Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a 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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, January 30, 2024

AI Summary. Falling Nordic birth rates are now driven by childlessness rather than smaller families, with roughly three-quarters of Finland's recent fertility decline attributable to people who have no children. Nearly 40% of Finnish men with low education are childless at 45, and most have no partners.

Henry Mance Financial Times
Date Posted:

Despite aggressive pro-natal policies such as world-class maternity care, generous parental leave, and a right to preschool childcare, Finland’s fertility rate was 1.27 in 2023, down 1/3 since 2010.

Despite aggressive pro-natal policies such as world-class maternity care, generous parental leave, and a right to preschool...

Is rising childlessness, not smaller families, driving falling birth rates?

Core argument: In Finland, three-quarters of the recent decline in fertility is attributable to people who have no children, with childlessness rather than smaller families now the key dynamic.

Anna Rotkirch, research director at the Family Federation of Finland’s Population Research Institute [noted] "The strange thing with fertility is nobody really knows what’s going on. The policy responses are untried because it’s a new situation. It’s not primarily driven by economics or family policies. It’s something cultural, psychological, biological, cognitive." Until recently, fertility decline was driven by families having fewer children than their parents and grandparents. Now the key dynamic is childlessness. In Finland, 3/4 of the recent decline in fertility is attributable to people who have no children. In the family barometer surveys, among Finns born in the late 1970s and 1980s, fewer than one in twenty said at the age of 25 that they didn’t want to have children. Among those born in the late 1980s and early 1990s, that proportion rose to nearly one in four. Nearly 40% of Finnish men with low education are now childless at the age of 45 (and probably for life): a “huge” proportion. Most have no partners. Men are as likely as women to say they want children but are more likely to be childless.

Takeaways by Macro Roundup® AI

  1. In Finland, three-quarters of the recent decline in fertility is attributable to people who have no children, with childlessness rather than smaller families now the key dynamic.
  2. Among Finns born in the late 1970s and 1980s, fewer than one in twenty said at age 25 that they did not want children, rising to nearly one in four among those born in the late 1980s and early 1990s.
  3. Nearly 40% of Finnish men with low education are childless at age 45, most of them without partners, and Anna Rotkirch of the Family Federation of Finland argues the decline is cultural, psychological, biological and cognitive rather than driven by economics or family policies.

Related Articles:

  • The World Is Becoming More African — United Nations forecasts project Africans will rise from 8% of the world's people in 1950 to one-quarter by 2100, with the continent holding the world's largest workforce within a decade. McKinsey & Company estimates Africa's per-person economic growth has averaged 1% annually since 1990, against India's 5% and China's 9%.
  • Korea Finance Nominee Likens Aging Demographics to Titanic Iceberg — South Korea's finance minister nominee argues the country's aging population requires immediate preparation, noting efforts to raise the world's lowest fertility rate would take at least 30 years to yield benefits. A shrinking workforce is a major cause of South Korea's declining potential growth rate, with births per woman at 0.78.
  • Thoughts and Comments on Demographic Aging and Shrinking — As an arithmetic matter, the greying of societies is driven much more by smaller families than by longer lives, which the author attributes to a withering away of the family. Demographic simulations project that by 2040 couples in their 60s in China will likely have at least one living parent to care for, and many will have two or three.

AI Summary. Walmart store managers can earn up to about $404,000 a year by combining an average salary of $128,000, up from $117,000, with bonuses of as much as 200% of base salary and maximum stock grants. About 75% of its managers started as hourly employees, taking about five years on average to reach management.

Jaewon Kang Bloomberg
Date Posted:

Walmart is offering store managers bonuses of up to 200% of base salary plus stock grants that allow top performers to earn over $400,000/year; 75% of Walmart’s managers started as hourly employees.

Walmart is offering store managers bonuses of up to 200% of base salary plus stock grants that allow top performers to earn...

How much can retail store managers earn with stock grants?

Core argument: A Walmart store manager earning the new average salary, hitting the top end of the bonus range, and receiving the maximum stock grant could make $404,000 a year.

