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


Wednesday, July 10, 2024

AI Summary. The authors estimate a causal effect of stock market wealth on business entry, comparing investors with similar portfolios but different returns from idiosyncratic holdings. Effects are concentrated among moderate-wealth owners with returns of 25% or above and in strong stock market years, consistent with gains lifting individuals past a wealth threshold for starting a firm.

Gabriel Chodorow-Reich, Plamen Nenov, Vitor Santos, et al. National Bureau of Economic Research
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Norwegian households with levels of financial wealth between 50-600k kroner, or $5-56k, who saw a 20% increase in their wealth from stock gains were 20% more likely to start a firm, suggesting financial constraints may impede entrepreneurship.

Do stock market gains lead people to start businesses?

Core argument: Stock portfolio returns of 25% or above raise business entry notably among moderate-wealth individuals, while effects for high-wealth individuals are much smaller, identified by comparing investors with the same ex ante portfolio characteristics but different idiosyncratic returns.

Does initial wealth affect who starts a firm or the type of business they build? We show a causal effect of wealth on entry using a research design that compares individuals with the same ex ante stock portfolio characteristics but different ex post market returns arising from idiosyncratic holdings. The first row of Figure 4 presents the estimated relative effects for each wealth bin. There is a notable positive effect of having a relatively high return of 25% or above for the moderate wealth group. In contrast, the effects for high wealth are much smaller. The effect also appears to be asymmetric in the sign of buy-and-hold returns with [the] only significant effects observed for sufficiently high positive returns, consistent with positive returns moving individuals above their wealth cutoff for starting a business. We also examine aggregate return heterogeneity by interacting each of the wealth-by-return bins with whether the aggregate stock return is above or below its median. In bad stock market years, the effect of returns is fairly flat and close to zero. In contrast, in good stock market years, the propensity to start a business is increasing in return bins, particularly for the moderate wealth stock owners.

Takeaways by Macro Roundup® AI

  1. Stock portfolio returns of 25% or above raise business entry notably among moderate-wealth individuals, while effects for high-wealth individuals are much smaller, identified by comparing investors with the same ex ante portfolio characteristics but different idiosyncratic returns.
  2. The wealth effect on entrepreneurship is asymmetric in the sign of buy-and-hold returns, with significant effects only for sufficiently high positive returns, consistent with gains lifting individuals above a wealth cutoff for starting a business.
  3. In years when aggregate stock returns fall below their median, the effect of individual returns on business formation is fairly flat and close to zero, whereas in good market years the propensity to start a business rises with return bins, particularly for moderate-wealth stock owners.

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.
  • America is in the Midst of an Extraordinary Startup Boom — US business-formation applications reached a record 5.5m in a year, with the monthly average running about 80% above the pre-pandemic decade versus a 20% rise in Europe. In the four years before the pandemic, established firms added one net job for every four created by startups; in the four years since, they lost one for every four.
  • Latinos Are Starting U.S. Businesses at a Torrid Pace — Immigrants accounted for 36% of new U.S. business launches last year, up from 25% in 2019, driven by a rise in Latino entrepreneurship, while business creation by white and native-born Americans has slowed. Hispanic-owned startups tend to be smaller, with 46% reporting over $100,000 in annual revenue versus 62% of white-owned firms.

AI Summary. A study finds 24% of the variation across chief executive pay components — salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites — has disappeared, and that greater similarity in pay structure is associated with lower shareholder value. The author identifies institutional investors' influence, proxy advisors' recommendations, and expanded compensation disclosure as drivers of this standardization.

Felipe Cabezon Journal of Accounting and Economics
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A “one size fits all” model of executive pay has become more common since 2006. This highlights the unintended consequences of the SEC’s rules for standardized pay disclosure in ‘06 and Say on Pay in ‘11, coupled with institutional investors’ influence.

Does standardized executive pay structure reduce shareholder value?

Core argument: Since 2006, 24% of the variation in how CEO pay is distributed across components — salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites — has disappeared, according to the author's analysis.

