Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, June 14, 2024

AI Summary. The authors argue firms inefficiently automate jobs where wages exceed workers' opportunity cost, so new automation technologies that deliver small cost savings can reduce productivity, average real wages, and aggregate consumption. They estimate workers earned an average wage premium of 35% in jobs automated between 1980 and 2016.

Daron Acemoglu and Pascual Restrepo National Bureau of Economic Research
Date Posted:
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Between 1980-2016, automation targeted tasks where workers earned an average wage that was 35% higher than their next best job opportunity. Automation accounted for 52% of the increase in between-group US inequality over the period. @DAcemogluMIT

Can automating high-wage jobs lower productivity and average wages?

Core argument: Workers earned an average rent of 35% — wages above opportunity cost — in jobs automated between 1980 and 2016, according to the authors' estimates.

Rents - wages above opportunity cost [in some sectors] distort employment decisions - the VMPL [Value Marginal Product of Labor] in tasks with high rents exceeds the VMPL in lower-rent tasks. Firms inefficiently automate tasks because the wage they face exceeds the opportunity cost of workers [due to] the difference in rents that firms would have paid workers in automated tasks and the rents earned by workers elsewhere in the economy. New automation technologies can have a net negative effect on productivity, average real wages, and aggregate consumption when [they] are adopted in tasks where workers earn high rents despite the fact that these technologies generate small cost savings. Estimates imply that workers used to earn an average rent of 35% in jobs automated between 1980 and 2016. The impact of automation on group-level wages is amplified because it targets higher-rent tasks and thus reduces worker rents. Automation worsens allocative efficiency because it tends to target higher-rent jobs, which are the ones that were undersupplied before automation ([as] these are the tasks where the value marginal product of labor is typically greater). As labor is eliminated from higher-rent tasks, productivity suffers. Consequently, automation may reduce TFP. Figure 8 plots the change in average wages for 500 demographic groups. The vertical axis is for the change in wages during 1980–2016 due to new automation technologies. The horizontal axes in all panels sort groups according to their average hourly wages in 1980. The panels of Figure 8 show the (cumulative) implications of different economic forces.

Takeaways by Macro Roundup® AI

  1. Workers earned an average rent of 35% — wages above opportunity cost — in jobs automated between 1980 and 2016, according to the authors' estimates.
  2. The authors argue that firms inefficiently automate tasks because the wage they face exceeds workers' opportunity cost, so new automation technologies can reduce productivity, average real wages, and aggregate consumption when cost savings are small.
  3. Because automation targets higher-rent tasks, which have higher value marginal product of labor and were undersupplied beforehand, the authors argue it worsens allocative efficiency and may reduce total factor productivity.

Related Articles:

  • Learning From Ricardo and Thompson: Machinery and Labor in the Early Industrial Revolution, and in the Age of AI — Mechanization of cotton spinning greatly increased labor productivity, but the authors find factory workers' real weekly wages barely rose and employment gains were modest, with productivity gains not shared with workers in textiles or offset elsewhere. They argue digital technologies, robotics, and office automation have similarly reduced affected workers' real earnings and employment.
  • Perspectives on the Labor Share — The share of US income going to labor fell roughly 5 percentage points between 1929 and 2022, with declines across most US industries and in most countries of Europe, Asia, and emerging markets. The author argues the most plausible causes are technological, including the information age and automation.
  • Navigating the Future of Work — Demographic groups whose work has been more displaced by automation have seen slower real wage growth, and automation is estimated to account for about 70% of between-group wage inequality in the US since 1980. Establishments adopting artificial intelligence have slowed hiring of non-AI workers by more than they have added AI specialists.

AI Summary. A tax on foreign capital inflows large enough to balance US trade would raise real interest rates for all US borrowers, domestic and foreign-funded alike, since some foreign funding is needed whenever a trade deficit exists. The argument holds the deficit would shrink mainly through lower investment, reducing demand, growth, and innovation.

Maurice Obstfeld Project Syndicate
Date Posted:
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Maurice Obstfeld argues that attempting to address America’s chronic trade deficits via a levy on foreign purchases of US assets would lead to higher interest rates and risk undermining the liquidity of US financial markets.

Would a tax on capital inflows raise rates for all borrowers?

Core argument: A US capital inflow tax large enough to balance trade would raise US real interest rates, lifting borrowing costs for every US borrower on every loan, not just those funded from abroad, the author argues.

