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


Tuesday, May 7, 2024

AI Summary. Bank lending standards tightened to a degree previously seen only during the 2008 financial crisis and the onset of the COVID-19 pandemic, with the tightening beginning well before the bank collapses and affecting businesses of all sizes. The analysis attributes about 23pp of the tightening to credit supply shocks and about 22pp to lending standards responding to broader economic conditions.

Vasco Cúrdia Federal Reserve Bank of San Francisco
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.@VCurdia estimates that the contraction in credit in the aftermath of SVB’s failure may have added 0.4pp to unemployment through the end of this year and pushed down inflation slightly.

How much of tighter bank lending reflects credit supply shocks?

Core argument: Analysis suggests credit supply shocks account for about 23pp of the tightening in bank lending standards in the first half of 2023, with the remaining 22pp associated with lending standards responding to economic conditions including supply chain pressures.

Lending standards tightened in 2023 to a degree seen only during the Global Financial Crisis in 2008 and the onset of the COVID-19 pandemic in 2020. It also clearly shows that lending standards began tightening in the second half of 2022, well before the bank collapses in early 2023. Finally, the tightening in 2023 lending standards was very similar for all businesses regardless of their size. The analysis suggests that credit supply shocks account for about 23pp of the tighter lending standards in the first half of 2023. The remaining 22pp of the tightening is associated with the response of lending standards to changes in economic conditions due to supply chain pressures and other factors originating outside the credit market. The measure also shows that lending standards started to tighten before 2023, as early as the second quarter of 2022. This suggests that inflationary pressures and monetary policy tightening in previous quarters played a role in banking conditions more generally. Therefore, tighter credit standards may be related to the bank collapses in that they shared similar root causes in recent economic and financial conditions.

Takeaways by Macro Roundup® AI

  1. Analysis suggests credit supply shocks account for about 23pp of the tightening in bank lending standards in the first half of 2023, with the remaining 22pp associated with lending standards responding to economic conditions including supply chain pressures.
  2. Bank lending standards tightened in 2023 to a degree seen only during the Global Financial Crisis in 2008 and the onset of the COVID-19 pandemic in 2020, and the tightening was very similar across businesses of all sizes.
  3. Lending standards began tightening as early as the second quarter of 2022, before the bank collapses of early 2023, suggesting that inflationary pressures and monetary policy tightening in prior quarters played a role in banking conditions.

Related Articles:

  • The Secular Decline of Bank Balance Sheet Lending — Traditional bank balance sheet lending has declined as a share of credit intermediation, with credit increasingly channeled through arms-length transactions such as securitization. A structural model attributes falling lending shares to lower securitization costs, savers' behavior driving bank balance sheet size, and implicit bank costs and subsidies shaping balance sheet composition.
  • All Clear — Data and commentary indicate the banking panic has ended and had only a limited effect on credit availability, with overall bank lending little changed and still growing, reflecting problems at a few poorly managed banks rather than a systemic crisis. Recognition that the banking sector is not collapsing has already prompted some repricing of expected interest rate cuts.
  • How the Banking System Changed Post-SVB — American banks have tightened lending standards and reduced credit availability for both business and household loans, amid a weaker macroeconomic environment, limited liquidity, and elevated financial risks. The degree of tightening matches levels previously seen only during the 2008 recession and the onset of the COVID-19 pandemic.

AI Summary. In a survey of U.S. homeowners, close to half put their chance of moving within three years below 10% and almost three-quarters below 25%. These patterns hold across homeowners' self-reported mortgage rates and for those with and without a mortgage, with mean moving probabilities of 16% to 19%.

Felix Aidala, Andrew Haughwout, Ben Hyman, et al. Federal Reserve Bank of New York
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Analysis at @NewYorkFed estimates that 24.9% of homeowners would move in the next three years if their mortgage rate didn’t increase, compared to a baseline of 17.5%. @felix_aidala @ReviseNRetweet @JasonSomervil10

Do mortgage rates explain homeowners' low expectations of moving?

