Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, October 7, 2024

AI Summary. Across the 1978 to 1992 birth cohorts, adult household incomes fell for white children raised in low-income families and rose for those raised in high-income families, increasing the intergenerational persistence of income ranks among white children by 28%. Over the same cohorts, adult incomes rose for Black children at all parental income levels.

Raj Chetty, Will Dobbie, Benjamin Goldman, Sonya Porter and Crystal Yang National Bureau of Economic Research
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Raj Chetty @OppInsights finds that a white child born into the bottom household income quintile in 1992 had a 29.7% chance of remaining there, up from 24.9% in 1978, and an 11.9% chance of rising to the top quintile, down from 13.7% in 1978.

Are class gaps in economic mobility widening while race gaps narrow?

Core argument: Between the 1978 and 1992 birth cohorts, the intergenerational persistence of household income ranks for white children rose 28%, as adult incomes fell sharply for white children from low-income families and rose for those from high-income families.

Between the 1978 and 1992 birth cohorts, household incomes in adulthood fell sharply for white children growing up in low-income families. At the same time, incomes increased for white children growing up in high-income families. These divergent trends resulted in growing white class gaps, with the intergenerational persistence of household income ranks for white children increasing by 28%. The gap in average household incomes for white children raised in low-income (25th percentile) versus high-income (75th percentile) families grew from $17,720 in the 1978 birth cohort to $20,950 in the 1992 birth cohort. In contrast, incomes in adulthood increased across all parental income levels for Black children.

Takeaways by Macro Roundup® AI

  1. Between the 1978 and 1992 birth cohorts, the intergenerational persistence of household income ranks for white children rose 28%, as adult incomes fell sharply for white children from low-income families and rose for those from high-income families.
  2. The adult household income gap between white children raised at the 25th versus 75th parental income percentile widened from $17,720 in the 1978 birth cohort to $20,950 in the 1992 cohort.
  3. For Black children, adult incomes increased across all parental income levels between the 1978 and 1992 birth cohorts, in contrast to the divergence among white children.

Related Articles:

  • Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility* — The authors find that children's economic mobility improves across birth cohorts in communities where parental employment rates increase, with larger effects for children who move to such communities at younger ages. The relationship is strongest for the parental employment rates of peers in a child's own birth cohort, suggesting it is mediated by social interaction.
  • Intergenerational Mobility in American History: Accounting for Race and Measurement Error — Accounting for Black families, who historical studies routinely drop, and for measurement error in fathers' economic status can double estimates of intergenerational persistence in linked United States census data from 1850 to 1940. The author argues historical mobility was lower than previously estimated, implying greater equality of opportunity today than in the past.
  • 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. The authors present four signs that US labor market change has accelerated, possibly from technology: polarization has ended as low- and middle-paid employment declined while highly paid work grew, low-paid service job growth stalled, the STEM employment share rose over 50%, and retail sales employment fell 25%. They argue artificial intelligence's effects will unfold over decades.

David Deming, Christopher Ong, and Lawrence Summers Aspen Strategy Group
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.@ProfDavidDeming and @LHSummers find higher “churn” in the labor market over 2010-2024 relative to 1990-2019. Growth in low-paid service jobs has “stalled.” Employment in STEM has risen by more than 50%, and retail sales jobs have declined by 25%.

Has the pace of US labor market change accelerated?

Core argument: The STEM share of US employment has risen by more than 50% since 2010, driven by growth in software and computer-related occupations.

We present four indications that the pace of labor market change has accelerated recently, possibly due to technological change. First, the labor market is no longer polarizing— employment in low- and middle-paid occupations has declined, while highly-paid employment has grown. Second, employment growth has stalled in low-paid service jobs. Third, the share of employment in STEM jobs has increased by more than 50% since 2010, fueled by growth in software and computer-related occupations. Fourth, retail sales employment has declined by 25% in the last decade, likely because of technological improvements in online retail. In the past, labor market disruption was fueled by breakthrough general-purpose technologies (GPTs) like steam power and electricity, which enabled the mechanization of agriculture. The impact of AI is likely to be widespread and long-lasting, fitting the mold of past GPTs. However, history teaches us that even if AI disrupts the labor market, its impact will unfold over many decades. [Thus] it is still too early to forecast the impact of AI on the labor market.

