Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, September 30, 2024

AI Summary. Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.

Kenan Fikri, Sarah Eckhardt and Benjamin Glasner Economic Innovation Group
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Transfer payments made up 18% of all US personal income in 2022, up from 8% in 1970. Social Security/Medicare made up 56% of the increase from 1970 to 2022, and income maintenance programs/Medicaid accounted for 35%. @kenanfikri @BenGlasner

How much have government transfers grown as a share of personal income?

Core argument: Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, ranking third as an income source after work and investments.

Transfers’ share of Americans’ total personal income has more than doubled over the past 50 years, from 8.2% in 1970 to 17.6% in 2022. They are the third largest source of Americans’ personal income, after income from work and investments. The average American received $11,500 in income from government transfers in 2022, compared to $40,500 in income derived from work and $12,900 from investments. Today, most U.S. counties depend on a level of government transfer income that was once reserved only for the most distressed places. In 1970, not even 1% of counties derived a quarter or more of their total personal income from transfers. In 2000, just 10.4% did. But by 2022, 53% of counties were receiving a quarter or more of their income from transfers. Increasing participation (as populations age) and rising underlying costs (driving up the expense of health-related programs, in particular) are the most significant factors at play. Income maintenance programs only account for 11.4% of the real increase in transfers from 1970 to 2022. In stark contrast to the rising elderly share of the population, the poor share has been stable.

Takeaways by Macro Roundup® AI

  1. Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, ranking third as an income source after work and investments.
  2. In 2022, 53% of U.S. counties derived a quarter or more of total personal income from transfers, up from 10.4% in 2000 and under 1% in 1970.
  3. Rising participation as populations age and rising underlying costs, particularly for health-related programs, are the most significant factors behind the increase, while income maintenance programs account for 11.4% of the real rise in transfers from 1970 to 2022.

Related Articles:

  • The Distribution of Household Income in 2021 — Income after transfers and taxes grew most for households in the highest quintile, a rate that would have been nearly the same without temporary pandemic policies such as recovery rebate credits, expanded unemployment compensation, and the expanded child tax credit. Those policies raised average income in the lowest quintile to $48,700 from $41,200 without them.
  • The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States — In a randomized experiment giving 1,000 individuals $1,000 per month, the authors estimate spending rose in most categories, most for housing, food, and car expenses, along with increased housing moves. Debt rose steadily to $1,600 higher by the study's end, and estimated net worth effects turned to roughly -$2,800.
  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.

AI Summary. New business applications, including those likely to become employer firms, surged during the pandemic and were followed by a rise in establishment and firm creation, consistent with reallocation toward high-tech and pandemic-friendly industries and from city centers to suburbs and the South. Business formation remains elevated relative to pre-pandemic levels, though cooling.

Ryan Decker and John Haltiwanger Working Paper
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.@JHaltiwanger_UM @UpdatedPriors document the continued high rate of new business formation by “likely employers” since 2020, and argue that “the pandemic and its aftermath featured a surge in genuine entrepreneurial employer business creation.”

Has the pandemic surge in new business creation held up?

Core argument: Applications for new businesses, including those with characteristics indicating potential to become employer businesses, surged beginning in the summer of 2020, followed in 2021 by a surge in employer entry measures covering both establishment and firm creation.

Applications for new businesses—including those with characteristics indicative of potential to transition to true employer businesses—surged starting in the summer of 2020. The surge in applications was followed in 2021 with a surge in measures of employer entry, including both establishment and firm creation, consistent with reallocation of economic activity toward pandemic-friendly and high tech industries and the geographic reallocation of activity from city centers to suburbs and from the northeast to the south and sunbelt regions. The high tech dimension has been particularly notable. Establishment births from the BLS Business Employment Dynamics (BED) through 2023:Q4. [which] include new establishments from both entirely new companies and existing firms opening new locations, started to rise late in 2020, rapidly increasing in 2021, and [remaining] elevated even while cooling recently. We provide overwhelming evidence that the pandemic and its aftermath featured a surge in genuine entrepreneurial employer business creation, and we show that measures of business formation have remained elevated relative to pre-pandemic levels even recently—though with clear signs of cooling.

