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, May 28, 2024

AI Summary. Using U.S. tax and transfer data, the authors estimate that the degree to which market income gains and losses are offset by taxes and transfers rises with income rank, peaks at the middle quintile, and then falls. They also find systematic spillovers to quintiles that neither gained nor lost, favoring the middle quintile.

Michael Boskin, Kareem Elnahal, and Adam Zhang National Bureau of Economic Research
Date Posted:
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Using CPS data from 1991-2013, Boskin, Elnahal, and Zhang find that redistribution policy attenuates market income shifts most strongly at the middle-income quintile, consistent with the median voter theory.

How much do taxes and transfers offset income shifts by rank?

Core argument: Using CPS data on U.S. state and federal taxes and transfers over 1991–2013, the authors estimate that attenuation of market income shifts rises with quintile rank, peaks at the middle quintile, and then falls for higher quintiles, consistent with median voter political economy theory.

Using CPS data on U.S. state and federal taxes and transfers over 1991-2013, we estimate a regression model that yields the marginal effect of any shift of market income share from one quintile to another on the entire post-tax, post-transfer income distribution. We identify exogenous income distribution changes [via] instruments based on exposure to international trade and commodity price shocks, and national industry demand shocks [the GMM results]. Attenuation denotes the degree to which initial (market) gains and losses are ultimately compensated. Attenuation can be achieved in two ways: by spreading gains and losses to other quintiles (spillovers), or by reversing/blunting the original shift in the market income distribution (cancellation). We find the degree of attenuation of market income shifts initially increases in quintile rank, peaks at the middle quintile, and then falls for higher income quintiles, consistent with median voter political economy theory (Figure 4). We also provide evidence of considerable and systematic spillover effects on quintiles neither gaining nor losing in the “experiments,” also favoring the middle quintile, what we label the greedy median voter.

Takeaways by Macro Roundup® AI

  1. Using CPS data on U.S. state and federal taxes and transfers over 1991–2013, the authors estimate that attenuation of market income shifts rises with quintile rank, peaks at the middle quintile, and then falls for higher quintiles, consistent with median voter political economy theory.
  2. The authors identify exogenous income distribution changes using instruments based on exposure to international trade and commodity price shocks and national industry demand shocks, estimating via GMM the marginal effect of shifting market income share between quintiles on the full post-tax, post-transfer distribution.
  3. The authors report considerable and systematic spillover effects on quintiles that neither gain nor lose in the experiments, with those spillovers also favoring the middle quintile, which the authors label the "greedy median voter.".

Related Articles:

AI Summary. The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.

Daniel Crown and Aaron Betz Congressional Budget Office
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A new @USCBO analysis argues rising government debt may drive significant crowding out going forward: “In CBO’s assessment, every additional dollar of deficit-financed spending reduces private investment by 33 cents.”

How much would greater investment sensitivity to deficits reduce incomes?

Core argument: CBO assesses that under greater sensitivity of private investment to deficits — with debt held by the public exceeding 250% of GDP beginning in 2051 — real GNP per person in 2051 would be 18% ($21,300) lower than in its extended baseline.

Under the [“If sensitivity of private investment to deficits differed: Greater sensitivity”] scenario, in which debt held by the public exceeds 250% of GDP beginning in 2051, private investment would be smaller than projected in CBO’s extended baseline. The reduction in private investment would, over time, lower the stock of private capital and reduce output. Lower economic output would reduce federal revenues and lead to even larger deficits as the effect on private investment compounded. Reductions in private investment would also decrease the amount of capital used by each worker, thereby increasing the return on capital and the return on investments (including government bonds). In CBO’s assessment, that greater sensitivity of private investment to deficits would increase the average interest rate on federal debt in 2051 by 2pp in relation to the agency’s extended baseline. Real GNP per person would be 18% (or $21,300) lower in that year than it is in CBO’s extended baseline. Under the second scenario, private investment would be larger than projected in CBO’s extended baseline. The increase in private investment would, over time, boost the stock of private capital and output. It would also increase the amount of capital used by each worker, thereby reducing the return on capital and the return on investments (including government bonds). In CBO’s assessment, the reduced sensitivity of private investment to deficits would lower the average interest rate on federal debt by 0.7pp in 2054 in relation to the agency’s extended baseline. Real GNP per person under that scenario would be 7% (or $8,700) higher in that year than it is in CBO’s extended baseline.

