Edward Conard

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  • “…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
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  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, June 19, 2024

AI Summary. The Congressional Budget Office projects federal spending of $84.9tn (24.1% of GDP) over the next decade against revenue of $62.8tn (17.8% of GDP), compared with 50-year averages of 21% and 17.3%. Interest costs are projected to reach $892bn, more than defense or Medicare, and grow to $1.7tn (4.1% of GDP).

CRFB Staff Committee for a Responsible Federal Budget
Date Posted:

According to the new @USCBO projections, interest costs are forecast to double from $345B in FY ‘20 to $892B in ‘24, reaching a near-record 3.1% of GDP, more than either defense or Medicare spending. @MarcGoldwein @BudgetHawks

Is rising federal debt driven by spending exceeding revenue?

Core argument: CBO's June 2024 baseline projects federal spending of $84.9 trillion (24.1% of GDP) and revenue of $62.8 trillion (17.8% of GDP) over the next decade, against 50-year historical averages of 21% and 17.3% of GDP.

Rising debt under CBO's baseline is driven by a large disconnect between spending and revenue, with spending totaling $84.9T (24.1% of GDP) over the next decade and revenue totaling $62.8T(17.8% of GDP). By comparison, the 50-year historic average is 21% of GDP for spending and 17.3% for revenue. Interest spending is a particularly large driver of growing spending and deficits. Interest costs are projected to more than double from $345B in FY 2020 to $892B in 2024, reaching a near-record of 3.1% of GDP this year and costing more than either defense or Medicare. Interest costs are projected to exceed their record as a share of the economy next year, top $1T in 2025, and continue to grow to $1.7T – or 4.1% of GDP – by 2034.

Takeaways by Macro Roundup® AI

  1. CBO's June 2024 baseline projects federal spending of $84.9 trillion (24.1% of GDP) and revenue of $62.8 trillion (17.8% of GDP) over the next decade, against 50-year historical averages of 21% and 17.3% of GDP.
  2. CBO projects interest costs will more than double from $345 billion in fiscal 2020 to $892 billion in 2024, reaching a near-record 3.1% of GDP and exceeding spending on either defense or Medicare.
  3. CBO projects interest costs will surpass their record share of the economy next year, top $1 trillion in 2025, and grow to $1.7 trillion, or 4.1% of GDP, by 2034.

Related Articles:

  • An Update to the Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects a federal budget deficit of $1.9tn in fiscal 2024, or $2tn excluding payment-timing shifts, rising to $2.8tn by 2034. On that adjusted basis, deficits equal 7% of gross domestic product in 2024, dip to 5.5% by 2027, and reach 6.9% by 2034, versus a 3.7% average over the past 50 years.
  • 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.
  • 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.

AI Summary. Home insurance premium growth has been concentrated in disaster-prone zipcodes, and the authors estimate that the pass-through of climate risk into premiums rose more than 60% between 2018 and 2023, with higher reinsurance prices explaining over half of that increase. They project climate-exposed homeowners will pay $700 more in annual premiums by 2053 from wildfire and hurricane risk.

Benjamin Keys and Philip Mulder National Bureau of Economic Research
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Across zip codes, a one SD increase in disaster risk was associated with $500 higher premiums in 2023, up from $300 in 2018, mainly caused by the pass-through of reinsurance costs. @Key_Z_E @Philipcheesy

How much of rising home insurance premiums do reinsurance costs explain?

Core argument: Using mortgage escrow data, the authors estimate that the pass-through of climate risk to property insurance premiums rose more than 60% between 2018 and 2023, with premium growth concentrated in disaster-prone zipcodes.

Premiums have risen sharply since 2020. This growth has been concentrated in disaster-prone zipcodes, and elevated reinsurance costs are a critical driver of the increase. New estimates of the elasticity of premiums with respect to climate risk show that the pass-through of risk to premiums increased more than 60% between 2018 and 2023. We alsoprovide a new estimate of the pass-through of reinsurance costs to insurance premiums in markets exposed to catastrophic disasters, finding that the increase in reinsurance prices can explain over half of the increase in the relationship between premiums and risk. By 2053, we estimate that climate-exposed homeowners will be paying $700 higher annual premiums due to increasing wildfire and hurricane risk. These premium increases are highly sensitive to reinsurance prices. If insurance costs revert to their 2018 levels, then premium increases will be reduced by ⅓. Thus, the costs of climate change depend on the costs of accessing reinsurance markets to diversify catastrophic risks.