Stock grants are the company’s latest effort to boost compensation for managers. It said in January that the average store manager’s salary will increase to $128,000 from $117,000. Walmart is also redesigning its bonus program so that store profits play a bigger role in determining awards. Managers can now receive as much as 200% of their base salary in bonuses if targets are met. About 75% of Walmart’s managers started as hourly employees and on average took about five years to land a management role, according to the company. A manager making the new average salary and hitting the top end of the bonus range could make $404,000 a year with the maximum stock grant.

Takeaways by Macro Roundup® AI

  1. A Walmart store manager earning the new average salary, hitting the top end of the bonus range, and receiving the maximum stock grant could make $404,000 a year.
  2. Walmart said in January that the average store manager's salary will rise to $128,000 from $117,000, and managers can now receive as much as 200% of base salary in bonuses if targets are met.
  3. About 75% of Walmart's managers started as hourly employees and on average took about five years to reach a management role, according to the company.

Related Articles:

  • Everyone Wants to Work at UPS After Teamsters Deal — UPS lowered its full-year profit forecast, citing the volume impact from labor negotiations and costs tied to its tentative labor agreement. Under the five-year contract, full-time drivers are set to earn about $170,000 in annual pay and benefits by its end, while part-time union employees earn at least $25.75 an hour plus full health care and pension benefits.
  • Falling College Wage Premiums by Race and Ethnicity — The college wage premium is largest for Asian workers, whose college graduates earn more than twice what high school graduates earn — about a 120% premium versus roughly 70–80% for Black, Hispanic, and White workers. The premium has edged down slightly for all groups except Hispanic workers since the pandemic recession.
  • 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. Real business fixed investment continues to expand, with manufacturing construction reaching an all-time high alongside rising semiconductor fabrication building. Manufacturing construction contributed more than 0.3% to overall US growth over the past year, its largest contribution in postwar history, while real electric power infrastructure investment rose more than 13.3%.

Joseph Politano Apricitas Economics
Date Posted:

Real investment in electric power infrastructure was up 13.3% y/y in 2023. Overall manufacturing construction contributed more than 0.3% to US GDP growth, its largest contribution since the Second World War. @JosephPolitano

Is manufacturing construction driving stronger-than-expected US growth?

Core argument: Manufacturing construction has contributed more than 0.3% to U.S. GDP growth over the last year, its largest contribution in postwar American history, as semiconductor fabricator construction rises in the wake of the CHIPS Act.

Real nonresidential fixed investment continues to boom thanks to manufacturing construction, which grew to another all-time high amidst the ongoing rise in semiconductor fabricator construction in the wake of the CHIPS Act. Over the last year, manufacturing construction has contributed more than 0.3% to overall GDP growth, its largest contribution in postwar American history. Real investments in electric power infrastructure have also risen more than 13.3% over the last year, and even real construction within the remote-work-battered office sector is up 2.7%.

Takeaways by Macro Roundup® AI

  1. Manufacturing construction has contributed more than 0.3% to U.S. GDP growth over the last year, its largest contribution in postwar American history, as semiconductor fabricator construction rises in the wake of the CHIPS Act.
  2. Real nonresidential fixed investment continues to boom on manufacturing construction, which grew to another all-time high.
  3. Real investment in electric power infrastructure rose more than 13.3% over the last year, and real construction in the remote-work-battered office sector is up 2.7%.

Related Articles:

  • US Manufacturers to Temper Investment Pace After Vibrant 2023 — US manufacturers' investment in plants and production facilities rose almost 63% in a year, the largest annual advance since 1951, reflecting federal incentives and spending deferred during the pandemic. Purchasing and supply executives expect outlays to increase almost 12% this year after rising nearly 15%.
  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • 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.

AI Summary. Global spending on the clean-energy transition rose 17% to a record $1.8tn, covering renewable power, electric vehicles, hydrogen production and other technologies, with total funding reaching about $2.8tn including supply chains and $900bn in financing. BloombergNEF reports this remains short of a net-zero emissions trajectory.

Will Wade Bloomberg
Date Posted:

A Bloomberg analysis finds global spending on the clean-energy transition was up 17% in 2023 to $1.8T; including supply chain spending funding was about $2.8T.

Is record clean-energy spending enough to reach net-zero emissions?

