Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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


Friday, January 19, 2024

AI Summary. The Penn Wharton Budget Model projects that exempting employment-based green cards from statutory limits for applicants with U.S. STEM doctoral or master's degrees and their families would cut federal deficits by $129bn over a decade, while a conventional estimate that omits added tax revenue from a larger population shows a $4bn deficit increase.

Douglas Elmendorf and Heidi Williams University of Pennsylvania
Date Posted:

Douglas Elmendorf and Heidi Williams argue that expanding the number of employment-based green cards for applicants with graduate STEM degrees would reduce the deficit by $129 billion between 2025 and 2034 relative to current accounting.

How does counting population growth change immigration policy's budget estimates?

Core argument: The Penn Wharton Budget Model forecasts that exempting STEM doctoral and master's degree holders and their families from statutory employment-based green card limits would reduce federal deficits by $129 billion from 2025 to 2034.

The Penn Wharton Budget Model (PWBM) forecasts that exempting employment-based green cards from statutory limits for applicants (and their families) who have earned a doctoral or master’s degree in a STEM field---similar to Section 80303 in H.R. 4521---would reduce federal budget deficits by $129 billion from 2025 to 2034. In contrast, a conventional budget estimate, which would include projected increases in federal spending but not the effect of a larger population on federal tax revenues, shows an increase in federal deficits of $4 billion. Over the following decade, the difference between estimates under the conventional approach and the population-change approach is even larger, from a $74 billion increase in the budget deficit under the conventional approach to a $634 billion decrease under the population-change approach.

Takeaways by Macro Roundup® AI

  1. The Penn Wharton Budget Model forecasts that exempting STEM doctoral and master's degree holders and their families from statutory employment-based green card limits would reduce federal deficits by $129 billion from 2025 to 2034.
  2. A conventional budget estimate of the same policy, which counts projected higher federal spending but not the tax revenues from a larger population, shows federal deficits rising by $4 billion from 2025 to 2034.
  3. Over the decade after 2034, the Penn Wharton Budget Model puts the gap between approaches at a $74 billion deficit increase under the conventional estimate versus a $634 billion deficit decrease under the population-change estimate.

Related Articles:

  • Third-Country Effects of U.S. Immigration Policy — U.S. H-1B visa denial rates rose from about 6% to 16%, and the authors estimate a 10 percentage point rise in denials increases Canadian applications by 30%, roughly one Canadian application per four forgone visas. More exposed Canadian firms increased sales and hired about 0.5 native workers per immigrant.
  • Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology — Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.
  • New U.S. Immigration Rules Spur More Visa Approvals For STEM Workers — U.S. Citizenship and Immigration Services data show that after the agency revised its guidance for two visa categories open to science, technology, engineering, and math workers, approvals of O-1A "extraordinary ability" visas rose nearly 30% to 4,570 and STEM green cards granted under a "national interest" waiver rose 55% to 70,240, with both holding at those levels the following year.

AI Summary. Health spending as a share of state economic output is highest in West Virginia, at more than one-fourth, and lowest in Washington State and Washington D.C., at less than one-ninth. Poorer states such as Arkansas, Alabama, and Mississippi rank far higher by share of output than by dollars spent per person.

James Bailey Economist Writing Every Day
Date Posted:

Health care spending is supporting the economies of less dynamic states, making up 26% of WV GDP in 2019 vs. 16% for the average state, and 12% in California, 13% in Texas, and 14% in NY. @1ArmedEconomist

Does health care take up a bigger share of poorer states' economies?

Core argument: Health spending accounts for more than a fourth of West Virginia's economy, the highest share measured, while in Washington State and Washington D.C. it makes up less than one ninth.

I wanted to know the states where health care takes up the largest and smallest share of the economy, so I got the data. Health spending is highest in West Virginia, where it makes up more than a fourth of the economy; and lowest in Washington State and Washington D.C., where it makes up less than one ninth of the economy. Many other states that spend a lot in $ also fall a lot in the rankings due to high GDP per capita, including Alaska, New York, and Massachusetts. The states that rise the most in this ranking are poor states like Arkansas, Alabama, and Mississippi. Mississippi rises the most, gaining 37 spots in the rankings of highest-spending states when we go from $ per capita to share of GDP.