Takeaways by Macro Roundup® AI

  1. Using mortgage escrow data, the authors estimate that the pass-through of climate risk to property insurance premiums rose more than 60% between 2018 and 2023, with premium growth concentrated in disaster-prone zipcodes.
  2. The authors find that higher reinsurance prices can explain over half of the increase in the relationship between insurance premiums and disaster risk.
  3. By 2053, the authors estimate that climate-exposed homeowners will pay $700 more in annual premiums due to rising wildfire and hurricane risk, with that increase reduced by one-third if insurance costs revert to 2018 levels.

Related Articles:

  • The Uninsurable World: What Climate Change Is Costing Homeowners — Global insurance losses from natural catastrophes have topped $100bn for four straight years, a level once considered the mark of an exceptionally bad year, and US insurers have repriced risk with significant premium increases. Reinsurer Swiss Re predicts a growing number of areas where buying insurance becomes uneconomical.
  • In Southwest Florida, High Home Insurance Rates Are Driving Away Would-Be Buyers — Florida homeowners paid about $6,000 a year for insurance on average, roughly triple what they paid in 2019 and compared with about $1,700 for the average US homeowner. Insurers and state regulators attribute the increases to widespread lawsuits and fraud, and a Category 5 hurricane led some insurers to exit the state or limit new policies.
  • As Texas Burns, Property Insurance Costs Soar — Rising property insurance premiums are attributed to climate-related damage, higher rebuilding costs, and costlier reinsurance protection for insurers, which is passed on to homeowners. The insurance industry says rebuilding and replacement costs rose 55% over a three-year span, driven by raw materials, wages, supply-chain bottlenecks, and a rising share of larger homes.

AI Summary. US inflation data indicate the early-year spike was an aberration, with core personal consumption prices estimated to have risen just 0.13% in a single month. The authors project monthly prints averaging 0.17% for the rest of the year, ending at 2.7% year-on-year, slightly below the Federal Reserve's median projection of 2.8%.

Jan Hatzius Goldman Sachs
Date Posted:

Last week’s CPI report reinforces Jan Hatzius’ @GoldmanSachs view that inflation will return to the Fed’s 2% target in 2025. Jan forecasts two cuts this year, the first in September followed by a cut in December.

Was the early-year inflation spike an aberration?

Core argument: Core PCE rose an estimated 0.13% in May, based on CPI, PPI, and import price data, reinforcing the view that the Q1 inflation spike was an aberration.

Last week’s US inflation data reinforced our view that the Q1 spike was an aberration. With CPI, PPI, and import prices in hand, we estimate that core PCE rose just 0.13% in May. In the remainder of 2024, we expect prints averaging 0.17%, with flat core goods prices and ongoing gradual deceleration in both shelter and non-housing core service inflation. This implies that core PCE will end 2024 at 2.7% year-on-year, a slight increase from May's estimated 2.6% because of adverse base effects but slightly below the latest median FOMC projection of 2.8%. We still expect both headline and core inflation to fall to 2% in 2025.

Takeaways by Macro Roundup® AI

  1. Core PCE rose an estimated 0.13% in May, based on CPI, PPI, and import price data, reinforcing the view that the Q1 inflation spike was an aberration.
  2. Core PCE prints are expected to average 0.17% over the remainder of 2024, with flat core goods prices and gradual deceleration in both shelter and non-housing core services inflation.
  3. Core PCE is projected to end 2024 at 2.7% year-on-year, up slightly from May's estimated 2.6% on adverse base effects but below the median FOMC projection of 2.8%, with headline and core inflation expected to fall to 2% in 2025.

Related Articles:

  • The Fed Can Take Its Time Taming Inflation — 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.
  • 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.
  • 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. Higher Federal Reserve interest rates raise the dividends money market funds pay to households, currently running at about $500bn, or roughly 2.5% of consumer spending. The author argues rate hikes therefore boost consumer spending through this channel.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes “When the Fed raises interest rates, money market funds pay a higher dividend.” Current dividends are $500B/year, the equivalent of 2.5% of consumer spending.

Do higher interest rates boost consumer spending through money market dividends?

Core argument: Money market funds are paying households roughly $500 billion in dividends, equal to about 2.5% of consumer spending, a channel that rises when the Federal Reserve raises interest rates.

