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, April 2, 2024

AI Summary. Investment in AI hardware is projected to rise substantially as a precursor to integrating AI into business processes, with the investment cycle estimated to peak at 2–2½% of GDP and early signs visible among AI-enabling companies. The authors estimate generative AI could raise developed-market labor productivity growth by 1.5pp annually over a 10-year adoption period, roughly 15% cumulatively.

Joseph Briggs and Devesh Kodnani Goldman Sachs
Date Posted:
Is Database:
Database
Is Important:
Important

Goldman Sachs forecasts an AI-driven investment cycle with $250B of annual hardware investment, equivalent to 9% of US business investment or roughly 1% of US GDP, through 2025. They expect this capex cycle to peak at 2-2.5% of US GDP by 2032.

How much will AI investment lift productivity growth over a decade?

Core argument: Analysts estimate generative AI could raise developed-market labor productivity growth by 1.5pp per year over a 10-year adoption period, implying a cumulative increase in labor productivity levels of around 15%.

Investment in AI [hardware] is likely to rise substantially as this investment is a precursor to the widespread integration of AI into business processes. We expect such an investment cycle (which we have estimated could peak at 2-2½% of GDP) to be the first measurable gauge of AI adoption. Early signs of such an investment boom are already visible among AI-enabling companies. This increased investment is not yet visible in official national accounts data that are relevant for GDP, but shipments for some AI-related components have recently picked up. The economic upside implied by our analysis is quite large. We estimate that generative AI could raise DM [developed market] labor productivity growth by 1½pp per year over a 10-year adoption period; implying a cumulative increase in labor productivity levels of around 15%; and forecast a net 0.4pp boost to DM potential GDP growth by the end of forecast horizon after accounting for the overlap with current technology-driven productivity gains and a slowing underlying productivity growth trend.

Takeaways by Macro Roundup® AI

  1. Analysts estimate generative AI could raise developed-market labor productivity growth by 1.5pp per year over a 10-year adoption period, implying a cumulative increase in labor productivity levels of around 15%.
  2. The AI hardware investment cycle, estimated to peak at 2–2.5% of GDP, is expected to be the first measurable gauge of AI adoption, with early signs already visible among AI-enabling companies.
  3. Increased AI investment is not yet visible in official national accounts data relevant for GDP, though shipments of some AI-related components have picked up; analysts forecast a net 0.4pp boost to developed-market potential GDP growth by the end of the forecast horizon.

Related Articles:

  • Microsoft and OpenAI Plot $100 Billion Stargate AI Supercomputer — Microsoft and OpenAI executives have drawn up plans for a US data center project, referred to as "Stargate," housing a supercomputer with millions of specialized server chips to power OpenAI's artificial intelligence. People involved say the project could cost as much as $100bn, roughly 100x some of today's biggest data centers, with Microsoft likely financing it.
  • Amazon Bets $150 Billion on Data Centers Required for AI Boom — Amazon has committed roughly $148bn over two years to build and operate data centers worldwide, expanding hubs in northern Virginia and Oregon while entering new locations including Mississippi, Saudi Arabia, and Malaysia. The buildout targets demand for corporate services like file storage and databases, as well as the computing power for expected growth in generative artificial intelligence.
  • AI Datacenter Energy Dilemma – Race for AI Datacenter Space — Artificial intelligence is projected to push datacenters to 4.5% of global electricity generation by 2030, with datacenter power capacity growth accelerating from a 12-15% annual rate to 25%. Global datacenter critical IT power demand is projected to rise from 49 gigawatts to 96 gigawatts, about 40 gigawatts of it for AI.

AI Summary. Foreign-born workers make up 20.3% of the roughly 19.9mn workers in strategically significant US industries—those ranking in the top fifth for research spending per worker and above average in use of science and engineering workers—compared with 18.4% of the workforce overall. Manufacturing and professional services account for 83% of employment in these industries.

Connor O’Brien and Adam Ozimek Economic Innovation Group
Date Posted:
Is Database:
Database
Is Important:
Important

Properly trained talent is the limiting constraint to growth; immigrants currently make up 20% of the domestic American workforce in strategic industries. @cojobrien @ModeledBehavior

How large a share of strategic industry workers are foreign-born?