Takeaways by Macro Roundup® AI

  1. Health spending accounts for more than a fourth of West Virginia's economy, the highest share measured, while in Washington State and Washington D.C. it makes up less than one ninth.
  2. States with high GDP per capita, including Alaska, New York, and Massachusetts, fall in the rankings when health spending is measured as a share of GDP rather than dollars per capita.
  3. Poorer states rise the most on a share-of-GDP basis, with Mississippi gaining 37 spots among the highest health spenders and Arkansas and Alabama also moving up.

Related Articles:

  • U.S. Health Spending is Slowing Down — U.S. health spending fell to 17.1% of GDP from 17.5% a year earlier and 17.9% the year before, the smallest share since 2014 and below the pre-pandemic level. Adjusted for overall and medical inflation the share was largely unchanged, with the decline driven by higher inflation outside health and lagging medical inflation.
  • A Huge Threat to the U.S. Budget Has Receded. And No One Is Sure Why — Spending per Medicare beneficiary in the US has nearly leveled off over more than a decade, though total enrollment has grown as baby boomers age. Policy changes including cuts to hospital and private plan payments explain some savings, but the Congressional Budget Office attributes most of its lowered forecasts to "technical adjustments" in public health and medical practice.
  • A Unified Long-Run Macroeconomic Projection of Health Care Spending, the Federal Budget, and Benefit Programs in the US — The authors project US debt to reach 134% of national income in 2032 and 263% in 2052, above Congressional Budget Office estimates of 115% and 189%. They attribute higher projected health spending, 29.6% of national income by 2072, to labor shortages in an aging economy's low-productivity healthcare sector.

AI Summary. Meta says it will have 350,000 Nvidia H100 graphics processing units and nearly 600,000 H100-equivalent units of computing power by year's end. At a roughly $25,000 per-unit price implied by an earlier company presentation, 350,000 H100s would cost close to $9bn, though Meta's actual purchase price is unknown.

Tae Kim Barrons
Date Posted:
Is Database:
Database

Meta is spending $9B on 350,000 NvidiaH100 GPUs and buying another 250,000 H100 equivalents this year as the AI-driven capex cycle ramps up.

Meta is spending $9B on 350,000 NvidiaH100 GPUs and buying another 250,000 H100 equivalents this year as the AI-driven capex...

How much are big tech firms spending to stockpile AI chips?

Core argument: Mark Zuckerberg said Meta will hold 350,000 Nvidia H100 GPUs, and almost 600,000 H100 compute equivalent GPUs overall, by the end of this year.

Mark Zuckerberg said the company will have 350,000 NvidiaH100 graphics processing units and overall almost 600,000 H100 compute equivalent GPUs by the end of this year. The H100 is Nvidia’s current top-of-line data center GPU and costs roughly $25,000 per GPU, according to a slide in an earlier company presentation that showed a 16 H100 GPU system costs $400,000. Though, it is unknown at what price Meta can purchase the H100, a quantity of 350,000 at $25,000 per GPU comes to nearly $9 billion.

Takeaways by Macro Roundup® AI

  1. Mark Zuckerberg said Meta will hold 350,000 Nvidia H100 GPUs, and almost 600,000 H100 compute equivalent GPUs overall, by the end of this year.
  2. At roughly $25,000 per H100 — implied by an earlier company slide showing a 16-GPU system priced at $400,000 — 350,000 units would total nearly $9 billion, though Meta's actual purchase price is unknown.
  3. The H100 is Nvidia's current top-of-line data center GPU.

Related Articles:

  • 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.
  • 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.
  • What Happened To The Artificial-Intelligence Investment Boom? — Business capital expenditure is weak worldwide despite artificial intelligence enthusiasm: excluding firms such as Microsoft and Nvidia, S&P 500 companies plan to lift capital spending only about 2.5% in 2024, roughly in line with inflation. A Goldman Sachs tracker of American business outlays is falling 4% year on year.

AI Summary. Taiwanese chip maker TSMC said volume production at the second of its two Arizona semiconductor plants, part of a $40bn project central to U.S. efforts to rebuild domestic chip manufacturing, is now expected in 2027 or 2028 rather than 2026, with the chip type still undetermined.