When the Fed raises interest rates, money market funds pay a higher dividend to households. This effect is very significant and currently running at $500B, or around 2.5% of consumer spending. Put differently, Fed hikes are boosting consumer spending through higher money market fund dividends.

Takeaways by Macro Roundup® AI

  1. Money market funds are paying households roughly $500 billion in dividends, equal to about 2.5% of consumer spending, a channel that rises when the Federal Reserve raises interest rates.
  2. Federal Reserve rate hikes boost consumer spending through higher money market fund dividends paid to households, an effect characterized as very significant.

Related Articles:

  • Americans Have More Investment Income Than Ever Before — Americans earn about $3.7tn a year from interest and dividends, according to the Commerce Department, roughly $770bn more than four years earlier. The Federal Reserve recorded wealth held in stocks, real estate, and other assets such as pensions at the highest level it has ever observed.
  • Who Benefits from Higher Yields? — Higher interest rates raise cash flows to fixed income holders, but the Federal Reserve and foreign investors hold 50% of outstanding Treasuries and foreigners hold 28% of outstanding corporate credit, so much of that added income does not boost US growth. The author argues higher rates are a net negative for the US economy.
  • Pandemic Savings Are Gone: What’s Next for U.S. Consumers? — Researchers estimate U.S. households' pandemic-era excess savings peaked at $2.1tn and were drawn down at an average pace of about $70bn per month before being depleted. The depletion is unlikely to cause households to sharply cut spending as long as they can support consumption through continued employment or wage gains, other wealth, and more debt.

AI Summary. Quit rates rose across all industries and demographic groups, with particularly sharp increases among younger, female, nonwhite, and non-college-educated workers; many moved directly to another employer, but a majority left the workforce entirely. The authors attribute the rise to both stronger labor demand and weaker labor supply, a combination that pushed up wage inflation and, in turn, price inflation.

Ryan Michaels Federal Reserve Bank of Philadelphia
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The pandemic-era rise in quit rates was strongest among female, nonwhite, non-college-educated workers aged < 35, many of whom left the workforce, facilitated by increases in wealth from stimulus checks. @philadelphiafed

Did both stronger labor demand and weaker labor supply drive rising quits?

Core argument: Quit rates rose across all industries and demographic groups, with particularly sharp increases among younger, female, nonwhite, and non-college-educated workers.

Higher quit rates were observed for all industries and demographic groups, but the rise in quits was particularly sharp for younger, female, nonwhite, and non-college-educated workers. Many of these workers transitioned directly to another employer, but a majority left the workforce altogether. This suggests that changes in both the supply of labor (as illustrated by the wealth narrative) and the demand (as illustrated by the fast-growth narrative) contributed to the rise in quits. Over the course of 2021 and into 2022, wage inflation accelerated. It’s probably not a coincidence that this overlaps with the Great Resignation. The rise in quits was fueled by both stronger labor demand and weaker labor supply—a combination that should put upward pressure on wages. The acceleration in wage inflation appears to have in turn fed into higher price inflation.

Takeaways by Macro Roundup® AI

  1. Quit rates rose across all industries and demographic groups, with particularly sharp increases among younger, female, nonwhite, and non-college-educated workers.
  2. A majority of workers who quit left the workforce altogether rather than moving directly to another employer, suggesting that both weaker labor supply and stronger labor demand contributed to the rise in quits.
  3. Wage inflation accelerated over 2021 and into 2022, overlapping with the Great Resignation, and that acceleration appears to have fed into higher price inflation.

Related Articles:

  • 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.
  • To Retire or Keep Working after a Pandemic? — Workers age 55 and older have not reversed the decline in labor force participation that began with the COVID-19 pandemic, unlike other age groups, amounting to roughly 2m workers by some estimates. The shortfall is concentrated among those without a college degree, while college-educated older workers' participation returned to its pre-pandemic trend.
  • Pandemic Labor Force Participation and Net Worth Fluctuations — The shortfall in U.S. labor force participation relative to its pre-pandemic peak is attributed mostly to a decline in participation among workers older than 55. The authors estimate that wealth effects from rising net worth can explain between 20% and 36% of the 3.3m excess retirements over the full period studied.