Takeaways by Macro Roundup® AI

  1. Applications for new businesses, including those with characteristics indicating potential to become employer businesses, surged beginning in the summer of 2020, followed in 2021 by a surge in employer entry measures covering both establishment and firm creation.
  2. The surge in employer business creation is consistent with reallocation of activity toward pandemic-friendly and high tech industries and geographically from city centers to suburbs and from the northeast to the south and sunbelt regions.
  3. Establishment births in the BLS Business Employment Dynamics data, which include new locations opened by existing firms as well as entirely new companies, rose late in 2020, increased rapidly in 2021, and remain elevated through 2023:Q4 while cooling.

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.
  • Surging Business Formation in the Pandemic: Causes and Consequences? — Shifts in consumer demand and in preferences for work and lifestyle during the pandemic created entrepreneurial opportunities, and applications to start businesses produced new firms and establishments that hired workers in large numbers. The authors argue these new businesses drew in quitting workers as founders or hires, implying economic restructuring across industry, geography, and firm size and age.
  • 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. Labor force participation among US men ages 25 to 34 has not grown in a decade, standing at 89%, which one analysis of Bureau of Labor Statistics data estimates is more than 700,000 fewer participants than at 2004 rates; women's participation in that age group is up 6 percentage points over 10 years, to 79%.

Rachel Wolfe Wall Street Journal
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In August, the labor force participation rate for women aged 25-34 hit a record 78.5%. The male rate for that cohort was 89.1%, which implies 700,000 fewer male workers than would their 2004 participation rate.

Are young men's labor force participation rates falling behind women's?

Core argument: As of August, 89% of U.S. men ages 25–34 were employed or looking for work, more than 700,000 fewer than if participation matched 2004 levels, according to Aspen Economic Strategy Group policy director Luke Pardue's analysis of Bureau of Labor Statistics data.

More women ages 25 to 34 have entered the workforce in recent years than ever. The share of young men in the labor market, meanwhile, hasn’t grown in a decade. As of August, 89% of this cohort of men were employed or looking for work, more than 700,000 fewer than if the current labor-force participation rate was at 2004 levels, according to an analysis of Bureau of Labor Statistics data by Aspen Economic Strategy Group policy director Luke Pardue. Women’s participation is up 6 percentage points in just the past 10 years, to 79%. A fifth of men in this same age range still lived with their parents as of 2023, according to the Census, compared with 12% of women.

Takeaways by Macro Roundup® AI

  1. As of August, 89% of U.S. men ages 25–34 were employed or looking for work, more than 700,000 fewer than if participation matched 2004 levels, according to Aspen Economic Strategy Group policy director Luke Pardue's analysis of Bureau of Labor Statistics data.
  2. Labor-force participation among women ages 25–34 rose 6 percentage points over the past 10 years to 79%, while the share of young men in the labor market has not grown in a decade.
  3. A fifth of U.S. men ages 25–34 lived with their parents as of 2023, compared with 12% of women in the same age range, according to the Census.

Related Articles:

  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.
  • 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.
  • 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. U.S. industrial policy has pledged over $2.1tn in investment incentives, and private investment in manufacturing building construction has nearly tripled since 2019, outpacing building construction investment overall. Of 3.8m manufacturing positions projected to open by 2033, only about half are likely to be filled, with nearly 75% of the gap attributed to retirements.

Benn Steil and Elisabeth Harding Council on Foreign Relations
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.@BennSteil cites investment in new manufacturing facilities and argues, “By 2033, 3.8 million new positions will open, yet only half of these are likely to be filled” due to retirement-linked withdrawals from the manufacturing labor force.

Are there enough workers to fill new manufacturing jobs?

Core argument: U.S. manufacturing is projected to open 3.8 million new positions by 2033, yet only about half are likely to be filled, with nearly 75% of the employment gap owing to retirements.

In order to make supply chains more resilient, boost domestic manufacturing, and compete with China in “strategic” industries, the Biden administration has—across the Inflation Reduction Act, Infrastructure Investment and Jobs Act, and CHIPS and Science Act—pledged over $2.1 trillion in investment incentives. As a result, private investment in construction of manufacturing buildings has almost tripled since 2019—rising significantly more rapidly than investment in building construction overall. However, the United States lacks the human capital to man a manufacturing boom. By 2033, 3.8 million new positions will open, yet only half of these are likely to be filled. Nearly 75% of this employment gap will owe to retirements. A quarter of U.S. manufacturing workers are over the age of 54, and those between 55 and 64 leave the industry at a higher rate than do those in other industries.

