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


Tuesday, February 6, 2024

AI Summary. Using post-tax, post-transfer income data, the authors find each of the past four US generations was better off than the prior one, with Millennials' real median household income at ages 36–40 18% above the previous generation's, versus 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.

Kevin Corinth and Jeff Larrimore Federal Reserve Board
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.@jefflarrimore @kevincorinth find that Millennials between the ages of 36-40 have 18% higher real median household incomes (net of taxes and transfers) than Generation X at the same age range and that Millennial’ market incomes were 14% higher.

Has each American generation earned more than the one before it?

Core argument: At age 36–40, Millennials' real median post-tax, post-transfer household income was 18% higher than the prior generation's at the same age, compared with 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.

Each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement. At age 36–40, Millennials had a real median household income that was 18% higher than that of the previous generation at the same age. This rate of [post-tax and transfer] intergenerational progress was slower than that experienced by the Silent Generation (34%) and Baby Boomers (27%), but similar to that experienced by Generation X (16%). Slower progress for Generation X and Millennials is due to their stalled growth in work hours—holding work hours constant, they experienced a greater intergenerational increase in real market income than Baby Boomers. We also find that the higher educational costs incurred by younger generations is far outweighed by their lifetime income gains.

Takeaways by Macro Roundup® AI

  1. At age 36–40, Millennials' real median post-tax, post-transfer household income was 18% higher than the prior generation's at the same age, compared with 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.
  2. The authors attribute slower intergenerational progress for Generation X and Millennials to stalled growth in work hours, finding that holding work hours constant, both generations posted larger intergenerational gains in real market income than Baby Boomers.
  3. The authors find that higher educational costs incurred by younger generations are far outweighed by their lifetime income gains, using an income measure built annually from the Current Population Survey Annual Social and Economic Supplement for 1963–2022.

Related Articles:

  • Young People Have a Lot More Wealth Than We Thought — Wealth data for young people comes from the Federal Reserve's quarterly Distributional Financial Accounts, which project forward results from the Survey of Consumer Finances conducted every three years. When newer survey results were released, young people turned out to hold considerably more wealth than the projections based on the prior survey had indicated.
  • With Housing, Millennials Have Much to Complain About — The Census Bureau's customary homeownership rate is measured by household, showing 52.7% of 25-to-34-year-old household heads own homes, but only 32.6% of all Americans in that age group do — down 20 percentage points from the late 1970s and nearly 10 points since the mid-2000s. Young-adult homeownership has seen a modest resurgence since 2016.
  • Young Adults in the U.S. Are Reaching Key Life Milestones Later Than in the Past — Pew Research Center analysis of Census Bureau data finds 21-year-olds in the US are less likely than their counterparts four decades earlier to have a full-time job, be financially independent, live on their own, be married, or have a child. Among 21-year-olds, 39% worked full time versus 64% four decades earlier, and a quarter were financially independent versus 42%.

AI Summary. Labor force participation among 25-to-54-year-olds rose after the pandemic shock, with women's rate exceeding its pre-pandemic peak while men's returned to its pre-pandemic level but stayed below its historical high. The authors find this participation rise can ease wage and price pressures in hot labor markets, but appears to have ended.

Robert Valletta Federal Reserve Bank of San Francisco
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Female prime-age LFP has exceeded its pre-pandemic peak hitting an all-time high last year, and male prime-age LFP returned to its pre-pandemic level. A @sffed analysis argues LFP gains are “winding down” which implies sustained tight labor markets.

Has prime-age labor force participation stopped easing wage pressures?

Core argument: Prime-age women's labor force participation reached a historical high in 2023, exceeding its pre-pandemic peak, while prime-age men's rate returned only to its pre-pandemic level and remains well below its prior historical high.

