Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “…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
  • “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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, January 11, 2024

AI Summary. Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.

Nicholas Eberstadt American Enterprise Institute
Date Posted:
Is Database:
Database

Nicholas Eberstadt notes that the labor force participation rate for prime-age women is up 5pp since the pandemic to an all-time high, while the rate for prime-age men was up by 1pp to a level that matches the trough of the 1983 recession. @AEIecon

Why have prime-age men's work rates lagged women's recovery?

Core argument: Indexing 2019 pre-pandemic levels to 100, prime-age female labor force participation stood 5 points higher at the end of 2023 than a decade earlier, while prime-age male participation rose by barely 1 point.

Figure 4, scales labor force participation rates for prime-age men and prime-age women against their 2019 pre-pandemic levels. In the decade from late 2013 to late 2023, female workforce participation rates witnessed a roaring comeback: pushing well above the pre-pandemic ceiling from significantly depressed pre-Trump levels. For prime-age men, the snap-back might be described as tepid: barely recovering to 2019 levels. If we scale 2019 at 100, prime-age female LFPRs were five points higher at the end of 2023 than a decade earlier—while prime-male rates were up by barely a point. Work rates for prime-age men today—after an economic recovery, during an economic expansion, and in the midst of a labor shortage—are barely as high as they were at the bottom of the trough after the severe Reagan-era recession. Yes: that 1983 floor for prime male work rates in the wake of what had been the worst postwar downturn to date is now, forty years later, the new normal for “full or near-full employment” for American men.

Takeaways by Macro Roundup® AI

  1. Indexing 2019 pre-pandemic levels to 100, prime-age female labor force participation stood 5 points higher at the end of 2023 than a decade earlier, while prime-age male participation rose by barely 1 point.
  2. Prime-age women's participation pushed well above pre-pandemic levels from significantly depressed earlier levels, while prime-age men's participation barely recovered to its 2019 level.
  3. Work rates for prime-age American men, after a recovery and amid an expansion and a labor shortage, are barely as high as at the 1983 trough following the Reagan-era recession, the worst postwar downturn to that point.

Related Articles:

  • Men’s Falling Labor Force Participation Across Generations — Each successive generation of prime-age men has shown higher rates of not participating in the labor force, with millennials starting at a higher level and declining more steeply into their mid-30s, a pattern driven by school enrollment. Given rising educational attainment, the authors suggest the sustained rise in male nonparticipation may slow, which could benefit economic growth.
  • Wage Inequality and the Rise in Labor Force Exit: The Case of US Prime-Age Men — Among US prime-age men without college degrees, a 10% rise in expected earnings is associated with a 0.12 percentage point lower labor force exit rate, while a 10% rise in peers' reference earnings is associated with a 0.13 percentage point higher exit rate, fully offsetting the earnings effect.
  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.

AI Summary. The author argues the economy avoided a slowdown for two reasons: post-pandemic demand for consumer services such as restaurants, hotels, and air travel kept spending strong, and easier financial conditions boosted growth. The author expects the economy to reaccelerate, renewing upward pressure on inflation and prompting a more hawkish Federal Reserve.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal argues that the cyclical components of the economy have been rebounding as financial conditions eased in the aftermath of SVB, and expects a reacceleration of GDP growth which may require further rate hikes.

Why did the economy avoid a slowdown despite rate hikes?

Core argument: Easing financial conditions following SVB boosted U.S. GDP growth to 4.9% in the third quarter of 2023, one reason the economy did not slow under Fed rate hikes.

Why did the economy not slow down more, and why did Fed hikes not result in a rise in unemployment? There are two reasons. First, the post-Covid economy saw surprising strength in the non-cyclical components of the economy, such as eating at restaurants, staying at hotels, and flying on airplanes, etc. Consumers wanted to travel and go to concerts and sporting events after Covid, and this has kept consumer spending strong. Second, financial conditions eased significantly following SVB, and this boosted GDP growth to 4.9% in the third quarter of 2023. Similarly, the rally in the stock market, credit markets, and Treasury markets since October and after the Fed pivot in December have also eased financial conditions significantly, likely boosting the cyclical components of GDP over the coming months. The bottom line is that the non-cyclical components continue to grow steadily because of post-Covid strong demand for consumer services, and the cyclical components are rebounding because of easier financial conditions. The likely scenario is that the economy will reaccelerate over the coming months, which will put renewed upward pressure on inflation and, hence, bring back a more hawkish Fed.

