Edward Conard

Top Ten New York Times Bestselling Author

  • “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 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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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


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%.

Tuesday, January 16, 2024

AI Summary. Americans filed 5.5m applications to start new businesses in a single year, nearly 1.8m of them highly likely to hire employees — both series highs in U.S. Census Bureau Business Formation Statistics. Likely-employer applications ran 37% above pre-pandemic levels, evidence that startup activity has settled at a higher baseline.

Kenan Fikri and Daniel Newman Economic Innovation Group
Date Posted:
Is Database:
Database

An @InnovateEconomy analysis of @uscensusbureau data finds that new business applications from firms that are likely employers hit 1.8mm in 2023, a new record high.

Has US startup activity settled at a higher baseline?

Core argument: Americans filed 5.5 million applications to start new businesses in 2023, nearly 1.8 million of them highly likely to hire employees — both series highs, slightly surpassing 2021's prior record.

Americans filed 5.5 million applications to start new businesses in 2023, nearly 1.8 million of which are highly likely to hire employees. Both figures are series highs, slightly surpassing 2021’s banner year when the disruptions wrought by the pandemic pushed early-stage entrepreneurial activity to its prior record. The latest data from the U.S. Census Bureau’s Business Formation Statistics through December 2023 provide further evidence that the background rate of startup activity in the U.S. economy has settled at much higher levels than before COVID-19 struck. In total, 484,000 more likely employer business applications were filed in 2023 than in 2019, an increase of 37 percent. Last year’s haul was also 8 percent higher than 2022’s.

Takeaways by Macro Roundup® AI

  1. Americans filed 5.5 million applications to start new businesses in 2023, nearly 1.8 million of them highly likely to hire employees — both series highs, slightly surpassing 2021's prior record.
  2. Likely employer business applications in 2023 exceeded 2019 by 484,000, an increase of 37 percent, and ran 8 percent above 2022, according to the U.S. Census Bureau's Business Formation Statistics through December 2023.
  3. The U.S. Census Bureau data provide further evidence that the background rate of U.S. startup activity has settled at much higher levels than before COVID-19 struck.

Related Articles:

  • Surging Business Formation in the Pandemic: Causes and Consequences? — Shifts in consumer demand and in preferences for work and lifestyle during the pandemic created entrepreneurial opportunities, and applications to start businesses produced new firms and establishments that hired workers in large numbers. The authors argue these new businesses drew in quitting workers as founders or hires, implying economic restructuring across industry, geography, and firm size and age.
  • Creative Destruction After the Pandemic — US establishment closures spiked and then returned to normal levels, while new establishment openings reached record highs—peaking at 379,000 in a single quarter—and have since cooled but remain far above any pre-2020 level. Much of this may be new businesses replacing those that closed, and it is unclear whether the new entrants are more productive than the firms they replaced.
  • Business Formation Boom — U.S. high-propensity business applications — those more likely to become employers — ran 40% above their 2019 average, according to Census Bureau data, with the elevated pace persisting after the pandemic. Business deaths also rose, but the net effect still points to strong growth in business formation.

AI Summary. The share of US workers employed by young firms is rising for the first time in decades, with 11.3% of jobs at firms less than 5 years old and 8.6% at firms 6–10 years old. Gains in the share of jobs at firms under 5 years old were larger in transportation and warehousing, management and information, and manufacturing.

Joseph Politano Apricitas Economics
Date Posted:
Is Database:
Database

The pandemic-era entrepreneurship boom has driven an increase in the share of workers employed by firms less than 5 years old to 11.3%, the highest since 2010. @JosephPolitano

Is the share of US jobs at young firms rising again?

Core argument: In 2022, 11.3% of U.S. jobs were at firms less than 5 years old, the highest share since 2010, while 8.6% were at firms 6–10 years old, the highest since 2014.

The end result of this boom in new businesses has been that, for the first time in decades, the share of workers employed by young firms is rising. In 2022, 11.3% of jobs were in firms less than 5 years old, the highest share since 2010, and 8.6% of jobs were in firms 6-10 years old, the highest share since 2014. Plus, in several key sectors, the rise in employment at young firms has been even more pronounced, with the share of jobs in companies below 5 years old or younger rising 1.3 pp in transportation/warehousing, 0.9 pp in Management and Information, and half a pp in Manufacturing. Of course, that still means the vast majority of Americans are employed at firms that are more than a decade old, highlighting just how prolonged the decline in business dynamism has been, but that trend is now finally beginning to be reversed.