Takeaways by Macro Roundup® AI

  1. The STEM share of US employment has risen by more than 50% since 2010, driven by growth in software and computer-related occupations.
  2. The US labor market is no longer polarizing: employment in low- and middle-paid occupations has declined while highly-paid employment has grown, and employment growth has stalled in low-paid service jobs.
  3. Retail sales employment has fallen 25% over the last decade, likely because of technological improvements in online retail.

Related Articles:

  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.
  • Assessing the Implications of a Productivity Miracle — If artificial intelligence can perform economically valuable cognitive tasks at very low marginal cost, consumers would buy far more of the cheapened goods and spend the savings in other categories, expanding activity and employment in sectors facing new demand. Where supply is inherently limited, such as real estate, those savings could bid up prices and produce inflation.

AI Summary. Retail employment began declining in the early 2010s after holding steady for more than two decades, coinciding with heavy big tech investment in deep learning and the commercial adoption of AI-directed warehouse robots and predictive pricing and inventory tools. The author argues this circumstantial evidence suggests AI has already affected the US labor market, but does not constitute proof.

David Deming Forked Lightning
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.@ProfDavidDeming notes an 850,000 decline in retail sales jobs between 2013-23, and speculates Amazon’s use of predictive analytics for product recommendations, inventory management, and warehouse operations are examples of AI-driven productivity gains.

Has AI already reshaped retail employment in the US?

Core argument: Employment in "stockers and order fillers" has grown 60% and in "light delivery service truck drivers" 29% since 2023, compared with 14% overall U.S. job growth.

Companies like Amazon have been using predictive AI tools like machine learning since the mid 2010s to produce personalized prices and product recommendations, optimize inventory management, and other innovations. Why did retail jobs start to decline in the early 2010s specifically, after holding steady for more than two decades after the dot com boom? There were many important AI developments in the early 2010s. Big tech companies started investing heavily in AI in response to the rapid performance improvements realized by deep learning models (like AlexNet) that were trained on Nvidia-produced GPU chips. On the commercial side, Amazon bought Kiva Systems in 2012 (now called Amazon Robotics), a company that uses AI-directed mobile robots to stock and manage inventory. Interestingly, “stockers and order fillers” and “light delivery service truck drivers” have grown by 60% and 29% respectively since 2023, compared to 14% overall job growth. None of this constitutes proof, but it is a decent circumstantial case that AI has already made its presence felt in the US labor market.

Takeaways by Macro Roundup® AI

  1. Employment in "stockers and order fillers" has grown 60% and in "light delivery service truck drivers" 29% since 2023, compared with 14% overall U.S. job growth.
  2. Retail jobs began declining in the early 2010s after holding steady for more than two decades, a period when big tech firms invested heavily in AI following performance gains from deep learning models like AlexNet trained on Nvidia GPUs.
  3. Amazon bought Kiva Systems, now Amazon Robotics, in 2012, a company whose AI-directed mobile robots stock and manage inventory; such evidence amounts to a circumstantial rather than conclusive case that AI has already affected the U.S. labor market.

Related Articles:

  • Technological Disruption in the US Labor Market — The authors present four signs that US labor market change has accelerated, possibly from technology: polarization has ended as low- and middle-paid employment declined while highly paid work grew, low-paid service job growth stalled, the STEM employment share rose over 50%, and retail sales employment fell 25%. They argue artificial intelligence's effects will unfold over decades.
  • 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.
  • 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.

AI Summary. Florida's housing market is cooling amid excess inventory and weaker buyer demand, with analysts warning some cities could see a price correction. Home insurance premiums in parts of the state are up as much as 400% over five years, pricing out some homeowners and prompting institutional investors to sell properties.

Deborah Acosta Wall Street Journal
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The pandemic-era Florida boom, which saw home prices double since 2017, is cooling off because of surplus inventory and dwindling buyer interest, coupled with a 400% rise in homeowners insurance premiums in parts of the state since 2019.

Are rising insurance costs and excess inventory cooling Florida's housing market?

Core argument: Florida home insurance premiums have risen as much as 400% over the past five years in certain areas, pricing many homeowners out of the market, and are likely to climb further after the hurricane season.

Much of Florida's housing market is cooling off because of a surplus of inventory and dwindling buyer interest. Analysts worry that a price correction in some cities could follow. Surging insurance costs are pricing many homeowners out of the market. Insurance premiums in Florida are up as much as 400% over the past five years in certain areas. Insurance premiums are likely to become even steeper following this hurricane season. Institutional investors are starting to sell some of their Florida properties because of the climbing insurance costs and the current interest-rate environment. This is another sign the market is approaching an inflection point.