Core argument: Close to half of surveyed U.S. homeowners put their chance of moving in the next three years below 10%, and almost three-quarters place their chances below 25%, across the distribution of self-reported mortgage rates.

To assess the impact of mortgage rate lock-in on homeowner’s moving plans, we first asked respondents who currently own a home for the percent chance that they will move in the next three years. As shown in the histograms below, U.S. households’ moving plans generally reflect the decline in mobility that we’ve seen in recent decades. Across the distribution of homeowners’ current self-reported mortgage rates, close to half of respondents assess their probability of moving in the next three years to be less than 10%, with almost three-quarters of respondents placing their chances at less than 25%. These patterns are broadly consistent across homeowners with and without a mortgage, as all groups report a mean probability of moving in the next three years between 16% and 19%.

Takeaways by Macro Roundup® AI

  1. Close to half of surveyed U.S. homeowners put their chance of moving in the next three years below 10%, and almost three-quarters place their chances below 25%, across the distribution of self-reported mortgage rates.
  2. Homeowners with and without a mortgage report broadly similar moving plans, with every group reporting a mean probability of moving in the next three years between 16% and 19%.
  3. Homeowners' self-reported moving plans generally reflect the decline in U.S. household mobility seen in recent decades.

Related Articles:

  • The Lock-In Effect of Rising Mortgage Rates — The authors estimate that each percentage point by which market mortgage rates exceed a homeowner's original rate lowers the probability of sale by 18.1%, an effect they calculate prevented 1.33m US home sales. They estimate this supply reduction raised home prices by 5.7%, outweighing a 3.3% price decline from higher rates.
  • Have Rising Mortgage Rates Frozen the Housing Market? — 42% of American homeowners own their homes outright with no mortgage, and among those with mortgages the median housing debt is 52% of the home's value. Homeowners with large equity cushions should be less affected by "lock-in" from low pandemic-era mortgage rates.
  • A Huge Number of Homeowners Have Mortgage Rates Too Good to Give Up — About 70% of US mortgage holders hold rates more than three percentage points below what a new loan would cost, compared with a 1998–2020 period in which no more than 40% had rates even one point below market. Economists at the Federal Housing Finance Agency estimate this lock-in effect accounts for roughly 1.3m fewer home sales.

AI Summary. The number of homeowners equals the adult population multiplied by the share who head households and the share of households that own rather than rent. Holding the headship and ownership rates at current levels, the author projects that population growth dominates and homeownership growth is set to slow rapidly.

Aziz Sunderji Home Economics
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.@AzizSunderji forecasts the end of an 80-year boom for the real estate industry, as slower population growth causes slower homeownership growth.

Will slowing population growth slow homeownership growth?

Core argument: The number of U.S. homeowners equals population multiplied by the headship rate (household heads divided by adult population) multiplied by the ownership rate (share of households owning rather than renting).

Three factors explain the growth rate of homeownership: The population growth rate. The headship rate: the number of household heads, divided by the total adult population. The ownership rate: the percentage of households who own their home, rather than renting. At any given time, the number of homeowners across the country is equal to the population multiplied by the headship rate, multiplied by the ownership rate. We can estimate the growth in homeownership by forecasting these three variables into the future. In my base case forecast, I assume headship and ownership rates stay right where they are today. In my view, this is a more reasonable approach than guessing at how these variables evolve. In any case, when I stressed these assumptions (I elaborate on this below), the result is not very different. The population effect dominates: the rate of homeownership growth is set to rapidly slow.

Takeaways by Macro Roundup® AI

  1. The number of U.S. homeowners equals population multiplied by the headship rate (household heads divided by adult population) multiplied by the ownership rate (share of households owning rather than renting).
  2. The author's base case holds headship and ownership rates at today's levels and finds the population effect dominates, with the rate of homeownership growth set to slow rapidly.
  3. Stressing the assumptions on headship and ownership rates produces results not very different from the base case, according to the author.