Prime-age LFP dropped precipitously for both men and women during the early phase of the pandemic. After a rapid but partial recovery in the few months following the initial pandemic shock, LFP increased steadily through mid-2023. LFP increase has been especially pronounced for prime-age women. Their LFP rate has notably exceeded the pre-pandemic peak and, in fact, reached a historical high in 2023. By contrast, the rate for prime-age men has returned to its pre-pandemic level but remains well below its prior historical high. Our results suggest that by increasing worker availability during economic expansions, rising prime-age LFP may act as a “safety valve” for hot labor markets, helping to ease upward wage and price pressures. However, our results for the years 2022–23 indicate that the recent procyclical rise in prime-age LFP may have ended. These findings suggest that further rebalancing of the labor market will need to come from slower growth in labor demand rather than continued rapid growth in worker supply.

Takeaways by Macro Roundup® AI

  1. Prime-age women's labor force participation reached a historical high in 2023, exceeding its pre-pandemic peak, while prime-age men's rate returned only to its pre-pandemic level and remains well below its prior historical high.
  2. Rising prime-age labor force participation may act as a "safety valve" for hot labor markets by increasing worker availability during expansions, helping ease upward wage and price pressures.
  3. Results for 2022–23 indicate the procyclical rise in prime-age participation may have ended, suggesting further labor market rebalancing will need to come from slower growth in labor demand rather than continued rapid growth in worker supply.

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.
  • Explaining The Rise In Prime Age Women’s Employment — 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.

AI Summary. The West's share of US population has flattened and appears to be falling, with relative housing affordability cited as a key part of the story. Metropolitan areas with median mortgage payments above the US average generally show negative or weakly positive population growth, and Pacific-state metros all have above-average mortgage payments.

David Tinsley Bank of America
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David Tinsley @BankofAmerica finds for the first time in US history the West’s population share is declining and suggests that relative housing affordability is a key factor.

Is housing affordability driving the West's shrinking population share?

Core argument: The West's share of overall US population has flattened and now appears to be falling, with relative housing affordability seen as a key part of the story.

The West's share of overall US population has flattened, and now appears to be falling. We believe relative housing affordability remains a key part of the story. Exhibit 7 shows a fairly close relationship between where a metropolitan statistical area (MSA’s) median mortgage payment in December 2023 stands compared to that of the overall US and the net change in population growth in that MSA over the last year, according to Bank of America internal data. Where an MSA has a relatively high median mortgage payment, its population growth has usually been negative or at best weakly positive. Looking at the MSAs in the Pacific states in the West (red squares in the exhibit), they all tend to have higher-than-average mortgage payments relative to the US. By contrast, in the southern Mountain states (yellow squares), mortgage payments are lower than the US average, so outward migration is potentially a reaction to housing costs.

Takeaways by Macro Roundup® AI

  1. The West's share of overall US population has flattened and now appears to be falling, with relative housing affordability seen as a key part of the story.
  2. Bank of America internal data show a fairly close relationship between an MSA's median mortgage payment in December 2023 relative to the US and its net population change over the past year, with high-payment MSAs usually seeing negative or weakly positive growth.
  3. MSAs in the Pacific states tend to have higher-than-average mortgage payments relative to the US, while southern Mountain state MSAs have below-average payments, suggesting outward migration is potentially a reaction to housing costs.

Related Articles:

  • The Determinants Of Declining Internal Migration — A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.
  • The New Geography of American Growth — Texas's real economic output rose $230bn over four years, making it the second-largest contributor to US growth behind California despite starting 30% smaller, and one in five new American jobs came from Texas. The Dallas metro contributed more to national growth than any other, and Texas surpassed New York in overall output.
  • Movers And Money: Mapping the Flow of Income During the Pandemic — Manhattan recorded the largest county-level income outflow to other states at $16.5bn, with 27.7 cents of every dollar leaving—$4.6bn—going to Florida, including $2.9bn to Miami-Dade County and $1.1bn to Palm Beach County. California had the largest state-level losses, while Florida was the biggest beneficiary with a net gain of $39bn.

AI Summary. Two alternative gauges of US growth — gross domestic income, which sums all income rather than all spending, and a current activity indicator — show growth of 1.5% and 0.8% at annualized rates, well below corresponding GDP figures. The authors conclude real output is at most growing modestly above potential despite stronger GDP data.