Takeaways by Macro Roundup® AI

  1. U.S. manufacturing is projected to open 3.8 million new positions by 2033, yet only about half are likely to be filled, with nearly 75% of the employment gap owing to retirements.
  2. The Biden administration has pledged over $2.1 trillion in investment incentives across the Inflation Reduction Act, Infrastructure Investment and Jobs Act, and CHIPS and Science Act to boost domestic manufacturing and compete with China in strategic industries.
  3. Private investment in construction of manufacturing buildings has almost tripled since 2019, rising significantly faster than investment in building construction overall, while a quarter of U.S. manufacturing workers are over the age of 54.

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • Does Worker Scarcity Spur Investment, Automation and Productivity? Evidence from Earnings Calls — The authors estimate that a one-unit increase in a firm's labor issues, as measured by earnings calls, raises its investment by 28 basis points, implying roughly $55bn in additional US investment attributable to tighter labor markets. The effect is concentrated in industries relying heavily on routine manual tasks, such as manufacturing assembly and warehouse packaging.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — 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.

AI Summary. The National Academy of Sciences estimates that the average U.S. immigrant without a high-school diploma receives $109,000 more in government benefits than they pay in taxes over a lifetime, in 2012 dollars. An economist argues that counting taxes on the capital income immigrant labor helps generate—roughly 80 cents per dollar of labor income—turns that into a net $128,000 contribution.

Tom Fairless Wall Street Journal
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.@m_clem estimates that every dollar of labor income paid to an immigrant also generates “roughly 80 cents of capital income.” Instead of costing the Treasury $109,000, US immigrants with less than a high school diploma, contribute a net $128,000.

Does counting taxes on capital income change immigrants' fiscal impact?

Core argument: The National Academy of Sciences estimated in 2017 that the average U.S. migrant without a high-school diploma will receive $109,000 more in government benefits than they pay in taxes over a lifetime, in 2012 dollars.

In the U.S., the National Academy of Sciences in 2017 published detailed estimates of the fiscal costs of various migrant groups. They suggest that the average migrant with less than a high-school diploma will receive $109,000 more in benefits from all levels of government than they pay in taxes over their lifetimes. The figures are expressed in 2012 dollars. Employers pay immigrants to work because that labor adds value to their capital, and their capital income is subsequently taxed, said Michael Clemens, professor of economics at George Mason University. Revenue from taxes on capital (profits, dividends, and capital gains) should therefore be added to immigrants’ fiscal contribution, he said. Clemens estimates that for every dollar of labor income, there are roughly 80 cents of capital income. Adding that factor to the National Academy of Sciences’ calculations, he finds a migrant in the U.S. with less than a high-school education actually contributes a net $128,000 over his or her lifetime to the U.S. Treasury, rather than subtracting $109,000.

Takeaways by Macro Roundup® AI

  1. The National Academy of Sciences estimated in 2017 that the average U.S. migrant without a high-school diploma will receive $109,000 more in government benefits than they pay in taxes over a lifetime, in 2012 dollars.
  2. Michael Clemens, professor of economics at George Mason University, argues that taxes on capital income — profits, dividends, and capital gains — should be counted in immigrants' fiscal contribution, since employers pay immigrants because their labor adds value to capital.
  3. Clemens estimates roughly 80 cents of capital income per dollar of labor income, and adding that factor to the National Academy of Sciences' calculations yields a net lifetime contribution of $128,000 to the U.S. Treasury rather than a $109,000 shortfall.

Related Articles:

  • How Immigration Remade the U.S. Labor Force — The Congressional Budget Office estimates more than 9m people have migrated on net to the U.S. in recent years, nearly matching the prior decade's total and lifting population growth to almost 1.2% a year. Fewer than 30% are lawful permanent residents; without immigration, growth would be 0.2%.
  • The Lifetime Fiscal Impact of Immigrants — A report estimates that a selectionist U.S. immigration policy—securing the border, reducing low-skilled immigration, and expanding high-skilled immigration—would cut future federal debt by trillions of dollars, providing over $2tn in net present value in the first year and over $200bn annually thereafter. Under the proposal, annual legal immigration falls from about 1m to roughly 860,000.
  • 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.