Core argument: Foreign-born workers make up 20.3% of the 19.9mm workers in strategically significant industries identified in the 2018–2022 five-year American Community Survey, above their 18.4% share of the workforce overall.

We identify Census-defined industries as strategically significant if they intersect with Brookings Metro’s Advanced Industries definition, using the Census Bureau’s NAICS crosswalk. Brookings defines advanced industries as those that are both in the top fifth of industries by R&D spending per worker and are above average in their use of STEM workers. We then examine the workforces of these industries using 2018-2022 five-year American Community Survey (ACS) microdata. The industries identified encompass nearly 20 million workers and range from software to shipbuilding. Strategic industries are disproportionately in manufacturing and professional services, which combine for 83% of employment. In non-strategic sectors, these two categories combined employ only 9% of workers. We find a total of 19.9mm workers in the 2022 five-year ACS in our identified strategic industries. Just over 4mm, or 20.3%, of such workers are foreign-born, compared with 18.4% of workers overall.

Takeaways by Macro Roundup® AI

  1. Foreign-born workers make up 20.3% of the 19.9mm workers in strategically significant industries identified in the 2018–2022 five-year American Community Survey, above their 18.4% share of the workforce overall.
  2. Manufacturing and professional services account for 83% of employment in strategically significant industries, compared with 9% of workers in non-strategic sectors.
  3. Strategically significant industries, defined by intersecting Census industries with Brookings Metro's advanced industries — those in the top fifth by R&D spending per worker and above average in STEM worker use — range from software to shipbuilding.

Related Articles:

  • The Extreme Shortage of High IQ Workers — Semiconductor manufacturing requires workers of above-average intelligence, with the most demanding roles needing IQs in the top 1 in 1,000 — a pool of about 164,000 people in the US, of whom perhaps 100,000 can be placed in such professions. The author argues this scarcity explains reliance on high-IQ workers abroad and on smarter tools and non-human intelligence.
  • Immigration and the U.S. Economy Since the Pandemic: An Accounting Exercise — The US native-born labor force fell by about 1.2m over four years, a decline driven overwhelmingly by population aging, while foreign-born labor supply grew by about 3m, leaving the overall labor force up roughly 2m. Without immigration, the total US labor force would have shrunk.
  • 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. The authors argue that slowing globalization, fragmenting global flows, longer supply chains, and fiscal pressures from pandemic-era debt and population aging are pushing average long-run inflation upward. They contend that keeping inflation low and stable would require offsetting political-economy factors such as stronger central bank independence or more credible public debt policy.

Hassan Afrouzi, Marina Halac, Kenneth Rogoff and Pierre Yared Brookings Papers On Economic Activity
Date Posted:
Is Database:
Database

.@krogoff @YaredPierre @hafrouzi argue that strengthened central bank independence and more credible public debt policies are required to offset inflationary pressures from trade-distorting geopolitical tensions and rising government deficits.

Are slowing globalization and fiscal pressures pushing long-run inflation higher?

Core argument: The authors argue that keeping inflation low and stable will require political economy offsets such as strengthened central bank independence or more credible public debt policy, because global economic pressures are pushing average long-run inflation upwards.

If countries pursue protectionist policies and do not deescalate geopolitical tensions in the coming years, then the slowdown in globalization, the rising fragmentation of global flows, and the lengthening of supply chains will also persist. Debt overhang from pandemic-era government spending combined with high interest rates is a common driver of [rising fiscal pressures], but it is not the only one. The fiscal pressures for advanced economies largely reflect the acceleration of the aging of the population and the resulting expansion of entitlement spending without commensurable revenue increases. We argue that for inflation to remain low and stable in the future, political economy factors, such as strengthened central bank independence or more credible public debt policy, would need to offset the global economic pressures now pushing average long-run inflation upwards.

Takeaways by Macro Roundup® AI

  1. The authors argue that keeping inflation low and stable will require political economy offsets such as strengthened central bank independence or more credible public debt policy, because global economic pressures are pushing average long-run inflation upwards.
  2. Continued protectionist policies and unresolved geopolitical tensions would sustain the slowdown in globalization, rising fragmentation of global flows, and lengthening of supply chains, according to the authors.
  3. Fiscal pressures in advanced economies largely reflect accelerating population aging and the resulting expansion of entitlement spending without commensurate revenue increases, while pandemic-era debt overhang combined with high interest rates is a common driver across countries.