I report and analyze a recent “one-size-fits-all” trend in the structure of executive compensation plans. Since 2006, 24% of the variation in the distribution of CEO compensation across pay components —salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites— disappeared. This uniformity might come at the expense of optimal incentives, as increases in pay structure similarity translate into lower shareholder value. I find that institutional investors’ influence, proxy advisors’ recommendations, and expanded compensation disclosure are salient drivers of this standardization. The findings highlight an unintended consequence of recent regulations enhancing shareholders’ participation and expanding compensation disclosure.

Takeaways by Macro Roundup® AI

  1. Since 2006, 24% of the variation in how CEO pay is distributed across components — salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites — has disappeared, according to the author's analysis.
  2. The author finds that increases in similarity of executive pay structure translate into lower shareholder value, suggesting the standardization may come at the expense of optimal incentives.
  3. Institutional investors' influence, proxy advisors' recommendations, and expanded compensation disclosure are identified as salient drivers of pay standardization, which the author frames as an unintended consequence of regulations enhancing shareholder participation and disclosure.

Related Articles:

  • The Market for CEOs: Evidence from Private Equity — In a study of larger U.S. companies bought by private equity, more than 70% hired new chief executives, and over 75% of those were external hires, unlike public companies where internal promotions dominate. The authors estimate these executives' pay exceeds that at similar-sized public companies, suggesting an active market for chief executives.
  • Perspectives on the Labor Share — The share of US income going to labor reached its lowest level since the Great Depression, falling roughly 5 percentage points between 1929 and 2022 across most industries, alongside a worldwide decline of about 6 percentage points since 1980. The author argues the most plausible causes are technological, including capital-augmenting technology.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. Large urban counties have continued to lose population of young children even as their overall population growth resumed, driven by immigration. Birth rates in large urban counties have declined twice as fast as in rural counties over the past decade, and the number of children under five fell in 58% of all US counties.

Connor O’Brien Economic Innovation Group
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Families with young children continue to migrate out of large US cities. Since 2020 the population aged 0-4 has fallen by 18% in New York City, 14% in LA County, and 4.6% nationwide. @cojobrien

Are big cities losing young children despite renewed population growth?

Core argument: More than 800,000 people moved out of large urban counties last year, twice the pre-pandemic rate, while those counties' population of young children continued to decline.

Large urban counties have suffered severe declines in their population of young children. While overall population growth in such counties resumed in 2023 (mainly due to immigration) for the first time since the pandemic, the population of young kids continued to decline. Birth rates in large urban counties have declined twice as fast as in rural counties over the last decade. More than 800,000 people moved out of large urban counties last year, twice the pre-pandemic rate. The number of young children in most counties across the country is on the decline. The number of children under five fell in 58% of all counties last year and has fallen in 2/3 of all counties since 2020.

Takeaways by Macro Roundup® AI

  1. More than 800,000 people moved out of large urban counties last year, twice the pre-pandemic rate, while those counties' population of young children continued to decline.
  2. Birth rates in large urban counties have declined twice as fast as in rural counties over the past decade.
  3. The number of children under five fell in 58% of all U.S. counties last year and has fallen in two-thirds of all counties since 2020, even as overall population growth in large urban counties resumed in 2023, mainly due to immigration.

Related Articles:

  • U.S. Fertility Rate Falls to Record Low — The U.S. total fertility rate fell 2% to 1.62 births per woman, the lowest since federal tracking began in the 1930s, with about 3.59mn births — the fewest since 1979 — according to provisional data. Birth rates for women aged 35-39, at 54.7 per 1,000, were close to the rate of 55.4 per 1,000 for women aged 20-24.
  • Young Families Have Not Returned to Large Cities Post-Pandemic — The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.
  • America Is Uniquely Ill-Suited To Handle a Falling Population — U.S. population growth slowed to about 7.4% in the decade to 2020, the slowest since the Great Depression, as the fertility rate fell from above the 2.1 needed for a stable population to 1.67. Because local and regional authorities levy 48% of all U.S. taxes—versus 20% in France and 6% in Britain—shrinking local revenue forces service cuts or tax rises.

AI Summary. US regulatory spending has doubled in real terms since the 1970s, alongside growth in the number of pages added annually to the Federal Register and Code of Federal Regulations. According to George Washington University's Regulatory Studies Center, agencies partly funded by fees on the entities they regulate have often seen larger increases in regulatory outlays and staffing.