Takeaways by Macro Roundup® AI

  1. In 2022, 11.3% of U.S. jobs were at firms less than 5 years old, the highest share since 2010, while 8.6% were at firms 6–10 years old, the highest since 2014.
  2. The share of workers employed by young firms is rising for the first time in decades, with jobs at firms under 5 years old up 1.3 points in transportation and warehousing, 0.9 points in management and information, and 0.5 points in manufacturing.
  3. The vast majority of Americans remain employed at firms more than a decade old, reflecting how prolonged the decline in U.S. business dynamism has been, even as that trend begins to reverse.

Related Articles:

  • Business Applications Eked Out a New Record in 2023 — Americans filed 5.5m applications to start new businesses in a single year, nearly 1.8m of them highly likely to hire employees — both series highs in U.S. Census Bureau Business Formation Statistics. Likely-employer applications ran 37% above pre-pandemic levels, evidence that startup activity has settled at a higher baseline.
  • Creative Destruction After the Pandemic — US establishment closures spiked and then returned to normal levels, while new establishment openings reached record highs—peaking at 379,000 in a single quarter—and have since cooled but remain far above any pre-2020 level. Much of this may be new businesses replacing those that closed, and it is unclear whether the new entrants are more productive than the firms they replaced.
  • The Economics of Inequality in High-Wage Economies — United States Income, Wealth, Consumption, and Inequality Diana Furchtgott-Roth

AI Summary. US foreign-born employment has returned to its pre-pandemic trend while native-born employment remains about 6m jobs below trend, leaving roughly 5m native-born workers missing even after accounting for about 1m Covid deaths. The author argues these missing workers explain the tight labor market and that wage inflation is likely to remain elevated.

Torsten Sløk Apollo
Date Posted:
Is Database:
Database
Is Important:
Important

Native-born employment is 6mm jobs under the pre-pandemic trend while foreign-born employment is back at trend. Netting out 1mm Covid deaths Torsten Sløk @apolloglobal finds 5mm native-born workers are “missing.”

Do missing native-born workers explain the tight labor market?

Core argument: Native-born US employment remains about 6 million jobs below its pre-pandemic trend while foreign-born employment has returned to trend, indicating the post-Covid normalization in labor force participation has been driven mainly by immigration.

Foreign-born employment in the US is back at the pre-pandemic trend, and native-born employment is still 6 million jobs below the pre-pandemic trend. In other words, the post-Covid normalization in the labor force participation rate has mainly been driven by immigration. At the same time, the number of retired individuals has remained on trend. The bottom line is that even taking into account that about 1 million died from Covid, there are still around 5 million native-born workers missing. These 5 million missing workers are the reason why the labor market is tight and why wage inflation is likely to remain elevated. Put differently, there is still plenty of room for job growth.

Takeaways by Macro Roundup® AI

  1. Native-born US employment remains about 6 million jobs below its pre-pandemic trend while foreign-born employment has returned to trend, indicating the post-Covid normalization in labor force participation has been driven mainly by immigration.
  2. Accounting for the roughly 1 million Covid deaths, around 5 million native-born workers are still missing, which the author identifies as the reason the labor market is tight and wage inflation is likely to remain elevated.
  3. The number of retired individuals in the US has remained on trend, and the missing native-born workers leave plenty of room for further job growth.

Related Articles:

  • Immigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995 — U.S. labor force data show immigrants accounted for 49% of labor force growth over roughly the past three decades and their children another 21%, together about 70% of an increase of nearly 32.8m workers. Immigrants rose from about 10% to 18% of the labor force, and immigrants plus their children from 18% to 29%.
  • Growth in Working-Age Population Ends. That’s Not All Bad — Immigration is the only factor keeping the US working-age population from shrinking, as about 4 million baby boomers turn 65 each year and more than 820,000 Americans aged 15–64 died last year. Forecasts project immigration will hold the US 15-to-64 population roughly constant through 2100, versus projected declines of 20% across high-income countries and 62% in China.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.