Related Articles:

  • Quo Vadis, r*? The Natural Rate Of Interest After The Pandemic — Estimates of the natural rate of interest across core advanced economies suggest it may have increased, though the estimates are widely dispersed and statistically uncertain. Low expected potential growth and rising longevity may weigh on the natural rate, while large fiscal deficits, age-related spending, and public investment needs for infrastructure, defense, and the green transition may push it up.
  • Has the U.S. Economy Transitioned to a Higher Long-Run Real Interest Rate Regime? — Labor productivity growth in the U.S. nonfarm business sector has exceeded its longer-run average in three of the past five years, suggesting a possible shift to a faster productivity growth regime. Such a shift is one possible explanation for a long-run neutral real interest rate above 2%.
  • What Have We Learned About the Neutral Rate? — Analysts estimate that if inflation is brought down without a recession, the Federal Reserve's policy rate will stabilize nearer 3–3.25% than the 2.5% longer-run median projection of Federal Reserve officials. Projected shifts in government debt and demographics imply a roughly 0.5 percentage point net increase in the neutral rate over the next decade.

AI Summary. Bloomberg Economics projects US federal debt will reach 123% of GDP by 2034, with debt servicing costs near 5.4% of GDP — over 1.5x what the federal government spent on national defense in 2023 and comparable to the entire Social Security budget. Across a million simulations, the worst 5% of outcomes put the debt ratio above 139%.

Bhargavi Sakthivel, Maeva Cousin, and David Wilcox Bloomberg
Date Posted:

A Bloomberg analysis argues the US debt outlook is fragile, with servicing costs reaching 5.4% of GDP by 2034, 1.5x what was spent on defense last year.

How high will US debt and interest costs rise by 2034?

Core argument: Bloomberg Economics' model, using market pricing for future interest rates and bond maturity data while keeping the CBO's other assumptions, projects US debt at 123% of GDP in 2034.

Bloomberg Economics has built a forecast model using market pricing for future interest rates and data on the maturity profile of bonds. Keeping all the CBO’s other assumptions in place, that shows debt equaling 123% of GDP for 2034. Debt at that level would mean servicing costs reach close to 5.4% of GDP — more than 1.5 times as much as what the federal government spent on national defense in 2023, and comparable to the entire Social Security budget. To put some parameters around the uncertainty, Bloomberg Economics has run a million simulations on the CBO’s baseline view — an approach economists call stochastic debt sustainability analysis. Each simulation forecasts the debt-to-GDP ratio with a different combination of GDP growth, inflation, budget deficits, and interest rates, with variations based on patterns seen in the historical data. In the worst 5% of outcomes, the debt-to-GDP ratio ends 2034 above 139%, which means that the US would have a higher debt ratio in 2034 than crisis-prone Italy did last year.

Takeaways by Macro Roundup® AI

  1. Bloomberg Economics' model, using market pricing for future interest rates and bond maturity data while keeping the CBO's other assumptions, projects US debt at 123% of GDP in 2034.
  2. Debt at 123% of GDP would put servicing costs near 5.4% of GDP, more than 1.5 times what the federal government spent on national defense in 2023 and comparable to the entire Social Security budget.
  3. In the worst 5% of Bloomberg Economics' million simulations, which vary GDP growth, inflation, budget deficits, and interest rates, the debt-to-GDP ratio ends 2034 above 139%, higher than Italy's ratio last year.

Related Articles:

  • The Long Term Budget Outlook: 2024 to 2054 — The Congressional Budget Office projects the federal budget deficit will reach 8.5% of gross domestic product over a 30-year horizon, with outlays rising to 27.3% of GDP and revenues to 18.8%. The projected growth is attributed to rising interest costs, large sustained deficits excluding interest, and spending on federal health care programs, particularly Medicare.
  • Olivier Blanchard on Debt Explosions — The author argues that rising long-term US Treasury yields reflect a term premium driven by heavy bond supply and weaker demand, including the Federal Reserve shrinking its holdings, rather than a risk premium, since inflation-indexed yields have also risen. Risks include a failed auction or debt monetization producing high inflation.
  • From Riches to Rags: Causes of Fiscal Deterioration Since 2001 — Federal debt held by the public rose from 32% to 98% of GDP over roughly two decades, despite earlier Congressional Budget Office projections that the debt would be paid off. The authors attribute 37 percentage points to major tax cuts, 33 to discretionary spending and Medicare expansions, and 28 to recession and pandemic responses.