Takeaways by Macro Roundup® AI

  1. Florida home insurance premiums have risen as much as 400% over the past five years in certain areas, pricing many homeowners out of the market, and are likely to climb further after the hurricane season.
  2. Much of Florida's housing market is cooling as inventory builds and buyer interest dwindles, and analysts worry a price correction could follow in some cities.
  3. Institutional investors are beginning to sell some of their Florida properties because of climbing insurance costs and the interest-rate environment, another sign the market is approaching an inflection point.

Related Articles:

  • Florida’s Home Insurance Industry May Be Worse Than Anyone Realizes — A working paper by researchers at Harvard, Columbia, and the Federal Reserve finds that nearly 20% of Florida insurers rated financially stable by the rating agency Demotech became insolvent, with 99.7% of that agency's ratings in the sample at A or above. The researchers argue this signals Florida's insurance market is more precarious than already known.
  • 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.
  • Snow Belt to Sun Belt Migration: End of an Era? — The correlation between US county population growth or net migration and historical extreme heat and cold days has declined over roughly the past 50 years, and in 2010–2020 was essentially zero. The authors argue this pivoting is likely to continue and reverse the 20th-century Snow Belt to Sun Belt migration pattern.

AI Summary. The Congressional Budget Office's current-law baseline projects U.S. national debt rising from 102% of GDP to 125% by 2035, exceeding the record 106% share set in 1946 within three years. The authors estimate the Harris campaign plan would raise debt to 133% of GDP by 2035 and the Trump plan to 142%.

CRFB Staff Committee for a Responsible Federal Budget
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.@BudgetHawks forecasts a rise in the federal debt by 2035 from 125% of GDP under current law to 133% of GDP under Harris’s plan and 142% of GDP under Trump’s. The point estimates are flanked by wide confidence intervals. @MarcGoldwein

How much would rival campaign plans add to national debt?

Core argument: Under central estimates, President Trump's plan would push federal debt to 142% of GDP in FY 2035, a 17% of GDP increase over the CBO current law baseline of 125%.

The national debt currently stands at 99% of Gross Domestic Product (GDP) and is projected to grow from 102% of GDP at the start of FY 2026 to 125% by the end of 2035 based on the CBO current law baseline. The debt will exceed its record as a share of the economy – 106% set in 1946 – in just three years. Debt would continue to grow faster than the economy under either candidates’ plans and in most scenarios would grow faster and higher than under current law. Under our central estimates, we find that Vice President Harris’s plan would push debt to 133% of GDP in FY 2035 – an 8% of GDP increase. We estimate President Trump’s plan would push debt to 142% of GDP in 2035 – a 17% of GDP increase.

Takeaways by Macro Roundup® AI

  1. Under central estimates, President Trump's plan would push federal debt to 142% of GDP in FY 2035, a 17% of GDP increase over the CBO current law baseline of 125%.
  2. Under central estimates, Vice President Harris's plan would push federal debt to 133% of GDP in FY 2035, an 8% of GDP increase relative to the CBO current law baseline.
  3. Federal debt stands at 99% of GDP and is projected to rise from 102% at the start of FY 2026 to 125% by the end of 2035, exceeding the 1946 record of 106% within three years.

Related Articles:

AI Summary. The author argues a resurgence of inflation is the biggest threat to an otherwise positive economic outlook, noting the 2021–2023 inflation pattern resembles the first peak of the 1970s, which was followed by a second wave. Risks cited include expected interest rate cuts despite a strong underlying economy and potentially inflationary policy proposals.

Jesper Rangvid Rangvid's Blog
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Drawing a parallel to the 1970’s, Jesper Rangvid warns that despite recent progress in returning inflation to target, overly loose monetary policy and a strong underlying US economy run the risk of resurgent inflation.

Is a second wave of inflation the biggest threat to the economy?

Core argument: Markets price a 50 basis point Federal Reserve cut this year and a further 100–125 basis points next year, roughly matching Fed governors' dot plots, though the author argues the strength of the US economy argues against further cuts.

