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


Thursday, October 17, 2024

AI Summary. Using US administrative tax data on pass-through business owners, who account for over 50% of US business net income, the authors find little evidence of inordinate risk, high startup costs, or non-pecuniary motives in self-employment, and steeper average income growth than comparable paid employees.

Anmol Bhandari, Tobey Kass, Thomas May, Ellen McGrattan and Evan Schulz National Bureau of Economic Research
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Using 2000-15 IRS data on 108mm self-employed Americans, Anmol Bhandari and team find the self-employed “have significantly higher average income and steeper, more persistent income growth profiles” than paid-employed peers with similar characteristics.

Does self-employment involve outsized risk and lower pay than paid employment?

Core argument: Pass-through business owners—sole proprietors, partners, and S corporation owners—account for over 50% of all US business net income, and the authors assemble a longitudinal database of them from US administrative tax data.

We use US administrative tax data to assemble a novel longitudinal database of pass-through business owners—one that is suitable for analyzing patterns of income growth and determinants of entrepreneurial choice for a large population of self-employed individuals. Collectively, pass-through owners, including sole proprietors, partners, and S corporation owners, account for over 50% of all business net income in the United States and have been central to studies of entrepreneurship. Once we include all dollars earned in self-employment, we do not find strong evidence of inordinate risk, high startup costs, or non-pecuniary motives, and, on average, we find the self-employed have much steeper income growth profiles than paid-employed peers with the same characteristics. Overall, education and skill levels are similar for self-and paid-employed, but there are notable differences in their primary industries. We find that more than half of the self-employed population are in construction, professional services, health care, and other services, which is a considerably higher fraction than for the paid-employed.

Takeaways by Macro Roundup® AI

  1. Pass-through business owners—sole proprietors, partners, and S corporation owners—account for over 50% of all US business net income, and the authors assemble a longitudinal database of them from US administrative tax data.
  2. Counting all dollars earned in self-employment, the authors find no strong evidence of inordinate risk, high startup costs, or non-pecuniary motives, and find the self-employed average much steeper income growth profiles than paid-employed peers with the same characteristics.
  3. More than half of the self-employed population works in construction, professional services, health care, and other services, a considerably higher fraction than for the paid-employed, while education and skill levels are similar across the two groups.

Related Articles:

  • Stock Market Wealth and Entrepreneurship — The authors estimate a causal effect of stock market wealth on business entry, comparing investors with similar portfolios but different returns from idiosyncratic holdings. Effects are concentrated among moderate-wealth owners with returns of 25% or above and in strong stock market years, consistent with gains lifting individuals past a wealth threshold for starting a firm.
  • Immigrant Entrepreneurship: New Estimates and a Research Agenda — Immigrants account for about a quarter of new employer businesses in the United States, and firms with immigrant owners are more likely to hold patents and hold more patents per employee. This higher propensity toward innovation is only partly explained by differences in owners' education levels and fields of study.
  • Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology — Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.

AI Summary. 35% of bachelor's degree programs at liberal arts colleges have a negative return on investment, versus 23% elsewhere, meaning students are typically worse off than not attending college. The gap reflects higher tuition and slightly lower alumni earnings, but engineering, computer science, nursing, and economics majors there beat national averages.

Preston Cooper American Enterprise Institute
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On average, 35% of degrees at liberal arts colleges have a negative ROI vs. 23% for all other colleges. Engineering, computer science, nursing, and economics degrees have the highest ROI. @PrestonCooper93 @AEIecon

Do liberal arts colleges deliver a worse return on investment?

Core argument: 35% of bachelor's degree programs at liberal arts colleges have a negative return on investment, compared with 23% at other schools; students in negative-ROI programs are typically worse off for having enrolled than if they had not attended college.