AI Summary. The Centers for Disease Control and Prevention reported a possible cluster of eight bird-flu cases in Missouri, which could represent the first person-to-person transmission of the H5N1 virus in the United States. Infections in seven of the individuals, a household member and six healthcare workers, have not been confirmed, leaving open other flulike illnesses.

Apoorva Mandavilli and Emily Anthes New York Times
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The CDC reported that the cluster of possible bird flu infections in Missouri has expanded to 8 people in what may be the first known person-to-person transmission of the virus in the US.

Is bird flu spreading from person to person in the US?

Core argument: The CDC reported a possible Missouri bird-flu cluster expanding to eight people, potentially the first instances of person-to-person H5N1 transmission in the United States.

A possible cluster of bird-flu infections in Missouri has grown to include eight people, in what may be the first examples of person-to-person transmission in the United States, the Centers for Disease Control and Prevention reported on Friday. If confirmed, the cases in Missouri could indicate that the virus may have acquired the ability to infect people more easily. Worldwide, clusters of bird flu among people are extremely rare. Most cases have resulted from close contact with infected birds. Health officials in Missouri initially identified a patient with bird flu who was hospitalized last month with unusual symptoms. The patient may have infected one household member and six healthcare workers, all of whom developed symptoms, according to the C.D.C. Investigators have not yet confirmed whether any of those seven individuals were infected with the virus, called H5N1, leaving open the possibility that they had Covid or some other illness with flulike symptoms.

Takeaways by Macro Roundup® AI

  1. The CDC reported a possible Missouri bird-flu cluster expanding to eight people, potentially the first instances of person-to-person H5N1 transmission in the United States.
  2. Missouri health officials identified a hospitalized bird-flu patient with unusual symptoms who may have infected one household member and six healthcare workers, all of whom developed symptoms, according to the CDC.
  3. Investigators have not confirmed H5N1 infection in any of the seven additional individuals, leaving open the possibility they had Covid or another illness with flulike symptoms.

Related Articles:

  • Is Bird Flu Spreading Among People? Data Gaps Leave Researchers In The Dark — A US bird flu infection in a person with no known contact with animal carriers, alongside illness in two close contacts, has left researchers awaiting data to determine whether human-to-human transmission has emerged. Gaps in surveillance persist because some states do not require farmers to test dairy cattle for the virus.
  • How the Current Bird Flu Strain Evolved to be So Deadly — A Nature study tracking bird flu genome changes and reported outbreaks found the virus spread three times faster among wild birds than farmed poultry, attributed to mutations letting it adapt to diverse species. Outbreaks, once seasonal with Northern Hemisphere bird migration, have become persistent, killing millions of birds across five continents.
  • The Bird Flu Virus Adapted to Sea Mammals. It May Not Be Done Yet — A genetic analysis indicates the H5N1 bird flu virus jumped at least three times from wild birds to marine mammals along South America's Pacific coast and then acquired mutations enabling spread between elephant seals, which died in large numbers. The authors warn the virus could similarly adapt to cause large-scale infections in other mammals, including humans.

Tuesday, October 1, 2024

AI Summary. US production of oil, gas, and natural gas liquids rose under the Biden administration, with federal policy relying mainly on subsidies and incentives for renewable power, carbon capture, green hydrogen, battery storage, and electric vehicles that may total $1–3tn by the end of the decade. The renewable share of US final energy consumption is 8%, up from 4% in 2010.

Michael Cembalest J.P. Morgan
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Michael Cembalest @JPMorgan notes that the residential electricity price in CA is >3.5x that of China/India; TX is 2x. US electrical prices have risen vs China and India as renewables’ share of final energy consumption has grown to 8% from 4% in 2010.

How much have renewable energy subsidies bought in energy share?

Core argument: The Biden/Harris energy approach has been more carrot than stick: incentives and subsidies for renewable power, carbon capture, green hydrogen, battery storage, and EV adoption may reach $1–$3 trillion by the end of the decade.

The two candidates differ on energy policy, although to be clear, US production of oil, gas, and natural gas liquids rose under the Biden administration. Some analysts point to a decline in drilling permits on Federal land under Biden, but that’s a pretty marginal issue at a time of all-time highs in US production. Rather than restrain oil & gas, the Biden/Harris approach has been much more carrot than stick: the true cost of energy bill incentives and subsidies for renewable power, carbon capture, green hydrogen, battery storage, and EV adoption may reach $1 - $3 trillion by the end of the decade. These costs are showing up in rising electricity prices, particularly when measured against places where energy-intensive production is outsourced to (China/India). And even though the journey to greater electrification of energy consumption has only just begun, the highest inflation category in the PPI report since 2020: transmission and transformer equipment. A progress marker: the renewable share of US final energy consumption is 8%, up from 4% in 2010.