Jan Hatzius Goldman Sachs
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Jan Hatzius has raised @GoldmanSachs 2024 US GDP growth forecast to 3%. Noting weaker growth in Gross Domestic Income and an internal measure he argues the economy can sustain the current disinflationary trend.

Do alternative growth measures show weaker US output than GDP?

Core argument: US gross domestic income grew 1.5% quarter-on-quarter annualized in Q3, considerably below the corresponding GDP growth rate, and Q4 GDI is not yet available.

Beyond GDP, we track two other measures of US growth, namely gross domestic income (GDI)—a conceptually equivalent measure of GDP that is calculated by adding up all income as opposed to all spending in the economy—and our current activity indicator (CAI). None of the three measures is perfect, but both GDP alternatives indicate a more muted growth pace. GDI is not yet available for Q4 but grew just 1.5% in Q3 on a quarter-on-quarter annualized basis and our CAI grew 0.8% in Q4, both considerably below the corresponding GDP growth rates. Based on these indicators, we still think that real output is at most growing modestly above potential, despite the much stronger GDP data.

Takeaways by Macro Roundup® AI

  1. US gross domestic income grew 1.5% quarter-on-quarter annualized in Q3, considerably below the corresponding GDP growth rate, and Q4 GDI is not yet available.
  2. The current activity indicator grew 0.8% in Q4, considerably below the corresponding GDP growth rate, indicating a more muted US growth pace than GDP data suggest.
  3. Based on gross domestic income and the current activity indicator, US real output is judged to be at most growing modestly above potential despite much stronger GDP data.

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 Wasn’t AI: How Fiscal Supports, Supply Chain Healing, & Full Employment Explain Exceptional Productivity In 2023 — 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.

AI Summary. Boeing's largest union, the International Association of Machinists and Aerospace Workers, is demanding a 40% pay raise over three or four years, citing a scarcity of qualified aerospace workers and an earlier contract that sacrificed pensions and limited raises. Analysts at Jefferies estimate every 10% rise in machinist wages would reduce Boeing's free cash flow by about $260m.

Julie Johnsson Bloomberg
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Boeing’s largest union is demanding a 40% pay raise over the next 3-4 years. Jefferies estimates that every 10% increase in wages would reduce 2026 free cash flow by $260mm before offsets. Boeing’s 2023 free cash flow was $1.87B.

Boeing’s largest union is demanding a 40% pay raise over the next 3-4 years. Jefferies estimates that every 10%...

Are scarce skilled aerospace workers driving union demands for large pay raises?

Core argument: Boeing's largest union, the International Association of Machinists and Aerospace Workers, will demand a 40% pay raise over three or four years, emboldened by a resurgent US labor movement, a scarcity of qualified aerospace workers, and pressure on Boeing to stabilize factory work.

Boeing’s largest union, the International Association of Machinists and Aerospace Workers is still smarting over a 2014 deal that sacrificed pensions, locked in minimal raises, and tied the hands of activists for a decade. Union leaders will demand a 40% pay raise over three or four years, emboldened by a resurgent US labor movement, a scarcity of qualified aerospace workers, and pressure on Boeing to stabilize work in its factories. A labor deal could also be costly. Every 10% increase in machinist wages will drag down 2026 free cash flow by an estimated $260 million before price and productivity offsets, according to Sheila Kahyaoglu, an analyst with Jefferies.

Takeaways by Macro Roundup® AI

  1. Boeing's largest union, the International Association of Machinists and Aerospace Workers, will demand a 40% pay raise over three or four years, emboldened by a resurgent US labor movement, a scarcity of qualified aerospace workers, and pressure on Boeing to stabilize factory work.
  2. Jefferies analyst Sheila Kahyaoglu estimates every 10% increase in Boeing machinist wages will reduce 2026 free cash flow by $260 million before price and productivity offsets.
  3. The machinists' union remains aggrieved over its 2014 Boeing deal, which sacrificed pensions, locked in minimal raises, and tied the hands of activists for a decade.

