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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences 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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, February 16, 2024

AI Summary. In US elections from the 1960s to 2000, higher turnout tended to favor Democrats because habitual voters were disproportionately wealthy and well-educated, while occasional voters came from lower socio-economic groups. That gradient has reversed as economically marginalised voters shifted rightward: lower-turnout, graduate-heavy electorates now tend to help Democrats.

John Burn-Murdoch Financial Times
Date Posted:

Higher turnout elections used to favor Democrats; however, in 2016 and 2020 “the more people nudged from abstention to voting, the higher Trump’s vote share.” @jburnmurdoch

Does higher voter turnout now favor the right instead of the left?

Core argument: The US partisan turnout gradient reversed after Donald Trump's 2016 arrival, with graduate-heavy voter pools in lower-turnout elections now favoring Democrats while a larger, more working-class electorate no longer produces a bluer result.

In US elections from the 1960s to 2000, the wealthy and well-educated voters who turned out come rain or shine were natural Republicans. Conversely, the wider the segment of society casting ballots, the more of them from lower socio-economic groups and the bluer the political environment. This age-old pattern has been turned on its head by the political realignment brought by Donald Trump’s arrival in 2016. Before Trump, economically marginalised groups leaned left. Today they lean increasingly rightward. The result is that the partisan turnout gradient has reversed. Now, the graduate-heavy voter pools in lower-turnout elections tend to benefit Democrats, and a larger, more working-class electorate no longer means a bluer one. At the time of Barack Obama’s 2008 and 2012 victories, the typical “marginal abstainer” — someone who came close to voting but stayed home — leaned more Democratic than the average voter. By 2016 this had reversed, and the more people nudged from abstention to voting, the higher Trump’s vote share.

Takeaways by Macro Roundup® AI

  1. The US partisan turnout gradient reversed after Donald Trump's 2016 arrival, with graduate-heavy voter pools in lower-turnout elections now favoring Democrats while a larger, more working-class electorate no longer produces a bluer result.
  2. During Barack Obama's 2008 and 2012 victories, the typical "marginal abstainer" leaned more Democratic than the average voter, but by 2016 that reversed, so nudging more abstainers to vote raised Trump's vote share.
  3. From the 1960s to 2000, wealthy and well-educated Americans who voted reliably were natural Republicans, and broader electorates drawing in lower socio-economic groups produced bluer outcomes.

Related Articles:

  • The Road to A Political Realignment in American Politics — College-educated voters are now more likely to identify as Democrats while those without degrees back Republicans, with educational attainment increasingly correlated with views on abortion, LGBTQ+ rights, and religion's relationship to government. This sorting leaves most states politically uncompetitive, with eight states near the national average in education levels holding 97 electoral votes in play.
  • Consistent Signs of Erosion in Black and Hispanic Support for Biden — Polling shows the Democratic presidential candidate's support among nonwhite voters running well below his prior election standing across racial groups, with leads of 72-11 among Black voters, 47-35 among Hispanic registrants, and 40-39 among other nonwhite voters. About 5% of his former nonwhite voters now back the Republican candidate, including 8% of Hispanic voters.
  • The Shape Of Polarization in America — An index scoring 60,000 U.S. survey respondents from 0 to 100 on more than 50 policy questions finds that those who give the conservative or liberal answer more than 75% of the time backed their side's presidential candidate by margins above 98%. Voters below that consistency threshold shift between candidates on a sliding scale according to their policy views.

AI Summary. Canada's adult male population grew 3.4% over the past year versus 2.9% for women, the widest gap in nearly 50 years of records, as a higher share of male newcomers shifts the gender ratio. Among those aged 25 to 44, men outnumber women by 141,000, against a long-run average of zero.

Randy Thanthong-Knight Bloomberg
Date Posted:

Mass immigration is skewing Canada’s sex ratio; the male population grew 3.4% over the past year and the female population grew 2.9%. The gap is widest in the 25-44 cohort.

Is immigration shifting the gender balance of a country's adult population?

Core argument: Canada's adult male population grew 3.4% over the past year versus 2.9% for women, the widest such gap in nearly 50 years of records, according to an analysis by Bank of Montreal chief economist Doug Porter.

An influx of new immigrants is shifting Canada’s gender ratio, as a higher share of male newcomers helps squeeze the female majority to its smallest margin in decades. The population of adult men grew 3.4% over the past year, while women rose 2.9%, making the spread between the growth of the two groups the widest in nearly 50 years of records, according to an analysis by Doug Porter, chief economist at Bank of Montreal. The gap is even larger in the 25-to-44 age group, in which men have seen a 4.8% jump and women a 3.9% increase. There are 141,000 more men than women in this age bracket as of January, compared with a long-run average difference of zero.

Takeaways by Macro Roundup® AI

  1. Canada's adult male population grew 3.4% over the past year versus 2.9% for women, the widest such gap in nearly 50 years of records, according to an analysis by Bank of Montreal chief economist Doug Porter.
  2. Among Canadians aged 25 to 44, men grew 4.8% and women 3.9%, leaving 141,000 more men than women in that age bracket as of January, against a long-run average difference of zero.
  3. A higher share of male newcomers among immigrants to Canada has helped squeeze the country's female majority to its smallest margin in decades.