In my view, the biggest threat to the otherwise positive economic situation is a resurgence of inflation. As I often remind readers, in the 1970s, many believed inflation was under control, only for it to spike again. Figure 6 illustrates this by comparing U.S. inflation today with inflation in the 1970s. The pattern during 2021-2023 closely mirrors the first inflation peak of the 1970s. In the mid-to-late 1970s, a second inflation wave followed. There are two potential risks on the horizon that could reignite inflation. Monetary policy could become overly loose. Markets anticipate a 50-basis-point cut this year and a further 100-125 basis points next year, and Fed governors expect about the same, as revealed by their “dot plots”. This comes against the backdrop of a strong underlying economy, as noted earlier. In fact, the strength of the current US economy argues against further interest rate cuts, yet they are still likely to happen. Without delving too deeply into politics, it is fair to say that Trump’s policies, if he wins, could be inflationary.

Takeaways by Macro Roundup® AI

  1. Markets price a 50 basis point Federal Reserve cut this year and a further 100–125 basis points next year, roughly matching Fed governors' dot plots, though the author argues the strength of the US economy argues against further cuts.
  2. The author argues US inflation during 2021–2023 closely mirrors the first inflation peak of the 1970s, which was followed by a second inflation wave in the mid-to-late 1970s.
  3. The author identifies two risks that could reignite inflation: monetary policy becoming overly loose and Trump's policies, if he wins.

Related Articles:

  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.
  • U.S. Inflation Is Still Hotter than Pre-Pandemic. And that’s Okay — 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.
  • 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.

AI Summary. China's state-owned defense enterprises now account for four of the world's ten largest companies by combined defense and nondefense revenue — including the two largest, Aviation Industry Corporation of China and China State Shipbuilding — and five of the top 12 by defense revenue alone, up from none in the top 100 a decade earlier.

Seth Jones Foreign Affairs
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Seth Jones @CSIS notes that China is acquiring weapons systems “at a pace five to six times as fast as the United States,” and argues that the US “needs to commit much more attention and resources to military readiness.”

How dominant have Chinese state-owned defense firms become globally?

Core argument: Four of the world's top ten companies by combined defense and nondefense revenue are Chinese, including the two largest, Aviation Industry Corporation of China and China State Shipbuilding, whereas a decade ago no Chinese firm ranked in the top 100 defense companies.

Driving this production are China’s massive state-owned enterprises, which are charged with developing and building the country’s weapons systems. Today, four of the world’s top ten largest companies in combined defense and nondefense revenue are Chinese, including the two largest: Aviation Industry Corporation of China and China State Shipbuilding. This is a seismic change from a decade ago, when no Chinese firm cracked the world’s top 100 defense companies. Looking at defense revenue alone, China has five companies in the global top 12, also up from zero ten years ago. Chinese defense companies now rival such U.S. giants as Lockheed Martin, RTX (Raytheon), Boeing, Northrop Grumman, and General Dynamics in size and production capacity. Washington must also address the glaring weaknesses in its current defense industrial system. The Defense Department—including the military services—needs a faster, more flexible, and less risk-averse contracting and acquisition process.

Takeaways by Macro Roundup® AI

  1. Four of the world's top ten companies by combined defense and nondefense revenue are Chinese, including the two largest, Aviation Industry Corporation of China and China State Shipbuilding, whereas a decade ago no Chinese firm ranked in the top 100 defense companies.
  2. China now has five companies in the global top 12 by defense revenue alone, up from zero ten years ago, with Chinese defense firms rivaling Lockheed Martin, RTX, Boeing, Northrop Grumman, and General Dynamics in size and production capacity.
  3. China's weapons development and production is driven by state-owned enterprises, while the U.S. Defense Department needs a faster, more flexible, and less risk-averse contracting and acquisition process.

Related Articles:

  • China’s Newest Nuclear Submarine Sank, Setting Back Its Military Modernization — U.S. officials say China's first Zhou-class nuclear-powered attack submarine, which features a distinctive X-shaped stern designed for greater maneuverability, sank at a shipyard near Wuhan, a setback for a priority weapons program that Chinese authorities sought to conceal.
  • 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.
  • Top Defence Contractors Set To Rake In Record Cash After Orders Soar — A Center for Strategic and International Studies report argues the U.S. defense industrial base is not prepared for the current security environment and operates in a manner better suited to peacetime. The study recommends reassessing total munitions requirements and stockpile replenishment needs, creating a strategic munitions reserve, and setting a sustainable procurement plan.