A capital inflow tax big enough to balance US trade would inflict economic damage at home and abroad in several ways, but the most notable effect would be a steep rise in US real interest rates. The capital inflow tax would, of course, raise the cost of foreign borrowing by the amount of the tax. But perhaps less obviously, it would also raise the interest rate paid by every US borrower on every loan, whether the funding source was domestic or foreign. After all, some foreign funding is necessary in the face of a trade deficit, however small; but nobody would be willing to borrow from abroad unless domestically sourced and foreign funding were equally costly. This rise in interest rates points to the key mechanism through which a capital inflow tax reduces the trade deficit. A country’s borrowing from foreigners must also equal the amount of its investment in excess of what it can cover out of national savings. Thus, the trade deficit (or, more precisely, the current-account deficit) equals investment minus saving. The rise in interest rates may compress the trade deficit through some increase in saving, but its main effect would most likely be a fall in investment, leading to reduced demand, lower growth, and less innovation. Worse, all these repercussions would be magnified if, as seems likely, the inflow tax undermined global confidence in the safety of the US dollar and the liquidity of US financial markets. The implications for monetary and fiscal policy are also worrying. On monetary policy, the capital inflow tax would raise the neutral real interest rate and introduce the risk of runaway inflation if the Fed did not raise its policy rate commensurately. And on fiscal policy, it would raise borrowing costs for the Treasury. The sustainability of US public-sector debt is already a problem, and while the tax would generate revenue, its net effect could be to make the fiscal situation even worse.

Takeaways by Macro Roundup® AI

  1. A US capital inflow tax large enough to balance trade would raise US real interest rates, lifting borrowing costs for every US borrower on every loan, not just those funded from abroad, the author argues.
  2. Because the current-account deficit equals investment minus saving, the author argues the tax would compress the trade deficit mainly by reducing investment, leading to weaker demand, lower growth, and less innovation.
  3. The author warns the inflow tax would raise the neutral real interest rate, risking runaway inflation if the Fed did not raise its policy rate commensurately, and would raise Treasury borrowing costs, potentially worsening the fiscal situation despite the revenue raised.

Related Articles:

  • 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.
  • A Second Dose of Trump On Trade Would Differ From The First — A second Trump administration would pair a 10 percentage point tariff increase on all US trading partners with a tariff of at least 60% on Chinese imports, with advisers arguing a broad import tax addresses America's persistent pattern of trade deficits rather than bilateral imbalances. Researchers estimate China's manufacturing goods surplus reached a record of almost 2% of world GDP.

AI Summary. U.S. inflation data show broad-based disinflation, with notable price declines in airfares, video and video game subscriptions and rentals, computer software, and gasoline, each falling by almost 4%. Few categories rose by much if at all, and narrower measures that strip out volatile or idiosyncratic components tell a similar story.

Matt Klein The Overshoot
Date Posted:

The last CPI print indicates a broad-based disinflation but @M_C_Klein expects the Fed to be “wary of adjusting their interest rate forecasts too much in response.”

Is disinflation broad-based across price categories?

Core argument: Airfares, subscription and rental of video and video games, computer software, and gasoline each fell by almost 4% in the latest inflation data.

The disinflation is broad-based. While a few categories experienced notable price declines, including airfares, “subscription and rental of video and video games”, computer software, and gasoline, each of which fell by almost 4%, the really notable feature of the latest data is that there were so few categories that rose by very much, if at all. Narrower cuts of the numbers, which attempt to strip out unusually volatile or idiosyncratic components, tell a similar story.

Takeaways by Macro Roundup® AI

  1. Airfares, subscription and rental of video and video games, computer software, and gasoline each fell by almost 4% in the latest inflation data.
  2. The disinflation is broad-based, with the notable feature of the data being how few categories rose by very much, if at all.
  3. Narrower cuts of the inflation data, which strip out unusually volatile or idiosyncratic components, tell a similar story of broad-based disinflation.

Related Articles:

  • Furman On CPI Report — Core consumer price inflation came in at 0.16% for the month, a 2.0% annual rate, with headline inflation at 0.01%. Core goods prices remained negative and core services inflation has been receding even as shelter inflation has not slowed, which the author argues supports hope for further inflation reduction and puts a second inflation-based interest rate cut in play.
  • An Analysis of Pandemic-Era Inflation In 11 Economies — A cross-country analysis of 11 economies finds wide agreement that global energy and food price increases and supply disruptions in key sectors drove pandemic-era inflation, and that their recession accounts for most of the global cooling of inflation. The authors find tight labor markets had smaller but more persistent inflationary effects, leaving wage inflation as the larger remaining factor.
  • An Update About How Inflation Has Affected Households at Different Income Levels Since 2019 — The Congressional Budget Office estimates that income after transfers and taxes grew faster than consumption prices for all income groups, lowering the share of income needed to buy the same goods by 2% for the lowest-income fifth and 6.3% for the highest-income fifth.