Related Articles:

  • Mass Immigration Experiment Gives Canada an Edge in Global Race for Labor — Nearly one in four people in Canada are immigrants, the largest share among the Group of Seven nations. At its current pace of population growth, Canada — the smallest G-7 country by population — would double its residents in about 26 years and exceed Italy, France, the UK and Germany.
  • Canadian Conservatives Have Found A Way To Win Back Young Voters — Canada's Conservative Party has doubled its vote share and moved into the lead, which the author attributes to an explicitly pro-youth platform centered on housebuilding, including proposals to withhold funds from cities that don't build enough housing and reward those that do. Housing affordability ranks as the second most important issue in Canada, behind the broader cost-of-living crisis.
  • Third-Country Effects of U.S. Immigration Policy — U.S. H-1B visa denial rates rose from about 6% to 16%, and the authors estimate a 10 percentage point rise in denials increases Canadian applications by 30%, roughly one Canadian application per four forgone visas. More exposed Canadian firms increased sales and hired about 0.5 native workers per immigrant.

AI Summary. Trade and investment flows between the US and China have declined, with protectionist measures prompting some reshoring alongside rerouting of trade and investment through third countries such as Vietnam and Mexico. The result is a loosening of US-China economic links rather than an end to globalization.

Barry Eichengreen National Council of Applied Economic Research
Date Posted:

The US and China have accepted a deterioration in efficiency in exchange for an improvement in security, reflected in declining FDI flows between the two countries and diversion of supply chains through countries like Vietnam and Mexico. @B_Eichengreen

The US and China have accepted a deterioration in efficiency in exchange for an improvement in security, reflected in...

Are declining US-China trade and investment flows ending globalization?

Core argument: Bilateral U.S.–China trade has slowed relative to global trade, while protectionist measures have produced some reshoring of final production stages alongside rerouting of trade through third countries.

Bilateral trade between the world’s two largest economies has been slowing relative to global trade. Protectionist measures have led to some reshoring of the final stages of production but also to rerouting of trade through third countries. Capital and foreign direct investment flows between the U.S. and China have declined precipitously due to a combination of government controls and political uncertainties. But the fact that total U.S. inward and outward FDI has remained buoyant points to the existence foreign investment diversion to other countries. Likewise, China, even while investing less in the United States, has been ramping up investment in and running growing trade surpluses with countries like Vietnam and Mexico that export significant volumes to the United States, including conceivably goods produced using Chinese parts, components, and technology. In sum, U.S.-China tensions have led to some loosening of economic links between the two countries but not to the end of globalization. The governments in question have accepted this deterioration in efficiency in return for what they hope will be an improvement in national security.

Takeaways by Macro Roundup® AI

  1. Bilateral U.S.–China trade has slowed relative to global trade, while protectionist measures have produced some reshoring of final production stages alongside rerouting of trade through third countries.
  2. Capital and foreign direct investment flows between the U.S. and China have declined precipitously due to government controls and political uncertainties, yet total U.S. inward and outward FDI has remained buoyant, pointing to investment diversion to other countries.
  3. China has ramped up investment in and run growing trade surpluses with countries such as Vietnam and Mexico that export significant volumes to the United States, conceivably including goods made with Chinese parts, components, and technology.

Related Articles:

  • Foreign Direct Investment is Exiting China, New Data Show — Two official Chinese data series—one measuring gross foreign direct investment inflows and one measuring inflows minus outflows—both show foreign direct investment exiting China. The author attributes most of the $113bn gap between the two measures to net sales of direct investment assets by foreign investors.
  • The Global Economy Enters an Era of Upheaval — Bloomberg Economics finds that the global share of new-project foreign direct investment going to countries that declined to condemn Russia's invasion of Ukraine averaged 15%, down from 30% in the decade to 2019, with China and Hong Kong's share falling below 2% from nearly 11%.
  • China Is Quietly Reducing Its Reliance On Foreign Chip Technology — China's producers of wafer-fabrication tools have increased their domestic market share from 4% to an estimated 14%, according to broker Bernstein. Even if Huawei and SMIC reach 5nm chip production, they would remain behind Samsung and TSMC, which have mass-produced 3nm chips.

AI Summary. Using a US government classification of critical sectors, the authors find China's share of US critical-goods imports rose from 6.2% in 2002 to 17.9% in 2017, then fell to 11.1% by 2023. The decline in China's share has been faster for non-critical goods, down about 9 percentage points versus 6.8 for critical goods.

Fernando Leibovici and Jason Dunn Federal Reserve Bank of St. Louis
Date Posted:

The share of US imports directly originating in China is down 7.7pp since 2017 led by a 9pp drop in goods rated “non-critical” by the Dept. of Homeland Security. The “critical goods” share is down by 6.8pp.

Is US import reliance on China falling faster in non-critical sectors?

Core argument: China's share of US critical-goods imports rose from 6.2% in 2002 to 17.9% in 2017, then fell to 11.1% in 2023, a decline of 6.8 percentage points, based on the Cybersecurity and Infrastructure Agency's sector classification.