Related Articles:

  • The Unexpected Revival of America’s Trade Unions — More than 485,000 US workers went on strike in a year across an estimated 317 work stoppages, the most in two decades, according to a Bloomberg Law analysis. The United Auto Workers is organizing at over a dozen non-unionized carmakers and urging other unions to align contract expiration dates for broader strikes.
  • Union Workers Score Big Pay Gains As Labour Action Sweeps US — The Bureau of Labor Statistics reports year-on-year wage growth for union members reached 4.6%, catching up with the larger pay rises non-union workers had been receiving. Analysis of 425 newly ratified union contracts by Bloomberg Law found first-year pay increases of 7% and 6.1%, against a 3% average over the preceding 10 years.
  • American Labor’s Real Problem: It Isn’t Productive Enough — U.S. manufacturing output per hour has grown about 0.2% a year since 2009, below the overall economy and peer economies in Europe and Asia except Japan, with motor vehicle manufacturing productivity falling 32% from 2012 through last year. Unlike warehouses and hospitals, manufacturers face foreign competition and cannot pass higher labor costs to customers.

AI Summary. US-listed exchange-traded funds buying Indian stocks drew record inflows while the four largest China funds saw combined outflows of nearly $800m, and India's weight in the main developing-market equity benchmark hit an all-time high of 18% as China's fell to a record low of 24.8%. Indian equities trade at more than 20x future earnings, 27% above their 2010–2020 average.

Srinivasan Sivabalan, Chiranjivi Chakraborty, and Subhadip Sircar Bloomberg
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Western money is rotating from China to India as India’s stock market has closely tracked economic growth. Over the past 20 years Indian GDP and market capitalization “rose in tandem from $500B to $3.5T.”

Are global investors shifting money from Chinese stocks to Indian ones?

Core argument: India's weight in MSCI's emerging-market equity benchmark stands at an all-time high of 18% while China's share has fallen to a record low of 24.8%, and India briefly overtook Hong Kong as the world's fourth-largest equity market.

In the US exchange-traded fund market, the main fund buying Indian stocks received record inflows in the final quarter of 2023, while the four largest China funds combined saw outflows of almost $800 million. Active bond funds have put 50 cents to work in India for every dollar they pulled from China since 2022, according to EPFR data. In mid-January, India briefly overtook Hong Kong to become the world’s fourth-largest equity market. Morgan Stanley predicts India’s stock market will become the third-largest by 2030. Its weight in the MSCI Inc.’s benchmark for developing-market equities is at an all-time high of 18%, even as China’s share has shrunk to its lowest on record at 24.8%. The euphoria has made Indian equities among the most expensive in the world. The gauge trades at more than 20 times future earnings, 27% more expensive than the average for the 2010 to 2020 period.

Takeaways by Macro Roundup® AI

  1. India's weight in MSCI's emerging-market equity benchmark stands at an all-time high of 18% while China's share has fallen to a record low of 24.8%, and India briefly overtook Hong Kong as the world's fourth-largest equity market.
  2. Indian equities trade at more than 20 times forward earnings, 27% above the 2010–2020 average, ranking among the world's most expensive, and Morgan Stanley projects India's stock market will become the third-largest by 2030.
  3. The main US exchange-traded fund buying Indian stocks drew record inflows in the final quarter of 2023, while the four largest China funds together saw outflows of almost $800 million.

Related Articles:

  • India At The Centre — India has averaged real GDP growth above 6% a year for three decades, and unlike China's growth, it has translated into equity returns, with the Sensex matching or beating the S&P 500 over 30-, 20-, 10-, and five-year spans. Analysis attributes the growth to rising total factor productivity, with contributions from services exports and improved basic infrastructure.
  • Indian Stock Market Surges as Foreign Funds Buy Into National Growth Story — Indian equities rose $440bn to more than $3.5tn in value, making India the world's fifth-largest stock market after the US, China, Japan, and Hong Kong, ahead of France and the UK. Foreign portfolio investors added a net $9.4bn to Indian shares in the quarter, with analysts attributing the bulk of this year's inflows to passive index buying.
  • India Equity: An Unsung Long-Term Performance Story — Cumulative total returns for Indian equities have been comparable to or better than US equities over roughly three decades, while Chinese equities have lagged both, according to index data for the MSCI India, S&P 500, and MSCI China indexes.

