening in March 2022.
  2. The authors expect the Fed to keep policy restrictive until inflation returns to its 2% annual target, a job it has yet to fully accomplish.
  3. The term premium has risen on factors including higher US Treasury borrowing needs, the loosening of Japan's yield-curve control, and reduced buying and diminished inventory of US sovereign debt held by China and other foreign nations.

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AI Summary. Mexico imposed a tariff of nearly 80% on some steel imports, including certain Vietnamese exports of cold-rolled steel sheets, after local producers said Chinese steelmakers had strangled their production. Exporters that prove the steel originates outside China are exempt.

Reuters Staff South China Morning Post
Date Posted:

Mexico has announced an 80% tariff on some steel imports from China accusing China of “dumping steel.” @SCMPNews

Mexico has announced an 80% tariff on some steel imports from China accusing China of “dumping steel.” @SCMPNews

Is Mexico raising steel tariffs in response to Chinese imports?

Core argument: Mexico announced a tariff of nearly 80% on some steel imports, following criticism from local producers that Chinese steelmakers have strangled their production.

Mexico announced a nearly 80% tariff on some steel imports on Thursday, following criticism from local producers that Chinese steelmakers have strangled their production. The tariff applies to some Vietnamese exports of cold-rolled steel sheets, although if the groups can prove the steel comes from a country other than China, they are exempt from the tariff, according to a declaration from the economy ministry published in Mexico’s official gazette.

Takeaways by Macro Roundup® AI

  1. Mexico announced a tariff of nearly 80% on some steel imports, following criticism from local producers that Chinese steelmakers have strangled their production.
  2. Mexico's tariff covers some Vietnamese exports of cold-rolled steel sheets, exempting groups that can prove the steel originated in a country other than China.
  3. Mexico's economy ministry set out the steel tariff in a declaration published in the country's official gazette.

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  • Can China Reduce Its Internal Balances Without Renewed External Imbalances? — 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.
  • How the U.S. and EU Could Harmonize Their Approaches to Trade in EVs and Steel — European-made batteries and cars do not straightforwardly qualify for U.S. consumer electric-vehicle subsidies, and U.S. national security tariffs apply even to close security allies, while the European Union prefers responding to Chinese trade distortions only through measures clearly permitted by the World Trade Organization. These competing approaches have fractured transatlantic markets for clean energy goods and steel.