Figure 2 partitions aggregate US import dependence from China across critical and non-critical sectors, based on a classification by the Department of Homeland Security's Cybersecurity and Infrastructure Agency. Over this period, we find that China has been an important source of imports of non-critical goods, while a more modest yet non-trivial source of critical goods. Moreover, we find that US-China import dependence in critical sectors increased in tandem with aggregate import dependence—from 6.2% of critical goods imports in 2002 to 17.9% in 2017. However, the systematic decline of total US imports from China has been faster in non-critical goods: The import share from China declined by around 9 percentage points for non-critical goods, while among critical goods it declined by 6.8 percentage points—from 17.9% in 2017 to 11.1% in 2023.

Takeaways by Macro Roundup® AI

  1. China's share of US critical-goods imports rose from 6.2% in 2002 to 17.9% in 2017, then fell to 11.1% in 2023, a decline of 6.8 percentage points, based on the Cybersecurity and Infrastructure Agency's sector classification.
  2. The decline in US import dependence on China has been faster in non-critical goods, where China's import share fell by roughly 9 percentage points, versus 6.8 percentage points for critical goods.
  3. China has been an important source of US non-critical goods imports and a more modest yet non-trivial source of critical goods, with critical-sector import dependence rising in tandem with aggregate import dependence.

Related Articles:

  • How America Is Failing To Break Up With China — Research finds that countries with the strongest existing trade ties to China in a given industry have gained the most as direct Chinese exports to the US are redirected, suggesting Chinese supply chains remain central to American imports even in advanced-manufacturing goods officials most want to shield from China.
  • Global Firms Are Eyeing Asian Alternatives to Chinese Manufacturing — Chinese manufacturing wages doubled between 2013 and 2022 to an average of $8.27 an hour, while hourly manufacturing wages in India, Malaysia, the Philippines, Thailand, and Vietnam remain below $3. This alternative Asian supply chain has a combined working-age population of 1.4bn versus China's 980m, and 154m tertiary-educated people aged 25–54 versus China's 145m.
  • Hidden Exposure: Measuring U.S. Supply Chain Reliance — The US buys at least 80% of industrial inputs domestically, so aggregate foreign supply chain exposure is limited, but disruptions occur at the sector level rather than the macro level. Accounting for Chinese inputs embedded in goods bought from other foreign suppliers, US exposure to China is almost 4x larger than it appears at face value.

AI Summary. East Asia and the Pacific account for one-third of global GDP in purchasing-power-parity terms, roughly twice the U.S. share, and Chinese domination of the region would harm U.S. economic interests. U.S. two-way goods trade with its nine largest Asian partners besides China was nearly $940bn, about 60% larger than U.S. goods trade with China.

Andrew Erickson, Gabriel Collins, and Matt Pottinger Foreign Affairs
Date Posted:

A successful Chinese invasion and annexation of Taiwan may drive a strategic realignment in East and Southeast Asia nations representing 1/3 of global GDP (2X the US share), leading to slower US growth. @AndrewSErickson

A successful Chinese invasion and annexation of Taiwan may drive a strategic realignment in East and Southeast Asia nations...

How would Chinese domination of East Asia harm U.S. economic interests?

Core argument: U.S. two-way goods trade with its nine largest Asian partners other than China was nearly $940 billion in 2023, about 60 percent larger than U.S. goods trade with China; in a worst-case scenario the United States could lose access to those volumes.

Chinese attempts to hive off Asia, the world’s largest, most dynamic economic region, would deal a devastating blow to U.S. economic interests. East Asia and the Pacific account for one-third of global GDP in purchasing power parity terms, a share roughly twice that of the United States. The region’s vibrant, open trading networks would likely degenerate into more of a hub-and-spoke system, with China as the hub and subjugated countries at the end of the spokes. In the worst-case scenario, the United States could lose access to trade volumes with its nine largest Asian trade partners other than China. This group’s two-way goods trade with the United States was nearly $940 billion in 2023—about 60 percent larger than the U.S. goods trade with China itself. U.S. investors might also lose out. In Asian countries besides China, particularly in Southeast Asia, the United States is one of the largest sources of invested capital. Americans have plowed untold sums into factories, data centers, and real estate properties throughout the region. Because these and other brick-and-mortar infrastructure are physically immovable, they would be vulnerable to forced changes of ownership under Chinese coercion.

Takeaways by Macro Roundup® AI

  1. U.S. two-way goods trade with its nine largest Asian partners other than China was nearly $940 billion in 2023, about 60 percent larger than U.S. goods trade with China; in a worst-case scenario the United States could lose access to those volumes.
  2. East Asia and the Pacific account for one-third of global GDP in purchasing power parity terms, roughly twice the U.S. share, and Chinese attempts to hive off the region would deal a devastating blow to U.S. economic interests.
  3. Asia's open trading networks would likely degenerate into more of a hub-and-spoke system with China as the hub, while physically immovable U.S.-funded factories, data centers, and real estate across the region would be vulnerable to forced changes of ownership under Chinese coercion.