Takeaways by Macro Roundup® AI

  1. CBO assesses that under greater sensitivity of private investment to deficits — with debt held by the public exceeding 250% of GDP beginning in 2051 — real GNP per person in 2051 would be 18% ($21,300) lower than in its extended baseline.
  2. CBO assesses that greater sensitivity of private investment to deficits would raise the average interest rate on federal debt in 2051 by 2 percentage points relative to its extended baseline, as less capital per worker increases returns on capital and government bonds.
  3. Under CBO's reduced-sensitivity scenario, larger private investment would lower the average interest rate on federal debt by 0.7 percentage points in 2054 and leave real GNP per person 7% ($8,700) higher than in the extended baseline.

Related Articles:

  • The Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.
  • Why We Should, but Won’t, Reduce the Budget Deficit — High interest rates will likely crowd out private investment and weaken long-term growth prospects. Because Social Security, health care, other safety-net programs, defense, and interest payments make up most federal spending, leaving only a small and already squeezed slice of nondefense discretionary spending, deficit reduction requires either cutting popular benefits or raising taxes.
  • Recent Movements in R*: The Most Important Interest Rate That You Have Never Heard Of — The natural rate of interest — the inflation-adjusted rate prevailing when the economy grows at trend with inflation at target — is unobservable and uncertain, but most estimates have risen and sit above pre-pandemic levels. The data lean toward a long-run natural rate higher than pre-pandemic and possibly above Federal Reserve projections.

AI Summary. Chinese wages are low even after adjusting for productivity differences with American workers, and it is these relatively low wages rather than comparative advantage that explain China's weak domestic demand and low export prices. If wages rose in line with productivity, Chinese households could consume more and the country would import as much as it exports.

Michael Pettis Financial Times
Date Posted:

.@michaelxpettis argues that persistent trade imbalances are caused by surplus countries’ suppression of domestic wages, not comparative advantage. “Excess savings and persistent trade surpluses are not signs of comparative advantage.”

Do low wages rather than comparative advantage explain persistent trade surpluses?

Core argument: Chinese wages remain low even after adjusting for the productivity gap between Chinese and American workers, and these relatively low wages, rather than comparative advantage, are argued to explain China's weak domestic demand and low export prices across the board.

Chinese workers are much less productive than American workers, so it’s to be expected that they earn lower wages. The problem is that even adjusting for differences in productivity, Chinese wages are low. It is these relatively low wages — not comparative advantage — that explain China’s weak domestic demand as well as its low export prices across the board. This would change if China were to raise its wages in line with its productivity, as it has been promising to do for nearly two decades. In that case, it would still export products in which it had a comparative advantage, like electric vehicles, but because Chinese households would be able to consume more, it would import just as much as it exported, and so would contribute as much demand to the world economy as it absorbs. Americans would pay for their Chinese imports with exports to the world. This isn’t what is happening. China exports far more than its population can afford to import. And so while most economists support free trade under comparative advantage because this maximises the value of goods and services produced by the economy, excess savings and persistent trade surpluses are not signs of comparative advantage.

Takeaways by Macro Roundup® AI

  1. Chinese wages remain low even after adjusting for the productivity gap between Chinese and American workers, and these relatively low wages, rather than comparative advantage, are argued to explain China's weak domestic demand and low export prices across the board.
  2. If China raised wages in line with productivity, as it has promised for nearly two decades, its households would consume more and it would import as much as it exported, contributing as much demand to the world economy as it absorbs.
  3. China exports far more than its population can afford to import, and excess savings and persistent trade surpluses are argued to be signs not of the comparative advantage that underpins most economists' support for free trade.

Related Articles:

  • Chinese “Overcapacity” Is Not the Problem. Underconsumption Is. — Chinese households spend only 37% of national income on goods and services, the lowest share in the world, while employee compensation at Chinese nonfinancial corporations is about 44% of gross value added versus roughly 60% in the US, Europe, and Japan. Chinese manufacturers appear to be adding production capacity far faster than actual output.
  • Can Trade Intervention Lead to Freer Trade? — China accounts for over 31% of global manufacturing but under 13% of global consumption, while the United States accounts for under 17% of manufacturing and nearly 27% of consumption. The author argues persistent surpluses reflect household subsidies to producers, and that the US could counter them with tariffs or taxes on capital inflows.
  • He Helped Trump Remake Global Trade. His Work Isn’t Done — A former U.S. trade representative argues that countries running chronic trade surpluses for decades are by definition protectionist, and backs a universal 10% tariff plus a higher tariff on China to push toward globally balanced trade over time. Alternatives include import certificates tied to exports and a charge on foreign investment in U.S. assets.

AI Summary. Household data show that older Americans have shifted from spending more than their income to saving: in the mid-1990s those aged 65-74 spent 10% more than they took in, while since 2015 they have saved about 1% of income. Federal Reserve survey data show the share of retired households reporting saving rose from 46% to 51%.