On average, liberal arts colleges are a worse bet than other schools. 35% of bachelor’s degree programs at liberal arts colleges have a negative ROI, compared to just 23% at other schools. When a degree program has a negative ROI, students are typically worse off for having enrolled, relative to not attending college at all. Liberal arts’ colleges underperformance is largely due to their higher tuition, along with slightly lower earnings for alumni. Even though liberal arts colleges tend to have lower financial returns than average, that is not true for the highest-ROI majors. If you study engineering, computer science, nursing, or economics at a liberal arts college, you’re likely to do even better than the national average for that major.

Takeaways by Macro Roundup® AI

  1. 35% of bachelor's degree programs at liberal arts colleges have a negative return on investment, compared with 23% at other schools; students in negative-ROI programs are typically worse off for having enrolled than if they had not attended college.
  2. Liberal arts colleges' weaker returns stem largely from their higher tuition, along with slightly lower earnings for their alumni.
  3. Students who study engineering, computer science, nursing, or economics at a liberal arts college are likely to do better than the national average for that major.

Related Articles:

  • Marginal Returns to Public Universities — Using admission-score cutoffs across all 35 Texas public universities, the author estimates that marginally admitted students complete an additional year of four-year education, are 12 percentage points more likely to earn a bachelor's degree, and earn 5–10% more than marginally rejected peers, with gains driven by students who otherwise would not attend a four-year school.
  • Talent Disrupted: Underemployment, College Graduates, and the Way Forward — A study classifying college graduates as underemployed when their occupation does not typically require a bachelor's degree finds that of every 100 graduates with a terminal bachelor's degree, 48 hold college-level jobs one year after graduation and 55 do at both five and 10 years. Graduates who start underemployed largely remain so.
  • 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.

AI Summary. US nonfarm business sector productivity has grown at about 1.6% a year in the recent period, the same compound annual rate recorded over two earlier multi-year stretches. On this view there is nothing unusual happening with productivity, and no basis for assuming the latest growth rate will persist.

Matt Klein The Overshoot
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Fed Governor Christopher Waller notes that nonfarm business output per hour worked is on its pre-pandemic trend, undermining the argument that high productivity growth supports wage growth of 4% without driving up inflation. @M_C_Klein

Is recent US productivity growth any faster than in past decades?

Core argument: U.S. nonfarm business sector productivity grew at a 1.6% yearly rate from 2019Q4 through 2024Q2, exactly matching the compound average yearly growth rates over 2004Q1–2019Q4 and 1984Q1–1996Q4.

[Waller] emphasized that the recent pace of gains looks much less impressive after you realize that output per hour worked was the same in 2023Q2 as it was in 2020Q2. From 2019Q4 through 2024Q2, U.S. nonfarm business sector productivity has grown at a yearly rate of just 1.6%. That happens to be exactly the same as the compound average yearly growth rate from 2004Q1-2019Q4, which in turn is exactly the same as the 1984Q1-1996Q4 average yearly growth rate. From this perspective, there is nothing special happening with productivity, and therefore no reason to assume that the most recent growth rate should be expected to continue.

Takeaways by Macro Roundup® AI

  1. U.S. nonfarm business sector productivity grew at a 1.6% yearly rate from 2019Q4 through 2024Q2, exactly matching the compound average yearly growth rates over 2004Q1–2019Q4 and 1984Q1–1996Q4.
  2. Waller emphasized that output per hour worked was the same in 2023Q2 as in 2020Q2, making recent gains look much less impressive.
  3. Waller argued that nothing special is happening with productivity, leaving no reason to assume the most recent growth rate will continue.

Related Articles:

  • A Data-Driven Case That AI Has Already Changed The U.S. Labor Market — 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.
  • 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.
  • 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.

AI Summary. Revised European Union fiscal rules shift the focus to multi-year structural plans and clearer debt-sustainability criteria, with France and Italy expected to cut their structural deficits in line with them. Fiscal consolidation in the four largest euro-area economies is forecast to continue, improving the structural balance by an average 0.35 percentage points a year.