Related Articles:

  • Xi, Biden and the $10 Trillion Cost of War Over Taiwan — Bloomberg Economics estimates a war over Taiwan would cost around $10tn, roughly 10% of global GDP, based on models of the hit to semiconductor supply, regional shipping, trade sanctions and tariffs, and financial markets. The largest estimated hit comes from missing Taiwanese chips, which would stall production of laptops, tablets, smartphones, and autos.
  • Xi Jinping Says He Is Preparing China for War — China's leadership has emphasized war readiness, announcing a 7.2% increase in the defense budget—which has doubled over the past decade—and plans to reduce dependence on foreign grain imports. China has also opened National Defense Mobilization recruitment offices across the country, while cities in Fujian Province opposite Taiwan build or upgrade air-raid shelters.
  • China’s Age Of Malaise — More than 300,000 Chinese people emigrated in a single year, more than double the pace of a decade earlier, with some traveling overland through a half-dozen countries to reach the US. US authorities at the southern border recorded 17,894 encounters with Chinese migrants over ten months, a thirteenfold increase from the prior year.

Tuesday, February 20, 2024

AI Summary. January price increases tend to be cyclical and volatile—a "January effect"—with sequential inflation usually slowing the following month, and 3- and 6-month trimmed inflation measures remained rangebound. The authors therefore raise their core personal consumption inflation forecast only modestly, by 0.1pp to 2.3%, and continue to project five 25bp Federal Reserve rate cuts this year.

Spencer Hill and Ronnie Walker Goldman Sachs
Date Posted:

After last week’s CPI print, @GoldmanSachs now forecasts the cutting cycle will get underway in May with five 25bp cuts in the FFR this year.

Do January price jumps change the inflation and rate-cut outlook?

Core argument: The authors raise their 2024 core PCE inflation forecast by 0.1pp to 2.3% (December y/y), attributing January's CPI and PPI strength to a cyclical, volatile "January effect" after which sequential inflation usually slows in February.

We are not too concerned about the strength elsewhere in the January CPI and PPI reports. January price changes tend to be cyclical and volatile—what we call the “January effect”—and usually, sequential inflation slows back down in February. Additionally, 3- and 6-month trimmed inflation remained rangebound in January, despite a boost from the January effect. Taken together, we are boosting our 2024 core PCE forecast only modestly, by 0.1pp to 2.3% (December y/y). The January FOMC statement indicates that rate cuts will likely commence once inflation is moving sustainably toward 2%. If inflation evolves as we expect, core PCE inflation would fall to 2.5% at the time of the May meeting, and participants would likely anticipate further declines over the next two months given the high base effects in mid-2023. Accordingly, we continue to forecast five 25bp cuts in the Fed funds rate this year, with the first cut at the May meeting. This being said, last week’s price data raise the stakes for the February CPI and PPI reports to confirm that the January jump in OER and non-housing services were both temporary.

Takeaways by Macro Roundup® AI

  1. The authors raise their 2024 core PCE inflation forecast by 0.1pp to 2.3% (December y/y), attributing January's CPI and PPI strength to a cyclical, volatile "January effect" after which sequential inflation usually slows in February.
  2. Three- and six-month trimmed inflation measures remained rangebound in January despite a boost from the January effect.
  3. The authors forecast five 25bp cuts in the Fed funds rate this year, beginning at the May meeting, when core PCE inflation would reach 2.5% with further declines likely given high mid-2023 base effects.

Related Articles:

  • Furman On January CPI — Core consumer price inflation came in hotter than expected at 0.4% in a single month, a 4.8% annual rate, versus 3.9% over 12 months, 3.6% over 6 months and 4.0% over 3 months. Overall inflation also picked up but trailed core, as food prices rose further while energy prices fell for a fourth straight month.
  • Macro Outlook 2024: The Hard Part Is Over — Goldman Sachs projects limited recession risk, holding a 15% US recession probability, and expects tailwinds to global growth including strong real household income growth, a smaller drag from monetary and fiscal tightening, recovering manufacturing, and central banks more willing to cut rates if growth slows. It projects core inflation falling to 2–2½%.
  • The 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.

AI Summary. Productivity growth has averaged 3.9% over recent quarters, more than triple the pace of the decade before the pandemic, driven by mundane factors such as an economy at full employment where workers gain experience and skills rather than by artificial intelligence. More efficient workers let firms raise wages without raising prices, easing inflation concerns for monetary policy.

Steve Matthews Bloomberg
Date Posted:
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US productivity growth has averaged 3.9% over the past three quarters, over 3X the 2009-2019 rate. The Fed’s long-term base case productivity growth remains at 1.5%.

Is faster productivity growth easing inflation without slower wage gains?

Core argument: U.S. productivity growth averaged 3.9% over the last three quarters, more than triple the rate of the decade preceding the pandemic.