AI Summary. China's central bank kept the yuan inside the weak edge of its trading band without drawing on its own foreign exchange, leaving its foreign currency balance sheet essentially flat. Multiple reports suggest it instead leaned on China's state banks to conduct the intervention.

Brad Setser Council on Foreign Relations
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.@Brad_Setser argues that China has shifted management of its currency band from direct intervention by the PBOC to “stealth” intervention by state-owned banks.

Is China using state banks to defend the yuan?

Core argument: The People's Bank of China's foreign currency balance sheet stayed flat for most of 2023, consistent with the PBOC's assertions that it is mostly out of the currency market even as the yuan sat at the weak edge of its band from August through October.

Usually, a band is maintained by the central bank, which buys or sells foreign exchange as needed to keep the market price of the yuan within said band. But that doesn’t seem to be what China did. The foreign currency balance sheet of the PBOC was totally flat for most of 2023 (hence the PBOC’s assertions that it is mostly out of the currency market). There were adjustments to banks’ required reserve ratio that freed up a bit of foreign exchange held in the banks’ reserves, but the PBOC doesn’t seem to have used any of its own funds to keep the yuan inside the weak edge of the band from August through October. With a bit of digging, it is possible to get a relatively clear understanding of how the PBOC avoided intervention when the fix was fixed and the yuan was at the weak edge of the band: there are multiple reports suggesting that the PBOC leaned on China’s state banks to do its dirty work.

Takeaways by Macro Roundup® AI

  1. The People's Bank of China's foreign currency balance sheet stayed flat for most of 2023, consistent with the PBOC's assertions that it is mostly out of the currency market even as the yuan sat at the weak edge of its band from August through October.
  2. Multiple reports suggest the PBOC leaned on China's state banks to hold the yuan inside the weak edge of its band rather than deploying its own funds, unlike the standard practice of a central bank buying or selling foreign exchange to maintain a band.
  3. Adjustments to Chinese banks' required reserve ratio freed up a small amount of foreign exchange held in bank reserves.

Related Articles:

  • Is the Chinese Government Pushing Down the Yuan? — The Bank for International Settlements measure of China's inflation-adjusted, trade-weighted exchange rate has fallen roughly 14% from its recent peak, the largest decline among the 64 countries it tracks. The author argues this reflects a policy choice, with China's central bank having outsourced foreign reserve management to state-run banks while lending increasingly large sums to the domestic banking system.
  • Will China’s Economic Slump Be Contagious? — A Chinese push to export its way out of its economic slump, allowing a further large depreciation of the yuan, could pressure parts of the U.S. economy that compete with Chinese manufacturing, absent a major increase in trade restrictions. The U.S. remains the largest market globally for consumer and imported goods.
  • 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.

Wednesday, February 7, 2024

AI Summary. Household income gains for Generation X and Millennials are not explained by working more hours, as their households log roughly the same working hours as Baby Boomers did in prime working years. The authors estimate that holding work hours constant, these younger generations saw a larger intergenerational increase in market income than Baby Boomers.

Jeremy Horpedahl Economist Writing Every Day
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.@jmhorp argues the rise in both market and post-tax/transfer income by generation documented by @jefflarrimore @kevincorinth is not driven by the growth of dual-income families.

Are younger generations' income gains explained by working more hours?

Core argument: Holding work hours constant, the authors find that Generation X and Millennials experienced a larger intergenerational increase in market income than Baby Boomers.

One other great thing about this paper is that we can answer the question of whether rising median incomes are driven by the growth of dual-income families. The authors look at total working hours for the household (covering both spouses). The finding is interesting, because it’s the reverse of what you often hear: for the Silent Generation and Baby Boomers, part of the increase in household income is from working more hours. But for the more recent generations (Gen X and Millennials), that’s not the case: younger households have roughly the same number of working hours as Boomers did during prime working years. Again, here’s the authors on this point: “Holding work hours constant, we find that Generation X and Millennials experienced a larger intergenerational increase in market income than Baby Boomers.”