AI Summary. The United States was the world's largest exporter of liquefied natural gas, shipping an average of 11.9 billion cubic feet per day, a 12% increase from the prior year.

Victoria Zaretskaya Energy Information Administration
Date Posted:

The US exported more LNG than any other country in 2023, with 66% of exports going to Europe and 26% to Asia.

Is the United States the world's largest LNG exporter?

Core argument: U.S. liquefied natural gas exports averaged 11.9 Bcf/d in 2023, a 12% (1.3 Bcf/d) increase over 2022.

The United States exported more liquefied natural gas (LNG) than any other country in 2023. U.S. LNG exports averaged 11.9 billion cubic feet per day (Bcf/d)—a 12% increase (1.3 Bcf/d) compared with 2022.

Takeaways by Macro Roundup® AI

  1. U.S. liquefied natural gas exports averaged 11.9 Bcf/d in 2023, a 12% (1.3 Bcf/d) increase over 2022.
  2. The United States exported more liquefied natural gas than any other country in 2023.

Related Articles:

  • Biden Freezes Licenses to Export Gas, Imperiling Projects — The US halted approval of new licenses to export liquefied natural gas pending review of how shipments affect climate change, the economy, and national security. The pause affects more than a dozen proposals awaiting review at the Energy Department and is likely to disrupt plans for billions of dollars in projects.
  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.
  • America’s Energy Export Boom — The US produces more crude oil than any other country and, counting total petroleum products, more than Saudi Arabia and Russia combined, with crude and natural gas output at record highs and gas production up 7% from its 2019 peak. Net US energy exports reached $70bn over 12 months despite falling oil and gas prices.

Wednesday, April 3, 2024

AI Summary. Demographic needs are outweighing affordability in the housing market, with the share of first-time buyers returning nearly to pre-pandemic levels despite high prices and interest rates. One in four Millennial buyers reported purchasing because they had no choice, and Millennials again make up the largest group of homebuyers.

Aziz Sunderji Home Economics
Date Posted:

Younger homebuyers are coming back into the market despite affordability being close to all-time lows as “demographics trump affordability in the housing market.” @AzizSunderji

Do demographic needs outweigh affordability in the housing market?

Core argument: One in four Millennial homebuyers reported buying because they had no choice, and the share of first-time buyers rose almost all the way back to pre-pandemic levels despite high interest rates and prices.

Homebuyers—younger ones in particular—are coming to grips with the new, less hospitable homebuying landscape. It’s a tangible reflection of the fact that demographics trump affordability in the housing market. One out of four Millennial buyers reported buying because they had no choice. Despite high interest rates and prices, the percentage of first time home buyers rose almost all the way back to pre-pandemic levels. Older Millennials in particular are starting families and need larger homes (two-thirds of them are married couples with at least one child). Higher costs put them on the back-burner in 2021-22, but their needs didn’t go away. In 2022-23, older Millennials surged back into the second spot in the ranking of homebuyers (behind Gen X), and Millennials as a whole (older + younger Millennials) once again asserted themselves as the largest cohort of buyers.

Takeaways by Macro Roundup® AI

  1. One in four Millennial homebuyers reported buying because they had no choice, and the share of first-time buyers rose almost all the way back to pre-pandemic levels despite high interest rates and prices.
  2. Older Millennials, two-thirds of whom are married couples with at least one child, moved back into second place among homebuyer cohorts in 2022–23 behind Gen X after higher costs delayed their purchases in 2021–22.
  3. Millennials as a whole, older and younger combined, again ranked as the largest cohort of homebuyers.

Related Articles:

  • The US Housing Market Is Very Quickly Becoming Unaffordable — Home prices in Las Vegas, Phoenix, Orlando, and Tampa now stand at 6 to 7x incomes, exceeding the ratios reached at the peak of the early 2000s housing bubble in each of those metro areas. All four shifted from affordable, to unaffordable, back to affordable, and into unaffordable territory again.
  • 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.
  • On The Move: West Side Story — 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.