Core argument: Global spending on the clean-energy transition rose 17% to a record $1.8 trillion last year, according to BloombergNEF, covering renewable energy installation, electric vehicle purchases, hydrogen production systems, and other technologies.

Global spending on the clean-energy transition hit record highs as the world moves to rein in climate change, but it’s still not enough to get on track to net-zero emissions. Total spending surged 17% last year to $1.8 trillion, according to a report Tuesday from BloombergNEF. These include investments to install renewable energy, buy electric vehicles, build hydrogen production systems, and deploy other technologies. Add in the investments in building out clean-energy supply chains, as well as $900 billion in financing, and the total funding in 2023 reached about $2.8 trillion.

Takeaways by Macro Roundup® AI

  1. Global spending on the clean-energy transition rose 17% to a record $1.8 trillion last year, according to BloombergNEF, covering renewable energy installation, electric vehicle purchases, hydrogen production systems, and other technologies.
  2. Including clean-energy supply chain investment and $900 billion in financing, total funding reached about $2.8 trillion in 2023, according to BloombergNEF.
  3. Record clean-energy spending remains insufficient to put the world on track for net-zero emissions, according to BloombergNEF.

Related Articles:

  • Reconciling The Tension Between Green Spending and Debt Sustainability — The green energy transition is likely to reduce growth for some time, and with the gap between interest rates and growth rates near zero in many countries, stabilizing debt ratios requires primary budget balances to eventually reach zero or a small surplus. That end constraint cannot be altered; the only margin governments have is how quickly they reach it.
  • Copper Producers Warn of Lack of Mines to Meet Demand for Metal — Copper producers warn that existing and planned mines are insufficient to meet expected demand, which is projected to climb as the world electrifies and as living standards rise in India and other developing nations. Anglo American estimates Western living standards require 200-250kg of copper per person, versus a global average of 60kg.
  • 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 venture capital firms hold $311bn in unspent cash, having deployed only about half of a record $435bn raised from investors between 2020 and 2022, according to private markets data company PitchBook. Investors in these funds are pressing them to return capital rather than make risky start-up bets.

George Hammond and Tabby Kinder Financial Times
Date Posted:

US VC firms have invested just half of the $435B they raised between 2020-2022 according to PitchBook data. VC firms currently have $311B of “dry powder” and are coming under pressure from LPs to cut their fund sizes and forgive commitments.

Are venture capital firms holding back cash instead of funding start-ups?

Core argument: US venture capital firms hold $311bn in unspent cash, having deployed only half of the record $435bn they raised from investors during the pandemic-era boom of 2020–2022, according to PitchBook.

US venture capitalists are sitting on $311bn in unspent cash, as they shy away from risky bets on Silicon Valley start-ups and concentrate on finding ways to return capital to their own backers. American VC groups have deployed just half of a record $435bn they raised from investors during the pandemic-era boom between 2020 and 2022, according to private markets data company PitchBook. VCs are coming under increasing pressure to return capital to their own backers — institutional investors, foundations, and pension funds, known as “limited partners”. “LPs don’t usually like to put pressure on VCs to spend money, but if you’re entering your third year of not doing anything, they’re starting to ask what are my fees for,” said a Silicon Valley venture capital investor. “In the first tech bubble crash [in 2000] there were a number of funds who downsized their funds significantly,” he said. “I would hope that we do see that, venture firms cutting their fund size and forgiving commitments to their investors and resizing. That would be a really good outcome.”

Takeaways by Macro Roundup® AI

  1. US venture capital firms hold $311bn in unspent cash, having deployed only half of the record $435bn they raised from investors during the pandemic-era boom of 2020–2022, according to PitchBook.
  2. US venture capitalists are shying away from risky bets on Silicon Valley start-ups and concentrating on returning capital to their limited partners, which include institutional investors, foundations, and pension funds.
  3. A Silicon Valley venture capital investor said limited partners facing a third year of inactivity are starting to ask what their fees are for, and expressed hope that firms cut fund sizes and forgive investor commitments, as a number of funds downsized after the 2000 crash.