Related Articles:

  • America Is Uniquely Ill-Suited To Handle a Falling Population — U.S. population growth slowed to about 7.4% in the decade to 2020, the slowest since the Great Depression, as the fertility rate fell from above the 2.1 needed for a stable population to 1.67. Because local and regional authorities levy 48% of all U.S. taxes—versus 20% in France and 6% in Britain—shrinking local revenue forces service cuts or tax rises.
  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • Inflation Adjusted House Prices 2.4% Below Peak — Inflation-adjusted U.S. house prices are 2.4% below their peak, while the monthly principal-and-interest payment on an equivalent house has risen 12% over one year and 107% over three years, as house prices rose 31% over that three-year span and 30-year mortgage rates went from 2.81% to 6.78%.

AI Summary. The unemployment rate has risen over the past year to 3.9%, just shy of the Federal Reserve's year-end projection of 4%. The author argues unemployment exhibits momentum, with increases tending to foretell further increases, and that an opaque influx of millions of migrants with limited skills and English proficiency adds persistent upward pressure.

Joseph Wang Fed Guy Blog
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.@FedGuy12 notes that the US labor market is softening while labor supply is rising due to immigration, and sees a possible spike in unemployment, implying the “probability of more rate cuts is increasing.”

Will unemployment rise faster than the Fed projects?

Core argument: The U.S. unemployment rate has risen steadily over the past year to 3.9%, just shy of the Fed's expected 4% rate for year-end 2025.

While the Fed expects the labor market to soften this year, the unemployment rate can easily rise by more than they expect. The unemployment rate has steadily risen over the past year and now sits at 3.9%, just shy of the Fed’s expected 4% unemployment rate for year-end 2025. An observation made by Dudley and Sahm is that the unemployment rate exhibits momentum, so increases tend to foretell further increases. In addition, the influx of millions of migrants places persistent upward pressure on the unemployment rate. Many of these migrants have limited skills and lack English proficiency, so they may be particularly vulnerable to weaker labor demand. A large but opaque increase in labor supply combined with a bout of weakening demand could move the unemployment rate upwards faster than anticipated.

Takeaways by Macro Roundup® AI

  1. The U.S. unemployment rate has risen steadily over the past year to 3.9%, just shy of the Fed's expected 4% rate for year-end 2025.
  2. Dudley and Sahm observe that the unemployment rate exhibits momentum, so increases tend to foretell further increases.
  3. The influx of millions of migrants, many with limited skills and lacking English proficiency, places persistent upward pressure on the unemployment rate, and combined with weakening labor demand could push it up faster than anticipated.

Related Articles:

  • Is Nominal Wage Growth Starting to Slow? — Aggregate nominal wage income, which tracks closely with nominal gross domestic product, has grown at a yearly rate of just 4.5%—identical to the pre-pandemic pace—compared with almost 7% over the prior six months. The author argues that several consecutive slow months, rather than a one-off, suggest the deceleration could be significant.
  • Global Views: Friendly Baseline, Greater Risks — Despite upside inflation surprises, the authors argue the broader disinflation narrative remains intact, citing a labor market that continues to rebalance: a jobs-workers gap of 2.0m, a quits rate below pre-pandemic levels, and wage growth running just over 4% year-on-year. They expect wage growth to converge to 3.5%, the pace they estimate is consistent with 2% inflation.
  • The Active Role of the Natural Rate of Unemployment During Cyclical Recoveries — The authors conclude that the natural rate of unemployment declined during the expansion that began in 2009, when unemployment fell from 10% to 3.5% with near-constant inflation. Their reasoning is that with inflation anchored at the Federal Reserve's 2% target over such a long stable period, New Keynesian theory implies the observed unemployment rate equals the natural rate.