Thursday, June 20, 2024

AI Summary. The 10-year U.S. Treasury yield and the economy-wide return on capital have diverged by more than 10 percentage points since 1980, as overall corporate profit rates rose while financing costs fell. The authors attribute the gap to composition: profit rates for publicly traded firms have fallen by over a third, while private companies' profit rates increased.

Anton Bobrov, Carter Davis, Alexandre Sollac & James Traina Federal Reserve Bank of San Francisco
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An analysis from @SFFed finds that capital returns for publicly traded firms have fallen since 1950 while returns for privately held companies have increased. @ASollaci @EconTraina @CarterDavisFin

Why have corporate profit rates risen while financing costs fell?

Core argument: The yield on 10-year U.S. Treasury securities and the overall return on capital have diverged by more than 10 percentage points since 1980, with aggregate U.S. corporate profit rates rising even as interest rates fell.

Since 1980 the yield on 10-year U.S. Treasury securities, which approximates the interest rate, and the overall return on capital, or profit rate have diverged by more than 10 percentage points. Profit rates for publicly traded firms have fallen by more than a third since 1980, in line with interest rate trends in financial markets. U.S. corporate profit rates have increased overall since the 1980s, alongside a decrease in interest rates. We explain how corporate returns continue to rise despite falling financing costs: while overall data track profits for all corporations, financing costs are based on data for public corporations only. Including private companies in comparisons with financial markets introduces bias because their investments can differ from public corporations and vary over time. By accounting for this bias, we demonstrate that profit rates for public corporations have declined while profit rates for private companies have increased.

Takeaways by Macro Roundup® AI

  1. The yield on 10-year U.S. Treasury securities and the overall return on capital have diverged by more than 10 percentage points since 1980, with aggregate U.S. corporate profit rates rising even as interest rates fell.
  2. Profit rates for publicly traded firms have fallen by more than a third since 1980, in line with interest rate trends in financial markets.
  3. Comparing profits for all corporations with financing costs measured only for public corporations introduces bias, and accounting for it shows public corporations' profit rates declining while private companies' profit rates increase.

Related Articles:

  • Public Markets Are a Small Part of the Overall Economy — Publicly traded companies represent a small share of US economic activity: 87% of firms with revenues above $100m are private, privately owned firms account for nearly 80% of job openings, and S&P 500 companies provide 18% of US employment and 15% of capital spending.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.
  • The Curious Incident of the Elevated Profit Margins — The US fiscal deficit averaged just under 3% of gross national product from 1950 to 2011 but 6.6% from 2012 to 2022, driven mainly by health and social security spending, a pattern that holds excluding pandemic years. Even assuming permanently elevated profit margins, US equity valuations imply low long-run returns.

AI Summary. Analysis of Federal Reserve balance sheet reduction finds that households and broker-dealers absorbed the additional supply of Treasury securities during the 2017–2019 episode, with household holdings correlated with hedge fund holdings. In the first year of the reduction begun in 2022, households purchased a large share while hedge funds did not, and insurance companies and foreign investors also increased holdings.

Lucy Cordes and Erin Ferris Federal Reserve Board
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Since June 2022 the marginal buyer of Treasuries has shifted to domestic households, foreign hedge fund buyers, and insurance companies. @FederalReserve

Who buys Treasuries when the Fed shrinks its balance sheet?

Core argument: The authors find that households and broker-dealers absorbed the additional Treasury supply created by the Federal Reserve's 2017–2019 balance sheet reduction, with household Treasury holdings correlated with hedge fund holdings.

Understanding the marginal buyer of Treasury securities during balance sheet reduction has implications for Treasury yield volatility. Our analysis establishes that households and broker-dealers purchased the additional supply of Treasury securities resulting from the Fed's 2017-2019 balance sheet reduction period. [The “households” sector includes hedge funds, private equity funds, and personal trusts.] We find that Treasury security holdings of households are correlated with hedge fund holdings. Over the first year of the balance sheet reduction that began in June 2022, households purchased a large portion of Treasury securities the Fed no longer holds, but hedge funds did not make those purchases. In addition, we find that insurance companies and the rest of the world increased their holdings of Treasury securities during this period, in contrast to the pre-COVID balance sheet reduction.

Takeaways by Macro Roundup® AI

  1. The authors find that households and broker-dealers absorbed the additional Treasury supply created by the Federal Reserve's 2017–2019 balance sheet reduction, with household Treasury holdings correlated with hedge fund holdings.
  2. Over the first year of the balance sheet reduction that began in June 2022, households purchased a large portion of the Treasury securities the Fed no longer held, but hedge funds did not make those purchases.
  3. Insurance companies and the rest of the world increased their Treasury holdings during the balance sheet reduction that began in June 2022, in contrast to the pre-COVID reduction period, according to the authors' analysis.