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%.
  • High Interest Rates Crushed Startup Investment. Here Is What Could Revive It — U.S. venture funding for startups peaked above $300bn—more than double the prior year—before a series of steep interest-rate increases, the fastest in four decades, curbed appetite for risky startup bets and pushed funding down for a second straight year to $167bn.
  • Data Update 4 for 2024: Risk enters the Equation — Across a universe of 47,698 companies, the median cost of capital for a US company is estimated at 7.9%, down from 9.6% a year earlier entirely because of declines in the price of risk, namely equity risk premiums and default spreads, though still above a historic low of 5.8%.

AI Summary. The European Commission is set to conclude an anti-subsidy investigation into Chinese electric vehicle production that could raise tariffs, and is weighing emergency support and an anti-dumping probe for solar panel manufacturing. Western critics argue China's policymaking has been mercantilist for decades, methodically targeting domestic supply-chain self-reliance.

Joe Leahy, James Kynge, and Sun Yu Financial Times
Date Posted:

The European Commission is completing an anti-subsidy investigation that could lead to higher tariffs for Chinese EV imports. There is also concern over the potential dumping of Chinese batteries and wind and solar components as Chinese output soars.

Will China's industrial subsidies trigger new Western trade barriers?

Core argument: The European Commission is set to conclude an anti-subsidy investigation into Chinese electric vehicle production that could result in higher tariffs on Chinese imports.

Later this year, the European Commission is set to conclude an anti-subsidy investigation into Chinese EV production that could lead to higher tariffs for Chinese imports. Brussels is also considering emergency support measures for its solar panel manufacturing industry, including an anti-dumping investigation. The US, meanwhile, has slapped export controls on high-technology shipments to China. Beijing has attacked the EU anti-subsidy investigation into EVs as “naked protectionism” and has criticised “de-risking”. But western critics argue China’s policymaking has been mercantilist for decades, with the methodical setting of targets to increase domestic supply chain self-reliance. Foreign companies complain they are facing growing obstacles to accessing the Chinese market.

Takeaways by Macro Roundup® AI

  1. The European Commission is set to conclude an anti-subsidy investigation into Chinese electric vehicle production that could result in higher tariffs on Chinese imports.
  2. Brussels is weighing emergency support measures for European solar panel manufacturing, including an anti-dumping investigation, while the US has imposed export controls on high-technology shipments to China.
  3. Beijing calls the EU electric vehicle anti-subsidy investigation "naked protectionism" and criticises "de-risking," while western critics argue China has pursued mercantilist policy for decades by methodically setting targets for domestic supply chain self-reliance.

Related Articles:

  • The Hamilton Index, 2023: China Is Running Away With Strategic Industries — An analysis of value-added output in 10 strategically important advanced industries, together accounting for over $10tn in global production, found China was the leading producer in seven and produced more than all other nations outside the top 10 combined. The authors argue China's gains came at the expense of the US and other advanced economies.
  • 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.
  • How the U.S. and EU Could Harmonize Their Approaches to Trade in EVs and Steel — European-made batteries and cars do not straightforwardly qualify for U.S. consumer electric-vehicle subsidies, and U.S. national security tariffs apply even to close security allies, while the European Union prefers responding to Chinese trade distortions only through measures clearly permitted by the World Trade Organization. These competing approaches have fractured transatlantic markets for clean energy goods and steel.

Wednesday, January 31, 2024

AI Summary. Prime-age employment rates are somewhat higher in major European nations than in the US, and output per hour worked is nearly identical. US real GDP grew 53% versus Europe's 31% over two decades, but almost all the gap reflects faster US working-age population growth: real GDP per working-age adult rose 31% in the US and 29% in the euro area.

Paul Krugman Krugman Wonks Out
Date Posted:

Between 1999 and 2019 real US GDP grew 53% vs. 31% in Europe. Almost all of the difference was driven by growth in the working-age population: 17% in the US vs. 2% in Europe. @paulkrugman

Does faster population growth explain the US-Europe growth gap?

Core argument: Real GDP per working-age adult rose 31% in the United States and 29% in the euro area, a gap the author describes as basically inside the margin of error.