Michael Cembalest J.P. Morgan
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The recent SCOTUS decision ending Chevron deference will likely lead to what Michael Cembalest @jpmorgan calls “the largest pushback on the regulatory state since the Reagan Administration.”

How much has the regulatory state grown since the 1970s?

Core argument: Real regulatory outlays have doubled since the 1970s, against a backdrop of three decades of gradual expansion in the regulatory state, measured by pages added annually to the Federal Register and the Code of Federal Regulations.

The backdrop to the court’s rulings has been a gradual expansion of the regulatory state over the last three decades. The chart shows the number of pages added each year to the Federal Register and to the Code of Federal Regulations. The Reagan and Trump deregulatory eras are shaded in gray. Regulatory outlays doubled in real terms since the 1970’s. An observation from GW’s Regulatory Studies Center: while tight budgets sometimes constrain regulatory spending at federal agencies, the agencies that are partially funded by fees on entities they regulate have often seen greater increases in regulatory outlays and staffing. The deregulatory impulse may be strengthened further if Republicans sweep Congress. GOP control may enable Trump to sign into law “deregulatory” legislation which would be harder for a future administration to reverse.

Takeaways by Macro Roundup® AI

  1. Real regulatory outlays have doubled since the 1970s, against a backdrop of three decades of gradual expansion in the regulatory state, measured by pages added annually to the Federal Register and the Code of Federal Regulations.
  2. George Washington University's Regulatory Studies Center observes that agencies partially funded by fees on the entities they regulate have often seen greater increases in regulatory outlays and staffing, while tight budgets sometimes constrain regulatory spending at federal agencies.
  3. Republican control of Congress may enable Donald Trump to sign deregulatory legislation into law, which would be harder for a future administration to reverse.

Related Articles:

  • The Cost of Regulatory Compliance in the United States — The authors estimate that labor devoted to regulatory compliance accounts for an average 1.34% of a firm's total wage bill in the United States, varying substantially across and within industries and increasing over time. They find an inverted-U relationship with size, with compliance spending shares peaking at establishments of about 500 employees.
  • Europe Regulates Its Way to Last Place — Europe's regulators tend to act on the mere possibility of harm rather than evidence of it, an approach that can throttle innovation early. The McKinsey Global Institute found that among companies with over $1bn in revenue, U.S. firms spent 80% more on research and development, had 30% higher return on capital, and grew revenue 1.3 percentage points faster.
  • Leonhardt On Investment — US chip and green-energy subsidies replicate what the country already does at far greater cost rather than making anything cheaper, faster, or better. The core problem with US public investment is waste rather than insufficient funding, as seen in $4bn-per-mile subways and a California high-speed rail project exceeding $100bn with no track laid.

AI Summary. Independent Russian media outlets estimate 106,000–140,000 Russian soldiers have been killed in Ukraine, based largely on inheritance records and obituaries, broadly consistent with French officials' estimate of 150,000. Estimates suggest roughly 2% of Russian men aged 20–50 may have been killed or severely wounded since the full-scale war began.

Economist Staff The Economist
Date Posted:

According to independent Russian sources, between 106,000 and 140,000 Russians have been killed in the Russo-Ukraine War since February 2022. Over 2 ½ years, roughly 2% of all Russian men aged 20-50 were killed or seriously wounded in Ukraine.

How many Russian soldiers have been killed in Ukraine?

Core argument: Mediazona and Meduza estimate 106,000–140,000 Russian soldiers had been killed in Ukraine by June 21st, based largely on inheritance records and obituaries, with data since February 6th extrapolated from trends after access to official records was disrupted.

The most recent data by Mediazona and Meduza, two independent Russian media outlets, suggest that Russia’s death toll [is somewhere btw] 106,000-140,000 dead by June 21st. Much of their analysis is based on inheritance records and obituaries on social media and in other outlets. (Their data since February 6th, however, is based on trends, as their access to official records has been disrupted.) Their number is broadly consistent with other recent sources: officials in France recently put the total at 150,000 by May. The greatest losses have been among those aged between 35 and 39, 27,000 of whom are estimated to have been killed between February 2022 and June 2024. But as a percentage of Russia’s male population, losses of those aged between 45 and 49 have been most severe. The latest estimates suggest that roughly 2% of all Russian men aged between 20 and 50 may have been either killed or severely wounded in Ukraine since the start of the full-scale war.