Related Articles:

  • The $27 Trillion Treasury Market Is Only Getting Bigger — Short-term Treasury bills have risen to 22.4% of outstanding U.S. government debt, above the 20% limit recommended by the committee that advises the Treasury on borrowing. Demand remains solid, with investors requiring no extra compensation to hold longer-term Treasurys and fewer alternatives available in corporate and mortgage-backed bond markets.
  • Who Is Buying US Treasuries? — The US Treasury buyer base has shifted from yield-insensitive buyers such as sovereign wealth funds and central banks toward yield-sensitive buyers such as US households, pensions, and insurers. If the Federal Reserve cuts rates, demand from these yield-sensitive buyers could weaken, producing a steeper yield curve.
  • In 2023 Foreign Demand for Long Term Treasuries Exceed Net Issuances — Foreign demand for long-term US Treasuries, at just over $450bn, exceeded the Treasury's net long-term issuance of just over $400bn, with that demand not coming from China. Net long-term issuance lagged the fiscal deficit—roughly 1.5% of GDP versus 6%—leaving the increase in the stock of long-term "safe" US assets modest.

AI Summary. The authors argue easier financial conditions will keep offsetting Federal Reserve rate hikes, supported by strong consumer and government spending, corporate earnings, and rising asset prices. They project US growth of 2.5%, above consensus, as gains in middle- and high-income household wealth more than offset higher rates on indebted consumers.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk forecasts 2.5% growth in 2024, and notes that loosening financial conditions and “the dramatic increase in the wealth of middle and high-income households is more than compensating for the negative effects of rising rates.”

Do easier financial conditions offset rate hikes to keep growth above consensus?

Core argument: The authors forecast US economic growth of 2.5% in 2024, above consensus, supported by a still-strong employment picture.

We believe that easier financial conditions will continue to offset the effects of the Fed rate hikes, at least for the next three quarters, driven by strong consumer spending, still-high government spending, still-strong aggregate corporate earnings, and the “wealth effect” triggered by rising asset prices. As a result, we expect US economic growth to come in above consensus in 2024, at 2.5%, on the back of a still-strong employment picture. From a holistic perspective, we believe that the consensus outlook for consumer spending is too low (Exhibit 25). Why? Because even though consumers with a lot of debt are being negatively impacted by higher interest rates, the dramatic increase in the wealth of middle and high income households is more than compensating for the negative effects of rising rates. This significant increase in household wealth, combined with still-strong home prices, will be a solid tailwind to consumer spending over the coming quarters, in our view.

Takeaways by Macro Roundup® AI

  1. The authors forecast US economic growth of 2.5% in 2024, above consensus, supported by a still-strong employment picture.
  2. The authors argue easier financial conditions will keep offsetting the effects of Fed rate hikes for at least the next three quarters, driven by strong consumer spending, still-high government spending, still-strong aggregate corporate earnings, and the wealth effect from rising asset prices.
  3. The authors judge consensus forecasts for consumer spending too low, arguing that the increase in wealth among middle- and high-income households, combined with still-strong home prices, more than compensates for the effect of higher rates on indebted consumers.

Related Articles:

  • Is Consumer Spending Slowing? — The dollar value of US consumer spending has grown about 6% a year since mid-2022, but a growing share of that growth comes from "imputed" categories rather than actual transactions, and excluding those, spending appears to be slowing. Meanwhile core goods inflation has accelerated, running at 2% annually.
  • Monetary Policy and Financial Conditions — Surprise monetary tightening is associated with significant, persistent tightening in financial conditions: a 0.1 percentage point policy surprise raises the Goldman Sachs financial conditions index by about 0.07 index points on the announcement day, with further increases over the following two weeks. Macroeconomic news, especially inflation releases, also moves financial conditions by shifting expectations about future policy.
  • Pandemic Savings Are Gone: What’s Next for U.S. Consumers? — Researchers estimate U.S. households' pandemic-era excess savings peaked at $2.1tn and were drawn down at an average pace of about $70bn per month before being depleted. The depletion is unlikely to cause households to sharply cut spending as long as they can support consumption through continued employment or wage gains, other wealth, and more debt.