Takeaways by Macro Roundup® AI

  1. Easing financial conditions following SVB boosted U.S. GDP growth to 4.9% in the third quarter of 2023, one reason the economy did not slow under Fed rate hikes.
  2. Post-Covid demand for consumer services — restaurants, hotels, flights, concerts, and sporting events — kept the non-cyclical components of the economy growing steadily and consumer spending strong.
  3. The rally in stock, credit, and Treasury markets since October and the Fed's December pivot are argued to lift cyclical GDP, reaccelerating the economy, renewing upward pressure on inflation, and bringing back a more hawkish Fed.

Related Articles:

  • The Grind Ahead — Higher short-term and long-term interest rates are flowing through to credit and interest costs, which the authors expect to produce "the grind" — a gradual decline in growth and in the health of corporate and household balance sheets — as a dominant driver of economies and markets over the next 12–18 months.
  • Macro Outlook 2024: The Hard Part Is Over — Goldman Sachs projects limited recession risk, holding a 15% US recession probability, and expects tailwinds to global growth including strong real household income growth, a smaller drag from monetary and fiscal tightening, recovering manufacturing, and central banks more willing to cut rates if growth slows. It projects core inflation falling to 2–2½%.
  • Global Views: The Great Disinflation — Across advanced and emerging economies that experienced a large post-Covid price surge, core inflation is estimated to have run at a 2.2% annualized pace over three months, and 1.3% in the latest month. On that basis, the authors now expect earlier and more aggressive interest-rate cuts from several major developed-market central banks.

AI Summary. US oil and natural gas production has been setting records, yet industry employment is 128,700 below its mid-2014 peak and 41,200 below pre-pandemic levels, with job gains stalling after rising from an early-2021 low. Productivity in the US oil and gas industry has risen dramatically.

Justin Fox Bloomberg
Date Posted:

Rising oil and gas labor productivity has allowed production to hit all-time highs while the sector has reduced employment by 41,200 since February 2020 and by 128,700 since 2014. @foxjust

Does record oil and gas production still mean more industry jobs?

Core argument: US oil and gas industry employment is down 128,700 from its mid-2014 peak and down 41,200 from February 2020, even as the country breaks production records for both fuels this year.

The US is the world’s top producer of oil and natural gas, and its production of both has been breaking records this year. It doesn’t feel like a boom in the places where oil and gas is produced. Even amid those production records, industry employment is down 128,700 from its mid-2014 peak and down 41,200 from just before the pandemic in February 2020. And while employment has risen from its early 2021 low, the job gains seem to have stalled last summer. The productivity of the US oil and gas industry has exploded.

Takeaways by Macro Roundup® AI

  1. US oil and gas industry employment is down 128,700 from its mid-2014 peak and down 41,200 from February 2020, even as the country breaks production records for both fuels this year.
  2. The US is the world's top producer of oil and natural gas, yet oil- and gas-producing regions do not feel like they are in a boom, as the industry's productivity has exploded.
  3. US oil and gas employment has risen from its early 2021 low, but those job gains appear to have stalled last summer.

Related Articles:

  • Oil Market Caught By Surprise As US Output Surges — US crude oil production reached an all-time high of 13.2mn barrels a day, more than any other country and about one in eight barrels of global output, outpacing official forecasts. The International Energy Agency attributes 80% of this year's growth in global oil supply to the US, complicating OPEC+ efforts to prop up prices through output cuts.
  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.
  • America’s Energy Export Boom — The US produces more crude oil than any other country and, counting total petroleum products, more than Saudi Arabia and Russia combined, with crude and natural gas output at record highs and gas production up 7% from its 2019 peak. Net US energy exports reached $70bn over 12 months despite falling oil and gas prices.

AI Summary. Microsoft overtook Apple as the world's most valuable company, reaching a market value of $2.87tn. Investor enthusiasm for generative artificial intelligence has fueled a rally in shares of Microsoft, the biggest backer of OpenAI.

