Edward Conard

Top Ten New York Times Bestselling Author

  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, August 16, 2024

AI Summary. The annual change in the debt-to-GDP ratio equals the deficit plus a "growth dividend," the amount by which nominal GDP growth shrinks the ratio. Under Congressional Budget Office baseline projections, interest payments stay below the growth dividend, so projected primary deficits—not existing debt—drive the unsustainable debt path.

Danny Yagan National Bureau of Economic Research
Date Posted:

.@dannyyagan notes that in CBO projections, GDP growth exceeds the average interest rate until 2040, making medium-run projections of debt/GDP less alarming, but highlighting the critical importance of primary surpluses for long-run debt sustainability.

Do primary deficits, not existing debt, drive the rising debt ratio?

Core argument: The annual change in the U.S. debt-to-GDP ratio equals the deficit plus a growth dividend, defined as last year's debt ratio times −y/(1+y), where y is the nominal GDP growth rate.

The deficit as a share of GDP increasingly exceeds each year’s change in the debt-to-GDP ratio. The debt ratio change equals the deficit plus the growth dividend: the amount by which GDP growth shrinks the debt ratio, equal to last year’s debt ratio times −y/1+y where y is the nominal GDP growth rate. The growth dividend has more than doubled since the Great Recession because the debt ratio has more than doubled. Adding a growth dividend row to CBO’s main budget table enables readers to exactly decompose America’s debt ratio path. Current debt increases the debt ratio each year by the amount that interest payments exceed the growth dividend. This excess interest remains negative in CBO baseline’s projection. Hence, America’s current debt is sustainable in the CBO baseline despite currently high interest payments. Projected primary deficits – i.e., future tax revenue failing to cover future non-interest spending – entirely drive America’s unsustainable debt ratio path. The primary deficit provides a good guide to how the debt ratio is projected to change, while the deficit does not.

Takeaways by Macro Roundup® AI

  1. The annual change in the U.S. debt-to-GDP ratio equals the deficit plus a growth dividend, defined as last year's debt ratio times −y/(1+y), where y is the nominal GDP growth rate.
  2. The growth dividend has more than doubled since the Great Recession because the debt ratio has more than doubled, and excess interest — interest payments minus the growth dividend — remains negative in the CBO baseline, leaving America's current debt sustainable in that projection.
  3. Projected primary deficits, in which future tax revenue fails to cover future non-interest spending, entirely drive America's unsustainable debt ratio path, so the primary deficit, not the deficit, guides how the debt ratio is projected to change.

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.
  • Federal Debt — Stabilizing federal debt would require a zero primary deficit — borrowing only to cover interest on past borrowing — which today would mean a cash deficit of about 3% of GDP, or roughly $800bn a year. The actual deficit is about $1.7tn, or 6% of GDP, with no political dynamics in prospect that would cut it to 3%.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.

AI Summary. More than a third of U.S. young adults reported no salary or wages, and 13.3% were neither in school nor working outside the summer months, down slightly from a record 14%. Disconnection rates are highest in rural areas (1 in 5) and among young Black adults, reaching 29.1% in rural areas.

William Rodgers III, Alice Kassens, Nishesh Chalise, and Nicole Summers-Gabr Federal Reserve Bank of St. Louis
Date Posted:

.@StLouisFed analysts find that from 2017 to April 2024, 16% of US 18-24-year-olds were “disconnected” from both the labor force and education, and argue that investing in disconnected young adults could further their contributions to US economic growth.

How many young adults are neither in school nor working?

Core argument: Excluding June–August, 14% of U.S. young adults were disconnected — neither in school nor working — in 2020, a record high, with the rate falling slightly to 13.3% in 2022.