AI Summary. Productivity growth means producing more output from the same or fewer inputs, driven by factors such as technological advances, better equipment, improved skills, and more efficient processes. The American Enterprise Institute recommends stepping up investment in human capital, noting the US ranks mid-pack among wealthy countries in public education spending and math and science scores despite near-top per capita income.

James Pethokoukis American Enterprise Institute
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US nonfarm business sector real output per hour grew at a 1.5% annual rate from Q4 2019 to Q1 2024, well under the 2.1% average from 1947-2024. @JimPethokoukis recommends that politicians “substantially step up investments in human capital.”

How can policymakers raise productivity growth?

Core argument: Steven Kamin of AEI notes that the United States ranks near the top of the OECD in per capita income but in the middle of the pack on public spending on education and on math and science test scores.

Productivity growth occurs when an economy can generate more output from the same amount of inputs, more from fewer inputs, or even the same output from fewer inputs. In other words, an economy becomes more productive when a worker can produce more output in the same amount of time due to factors such as technological advancements, better equipment, improved skills, or more efficient processes. Steven Kamin, an AEI senior fellow and former economist at the Federal Reserve [recommends] “substantially step up investments in human capital. Ultimately, our ability to compete and thrive in a global knowledge economy will depend on the training, intelligence, and creativity of our workforce. But even though the United States ranks near the top of the OECD in per capita income, it ranks very much in the middle of the pack when it comes to public spending on education as well as test scores in math and science.”

Takeaways by Macro Roundup® AI

  1. Steven Kamin of AEI notes that the United States ranks near the top of the OECD in per capita income but in the middle of the pack on public spending on education and on math and science test scores.
  2. Steven Kamin, a former Federal Reserve economist, recommends substantially stepping up investments in human capital, arguing that the ability to compete in a global knowledge economy depends on the training, intelligence, and creativity of the workforce.
  3. Productivity growth occurs when an economy generates more output from the same inputs, more from fewer inputs, or the same output from fewer inputs, through factors such as technological advancements, better equipment, improved skills, or more efficient processes.

Related Articles:

  • The Outlook for Long-Term Economic Growth — Growth theory holds that long-run growth in living standards is determined by growth in the worldwide number of people searching for ideas, and growth accounting for the US suggests temporary boosts from rising educational attainment and idea investment could fade. Potential offsets include China and India, better talent allocation, and artificial intelligence.
  • 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.
  • Labor Productivity Is Popping — Labor productivity, measured as output per hour worked, rose 0.8% quarter over quarter and 2.7% year over year, compared with average paces of 0.3% and 1.3% in the decade before the pandemic. Productivity growth is volatile and can turn negative even outside recessions.

AI Summary. Ecuador suspended its visa waiver agreement with China, with its foreign ministry stating that nearly half of Chinese travellers who entered did not leave through regular routes or within the 90 days permitted. US Customs and Border Protection detained more than 37,000 Chinese citizens at the southern border, a 10-fold increase.

Joe Daniels Financial Times
Date Posted:

Ecuador is suspending a visa waiver agreement with China as the country increasingly becomes an entry point for Chinese citizens attempting to migrate to the US. In 2023 at least 37,000 Chinese citizens were detained at the US southern border.

Are visa waivers fueling Chinese migration routes to the US border?

Core argument: Ecuador will suspend its visa waiver agreement with China, citing a "worrying increase" in arrivals after Ecuador became an important staging post on a global migrant route to the US.

Ecuador is to suspend a visa waiver agreement with China, citing a “worrying increase” in arrivals after the South American country became an important staging post on a global migrant route to the US. The country’s foreign ministry said nearly half of Chinese travellers who entered Ecuador did not leave “through regular routes” or within the 90 days permitted. Chinese people are increasingly part of that migration flow. Last year, the number of Chinese people attempting to cross the US southern border skyrocketed, with US Customs and Border Protection detaining more than 37,000 Chinese citizens, up 10-fold from 2022. About 66,000 Chinese travellers entered Ecuador last year, while only 34,000 left through regular channels, according to officials.