Tim Bradshaw Financial Times
Date Posted:

Microsoft overtook Apple as the world’s largest firm by market value as investors price in MSFT artificial intelligence growth potential. MSFT is the largest backer of OpenAI, the developer of ChatGPT.

Has AI enthusiasm made Microsoft the world's most valuable company?

Core argument: Microsoft's shares rose about 1% in early Thursday trading to lift its market value to $2.87tn, overtaking Apple as the world's most valuable company as Apple's shares fell by almost 1%.

Microsoft usurped Apple to become the world’s biggest company by market value, as the boom in artificial intelligence brought a new twist to the decades-long rivalry between the two Big Tech groups. The software company’s shares climbed around 1% in early trading on Thursday to take its market value to $2.87tn, just ahead of the iPhone maker, whose shares fell by almost 1%. Investors’ excitement about the new wave of generative AI has fuelled a rally in the shares of Microsoft, which is the biggest backer of OpenAI, the maker of the popular AI-powered chatbot ChatGPT.

Takeaways by Macro Roundup® AI

  1. Microsoft's shares rose about 1% in early Thursday trading to lift its market value to $2.87tn, overtaking Apple as the world's most valuable company as Apple's shares fell by almost 1%.
  2. Investors' excitement about generative AI has fuelled a rally in Microsoft shares, with Microsoft the biggest backer of OpenAI, maker of the chatbot ChatGPT.
  3. The artificial intelligence boom has brought a new twist to the decades-long rivalry between Microsoft and Apple.

Related Articles:

  • Top 10 Charts of 2023 — Goldman Sachs projects that artificial intelligence could drive a capital investment cycle reaching almost 2.5% of US GDP by 2032, up from 0.5% of GDP.
  • Microsoft Infrastructure – AI & CPU Custom Silicon Maia 100, Athena, Cobalt 100 — Microsoft has planned annual datacenter spending of more than $50bn, which exceeds the annual spend of megaprojects such as nationwide rail networks, dams, and the Apollo moon program. The buildout is aimed at accelerating artificial general intelligence and extending generative AI from productivity applications to leisure.
  • Assessing the Implications of a Productivity Miracle — If artificial intelligence can perform economically valuable cognitive tasks at very low marginal cost, consumers would buy far more of the cheapened goods and spend the savings in other categories, expanding activity and employment in sectors facing new demand. Where supply is inherently limited, such as real estate, those savings could bid up prices and produce inflation.

AI Summary. Private-sector funding of space-related companies has topped $10bn, close to a tenfold rise over the past decade, though the US government remains the largest source of space funding. If current momentum continues, commercial funding for space ventures could surpass government funding within 20 years.

Ryan Brukardt, Jesse Klempner, Bob Sternfels, and Brooke Stokes McKinsey & Company
Date Posted:

Private capital is flowing into the space sector; according to @McKinsey there was $10 billion of private space funding in 2021, close to a tenfold increase over the last decade.

Will commercial funding of space ventures overtake government funding?

Core argument: Private-sector funding in space-related companies topped $10 billion in 2021, close to a tenfold increase over the prior decade, with 2022 recording the second-most inflows in history.

Capital inflows are increasing. While the US government remains the primary source of funding, private companies, especially new space players, have substantially increased their investment in recent years. Private-sector funding in space-related companies topped $10 billion in 2021—close to a tenfold increase over the past decade (2022, despite much angst, had the second-most inflows in history). If the current momentum continues, commercial funding for space ventures could surpass government funding in the next 20 years. We have seen this same trend occur during the early days of mass commercial air travel (enabled by government investment in aviation during World War II) and the internet (originally conceived as a national-security network in the United States).

Takeaways by Macro Roundup® AI

  1. Private-sector funding in space-related companies topped $10 billion in 2021, close to a tenfold increase over the prior decade, with 2022 recording the second-most inflows in history.
  2. The US government remains the primary source of space funding, though commercial funding for space ventures could surpass government funding within the next 20 years if current momentum continues.
  3. Space's funding trajectory echoes the early days of mass commercial air travel, enabled by World War II government investment in aviation, and the internet, originally conceived as a US national-security network.