More than 1/3 of young adults reported having no salary or wages. Many of these young adults belong to a group known as “disconnected youth,” meaning they are neither in school nor working. Even when excluding the summer months of June through August, 14% of young adults nationwide were disconnected in 2020, a record high. Excluding the summer months, the rate fell slightly to 13.3% in 2022. 1 in 5 rural young adults are disconnected, compared with 17.1% of young adults who live in principal cities and 15.6% of young adults in metro areas. Regardless of geography, young Black adults have the highest rates of disconnection: 29.1% (rural), 23.8% (city), and 20.9% (metro area). Compared with those in metro areas, larger shares of disconnected young adults in rural areas and cities come from families with income of less than $50,000. Educational attainment plays a role in being disconnected; 80.2% of disconnected young adults in rural areas and 2/3 of disconnected young adults in cities have no more than a high school diploma.

Takeaways by Macro Roundup® AI

  1. Excluding June–August, 14% of U.S. young adults were disconnected — neither in school nor working — in 2020, a record high, with the rate falling slightly to 13.3% in 2022.
  2. Disconnection among young adults is highest in rural areas at 1 in 5, compared with 17.1% in principal cities and 15.6% in metro areas, and young Black adults have the highest rates in every geography: 29.1% rural, 23.8% city, and 20.9% metro.
  3. Educational attainment plays a role in disconnection, with 80.2% of disconnected young adults in rural areas and two-thirds in cities holding no more than a high school diploma.

Related Articles:

  • Measuring Unemployment Risk — The authors estimate individual unemployment risk using employment status, demographic, job, and geographic characteristics, and find that before a recession this risk is concentrated: unemployment risk is below 5% for the vast majority of employed workers. Unemployed individuals, a small share of the population, average nearly 22% risk, about 10x the average for employed (2.7%) or out-of-the-labor-force (2.4%) individuals.
  • The Dual U.S. Labor Market Uncovered — The authors identify a dual U.S. labor market in which a primary segment of about 55% of the population is almost always employed, while a secondary segment of about 14% absorbs most seasonal and business-cycle fluctuations. Workers in the secondary segment have 6x higher turnover and are 10x more likely to be unemployed than primary-segment workers.
  • Men’s Falling Labor Force Participation Across Generations — Each successive generation of prime-age men has shown higher rates of not participating in the labor force, with millennials starting at a higher level and declining more steeply into their mid-30s, a pattern driven by school enrollment. Given rising educational attainment, the authors suggest the sustained rise in male nonparticipation may slow, which could benefit economic growth.

AI Summary. Proposed federal legislation would ban "grossly excessive" prices during any "atypical disruption" of a market without defining those terms, empowering the Federal Trade Commission to enforce the ban using whatever metric it chooses. The author argues this amounts to sweeping government price controls across every industry, replacing supply and demand with bureaucratic judgment.

Cathy Rampell Washington Post
Date Posted:

.@crampell argues that under Kamala Harris’s “price-gouging” proposal, “Supply and demand would no longer determine prices or profit levels. Far-off Washington bureaucrats would.”

Would banning "grossly excessive" prices amount to economy-wide price controls?

Core argument: Sen. Elizabeth Warren's bill, the likely template for Harris's proposal, would ban any "grossly excessive price" during any "atypical disruption" of a market without defining either term.

The most likely template for Harris’s proposal is a recent bill from Sen. Elizabeth Warren (D-Mass.). (Harris co-sponsored similar legislation with Warren in 2020, when Harris was a senator.) Warren’s bill would ban any “grossly excessive price” during any “atypical disruption” of a market. Alas, no definition was provided for these terms, either; rather, the bill would empower the Federal Trade Commission to enforce bans using any metric it deems appropriate. It’s hard to exaggerate how bad this policy is. It is, in all but name, a sweeping set of government-enforced price controls across every industry, not only food. Supply and demand would no longer determine prices or profit levels. Far-off Washington bureaucrats would. The FTC would be able to tell, say, a Kroger in Ohio the acceptable price it can charge for milk.