Takeaways by Macro Roundup® AI

  1. Ecuador will suspend its visa waiver agreement with China, citing a "worrying increase" in arrivals after Ecuador became an important staging post on a global migrant route to the US.
  2. Ecuador's foreign ministry said about 66,000 Chinese travellers entered the country last year while only 34,000 left through regular channels, with nearly half not exiting through regular routes or within the 90 days permitted.
  3. US Customs and Border Protection detained more than 37,000 Chinese citizens at the US southern border last year, a 10-fold increase from 2022.

Related Articles:

  • China to See Biggest Millionaire Exodus in 2024 as Many Head to U.S. — China is projected to see a record 15,200 high-net-worth individuals — those with at least $1m in assets — leave the country, the world's largest such outflow, according to a Henley & Partners report. The prior year's 13,800 departures went mostly to the US, Canada, and Singapore.
  • Why So Many Middle-Class Chinese Migrants Take Risky, Illegal Route To U.S. — U.S. Customs and Border Protection reported more than 37,000 Chinese nationals detained at the border with Mexico in a single year, roughly 10x pre-pandemic levels, with families among the fastest-growing group. United Nations data show China's annual net emigration rose above 300,000, compared with about 190,000 a year over the prior decade.
  • 2023 Letter — Rising numbers of Chinese nationals are being apprehended at the US-Mexico border, with US officers encountering around 1,000 in one month early in the year and nearly 5,000 by November. Most Chinese emigrants leave through legal means, going primarily to Singapore, Japan, and Thailand.

AI Summary. Canada has adopted some of the most aggressive immigration policies in the OECD, adding 1.273m residents in a year to reach a population of 41m — proportionally equivalent to the US admitting more than 10m immigrants annually. Canadians are increasingly angry as housing prices soar, sprawl expands, and traffic worsens.

Paul Kedrosky Applied Complexity
Date Posted:

Canada added 1.3mm immigrants last year, equivalent to the US adding more than 10mm immigrants in a year. @pkedrosky notes that the resultant rise in real estate prices and other impacts will likely cost the Trudeau government the election in 2025.

Is rapid immigration driving housing costs and public anger in Canada?

Core argument: Canada added 1.273 million new residents, a mix of permanent and non-permanent immigrants, over the past year, bringing its population to 41 million — equivalent to the US adding more than 10 million immigrants annually.

The Canadian government, faced with flatlining GDP, a declining birthrate, and an aging population, has instituted some of the most aggressive immigration policies in the OECD, and in recent Canadian history. The result? Canada's population is now 41 million, having added a staggering 1.273 million new residents in the past year, a mix of permanent and non-permanent immigrants. This is the equivalent of the US adding more than 10 million immigrants a year. While some economists might laud the "free lunch" that comes with wide-open immigration, Canadians themselves are increasingly angry about what is going on. A generally tolerant society, historically open to immigration, Canadians are watching real estate get priced into the stratosphere, sprawl destroy much of what made cities' environs appealing, and traffic turning everyone into Angeleno freeway rage monsters.

Takeaways by Macro Roundup® AI

  1. Canada added 1.273 million new residents, a mix of permanent and non-permanent immigrants, over the past year, bringing its population to 41 million — equivalent to the US adding more than 10 million immigrants annually.
  2. Canada's government adopted some of the most aggressive immigration policies in the OECD and in recent Canadian history in response to flatlining GDP, a declining birthrate, and an aging population.
  3. Canadians, historically open to immigration, are increasingly angry as real estate prices climb, sprawl spreads across city environs, and traffic worsens.

Related Articles:

  • Immigration Surge Fuels Male Population Boom in Canada — Canada's adult male population grew 3.4% over the past year versus 2.9% for women, the widest gap in nearly 50 years of records, as a higher share of male newcomers shifts the gender ratio. Among those aged 25 to 44, men outnumber women by 141,000, against a long-run average of zero.
  • Population Gains in Canada Set Record, But Slower Growth Ahead — Canada's population grew at a 3.2% annual rate, among the world's fastest, with only 2.4% of the increase from net births and the remainder from international migration, primarily foreign workers and students. Without temporary immigration, growth would have been 1.2%, and planned cuts to temporary residents and international students are expected to slow future gains.
  • Canadian Conservatives Have Found A Way To Win Back Young Voters — Canada's Conservative Party has doubled its vote share and moved into the lead, which the author attributes to an explicitly pro-youth platform centered on housebuilding, including proposals to withhold funds from cities that don't build enough housing and reward those that do. Housing affordability ranks as the second most important issue in Canada, behind the broader cost-of-living crisis.