Related Articles:

  • SpaceX Launches 15 Starlink Satellites, Lands Rocket At Sea — SpaceX launched 15 more Starlink internet satellites aboard a Falcon 9 rocket from California's Vandenberg Space Force Base, with the rocket's first stage landing on a drone ship at sea about 9.5 minutes after liftoff. SpaceX has launched 4,918 Starlink spacecraft to date, more than 4,500 of which are currently functional.
  • Despite An Explosion, Elon Musk Is Closer to His New Space Age — SpaceX says it is producing Super Heavy boosters and Starships at a healthy pace, though damage to the launch support structure may require a significant redesign and cause delays. A Starship launched by a Super Heavy would lift 100-150 tonnes to orbit, against 64 tonnes for Falcon Heavy and 24 for the space shuttle.

AI Summary. Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.

Qianer Liu Financial Times
Date Posted:

To circumvent American export controls Chinese firms are repurposing Nvidia gaming graphics cards at scale in an effort to support their AI sector.

To circumvent American export controls Chinese firms are repurposing Nvidia gaming graphics cards at scale in an effort to...

Are export controls pushing Chinese firms to repurpose gaming chips for AI?

Core argument: Thousands of Nvidia gaming graphics cards are stripped of their core components each month in Chinese factories and workshops and reinstalled on new circuit boards, according to two factory managers and two chip buyers familiar with the situation.

Chinese companies are resorting to chips repurposed from standard PC gaming products to develop artificial intelligence tools after Washington blocked US exports of high-performance processors. Thousands of Nvidia gaming graphics cards are being stripped of their core components in factories and workshops every month, before being installed on new circuit boards, according to two factory managers and two chip buyers familiar with the situation. Industry experts said the repurposing of chips from cards designed to be slotted into consumer PC motherboards to improve gaming graphics amounted to a rough workaround to tackle the lack of high-end processors in China.

Takeaways by Macro Roundup® AI

  1. Thousands of Nvidia gaming graphics cards are stripped of their core components each month in Chinese factories and workshops and reinstalled on new circuit boards, according to two factory managers and two chip buyers familiar with the situation.
  2. Chinese companies are developing artificial intelligence tools using chips repurposed from standard PC gaming products after Washington blocked US exports of high-performance processors.
  3. Industry experts described the repurposing of consumer gaming cards as a rough workaround for China's lack of high-end processors.

Related Articles:

  • China AI & Semiconductors Rise: US Sanctions Have Failed — China's Kirin 9000S is a better-designed, leading-edge chip than the West realizes, developed without access to extreme ultraviolet lithography or cutting-edge US intellectual property, indicating existing export controls have not worked. The authors argue only decisive, full-scale measures—not half measures—could prevent China from mass-manufacturing chips needed for high-end military applications.
  • Raimondo Says Commerce Needs More Money to Halt China Chip Drive — The US Commerce Department says its roughly $200m budget is inadequate to enforce semiconductor export controls aimed at limiting China's access to artificial intelligence chips, and has called for greater funding. It has warned that chips redesigned to fall just below existing thresholds will themselves be restricted, arguing national security outweighs chipmakers' short-term revenue.
  • US Restricts Nvidia Made-for-China Chips in New Export Rules — The US is restricting sales of Nvidia's A800 and H800 chips, designed specifically for the Chinese market, and curbing exports to two Chinese artificial-intelligence chip firms. The export controls aim to block China's access to advanced semiconductor technology with military uses.

Friday, January 12, 2024

AI Summary. The secular backdrop has shifted from disinflationary to more inflationary, with interest rates no longer near zero and real rates no longer negative. Household balance sheets are as healthy as they have been in 20 years, leaving room to borrow, while the public sector is as indebted as it has ever been.

Karen Karniol-Tambour, Melissa Saphier, and John Michael Cassetta Bridgewater Associates
Date Posted:

Bridgewater argues we are going “back to the future” entering a regime dominated by higher interest rates, higher inflation, and geopolitical tensions; in this environment cash and “risk free” bonds look more attractive.