Tuesday, October 8, 2024

AI Summary. US survey data show large differences in lifetime hours of work, and a calibrated model of labor supply and human capital accumulation implies that nearly 20% of the variance in lifetime earnings is accounted for by these differences, with 90% of that effect due to heterogeneity in preferences for work.

Alexander Bick, Adam Blandin, and Richard Rogerson National Bureau of Economic Research
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Richard Rogerson and team infer 20% of the inequality in lifetime earnings among American men can be explained by differences in hours worked, and that 90% of the difference in hours worked is explained by worker preferences.

How much of lifetime earnings inequality comes from differences in hours worked?

Core argument: A calibrated heterogeneous agent model of labor supply and human capital accumulation, using NLSY79 data, implies that almost 20% of the variance in lifetime earnings is accounted for by differences in lifetime hours of work.

We document large differences in lifetime hours of work using data from the NLSY79 and argue that these differences are an important source of inequality in lifetime earnings. To establish this we develop and calibrate a rich heterogeneous agent model of labor supply and human capital accumulation that allows for heterogeneity in preferences for work, initial human capital andlearning ability, as well as idiosyncratic shocks to human capital throughout the life-cycle. Our calibrated model implies that almost 20% of the variance in lifetime earnings is accounted for by differences in lifetime hours of work, with 90% of this effect due to heterogeneity in preferences. Higher lifetime hours contribute to lifetime earnings via two channels: a direct channel (more hours spent in production at given productivity) and a human capital channel (more hours spent investing in human capital, which increases future productivity). Between a third and a half of the effect of lifetime hours on lifetime earnings is due to the human capital channel. Our model implies that policies that limit long hours have important effects on both the mean and variance of lifetime earnings.

Takeaways by Macro Roundup® AI

  1. A calibrated heterogeneous agent model of labor supply and human capital accumulation, using NLSY79 data, implies that almost 20% of the variance in lifetime earnings is accounted for by differences in lifetime hours of work.
  2. The model attributes 90% of the effect of lifetime hours on lifetime earnings variance to heterogeneity in preferences for work.
  3. Between a third and a half of the effect of lifetime hours on lifetime earnings operates through the human capital channel, and the model implies that policies limiting long hours affect both the mean and variance of lifetime earnings.

Related Articles:

  • Europeans ‘Less Hard-Working’ Than Americans, Says Norway Oil Fund Boss — Norway's sovereign wealth fund argues that American companies are outpacing European rivals on innovation and technology because the US more readily accepts failure and risk and because Americans work harder and are more ambitious. US shares now make up almost half of the fund's equity holdings, up from 32% a decade earlier, while UK holdings fell from 15% to 6%.
  • America is Still Working — US hours worked per person fell 7% between 2000 and 2022, a decline attributable entirely to the employment rate falling from 70% to 65%. Hours now sit roughly at their level in the first years after World War II, 23% below 1900.
  • Gen Z Really Does Have a Work Ethic Problem — Long-running nationally representative surveys of U.S. 12th graders show the share saying they want to do their best at a job "even if this sometimes means working overtime" fell from 54% to 36%, a relative drop of 33% in two years, after work ethic measures had recovered among Gen Z in the 2010s.

AI Summary. The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, with the decline concentrated among young and small firms while mature and large firms showed little change. All sectors declined, especially construction and manufacturing, though information industries staged a modest rebound after 2010.

J. Daniel Kim, Joonkyu Choi, Nathan Goldschlag et al. Federal Reserve Board
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The share of US firms with growth over 130%/year declined from 18% in 1985 to 12% in 2015, driven by a decline in new firm formation and slower growth among existing firms. @ngoldschlag @JHaltiwanger_UM @jdanielkim

Has the share of high-growth U.S. firms declined across sectors?

Core argument: The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, even as the total number of firms generally increased over the past four decades.

While there generally has been an increase in the number of firms in the U.S. in the past four decades, the share of firms that are high-growth has steadily decreased from 18% in 1985 to 12% in 2015. This decline is driven by both falling shares of new firms and languishing growth among existing firms. With respect to firm size and age, we find that the decline in the share of high-growth firms is particularly severe for young and small firms. In contrast, mature and large firms do not exhibit substantial changes in high-growth activity over time. In terms of industry, we find that all sectors—especially construction and manufacturing—have shown a general decline in the share of high-growth firms. Interestingly, a few sectors such as Information (e.g., software, media streaming, and computing infrastructure) have shown a modest rebound beginning in 2010. However, all sectors remain far below their shares of high-growth firms from earlier decades.