AI Summary. Survey evidence finds 80% of respondents believe prices rise faster than wages, though real weekly earnings for the median worker grew 1.7% between 2019 and 2023. About 40% think their nominal income would be higher had inflation been lower, and half expect wages to take over a year to catch up if inflation doubled.

Stefanie Stantcheva Brookings Papers On Economic Activity
Date Posted:
Is Database:
Database

New survey research shows that people dislike inflation because they believe that it is associated with declining real wages and falling living standards. @S_Stantcheva building on @RobertJShiller

Do people believe prices rise faster than their wages?

Core argument: 80% of survey respondents believe prices rise faster than wages, while U.S. Treasury figures show real weekly earnings for the median worker grew 1.7% between 2019 and 2023 and about 0.8% in the year preceding the survey.

Figure 13 summarizes the key findings from closed-ended questions related to wage impacts [of inflation]. People systematically think that prices rise faster than wages (80% of all respondents). In reality, real weekly earnings for the median worker grew 1.7% between 2019 and 2023, and real weekly earnings by around 0.8% in the year preceding the survey (The Purchasing Power of American Households, U.S. Department of the Treasury). Around 40% of respondents think that if inflation had been lower, their (nominal) income would be higher. In addition, one-third of respondents say that their job satisfaction would be lower if their wage increased just as much as prices. Respondents are asked how long it would take for their wage to catch up if inflation doubled. Half of the sample believes it will take more than one year for their wage to catch up if inflation doubled. These numbers are much lower than those in Shiller (1997) for the ’90s, where more than 80% of respondents thought it would take “several years” for their wage to adjust or that it would “never” adjust.

Takeaways by Macro Roundup® AI

  1. 80% of survey respondents believe prices rise faster than wages, while U.S. Treasury figures show real weekly earnings for the median worker grew 1.7% between 2019 and 2023 and about 0.8% in the year preceding the survey.
  2. Around 40% of respondents think their nominal income would be higher had inflation been lower, and one-third say their job satisfaction would be lower if their wage rose just as much as prices.
  3. Half of respondents believe their wage would take more than a year to catch up if inflation doubled, below Shiller (1997), where over 80% said adjustment would take "several years" or never occur.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Digesting Inflation — The authors estimate that inflation's drag on consumer sentiment decays about 50% per year, with a 10% inflation shock cutting sentiment by 35 index points in the current year, 16 the next, and 8 the year after. On these estimates, inflation over the prior three years is holding sentiment down by 16 index points.
  • Asymmetric Amplification and the Consumer Sentiment Gap — Consumer sentiment surveys show Republican respondents' views swing about ±15 index points relative to predicted levels depending on which party holds the presidency, while Democrats' views swing only about ±6 points. The authors estimate that adjusting for this asymmetric amplification shrinks the gap between observed and predicted consumer sentiment by 30%.

AI Summary. Dominion Energy, which serves 6m customers, has raised its projected power needs for the coming decade, attributing the change to data center demand. McKinsey, BCG, and S&P Global all expect US power demand to grow 13%-15% annually through 2030, and rising transformer costs alongside electrification could make electricity scarcer.

Michael Cembalest J.P. Morgan
Date Posted:
Is Database:
Database
Is Important:
Important

Michael Cembalest @jpmorgan notes McKinsey, BCG, and S&P Global all expect American electric power demand to grow 15-30% annually until 2030, with previously unanticipated power demand from AI a major driver.

Is data center demand making electricity a scarcer resource?

Core argument: Dominion Resources, which serves 6 million customers across 15 states, sharply raised its projected power needs for the coming decade, attributing the change solely to increased demand from data centers.

Energy is a hot topic in AI circles. Dominion Resources which serves 6 million customers in 15 states has sharply increased its projected power needs for the coming decade. The sole reason for the change: increased demand from data centers. Dominion may not be representative of all utilities, but with the cost of transformer equipment already rising sharply, electrification of transport/heating and increased power demand from AI may turn electricity into a much scarcer resource. McKinsey, BCG, and S&P Global all expect US power demand to grow by 13%-15% per year until 2030. There were a lot of media articles on Amazon which acquired data centers and up to 40% of the output from the Susquehanna nuclear plant, both owned by Talen Energy. Amazon paid a premium of 50% over what Talen could earn from the grid. But these articles missed an important point: taking baseload power off an existing grid may not be feasible everywhere.