Takeaways by Macro Roundup® AI

  1. Holding work hours constant, the authors find that Generation X and Millennials experienced a larger intergenerational increase in market income than Baby Boomers.
  2. Generation X and Millennial households work roughly the same number of hours during prime working years as Baby Boomer households did, so their income gains are not attributable to added work hours.
  3. For the Silent Generation and Baby Boomers, part of the increase in household income came from working more total hours across both spouses.

Related Articles:

  • Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans — Using post-tax, post-transfer income data, the authors find each of the past four US generations was better off than the prior one, with Millennials' real median household income at ages 36–40 18% above the previous generation's, versus 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.
  • Young People Have a Lot More Wealth Than We Thought — Wealth data for young people comes from the Federal Reserve's quarterly Distributional Financial Accounts, which project forward results from the Survey of Consumer Finances conducted every three years. When newer survey results were released, young people turned out to hold considerably more wealth than the projections based on the prior survey had indicated.
  • With Housing, Millennials Have Much to Complain About — The Census Bureau's customary homeownership rate is measured by household, showing 52.7% of 25-to-34-year-old household heads own homes, but only 32.6% of all Americans in that age group do — down 20 percentage points from the late 1970s and nearly 10 points since the mid-2000s. Young-adult homeownership has seen a modest resurgence since 2016.

AI Summary. Americans under 40 held just 4.9% of total U.S. wealth while making up 37% of the adult population, whereas those over 54 held 71.6% with a similar population share. These age gaps narrowed slightly afterward, with the real value of financial assets held by under-40s rising more than 50% versus about 20% for those over 54.

Rajashri Chakrabarti, Natalia Emanuel, and Ben Lahey Federal Reserve Bank of New York
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Prior to the pandemic Americans under the age of 40 who were 37% of the adult population had 4.9% of wealth; in Q3 of 2023 after the rise in asset prices during the pandemic period they held 6.6% of wealth.

Have wealth gaps between younger and older Americans narrowed?

Core argument: As of 2019, Americans under 40 held 4.9% of total U.S. wealth while making up 37% of the adult population, whereas those over 54 comprised a similar population share and held 71.6% of wealth.

As of 2019, individuals under 40 years old held just 4.9% of total U.S. wealth despite comprising 37% of the adult population. Conversely, individuals over age 54 made up a similar share of the population and held 71.6% of total wealth. Since 2019, we find a slight narrowing of these wealth disparities across age groups, likely driven by expanded ownership of financial assets among younger Americans. Financial asset prices rose through much of the COVID period. Those under 40 saw a greater than 50% increase in the real value of their financial assets between 2019 and 2023. Those who were 40-54 saw only a 3% increase, while those over 54 saw about a 20% increase.

Takeaways by Macro Roundup® AI

  1. As of 2019, Americans under 40 held 4.9% of total U.S. wealth while making up 37% of the adult population, whereas those over 54 comprised a similar population share and held 71.6% of wealth.
  2. Americans under 40 saw the real value of their financial assets rise more than 50% between 2019 and 2023, compared with 3% for those aged 40–54 and about 20% for those over 54.
  3. Wealth disparities across age groups narrowed slightly after 2019, likely driven by expanded ownership of financial assets among younger Americans, with financial asset prices rising through much of the COVID period.

Related Articles:

  • Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans — Using post-tax, post-transfer income data, the authors find each of the past four US generations was better off than the prior one, with Millennials' real median household income at ages 36–40 18% above the previous generation's, versus 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.
  • Young People Have a Lot More Wealth Than We Thought — Wealth data for young people comes from the Federal Reserve's quarterly Distributional Financial Accounts, which project forward results from the Survey of Consumer Finances conducted every three years. When newer survey results were released, young people turned out to hold considerably more wealth than the projections based on the prior survey had indicated.

AI Summary. China's import growth has been notably weaker than export growth over the past five years, and the correlation between GDP growth and import growth has run below that between GDP growth and export growth for about a decade, which could be an early sign of increasing self-reliance. China is reducing reliance on imported inputs while maintaining reliance on foreign demand.