Takeaways by Macro Roundup® AI

  1. The Biden/Harris energy approach has been more carrot than stick: incentives and subsidies for renewable power, carbon capture, green hydrogen, battery storage, and EV adoption may reach $1–$3 trillion by the end of the decade.
  2. US production of oil, gas, and natural gas liquids rose under the Biden administration to all-time highs, which some analysts weigh against a decline in drilling permits on federal land.
  3. The renewable share of US final energy consumption stands at 8%, up from 4% in 2010, while transmission and transformer equipment is the highest-inflation category in the PPI report since 2020.

Related Articles:

  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.
  • Three Mile Island’s Nuclear Plant to Reopen, Help Power Microsoft’s AI Centers — Constellation Energy will spend about $1.6bn to restart the undamaged reactor at Pennsylvania's Three Mile Island nuclear plant, which closed in 2019, and has signed a 20-year agreement to sell the power to Microsoft. The deal reflects the scale of round-the-clock carbon-free electricity sought for artificial intelligence data centers.
  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.

AI Summary. A single search on a generative AI platform such as ChatGPT can use at least 10x the energy of a Google search, and the Electric Power Research Institute estimates data centers could consume as much as 9% of U.S. electricity by 2030. Goldman Sachs estimates about 47 gigawatts of new generation capacity will be needed to meet that demand growth.

Jennifer Hiller Wall Street Journal
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Data centers used 26% of Virginia’s total power consumption in 2023; nationwide data centers could use 9% of US electricity by 2030 according to the Electric Power Research Institute.

How much new electricity generation will AI data centers require?

Core argument: Data centers could consume as much as 9% of U.S. electricity by 2030, according to the Electric Power Research Institute.

AI is a fast-growing source of spending by tech companies that say they are on the cusp of the biggest boom since the internet, with implications for national security and the economy. But a search on a generative AI platform such as ChatGPT can use at least 10 times the amount of energy as a Google search. Data centers could use as much as 9% of U.S. electricity by 2030, according to the Electric Power Research Institute. Goldman Sachs estimates around 47 gigawatts of new power generation capacity will be required to support U.S. data center power demand growth through 2030.

Takeaways by Macro Roundup® AI

  1. Data centers could consume as much as 9% of U.S. electricity by 2030, according to the Electric Power Research Institute.
  2. Goldman Sachs estimates roughly 47 gigawatts of new power generation capacity will be needed to support growth in U.S. data center electricity demand through 2030.
  3. A search on a generative AI platform such as ChatGPT can use at least 10 times the energy of a Google search, as tech companies raise AI spending they describe as the biggest boom since the internet.

Related Articles:

  • Generational Growth AI, Data Centers and the Coming US Power Demand Surge — Data center power demand is projected to grow 15% annually through 2030, lifting data centers to 8% of US power demand from about 3% and raising overall US power demand growth to 2.4% a year versus roughly 0% over the prior decade.
  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • OpenAI Pitched White House on Unprecedented Data Center Buildout — OpenAI has pitched the White House on building 5 gigawatt data centers across US states, arguing the expansion is needed to develop more advanced artificial intelligence models and compete with China. Each such facility would use roughly the output of five nuclear reactors, enough to power almost 3m homes.

AI Summary. Research from the Economic Innovation Group finds that in 1970, fewer than 1% of US counties drew at least 25% of personal income from government safety-net and social programs, compared with 53% of counties by 2022, a shift the group associates with population aging.

Aaron Zitner, Jon Kamp, and Brian McGill Wall Street Journal
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In the 2000 presidential election, of the 317 counties that received transfers equal to at least 25% of total personal income, 59% voted for the GOP candidate. In 2020, 88% of 1,986 counties voted GOP.

Are more US counties relying on government aid for income?

Core argument: Research by the bipartisan Economic Innovation Group finds that 53% of U.S. counties drew at least a quarter of personal income from government safety-net and social programs in 2022, up from fewer than 1% in 1970.