Productivity growth has averaged 3.9% the last three quarters, more than triple the rate seen in the decade prior to the pandemic. When workers are more efficient, firms can generate more money to raise wages without charging higher prices, so monetary policy can be a bit less concerned about inflation. While Wall Street has been focused on how artificial intelligence and innovations such as ChatGPT will drive efficiencies, lifting technology stocks to record highs, the 2023 boom has resulted from more mundane factors. One of those is simply an economy at full employment, with workers gaining experience and skills. The AI potential is “massive,” said Rebecca Patterson, former chief investment strategist at Bridgewater Associates. That could “double productivity growth in the US, which would be a major lift for GDP.”

Takeaways by Macro Roundup® AI

  1. U.S. productivity growth averaged 3.9% over the last three quarters, more than triple the rate of the decade preceding the pandemic.
  2. Higher worker efficiency lets firms fund wage increases without raising prices, allowing monetary policy to be somewhat less concerned about inflation.
  3. The 2023 productivity boom stems from mundane factors such as an economy at full employment where workers gain experience and skills, though Rebecca Patterson, former chief investment strategist at Bridgewater Associates, calls AI's potential "massive" and able to double U.S. productivity growth.

Related Articles:

  • It Wasn’t AI: How Fiscal Supports, Supply Chain Healing, and 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.
  • Labor Productivity Is Popping — Labor productivity, measured as output per hour worked, rose 0.8% quarter over quarter and 2.7% year over year, compared with average paces of 0.3% and 1.3% in the decade before the pandemic. Productivity growth is volatile and can turn negative even outside recessions.
  • 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.

AI Summary. The European Union's economy is about 10% smaller than the US after being larger before 2008, though growth in output per person of working age has been broadly similar on both sides of the Atlantic since 1995. Rising European employment rates have been offset by slower gains in output per worker and per hour.

Chris Giles Financial Times
Date Posted:
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The EU’s GDP/working age population has remained ~32% lower than the US’s since 1995, as rising working-age employment has been offset by declining GDP/person employed. @ChrisGiles_

Why has Europe's economy shrunk relative to America's despite similar productivity growth?

Core argument: The EU excluding the UK had a larger economy than the US before 2008 and is now about 10% smaller, with real GDP per head growing 47% in the EU between 1995 and 2022 versus 53% in the US.

2008 was something of a turning point. Before then, the EU (excluding the UK) had a larger economy, and now it is about 10% smaller [than the US]. Real gross domestic product per head grew 53% between 1995 and 2022 in the US, compared with 47% in the EU. GDP growth per person of working age has been broadly the same on both sides of the Atlantic since 1995. The European growth rate just eclipses that of the US, growing 56% compared with 54%. For sure, European levels of GDP per person of working age are lower, but this reflects choices to have longer holidays, retire earlier and work fewer hours. The main reason for a stable gap between US and EU GDP per person of working age has been two offsetting forces netting out. European employment rates have risen from about 60% of the working-age population in 1995 to a rate close to or even slightly higher than the traditional US rate of more than 70%. Offsetting a rising European employment rate have been slower improvements in output per person employed and per hour worked. Europe has more people in work now than it did, but they are not terribly productive.

Takeaways by Macro Roundup® AI

  1. The EU excluding the UK had a larger economy than the US before 2008 and is now about 10% smaller, with real GDP per head growing 47% in the EU between 1995 and 2022 versus 53% in the US.
  2. GDP growth per person of working age has been broadly the same on both sides of the Atlantic since 1995, with Europe growing 56% against 54% in the US, and lower European levels reflecting choices to take longer holidays, retire earlier and work fewer hours.
  3. European employment rates rose from about 60% of the working-age population in 1995 to a rate close to or slightly above the traditional US rate of more than 70%, offset by slower improvements in output per person employed and per hour worked.

Related Articles:

  • What’s the Matter With Europe? — 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.
  • 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.
  • 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.

AI Summary. German companies announced a record $15.7bn of capital commitments to US projects, up from $8.2bn a year earlier and well above the $5.9bn pledged in China, according to data compiled by fDi Markets. Executives at BASF and Siemens Energy attribute the shift to pragmatic US industrial policies, a strong long-term market outlook and supply-chain concerns.

Jamie Smyth and Patricia Nilsson Financial Times
Date Posted:

German companies announced a record $15.7B of capital commitments for US projects in 2023, up from $8.2B in 2022, dwarfing the $5.9B pledged in China in 2023. @FT

Are German companies shifting record capital investment toward the US?

Core argument: German companies announced a record $15.7bn of capital commitments in US projects in 2023, up from $8.2bn a year earlier and above the $5.9bn pledged in China, according to data compiled by fDi Markets.

German companies announced a record $15.7bn of capital commitments in US projects last year, up from $8.2bn a year earlier, according to data compiled by fDi Markets, a subsidiary of the Financial Times, dwarfing the $5.9bn pledged in China. The amount heading for the US made up about 15% of total commitments in 2023 in either greenfield or expansion projects overseas, compared with 6% the previous year. German companies announced 185 capital projects in the US in 2023, of which 73 were in the manufacturing sector. The largest project was a $2bn investment by Volkswagen’s Scout Motors electric vehicle subsidiary in Columbia, South Carolina. Senior executives at BASF and Siemens Energy — two of Germany’s largest companies — said a combination of pragmatic US government industrial policies, a strong long-term market outlook and increasing focus on supply chains was driving US investment.