AI Summary. The share of outstanding US mortgages with interest rates below 4% has risen from 38% before the pandemic to 63%, leaving millions of households insulated from Federal Reserve rate increases. The author argues this slows the transmission of monetary policy and will require the Federal Reserve to hold rates higher for longer to contain inflation.

Torsten Sløk Apollo
Date Posted:

Prior to the pandemic, 38% of mortgages had interest rates below 4%, vs. 63% today. Torsten Sløk argues that lock-in slows the impact of rate hikes so that “the Fed will need to keep interest rates higher for longer to get inflation under control.”

Do locked-in low mortgage rates slow monetary policy transmission?

Core argument: The share of outstanding U.S. mortgages carrying interest rates below 4% has risen to 63% from 38% before the pandemic, leaving housing to adjust very slowly to Fed rate hikes.

Before the pandemic, the share of outstanding mortgages with interest rates below 4% was 38%. Today it is 63%. In other words, housing is adjusting very slowly to Fed hikes. Millions of households still benefit from having locked-in low mortgage rates during the pandemic. Put differently, the transmission mechanism of monetary policy is much slower than normal, and the Fed will need to keep interest rates higher for longer to get inflation under control.

Takeaways by Macro Roundup® AI

  1. The share of outstanding U.S. mortgages carrying interest rates below 4% has risen to 63% from 38% before the pandemic, leaving housing to adjust very slowly to Fed rate hikes.
  2. Millions of U.S. households still benefit from low mortgage rates locked in during the pandemic, slowing the transmission mechanism of monetary policy relative to normal.
  3. With monetary policy transmission slowed by locked-in low mortgage rates, the Fed will need to keep interest rates higher for longer to bring inflation under control.

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.
  • 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.
  • How Quickly Do Prices Respond to Monetary Policy? — An analysis finds recent swings in inflation have been concentrated in the categories most sensitive to monetary policy, with inflation for that responsive group now close to its pre-2020 rate. The authors estimate that interest rate increases likely began putting downward pressure on prices about a year later and will continue to do so near term.

Monday, June 17, 2024

AI Summary. The author argues that two pandemic-era labor market shifts help explain the recent fall in inflation: a large withdrawal from the labor force followed by recovering participation, and a lasting move to working from home. Surveys of business executives imply the work-from-home shift lowered average wage growth by 2 percentage points over two years.

Steven Davis National Bureau of Economic Research
Date Posted:
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The return of lower-paid workers who left the labor force during Covid as well as other workers’ willingness to accept lower pay for work-from-home jobs left average real wages in Q1 ‘24 down 3.5 to 4.4 ppts relative to 2006-19 trends.

Did pandemic labor market shifts help bring inflation down?

Core argument: Surveys of business executives imply the shift to work from home lowered average wage growth by two percentage points from spring 2021 to spring 2023, easing wage-growth pressures along the path to a new equilibrium.

I advance a different and complementary explanation for the recent disinflation that centers on two extraordinary labor market developments associated with the pandemic and its aftermath. The first is the sizable labor force withdrawal in 2020 and 2021, driven by infection worries and social distancing, followed by recovery in participation rates as [these] receded. The second development is the big and lasting shift to work from home. This development lowered wage-growth pressures along the transition path to a new equilibrium with pay packages that recognized higher remote work levels and their benefits to workers. Surveys of business executives imply that the shift to WFH lowered average wage growth by two percentage points from spring 2021 to spring 2023. A direct inspection [see Chart 5] finds that average real wage growth from 2021 Q1 to 2024 Q1 in the U.S. economy was at least 3.5 to 4.4 ppts below the path suggested by pre-pandemic experience. This large shortfall in real wage growth aligns well with the interpretation of the 2022-23 disinflation offered here.

Takeaways by Macro Roundup® AI

  1. Surveys of business executives imply the shift to work from home lowered average wage growth by two percentage points from spring 2021 to spring 2023, easing wage-growth pressures along the path to a new equilibrium.
  2. Average real wage growth in the U.S. economy from 2021 Q1 to 2024 Q1 ran at least 3.5 to 4.4 percentage points below the path suggested by pre-pandemic experience, a shortfall aligned with the proposed interpretation of the 2022-23 disinflation.
  3. The proposed explanation of the 2022-23 disinflation centers on two pandemic-era labor market developments: sizable labor force withdrawal in 2020 and 2021 driven by infection worries and social distancing, followed by recovery in participation rates, and a big and lasting shift to work from home.