Francois de Soyres and Dylan Moore Federal Reserve Board
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.@FSoyres notes that Xi Jinping’s goal of greater “self-reliance” is bearing fruit with slower import growth, but China’s economic growth continues to rely on foreign demand.

Is China reducing reliance on imported inputs while depending on foreign demand?

Core argument: China's import growth has been notably weaker than export growth over the past five years, after Xi Jinping told workers at a state-owned enterprise in November 2018 that current events were forcing China to "travel the road of self-reliance.".

In a November 2018 speech to workers at a state-owned enterprise, President Xi Jinping mentioned that current events were forcing China to "travel the road of self-reliance." Over the past 5 years, import growth has been notably weaker than export growth. To investigate this trend further, we use a 5-years rolling-window to compute the correlation between GDP, imports, and exports growth. The correlation between GDP growth and import growth has been systematically lower than the correlation with export growth for about a decade now. The reduced synchronization between GDP and imports could be an early sign of increasing self-reliance at work. While decreasing its reliance on imports, China has simultaneously scaled up exports in sectors like automotives, and exports have become more closely linked to the overall GDP growth. In a sense, China is decreasing its reliance on imported inputs, but continues to maintain its reliance on foreign demand. All told, a delinking of global production processes and consumption from China is not in sight.

Takeaways by Macro Roundup® AI

  1. China's import growth has been notably weaker than export growth over the past five years, after Xi Jinping told workers at a state-owned enterprise in November 2018 that current events were forcing China to "travel the road of self-reliance.".
  2. Using a five-year rolling window, the analysis finds China's GDP growth has correlated systematically less with import growth than with export growth for about a decade, which could be an early sign of increasing self-reliance.
  3. China has scaled up exports in sectors such as automotives while decreasing its reliance on imported inputs, continuing to rely on foreign demand, so a delinking of global production processes and consumption from China is not in sight.

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  • Can China Reduce Its Internal Balances Without Renewed External Imbalances? — China's headline goods trade surplus is about 5% of its GDP, with the underlying surplus in manufactured goods close to 10% of GDP. The author argues that if China relies on interest rate cuts, exchange rate liberalization, and a weak yuan to offset its property downturn, its trade surplus could reach record levels relative to trading partners' output.
  • 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.
  • EU to Press China On Industrial Overcapacity at Beijing Summit — European Union leaders are pressing China over its expansion of industrial capacity, particularly in renewable energy products, at a time of weak Chinese domestic demand and tightening access to markets such as the US, leaving Europe a target for excess exports. EU officials say the bloc's trade deficit with China is just below $400bn and has doubled within two years.

AI Summary. The People's Bank of China has increased its lending to the country's banking system by 50%, which may be a response to business deposits migrating out of smaller and mid-sized commercial banks. The available data do not explain whether those businesses face unusual stress or are worried about deposit safety outside the largest banks.

Matt Klein The Overshoot
Date Posted:

China’s small and medium-sized banks are increasingly relying on loans from the PBOC, as deposits are migrating to the biggest institutions. @M_C_Klein

Is China's central bank lending more as deposits leave smaller banks?

Core argument: The People's Bank of China has increased its lending to the country's banking system by 50% since mid-2022, a move that may respond to business deposits migrating out of smaller commercial banks.

The People’s Bank of China (PBOC) has ramped up its lending to the country’s banking system by 50% since mid-2022. This may be a response to the migration of business deposits out of smaller commercial banks. The data available to me are not yet sufficient to explain why these deposits are leaving. It could be that the businesses that banked with smaller and mid-sized banks are facing unusual amounts of stress, or it could be that those businesses are worried about the safety of deposits held outside of the biggest banks. Either way, it is a novel development that is worth tracking for understanding the evolution of the Chinese financial system.

Takeaways by Macro Roundup® AI

  1. The People's Bank of China has increased its lending to the country's banking system by 50% since mid-2022, a move that may respond to business deposits migrating out of smaller commercial banks.
  2. Available data are insufficient to explain why business deposits are leaving China's smaller and mid-sized banks, with possible causes including unusual stress among those banks' business clients or worries about the safety of deposits held outside the largest banks.
  3. The migration of business deposits away from China's smaller banks is a novel development worth tracking to understand the evolution of the Chinese financial system.