AI Summary. The Social Security Trustees project the retirement trust fund will deplete its reserves by 2033, triggering a 21% across-the-board benefit cut, with the combined retirement and disability funds insolvent by 2035 and a 17% cut. Restoring 75-year solvency would require the equivalent of a 27% payroll tax increase or a 21% benefit reduction.

CRFB Staff Committee for a Responsible Federal Budget
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A @BudgetHawks analysis notes the Social Security “trust fund” will deplete its reserves by 2033, triggering a 21% benefit cut under current law. A 27% (i.e. 3.3pp) payroll tax increase could close the funding gap.

How large a benefit cut will Social Security insolvency trigger?

Core argument: The Social Security Trustees project the Old-Age and Survivors Insurance trust fund will deplete its reserves by 2033, when all beneficiaries would face a 21 percent across-the-board benefit cut.

Social Security is approaching insolvency. Under current law, Social Security cannot guarantee full benefits to current retirees. The Trustees project the Social Security Old-Age and Survivors Insurance (OASI) trust fund will deplete its reserves by 2033, when today’s 58-year-olds reach the full retirement age and today’s youngest retirees turn 71. Upon insolvency, all beneficiaries will face a 21 percent across-the-board benefit cut. Including the Disability Insurance (SSDI) trust fund, the theoretically combined trust funds will be insolvent by 2035 and beneficiaries would face a 17 percent cut. According to the Trustees, lawmakers could restore 75-year solvency with the equivalent of a 27% (3.3 percentage point) payroll tax increase, a 21% reduction in all benefits, or a 25% reduction in benefits for new beneficiaries if they act today.

Takeaways by Macro Roundup® AI

  1. The Social Security Trustees project the Old-Age and Survivors Insurance trust fund will deplete its reserves by 2033, when all beneficiaries would face a 21 percent across-the-board benefit cut.
  2. Including the Disability Insurance trust fund, the Trustees project the theoretically combined trust funds will be insolvent by 2035, with beneficiaries facing a 17 percent cut.
  3. The Trustees estimate lawmakers acting today could restore 75-year solvency with the equivalent of a 27 percent (3.3 percentage point) payroll tax increase, a 21 percent reduction in all benefits, or a 25 percent reduction for new beneficiaries.

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.
  • Bill Cassidy’s Well-Intentioned but Misguided Social-Security Reform — A Senate proposal would have the federal government borrow about $1.5tn over five years—at a federal borrowing rate of roughly 3.9%—and invest it in stocks, private equity, and other assets riskier than Treasury bonds for 75 years, borrowing meanwhile to cover Social Security shortfalls. A Wharton economist argues this is not meaningfully different from raising the capital gains tax.
  • A Million Simulations, One Verdict for US Economy: Debt Danger Ahead — 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%.

AI Summary. Medicare's Hospital Insurance trust fund is projected to exhaust its reserves in 2036, with a 75-year shortfall of 0.35% of payroll, and total gross Medicare costs are projected to rise from 3.90% of GDP to 6.20% by 2098. An alternative scenario from the program's Chief Actuary projects 8.38% of GDP instead.

CRFB Staff Committee for a Responsible Federal Budget
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The Medicare Trustees report that the Medicare “trust fund” will be insolvent in 2036 with a 75-year shortfall of up to 1.2% of payroll. @MarcGoldwein @BudgetHawks

How large is Medicare's projected shortfall and spending growth?

Core argument: The 2024 Medicare Trustees' Report projects the Hospital Insurance Trust Fund will exhaust its reserves in 2036, when today's 53-year-olds first become eligible for benefits and today's youngest beneficiaries turn 77.