Takeaways by Macro Roundup® AI

  1. The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, even as the total number of firms generally increased over the past four decades.
  2. The decline in high-growth firms stems from both falling shares of new firms and languishing growth among existing firms, with the drop most severe among young and small firms while mature and large firms show little change.
  3. All sectors, especially construction and manufacturing, show a general decline in high-growth firm shares, and although the Information sector, including software, media streaming, and computing infrastructure, rebounded modestly beginning in 2010, all remain far below earlier decades.

Related Articles:

  • Surging Business Formation in the Pandemic: A Brief Update — 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.
  • 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.
  • Demographic Origins of the Start-up Deficit — The authors estimate that the slowdown in US labor supply growth can explain up to 52% of the decline in the start-up rate and up to 80% of the decline in start-ups' share of employment. In their model, growing labor supply requires growing labor demand, which comes through entry of new firms or a lower real wage.

AI Summary. U.S. manufacturing employment recovered the 650,000 jobs lost in the 2020 recession, rising above 12.9m workers and exceeding the pre-pandemic level of 12.8m — the first such post-recession recovery since the late 1970s. Even so, manufacturing's share of private-sector employment fell from 31% in 1970 to 9.7%.

August Benzow and Connor O’Brien Economic Innovation Group
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US manufacturing employment is now above its pre-pandemic level; this is the first time since the 1970s that the sector has exceeded pre-recession employment levels. @cojobrien @AugustBenzow

Has manufacturing employment recovered its recession losses while its employment share declines?

Core argument: U.S. manufacturing employment surpassed 12.9 million workers by 2023, recouping the 650,000 jobs lost in 2020 and exceeding the 2019 level of 12.8 million.

In every economic expansion since the late 1970s, the U.S. manufacturing sector has failed to recover the jobs it lost in the preceding recession — until now. The COVID-19 recession dealt a severe blow to the sector, which lost 650,000 jobs in 2020. But by 2023, it had entirely recouped these losses, with total manufacturing employment above 12.9 million workers, just exceeding the 2019 figure of 12.8 million. Despite this encouraging comeback, manufacturing’s overall importance in the U.S. job market continues to wane. In 1970, the sector employed roughly 18 million workers, or 31% of private sector employment. By 2010, manufacturing jobs accounted for only 10.7% of the private workforce. As of 2023, the share was down to 9.7%.

Takeaways by Macro Roundup® AI

  1. U.S. manufacturing employment surpassed 12.9 million workers by 2023, recouping the 650,000 jobs lost in 2020 and exceeding the 2019 level of 12.8 million.
  2. In every economic expansion since the late 1970s, U.S. manufacturing failed to recover the jobs lost in the preceding recession, until the post-COVID recovery.
  3. Manufacturing's share of U.S. private sector employment fell from 31% in 1970, when the sector employed roughly 18 million workers, to 10.7% in 2010 and 9.7% in 2023.

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.
  • A US Industrial Renaissance Has Started — US legislation supporting semiconductors, clean energy, and infrastructure has triggered an industrial renaissance in artificial intelligence and energy, and US manufacturing capacity is now growing after declining for decades.
  • 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. Mexico is asking major foreign manufacturers operating in the country—including U.S. carmakers, semiconductor firms, and aerospace and electronics companies—to identify Chinese products and parts that could be made locally, aiming to reduce reliance on imports from China, Malaysia, Vietnam, and Taiwan. China accounts for 20% of Mexico's total imports, according to Mexican government data.

Santiago Pérez Wall Street Journal
Date Posted:

Mexico is launching an import-substitution initiative aimed at replacing Chinese imports with domestically manufactured goods; currently, China’s exports make up about 20% of Mexico’s total imports.

Can Mexico cut Chinese imports by enlisting foreign manufacturers?

Core argument: China's exports to Mexico have risen steadily to reach 20% of Mexico's total imports, according to Mexican government data.

Mexico wants to reduce its dependence on imports from China and is asking some of the world’s biggest manufacturers and tech firms operating in the country to identify Chinese products and parts that could be made locally. The administration of leftist President Claudia Sheinbaum wants U.S. carmakers and semiconductor manufacturers as well as global giants in the aerospace and electronics sectors to substitute some goods and components manufactured in China, Malaysia, Vietnam, and Taiwan. China’s exports to Mexico have also risen steadily in recent years to reach 20% of total imports, according to Mexican government data. About 70% of Mexico’s imports from Asia, primarily Chinese goods and components, are brought in by about 50 foreign companies operating in Mexico. Half of them are U.S. firms in the automotive, semiconductor, and aerospace industries.