Takeaways by Macro Roundup® AI

  1. Sen. Elizabeth Warren's bill, the likely template for Harris's proposal, would ban any "grossly excessive price" during any "atypical disruption" of a market without defining either term.
  2. Warren's bill would empower the Federal Trade Commission to enforce the ban using any metric it deems appropriate, letting the agency tell a Kroger in Ohio the acceptable price for milk.
  3. Warren's bill amounts, in all but name, to sweeping government-enforced price controls across every industry rather than food alone, with Washington bureaucrats rather than supply and demand determining prices and profit levels.

Related Articles:

  • What Was Up with Grocery Prices? — Retail grocery workers' wages rose roughly 15 percentage points more than wages in food manufacturing and the overall workforce, and profit margins at food and beverage stores increased from 2.9% to 4.4% while food manufacturing margins were little changed at about 6.8%. That margin increase is small relative to the 25% rise in grocery prices.
  • How Far $100 Goes at the Grocery Store After Five Years of Food Inflation — Prices for hundreds of grocery items have risen more than 50% over five years as food companies raised prices, with recent Labor Department data showing grocery prices up 1% from a year earlier. Executives have said higher prices were needed to offset their own rising costs for ingredients, transportation, and labor.
  • 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. Chicago spends more than $24,000 per student on public schools, up 107%, while reading and math proficiency in grades 3–8 fell 63% and 78%; the city has led the nation in homicides for 12 consecutive years. Its population has declined for nine straight years as almost half the city budget goes to debt service and public pensions.

George Will Washington Post
Date Posted:
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.@GeorgeWill argues, “Chicago’s population has declined for 9 consecutive years as education has cratered, crime has soared, and public services have withered because almost 1/2 of the city budget goes to debt service and government employees’ pensions.”

Has higher school spending in a big city improved student outcomes?

Core argument: Chicago public school spending has risen 107% since 2012 to more than $24,000 per student, excluding debt service and capital expenditures, while grades 3–8 proficiency fell 63% in reading and 78% in math.

Spending on public schools (more than $24,000 per student, not counting debt service and capital expenditures) has increased 107% since 2012, but proficiency in reading and math in grades 3-8 plummeted 63% and 78%, respectively. Crime is higher than in any other major U.S. city. Year-on-year, robberies are up 21%, assaults 7%, violent crimes in schools 26%. Chicago has led the nation in number of homicides for 12 consecutive years. The [Illinois Policy Institute] says Chicago’s population has shrunk by more than a quarter since it peaked in 1950; in 2023, the city hit its lowest point since 1920. Chicago’s population has declined for nine consecutive years as education has cratered, crime has soared, and public services have withered because almost half of the city budget goes to debt service and government employees’ pensions. These have been negotiated with government sitting on both sides of the table: its employees demanding that it do what it wants to do — grow. The steep price of this progressivism is disproportionately paid by its supposed beneficiaries.

Takeaways by Macro Roundup® AI

  1. Chicago public school spending has risen 107% since 2012 to more than $24,000 per student, excluding debt service and capital expenditures, while grades 3–8 proficiency fell 63% in reading and 78% in math.
  2. Chicago's crime is higher than in any other major U.S. city, with robberies up 21%, assaults up 7%, and violent crimes in schools up 26% year-on-year, and the city has led the nation in homicides for 12 consecutive years.
  3. The Illinois Policy Institute says Chicago's population has shrunk by more than a quarter since its 1950 peak, declining for nine consecutive years and hitting its lowest point since 1920 in 2023, while almost half the city budget goes to debt service and government employee pensions.

Related Articles:

  • Young Families Have Continued Leaving Big Cities Post-Pandemic — 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.
  • Students Are Making a ‘Surprising’ Rebound From Pandemic Closures. But Some May Never Catch Up — An analysis of standardized test data led by Stanford and Harvard researchers finds elementary and middle-school students have regained about a third of pandemic learning losses in math and a quarter in reading. Because poorer districts lost more ground initially, the typical poor district remains nearly half a grade level behind, versus about a fifth for rich districts.
  • Long COVID for Public Schools: Chronic Absenteeism Before and After the Pandemic — Nationwide chronic absenteeism — the share of students missing at least 10% of a school year — rose from 15% in 2018 to 28% in 2022, and although rates improved in 2023, they remained 75% above the pre-pandemic baseline. Chronic absenteeism is associated with lower standardized test scores, with the highest rates in lower-achieving, higher-poverty districts.