Takeaways by Macro Roundup® AI

  1. Mediazona and Meduza estimate 106,000–140,000 Russian soldiers had been killed in Ukraine by June 21st, based largely on inheritance records and obituaries, with data since February 6th extrapolated from trends after access to official records was disrupted.
  2. Russian men aged 35–39 account for the greatest losses, with an estimated 27,000 killed between February 2022 and June 2024, while losses among those aged 45–49 are most severe as a share of Russia's male population.
  3. Estimates suggest roughly 2% of all Russian men aged 20–50 may have been killed or severely wounded in Ukraine since the start of the full-scale war, while officials in France put the death toll at 150,000 by May.

Related Articles:

  • Putin’s Existential Problem: Not Enough Russians — Russia's population has been declining for years, with Western estimates of at least 150,000 Russian battlefield deaths in Ukraine, nearly a million people leaving the country after the war began, and births at their lowest level in more than two decades. Russia has pledged to spend up to $157bn over six years on measures supporting families and children.
  • Russians Have Emigrated in Huge Numbers Since the War in Ukraine — An analysis network estimates that between 817,000 and 922,000 people have left Russia since the start of the war in Ukraine, roughly 1% of the country's workforce, worsening an acute labour shortage. A Moscow think-tank reported that 35% of manufacturing businesses lacked enough workers, the highest share since 1996.
  • Russian Power in Decline — World Health Organization estimates put remaining life expectancy for 15-year-old Russian males in 2019 at 53.7 years, the same as in Haiti and worse than in 23 of the 46 countries the United Nations classifies as least developed. Projecting from those survival patterns, more than one in four 20-year-old Russian males would die before age 60, twice the European risk.

Thursday, July 11, 2024

AI Summary. US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.

Danial Lashkari and Jeremy Pearce Federal Reserve Bank of New York
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Labor productivity in the US manufacturing sector grew 3.4% annually between 1987-2007 but declined 0.5% annually between 2010-2022. Even the fastest-growing industries and the largest firms experienced a slowdown.

Is the US manufacturing productivity slowdown limited to smaller firms?

Core argument: Labor productivity growth among the four largest firms in each U.S. manufacturing industry averaged 3.7% in 1987–2007 but –0.5% in 2010–2022, a 4.2pp reduction.

Most manufacturing industries, even those exhibiting stellar productivity gains in the 1990s, suffered a sustained productivity slowdown after the Great Recession, particularly puzzling in light of the widespread adoption of automation and robots. [The four largest firms in each industry] appear to have played a larger role in the productivity boom in the 1990s. For these firms, the average labor productivity growth in the 1987-2007 period was 3.7%, while follower firms in Compustat experienced growth of 2.9% in the same period. From 2010 to 2022, both leading firms and following firms experience similar productivity growth declines. Leading firms show an average growth rate of –0.5% in the second period, a 4.2pp reduction, while follower firms experience –1.3% growth, also a 4.2pp reduction. Thus the productivity slowdown appears to be a broad phenomenon affecting all industries and all firms in each industry. These findings diverge from recent findings in the literature that focus on large firms separating from smaller firms. While there is evidence of this separation, this looks to be mostly coming from growth in the 1990s and early 2000s.

Takeaways by Macro Roundup® AI

  1. Labor productivity growth among the four largest firms in each U.S. manufacturing industry averaged 3.7% in 1987–2007 but –0.5% in 2010–2022, a 4.2pp reduction.
  2. Follower firms in Compustat saw manufacturing labor productivity growth fall from 2.9% in 1987–2007 to –1.3% in 2010–2022, the same 4.2pp reduction as leading firms.
  3. The manufacturing productivity slowdown after the Great Recession appears to span all industries and firms, diverging from literature emphasizing large firms separating from smaller ones, a separation that appears to stem mostly from growth in the 1990s and early 2000s.