Takeaways by Macro Roundup® AI

  1. China's exports to Mexico have risen steadily to reach 20% of Mexico's total imports, according to Mexican government data.
  2. About 70% of Mexico's imports from Asia, primarily Chinese goods and components, are brought in by roughly 50 foreign companies operating in Mexico, half of them U.S. firms in automotive, semiconductor, and aerospace industries.
  3. President Claudia Sheinbaum's administration is asking U.S. carmakers, semiconductor manufacturers, and global aerospace and electronics firms to substitute goods and components made in China, Malaysia, Vietnam, and Taiwan with locally produced ones.

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  • Mexico’s Investment Boom — Mexico's export boom is largely genuine rather than a channel for tariff avoidance, since much of the growth comes from industries like motor vehicles where China has little presence in the North American market. Mexican manufacturing output has risen 5% since 2018, with computer output up nearly 25% and appliance and electrical equipment output up 15%.
  • China Circumvents US Tariffs By Shipping More Goods Via Mexico — An analysis of trade data indicates China is shipping more goods to the US via Mexico, circumventing US tariffs, with containers shipped from China to Mexico rising to 881,000 from 689,000 over comparable nine-month periods. Mexico has overtaken China as the largest exporter of goods to the US.
  • Mexico Targets Chinese Steel Imports With Increased Tariff Of Nearly 80% — Mexico imposed a tariff of nearly 80% on some steel imports, including certain Vietnamese exports of cold-rolled steel sheets, after local producers said Chinese steelmakers had strangled their production. Exporters that prove the steel originates outside China are exempt.

AI Summary. The 12-month US recession probability has been cut to the long-term average of 15%, after the unemployment rate fell to 4.051%, marginally below the level that activates the "Sahm rule" recession signal. Strong payroll growth and upward revisions imply an underlying jobs trend of 196k, above the estimated breakeven rate of 150-180k.

Jan Hatzius Goldman Sachs
Date Posted:

Citing the unemployment rate falling to 4.05%, Jan Hatzius has moved the @GoldmanSachs 12-month recession probability back to 15%, the firm’s long-term average.

Do falling unemployment and strong job gains lower recession odds?

Core argument: The 12-month US recession probability has been cut to the unconditional long-term average of 15%, where it stood before the unemployment rate's rise from 4.054% in June to 4.253% in July.

We have cut our 12-month US recession probability back to the unconditional long-term average of 15%, where it stood before the jump in the unemployment rate from 4.054% in June to 4.253% in July. The most important reason is that the unemployment rate fell to 4.051% in September, marginally below both the June level and the threshold that activates the “Sahm rule.” Moreover, with nonfarm payroll growth of 254k surprising sharply to the upside, prior months revised higher, and household employment also solid, we now estimate an underlying jobs trend of 196k, well above our pre-payrolls estimate of 140k and modestly above our estimated “breakeven rate” of 150-180k. The upshot is that the fundamental upward pressure on the unemployment rate may have ended via a combination of stronger labor demand growth and weaker labor supply growth (because of slowing immigration).

Takeaways by Macro Roundup® AI

  1. The 12-month US recession probability has been cut to the unconditional long-term average of 15%, where it stood before the unemployment rate's rise from 4.054% in June to 4.253% in July.
  2. The US unemployment rate fell to 4.051% in September, marginally below both its June level and the threshold that activates the "Sahm rule," the most important reason cited for the lower recession odds.
  3. Nonfarm payroll growth of 254k surprised sharply to the upside with prior months revised higher, lifting the estimated underlying jobs trend to 196k from a pre-payrolls estimate of 140k and modestly above the estimated breakeven rate of 150-180k.

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  • An Update from Our CIOs: How Durable Is the Economy? — Central banks will likely struggle to deliver the stimulus already priced into rate markets, and the cost of capital must rise enough to offset structurally higher government borrowing and durable private demand. Artificial intelligence spending is inflationary near-term while building capacity, but its deflationary potential is massive and could arrive fast.
  • Surging Business Formation in the Pandemic: A Brief Update — 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.
  • U.S. Inflation Is Still Hotter than Pre-Pandemic. And that’s Okay — 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.