At this point adults in their prime working years are actually somewhat more likely to be employed in major European nations than in America. Europeans also know all about information technology, and productivity — gross domestic product per hour worked — is virtually the same in Europe as it is here. In real terms, the U.S. economy grew a lot more btw 1999 and 2019 — 53% versus 31%. But almost all of that difference is explained by the fact that the U.S. working-age population (conventionally, if somewhat unfortunately, defined as adults 15 to 64) grew a lot, while Europe’s hardly grew at all (and has been declining in recent years). Real G.D.P. per working-age adult rose 31% in the United States and 29% — basically inside the margin of error — in the euro area.

Takeaways by Macro Roundup® AI

  1. Real GDP per working-age adult rose 31% in the United States and 29% in the euro area, a gap the author describes as basically inside the margin of error.
  2. The U.S. economy grew 53% in real terms between 1999 and 2019 versus Europe's 31%, with almost all of that difference explained by growth in the U.S. working-age population aged 15 to 64, while Europe's hardly grew and has recently declined.
  3. Adults in their prime working years are somewhat more likely to be employed in major European nations than in America, and productivity measured as GDP per hour worked is virtually the same in Europe as in the United States.

Related Articles:

  • Productivity Has Grown Faster in Western Europe than in America — Adjusted for purchasing power, the EU's GDP is roughly 95% of America's, the same share as a decade earlier, while at market exchange rates US prices went from 5.4% above EU levels to 46% higher, largely because of a strong dollar. GDP per person has still grown faster in America than in most of Western Europe.
  • Comparing EU-to-US Output Per Hour — European Union output per hour worked has risen from about 72% of the US level in the early 2000s to about 82%. The EU's 28% shortfall in GDP per capita versus the US is roughly two-thirds attributable to lower output per hour and one-third to fewer hours worked; Germany's shortfall reflects fewer hours alone.
  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.

AI Summary. Studies of large language models across tasks including software coding, consulting, and writing find double-digit productivity gains appearing within months, with less-skilled workers typically benefiting most. Given the large share of modern work these tools can augment, the author projects US productivity growth near 3% annually in the 2020s, roughly double the Congressional Budget Office's 1.4% projection.

Tej Parikh Financial Times
Date Posted:

.@erikbryn argues that generative AI will drive annual productivity growth over twice the CBO’s 1.4% forecast in the 2020s, citing recent research showing double-digit productivity gains on some tasks.

.@erikbryn argues that generative AI will drive annual productivity growth over twice the CBO’s 1.4% forecast in the...

Will AI double US productivity growth this decade?

Core argument: Erik Brynjolfsson expects U.S. productivity growth in the 2020s to run closer to 3% per year, roughly twice the 1.4% average the Congressional Budget Office projects, or more.

A big percentage of the work that is done in a modern economy is amenable to being augmented by LLMs and generative AI. The effects on those tasks have been significant — double-digit productivity gains within just a few months in some of the cases I’ve studied. Multiply the large percentage of affected tasks by sizeable productivity gains for each one and you get a big total economic impact. I’m betting that productivity growth is maybe significantly higher in the 2020s than the Congressional Budget Office is projecting. They projected 1.4% average per year. I think it could be twice that — closer to 3% — maybe more. There have been other studies that have looked at roles from software coding to management consulting, and different kinds of writing tasks. And each of them found a very similar pattern where 1) there were often double-digit gains in productivity, 2) the less skilled workers typically benefited more, and 3) the gains showed up within just a few months.

Takeaways by Macro Roundup® AI

  1. Erik Brynjolfsson expects U.S. productivity growth in the 2020s to run closer to 3% per year, roughly twice the 1.4% average the Congressional Budget Office projects, or more.
  2. Brynjolfsson reports double-digit productivity gains within a few months in some cases he has studied, and argues a large percentage of work in a modern economy is amenable to augmentation by large language models and generative AI.
  3. Studies spanning software coding, management consulting, and writing tasks found a similar pattern of often double-digit productivity gains, with less skilled workers typically benefiting more and gains appearing within a few months.

Related Articles:

  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.
  • Centaurs and Cyborgs on the Jagged Frontier — In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.
  • The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market — Freelancers in occupations most exposed to generative AI saw employment and earnings decline, with the authors estimating a 2% drop in jobs and a 5.2% drop in monthly earnings on an online labor platform. Offering high-quality service did not mitigate the effect, and top-rated freelancers appear disproportionately hurt.