Has the secular backdrop shifted from disinflationary to inflationary?

Core argument: The secular inflation backdrop has shifted from disinflationary to more inflationary, with interest rates no longer at zero and real rates no longer negative for the first time in over a decade.

Inflation is no longer a “non-factor.” Even as acute inflation pressures have abated recently, the secular backdrop has shifted from disinflationary to more inflationary. For the first time in over a decade, money isn’t free. Interest rates aren’t zero; real rates aren’t negative. Acute deleveraging is behind us, and household balance sheets are as healthy as they have been in 20 years. For the first time in decades, there is room for households to leverage up in order to finance an expansion more rapid than their income growth. Deleveraging was relatively painless because the government offset it. As a result, the public sector is now as indebted as it has ever been and never so dependent on the Fed to fund it. The US has a kind of “Dutch disease” from its financial assets. US assets are now the lion’s share of global asset markets. That, by default, makes the US a recipient of significant foreign inflows from savers. You can think of American financial assets almost like a “commodity”—one that savers need to park their money in. This leads to a special kind of “Dutch disease” akin to what economies experience when the world purchases their oil or other commodities. The dollar is secularly strong, and US assets have been less vulnerable to poor performance, with ample inflows to finance historically high government borrowing and continue pushing up relative equity valuations.

Takeaways by Macro Roundup® AI

  1. The secular inflation backdrop has shifted from disinflationary to more inflationary, with interest rates no longer at zero and real rates no longer negative for the first time in over a decade.
  2. US household balance sheets are as healthy as they have been in 20 years, leaving room for households to leverage up and finance an expansion faster than their income growth.
  3. US assets make up the lion's share of global asset markets, drawing foreign savings inflows that finance historically high government borrowing, keep the dollar secularly strong, and push up relative equity valuations.

Related Articles:

  • Macro Outlook 2024: The Hard Part Is Over — Goldman Sachs projects limited recession risk, holding a 15% US recession probability, and expects tailwinds to global growth including strong real household income growth, a smaller drag from monetary and fiscal tightening, recovering manufacturing, and central banks more willing to cut rates if growth slows. It projects core inflation falling to 2–2½%.
  • The Grind Ahead — Higher short-term and long-term interest rates are flowing through to credit and interest costs, which the authors expect to produce "the grind" — a gradual decline in growth and in the health of corporate and household balance sheets — as a dominant driver of economies and markets over the next 12–18 months.
  • 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. US electricity demand is growing after years of stagnation, driven by artificial intelligence, electric vehicles, and announced industrial projects, prompting warnings about power grid stability. Nationwide forecasts for five-year electricity demand growth rose from 2.6% to 4.7%, based on utility filings to federal regulators, with retail sales projected at a record.

Jamie Smyth and Eva Xiao Financial Times
Date Posted:
Is Database:
Database

US electricity demand is booming after years of stagnation, driven by new manufacturing capacity and data centers, prompting warnings over the stability of the power grid.

Is rising US electricity demand straining the power grid?

Core argument: Grid Strategies reports that nationwide five-year forecasts for US electricity demand growth rose from 2.6% in 2022 to 4.7% in 2023, based on an analysis of utility filings to the Federal Energy Regulatory Commission.

US electricity demand is booming after years of stagnation, driven by emerging technologies such as artificial intelligence and electric vehicles and prompting warnings over the stability of the power grid. Retail sales of electricity will total nearly 4bn kilowatt-hours this year, a record, the government’s energy analysis agency forecast this week. Grid Strategies, a US consultancy, said that nationwide forecasts for electricity demand growth over the next five years had “shot up” from 2.6% in 2022 to 4.7% in 2023, in a report based on an analysis of utility filings to the Federal Energy Regulatory Commission. The largest driver of increased electricity demand was $481bn in industrial projects that have been announced since 2021, including the manufacturing of chips and batteries. Another big driver was the anticipated construction of $150bn in new data centres by 2028 and clean technologies such as electric heat pumps, water heaters and cars.