The HI Trust Fund will run out of reserves in 12 years, with a projected insolvency date of 2036. That’s when today’s 53-year-olds will first be eligible for benefits and today’s youngest beneficiaries turn 77. The HI trust fund faces a large shortfall, totaling 0.35% of payroll (0.15% of GDP) over 75 years and peaking at 0.60% of payroll (0.27% of GDP) in 2044. Total Medicare costs will grow rapidly. Total Gross Medicare costs have increased from 2.19% of GDP in 2000 to a projected 3.90% of GDP in 2025 and are projected to grow further to 5.86% of GDP by 2050 and 6.20% of GDP by 2098. Medicare’s financial outlook has largely improved since last year, with the insolvency date now five years later, the 75-year HI shortfall 44% smaller, and gross program costs in 2050 15 percent of GDP lower. However, Part B and D costs are projected to be higher after 2060 and gross costs higher after 2080. Medicare’s situation might be far worse than official projections. Under an alternative scenario created by the Chief Actuary, Medicare spending will rise to 8.38% of GDP in 2098 rather than 6.20 percent. The HI shortfall in this scenario would be 1.19% of payroll instead of 0.35% of payroll.

Takeaways by Macro Roundup® AI

  1. The 2024 Medicare Trustees' Report projects the Hospital Insurance Trust Fund will exhaust its reserves in 2036, when today's 53-year-olds first become eligible for benefits and today's youngest beneficiaries turn 77.
  2. Total gross Medicare costs rose from 2.19% of GDP in 2000 to a projected 3.90% in 2025 and are projected to reach 5.86% by 2050 and 6.20% by 2098.
  3. Medicare's outlook improved from the prior year, with the insolvency date five years later and the 75-year HI shortfall 44% smaller at 0.35% of payroll, though the Chief Actuary's alternative scenario puts spending at 8.38% of GDP in 2098 and the shortfall at 1.19% of payroll.

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.
  • Has the Medicare Cost Problem Gone Away? — Average annual real per capita spending growth in the US Medicare program fell from 5.2% in 1987-1996 to 2.7% in 1996-2005 and 0.7% in 2006-2022, a slowdown most plausibly attributed to congressionally mandated payment reforms and cuts. With enrollment projected to rise from 66m to 83m by 2040, aggregate costs are expected to grow rapidly.
  • Long-Run Fiscal Outlook in the United States — The Congressional Budget Office projects the U.S. primary deficit will rise gradually until the early 2040s before plateauing near 2.7% of GDP, driven mainly by mandatory spending such as Social Security and Medicare. Limiting both health-care and Social Security spending to grow no faster than GDP would not produce a primary surplus until 2036.

Wednesday, May 8, 2024

AI Summary. Immigrants account for about a quarter of new employer businesses in the United States, and firms with immigrant owners are more likely to hold patents and hold more patents per employee. This higher propensity toward innovation is only partly explained by differences in owners' education levels and fields of study.

Saheel Chodavadia, Sari Pekkala Kerr, William Kerr et al. National Bureau of Economic Research
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Immigrants accounted for 15% of the 2020 US population, but 27% of new businesses formed in 2021-23. Differences in education and fields of study only partly explain immigrant firms’ high rates of patenting and innovation. @william_r_kerr @schodavadia

How much do immigrants contribute to new business formation and patenting?

Core argument: Immigrants account for about a quarter of new employer businesses in the United States and play outsized roles in entrepreneurship in many countries.

Immigrants play outsized roles in entrepreneurship in many countries, accounting for about a quarter of new employer businesses in the United States. In 2022, the four most valuable private, venture-backed US companies (SpaceX, Stripe, Instacart, Databricks) had immigrant founders, along with three of the ten most valuable public companies globally (Alphabet, Nvidia, Tesla) (Crunchbase, 2022). We utilize the Annual Business Survey (ABS) to quantify the greater rates of patenting and innovation in immigrant-founded firms. Figure 1b compares the 2019 ABS estimate to alternatives from the same period, some of them for specific type of entrepreneurship and prominent artificial intelligence startups. [Regressions] show that a firm is more likely to have a patent and more patents per employee if the owner is an immigrant. This result is quite robust to controlling for education and other traits of the owner and firm. Immigrants are over-represented as founders of innovative firms and in the high-tech industry. This higher propensity towards innovation is only partly explained by differences in education levels and fields of study.