Economist Staff The Economist
Date Posted:

“Baby Boomers” in the United States have 52% of net wealth, and the “life-cycle hypothesis” predicts that they should be eating into their wealth to fund current spending. However, in 2022 51% of retired households reported net savings. @TheEconomist

Are older Americans saving rather than spending down their wealth?

Core argument: Americans aged 65–74 spent 10% more than their income in the mid-1990s, drawing down wealth, but since 2015 have saved about 1% of their income.

We have looked at household data from a range of rich countries. Turn first to America. In the recent past old people behaved like old people behave in economic models. In the mid-1990s, those aged between 65 and 74 spent 10% more than they took in, eating into their wealth. But since 2015 people this age have saved about 1% of their income. Boomers are also likelier than previous generations to say they save, suggests a survey by the Federal Reserve. In 1995, 46% of retired households claimed to have saved in the past year. By 2022, 51% of retired households did. There could be deeper forces at play, making boomers reluctant to spend what they have earned, and in turn, pressing down on interest rates and inflation. Three factors stand out: “bequest motives,” the Covid-19 pandemic, and worries about care.

Takeaways by Macro Roundup® AI

  1. Americans aged 65–74 spent 10% more than their income in the mid-1990s, drawing down wealth, but since 2015 have saved about 1% of their income.
  2. A Federal Reserve survey suggests 51% of retired American households claimed to have saved in the past year in 2022, up from 46% in 1995.
  3. Three factors stand out as possible explanations for boomers' reluctance to spend their wealth, which may press down on interest rates and inflation: bequest motives, the Covid-19 pandemic and worries about care.

Related Articles:

  • Generation Z Is Unprecedentedly Rich — Hourly pay growth for Americans aged 16–24 reached 13% year on year versus 6% for those aged 25–54, the largest such gap since reliable data began. Americans aged 15–24 spent 25% less time on work and work-related activities than in 2007, and the share of 12th-graders calling work a central part of life has dropped sharply.
  • The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners — Total US family wealth rose from about $38tn in 1989 to $140tn in 2022, adjusted for inflation, and $84tn is projected to pass from older Americans to millennial and Gen X heirs through 2045. Households holding at least $5m in liquid assets, 1.5% of all households, account for 42% of expected transfers.
  • Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans — Using post-tax, post-transfer income data, the authors find each of the past four US generations was better off than the prior one, with Millennials' real median household income at ages 36–40 18% above the previous generation's, versus 34% for the Silent Generation, 27% for Baby Boomers, and 16% for Generation X.

AI Summary. Central banks facing economic uncertainty are likely to set interest-rate policy in ways that make renewed inflation more likely than a deep recession or financial crisis. This inflationary bias is well known to economists but is not priced in by financial markets, and political pressure makes it harder for central bankers to resist.

Ken Rogoff Project Syndicate
Date Posted:

.@krogoff argues “The COVID-19 pandemic has revived central bankers’ long-dormant preference for inflationary policies,” favoring policy that makes inflation a more likely outcome than a recession or a financial crisis.

Do central banks tilt toward inflation rather than recession under uncertainty?

Core argument: Central banks facing economic uncertainty will likely set interest-rate policy in ways that make renewed inflation more likely than a deep recession or financial crisis, even if they do not aim for high inflation.

To be sure, inflationary surges do not happen every year. But another bout of inflation could occur sooner than markets expect. When faced with economic uncertainties, central banks may not aim for high inflation, but they will likely adjust their interest-rate policies in a way that makes such an outcome more likely than a deep recession or a financial crisis. Despite being well-known to economists, this inflationary bias has not been recognized by financial markets, perhaps because central-bank messaging has become exceptionally effective over the past few decades. Central bankers understand that as soon as markets doubt their intentions, interest rates will quickly reflect rising inflation expectations. Nevertheless, this realization is unlikely to help them resist pressures from politicians, who often focus only on the next election and may prioritize other issues over stabilizing short-term inflation.

Takeaways by Macro Roundup® AI

  1. Central banks facing economic uncertainty will likely set interest-rate policy in ways that make renewed inflation more likely than a deep recession or financial crisis, even if they do not aim for high inflation.
  2. This inflationary bias, though well-known to economists, has not been recognized by financial markets, perhaps because central-bank messaging has become exceptionally effective over recent decades.
  3. Central bankers know that interest rates will quickly reflect rising inflation expectations once markets doubt their intentions, yet that awareness is unlikely to help them resist pressure from politicians focused on the next election.