Takeaways by Macro Roundup® AI

  1. Grid Strategies reports that nationwide five-year forecasts for US electricity demand growth rose from 2.6% in 2022 to 4.7% in 2023, based on an analysis of utility filings to the Federal Energy Regulatory Commission.
  2. The largest driver of rising US electricity demand was $481bn in industrial projects announced since 2021, including chip and battery manufacturing, followed by $150bn in anticipated new data centres by 2028.
  3. US retail electricity sales will total nearly 4bn kilowatt-hours this year, a record, the government's energy analysis agency forecast, with demand driven by emerging technologies such as artificial intelligence and electric vehicles and prompting warnings over grid stability.

Related Articles:

  • Elon Musk’s Latest Mission: Rev Up the Electricity Industry — U.S. electricity demand has grown at an average of 1% a year over the past 20 years, but McKinsey projects it will double by 2050 and PG&E expects a 70% rise over the next 20 years. Deloitte estimates the largest U.S. electric companies will together spend as much as $1.8tn by 2030.
  • Electricity Grids and Secure Energy Transitions — Under a scenario based on announced government pledges, global electricity demand is projected to grow 2.7% per year, more than doubling from just under 25,000 terawatt-hours to nearly 54,000 terawatt-hours by 2050. Hydrogen production via electrolysis and electric vehicles account for more than half of that projected growth.
  • 2023 Long-Term Reliability Assessment — North American grid reliability assessments project electricity capacity deficits over the next decade in areas where generator retirements are expected before replacement resources are in service to meet rising demand. Ten-year peak demand and energy growth forecasts are higher than at any point in the past decade, contributing to lower reserve margins.

AI Summary. U.S. goods imports from China fell more than 20% year over year, leaving China at 13.9% of total U.S. imports, its smallest share since 2004 after peaking above 21%. Mexico's share topped 15%, positioning it to become the top exporter to the U.S. for the first time since 2000.

Rintaro Tobita and Iori Kawate Nikkei Asia
Date Posted:

For the first time since 2006 China was not the top exporter to the United States in 2023. China’s share of American imports was 13.9% down from 21% in 2017. Mexico, the largest exporter to the US in 2023, had a 15% share.

Is Mexico replacing China as the top exporter to the U.S.?

Core argument: Mexico is set to become the top exporter to the U.S. for the full year for the first time since 2000, with U.S. imports from Mexico on track for a record high in 2023 and its share topping 15% over the first 11 months.

China was likely knocked off the perch as the top exporter to the U.S. for the first time since 2006 last year. American goods imports from China dropped more than 20% on the year for the January-November period, according to U.S. Commerce Department data released this week. China accounted for 13.9% of total U.S. imports, the smallest share since 2004, after peaking at more than 21% around 2017. U.S. exports to China have stayed roughly flat on the year. Mexico is set to take the lead for the full year for the first time since 2000. U.S. imports from the country are on track to set a record high in 2023, and its share of the total topped 15% for the first 11 months of the year. Imports from the European Union also reached an all-time high for that period.

Takeaways by Macro Roundup® AI

  1. Mexico is set to become the top exporter to the U.S. for the full year for the first time since 2000, with U.S. imports from Mexico on track for a record high in 2023 and its share topping 15% over the first 11 months.
  2. U.S. imports from the European Union reached an all-time high for the January–November period, while U.S. exports to China stayed roughly flat on the year, according to U.S. Commerce Department data.

Related Articles:

  • Mexico Targets Chinese Steel Imports With Increased Tariff Of Nearly 80% — 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.
  • 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.
  • 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.

AI Summary. A venture capital analysis ranks industries by an "Opportunity Ratio" — market size divided by current startup funding — labeling those with the highest ratios underfunded opportunities. The article counters that high ratios need not signal good investments, since some industries face shrinking demand or prohibitive regulation, while investors concentrate in software because that is where growth is.

James Bailey Economist Writing Every Day
Date Posted:

VC firm Fifty Years takes a contrarian approach and highlights “massive markets with little startup investment and ripe conditions for disruption,” including the paper industry, home construction, plastics, and education. @1ArmedEconomist

Do underfunded industries represent overlooked investment opportunities?

Core argument: Venture capital firm Fifty Years catalogs which industries receive the most and least investment relative to their size, constructing an "Opportunity Ratio" of current market size divided by current startup funding.