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  • Why Are China’s Households in the Doldrums? — Chinese mortgage loans account for over 50% of total household debt, at $6tn and a third of GDP, and the stock of outstanding mortgage loans has declined for the first time as households prioritize repayment. Other forms of consumer credit have slowed sharply while new deposit growth has accelerated.
  • 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.
  • The Threat from China’s Capital Flight — Oddities in China's official balance of payments statistics suggest its actual current account surplus may be nearly 3x the reported figure, which would make it about as large relative to world output as it has ever been. The likeliest explanation for simultaneous downward pressure on the yuan is capital flight of roughly $500bn a year.

AI Summary. China's largest chipmaker, SMIC, has assembled new production lines in Shanghai to mass-produce 5-nanometre smartphone processors designed by Huawei, using its existing stock of US- and Dutch-made equipment. Though 5nm remains a generation behind cutting-edge 3nm chips, the move indicates China's semiconductor industry is still progressing despite US export controls.

Qianer Liu Financial Times
Date Posted:

SMIC is using its existing stock of US and Dutch-made equipment to produce 5nm chips for Huawei. While this is a generation behind cutting-edge 3nm chips, the PRC’s semiconductor industry is making “gradual progress” in the face of US export controls.

SMIC is using its existing stock of US and Dutch-made equipment to produce 5nm chips for Huawei. While this is a generation...

Is China's chip industry still advancing despite US export controls?

Core argument: SMIC aims to mass produce 5nm chips using its existing stock of US- and Dutch-made equipment, on new production lines assembled in Shanghai, according to two people familiar with the plans.

China’s national chip champions expect to make next-generation smartphone processors as early as this year, despite US efforts to restrict their development of advanced technologies. The country’s biggest chipmaker SMIC has put together new semiconductor production lines in Shanghai, according to two people familiar with the move, to mass produce the chips designed by technology giant Huawei. According to two people with knowledge of the plans, SMIC is aiming to use its existing stock of US and Dutch-made equipment to produce more-miniaturised 5-nanometre chips. The production line will make Kirin chips designed by Huawei’s HiSilicon unit and destined for new versions of its premium smartphones. While 5nm chips remain a generation behind the current cutting-edge 3nm ones, the move would show China’s semiconductor industry is still making gradual progress, despite US export controls.

Takeaways by Macro Roundup® AI

  1. SMIC aims to mass produce 5nm chips using its existing stock of US- and Dutch-made equipment, on new production lines assembled in Shanghai, according to two people familiar with the plans.
  2. The 5nm chips would be Kirin processors designed by Huawei's HiSilicon unit for new versions of Huawei's premium smartphones, with Chinese chip champions expecting production as early as this year.
  3. The 5nm chips remain a generation behind the current cutting-edge 3nm ones, though the move would show China's semiconductor industry making gradual progress despite US export controls.

Related Articles:

  • China AI & Semiconductors Rise: US Sanctions Have Failed — China's Kirin 9000S is a better-designed, leading-edge chip than the West realizes, developed without access to extreme ultraviolet lithography or cutting-edge US intellectual property, indicating existing export controls have not worked. The authors argue only decisive, full-scale measures—not half measures—could prevent China from mass-manufacturing chips needed for high-end military applications.
  • Huawei’s Breakthrough Still Shows China’s Limits in Tech Race — A teardown of Huawei's Mate 60 Pro smartphone found its main chip is made with technology comparable to a 7nm process, possibly by Chinese foundry SMIC, still generations behind leaders such as TSMC, which is mass-producing 3nm chips. SMIC lacks the most advanced lithography machines and likely used older equipment with multipatterning.
  • Chinese Scientists Create Chip That Can Perform AI Task 3,000 Times Faster Than Nvidia’s A100: Study — Chinese researchers report developing a chip that performs certain AI tasks, such as image recognition and autonomous driving, faster and more energy efficiently than current high-performance AI chips. The authors write that while it cannot replace chips in computers or smartphones, it may be used in wearable devices, electric cars, or smart factories.