Alexandre Stott and Filippo Taddei Goldman Sachs
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Fiscal consolidation in Europe is underway, with France, Italy, and Spain taking required steps under EU rules targeting deficits of no more than 3% of GDP.

Will revised European fiscal rules keep the largest euro-area economies consolidating?

Core argument: The EMU4 structural balance is forecast to improve by an average 0.35pp per annum through 2027, with faster consolidation in France, a constant pace in Spain and Italy, and a slight deceleration in Germany from 2026.

The [April 2024] European fiscal rules established a more transparent set of criteria to achieve debt sustainability. We expect both France and Italy, currently in Excessive Deficit Procedure (EDP), to reduce their structural deficit in line with the rules. The main innovation of the new fiscal framework is the shift in focus to multi-year planning through the medium-term fiscal structural plan (FSP). The biggest challenge in the Italian FSP is to achieve an average reduction of the debt-to-GDP ratio compliant with the rules. We expect the European Commission to scrutinise recent fiscal slippage in France but eventually to endorse the government’s intended speed of adjustment. Fiscal consolidation in the EMU4 will continue, in our forecast, for the next three years. The structural balance will improve by an average 0.35pp per annum until 2027 thanks to an acceleration in fiscal consolidation in France, a constant pace in Spain and Italy, and notwithstanding a slight deceleration from 2026 in Germany.

Takeaways by Macro Roundup® AI

  1. The EMU4 structural balance is forecast to improve by an average 0.35pp per annum through 2027, with faster consolidation in France, a constant pace in Spain and Italy, and a slight deceleration in Germany from 2026.
  2. France and Italy, both under the EU's Excessive Deficit Procedure, are expected to cut their structural deficits in line with the April 2024 European fiscal rules, whose main innovation is a shift to multi-year planning via medium-term fiscal structural plans.
  3. Italy's fiscal structural plan faces its biggest challenge in achieving an average reduction in the debt-to-GDP ratio compliant with the rules, while the European Commission is expected to scrutinise France's fiscal slippage but eventually endorse the government's intended speed of adjustment.

Related Articles:

  • Fiscal Monitor: Putting a Lid on Public Debt — Global public debt is projected to approach 100% of GDP by 2030, with China and the United States largely driving the increase. Debt is projected to stabilize or decline in about two-thirds of countries, but remains higher than before the pandemic.
  • Current Estimates of Sustainable Government Debt Limits for the US and 26 Other OECD Countries — The authors estimate sustainable sovereign debt limits for 27 advanced economies at 136%–234% of GDP on a gross basis and 181%–268% net of central bank holdings, finding evidence of "fiscal fatigue" once gross debt exceeds roughly 140%–145% of GDP. One estimate puts the US sustainable gross debt limit at 154% of GDP, about 30 percentage points above its current level.
  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.

AI Summary. Google has ordered six to seven small modular nuclear reactors totaling 500 megawatts from Kairos Power to supply low-carbon electricity to its data centres, with the first commercial reactor targeted to come online by 2030 and additional units by 2035. Kairos uses molten fluoride salt rather than water to cool its reactors.

Malcolm Moore Financial Times
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Google has ordered 6 to 7 small modular nuclear reactors from Kairos to provide electricity for its data centers. The reactors are cooled by molten fluoride salt as opposed to water and are the first new design approved in the US in 50 years.

Are tech companies turning to small modular reactors to power data centres?

Core argument: Google has ordered six to seven small modular nuclear reactors totaling 500MW from Kairos Power, becoming the first tech company to commission new nuclear power plants to supply low-carbon electricity to its data centres.

Google has ordered six to seven small modular nuclear reactors (SMRs) from Kairos Power, becoming the first tech company to commission new nuclear power plants to provide low-carbon electricity for its energy-hungry data centres. The tech company had placed an order for SMRs with a total capacity of 500 megawatts, helping Kairos, a seven-year-old start-up, to bring its first commercial reactor online by 2030 and additional reactors by 2035. Kairos, based in Alameda, California, has developed a reactor cooled by molten fluoride salt, rather than water. In December, it received a construction permit from the US Nuclear Regulatory Commission to build a 50MW demonstration reactor in Tennessee called Hermes.