Yang Jie and Yuka Hayashi Wall Street Journal
Date Posted:

TSMC has delayed the start of production from 2026 to 2027-8 at their $40B fab in Arizona, citing labor shortages and ongoing negotiations over federal subsidies.

TSMC has delayed the start of production from 2026 to 2027-8 at their $40B fab in Arizona, citing labor shortages and...

Are efforts to rebuild domestic chip manufacturing facing new delays?

Core argument: TSMC expects volume production at the second of its two Arizona plants in 2027 or 2028, rather than the scheduled 2026, a setback for a $40 billion project central to Washington's effort to rebuild U.S. chip manufacturing.

Taiwanese chip maker TSMC said it expected to delay production at the second of two semiconductor plants it is building in Arizona, the latest setback for a $40 billion project at the core of Washington’s effort to rebuild U.S. chip manufacturing. The second factory had been scheduled to begin production of 3-nanometer chips in 2026. TSMC Chairman Mark Liu revised that schedule saying that while construction continues, TSMC now is looking at 2027 or 2028 as the timeline for volume production. He also said the specific chip type wasn’t yet determined. Customer demand and government incentives will play a role in deciding whether the second factory makes 3-nanometer chips, he said. The nanometer figure reflects the size of transistors that can be packed onto a chip, with a lower figure designating more advanced technology. Chips labeled 3-nanometer would be among the most advanced manufactured today.

Takeaways by Macro Roundup® AI

  1. TSMC expects volume production at the second of its two Arizona plants in 2027 or 2028, rather than the scheduled 2026, a setback for a $40 billion project central to Washington's effort to rebuild U.S. chip manufacturing.
  2. TSMC Chairman Mark Liu said construction of the second Arizona factory continues but the specific chip type is not yet determined, with customer demand and government incentives shaping whether it makes 3-nanometer chips.
  3. Chips labeled 3-nanometer, the type originally scheduled for TSMC's second Arizona plant, are among the most advanced manufactured today, as a lower nanometer figure designates more advanced technology.

Related Articles:

  • How Real is America’s Chipmaking Renaissance? — Chipmakers have announced more than $200bn of investments in America, including $40bn from TSMC in Arizona, $17bn from Samsung in Texas, and $40bn from Intel in Arizona and Ohio. Even if all planned investments materialize, American output of cutting-edge chips would meet barely a third of domestic demand.
  • TSMC Delays Start of First Arizona Chip Factory, Citing Worker Shortage — Taiwan Semiconductor Manufacturing Company said a shortage of skilled workers is hampering construction of its first Arizona chip factory, pushing mass production of 4-nanometer chips to 2025 from a previously stated 2024, and may require temporarily bringing in experienced technicians from Taiwan. The company expects to invest $40bn in Arizona.
  • The Extreme Shortage of High IQ Workers — Semiconductor manufacturing requires workers of above-average intelligence, with the most demanding roles needing IQs in the top 1 in 1,000 — a pool of about 164,000 people in the US, of whom perhaps 100,000 can be placed in such professions. The author argues this scarcity explains reliance on high-IQ workers abroad and on smarter tools and non-human intelligence.

AI Summary. The most plausible path for the world economy is a messy status quo in which trade remains relatively open by historical standards and grows roughly in line with global output. Some direct US-China links would decouple, but shifting to other suppliers would leave indirect dependence on Chinese inputs.

Martin Wolf Financial Times
Date Posted:

Martin Wolf notes that trade is now growing roughly in line with global output, and argues that concerns about “deglobalization” are overstated.

Is the world economy still on a path of integration?

Core argument: The most plausible path for the world economy is a continuation of a messy status quo in which trade remains relatively open by historical standards and grows roughly in line with world output.

Continuation of a messy status quo seems the most plausible answer. The world economy would remain relatively open by historical standards with trade growing more or less in line with world output. Some decoupling of direct links between the US and China would occur. But the attempted shift by the US (and others) towards other suppliers would leave indirect dependence on inputs imported from China. A large number of countries would continue to maintain trade with the US and its close allies, on the one hand, and China, on the other.