Venture capital firm Fifty Years has done a nice job cataloging exactly which industries see the most, and least, investment relative to their size. Though unfortunately, they aren’t very clear about their data source for it. They use this to create an “Opportunity Ratio”- current market size divided by current startup funding. They call the industries with the largest Opportunity Ratios the “Top Underfunded Opportunities.” I don’t necessarily agree; some industries face shrinking demand, prohibitive regulation, or other fundamental issues making them bad candidates for investment. Conversely, investors haven’t just focused on software randomly or through imitation; they see that it is where the growth is.

Takeaways by Macro Roundup® AI

  1. Venture capital firm Fifty Years catalogs which industries receive the most and least investment relative to their size, constructing an "Opportunity Ratio" of current market size divided by current startup funding.
  2. Fifty Years labels the industries with the largest Opportunity Ratios its "Top Underfunded Opportunities," though the firm is not clear about the data source behind the rankings.
  3. A high Opportunity Ratio need not signal a good investment, since some industries face shrinking demand, prohibitive regulation, or other fundamental issues, while investors concentrate on software because they see growth there.

Related Articles:

  • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.
  • US Venture Capital Fundraising Hits A 6-Year Low — 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.
  • 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.

AI Summary. Census Bureau estimates show 16.1m US residents moved to another state over a two-year period. A Bloomberg analysis of state population forecasts finds swing-state counties that Democrats won in 2020 will have gained on net almost twice as many people as Republican-won counties, though North Carolina is an exception.

Shawn Donnan Bloomberg
Date Posted:

Between election day 2020 and 2024 30mm Americans will have moved to a different state. A Bloomberg analysis of swing states found that Biden 2020 counties will see population gains almost twice as large as Trump counties by election day this year.

Are swing-state counties gaining population unevenly across party lines?

Core argument: Census Bureau estimates show 16.1 million US residents moved to another state across 2021 and 2022 combined.

16.1 million US residents who moved to another state in 2021 and 2022 combined, according to Census Bureau estimates. A Bloomberg analysis of state population forecasts found swing-state counties that Biden won in 2020 will have on net gained almost twice as many people by election day as those that voted for Trump. In Georgia, where Biden beat Trump by fewer than 12,000 votes in 2020, the population will have grown by almost 395,000, according to state forecasts. State forecasts show Maricopa County, Arizona, which Biden won narrowly and where 2 million ballots were cast in 2020, will have 337,000 more residents on election day 2024. Biden’s razor-thin 2020 margin there suggests that capitalizing on that growth may not be as easy as in Wisconsin, Georgia or Nevada. The relocation boom is not a tailwind for Biden everywhere. In North Carolina, the growth in red counties appears to have more than offset the rapid growth in the Raleigh-Durham metro area’s blue suburbs, according to state forecasts.

Takeaways by Macro Roundup® AI

  1. Census Bureau estimates show 16.1 million US residents moved to another state across 2021 and 2022 combined.
  2. A Bloomberg analysis of state population forecasts found swing-state counties Biden won in 2020 will have gained on net almost twice as many people by election day as counties that voted for Trump.
  3. State forecasts put Georgia's population growth at almost 395,000 and Arizona's Maricopa County at 337,000 more residents by election day 2024, while in North Carolina growth in red counties appears to more than offset rapid growth in Raleigh-Durham's blue suburbs.

Related Articles:

  • Trump’s Electoral College Edge Seems to Be Fading — Polling suggests the demographic basis of the Republican candidate's Electoral College advantage may be eroding, with relative Democratic resilience among white voters and Republican strength among nonwhite voters. Because nonwhite voters are underrepresented in the most critical battleground states, such gains would tend to boost the national vote more than the battlegrounds.
  • Young Families Have Not Returned to Large Cities Post-Pandemic — The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.
  • Tax Data Reveals Large Flight of High Earners from Major Cities During the Pandemic — Internal Revenue Service migration data show net migration subtracted more than $68bn of taxable income from large urban counties in a single year, about 2% of their total, while adding to taxable income in all other county types. Manhattan lost over $16bn and San Francisco over $8bn, or 20%.