Takeaways by Macro Roundup® AI

  1. German companies announced a record $15.7bn of capital commitments in US projects in 2023, up from $8.2bn a year earlier and above the $5.9bn pledged in China, according to data compiled by fDi Markets.
  2. The US share of German companies' total overseas greenfield and expansion commitments rose to about 15% in 2023 from 6% the previous year, spanning 185 US projects, 73 of them in manufacturing.
  3. The largest project was a $2bn investment by Volkswagen's Scout Motors electric vehicle subsidiary in Columbia, South Carolina, while senior executives at BASF and Siemens Energy cited pragmatic US industrial policies, a strong long-term market outlook and increasing focus on supply chains.

Related Articles:

  • Germany’s Days as an Industrial Superpower Are Coming to an End — Germany's industrial base faces mounting pressure as the US competes with Europe for climate investment, China shifts from customer to rival, and cheap Russian natural gas has ended. In chemicals, nearly one in 10 companies plan to permanently halt production processes, according to an industry association survey, while BASF is cutting 2,600 jobs and Lanxess is reducing staff by 7%.
  • Germany’s Industrial Slowdown — German output remains barely above pre-pandemic levels, with cumulative GDP growth of less than 0.5% over roughly five years. German industrial investment has not recovered to pre-pandemic levels, and real fixed investment in equipment remains below its 2018 level, even as the US devotes record resources to factory construction and equipment purchases.
  • Germany Is Losing Its Mojo. Finding It Again Won’t Be Easy — The International Monetary Fund projects Germany will be the only major economy to contract this year, while even sanctioned Russia grows. German exports long depended on a rapidly industrializing China buying its capital goods, but Chinese growth and import demand have faltered, and German industry still faces higher energy costs than U.S. and Asian competitors.

AI Summary. China's imports of chipmaking equipment have reached record highs, with purchases rising from Japan, the Netherlands, and Singapore alongside a rebound in imports from the United States, as Chinese manufacturers work to indigenize chip production. Chinese government and military buyers have obtained some NVIDIA A100 and H100 chips that US sanctions were designed to block.

Joseph Politano Apricitas Economics
Date Posted:

US chip manufacturing investments and Chinese chip-making machine imports are both surging as the two countries race to build domestic manufacturing capacity. @JosephPolitano

Are chip export controls failing to slow China's semiconductor buildup?

Core argument: China's imports of chipmaking machinery have reached record highs, including a rebound in purchases from the United States and a surge from Japan, the Netherlands, and Singapore.

China is in the midst of a massive semiconductor equipment buying spree that has sent the nation’s imports of chipmaking machinery to record highs. That includes a rebound in imports from the United States alongside a massive surge in imports from key chipmaking equipment centers like Japan, the Netherlands, and Singapore. In response to the semiconductor trade war, Chinese manufacturers are working to indigenize chip production and fortify their domestic electronics industry—racing to get ahead as Washington tries to tighten its grip with further sanctions. The Chinese government and military have already been able to acquire some of the highly-coveted NVIDIA A100 and H100 chips American sanctions were designed to keep them from buying, and NVIDIA is rumored to be making more chips explicitly for the Chinese market with capabilities designed to come just under new US export restrictions. The US is continually playing whack-a-mole to wrangle the trading firms that enabled those acquisitions, as well as other possible methods of circumventing sanctions like via cloud computing services.

Takeaways by Macro Roundup® AI

  1. China's imports of chipmaking machinery have reached record highs, including a rebound in purchases from the United States and a surge from Japan, the Netherlands, and Singapore.
  2. Chinese manufacturers are working to indigenize chip production and fortify the domestic electronics industry as Washington seeks to tighten semiconductor sanctions.
  3. The Chinese government and military have acquired some NVIDIA A100 and H100 chips that US sanctions were designed to block, while Washington pursues the trading firms and possible cloud-computing routes enabling such circumvention.

Related Articles:

  • Western Nations Need A Plan For When China Floods the Chip Market — China's chipmakers are expanding production capacity despite warnings of a global supply glut, with one consultancy projecting the country's chip capacity will grow 60% over three years and potentially double over five. Because Western export restrictions bar China from making the most advanced processors, much of this output will be foundational chips used in cars, household goods, and consumer devices.
  • China Is Quietly Reducing Its Reliance On Foreign Chip Technology — China's producers of wafer-fabrication tools have increased their domestic market share from 4% to an estimated 14%, according to broker Bernstein. Even if Huawei and SMIC reach 5nm chip production, they would remain behind Samsung and TSMC, which have mass-produced 3nm chips.
  • China AI and 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.

AI Summary. China's direct investment liabilities, a measure of foreign capital flowing into the country, totalled about $33bn in 2023, an 82% decline from the prior year and the lowest annual level since 1993, according to China's State Administration of Foreign Exchange.

Cheng Leng Financial Times
Date Posted:

China reported FDI of $33B in 2023, the lowest level since 1993. Other estimates showed negative FDI last year.

Is foreign direct investment in China falling to multi-decade lows?