AI Summary. The US is easing arms-export restrictions so that the UK and Australia no longer need licences for roughly 80% of their defence-related trade with the US, removing barriers to trilateral defence cooperation under the Aukus pact. The State Department says the change is critical to allied work on hypersonics, artificial intelligence, and undersea military capabilities.

Demetri Sevastopulo Financial Times
Date Posted:

The US is easing licensing restrictions on roughly 80% of defense-related trade with the UK and Australia, to facilitate the 2021 Aukus security pact covering nuclear-powered submarines, hypersonic missiles, and artificial intelligence.

Will easing arms-export licensing rules deepen trilateral defense technology cooperation?

Core argument: The US State Department says its amended International Traffic in Arms Regulations will let the UK and Australia obtain American technology without licences for roughly 80% of their defence-related trade with the US.

The US is easing its restrictions on sharing sensitive technology with the UK and Australia, removing barriers to trilateral defence co-operation as the allies try to counter China in the Indo-Pacific. The US Department of State is amending its International Traffic in Arms Regulation rules to facilitate military-related technology sharing with the allies, erasing some hurdles for Aukus, the submarine, and advanced technology development accord the allies agreed in 2021. The State Department said the reform would mean the UK and Australia did not need to apply for licences to obtain American technology for roughly 80% of their defence-related trade with the US. The move would also be “critical” to Pillar 2, in which the three allies are co-operating in areas ranging from hypersonics to artificial intelligence and undersea military capabilities.

Takeaways by Macro Roundup® AI

  1. The US State Department says its amended International Traffic in Arms Regulations will let the UK and Australia obtain American technology without licences for roughly 80% of their defence-related trade with the US.
  2. The rule change removes barriers to trilateral defence co-operation under Aukus, the submarine and advanced technology accord the US, UK and Australia agreed in 2021, as the allies seek to counter China in the Indo-Pacific.
  3. The State Department described the reform as "critical" to Aukus Pillar 2, under which the three allies co-operate in areas ranging from hypersonics to artificial intelligence and undersea military capabilities.

Related Articles:

  • US Attack Submarines to Counter China Are Running Up to Two Years Late — Deliveries of US Virginia-class attack submarines are running an estimated 24 to 36 months behind contracted dates, with builders General Dynamics and HII averaging roughly 1.2 submarines a year against a required two. The Navy projects the contractors will reach the two-a-year rate by 2028.
  • 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.
  • U.S. Seeks To ‘Integrate’ Japan Into Defense Industrial Base — The U.S. and Japan are formalizing arrangements for U.S. Navy warships to undergo maintenance, repair, and overhaul at Japanese private shipyards, initially limited to the roughly two dozen ships forward-deployed to Japan. Expanding the work to U.S.-based ships, which could ease American maintenance bottlenecks, may require congressional action.

Monday, August 19, 2024

AI Summary. Administrative tax data show that entrants to the taxi and limousine services industry after online ridesharing platforms appeared were more likely to be young, female, White, and U.S.-born, and to combine driving income with wage and salary jobs. Average net earnings of entrants fell to $2,110, consistent with driving being used to supplement income.

Katharine Abraham, John Haltiwanger, Claire Hou, et al. National Bureau of Economic Research
Date Posted:

From 2013-2019, drivers in the taxi/rideshare industry grew six-fold to 1.3mm. The mean entrant in 2016 had net earnings of just $2,110, as the share of drivers supplementing other wage and salary earnings rose from <20% in 2011 to over 70% in 2015.

How did ridesharing platforms change who drives and what they earn?

Core argument: Average net earnings of entrants to the Taxi and Limousine Services industry (NAICS 4853) fell to $2,110 by 2016, while 2011 nonemployer incumbents averaged $12,290 in net earnings (in 2015 dollars), according to administrative tax data.