AI Summary. Strong US productivity growth over the past 40 years has coincided with periods when the employment rate for people aged 25–54 was above 80%, including the late 1990s, 2019, and 2023. Excluding recession-distorted observations, the author estimates that a 1% higher prime-age employment rate is associated with an additional 0.3% of productivity growth.

Skanda Amarnath Employ America
Date Posted:

.@IrvingSwisher uses 1986-2023 data to conclude that a 1% gain in the prime-age employment rate adds 0.3% to annual productivity growth. He argues that productivity growth in 2023 was driven by full employment, not AI.

Does high prime-age employment drive stronger productivity growth?

Core argument: In a univariate linear specification excluding recession-distorted observations, a 1% higher prime-age (25–54) employment rate translates into an additional 0.3% of productivity growth.

The evidence keeps pointing to high employment rates aiding productivity growth. We now have three distinct episodes in which productivity growth outperformed in the past 40 years for reasons other than aggregate job loss: the late 1990s, 2019, and 2023. What do those periods have in common? The Prime-Age 25-54 Employment Rate was elevated and above 80%, such that labor market was in a more mature state and job and hours growth was primed to endogenously cool. Productivity growth is a multi-causal phenomenon, but recent history suggests that getting to elevated levels of prime-age employment raises the odds of achieving impressive growth outcomes. In a univariate linear specification that excludes recession-distorted observations, 1% higher on the Prime-Age Employment Rate translates into an additional 0.3% of productivity growth.

Takeaways by Macro Roundup® AI

  1. In a univariate linear specification excluding recession-distorted observations, a 1% higher prime-age (25–54) employment rate translates into an additional 0.3% of productivity growth.
  2. Three episodes in the past 40 years — the late 1990s, 2019, and 2023 — saw productivity growth outperform for reasons other than aggregate job loss, and each coincided with a prime-age employment rate above 80%.
  3. The author attributes exceptional 2023 productivity growth to fiscal supports, supply chain healing, and full employment rather than AI, describing productivity growth as a multi-causal phenomenon.

Related Articles:

  • Productivity in the World Economy During and After the Pandemic — American labor productivity rose well above its pre-pandemic estimated trend starting in 2020, but subsequently returned to that trend and, by early 2023, fell slightly below it. The estimated trend allows for a slowdown after 2004, capturing the end of the Internet-led boom.
  • 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.
  • The U.S. Economy is Roaring. Why Should Rates Come Down? — Traders and Federal Reserve officials expect short-term interest rates to fall sharply on the assumption the economy resembles its pre-pandemic state, but the data suggest a period of structurally faster growth more like the late 1990s, with inflation-adjusted U.S. output up more than 3% in 2023 versus 0.7% the prior year.

AI Summary. Within U.S. manufacturing, output at the 90th-percentile plant is nearly double that at the 10th percentile, a gap economists commonly attribute to differences in management talent. Superstar firms outspend rivals on intangible assets, and U.S. firms spend over $200bn a year on proprietary software that the authors argue enables economies of scale and product differentiation.

Michael Mauboussin and Dan Callahan Morgan Stanley
Date Posted:

Increasing returns on capital may be driven by superstar firms that outspend their competitors on R&D and better management practices which they can then scale. @mjmauboussin

What drives the large productivity gap between firms within industries?

Core argument: Economists measuring U.S. manufacturing plants found output at the 90th percentile was nearly double that at the 10th percentile, a within-industry productivity gap they do not fully understand but commonly attribute to management talent.

The gap in productivity between the best and worst companies within industries is large. For instance, economists measured the productivity of U.S. manufacturing plants and found that the output at the 90th percentile was nearly double that of those at the 10th percentile. Economists do not fully understand why that difference is so large, but they commonly attribute it to management talent. Organizations do not always identify and implement best practices. Superstar firms substantially outspend their competitors on intangible assets. They are spending big on “ideas”: software, training, and research and development (R&D). James Bessen documents that spending for proprietary software has grown substantially faster than that for R&D, acquisitions, advertising, and lobbying. U.S. firms spend more than $200 billion per year on proprietary software and the big firms represent the bulk of that outlay. They are investing heavily in nonrival goods. Bessen then makes the case that proprietary software enables superstar firms to capture classic economies of scale and to offer differentiated products.