Takeaways by Macro Roundup® AI

  1. Dominion Resources, which serves 6 million customers across 15 states, sharply raised its projected power needs for the coming decade, attributing the change solely to increased demand from data centers.
  2. McKinsey, BCG, and S&P Global each expect US power demand to grow 13%–15% per year until 2030, while rising transformer equipment costs, electrification of transport and heating, and AI demand may make electricity a much scarcer resource.
  3. Amazon acquired data centers and up to 40% of the output from Talen Energy's Susquehanna nuclear plant, paying a 50% premium over what Talen could earn from the grid, though taking baseload power off an existing grid may not be feasible everywhere.

Related Articles:

  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.
  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • The AI Transition One Year Later: On Track, but Macro Impact Still Several Years Off — Investment in AI hardware is projected to rise substantially as a precursor to integrating AI into business processes, with the investment cycle estimated to peak at 2–2½% of GDP and early signs visible among AI-enabling companies. The authors estimate generative AI could raise developed-market labor productivity growth by 1.5pp annually over a 10-year adoption period, roughly 15% cumulatively.

AI Summary. Venture capital fundraising has slowed sharply, from $555bn at its peak to about a third of that the following year, leaving venture investors on course for their worst fundraising year since 2015. Firms holding large pre-downturn funds have been reluctant to back start-ups whose valuations were hit by higher interest rates.

George Hammond Financial Times
Date Posted:
Is Database:
Database
Is Important:
Important

Last year global venture capital funds raised one-third of 2021’s record total of $555B. Funds are increasingly using their dry powder to support existing investments as opposed to making new investments.

Has venture capital fundraising slowed sharply since its peak?

Core argument: Venture capital firms raised roughly a third of their 2021 haul of $555bn last year, and continued slowing puts them on course for their worst fundraising year since 2015.

Fundraising activity has slowed sharply since 2021, when VCs hauled in $555bn. Last year, they raised a third of that total, and activity has continued to slow, putting venture investors on course for their worst fundraising year since 2015. In the US, just $9.3bn in capital was raised in the first three months of this year, roughly a tenth of the total raised in 2023. VCs that raised large funds before the market turned still have billions of dollars of “dry powder”, but have been reluctant to invest in start-ups whose valuations have been rocked by higher rates. Increasingly, they are focused on helping companies already in their portfolios towards exits which would then allow VCs to return capital to their own limited partners.

Takeaways by Macro Roundup® AI

  1. Venture capital firms raised roughly a third of their 2021 haul of $555bn last year, and continued slowing puts them on course for their worst fundraising year since 2015.
  2. US venture funds raised just $9.3bn in the first three months of this year, roughly a tenth of the total raised in 2023.
  3. Venture investors holding billions in "dry powder" from funds raised before the market turned have been reluctant to back start-ups whose valuations were rocked by higher rates, focusing instead on steering portfolio companies toward exits that return capital to limited partners.

Related Articles:

  • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.
  • High-Interest Rates Crushed Startup Investment. Here Is What Could Revive It — U.S. venture funding for startups peaked above $300bn—more than double the prior year—before a series of steep interest-rate increases, the fastest in four decades, curbed appetite for risky startup bets and pushed funding down for a second straight year to $167bn.
  • Data Update 3 for 2024: A Rule-breaking Year for Interest Rates — Central bank influence on interest rates is strongest at the shortest maturities and decays at longer ones, so long-term rates are better understood through the Fisher decomposition of a nominal rate into expected inflation plus an expected real rate. Assuming the expected real rate converges on real economic growth yields an "intrinsic risk-free rate" estimated as inflation plus real growth.

AI Summary. US southwest border migrant encounters totaled about 850,000 in fiscal 2019, nearly double the prior year, and more than doubled again to 2.5m in fiscal 2023, with monthly encounters topping 300,000 for the first time before falling to roughly 175,000–190,000. Encounters are typically lower in winter months and higher in the fall.

Julie Fine, Josh Wingrove and Maya Averbuch Bloomberg
Date Posted:

2% of the population of Denver, Miami-Dade, Queens, and the Bronx in New York City now consists of new migrants.