The country hasn’t always been this reliant on government support. In 1970, government safety-net money accounted for significant income in fewer than 1% of America's counties, new research by the bipartisan think tank Economic Innovation Group finds. As America’s population aged, more counties came to count on this government backing for a significant share of their total income. That is defined by EIG, the think tank, as those in which government safety-net and social programs account for 25% or more of personal income in the county. By 2022, 53%—more than half of all U.S counties—drew at least a quarter of their income from government aid.

Takeaways by Macro Roundup® AI

  1. Research by the bipartisan Economic Innovation Group finds that 53% of U.S. counties drew at least a quarter of personal income from government safety-net and social programs in 2022, up from fewer than 1% in 1970.
  2. The Economic Innovation Group defines a county as reliant when government safety-net and social programs account for 25% or more of its personal income.
  3. The Economic Innovation Group attributes the rising number of aid-reliant counties to the aging of America's population.

Related Articles:

  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • Economic Renaissance or Fleeting Recovery? Left-Behind Counties See Boom in Jobs and Businesses Amid Widening Divides — More than 1,000 US "left-behind" counties—home to 18% of the population and defined by lagging population and income growth—recorded their strongest three-year stretch of job and business creation since 2000, with jobs growing over 4x faster than in the preceding four years. Their share of national jobs nonetheless kept falling.
  • 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 real interest rates of about 1.5% remain below pre-financial-crisis levels, with Federal Reserve Bank of St Louis estimates putting 1990s real rates above 2%. With the gap between real rates and the cyclically adjusted earnings yield very small, returns from US stocks are unlikely to come from further revaluation, making current valuations a bet on sustained supernormal profit growth.

Martin Wolf Financial Times
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Martin Wolf argues that interest rates are likely to rise further, implying that equity valuations are stretched, and can be rationalized only by “belief in the ability of earnings to grow at extremely high rates far into the future.”

Do today's stock valuations require a bet on sustained supernormal profit growth?

Core argument: US real interest rates stand at 1.5%, below the above-2% levels the Federal Reserve Bank of St Louis estimates for the 1990s in the US, leaving reasons to expect real rates to rise further.

Yet the recent rise in real rates has not brought real interest rates back to pre-financial crisis levels: today, they are 1.5% in the US. These are modest rates. Estimates by the Federal Reserve Bank of St Louis give real interest rates of above 2% in the 1990s in the US. We have some reasons to expect real rates to go even higher. After all, they are still not all that high. What we do know is that the margin between the real interest rate and the cyclically adjusted earnings yield is very small. It seems safe to argue that prospective returns from owning US stocks are unlikely to come to any large extent (if at all) from revaluations, given how highly valued they already are. Even the current valuations must depend on a belief in the ability of earnings to grow at extremely high rates far into the future, perhaps because existing (or prospective) monopolists will remain as profitable as today’s tech giants (now including Nvidia) have been. This is essentially a bet on the ability of today’s US capitalism to generate supernormal profits forever. The weakness of other markets is a bet on the opposite outcome.

Takeaways by Macro Roundup® AI

  1. US real interest rates stand at 1.5%, below the above-2% levels the Federal Reserve Bank of St Louis estimates for the 1990s in the US, leaving reasons to expect real rates to rise further.
  2. The margin between the US real interest rate and the cyclically adjusted earnings yield is very small, and prospective returns from owning US stocks are unlikely to come to any large extent from revaluations, given how highly valued they already are.
  3. Current US equity valuations depend on a belief that earnings can grow at extremely high rates far into the future, a bet that US capitalism generates supernormal profits forever, while the weakness of other markets bets on the opposite outcome.

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AI Summary. If underlying services inflation holds near 2% a year and prior relationships reassert themselves, total yearly personal consumption inflation could settle near 3% rather than returning to 2%. That would carry implications for interest rate pricing, and traders assuming a reversion to pre-pandemic inflation norms may be surprised.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein notes that inflation is running ~ 1pp above the 2017-19 trend. He warns that “Traders pricing assets with implicit or explicit assumptions that inflation reverts to pre-pandemic norms may be in for an unwelcome surprise.”

Will inflation settle near 3% instead of returning to 2%?

Core argument: If supercore PCE inflation holds near 2% a year and prior relationships reassert themselves, total yearly PCE inflation might settle around 3% rather than returning to 2%.