Takeaways by Macro Roundup® AI

  1. Economists measuring U.S. manufacturing plants found output at the 90th percentile was nearly double that at the 10th percentile, a within-industry productivity gap they do not fully understand but commonly attribute to management talent.
  2. U.S. firms spend more than $200 billion per year on proprietary software, with big firms representing the bulk of that outlay.
  3. James Bessen documents that proprietary software spending has grown substantially faster than spending on R&D, acquisitions, advertising, and lobbying, and argues it enables superstar firms to capture economies of scale and offer differentiated products.

Related Articles:

  • The Economics of Inequality in High-Wage Economies — Using French employer-employee and tax data, the authors find that workers entering the information and communications technology sector during its boom earned 5% higher entry wages but 6% lower wages 15 years later than similar peers starting elsewhere. Larger capital flows to firms are associated with greater human capital depreciation among their workers.
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AI Summary. A proposed child tax credit expansion would raise the effective tax rate on a parent with multiple children moving from part-time to full-time work from 69% to 83%, so doubling earnings from $20,000 to $40,000 would raise total income by only $3,400. The author argues such work disincentives could stunt upward mobility.

Kevin Cornith and Scott Winship American Enterprise Institute
Date Posted:

Proposed changes to the Child Tax Credit contain significant work disincentives. @swinshi @kevincorinth

Does expanding the child tax credit discourage full-time work?

Core argument: Under the Wyden-Smith child tax credit bill, a parent moving from 20 to 40 hours per week at $20 per hour would see earnings rise $20,000 but total income rise only $3,400, an effective tax rate of 83 percent.

A striking aspect of Figure 1 is a large disincentive for substantially increasing earnings. For example, consider a parent currently working 20 hours per week for $20 per hour (within a few dollars of the minimum wage in an increasing number of areas). Her annual earnings would total $20,000. By moving into full-time work at the same $20 hourly wage, her earnings would rise to $40,000. Under the proposed law, her total income would rise by only $3,400 as a result of earning $20,000 more, an effective tax rate of 83 percent. Under existing law, her total income would rise by $6,200, for an effective tax rate of 69%. A 14pp increase in the effective tax on moving from part-time to full-time work for some parents could ultimately stunt upward mobility. The effective tax on increasing earnings could even exceed 100% for other earnings changes, or when accounting for other means-tested benefits such as housing assistance.

Takeaways by Macro Roundup® AI

  1. Under the Wyden-Smith child tax credit bill, a parent moving from 20 to 40 hours per week at $20 per hour would see earnings rise $20,000 but total income rise only $3,400, an effective tax rate of 83 percent.
  2. Under existing law, that same $20,000 earnings increase raises total income by $6,200, a 69 percent effective tax rate, so the bill would add 14 percentage points to the effective tax on shifting from part-time to full-time work for some parents.
  3. The effective tax on increasing earnings could exceed 100 percent for other earnings changes or when other means-tested benefits such as housing assistance are counted, which the author argues could stunt upward mobility.

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AI Summary. Cohort life expectancy projects the average age of death for people born or turning 65 in a given year: those born in 1940 had a cohort life expectancy of 73, those born today about 85, and those born in 2100 a projected 89. Life expectancy is higher still for people who reach age 65.

CRFB Staff Committee for a Responsible Federal Budget
Date Posted:

US life expectancy has grown by 10 months over the past decade to 85 years and is projected to rise between 4 and 5 years by the end of the century. @BudgetHawks

Is life expectancy still rising across generations?

Core argument: Cohort life expectancy for people born today is about 85 years, up from 73 for those born in 1940, and is projected to reach 89 for those born in 2100.

Estimates of how long people are likely to live are generated through a measure known as “cohort life expectancy,” which projects the average age of death for someone born or turning 65 in a given year. People born in 1940 had a cohort life expectancy of 73, while people born today have a cohort life expectancy of about 85, and people born in 2100 are projected to have a cohort life expectancy of 89. That means the average person born today is likely to live to be 85 and the average person in 2100 is likely to live to be 89 years old. Life expectancy is even higher for those who make it to age 65.