Using administrative tax data, we explore the effects of the introduction of online ridesharing platforms on entry, employment, and earnings in the Taxi and Limousine Services industry [NAICS 4853]. New entrants were more likely to be young, female, White, and U.S. born, and to combine earnings from ridesharing with wage and salary earnings. The first two panels of Figure 4 display the gross receipts and net earnings of the 2011 NAICS 4853 nonemployer incumbents and of entrants to the industry. Incumbents had net earnings that averaged just $12,290 (in 2015 dollars) in 2011. Beginning in 2013, the net earnings of NAICS 4853 entrants began to fall off sharply. By 2016, the average NAICS 4853 entrant had net earnings of just $2,110. The decline in average nonemployer earnings and increased propensity to combine nonemployer self-employment with a wage and salary job among NAICS 4853 entrants are consistent with earlier findings that many app-based drivers use driving to supplement or smooth their earnings rather than as a primary source of income

Takeaways by Macro Roundup® AI

  1. Average net earnings of entrants to the Taxi and Limousine Services industry (NAICS 4853) fell to $2,110 by 2016, while 2011 nonemployer incumbents averaged $12,290 in net earnings (in 2015 dollars), according to administrative tax data.
  2. Entrants to NAICS 4853 following the introduction of online ridesharing platforms were more likely to be young, female, White, and U.S. born, and to combine ridesharing earnings with wage and salary earnings.
  3. The decline in average nonemployer earnings and the greater propensity of NAICS 4853 entrants to pair self-employment with a wage and salary job are consistent with earlier findings that many app-based drivers drive to supplement or smooth earnings rather than as a primary income source.

Related Articles:

  • Consumer Morsel: The Gig Is Up – In A Good Way — Bank of America internal data show the share of its customers receiving income from gig platforms reached 3.8% on a three-month moving average, above the prior peak, after stalling and then resuming an uptrend. Ridesharing has driven the increase and is now the largest gig category, while social commerce and delivery shares have moderated.
  • The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market — Freelancers in occupations most exposed to generative AI saw employment and earnings decline, with the authors estimating a 2% drop in jobs and a 5.2% drop in monthly earnings on an online labor platform. Offering high-quality service did not mitigate the effect, and top-rated freelancers appear disproportionately hurt.

AI Summary. Data from private-company services provider Carta show start-up shutdowns rising sharply, with 254 venture-backed clients going bust in a single quarter and the failure rate more than 7x the level when tracking began. Carta also reports a steep drop in the share of companies able to raise new funding within two years of their last round.

George Hammond Financial Times
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Start-up failures are up 60% year-over-year in Q1 2024 and are running at 7x the 2019 rate according to @cartainc data. Only 9% of venture funds raised in 2021 have returned capital to investors, vs. 25% of 2017 funds in their third year of operation.

Are start-up failures rising as follow-on funding becomes harder to get?

Core argument: Carta reported 254 of its venture-backed clients went bust in the first quarter of this year, a bankruptcy rate more than seven times higher than when Carta began tracking failures in 2019.

According to data from Carta, which provides services to private companies, start-up shutdowns are rising sharply, even as billions of dollars of venture capital gushes into artificial intelligence outfits. Carta said 254 of its venture-backed clients had gone bust in the first quarter of this year. The rate of bankruptcies today is more than seven times higher than when Carta began tracking failures in 2019. Peter Walker, head of insights at Carta, said there had been a “huge drop” in the number of companies able to raise money again within two years of their last funding round. That is particularly galling for start-ups that have slashed costs to survive over the past two years, sacrificing growth in the process. “The advice shifted…VCs [were] telling you to grow at all costs, then to be profitable tomorrow. If you’ve curtailed your growth with cuts then it’s maybe not a VC business.” Only 9% of venture funds raised in 2021 have returned any capital to their ultimate investors, according to Carta. By comparison, a quarter of 2017 funds had returned capital by the same stage.