Related Articles:

  • America’s Manufacturing Productivity Problem — Weak US manufacturing productivity growth reflects a compositional shift, as high-tech, fast-productivity-growth industries were increasingly offshored and became a smaller share of US manufacturing, alongside weak manufacturing investment. Capital intensity—fixed assets used per worker—slowed in the 2000s and nearly flatlined in the 2010s, with stagnation in electrical and vehicle manufacturing.
  • American Labor’s Real Problem: It Isn’t Productive Enough — U.S. manufacturing output per hour has grown about 0.2% a year since 2009, below the overall economy and peer economies in Europe and Asia except Japan, with motor vehicle manufacturing productivity falling 32% from 2012 through last year. Unlike warehouses and hospitals, manufacturers face foreign competition and cannot pass higher labor costs to customers.
  • Labor Market Conflict and the Decline of the Rust Belt — The authors argue that persistent labor market conflict in the Rust Belt's main industries lowered investment and productivity growth, shifting employment to the rest of the country, and estimate it accounts for roughly half the decline in the region's share of US manufacturing employment. Rising foreign competition plays a more modest quantitative role.

AI Summary. A 1% immigration-driven population increase with labor-force integration comparable to native-born workers expands employment and output immediately, leaving demand and supply balanced. Because capital accumulates only over time, the temporary shortage of capital relative to labor is argued to raise real returns to capital and depress real wages, with smaller effects if immigrants take manual jobs requiring less capital.

Anton Cheremukhin, Sewon Hur, Ron Mau and Alexander Richter Federal Reserve Bank of Dallas
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A @DallasFed analysis finds that “over the past year, the immigration wave contributed to the higher GDP growth by adding nearly 2 million newly employed workers…with very little effect on inflation.”

Does immigration-driven population growth raise inflation?

Core argument: A 1% immigration-driven population increase, with newcomers joining the labor force at native-born rates, expands employment, output, and consumption by 1% in a model without capital, balancing demand and supply and leaving GDP per capita unchanged.

If immigration increases the population by 1%, and these newcomers integrate into the labor force at rates comparable to native-born citizens, both employment and output expand immediately. In the absence of capital as a factor of production—machines, plants, and equipment—employment, output, and consumption would each expand by 1%, balancing demand and supply, maintaining price stability, and keeping GDP per capita unchanged. Accounting for capital as an input in the production process complicates the transmission mechanism. When labor inputs increase by 1%, reaching the same per capita output necessitates a simultaneous 1% increase in capital, which only builds over time. This delay creates temporary shortages of capital relative to labor, boosting real returns to capital but depressing real wages. If new immigrants are less skilled and more likely to accept manual labor positions, the need for capital accumulation diminishes, softening the inflationary impacts.

Takeaways by Macro Roundup® AI

  1. A 1% immigration-driven population increase, with newcomers joining the labor force at native-born rates, expands employment, output, and consumption by 1% in a model without capital, balancing demand and supply and leaving GDP per capita unchanged.
  2. Once capital is included as a production input, a 1% rise in labor requires a matching 1% rise in capital to hold per capita output constant, and capital accumulates only over time, creating temporary capital shortages that raise real returns to capital and depress real wages.
  3. Immigrants who are less skilled and more likely to take manual labor positions reduce the required capital accumulation, softening the inflationary impact of population growth.

Related Articles:

  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • Unprecedented US Immigration Surge Boosts Job Growth, Output — The US foreign-born labor force has fully recovered from its pandemic decline and now exceeds what pre-pandemic trend growth would have implied, reaching 31.9M. Wages rose faster in immigrant-intensive occupations and industries than in those with a lower share of immigrants.
  • Importing Shelter Inflation — Shelter costs make up about 30% of the consumer price index, and their monthly inflation appears to be stabilizing above pre-pandemic rates rather than delivering the disinflation forward-looking data had implied. The author suggests this may be related to a surge in migration, estimated at 3.3m migrants in a year.