Related Articles:

  • An Update About How Inflation Has Affected Households at Different Income Levels Since 2019 — The Congressional Budget Office estimates that income after transfers and taxes grew faster than consumption prices for all income groups, lowering the share of income needed to buy the same goods by 2% for the lowest-income fifth and 6.3% for the highest-income fifth.
  • Has Pay Kept Up With Inflation? — 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.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.

AI Summary. Wage growth and price growth reinforce each other and both run 1 to 1.5 percentage points above pre-pandemic rates, with underlying inflation estimated at 2.5% to 3%. The author puts roughly a 1-in-3 chance that persistently strong demand keeps inflation above 3%, and argues strong job growth lets the Federal Reserve spend months assessing that risk.

Jason Furman Wall Street Journal
Date Posted:

Estimating underlying inflation in the 2.5-3% range @jasonfurman argues the Fed should be cautious on rate cuts. “The last mile of disinflation could be the hardest and cuts risk undermining the Fed’s credibility.”

Can the Fed take months to assess inflation risk?

Core argument: Wage growth and price growth are each running 1 to 1.5 percentage points above their pre-Covid rates and feed into each other, a wage-price persistence that the author argues will keep inflation higher until something pushes it in a different direction.

Wage growth and price growth feed into each other, and both of those are running 1 to 1.5 percentage points higher than before Covid. Shorter-term measures of inflation expectations are also elevated. While this may not be a full-blown wage-price spiral, wage-price persistence will keep inflation higher until something pushes it in a different direction. There is reason to expect inflation to continue falling. The labor-market loosening will work with a lag, and wages and prices appear to be in a diminishing dynamic. I believe underlying inflation is in the 2.5% to 3% range. Getting it much below that could be hard and may not even be needed. But there is a meaningful risk, maybe 1 in 3, that if demand stays strong inflation could stay above 3%, which would be a big blow to the credibility that has helped make Jerome Powell’s task so much easier than Volcker’s. Given strong U.S. job growth, the Fed can afford to spend several more months assessing just how big the reflation risk is.

Takeaways by Macro Roundup® AI

  1. Wage growth and price growth are each running 1 to 1.5 percentage points above their pre-Covid rates and feed into each other, a wage-price persistence that the author argues will keep inflation higher until something pushes it in a different direction.
  2. The author puts underlying inflation in the 2.5% to 3% range and sees roughly a 1-in-3 risk that persistently strong demand keeps inflation above 3%, which would be a big blow to the Federal Reserve's credibility.
  3. Given strong U.S. job growth, the Federal Reserve can afford several more months to assess the reflation risk, with labor-market loosening working with a lag and wages and prices appearing to be in a diminishing dynamic.

Related Articles:

  • The Transmission Mechanism of Monetary Policy Is Much Slower than Normal — The share of outstanding US mortgages with interest rates below 4% has risen from 38% before the pandemic to 63%, leaving millions of households insulated from Federal Reserve rate increases. The author argues this slows the transmission of monetary policy and will require the Federal Reserve to hold rates higher for longer to contain inflation.
  • The Fed Looks Through a Great Inflation Print — U.S. inflation data show broad-based disinflation, with notable price declines in airfares, video and video game subscriptions and rentals, computer software, and gasoline, each falling by almost 4%. Few categories rose by much if at all, and narrower measures that strip out volatile or idiosyncratic components tell a similar story.
  • An Update About How Inflation Has Affected Households at Different Income Levels Since 2019 — The Congressional Budget Office estimates that income after transfers and taxes grew faster than consumption prices for all income groups, lowering the share of income needed to buy the same goods by 2% for the lowest-income fifth and 6.3% for the highest-income fifth.

AI Summary. Because the balance of payments must balance, net foreign capital inflows into advanced economies are more likely to reduce domestic savings than to raise domestic investment, so they do not lower interest rates and taxing them would not raise them. The US absorbs nearly half of the world's excess savings, so US savings adjust to accommodate other countries.

Michael Pettis @michaelxpettis
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Responding to Maurice Obstfeld, @michaelxpettis argues that a capital inflow tax won’t raise US interest rates because capital inflows are “more likely to cause domestic savings to decline than to cause domestic investment to rise.”

Do foreign capital inflows lower interest rates in advanced economies?