Takeaways by Macro Roundup® AI

  1. Immigrants account for about a quarter of new employer businesses in the United States and play outsized roles in entrepreneurship in many countries.
  2. In 2022, the four most valuable private venture-backed US companies — SpaceX, Stripe, Instacart, and Databricks — had immigrant founders, as did three of the ten most valuable public companies globally: Alphabet, Nvidia, and Tesla, per Crunchbase.
  3. Annual Business Survey regressions indicate that firms with immigrant owners are more likely to hold a patent and have more patents per employee, a result robust to controls for owner education and other owner and firm traits.

Related Articles:

  • Latinos Are Starting U.S. Businesses at a Torrid Pace — Immigrants accounted for 36% of new U.S. business launches last year, up from 25% in 2019, driven by a rise in Latino entrepreneurship, while business creation by white and native-born Americans has slowed. Hispanic-owned startups tend to be smaller, with 46% reporting over $100,000 in annual revenue versus 62% of white-owned firms.
  • High Tech Business Entry In The Pandemic Era — High-tech industries accounted for a disproportionate share of the surge in net new business establishments after 2019, with net entry higher in tech than non-tech industries. The authors find suggestive evidence that tech establishment births rose more for existing firms than new firms, though both categories saw elevated openings.
  • Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology — Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.

AI Summary. All four measures of typical and aggregate pay have grown since 2019 when adjusted using the personal consumption expenditures price index, but show smaller increases in three measures and a decline in one when adjusted using the consumer price index. This pattern of smaller gains under consumer price index adjustment holds across time periods.

Wendy Edelberg and Noadia Steinmetz-Silber Brookings Institution
Date Posted:

Between Q4 2019 and Q1 2024, 7 out of 8 measures of real wage growth were positive, ranging from 0.1% to 1.8% per annum over the period. @WendyEdelberg

Does the inflation measure used change whether pay has kept up?

Core argument: All four measures of typical and aggregate pay have grown since 2019 when deflated by PCE prices, indicating nominal pay has kept up relatively well with overall costs of living on that measure.

All four measures of typical and aggregate pay, adjusted by PCE, have grown since 2019. When deflating using CPI, we find smaller increases across three of the four measures and a decline in one measure. In other words, nominal pay by these measures has done relatively well in keeping up with overall costs of living since 2019, measured by PCE. Nominal pay has done somewhat less well in keeping up with increases in the costs of goods and services that are much more salient to consumers, measured by CPI. This pattern is consistent across time periods, with pay deflated by CPI experiencing smaller increases—or instead decreases—relative to pay deflated using PCE.

Takeaways by Macro Roundup® AI

  1. All four measures of typical and aggregate pay have grown since 2019 when deflated by PCE prices, indicating nominal pay has kept up relatively well with overall costs of living on that measure.
  2. Deflating the same four pay measures by CPI yields smaller increases in three measures and a decline in one, indicating pay has kept up less well with the costs of goods and services more salient to consumers.
  3. The pattern holds across time periods, with pay deflated by CPI showing smaller increases—or decreases—relative to pay deflated using PCE.

Related Articles:

  • Credit Bidenomics for Rising US Wages — Inflation-adjusted wages for US workers in the middle pay range, between the 40th and 60th percentiles, were 6.6% higher than before the pandemic, slightly above what 2015-19 trends would predict. The US is the only G7 country with substantial real wage gains, ranging elsewhere from a 0.2% rise in Canada to a 9% decline in Italy.
  • Why Americans Dislike the Economy — The Employment Cost Index, which adjusts for shifts in the mix of jobs and industries, shows inflation-adjusted wages have fallen 3.7% since the end of 2020, erasing the gains of the late 2010s. Real wages stand at 2015 levels, so American paychecks buy no more than they did eight years earlier.
  • Are You Better Off Than You Were Four Years Ago? — Inflation-adjusted wages rose over the past four years, including when measured from just before the pandemic, at roughly the same pace as in the preceding years: about 3% cumulative growth adjusted by the consumer price index versus about 4% in 2015-2019, and about 5% growth adjusted by personal consumption prices.