AI Summary. The authors estimate that surges in immigration and labor force participation have pushed short-run breakeven employment growth—the job gains needed to hold the unemployment rate steady—as high as 230,000 jobs/month under a high-immigration scenario, versus about 140,000 in their baseline. They estimate long-run breakeven growth at 70,000–90,000 jobs/month.

Nicolas Petrosky-Nadeau and Stephanie Stewart Federal Reserve Bank of San Francisco
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Despite the recent surge in immigration and rising labor force participation rates, @Petrosky_Nadeau at @sfffed projects that the US breakeven long-run employment growth rate will remain in its historical range of 70-90,000 jobs/month.

How many jobs per month are needed to hold unemployment steady?

Core argument: Petrosky-Nadeau of the San Francisco Fed projects US long-run breakeven employment growth will stay within its historical range of 70,000–90,000 jobs/month in 2024, despite the immigration surge and rising labor force participation.

In the short-run, recent surges in immigration and labor force participation have caused the current breakeven employment growth rate to rise as high as 230,000 jobs/month. Our baseline calculations assume a long-run unemployment rate of 3.8%. Short-run breakeven employment growth is estimated to be higher than long-run growth under each scenario, as shown in Figure 3. Under the baseline scenario, short-run breakeven employment growth is estimated to be around 140,000 jobs/month in the first quarter of ‘24 (dark blue line). It is significantly higher at 230,000 jobs/month under the CBO high immigration scenario (red line), reflecting the recent surge in immigration. Under the baseline projections, short-run breakeven growth will converge on the long-run rate (gray line) by the end of ‘25. However, this return to the long-run trend stretches further out to ‘27 for the CBO high immigration scenario. Long-run breakeven employment growth is estimated to range between 70,000 and 90,000 jobs/month in ‘24

Takeaways by Macro Roundup® AI

  1. Petrosky-Nadeau of the San Francisco Fed projects US long-run breakeven employment growth will stay within its historical range of 70,000–90,000 jobs/month in 2024, despite the immigration surge and rising labor force participation.

  2. Under the baseline projections, short-run breakeven growth converges on the long-run rate by the end of 2025, while convergence stretches to 2027 under the CBO high immigration scenario.

Related Articles:

  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • New Immigration Estimates Help Make Sense Of The Pace Of Employment — The Congressional Budget Office estimates net immigration was 3.3m in 2023, versus the 1m it had projected, implying faster population and labor force growth than currently reported. The authors estimate this raised real economic growth by about 0.1 percentage point and, by lifting both production and demand, added little price or wage pressure.
  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.

AI Summary. Home insurers recorded a $16bn underwriting loss, the largest since at least 2000, according to AM Best, which expects losses to continue. An analysis by S&P Global Market Intelligence finds state-approved rate increases have averaged just 0.2 percentage point below what insurers requested, with California approving an average 21% increase.

Wall Street Journal Jean Eaglesham
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State regulators are greenlighting double-digit increases in home insurance premiums, in an effort to prevent insurance companies from withdrawing from their markets. The mean home insurance policy has increased by 20% nationally this year.

Are state regulators approving nearly all requested home insurance rate increases?

Core argument: Home insurers posted a $16 billion underwriting loss last year, the largest since at least 2000, according to AM Best, which expects losses to continue.

Home insurers racked up a $16 billion underwriting loss last year, the biggest amount since at least 2000, according to AM Best. It expects losses to continue. States are also giving home insurers almost everything they ask for on rates, an analysis conducted for The Wall Street Journal suggests. The average state-approved increase since the start of last year is just 0.2 percentage point below the increase requested by the industry, according to the analysis by S&P Global Market Intelligence. Ten states where regulators can reject requests upfront have all greenlighted double-digit increases since the start of last year, with half those increases close to or above the 20% national average, the S&P data show. California, which for decades kept a tight lid on home-insurance rates, has approved an average 21% rate increase over the period, according to the S&P data.

Takeaways by Macro Roundup® AI

  1. Home insurers posted a $16 billion underwriting loss last year, the largest since at least 2000, according to AM Best, which expects losses to continue.
  2. Average state-approved home-insurance rate increases since the start of last year came in just 0.2 percentage point below what insurers requested, according to an S&P Global Market Intelligence analysis conducted for The Wall Street Journal.
  3. California, which for decades kept a tight lid on home-insurance rates, has approved an average 21% increase since the start of last year, while ten states whose regulators can reject requests upfront all approved double-digit increases, according to S&P data.