How much have southwest border migrant encounters risen since 2018?

Core argument: Southwest border migrant encounters reached 2.5 million in fiscal 2023, more than double the roughly 850,000 recorded in fiscal 2019, which itself was almost twice the 2018 level.

There were about 850,000 southwest border “encounters” of migrants—some are caught more than once—in the 2019 fiscal year. That was almost twice as much as 2018. It has more than doubled since, with 2.5 million encounters in the 2023 fiscal year. Migrant encounters across the Mexican border hit a record in December, topping 300,000 for the first time, before falling to about 175,000 in January and 190,000 in February. They’re typically lower in winter months and higher in the fall, right around the election.

Takeaways by Macro Roundup® AI

  1. Southwest border migrant encounters reached 2.5 million in fiscal 2023, more than double the roughly 850,000 recorded in fiscal 2019, which itself was almost twice the 2018 level.
  2. Migrant encounters across the Mexican border topped 300,000 for the first time in December, a record, before falling to about 175,000 in January and 190,000 in February.
  3. Border encounters are typically lower in winter months and higher in the fall, around the time of the US presidential election.

Related Articles:

  • Immigration and the U.S. Economy Since the Pandemic: An Accounting Exercise — The US native-born labor force fell by about 1.2m over four years, a decline driven overwhelmingly by population aging, while foreign-born labor supply grew by about 3m, leaving the overall labor force up roughly 2m. Without immigration, the total US labor force would have shrunk.
  • Illegal US Border Crossings Aren’t Really Breaking Records — Official US border encounter statistics exclude people who evade Border Patrol agents, who in past decades made up the majority of illegal crossers. The Department of Homeland Security estimated apprehension rates of 33%–43% in the 2000s versus 81% more recently, a shift attributed mainly to most crossers intending to turn themselves in and apply for asylum.
  • Illegal Immigration Is a Bigger Problem Than Ever. These Five Charts Explain Why — Government data show border agents made 2.05m arrests in a single federal fiscal year, the second consecutive year above 2m, after figures never previously exceeded 1.7m or stayed elevated for as long. A growing share of migrants are families with children, who are difficult to deport to their home countries, rather than single adults from Mexico seeking work.

AI Summary. Deliveries of US Virginia-class attack submarines are running an estimated 24 to 36 months behind contracted dates, with builders General Dynamics and HII averaging roughly 1.2 submarines a year against a required two. The Navy projects the contractors will reach the two-a-year rate by 2028.

Anthony Capaccio Bloomberg
Date Posted:

The Navy’s submarine program is facing delays of 24-36 months, largely driven by shipyard capacity. These delays could undermine plans to deliver at least 5 Virginia-class subs to Australia starting in 2032.

The Navy’s submarine program is facing delays of 24-36 months, largely driven by shipyard capacity. These delays...

Are US attack submarine deliveries falling years behind schedule?

Core argument: Virginia-class attack submarine deliveries are running an estimated 24 to 36 months behind contracted dates, according to results of the Navy's 45-day ship review made available to Bloomberg News ahead of its release.

Delivery dates for Virginia-class subs are running an estimated 24 to 36 months past the contracted dates, according to results of the Navy’s new 45-day ship review made available to Bloomberg News in advance of its release this week. General Dynamics and HII are supposed to be completing two submarines a year but instead are averaging the completion of one plus 20% of the work building a second sub. The Navy projects the contractors hitting the two-a-year rate by 2028.

Takeaways by Macro Roundup® AI

  1. Virginia-class attack submarine deliveries are running an estimated 24 to 36 months behind contracted dates, according to results of the Navy's 45-day ship review made available to Bloomberg News ahead of its release.
  2. General Dynamics and HII are supposed to complete two submarines a year but are averaging one submarine plus 20% of the work on a second.
  3. The Navy projects its contractors will reach the two-submarine-per-year rate by 2028.

Related Articles:

  • 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.
  • Why Xi Can No Longer Brag About the Chinese Economy — China's shipyards build 46% of the world's ships, letting it produce several warships and submarines a year, while the U.S. holds under 1% of capacity and its Navy faces late, over-budget deliveries from a few yards lacking workers. China is also the largest drone producer.
  • 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.