Takeaways by Macro Roundup® AI

  1. The most plausible path for the world economy is a continuation of a messy status quo in which trade remains relatively open by historical standards and grows roughly in line with world output.
  2. Some decoupling of direct US–China links would occur, but the shift by the US and others toward alternative suppliers would leave indirect dependence on inputs imported from China.
  3. A large number of countries would continue to maintain trade with the US and its close allies on one side and with China on the other.

Related Articles:

  • Trade Hyperglobalization is Dead. Long Live…? — Between 1992 and 2008, global exports grew near 10% a year in nominal terms versus 6% GDP growth, lifting exports from under 20% to over 30% of national economies before flattening. Afterward, China's trade-to-GDP ratio fell from 71% to about 35% even as its share of global exports kept rising.
  • 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.
  • 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. The private sector's share of China's 100 largest listed companies by market capitalization fell to 36.8% from 38.1% six months earlier, extending a continuous decline from a peak of 55.4%. The state sector's share, counting both majority state-owned firms and those with 10–50% state ownership, rose above 63%.

Tianlei Huang and Nicolas Véron Peterson Institute for International Economics
Date Posted:

Among China’s 100 largest listed firms, private company share of total market capitalization dropped to 36.8% at the end of 2023, from a peak of 55.4% in mid-2021. @PIIE

Is China's private sector losing ground among its largest listed companies?

Core argument: The private sector's share of China's 100 largest listed companies by aggregate market capitalization fell from 38.1% in mid-2023 to 36.8% at end-2023 in the half-yearly PIIE tracker.

The share of China’s private sector among the country’s 100 largest listed companies, measured by aggregate market capitalization in the half-yearly PIIE tracker, continued to decline through 2023. It dropped from 38.1% in mid-2023 to 36.8% at the end of 2023, extending a nonstop slide since its mid-2021 peak of 55.4%. The private sector is defined restrictively as firms with less than 10 percent state ownership. Meanwhile, the share of the state sector, including both mixed-ownership enterprises (MOEs), in which the state owns between 10 and 50% and majority-owned state-owned enterprises (SOEs), continued to advance in 2023, rising from less than 60% a year ago to more than 63% at the end of 2023.

Takeaways by Macro Roundup® AI

  1. The private sector's share of China's 100 largest listed companies by aggregate market capitalization fell from 38.1% in mid-2023 to 36.8% at end-2023 in the half-yearly PIIE tracker.
  2. China's private-sector share among its top 100 listed firms, defined as firms with less than 10% state ownership, has declined without interruption since its mid-2021 peak of 55.4%, according to the PIIE tracker.
  3. The state sector's share, comprising mixed-ownership enterprises with 10–50% state ownership and majority state-owned enterprises, rose from below 60% a year earlier to above 63% at end-2023.

Related Articles:

  • China Economy Memo: Tempest in a Teapot or Crisis A-Brewing? — The authors argue China is heading into a protracted debt crisis in which about 40% of local government financing vehicles default, hitting regional banks most exposed to such lending. They estimate total losses for these creditors at roughly $5tn, or about 30% of China's GDP.
  • 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 Age Of Malaise — More than 300,000 Chinese people emigrated in a single year, more than double the pace of a decade earlier, with some traveling overland through a half-dozen countries to reach the US. US authorities at the southern border recorded 17,894 encounters with Chinese migrants over ten months, a thirteenfold increase from the prior year.

Monday, January 22, 2024

AI Summary. Long-term shifts in the US economy — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in rural communities, especially for prime working-age men and those without a high school degree.

Andrew Dumont Federal Reserve Board
Date Posted:

While total employment in metro areas has passed its pre-pandemic peak, rural employment is still below 2007 levels. The employment-to-population rate of prime-aged men in metro areas is 84.2 relative to 76.2 for their rural counterparts. @FedResearch

Have long-term economic shifts hurt rural employment more than urban?

Core argument: Long-term U.S. economic shifts — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in many rural, nonmetro communities.

In the United States, long-term changes in the nature of the economy – including advances in technological innovation and automation, declines in the extraction of certain energy resources, increases in globalization, and a shift to the "knowledge-based" economy – have coincided with disproportionately negative employment outcomes in many rural, or "nonmetro," communities, especially for prime working-age men and those with less than a high school degree. These relatively large, negative employment effects may be due, in part, to differences in the historical industrial composition of nonmetro economies (e.g., a relatively large concentration in manufacturing), as well as the lower levels of educational attainment of their residents. In addition to these historical factors, remote places may face an inherent disadvantage in the modern knowledge economy where the clustering of highly skilled workers and firms in dense areas generate increasing returns.