Takeaways by Macro Roundup® AI

  1. Carta reported 254 of its venture-backed clients went bust in the first quarter of this year, a bankruptcy rate more than seven times higher than when Carta began tracking failures in 2019.
  2. Only 9% of venture funds raised in 2021 have returned any capital to their ultimate investors, according to Carta, versus a quarter of 2017 funds by the same stage.
  3. Peter Walker, head of insights at Carta, described a "huge drop" in the number of start-ups able to raise money again within two years of their last funding round, even as billions of dollars of venture capital flows into artificial intelligence companies.

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.
  • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.

AI Summary. Consumer price inflation slowed only modestly over the past year, a deceleration attributable to slower rental inflation based on signed leases that are checked once every six months. Measures stripping out housing and volatile components indicate underlying inflation has been running around 2.5%-3% annually since the end of 2022.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein argues that the CPI increase of 0.1% between April and July overstates the extent of the disinflation, and that “CPI inflation is still running around 2.5%-3% a year, just as it has been since the end of 2022.”

Has underlying inflation actually slowed over the past year?

Core argument: CPI inflation slowed only modestly, from 3.1% over the 12 months to June 2023 to 2.9% over the 12 months to July 2024, a deceleration attributed entirely to slower rental inflation based on signed leases, which are checked once every six months.

The 12-month change in the CPI from June 2022 to June 2023 was 3.1%, while the 12-month change from July 2023 to July 2024 was 2.9%. That modest slowdown is entirely attributable to the substantial deceleration in rental inflation based on signed leases—which are checked only once every six months. Measures based on listed rents for available units had long implied that this measure of inflation would eventually slow, and it has. Higher-frequency cuts of the CPI that strip out housing and other volatile or idiosyncratic components tell a similar story: underlying CPI inflation is still running around 2.5%-3% a year, just as it has been since the end of 2022. I do not know what would be gained by squeezing the last percentage point or so of inflation out of the economy, especially if that came at the cost of impoverishing consumers and reducing business investment.

Takeaways by Macro Roundup® AI

  1. CPI inflation slowed only modestly, from 3.1% over the 12 months to June 2023 to 2.9% over the 12 months to July 2024, a deceleration attributed entirely to slower rental inflation based on signed leases, which are checked once every six months.
  2. Higher-frequency CPI measures that strip out housing and other volatile or idiosyncratic components show underlying inflation running around 2.5%–3% a year, as it has since the end of 2022.
  3. Squeezing the last percentage point of inflation out of the economy offers unclear gains if the cost is impoverishing consumers and reducing business investment.

Related Articles:

  • Markets Think Inflation Will Be Too High For The Next 20 Years — Inflation expectations derived from the gap between regular Treasury yields and inflation-indexed Treasury yields show expected annual inflation over the next 10 and 20 years running considerably above expected inflation for the decade beginning 20 years out. Before the pandemic-era inflation surge, actual inflation and expected future inflation tracked each other closely.
  • The Fed Should Not Cut Interest Rates Yet — Labor demand continues to outpace labor supply, with job openings 17% above pre-pandemic levels and average wages up 3.9% year on year. The author argues current conditions do not warrant interest rate cuts, as the risk of inflation getting stuck above 2.5% is too great.
  • Strong, But Not Too Hot: The U.S. Economy as of Mid-2024 — Nominal spending by U.S. consumers and businesses continues rising at roughly 5.5% a year, a pace that makes it difficult for inflation to settle at the Federal Reserve's 2% goal unless real output grows about 3.5% annually. Output is growing about 2.5%-3% while inflation has slowed toward 2.5%-3%, an improvement the author attributes to faster productivity and easing supply disruptions.

AI Summary. The author argues that a proposed economic plan combining demand subsidies—such as housing support and loan forgiveness—with supply-discouraging measures like higher taxes and price controls would produce stagflation, historically bad for stocks and bonds. The expansion of executive power could allow such a program to advance without congressional cooperation.