Related Articles:

  • Changing Central Bank Pressures and Inflation — 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.
  • The Big Picture: Back to the Future — The secular backdrop has shifted from disinflationary to more inflationary, with interest rates no longer near zero and real rates no longer negative. Household balance sheets are as healthy as they have been in 20 years, leaving room to borrow, while the public sector is as indebted as it has ever been.
  • The Inflation Outlook Is Getting Better, But Also Worse? — Producer price measures of input costs for manufactured goods have turned positive again, in some cases rising at the fastest rate in more than a year, and this is filtering through to core final demand. US domestic manufacturing production has been flat or slightly down since 2013 despite strong growth in domestic demand for manufactured goods.

AI Summary. American multinationals' spending on research and development in India rose from $1.7bn in 2010 to $5.5bn in 2021, according to the US Bureau of Economic Analysis. India's services exports reached $338bn, nearly 10% of GDP, up from $53bn in 2005, lifting its share of global services exports to 4.6% from roughly 2%.

Economist Staff The Economist
Date Posted:

Between 2010 and 2021 US R&D spending in India increased 224% to $5.5B. “Growing geopolitical tension with the West means that China, India’s principal rival hub for low-cost R&D, has lost some of its appeal.” @TheEconomist

Is India becoming a global hub for corporate research and services exports?

Core argument: American multinationals' R&D spending in India rose from $1.7bn in 2010 to $5.5bn in 2021, the latest year available, according to America's Bureau of Economic Analysis.

In 2010 American multinationals spent $1.7bn on R&D activities in India, according to America’s Bureau of Economic Analysis. By 2021, the latest year available, that figure had surged to $5.5bn. Growing geopolitical tension with the West means that China, India’s principal rival hub for low-cost R&D, has lost some of its appeal. On May 16th it was reported that Microsoft had asked hundreds of employees working on advanced technologies such as machine learning and cloud computing in the country to relocate. All this has helped turbocharge India’s services exports, which hit $338bn last year, or nearly 10% of GDP, up from $53bn in 2005, reckons Goldman Sachs. The country now accounts for 4.6% of global services exports, up from roughly 2% in 2005. India’s goods exports, by contrast, account for just 1.8% of the global total, up from 1% in 2005.

Takeaways by Macro Roundup® AI

  1. American multinationals' R&D spending in India rose from $1.7bn in 2010 to $5.5bn in 2021, the latest year available, according to America's Bureau of Economic Analysis.
  2. India's services exports reached $338bn last year, nearly 10% of GDP, up from $53bn in 2005, and its share of global services exports rose to 4.6% from roughly 2%, reckons Goldman Sachs.
  3. India's goods exports account for 1.8% of the global total, up from 1% in 2005, below its 4.6% share of global services exports.

Related Articles:

  • Where Can Investors Find Geographic Diversification Today? — Japan offers investors geographic diversification, with among the lowest correlation in economic conditions to the US of any developed country, reflecting trade exposure split between the US, China, and the broader Asia region. Most sales of Japanese-listed companies are domestic, and investors remain underweight Japanese assets.
  • Wall Street Snubs China for India in a Historic Markets Shift — US-listed exchange-traded funds buying Indian stocks drew record inflows while the four largest China funds saw combined outflows of nearly $800m, and India's weight in the main developing-market equity benchmark hit an all-time high of 18% as China's fell to a record low of 24.8%. Indian equities trade at more than 20x future earnings, 27% above their 2010–2020 average.
  • India At The Centre — India has averaged real GDP growth above 6% a year for three decades, and unlike China's growth, it has translated into equity returns, with the Sensex matching or beating the S&P 500 over 30-, 20-, 10-, and five-year spans. Analysis attributes the growth to rising total factor productivity, with contributions from services exports and improved basic infrastructure.

Wednesday, May 29, 2024

AI Summary. Survey data show 6.30% of US workers who switched to remote work after the pandemic moved states, compared with 3.58% of those who kept commuting, and plausibly exogenous changes in employer remote-work policies predict both higher remote work and higher interstate migration. Remote workers staying with the same employer are more likely to move states.

Alexander Bick, Adam Blandin, Karel Mertens, et al. Federal Reserve Bank of St. Louis Working Papers
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The rise in the work-from-home share accounts for more than half of the rise in overall interstate migration since 2019, and states with greater WFH opportunities experienced more out-migration.

Does remote work increase interstate migration?

Core argument: In the Real-Time Population Survey, 6.30% of workers who switched to work from home after Covid moved states since February 2020, compared with 3.58% of workers who commuted both before and after Covid.