Takeaways by Macro Roundup® AI

  1. Long-term U.S. economic shifts — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in many rural, nonmetro communities.
  2. The negative employment outcomes in nonmetro communities are concentrated among prime working-age men and workers with less than a high school degree.
  3. Differences in the historical industrial composition of nonmetro economies, such as a relatively large concentration in manufacturing, and lower educational attainment among residents may partly explain these employment effects, while remote places may face disadvantage where skilled workers and firms cluster in dense areas.

Related Articles:

  • The World’s Rust Belts: The Heterogeneous Effects of Deindustrialization on 1,993 Cities in Six Countries — A study of 1,993 cities in France, Germany, Italy, Japan, the UK and the US finds former manufacturing hubs lost employment on average after each country's manufacturing peak, though a large share fully recovered. After the peak, hubs with a higher initial share of college-educated workers grew significantly faster.
  • Pandemic Population Boom in Rural Hotspots Sparks Resentment — U.S. rural population grew for a second consecutive year after decades of decline, with non-metro areas outpacing urban growth for the first time in three decades. Gains were concentrated: the 10 rural counties with the largest increases grew about 5% on average versus a 0.4% national rate, and their house prices rose more than 40% over three years.

AI Summary. Pandemic-era house price gains tracked the plunge in mortgage rates, and the initial post-pandemic price dip tracked their rise, but the rebound since early 2023 breaks that relationship and instead matches faster U.S. growth and rising risk asset prices. If mortgage rates stay near current levels, housing activity should increase further.

Matt Klein The Overshoot
Date Posted:

US residential construction and renovation spending has been resilient in the face of higher rates; housing starts are 14% above the pre-pandemic run rate. @M_C_Klein

Are house prices now driven by growth rather than mortgage rates?

Core argument: The pandemic surge in U.S. house prices was consistent with the plunge in mortgage rates, and the subsequent jump in mortgage rates was consistent with the initial downtick in house prices.

The surge in house prices during the pandemic was entirely consistent with the plunge in mortgage interest rates. The post-pandemic surge in mortgage rates was also consistent with the initial downtick in house prices. The turn in house prices since the beginning of 2023 represents a break in the prior relationship, but it is consistent with the broader re-accleration in U.S. growth and risk asset prices over that period. Most of these data are old enough that they do not even reflect the impact of the recent drop in ~1 percentage point drop mortgage rates since October. Should rates stay at current levels, housing activity should ramp up even more.

Takeaways by Macro Roundup® AI

  1. The pandemic surge in U.S. house prices was consistent with the plunge in mortgage rates, and the subsequent jump in mortgage rates was consistent with the initial downtick in house prices.
  2. The turn in U.S. house prices since the start of 2023 breaks the prior relationship with mortgage rates but is consistent with the broader re-acceleration in U.S. growth and risk asset prices.
  3. Most of the house price data predate the roughly 1 percentage point drop in mortgage rates since October, and housing activity should ramp up further if rates stay at current levels.

Related Articles:

  • Higher For Longer and The 2024 Housing Outlook — Sustained higher mortgage rates are expected to weigh most on housing turnover, since nearly all borrowers hold rates below market levels, discouraging moves; the authors project existing home sales of 3.8mn, the fewest annual sales since the early 1990s. Housing starts are projected to fall 4% to 1.34mn.
  • The “New Normal” Mortgage Rate Range — Goldman Sachs economists expect the federal funds rate to eventually stabilize at 3–3.25%, above what the Federal Reserve currently projects for the neutral rate. With a funds rate near 3.25% and a 10-year Treasury yield of 4.45%, 30-year fixed mortgage rates would sit in the low-to-mid 6% range.
  • America’s Missing Empty Homes — Restoring the pre-pandemic 12% vacancy rate would require 2.7m new housing units left entirely empty, or more than 18m additional units if 75% of new units are filled on net. Construction of 1.4m units in the first half of 2023 failed to keep up with demand, pushing unoccupied housing rates lower.