Joseph Wang Fed Guy Blog
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.@FedGuy12 argues that “Vice President Harris’ proposed economic plan essentially guarantees stagflation by both subsidizing demand and discouraging supply.” He notes that stagflation “has historically been bad for equities and bonds.”

Does subsidizing demand while discouraging supply produce stagflation?

Core argument: The author argues Vice President Harris' proposed economic plan would produce stagflation by subsidizing demand through housing subsidies and loan forgiveness while discouraging supply through higher taxes and price controls.

Vice President Harris’ proposed economic plan essentially guarantees stagflation by both subsidizing demand and discouraging supply. While Harris has been shy about her economic platform, her recent speech and prior campaigns suggest she would favor measures that discourage supply such as higher taxes and price controls. It also seems she would like to increase demand by subsidizing housing and forgiving some types of loans. A combination of stronger demand amidst lower supply suggests a stagflationary economy, which has historically been bad for equities and bonds. While Harris’ should need the cooperation of Congress to realize her aspirations, the recent expansion of executive power implies she may have more influence than expected.

Takeaways by Macro Roundup® AI

  1. The author argues Vice President Harris' proposed economic plan would produce stagflation by subsidizing demand through housing subsidies and loan forgiveness while discouraging supply through higher taxes and price controls.
  2. Stagflation, which the author expects from Harris' combination of stronger demand and lower supply, has historically been bad for both equities and bonds.
  3. Although Harris would need congressional cooperation to enact her agenda, the author contends the recent expansion of executive power implies she may hold more influence than expected.

Related Articles:

  • When Your Opponent Calls You ‘Communist,’ Maybe Don’t Propose Price Controls? — Proposed federal legislation would ban "grossly excessive" prices during any "atypical disruption" of a market without defining those terms, empowering the Federal Trade Commission to enforce the ban using whatever metric it chooses. The author argues this amounts to sweeping government price controls across every industry, replacing supply and demand with bureaucratic judgment.
  • The Big Picture: Back to the Future — The secular backdrop has shifted from disinflationary to more inflationary, with interest rates no longer near zero and real rates no longer negative. Household balance sheets are as healthy as they have been in 20 years, leaving room to borrow, while the public sector is as indebted as it has ever been.
  • 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.

AI Summary. Polling of likely voters in four Sun Belt states shows Harris leading Trump 50% to 45% in Arizona, edging ahead in North Carolina, and narrowing his lead in Georgia and Nevada, with the two tied at 48% across the four-state average.

Shane Goldmacher and Ruth Igielnik New York Times
Date Posted:

The latest Times/Siena poll shows the race for the White House is a dead heat, with Harris putting the Sun Belt in play; she leads in Arizona by 5pp and NC by 2pp, while Trump leads in Georgia by 4pp and Nevada by 1pp. @Nate_Cohn

Are Sun Belt battleground states now competitive again?

Core argument: Harris leads Trump among likely voters in Arizona, 50% to 45%, in Times/Siena polls conducted Aug. 8–15.

Ms. Harris is now leading Mr. Trump among likely voters in Arizona, 50% to 45%, and has even edged ahead of Mr. Trump in North Carolina — a state Mr. Trump won four years ago — while narrowing his lead significantly in Georgia and Nevada. Mr. Trump and Ms. Harris are tied at 48% across an average of the four Sun Belt states in surveys conducted Aug. 8 to 15.

Takeaways by Macro Roundup® AI

  1. Harris leads Trump among likely voters in Arizona, 50% to 45%, in Times/Siena polls conducted Aug. 8–15.
  2. Harris has edged ahead of Trump in North Carolina, a state Trump won four years ago, and has narrowed his leads in Georgia and Nevada, according to Times/Siena polls.
  3. Trump and Harris are tied at 48% across an average of the four Sun Belt states surveyed by Times/Siena from Aug. 8 to 15.