AI Summary. The employment rate for women aged 25–54 reached an all-time high of 75.3%, about 1pp above prior peaks and 6pp above a decade earlier. Rising educational attainment — with the college-educated share of prime-age women climbing from below 30% to more than 45% — added 2.7pp to their employment rate, and employment among college-educated mothers of young children rose 10pp.

Alex Arnon, Aidan O'Connell, Jesús Villero, and Youran Wu University of Pennsylvania
Date Posted:

A record prime-age female employment rate of 75.3% is being driven by two trends: rising female educational attainment and greater participation of college-educated mothers with young children.

Does rising educational attainment explain record prime-age women's employment?

Core argument: The share of prime-age women employed reached an all-time high of 75.3%, nearly 1pp above its prior peaks in spring 2000 and just before the pandemic, and 6pp above a decade ago.

The share of prime-age women employed reached an all-time high of 75.3% over the last few months. This is almost 1pp higher than its previous peaks in the spring of 2000 and just before the pandemic, and 6pp higher than a decade ago. One reason for the high level of women’s employment is increased educational attainment. Over the last two decades, the share of prime-age women with a college degree rose from below 30% to more than 45%. Since college graduates are more likely to work, this raised the overall employment rate of prime-age women, adding 2.7pp since 2000. Another reason is that college-educated mothers of young children are more likely to be employed. The share of college graduates with a child under 10 who worked rose 10pp from the early 2000s to 2023. These changes were largest for mothers of infants and toddlers and were only briefly interrupted by the pandemic.

Takeaways by Macro Roundup® AI

  1. The share of prime-age women employed reached an all-time high of 75.3%, nearly 1pp above its prior peaks in spring 2000 and just before the pandemic, and 6pp above a decade ago.
  2. The share of prime-age women with a college degree rose from below 30% to more than 45% over two decades, and because college graduates are more likely to work, this added 2.7pp to prime-age women's employment rate since 2000.
  3. The share of college graduates with a child under 10 who worked rose 10pp from the early 2000s to 2023, with the largest changes for mothers of infants and toddlers and only a brief interruption during the pandemic.

Related Articles:

  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — 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.
  • 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.

AI Summary. Federal Reserve policymakers' median estimate of the equilibrium real policy rate is 0.5%; on that basis, repeating the past decade's equity returns over cash would require a real equity total return of 12.4%. With a dividend yield of 1.5%, the author argues that under even extreme earnings-growth scenarios valuations would have to exceed the Tech Bubble peak.

Jordan Brooks AQR
Date Posted:

Jordan Brooks argues the S&P 500’s 11.9% CAGR for the last decade is unlikely to be repeated as it would require “exceptional real earnings growth and all-time high valuations…at least 80% more per dollar of earnings than at present.”

Can the past decade's equity returns over cash be repeated?

Core argument: Repeating the past decade's 11.9% excess-of-cash equity return would require a 12.4% real total return, given the FOMC median r-star estimate of 0.5% as the expected real cash return over the next decade.

The median estimate of the equilibrium real funds rate (often called “r-star”) by FOMC members is 0.5%. Let’s use that as our best guess of real cash returns over the next decade. If real cash returns average 0.5% per year, then hitting an 11.9% excess-of-cash return requires a real equity market total return of 12.4%. The current dividend yield is 1.5%.12 That leaves 12.4% – 1.5% = 10.9% to be explained by a combination of real earnings growth and multiple expansion. Intuitively, the lower (higher) real earnings growth, the more (less) valuations must richen. Exhibit 3 plots the combination of real earnings growth and terminal CAPE ratios required to match last decade’s return. In even the most extreme real earning scenarios, stock market valuations would need to pop to all-time highs, levels meaningfully higher than the Tech Bubble peak.

Takeaways by Macro Roundup® AI

  1. Repeating the past decade's 11.9% excess-of-cash equity return would require a 12.4% real total return, given the FOMC median r-star estimate of 0.5% as the expected real cash return over the next decade.
  2. With a dividend yield of 1.5%, 10.9 percentage points of the required 12.4% real return would have to come from real earnings growth and multiple expansion combined.
  3. Across even the most extreme real earnings growth scenarios plotted, matching last decade's return would require stock market valuations to reach all-time highs, meaningfully above the Tech Bubble peak.

Related Articles:

  • The Big Picture: Back to the Future — 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.
  • 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%.
  • 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%.