AI Summary. United Nations projections show China's population falling 8%, Japan's 18%, South Korea's 12%, and Taiwan's 8% between 2020 and 2050, while the US population rises 12%. Working-age people per person over 65 are projected to drop to about 1.8 in China and 1.2 in Japan and South Korea.

Nicholas Eberstadt Foreign Affairs
Date Posted:

Nicholas Eberstadt @AEIecon notes East Asia is depopulating; over the next 26 years Japan’s population is projected to fall by 18%, China’s by 8%, South Korea’s by 12% and Taiwan’s by 8%. The US population is projected to grow by 12%.

How sharply will East Asia's population and working-age support ratios fall?

Core argument: UN Population Division projections show Japan's population falling 18% and South Korea's 12% between 2020 and 2050, with China's and Taiwan's each down 8%, while the U.S. population rises 12%.

According to projections from the Population Division of the UN Department of Economic Social Affairs, China’s and Japan’s populations are set to fall by 8% and 18%, respectively, between 2020 and 2050. South Korea’s population is poised to shrink by 12%. And Taiwan’s will go down by an estimated 8%. The U.S. population, by contrast, is on track to increase by 12%. The region’s “potential support ratios”—that is, the number of people who are between 20 and 64 relative to those who are 65 and older—are expected to plunge in the years ahead. In 2020, that ratio was 5.1 to 1 for China, 4.4 to 1 for Taiwan, 4.2 to 1 for South Korea, and 1.8 to 1 for Japan. In 2050, it will be 1.8 to 1 for China, 1.4 to 1 for Taiwan, and an almost unfathomable 1.2 to 1 in Japan and South Korea—meaning that, in Japan and South Korea, there will be almost as many people over 65 as between 20 and 64. This transformation will likely depress individual productivity, savings, and investments, as workers and their parents devote ever more time and money to elder care.

Takeaways by Macro Roundup® AI

  1. UN Population Division projections show Japan's population falling 18% and South Korea's 12% between 2020 and 2050, with China's and Taiwan's each down 8%, while the U.S. population rises 12%.
  2. China's potential support ratio of people aged 20–64 to those 65 and older is projected to fall from 5.1:1 in 2020 to 1.8:1 in 2050, with Taiwan going from 4.4:1 to 1.4:1.
  3. Japan and South Korea are projected to reach potential support ratios of 1.2:1 by 2050, leaving almost as many people over 65 as aged 20–64, a shift likely to depress individual productivity, savings, and investment as elder-care burdens grow.

Related Articles:

  • Thoughts and Comments on Demographic Aging and Shrinking — As an arithmetic matter, the greying of societies is driven much more by smaller families than by longer lives, which the author attributes to a withering away of the family. Demographic simulations project that by 2040 couples in their 60s in China will likely have at least one living parent to care for, and many will have two or three.
  • A Revolution Is Coming for China’s Families — Prolonged below-replacement fertility in China is projected to produce a "kin crash" in which rising generations have fewer living relatives than ever before in Chinese history. The authors argue this shrinking of extended family networks will erode the Chinese family's role in protecting people from adversity and helping them seize opportunity.
  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.

AI Summary. Metro areas still short of their pre-pandemic employment levels saw steeper job losses during the pandemic recession (16.1% on average versus 13.4% for recovered areas) and slower job growth beforehand (0.5% average annual growth over the prior five years versus 1.5%). Worker shortages have been especially acute in these lagging areas.