Takeaways by Macro Roundup® AI

  1. Google has ordered six to seven small modular nuclear reactors totaling 500MW from Kairos Power, becoming the first tech company to commission new nuclear power plants to supply low-carbon electricity to its data centres.
  2. The Google order helps Kairos Power, a seven-year-old start-up based in Alameda, California, bring its first commercial reactor online by 2030, with additional reactors by 2035.
  3. Kairos Power has developed a reactor cooled by molten fluoride salt rather than water, and received a US Nuclear Regulatory Commission construction permit for a 50MW demonstration reactor in Tennessee called Hermes.

Related Articles:

  • 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.
  • Nuclear Power Is Hard. A Climate-Minded Billionaire Wants to Make It Easier — Start-up TerraPower has begun building a sodium-cooled nuclear reactor designed to be smaller and cheaper than conventional water-cooled plants, with completion expected no earlier than 2030 and the design not yet approved by the Nuclear Regulatory Commission. The company says the reactors should ultimately generate electricity at half the cost of traditional nuclear plants.
  • Plant Vogtle Unit 4 Begins Commercial Operation — The 1,114-megawatt Unit 4 reactor at Georgia's Plant Vogtle entered commercial operation, completing an 11-year expansion that brings the plant's capacity to nearly 5 gigawatts and makes it the largest US nuclear plant. No nuclear reactors are currently under construction in the United States, where nuclear supplies about 19% of electricity.

Friday, October 18, 2024

AI Summary. Using political donation-based ideology scores, the author finds the average ideology of directors and executives at America's largest companies shifted left over two decades, moving from a modest conservative tilt to roughly the center—a shift of about 42% of a standard deviation. Conservatives nonetheless remain common among corporate elites.

Reilly Steel Columbia Law School
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Between 2001-22 both CEOs and senior corporate managers shifted left ideologically. The gap between centrist CEOs and left leaning senior managers increased significantly. @reillysteel argues corporate America is not red or blue; “it is purple.”

Has the political ideology of corporate leaders shifted left?

Core argument: The average ideology of U.S. corporate directors and executives shifted left by about 42% of a standard deviation between 2001 and 2022, moving from a modest conservative tilt to roughly the middle, based on contribution-based CF Scores.

Tracking contribution-based measures of corporate director and executive ideology over time [CF Score], I find that between 2001 and 2022, the average ideology of these individuals moved meaningfully to the left, starting from a modest conservative tilt and eventually landing around the middle. Unlike measures based on voter registration or the proportion donated to each party, the CFScore measure allows for distinctions within parties—such that a donation made to a progressive Democrat like Alexandria Ocasio-Cortez would be treated differently from a donation to a conservative Democrat like Joe Manchin. This leftward shift is large relative to the ideological distribution of corporate elites, amounting to about 42% of a standard deviation. The average ideology of the people who run America’s largest companies has become considerably more liberal. Contrary to the perception that the left has taken over big business, however, conservatives still remain common in the ranks of corporate elites. Corporate America is thus neither red nor blue; it is purple.

Takeaways by Macro Roundup® AI

  1. The average ideology of U.S. corporate directors and executives shifted left by about 42% of a standard deviation between 2001 and 2022, moving from a modest conservative tilt to roughly the middle, based on contribution-based CF Scores.
  2. The CF Score measure distinguishes within parties, treating a donation to a progressive Democrat like Alexandria Ocasio-Cortez differently from one to a conservative Democrat like Joe Manchin, unlike measures based on voter registration or party shares of donations.
  3. Conservatives remain common among corporate elites despite the leftward shift, leaving corporate America neither red nor blue but purple.