AI Summary. Federal Reserve officials aim both to shrink the central bank's bond holdings, especially mortgage bonds, on the view that portfolio size and composition affect how others price risky assets, and to reduce bank reserves to "ample" rather than "abundant" levels. Aggregate reserve estimates may overstate ampleness by ignoring concentration across institutions.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein writes that, although the Fed would dub current reserves as “ample,” the Fed may nonetheless taper its balance sheet reduction early because the distribution of reserves is tilted towards a few big banks.

Do aggregate reserve measures overstate how ample bank reserves really are?

Core argument: Fed officials pursue two distinct goals: shrinking the central bank's bond holdings, especially mortgage bonds, because they believe portfolio size and composition affect how others price risky assets, and separately reducing the supply of bank reserves.

Fed officials have two related but distinct objectives. First, they want the central bank to hold fewer bonds (especially mortgage bonds), because they believe that the size and composition of the Fed’s portfolio affects how everyone else prices risky assets.At the same time, Fed officials also want to reduce the supply of reserves in the banking system independent of what happens to the asset side of the balance sheet. This is why they say they want reserves to be “ample” rather than “abundant”. The problem is that these aggregate estimates may overstate the “ampleness” of reserves because they ignore issues of distribution. Stress could show up even when reserves levels seem “ample” if those reserves are concentrated in a few institutions and cannot easily be lent or otherwise transferred to other banks that might need them to make payments or cover deposit outflows.

Takeaways by Macro Roundup® AI

  1. Fed officials pursue two distinct goals: shrinking the central bank's bond holdings, especially mortgage bonds, because they believe portfolio size and composition affect how others price risky assets, and separately reducing the supply of bank reserves.
  2. Fed officials say they want reserves to be "ample" rather than "abundant", reflecting a desired reduction in reserve supply independent of what happens to the asset side of the balance sheet.
  3. Aggregate reserve estimates may overstate ampleness by ignoring distribution, since stress can emerge when reserves are concentrated in a few institutions and cannot easily be lent or transferred to banks needing them for payments or deposit outflows.

Related Articles:

  • Crash Up — Large fiscal deficits paired with expected interest rate cuts are argued to drive strong demand for equities, as newly issued Treasury debt accumulates with a concentrated group of wealthy holders who may rebalance out of bonds as yields fall. Combined with a structural decline in equity supply, this points to upward price pressure.

AI Summary. International retractions of research papers rose from about 400 in 2010 to more than 10,000 in 2023, an annual record, according to the journal Nature, which attributes part of the increase to paper-writing mills. Watchdog groups including Retraction Watch, the Center for Open Science, and Data Colada now scrutinize published research.

Anemona Hartocollis The New York Times
Date Posted:
Is Database:
Database

Over 10,000 research papers were retracted in 2023 globally according to @Nature, up from 400 in 2010. The retractions are due to both increased scrutiny but also the rise of “paper writing mills” or low-quality journals.

Over 10,000 research papers were retracted in 2023 globally according to @Nature, up from 400 in 2010. The retractions are...

Are retractions of research papers rising sharply?

Core argument: Retracted research papers exceeded 10,000 internationally in 2023, an annual record, up from about 400 in 2010, according to the journal Nature.

A cottage industry of checking research papers sprung up in the last two decades, including Retraction Watch, the Center for Open Science, and Data Colada, a blog dedicated to unmasking research based on bad data. The number of retracted research papers has grown dramatically over time, to more than 10,000 retractions internationally in 2023, an annual record, according to the journal Nature, up from about 400 papers in 2010, when Retraction Watch began its work. This may be in part because the scrutiny has intensified, said Ivan Oransky, co-founder of Retraction Watch. Nature also blamed the rise of paper-writing mills. “What’s different this time is the levels at which this seems to be striking — Harvard and Stanford,” Dr. Oransky said. “These are cataclysmic events.”

Takeaways by Macro Roundup® AI

  1. Retracted research papers exceeded 10,000 internationally in 2023, an annual record, up from about 400 in 2010, according to the journal Nature.
  2. Nature attributed part of the rise in retractions to paper-writing mills, while Retraction Watch co-founder Ivan Oransky said intensified scrutiny may also play a part.
  3. A cottage industry of research checking has emerged over two decades, including Retraction Watch, the Center for Open Science, and Data Colada, with Oransky saying cases now strike Harvard and Stanford.