AI Summary. Medicare's projected doubling of cost as a share of GDP is accounted for by increased use of healthcare services, especially newly developed procedures and therapies; without that expansion, spending would fall from 3.2% to 2.4% of GDP rather than rise to 5.4%. The author argues beneficiaries wanting these added services should pay supplemental premiums.

Andrew Biggs and Chris Pope American Enterprise Institute
Date Posted:
Is Database:
Database

Slowing the uptake of new healthcare services by Medicare would mean “Medicare’s expenditures would shrink from 3.2% to 2.4% of GDP, rather than increasing to 5.4%.” @biggsag and @CPopeHC suggest a supplemental premium to cover new services.

Can supplemental premiums cover Medicare's growing cost of new treatments?

Core argument: The projected doubling of Medicare's cost from 3.2% to 5.4% of GDP is accounted for by increased use of healthcare services, particularly newly developed procedures and therapies not previously available.

The projected doubling of Medicare’s cost as a share of GDP is entirely accounted for by the increased use of healthcare services—particularly newly-developed procedures and therapies, which haven’t previously been available. Without this expanded provision of medical services, Medicare’s expenditures would shrink from 3.2% to 2.4% of GDP, rather than increasing to 5.4%. This is not to say that Medicare should never cover newly developed healthcare services. But which new medical technologies are developed reflects what Medicare promises to pay for. If beneficiaries want to receive additional services which increase the cost of the program, they should pay supplemental premiums to cover the expense.

Takeaways by Macro Roundup® AI

  1. The projected doubling of Medicare's cost from 3.2% to 5.4% of GDP is accounted for by increased use of healthcare services, particularly newly developed procedures and therapies not previously available.
  2. Without the expanded provision of medical services, Medicare's expenditures would fall from 3.2% to 2.4% of GDP rather than rising to 5.4%.
  3. Which new medical technologies are developed reflects what Medicare promises to pay for, and beneficiaries who want additional services that increase the program's cost should pay supplemental premiums to cover the expense.

Related Articles:

  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • 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.
  • Has the Medicare Cost Problem Gone Away? — Average annual real per capita spending growth in the US Medicare program fell from 5.2% in 1987-1996 to 2.7% in 1996-2005 and 0.7% in 2006-2022, a slowdown most plausibly attributed to congressionally mandated payment reforms and cuts. With enrollment projected to rise from 66m to 83m by 2040, aggregate costs are expected to grow rapidly.

AI Summary. A New York Times/Siena national poll of 3,385 likely voters found Kamala Harris leading Donald Trump 49% to 46%, a margin within the poll's margin of error. Battleground-state surveys show one of the closest presidential races in modern history.

Adam Nagourney, Ruth Igielnik, and Camille Baker New York Times
Date Posted:

NYT/Siena finds the race for the White House remains a dead heat with Harris leading Trump by 3pp nationally, within the poll’s margin of error. Trump is leading by 13pp in Florida.

Is the presidential race one of the closest in modern history?

Core argument: The Times/Siena poll of 3,385 likely voters, conducted Sept. 29 to Oct. 6, found Kamala Harris leading Donald Trump 49% to 46%, a lead within the poll's margin of error.

The finding is the first time Ms. Harris has led Mr. Trump in the Times/Siena poll since July when President Biden dropped out of the race and Democrats rallied behind Ms. Harris as his replacement. It comes as the contest moves into its final month, and surveys from the battleground states find the race to be one of the closest in modern history. While the Times/Siena poll shows some solid advantages for Mr. Trump, the results suggest Ms. Harris is making gains, if small ones, on questions about temperament, trust, and change that can be critical in a presidential race. The poll, conducted from Sept. 29 to Oct. 6 among 3,385 likely voters, found that Ms. Harris led Mr. Trump, the Republican, by 49% to 46%, a slight lead that is within the poll’s margin of error.

Takeaways by Macro Roundup® AI

  1. The Times/Siena poll of 3,385 likely voters, conducted Sept. 29 to Oct. 6, found Kamala Harris leading Donald Trump 49% to 46%, a lead within the poll's margin of error.
  2. The result marks the first time Harris has led Trump in the Times/Siena poll since July, when President Biden dropped out and Democrats rallied behind Harris as his replacement.
  3. The Times/Siena poll shows some solid advantages for Trump while suggesting Harris is making small gains on questions of temperament, trust, and change, with battleground-state surveys finding one of the closest races in modern history.

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