AI Summary. Elevated wage growth can threaten a strong labor market if it raises inflation concerns and leads the Federal Reserve to hold monetary policy tighter, though productivity growth eases that concern. After wage growth exceeded a sustainable benchmark of productivity growth plus the Federal Reserve's 2% inflation target, rebounding productivity and moderating wage growth have narrowed the gap.

Kevin Rinz Briefing Book
Date Posted:

Monthly nominal wage growth is now in line with both the pre-pandemic period and current productivity growth plus 2% inflation, suggesting the current expansion is sustainable. @kevinrinz

Is wage growth returning to a level productivity makes sustainable?

Core argument: U.S. wage growth exceeded a sustainable benchmark — labor productivity growth plus the Federal Reserve's 2% inflation target — beginning in early 2022, but over 2023 productivity rebounded and wage growth moderated, bringing actual wage growth closer to that sustainable level.

Counterintuitively, elevated wage growth could be a problem for sustaining a strong labor market if it generates concerns about (or actual) higher inflation and leads the Federal Reserve to keep monetary policy tighter than it otherwise would have. Labor productivity growth, however, would alleviate this concern. Figure 4 shows the three measures of wage growth considered above alongside a measure of sustainable wage growth that is equal to productivity growth plus the Federal Reserve’s two percent inflation target. From 2001 through 2019, actual wage growth tracked this measure well, and inflation was low and stable. Since the onset of the pandemic, labor productivity has fluctuated widely (partially reflecting shifts in the composition of employment as acutely exposed sectors reacted and adapted to the pandemic), and beginning in early 2022, actual wage growth substantially exceeded the sustainable benchmark. Over the course of 2023, however, productivity has rebounded while wage growth has moderated, bringing actual wage growth closer to a level that would be sustainable.

Takeaways by Macro Roundup® AI

  1. U.S. wage growth exceeded a sustainable benchmark — labor productivity growth plus the Federal Reserve's 2% inflation target — beginning in early 2022, but over 2023 productivity rebounded and wage growth moderated, bringing actual wage growth closer to that sustainable level.
  2. From 2001 through 2019, actual wage growth tracked the sustainable benchmark of productivity growth plus 2% inflation well, and inflation was low and stable over that period.
  3. Elevated wage growth can threaten a strong labor market by raising inflation concerns and leading the Federal Reserve to hold policy tighter than it otherwise would, a risk that labor productivity growth alleviates.

Related Articles:

  • Why Is the Labor Market so Tight? — 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.
  • Are You Better Off Than You Were Four Years Ago? — Inflation-adjusted wages rose over the past four years, including when measured from just before the pandemic, at roughly the same pace as in the preceding years: about 3% cumulative growth adjusted by the consumer price index versus about 4% in 2015-2019, and about 5% growth adjusted by personal consumption prices.
  • 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 University of Michigan's consumer sentiment survey recorded a 29% rise over two months, the largest two-month increase since 1991. The improvement was broad-based across consumers of different ages, incomes, education levels, and regions.

Gwynn Guilford and Amara Omeokwe Wall Street Journal
Date Posted:

Consumer sentiment has surged 29% since November, the largest 2-month gain since 1991; broad-based gains spanned age, income, education, and geographic brackets.

Is consumer sentiment rising broadly across income, age, and region?

Core argument: U.S. consumer sentiment surged 29% since November, the largest two-month increase since 1991, according to the University of Michigan survey released Friday.

Americans are rapidly becoming much more upbeat about the economy. Consumer sentiment surged 29% since November, the biggest two-month increase since 1991, the University of Michigan said Friday. Consumer sentiment leapt 13% in the first half of January from December, the Michigan survey said, after a sharp rise the prior month. The pickup in sentiment was broad-based, spanning consumers of different age, income, education and geography.

Takeaways by Macro Roundup® AI

  1. U.S. consumer sentiment surged 29% since November, the largest two-month increase since 1991, according to the University of Michigan survey released Friday.
  2. Consumer sentiment rose 13% in the first half of January from December, the University of Michigan survey said, following a sharp rise the prior month.
  3. The improvement in U.S. consumer sentiment was broad-based, spanning consumers across age, income, education and geography, the University of Michigan said.