Related Articles:

  • A Looming Retraction Casts a Shadow Over a Field of Physics — A major physics journal is retracting a paper on how a chemical compound transforms when compressed between diamonds, co-led by a University of Rochester physicist who also claimed to have discovered a room-temperature superconductor. While the researcher defends the work, some scientists who reviewed reports on it say the data submitted were falsified.
  • The U.S. Is Turning Away From Its Biggest Scientific Partner at a Precarious Time — More than 40% of high-quality U.S. scientific papers involve collaboration with researchers abroad, and China and the U.S. are each other's largest research partners, with their joint work consistently among the most-cited across fields. In some strategic areas, analysis of publication data finds the U.S. depends on China more than China depends on the U.S.

AI Summary. The UK's defence secretary described the world as having entered a "prewar" phase and urged allies to raise defence spending, arguing the number of global conflicts is more likely to grow than shrink and could involve Russia, China, Iran and North Korea. Britain spends over £50bn a year, just above 2% of GDP, on defence.

Lucy Fisher and John Paul Rathbone Financial Times
Date Posted:

Grant Shapps, the British defence secretary, argues that the world has moved into a “prewar” phase, noting that “In five years’ time, we could be looking at multiple theatres [of conflict] involving Russia, China, Iran, [and] North Korea.”

Should allies raise defence spending as global conflicts multiply?

Core argument: UK Defence Secretary Grant Shapps said Britain spends over £50bn a year, just over 2% of GDP, on defence, and reiterated the government's "aspiration" to reach 2.5% of GDP as economic conditions allow, without calling for extra spending.

Grant Shapps, the UK’s defence secretary warned that the world had moved to a “prewar” phase as he called on allies to lift defence spending to meet the rising threat. “The era of peace dividend is over...In five years’ time, we could be looking at multiple theatres [of conflict] involving Russia, China, Iran, North Korea. Looking at today’s conflicts across the world, is it more likely that the number grows or reduces? I suspect we all know the answer — it’s likely to grow.” Shapps said Britain was spending more than £50bn a year — or just over 2% of GDP — on defence, and had increased funds to modernise the UK’s nuclear deterrent and replenish stockpiles of weapons supplied as military aid to Ukraine. However, he made no calls for extra UK spending on defence, other than to reiterate that it was the government’s “aspiration” to spend 2.5% of GDP on defence as economic conditions allowed.

Takeaways by Macro Roundup® AI

  1. UK Defence Secretary Grant Shapps said Britain spends over £50bn a year, just over 2% of GDP, on defence, and reiterated the government's "aspiration" to reach 2.5% of GDP as economic conditions allow, without calling for extra spending.
  2. Shapps warned the world has moved to a "prewar" phase and said that within five years there could be multiple theatres of conflict involving Russia, China, Iran and North Korea, with the number of conflicts likely to grow.
  3. Shapps said the UK has increased funds to modernise its nuclear deterrent and replenish stockpiles of weapons supplied as military aid to Ukraine, and called on allies to lift defence spending, declaring "the era of peace dividend is over".

Related Articles:

  • The ‘Eye-Watering’ Cost of Ending the Peace Dividend — Sweden announced plans to raise defense spending by more than 25% to reach NATO's target of 2% of GDP, a level met by only 11 of the alliance's 31 members. Meeting such commitments requires a major reordering of budget and electoral priorities, as when Denmark funded higher spending by cancelling a public holiday.
  • India’s Military Studying Options for Any China-Taiwan War — India's military has commissioned a study of how a war over Taiwan involving the US and its allies would affect India and how it could respond. Options under study include serving as a logistics hub for allied warships, aircraft and armies, or engaging China directly along their shared northern border.
  • Japan Raises Military Spending To Counter China With More Missiles and Ships — Japan's defense budget rises 13% over the prior fiscal year's planned spending, part of a five-year, ¥43tn plan to lift military spending to roughly 2% of gross domestic product, versus the roughly 1% cap maintained since the 1960s. Purchases include Aegis-equipped destroyers and Tomahawk cruise missiles, with the largest share directed at the Self-Defense Forces' sustainability and resilience.