In the American Community Survey (ACS), annual interstate migration [AIM] among adults ages 18-64 fell from 2.75% in 2005 to 2.23% in 2010. AIM rose from 2.40% in 2019 to 2.66% in 2022. Data from the Real-Time Population Survey (RPS) provide micro evidence that access to WFH increases interstate migration. [Fig. 4 shows] that 6.30% of workers who switched to WFH post-Covid moved states since February 2020, [compared to] 3.58% of workers who commuted both pre- and post-Covid. A potential concern [is]that the pandemic increased the desire to move across states and a large share of these moves involve WFH, but WFH itself was not necessary for those moves to happen [and thus not causal]. Using novel questions in the RPS - whether workers who commuted prior to the pandemic did so due to job characteristics, personal preferences, or employer requirements, and whether employer WFH policies had changed since 2020 - we find that plausibly exogenous changes in employer WFH policies predict higher rates of WFH and higher rates of interstate migration. Finally, consistent with the interpretation that WFH reduces the benefit of living near a workplace, we find that (i) among workers who remain with their pre-pandemic employer, WFH workers are more likely to move states, and (ii) among workers who move states WFH workers are less likely to change employers.

Takeaways by Macro Roundup® AI

  1. In the Real-Time Population Survey, 6.30% of workers who switched to work from home after Covid moved states since February 2020, compared with 3.58% of workers who commuted both before and after Covid.
  2. Annual interstate migration among U.S. adults ages 18–64 in the American Community Survey fell from 2.75% in 2005 to 2.23% in 2010, then rose from 2.40% in 2019 to 2.66% in 2022.
  3. Plausibly exogenous changes in employer work-from-home policies predict higher rates of work from home and higher rates of interstate migration; among workers staying with pre-pandemic employers, those working from home are more likely to move states.

Related Articles:

  • Working From Density — Within the same metropolitan-area income quartile, denser neighborhoods have a higher share of jobs that can be done remotely. The authors argue this pattern suggests increased telework raises willingness to pay for housing in high-density places, where leisure amenities and nonwork social interaction are more available.
  • Remote Work Is Less Common Than We Thought — New Bureau of Labor Statistics estimates show hybrid remote work is substantially less common than other surveys indicated, while fully remote work matches other estimates at about one in ten workers, making fully remote slightly more common than hybrid. Nearly one in five college-educated workers are fully remote, and nearly 40% of advanced-degree holders work hybrid or fully remote.
  • Remote Work, Three Years Later — Remote work has reduced office utilization but not yet office occupancy, because most firms are locked into long-duration leases. Baseline estimates suggest remote work will exert 0.8 percentage points of upward pressure on the office vacancy rate near-term, 2.3 more over the following five years, and 1.8 thereafter.

AI Summary. Financial conditions are significantly easier than when the Federal Reserve began raising interest rates, with the S&P 500's market value up $9tn since the Fed shifted to discussing cuts — a household windfall equal to about 50% of annual consumer spending. Easy financial conditions and continued fiscal support are offsetting rate hikes.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal makes the case for the “Fed Cut Reflexivity Paradox: The more the Fed insists that the next move in interest rates is a cut, the more financial conditions will ease, making it more difficult for the Fed to cut.”

Are easy financial conditions and fiscal support offsetting rate hikes?

Core argument: Since the Fed's November 2023 pivot from discussing hikes to discussing cuts, S&P 500 market cap has risen $9 trillion, a household windfall equal to about 50% of 2023 consumer spending of $19 trillion.

Financial conditions are significantly easier than when the Fed started raising interest rates in March 2022. The stock market is being boosted by more than strong earnings and the prospects of AI lifting future GDP growth. Since the Fed pivot in November 2023, when the FOMC started talking about cuts instead of hikes, the S&P 500 market cap is up $9 trillion. For comparison, consumer spending in 2023 was $19 trillion. In other words, in a few months, the household sector has experienced a windfall gain corresponding to about 50% of last year’s consumer spending! Combined with continued easy fiscal policy via the Chips Act, the Inflation Reduction Act, and the Infrastructure Act, it is not surprising that employment growth and inflation have been reaccelerating in 2024. In short, why is the economy still so strong? Because fiscal policy is still a significant tailwind to the economy, and easy financial conditions have been offsetting Fed hikes.

Takeaways by Macro Roundup® AI

  1. Since the Fed's November 2023 pivot from discussing hikes to discussing cuts, S&P 500 market cap has risen $9 trillion, a household windfall equal to about 50% of 2023 consumer spending of $19 trillion.
  2. Financial conditions are significantly easier than when the Fed began raising rates in March 2022, offsetting the Fed's hikes as employment growth and inflation reaccelerate in 2024.
  3. Fiscal policy remains a significant tailwind to the economy through the Chips Act, the Inflation Reduction Act, and the Infrastructure Act.