Core argument: Pettis argues the US absorbs nearly half of the world's excess savings, with the UK, Canada and Australia absorbing much of the rest, so it is mainly US savings that must rise and fall to accommodate savings elsewhere.

The balance of payments must still balance, and so this means that foreign inflows must either cause US investment to rise or US savings to decline. If the US were a developing economy in which businesses were eager to invest, but were constrained by scarce and expensive capital, these inflows would indeed probably cause interest rates to decline and investment to rise. In advanced economies, net foreign capital inflows are more likely to cause domestic savings to decline than to cause domestic investment to rise. That is why they don't reduce interest rates, and why taxing them won't raise interest rates. Many Americans find it shocking to think that foreigners can affect US savings rates, but this is how the balance of payments works: if one country increases its savings relative to its investment, other countries must either increase their investment or reduce their savings. And because the US absorbs nearly half of the excess savings of the world (and the UK, Canada and Australia, much of the rest), it is mainly US savings that must rise and fall to accommodate that of the rest of the world.

Takeaways by Macro Roundup® AI

  1. Pettis argues the US absorbs nearly half of the world's excess savings, with the UK, Canada and Australia absorbing much of the rest, so it is mainly US savings that must rise and fall to accommodate savings elsewhere.
  2. Because the balance of payments must balance, Pettis argues foreign inflows must either raise US investment or reduce US savings, and that in advanced economies such inflows are more likely to cause domestic savings to decline.
  3. Pettis argues that because net foreign capital inflows into advanced economies are more likely to depress domestic savings than to lift investment, they do not reduce interest rates, and taxing them will not raise interest rates.

Related Articles:

  • The Dangers of a US Capital Inflow Tax — A tax on foreign capital inflows large enough to balance US trade would raise real interest rates for all US borrowers, domestic and foreign-funded alike, since some foreign funding is needed whenever a trade deficit exists. The argument holds the deficit would shrink mainly through lower investment, reducing demand, growth, and innovation.
  • 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. An International Monetary Fund analysis finds the US has absorbed about a third of global capital flows, up from a pre-pandemic average of 18%. The analysis attributes the increase to US interest rates at their highest levels in decades and to foreign direct investment drawn by US renewable energy and semiconductor incentives.

Enda Curran and Saleha Mohsin Bloomberg
Date Posted:
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According to an IMF analysis, almost 1/3 of global investment flows since the pandemic have been into the US, up from 18% pre-pandemic.

Why has the US share of global capital flows risen?

Core argument: The US has absorbed about a third of global capital flows since Covid, up from a pre-pandemic average share of 18%, according to an IMF analysis.

An International Monetary Fund analysis shows that the share of global flows has climbed — not fallen — since a shortage of dollars in 2020 spooked global investors and the 2022 freezing of Russian assets stoked questions about respect for free movement of capital. The pre-pandemic US average share was just 18%, according to the IMF. For all the angst over the dollar’s dominance, a run-up in US interest rates to the highest levels in decades proved a major draw for overseas investors. The US has also pulled in a fresh wave of foreign direct investment thanks to billions of dollars worth of incentives under President Joe Biden’s initiatives to spur renewable energy and semiconductor production.

Takeaways by Macro Roundup® AI

  1. The US has absorbed about a third of global capital flows since Covid, up from a pre-pandemic average share of 18%, according to an IMF analysis.
  2. The IMF analysis shows the US share of global capital flows rose rather than fell after the 2020 dollar shortage spooked investors and the 2022 freezing of Russian assets raised questions about respect for free movement of capital.
  3. A run-up in US interest rates to the highest levels in decades proved a major draw for overseas investors, while billions of dollars of incentives under President Joe Biden's renewable energy and semiconductor initiatives pulled in a fresh wave of foreign direct investment.

Related Articles:

  • Is the Global Economy Deglobalizing? — Trade as a share of GDP has stalled since the financial crisis and declined in some cases, but capital and labor market trends point the other way, making it premature to describe the world economy as deglobalizing. While the US and China appear to be reducing reliance on global markets, other countries are not.
  • 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.
  • The Dangers of a US Capital Inflow Tax — A tax on foreign capital inflows large enough to balance US trade would raise real interest rates for all US borrowers, domestic and foreign-funded alike, since some foreign funding is needed whenever a trade deficit exists. The argument holds the deficit would shrink mainly through lower investment, reducing demand, growth, and innovation.