Jaison Abel, Richard Deitz, Jonathan Hastings, et al. Federal Reserve Bank of New York
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A @NewYorkFed analysis notes that while the US overall has recovered from the pandemic, metro areas in the Rust Belt with slow growth before the pandemic and most of upstate New York have not, driven in part by persistent worker shortages.

Why have some metro areas not regained pre-pandemic employment levels?

Core argument: Metro areas that have not regained pre-pandemic employment saw an average 16.1% employment decline during the pandemic recession, versus 13.4% in metros that have recovered, leaving a bigger hole to dig out of.

The metro areas that are lagging in the jobs recovery share some common features. First, many of them were hit particularly hard during the initial shock, leaving a bigger hole to dig out of. On average, the places that have not yet recovered experienced an employment decline of 16.1% during the pandemic recession compared to a 13.4% decline in the places that have recovered. In addition, many of the places that have not recovered were slow-growth economies heading into the pandemic, leaving less momentum to grow and recover coming out of it. Indeed, the metro areas with job deficits saw average annual job growth of just 0.5% in the five years leading up to the pandemic, compared to 1.5%, on average, for those that have recovered. Over the past year, slower job growth in the areas that have not yet recovered has resumed. Further, many places that have not recovered just don’t have the workers to allow their local economies to grow. With persistent worker shortages across the country since the pandemic, labor has often been hard to find, and that’s been especially true in places that still have job deficits.

Takeaways by Macro Roundup® AI

  1. Metro areas that have not regained pre-pandemic employment saw an average 16.1% employment decline during the pandemic recession, versus 13.4% in metros that have recovered, leaving a bigger hole to dig out of.
  2. Metro areas still running job deficits averaged just 0.5% annual job growth in the five years before the pandemic, compared with 1.5% for those that have recovered, leaving less momentum for recovery.
  3. Slower job growth has resumed in metro areas that have not yet recovered, where worker shortages persisting since the pandemic have made labor especially hard to find.

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AI Summary. The US Department of Commerce has revoked certain export licences allowing American firms to supply semiconductors to Chinese telecoms equipment maker Huawei, affecting chips used in Huawei laptops and mobile phones.

Demetri Sevastopulo Financial Times
Date Posted:

The Biden administration has revoked export licences that allow Intel and Qualcomm to supply Huawei with semiconductors used in laptops and mobile phones, extending export controls targeting high-tech sectors of the PRC’s economy.

Is the US tightening chip export licences for Huawei?

Core argument: The Biden administration has revoked export licences permitting Intel and Qualcomm to supply semiconductors to Huawei, increasing US pressure on the Chinese telecoms equipment maker.

The Biden administration has revoked export licences that allow Intel and Qualcomm to supply Huawei with semiconductors as Washington increases the pressure on the Chinese telecoms equipment company. The move by the US Department of Commerce affects the supply of chips for Huawei’s laptop computers and mobile phones, according to people familiar with the situation. The commerce department confirmed to the Financial Times that it had “revoked certain licences for exports to Huawei” but did not name which US companies would be affected.

Takeaways by Macro Roundup® AI

  1. The Biden administration has revoked export licences permitting Intel and Qualcomm to supply semiconductors to Huawei, increasing US pressure on the Chinese telecoms equipment maker.
  2. The US Department of Commerce action affects chips used in Huawei's laptop computers and mobile phones, according to people familiar with the situation.
  3. The commerce department confirmed to the Financial Times that it had "revoked certain licences for exports to Huawei" without naming which US companies would be affected.

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  • Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI — Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.
  • China On Cusp Of Next-Generation Chip Production Despite US Curbs — China's largest chipmaker, SMIC, has assembled new production lines in Shanghai to mass-produce 5-nanometre smartphone processors designed by Huawei, using its existing stock of US- and Dutch-made equipment. Though 5nm remains a generation behind cutting-edge 3nm chips, the move indicates China's semiconductor industry is still progressing despite US export controls.