Related Articles:

  • Movers And Money: Mapping the Flow of Income During the Pandemic — Manhattan recorded the largest county-level income outflow to other states at $16.5bn, with 27.7 cents of every dollar leaving—$4.6bn—going to Florida, including $2.9bn to Miami-Dade County and $1.1bn to Palm Beach County. California had the largest state-level losses, while Florida was the biggest beneficiary with a net gain of $39bn.
  • Let’s Recap: 2023 At A Glance — Bank of America found that Sun Belt cities such as Phoenix, Miami, Tampa, and Atlanta experienced a stronger housing boom, with rents and mortgage costs rising more than in the Northeast and West. Potential explanations include domestic migration driven by affordability, above-average employment gains, and a growing share of higher-paid jobs.
  • The New Hispanic Diploma Divide — Survey data from the Survey Center on American Life show a large education split among Hispanic voters, with the Democratic presidential candidate leading by 24 points among college-educated Hispanics but only 2 points among those without degrees. 13% of working-class Hispanics are undecided, and non-college Hispanics make up roughly 7% of the electorate versus 3% for college-educated Hispanics.

AI Summary. China's unemployment rate for 16–24 year-olds excluding students rose to 17.2% from 13.2% a month earlier, the highest level since the National Bureau of Statistics adopted a revised counting method. The bureau excluded students from the calculation, saying this more accurately reflects that job-hunting is not a priority for students in China.

Orange Wang and Danielle Popov South China Morning Post
Date Posted:

Youth unemployment (16-24) in China hit 17.2% in July, a record high under the new data methodology that excludes students. A previous approach that included students was suspended after hitting 21.3% in June 2023.

Is youth unemployment rising as more graduates enter China's labor market?

Core argument: China's youth unemployment rate for 16–24 year-olds excluding students rose to 17.2% in July from 13.2% a month earlier, the highest in the eight months since the National Bureau of Statistics adopted a new counting method.

China’s youth unemployment surged to 17.2% in July, the highest level in the eight months since the National Bureau of Statistics adopted a new method of counting. The jobless rate for 16 to 24 year-olds – excluding students – was up from 13.2% a month earlier and ended three months of declines, according to NBS data released on Friday. Beijing introduced the revised method for December after suspending the release of youth unemployment data from July. Under the previous approach, the jobless rate for the 16-24 age group, including students, peaked at 21.3% in June. Student numbers were then stripped out of the calculation, a change that the NBS said was to “more accurately” reflect that job-hunting was not a priority for students in China.

Takeaways by Macro Roundup® AI

  1. China's youth unemployment rate for 16–24 year-olds excluding students rose to 17.2% in July from 13.2% a month earlier, the highest in the eight months since the National Bureau of Statistics adopted a new counting method.
  2. The increase ended three months of declines in China's youth jobless rate, according to National Bureau of Statistics data.
  3. Under China's previous method, which included students, the 16–24 jobless rate peaked at 21.3% in June, after which Beijing suspended publication and introduced a revised measure for December that the NBS said would "more accurately" reflect that job-hunting was not a priority for students.

Related Articles:

  • Xi Jinping Calls for Quality Jobs for Youth Instead of ‘Bitterness’ — China's leadership has ordered that providing "high-quality full employment" be an economic priority, with youth unemployment running at nearly three times the overall rate. Unemployment among 16-24 year-olds, excluding students, stood at 14.7% against an urban unemployment rate of 5%.
  • Why Has Youth Unemployment Risen So Much in China? — Young workers aged 15-24 are particularly vulnerable when economic growth slows, and China's youth unemployment rate does not appear to be an outlier relative to its income level among global peers. Mismatches between the skills graduates acquire in higher education and those employers demand may add to labor market frictions.
  • The Root of China’s Growing Youth Unemployment Crisis — China's government has long encouraged university enrollment, raising higher-education student numbers from 22m to 383m and expanding graduate-school capacity, with master's candidates up 25% in one year. The author argues that boosting graduate numbers while restricting the services sector and subsidizing construction is bad economics and worse social policy.