Related Articles:

  • What’s Behind the Recent Slump in Consumer Sentiment? — 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.
  • 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. US goods prices excluding used cars and trucks have been in sequential deflation, while services excluding housing, travel and medical care slowed from an annualized pace above 7% to about 4.5% over three months. If those trends persist, core inflation measures running near 1% annualized over three months are expected to weaken further.

Chris Marsh Money: Inside and Out
Date Posted:

.@GeneralTheorist notes that annualized inflation for services excluding housing, travel, and medical services slowed from above 7% in July to about 4.5% over the past 3 months and argues “disinflation is spreading.”

Is core inflation set to weaken further as goods deflate?

Core argument: US goods prices excluding used cars and trucks have been in sequential deflation since June on a 3-month seasonally adjusted basis and should turn negative year-over-year shortly.

Looking at the 3M growth of seasonally adjusted measures of adjusted goods and services. Goods ex. used cars and trucks have been in sequential deflation since June and should turn negative in YoY% terms shortly. Services ex. housing, travel and medical services slowed from above 7% sequentially in July to about 4.5% over the past 3 months (annualized.) If super core services continue on a slow disinflation path, while goods remain in deflation, then super core CPI, sequentially running at about 1% over 3 months, will continue to weaken from here. As will core PCE which better accounts for changing spending habits.

Takeaways by Macro Roundup® AI

  1. US goods prices excluding used cars and trucks have been in sequential deflation since June on a 3-month seasonally adjusted basis and should turn negative year-over-year shortly.
  2. Services excluding housing, travel and medical care slowed from above 7% annualized sequentially in July to about 4.5% over the past 3 months.
  3. Super core CPI, running at about 1% sequentially over 3 months, would weaken further if services disinflation continues and goods stay in deflation, as would core PCE, which better accounts for changing spending habits.

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AI Summary. Migrants from countries other than Mexico, El Salvador, Guatemala, and Honduras made up more than half of all people apprehended at the US southern border for the first time, with Venezuelans the largest share. Crossings included 43,000 Russians, 42,000 Indians, and 24,000 Chinese, up from 4,100, 2,600, and 450 two years earlier.

Economist Staff The Economist
Date Posted:

In 2023 migrants from countries beyond Mexico and Central America made up more than half of apprehensions at the border; 43,000 Russians, 42,000 Indians, and 24,000 Chinese were detained in 2023 up from 4,100, 2,600 and 450 respectively 2021.

Are migrants at the southern border coming from more distant countries?

Core argument: In fiscal year 2023, migrants from countries other than Mexico, El Salvador, Guatemala, and Honduras made up more than half of all those apprehended at the U.S. southern border for the first time, with Venezuelans the largest share.

In fiscal year 2023, for the first time, migrants from places beyond Mexico, El Salvador, Guatemala, and Honduras made up more than half of all those apprehended at the border. Venezuelans are the largest part of this group. But last year 43,000 Russians, 42,000 Indians, and 24,000 Chinese also made the crossing—up from 4,100, 2,600, and 450, respectively, in 2021. America’s northern border has proved porous, too. In total, some 40,000 Indian and Chinese migrants came south from Canada last year.

Takeaways by Macro Roundup® AI

  1. In fiscal year 2023, migrants from countries other than Mexico, El Salvador, Guatemala, and Honduras made up more than half of all those apprehended at the U.S. southern border for the first time, with Venezuelans the largest share.
  2. Crossings at the U.S. southern border last year included 43,000 Russians, 42,000 Indians, and 24,000 Chinese, up from 4,100, 2,600, and 450 respectively in 2021.
  3. Some 40,000 Indian and Chinese migrants came south from Canada last year, indicating that America's northern border has also proved porous.

Related Articles:

  • U.S. Released More Than 2.3 Million Migrants At Border Since 2021, Data Show — U.S. Customs and Border Protection released more than 2.3m migrants into the United States at the southern border, out of more than 6m taken into custody, according to Department of Homeland Security data. Families made up the majority of those released, with the share of families released reaching 81%.
  • 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%.
  • Immigrants’ Share of the U.S. Labor Force Grows to a New High — Foreign-born workers made up 18.1% of the U.S. labor force, up from 17.4% a year earlier and the highest share in 27 years of Labor Department records. The number of immigrants working or looking for work rose by 1.8m, or 6.3%, to 29.8m.