Takeaways by Macro Roundup® AI

  1. Cohort life expectancy for people born today is about 85 years, up from 73 for those born in 1940, and is projected to reach 89 for those born in 2100.
  2. Cohort life expectancy projects the average age of death for someone born, or turning 65, in a given year, and runs higher for those who reach age 65.

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AI Summary. An analysis of standardized test data led by Stanford and Harvard researchers finds elementary and middle-school students have regained about a third of pandemic learning losses in math and a quarter in reading. Because poorer districts lost more ground initially, the typical poor district remains nearly half a grade level behind, versus about a fifth for rich districts.

Claire Cain Miller, Sarah Mervosh, and Francesca Paris New York Times
Date Posted:

According to a new analysis by teams at Stanford and Harvard, US students have made up 1/3 of pandemic-related learning loss in math and 1/4 in reading; the gap in performance between rich and poor school districts has increased.

Are students recovering pandemic learning losses unevenly across rich and poor districts?

Core argument: Elementary and middle-school students have recovered about a third of pandemic learning losses in math and a quarter in reading, according to an analysis of standardized test score data led by Stanford and Harvard researchers.

Elementary and middle-school students have made up significant ground since the pandemic school closings in 2020. Overall in math, a subject where learning loss has been greatest, students have made up about a third of what they lost. In reading, they have made up a quarter, according to the new analysis of standardized test score data led by researchers at Stanford and Harvard. Once schools reopened, the pace of recovery was similar across districts, the analysis shows. Both the richest and poorest districts managed to teach more than in a usual school year — about 17 percent more in math, and 8 percent more in reading — as schools raced to help students recover. Yet because poor districts had lost more ground, their progress was not nearly enough to outpace wealthier districts, widening the gulf between them. The typical rich district is about a fifth of a grade level behind where it was in 2019. The typical poor district: nearly half a grade.

Takeaways by Macro Roundup® AI

  1. Elementary and middle-school students have recovered about a third of pandemic learning losses in math and a quarter in reading, according to an analysis of standardized test score data led by Stanford and Harvard researchers.
  2. Both the richest and poorest districts taught more than in a usual school year after reopening — about 17 percent more in math and 8 percent more in reading — and the pace of recovery was similar across districts.
  3. Because poor districts had lost more ground, the gulf between rich and poor districts widened, with the typical rich district about a fifth of a grade level behind its 2019 level and the typical poor district nearly half a grade.

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AI Summary. Chinese investors and households have bought gold as a refuge from local property and stock market turmoil, which the World Gold Council says has helped support record prices. Chinese investment demand for gold bars and coins grew 28% to 280 tonnes, largely offsetting a steep drop in Europe, while jewelry consumption rose 10% to 630 tonnes.

Harry Dempsey Financial Times
Date Posted:

Chinese jewelry consumption was up 10% and overall demand for gold rose 28% y/y as capital controls became more restrictive and investors and households sought to protect their savings.

Are Chinese investors turning to gold as property and stocks slump?

Core argument: Chinese investment demand for gold bars and coins grew 28% to 280 tonnes, largely offsetting a steep drop in European demand, according to the World Gold Council.

Chinese investors and households have been buying gold as a refuge from local property and stock market mayhem, helping to support record prices for the haven asset according to the World Gold Council. Chinese investment demand for gold — spanning bars and coins — grew 28% to 280 tonnes, largely offsetting a steep drop in Europe. The country’s jewelry consumption rose 10% to 630 tonnes last year, even as global demand remained flat.

Takeaways by Macro Roundup® AI

  1. Chinese investment demand for gold bars and coins grew 28% to 280 tonnes, largely offsetting a steep drop in European demand, according to the World Gold Council.
  2. China's gold jewelry consumption rose 10% to 630 tonnes, even as global demand remained flat, according to the World Gold Council.
  3. Chinese investors and households have bought gold as a refuge from local property and stock market mayhem, helping support record prices for the haven asset, according to the World Gold Council.

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