If supercore PCE inflation remains stable at around 2% a year and if prior relationships reassert themselves, then total yearly PCE inflation might be expected to settle around 3%, instead of landing back at 2%. If 2.5%-3% is the new 1.5%-2%, more or less, that could have implications for interest rate pricing above and beyond Jerome Powell’s belief “that the neutral rate is probably significantly higher than it was [before the pandemic].”The bigger potential implication is what this all means for where things settle down in the years ahead. Traders pricing assets with implicit or explicit assumptions that inflation reverts to pre-pandemic norms may be in for an unwelcome surprise.

Takeaways by Macro Roundup® AI

  1. If supercore PCE inflation holds near 2% a year and prior relationships reassert themselves, total yearly PCE inflation might settle around 3% rather than returning to 2%.
  2. A shift to 2.5%–3% inflation in place of 1.5%–2% could carry implications for interest rate pricing beyond Jerome Powell's belief that the neutral rate is probably significantly higher than before the pandemic.
  3. Traders pricing assets on implicit or explicit assumptions that inflation reverts to pre-pandemic norms may be in for an unwelcome surprise.

Related Articles:

  • Quo Vadis, r*? The Natural Rate Of Interest After The Pandemic — Estimates of the natural rate of interest across core advanced economies suggest it may have increased, though the estimates are widely dispersed and statistically uncertain. Low expected potential growth and rising longevity may weigh on the natural rate, while large fiscal deficits, age-related spending, and public investment needs for infrastructure, defense, and the green transition may push it up.
  • The Future Of r* — Long-run equilibrium interest rates are argued to stay low relative to recent decades' historical average but above pre-pandemic lows, implying rates only slightly below current levels, with a nominal neutral rate near 3.5% offered as illustration. Rising government debt, particularly in the US, is identified as the main risk to that view.
  • What Have We Learned About the Neutral Rate? — Analysts estimate that if inflation is brought down without a recession, the Federal Reserve's policy rate will stabilize nearer 3–3.25% than the 2.5% longer-run median projection of Federal Reserve officials. Projected shifts in government debt and demographics imply a roughly 0.5 percentage point net increase in the neutral rate over the next decade.

AI Summary. Dockworkers at dozens of East Coast and Gulf Coast ports, represented by the International Longshoremen's Association's 45,000 members, launched a strike at cargo terminals handling more than half of US import and export volumes. Port employers raised their wage offer to a 50% increase over six years, up from 40%.

Paul Berger Wall Street Journal
Date Posted:

The East and Gulf Coast dockworkers union went on strike Tuesday morning, seeking a 77% pay raise over six years and an end to automation in American ports.

Are dockworkers striking at ports handling most US trade volumes?

Core argument: Members of the International Longshoremen's Association, which represents 45,000 dockworkers, walked off the job at midnight at dozens of East Coast and Gulf Coast ports handling more than half of U.S. import and export volumes, as their contract with port employers expired.

Dockworkers walked off their jobs at dozens of ports from Maine to Texas at midnight, launching a strike that threatens to rattle the American economy five weeks ahead of the presidential election. Members of the International Longshoremen’s Association, which represents 45,000 dockworkers at East Coast and Gulf Coast ports, began picketing early Tuesday at cargo terminals that handle more than half of American import and export volumes as the contract with port employers expired. Port employers, pressed by Biden administration officials to resolve the impasse, raised their offer on wages to a 50% increase over six years, from an earlier 40% increase, along with other improvements in benefits in the 24 hours before the strike deadline.

Takeaways by Macro Roundup® AI

  1. Members of the International Longshoremen's Association, which represents 45,000 dockworkers, walked off the job at midnight at dozens of East Coast and Gulf Coast ports handling more than half of U.S. import and export volumes, as their contract with port employers expired.
  2. Port employers raised their wage offer to a 50% increase over six years, up from an earlier 40% increase, along with other benefit improvements, in the 24 hours before the strike deadline.
  3. The strike threatens to rattle the American economy five weeks ahead of the presidential election, with Biden administration officials pressing port employers to resolve the impasse.

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  • Union Voters Could Be Decisive in 2024 — A declining union share of the electorate and weaker Democratic performance among union households have made Michigan, Pennsylvania, and Wisconsin more competitive, with white voters without college degrees making up majorities of the electorate in all three states. Unionized white non-college voters were less likely to back Trump than their non-union counterparts.
  • 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.