Related Articles:

  • As Insurers Around the U.S. Bleed Cash From Climate Shocks, Homeowners Lose — Insurers lost money on homeowners coverage in 18 states, up from 12 states five years earlier and eight a decade earlier, according to a New York Times analysis of financial data. In response, insurers are raising premiums by as much as 50% or more, cutting coverage, or exiting entire states.
  • A Hidden Crisis In US Housing — State-run "last resort" home insurance programs, which cover properties the private market won't, have more than doubled their market share since 2018, with liabilities passing $1tn; Florida's plan faces potential losses of $525bn and California's at least $290bn, six times its 2018 level. Of 36 such plans covering natural catastrophes, 21 do not explicitly detail how they would pay deficits.
  • Measuring the Climate Risk Exposure of Insurers — The authors estimate that U.S. life insurers' aggregate climate transition risk exposure rose by more than $150bn, about 28% of their market value, during a fossil fuel price collapse, with more than $85bn attributable solely to climate stress. The ten largest U.S. property and casualty insurers mostly showed excess reserves, indicating no sign of undercapitalization under physical climate stress.

AI Summary. The authors argue Congress should pair extension of the expiring tax law with revenue-neutral, pro-growth reform: permanently restoring 100% bonus depreciation for business investment, curbing itemized deductions that cost over $100bn a year, repealing green energy tax credits, and letting the pass-through business deduction lapse, saving over $600bn.

Kyle Pomerleau American Enterprise Institute
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.@kpomerleau argues that the expiration of the TCJA offers an opportunity to extend “the most pro-growth aspects” like the 100% bonus depreciation on a revenue-neutral basis by repealing green energy tax credits and business pass-through deductions.

How should lawmakers turn expiring tax cuts into pro-growth reform?

Core argument: Allowing the pass-through business deduction to expire would reduce the cost of extending the Tax Cuts and Jobs Act by more than $600 billion.

Lawmakers should approach 2025 as an opportunity to enact fiscally sustainable, pro-growth tax reform. They should attempt to accomplish three goals. First, aim for revenue neutrality or a bill that neither increases nor decreases federal revenue. Second, build on the most pro-growth aspects of the TCJA. First, lawmakers should restore 100% bonus depreciation, ideally on a permanent basis. This provision is the single most pro-growth policy in the law. Lawmakers could increase its growth potential by expanding it to apply to more assets. Third, further clean up the tax code. Even after the TCJA, the federal government still loses more than $100B a year from itemized deductions. Lawmakers could raise nearly as much by repealing the new green energy tax credits introduced in the IRA. Allowing the deduction for pass-through businesses to expire would reduce the cost of extending the law by more than $600B.

Takeaways by Macro Roundup® AI

  1. Allowing the pass-through business deduction to expire would reduce the cost of extending the Tax Cuts and Jobs Act by more than $600 billion.
  2. The federal government loses more than $100 billion a year from itemized deductions even after the TCJA, and repealing the green energy tax credits introduced in the Inflation Reduction Act would raise nearly as much.
  3. Lawmakers should restore 100% bonus depreciation, ideally permanently, and could expand it to more assets, as it is the single most pro-growth policy in the TCJA, while aiming for revenue neutrality.

Related Articles:

  • Tax Policy and Investment in a Global Economy — Using administrative tax data, the authors estimate that firms experiencing the mean corporate tax change under the 2017 US tax law increased investment by 20% relative to firms with no change, with long-run domestic and total capital up 7% and 13%. They find higher depreciation deductions largely offset added revenue from capital accumulation.
  • Making the Tax Cuts and Jobs Act Permanent: Two Revenue-Neutral, Pro-Growth Options for Tax Reform — Following the 2017 US tax law, real economic output, consumption, business investment, and payrolls grew faster than pre-law forecasts and nearly matched post-law projections, and an analysis of administrative corporate tax return data estimates firms with the average tax change raised domestic investment about 20% relative to firms with no change.
  • 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.