Related Articles:

  • Global Views: A Global Perspective on Monetary Easing — US growth is projected to slow to about 2.2% from 4.1%, close to potential given the boost to labor force growth from recent immigration, while growth in other advanced G10 economies is projected to pick up from about -0.4% to +1.2%. Core inflation estimates point to two Federal Reserve rate cuts, with timing sensitive to incoming data.
  • How Fast Can the Fed Ease? The Private Sector Response to Easier Conditions Will Be a Key Factor — US households have reduced debt over the past 20 years, leaving room to borrow more if incentives improve, while companies that issued debt at low rates hold large liquidity and healthy balance sheets. That gives businesses capacity to raise investment, and business surveys indicate capital-spending sentiment is already improving.
  • 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. Africa's population is forecast to exceed that of all of today's high-income countries plus China by 2060, while age structures elsewhere are inverting. In South Korea, males aged 50-54 make up 4.3% of the population versus 1.5% for those aged 0-4, with similar inversions in China and, more slowly, India.

Martin Wolf Financial Times
Date Posted:

According to UN projections, by 2060 Sub-Saharan Africa will have 24.4% of the global population, almost as large as the combined total of today’s high-income countries (12.6%) and China (12%).

How is the global distribution of population by age shifting?

Core argument: In South Korea, males aged 50–54 make up 4.3% of the population while those aged 0–4 account for just 1.5%, inverting the traditional population pyramid.

The population of Africa is forecast to be larger than that of all today’s high-income countries, plus China by 2060. Familiar population pyramids, with the largest numbers at the youngest ages, are inverting. In South Korea, for example, males aged 50-54 are 4.3% of the population, while those aged 0-4 are a mere 1.5% of it. Similar inversions are occurring elsewhere, notably including China and even, albeit more slowly, in India.

Takeaways by Macro Roundup® AI

  1. In South Korea, males aged 50–54 make up 4.3% of the population while those aged 0–4 account for just 1.5%, inverting the traditional population pyramid.
  2. Africa's population is forecast to exceed the combined population of all of today's high-income countries plus China by 2060.
  3. Population pyramid inversions similar to South Korea's are occurring elsewhere, notably in China and, more slowly, in India.

Related Articles:

  • 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.
  • The World Is Becoming More African — United Nations forecasts project Africans will rise from 8% of the world's people in 1950 to one-quarter by 2100, with the continent holding the world's largest workforce within a decade. McKinsey & Company estimates Africa's per-person economic growth has averaged 1% annually since 1990, against India's 5% and China's 9%.
  • Europe Hopes Barbed Wire Will Keep Migrants Out. It Won’t — The total length of border fences in the European Union grew from 315km to 2,163km over roughly a decade, yet unauthorised crossings made up just 0.13% of all external crossings into the EU. Most migrants arrive via the Mediterranean rather than the Balkans or the eastern land border.

AI Summary. The Congressional Budget Office projects that if federal debt stays at 99% of GDP, average income per person would rise from about $84,400 to $128,600 over three decades, but reaches only $123,200 if debt climbs to 166% of GDP. Higher debt is projected to crowd out private investment.

CRFB Staff Committee for a Responsible Federal Budget
Date Posted:
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Under the CBO’s “Rising Debt” scenario, real GDP per person in 2054 would be almost $15,000 lower than the “Stable Debt” scenario, due to higher debt levels crowding out private investment and slowing growth. @MarcGoldwein

How much does rising federal debt slow income growth?

Core argument: CBO projects average income, measured by GNP per person, will rise from about $84,400 this year to $128,600 in thirty years if debt stays stable at 99% of GDP, an inflation-adjusted gain above $44,000.

This year, CBO estimates average income, as measured by GNP per person, will total about $84,400. Assuming debt remains stable at 99% of GDP over the next three decades, CBO projects average income will grow by more than $44,000 (when adjusted for inflation), to $128,600. However, rising national debt will stifle this growth. Under CBO’s current law baseline, where debt is projected to rise to 166% of GDP by FY 2054, CBO projects income will grow by less than $39,000, to $123,200 per person. In other words, income growth would slow by about 12%. This is the result of crowding out, whereby a higher national debt reduces private investment and slows income growth. With additional debt, income growth would slow further. For example, CBO constructs an alternative scenario where revenue and certain spending returns to historical averages and, as a result, debt rises to 294% of GDP by FY 2054. Under that scenario, we estimate per person income would grow by less than $30,000 over thirty years, to about $114,100. In other words, income growth would slow by about one-third relative to if debt was stable.

Takeaways by Macro Roundup® AI

  1. CBO projects average income, measured by GNP per person, will rise from about $84,400 this year to $128,600 in thirty years if debt stays stable at 99% of GDP, an inflation-adjusted gain above $44,000.
  2. Under CBO's current-law baseline, with debt rising to 166% of GDP by FY 2054, income per person would grow by less than $39,000 to $123,200, slowing income growth about 12% versus stable debt.
  3. In an alternative scenario where revenue and certain spending return to historical averages and debt reaches 294% of GDP by FY 2054, per-person income would grow by less than $30,000 to about $114,100, roughly one-third slower growth than under stable debt.