Core argument: China's direct investment liabilities totalled about $33bn in 2023, an 82% decline from the prior year and the lowest annual figure since 1993, according to State Administration of Foreign Exchange data.

China’s direct investment liabilities, a gauge of foreign capital flowing into the country, totalled about $33bn in 2023, according to data released late on Sunday by the State Administration of Foreign Exchange. This was an 82% decline from the previous year and the lowest annual figure since 1993. Financial Times calculations based on Chinese commerce ministry data compiled by Wind show that FDI fell 34% to Rmb72.8bn ($10bn) year on year in September, the biggest decline since monthly figures became available in 2014. The commerce ministry data is a narrower gauge than the SAFE measure, covering only new inbound investments. The latest SAFE reading offered some grounds for optimism. In the fourth quarter of 2023, there were $17.4bn of investments. This followed a deficit, the first ever, in the third quarter, SAFE data showed.

Takeaways by Macro Roundup® AI

  1. China's direct investment liabilities totalled about $33bn in 2023, an 82% decline from the prior year and the lowest annual figure since 1993, according to State Administration of Foreign Exchange data.
  2. FDI into China fell 34% year on year in September to Rmb72.8bn ($10bn), the biggest decline since monthly commerce ministry figures became available in 2014, per Financial Times calculations using Wind-compiled data.
  3. State Administration of Foreign Exchange data show $17.4bn of investments into China in the fourth quarter of 2023, following the first-ever quarterly deficit in the third quarter.

Related Articles:

  • Foreign Direct Investment is Exiting China, New Data Show — Two official Chinese data series—one measuring gross foreign direct investment inflows and one measuring inflows minus outflows—both show foreign direct investment exiting China. The author attributes most of the $113bn gap between the two measures to net sales of direct investment assets by foreign investors.
  • The Rise and Fall of Foreign Direct Investment in China — Net foreign direct investment into China has been negative for four consecutive quarters, as foreign investors shifted from reinvesting earnings from their Chinese operations to repatriating them. Whether this reflects cash management or signals a future slowdown in foreign direct investment is unclear, but the repatriation of profits is negative for China's currency.
  • Singapore Asks Banks to Keep Quiet on Wealth Inflows During China Boom — Singapore's central bank has asked major banks to minimize public discussion of the origins of large inflows of money into the city-state, much of it from wealthy Chinese, an issue that has become politically sensitive domestically. Lawyers and industry groups estimate Singapore hosts roughly 1,500 family offices, a large share of them Chinese.

AI Summary. Federal Reserve data show U.S. defense and space industrial production has risen 17.5% since Russia's full-scale invasion of Ukraine. U.S. officials say 64% of the $60.7bn earmarked for Ukraine will flow back to the U.S. defense industrial base, and the State Department reported over $80bn in major arms deals, about $50bn to European allies.

Tom Fairless Wall Street Journal
Date Posted:

Since the start of the current stage of the Russo-Ukrainian War American industrial production in the defense and space sector is up 17.5%.

Does war in Europe boost U.S. defense production and arms sales?

Core argument: U.S. defense and space industrial production has risen 17.5% since Russia's full-scale invasion of Ukraine two years ago, according to Federal Reserve data.

Industrial production in the U.S. defense and space sector has increased 17.5% since Russia launched its full-scale invasion of Ukraine two years ago, according to Federal Reserve data. Biden administration officials say that of the $60.7 billion earmarked for Ukraine in a $95 billion supplemental defense bill, 64% will actually flow back to the U.S. defense industrial base. The latest money, on top of previous commitments, could inject funds worth about 0.5% of one year’s gross domestic product into the U.S. industrial defense base over several years. The State Department recently said the U.S. made more than $80 billion in major arms deals in the year through September of which about $50 billion went to European allies—more than five times the historical norm.

Takeaways by Macro Roundup® AI

  1. U.S. defense and space industrial production has risen 17.5% since Russia's full-scale invasion of Ukraine two years ago, according to Federal Reserve data.
  2. Biden administration officials say 64% of the $60.7 billion earmarked for Ukraine in a $95 billion supplemental defense bill will flow back to the U.S. defense industrial base, which with prior commitments could receive funds worth about 0.5% of annual GDP over several years.
  3. The State Department said the U.S. made more than $80 billion in major arms deals in the year through September, of which about $50 billion went to European allies—more than five times the historical norm.

Related Articles:

  • The West Badly Needs More Missiles—But The Wait To Buy Them Is Years Long — Each Nasams air-defense system, made by Norway's Kongsberg, takes two years to build and new buyers face a multiyear backlog, prompting the plant to run 24-hour, seven-day shifts. The defense industry faces a prolonged labor crunch, struggling to find workers with niche skills willing to undergo lengthy security checks.
  • Nearly 40% of US Attack Submarines Are Out of Commission for Repairs — US Navy data show 18 of its 49 attack submarines — 37% — are out of commission for repairs because of naval shipyard delays, up from 28% and well above the 20% industry best practice. The report argues this leaves the US at a disadvantage against China's numerically larger fleet.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.