AI Summary. A survey of 20 large and medium-sized US and European defence and aerospace companies found they plan to recruit tens of thousands of workers, with 10 of them seeking to add almost 37,000 positions, or nearly 10% of their combined workforce. Demand spans apprentices to executives, including engineers, software developers, cyber security analysts, welders, and mechanics.

Sylvia Pfeifer, Clara Murray, Arjun Neil Alim, and Sarah White Financial Times
Date Posted:

After adding over 12,000 employees in 2023, top Western defense contractors plan to grow their aggregate workforces by almost 10% this year. An @ft analysis of 20 large and medium-sized western defense firms finds 37,000 job openings.

Are defence companies expanding their workforces to meet record orders?

Core argument: Ten of the 20 US and European defence and aerospace companies surveyed by the Financial Times are seeking to add almost 37,000 positions, or almost 10% of their aggregate workforce.

A Financial Times survey of the hiring plans of 20 large and medium-sized US and European defence and aerospace companies found they are looking to recruit tens of thousands of people this year. Three of the largest US contractors — Lockheed Martin, Northrop Grumman, and General Dynamics — have close to 6,000 job openings they need to fill, while 10 companies surveyed are seeking to increase positions by almost 37,000 in total, or almost 10% of their aggregate workforce. Companies said they are looking to fill positions across the board, from apprentices to late-stage career executives. Engineers, software developers, and cyber security analysts as well as welders and mechanics are in demand.

Takeaways by Macro Roundup® AI

  1. Ten of the 20 US and European defence and aerospace companies surveyed by the Financial Times are seeking to add almost 37,000 positions, or almost 10% of their aggregate workforce.
  2. Lockheed Martin, Northrop Grumman, and General Dynamics together have close to 6,000 job openings to fill, according to the Financial Times survey of 20 large and medium-sized defence and aerospace companies.
  3. Defence and aerospace companies said they are filling roles from apprentices to late-stage career executives, with demand for engineers, software developers, cyber security analysts, welders, and mechanics.

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • Japan, U.S. Form Working Group For Joint Missile Production — Japan and the United States agreed to create working groups on joint missile production, ship and aircraft repair, and supply chain resiliency as part of a defense industry cooperation forum. U.S. officials say Japan's engineering, industrial, and manufacturing capacity is a significant addition for the U.S. defense industrial base.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.

AI Summary. Polling indicates infrequent, less engaged voters now favor the Republican presidential candidate, a reversal that would mean higher turnout benefits Republicans rather than Democrats. In Pennsylvania, new registrants under automatic voter registration have affiliated with Republicans over Democrats by six percentage points.

Nate Cohn New York Times
Date Posted:

According to recent New York Times/Siena College polling Trump leads Biden by 14pp with respondents with no voting history; the least frequent voters being the most Republican is a new pattern in 2024. @Nate_Cohn

Does higher voter turnout now favor Republicans instead of Democrats?

Core argument: If the polls are right, infrequent voters have swung 20 percentage points since 2020, and Donald Trump would stand to gain if they turn out — something unimaginable for a Republican as recently as a few years ago.

With five months to go until the election, there’s still time for less engaged voters to tune in and swing back toward Mr. Biden. Many infrequent voters aren’t yet tuned into the race, and their preferences appear highly volatile. If the polls are right, they’ve swung 20 percentage points since 2020, but some changed their answers when re-interviewed in the wake of Mr. Trump’s felony conviction in New York. Even if Mr. Trump holds his edge among the disengaged, it’s not clear many of these low-turnout voters will ultimately show up to vote. But if they do vote, Mr. Trump would stand to gain — something unimaginable for a Republican as recently as a few years ago. In Pennsylvania, where Democrats enacted automatic voter registration last year, new registrants have affiliated with Republicans over Democrats by six percentage points.

Takeaways by Macro Roundup® AI

  1. If the polls are right, infrequent voters have swung 20 percentage points since 2020, and Donald Trump would stand to gain if they turn out — something unimaginable for a Republican as recently as a few years ago.
  2. Some infrequent voters changed their answers when re-interviewed in the wake of Trump's felony conviction in New York, and their preferences appear highly volatile.
  3. In Pennsylvania, where Democrats enacted automatic voter registration last year, new registrants have affiliated with Republicans over Democrats by six percentage points.

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  • Small Shift Toward Biden After Trump Verdict — A New York Times/Siena College re-interview of nearly 2,000 voters found the group's support for Trump over Biden narrowed from three points to one point after his conviction for falsifying business records. About one-quarter of those who had said they backed Biden in 2020 but would switch to Trump said they would stick with Biden.
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