Related Articles:

  • The Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.
  • The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget — The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.

AI Summary. China's leadership has ordered that providing "high-quality full employment" be an economic priority, with youth unemployment running at nearly three times the overall rate. Unemployment among 16-24 year-olds, excluding students, stood at 14.7% against an urban unemployment rate of 5%.

Joe Leahy Financial Times
Date Posted:

About 12mm graduates are set to enter China’s workforce this year. A revamped youth unemployment level excluding students was 14.7% in April, vs. 5% for the overall Chinese urban workforce.

Is China making youth employment a top economic priority?

Core argument: China's unemployment rate for those aged 16–24, excluding students, was 14.7% in April, down from 15.3% a month earlier but far above the urban unemployment rate of 5%.

A year after telling young people in China struggling to get a job that they should “eat bitterness,” or endure hardship, Xi Jinping has changed his tune as the world’s second-largest economy struggles to return to full health. With youth unemployment still running at nearly three times the overall rate, China’s president sounded a more sympathetic note on Tuesday, ordering the Communist party’s politburo leadership group to make the provision of “high-quality full employment” an economic priority. China’s unemployment rate for those aged 16-24 was running at more than 21% in June last year, when the National Bureau of Statistics suddenly stopped reporting the figures, citing the need to improve the methodology. The government started releasing figures for youth unemployment again in December, but excluded students. The figure came in at 14.7% in April, down from 15.3% a month earlier but still much higher than the urban unemployment rate of 5%.

Takeaways by Macro Roundup® AI

  1. China's unemployment rate for those aged 16–24, excluding students, was 14.7% in April, down from 15.3% a month earlier but far above the urban unemployment rate of 5%.
  2. Xi Jinping ordered the Communist party's politburo to make "high-quality full employment" an economic priority, a shift from his earlier advice that young people should "eat bitterness," or endure hardship.
  3. China's National Bureau of Statistics stopped reporting youth unemployment in June last year, when the rate exceeded 21%, citing the need to improve methodology, and resumed publication in December while excluding students.

Related Articles:

  • China Stops Reporting Youth Unemployment as Economic Pressures Mount — China has said it will stop publishing youth unemployment data, which reached 21.3% and was omitted from a subsequent broader data release, alongside other data pointing to weakness in its economic recovery.
  • Why Has Youth Unemployment Risen So Much in China? — Young workers aged 15-24 are particularly vulnerable when economic growth slows, and China's youth unemployment rate does not appear to be an outlier relative to its income level among global peers. Mismatches between the skills graduates acquire in higher education and those employers demand may add to labor market frictions.
  • China’s Defeated Youth — Urban Chinese unemployment among those aged 16 to 24 has run above 20%, about double the pre-pandemic level for that age group, with over 70% of unemployed youth in one year calculated to be graduates. Sentiment analysis of social media indicates the mood of young Chinese is growing darker.

AI Summary. New US tariffs on Chinese goods are designed to shield sectors supported by American semiconductor and clean-energy industrial policy, betting that trade restrictions give domestic manufacturers room to match China's supply chains. US battery shipments totaled $15.8bn against $23.9bn in net imports, so domestic capacity would have to grow much faster to replace Chinese imports.

Joseph Politano Apricitas Economics
Date Posted:

The recent Biden tariffs are largely designed to protect two sectors already boosted by recent US industrial policy: semiconductors and green energy manufacturing. @JosephPolitano

Can US manufacturers scale fast enough to replace Chinese imports behind tariffs?

Core argument: Real US battery production has risen more than 25% since the Inflation Reduction Act passed in late 2022, with sector employment up roughly 10% over the same period.

The tariffs were largely designed to protect the sectors boosted by America’s two major industrial policy bills—the CHIPS Act and Inflation Reduction Act—while guarding against the recent surge in Chinese net exports. Policymakers have gambled that American industry can quickly match the complexity and scale of China’s supply chain across a variety of key sectors and are hoping trade restrictions can give domestic manufacturers more room to catch up. So far, real US battery production has risen more than 25% since the passage of the IRA in late 2022, and employment in the sector is up roughly 10% over the same period. Yet that growth has still not been nearly enough to meet domestic demand—in 2023, US manufacturers’ battery shipments totaled $15.8B while net imports totaled $23.9B. The US has tens of billions in battery manufacturing capacity currently under construction, but America’s battery industry would still have to grow significantly faster just to replace current Chinese imports, let alone to meet increasing demand from rising cleantech deployment.