AI Summary. Using admissions records and first-year grades at multiple Ivy-Plus colleges, the authors find SAT and ACT scores substantially predict college academic success even among students with the same high school grades, while high school grade point average does little to predict it. Conditional on test scores, students from lower- and higher-resourced high schools have virtually identical college grades.

John Friedman, Bruce Sacerdote, and Michele Tine Harvard University
Date Posted:
Is Database:
Database

Students at Ivy-Plus colleges with 99th percentile SAT/ACT scores earned a first-year college GPA 0.43 points higher than students who scored at the 75th percentile, ~ 1200 SAT. @John_N_Friedman

Do standardized test scores predict college success better than high school grades?

Core argument: Students entering Ivy-Plus colleges with a perfect 4.0 scaled high school GPA achieve a cumulative college GPA less than 0.1 points higher than students with a 3.2 high school GPA, indicating high school GPA does little to predict college academic success.

We use admissions records and first-year college grades from multiple Ivy-Plus colleges for students between 2017 and 2022 to study how standardized test scores and high school grade point average relate to academic success in college. Even among otherwise similar students with the same high school grades, we find that SAT and ACT scores have substantial predictive power for academic success in college. Students with a perfect (scaled) high school GPA of 4.0 achieve a cumulative GPA in college that is less than 0.1 points higher than a student with a 3.2 high school GPA, indicating high school GPA does little to predict academic success in college. We compare college success outcomes (first-year college GPA) of students from less advantaged vs. more advantaged high schools and find that conditional on SAT/ACT scores, there is no evidence that students from higher-resourced backgrounds outperform students from lower-resourced backgrounds – their college GPAs are virtually identical.

Takeaways by Macro Roundup® AI

  1. Students entering Ivy-Plus colleges with a perfect 4.0 scaled high school GPA achieve a cumulative college GPA less than 0.1 points higher than students with a 3.2 high school GPA, indicating high school GPA does little to predict college academic success.
  2. Using admissions records and first-year grades from multiple Ivy-Plus colleges for students between 2017 and 2022, the authors find SAT and ACT scores have substantial predictive power for college academic success even among otherwise similar students with the same high school grades.
  3. Conditional on SAT/ACT scores, the authors find no evidence that Ivy-Plus students from higher-resourced high schools outperform those from lower-resourced high schools, with virtually identical college GPAs.

Related Articles:

  • Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges — Children from top-1% families are more than 2x as likely as middle-class students with comparable SAT/ACT scores to attend an Ivy-Plus college, with two-thirds of the gap attributable to higher admissions rates. The authors attribute this advantage to legacy preferences, weight on non-academic credentials, and athlete recruitment.
  • The Misguided War On The SAT — The National Assessment of Educational Progress, a nationwide test of elementary and middle school students with no test-prep industry around it, shows racial and economic gaps closely resembling those on the SAT and ACT. Researchers argue this indicates college admissions tests measure underlying learning, making score disparities a symptom rather than a cause of inequality.
  • Ivy League’s Dartmouth College Reinstates Standardised Tests For Admissions — Dartmouth College has reinstated its standardised test requirement after commissioned research concluded that dropping it did not increase applicant diversity and that high school grade point averages and counsellor recommendations were far less reliable predictors of university performance than SAT scores.

AI Summary. The US has warned China that it and its allies will respond if Beijing addresses its industrial overcapacity by dumping goods on international markets. US Treasury officials say Chinese industrial support and macroeconomic policies focused on supply rather than demand risk pushing excess capacity onto world markets.

Demetri Sevastopulo and Edward White Financial Times
Date Posted:

US Treasury officials have warned Beijing that the US and its allies will take action if China tries to ease overcapacity by dumping goods on international markets. @JayCShambaugh

US Treasury officials have warned Beijing that the US and its allies will take action if China tries to ease overcapacity by...

Will allies respond if China dumps excess goods abroad?

Core argument: US officials warned Beijing that Washington and its allies will take action if China eases its industrial overcapacity by dumping goods on international markets, according to two senior Treasury officials speaking to the Financial Times.

Washington has warned Beijing that the US and its allies will take action if China tries to ease its industrial overcapacity problem by dumping goods on international markets, according to American officials. Two senior Treasury officials told the Financial Times that a US delegation made its concerns clear in a recent visit to China, including in conversations with He Lifeng, the vice-premier responsible for China’s economy. “We are worried that Chinese industrial support policies and macro policies that are more focused on supply rather than thinking about where the demand will come from are both careening towards a situation where overcapacity in China...is going to wind up hitting world markets,” said Jay Shambaugh, the under-secretary for international affairs, who recently led an economic team to Beijing.

Takeaways by Macro Roundup® AI

  1. US officials warned Beijing that Washington and its allies will take action if China eases its industrial overcapacity by dumping goods on international markets, according to two senior Treasury officials speaking to the Financial Times.
  2. Jay Shambaugh, the US under-secretary for international affairs, said Chinese industrial support and macro policies focused on supply rather than demand are careening toward overcapacity that will hit world markets.
  3. A US delegation led by Jay Shambaugh raised overcapacity concerns on a recent visit to China, including with He Lifeng, the vice-premier responsible for China's economy.

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  • 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.
  • 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.