Takeaways by Macro Roundup® AI

  1. Real US battery production has risen more than 25% since the Inflation Reduction Act passed in late 2022, with sector employment up roughly 10% over the same period.
  2. US manufacturers' battery shipments totaled $15.8B in 2023 while net battery imports totaled $23.9B, leaving domestic output short of domestic demand.
  3. Biden's China tariffs were largely designed to protect sectors boosted by the CHIPS Act and Inflation Reduction Act while guarding against the recent surge in Chinese net exports, with policymakers hoping trade restrictions give domestic manufacturers room to catch up.

Related Articles:

  • Biden Accuses China of ‘Cheating’ on Trade, Imposes New Tariffs — The US is raising tariffs on Chinese semiconductors, batteries, solar cells, critical minerals, steel, aluminum, and electric vehicles, affecting a projected $18bn in current annual imports, while leaving prior tariffs in place. Semiconductor tariffs double from 25% to 50%, electric vehicle tariffs rise from 27.5% to 102.5%, and certain critical minerals and ship-to-shore cranes face new 25% rates.
  • China’s Plan to Reshape World Trade On Its Own Terms — Countries covered by China's free trade agreement network took about 38% of its merchandise exports, roughly $1.3tn out of some $3.43tn shipped worldwide over a 12-month period. That free trade footprint exceeds the total worldwide exports of the Netherlands or Japan, the world's fourth- and fifth-biggest exporters.
  • Can Trade Intervention Lead to Freer Trade? — China accounts for over 31% of global manufacturing but under 13% of global consumption, while the United States accounts for under 17% of manufacturing and nearly 27% of consumption. The author argues persistent surpluses reflect household subsidies to producers, and that the US could counter them with tariffs or taxes on capital inflows.

AI Summary. Bird flu was detected in an Iowa egg-laying flock of 4.2m birds, the largest US outbreak since 2022, in a state that produces nearly 12% of the country's layer hens according to the US Department of Agriculture. The virus has also been infecting dairy cows across the US.

Michael Hirtzer Bloomberg
Date Posted:

Bird flu was detected at an Iowa chicken farm; 4.2mm birds were affected in the largest bird flu outbreak in the US since 2022.

Is bird flu spreading again through US poultry and dairy herds?

Core argument: Bird flu was detected in an egg-laying flock of 4.2 million birds in Sioux County, Iowa, the largest US outbreak since more than 5 million birds were affected in Iowa's Osceola County in March 2022.

Deadly bird flu was detected in an egg-laying chicken flock in Iowa, affecting 4.2 million birds in the biggest US outbreak since 2022. The detection is the first since December in Iowa, which is the top US egg producer with nearly 12% of the country’s layer hens, according to US Department of Agriculture data. The findings come as the virus has been infecting dairy cows across the US. The Iowa Department of Agriculture and Land Stewardship said the site is in Sioux County, according to a statement Tuesday. It’s the worst outbreak since more than 5 million birds were affected at a farm in Iowa’s Osceola County in March 2022, when the virus was first spreading in the country. Prices for eggs surged to a record as tens of millions of birds were killed to slow the spread. The virus now has moved to dairy cattle as well, prompting dairy farmers to seek compensation for milk losses.

Takeaways by Macro Roundup® AI

  1. Bird flu was detected in an egg-laying flock of 4.2 million birds in Sioux County, Iowa, the largest US outbreak since more than 5 million birds were affected in Iowa's Osceola County in March 2022.
  2. Iowa is the top US egg producer with nearly 12% of the country's layer hens, according to USDA data, and the Sioux County case is the state's first detection since December.
  3. Egg prices surged to a record as tens of millions of birds were killed to slow the virus, which has since moved to dairy cattle, prompting dairy farmers to seek compensation for milk losses.

Related Articles:

  • Bird Flu Is Infecting More Mammals. What Does That Mean for Us? — The H5N1 bird flu strain now circulating globally has spread not only among farmed and wild birds but into many other animals, unlike earlier versions of the virus. Outbreaks in mink and in South American sea mammals suggest the virus most likely adapted to spread between mammals.
  • Bird Flu Outbreak in US Cows: Why Scientists Are Concerned — The H5N1 bird flu virus has been detected in cows from 16 herds across six US states, the first widespread outbreak in cattle after only sporadic prior infections with closely related flu viruses. One infected dairy worker is recovering, and the worker's viral variant carries a mutation linked to more efficient spread in mammals.
  • This May Be Our Last Chance to Halt Bird Flu in Humans and We Are Blowing It — An outbreak of H5N1 avian influenza in U.S. dairy cattle has spread to at least 33 herds across eight states with one confirmed human case, and Texas's agriculture commissioner suspects it began earlier and may have infected up to 40% of Texas Panhandle herds. An H5N1 expert argues containment becomes unlikely once around 10 human cases are detected.