Related Articles:

  • The Market for CEOs: Evidence from Private Equity — In a study of larger U.S. companies bought by private equity, more than 70% hired new chief executives, and over 75% of those were external hires, unlike public companies where internal promotions dominate. The authors estimate these executives' pay exceeds that at similar-sized public companies, suggesting an active market for chief executives.
  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.
  • The Road to A Political Realignment in American Politics — College-educated voters are now more likely to identify as Democrats while those without degrees back Republicans, with educational attainment increasingly correlated with views on abortion, LGBTQ+ rights, and religion's relationship to government. This sorting leaves most states politically uncompetitive, with eight states near the national average in education levels holding 97 electoral votes in play.

AI Summary. Research finds corporate leadership is becoming more politically polarised, with a rising share of companies whose leadership teams are overwhelmingly left-leaning or right-leaning. The researchers link this to higher rates of disruption when politically mismatched executives leave or are pushed out.

John Burn-Murdoch Financial Times
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.@jburnmurdoch shows that Silicon Valley’s politics recently became deeply polarized “into an increasingly outspoken conservative venture capital industry and a still left-leaning broader tech sector.”

Is corporate leadership becoming more politically polarized, disrupting executive teams?

Core argument: Steel and a separate team of US finance professors find that the share of companies with overwhelmingly left-leaning or right-leaning leadership teams is rising, pointing to polarisation rather than a single leftward shift.

The political transformation of the corporate world has not been a single directional shift: polarisation is also increasing. Both Steel and a separate team of US finance professors find that the share of companies with overwhelmingly left-leaning or right-leaning leadership teams is rising, leading to increased rates of disruption when political misfits leave or are pushed out. The recent splintering of Silicon Valley into an increasingly outspoken conservative venture capital industry and a still left-leaning broader tech sector appears emblematic of this wider trend.

Takeaways by Macro Roundup® AI

  1. Steel and a separate team of US finance professors find that the share of companies with overwhelmingly left-leaning or right-leaning leadership teams is rising, pointing to polarisation rather than a single leftward shift.
  2. Both research efforts tie rising political homogeneity in leadership teams to higher rates of disruption when politically mismatched executives leave or are pushed out.
  3. The splintering of Silicon Valley into an increasingly outspoken conservative venture capital industry and a still left-leaning broader tech sector appears emblematic of wider corporate polarisation.

Related Articles:

  • The Political Transformation of Corporate America, 2001-2022 — Using political donation-based ideology scores, the author finds the average ideology of directors and executives at America's largest companies shifted left over two decades, moving from a modest conservative tilt to roughly the center—a shift of about 42% of a standard deviation. Conservatives nonetheless remain common among corporate elites.

AI Summary. A 20% down payment on a median-priced home now costs 83% of a year's income for a typical family ready to buy, up from 65% eight years earlier, according to Bloomberg calculations. Child care has risen from about a quarter of that family's weekly income to more than a third, while college costs have fallen as a share of income.

Shawn Donnan and Claire Ballentine Bloomberg
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Bloomberg finds that the price of the American Dream has risen sharply. In 2016 childcare cost the mean family ~ 25% of weekly income; it’s risen to over 33%. A 20% down payment on a median-priced home cost 65% of annual income in 2016, vs. 83% now.

Has the cost of middle-class life risen faster than incomes?

Core argument: A 20% down payment on a median-priced U.S. home costs 83% of a year's income for the typical family ready to buy, up from 65% on the eve of the 2016 election, according to Bloomberg calculations.

The standard 20% down payment on a median-priced home now costs 83% of a year’s income for the typical family ready to buy a home, up from 65% on the eve of the 2016 election, according to Bloomberg calculations. Buying a new car takes almost two extra weeks of work for the median household compared to eight years ago. Child care then cost the same family about a quarter of its weekly income. Now it swallows up more than a third. The cost of attending college has gone down as a share of income in recent years, a median household can expect to pay 75% of its annual income for a private college and more than third for a public in-state university.

Takeaways by Macro Roundup® AI

  1. A 20% down payment on a median-priced U.S. home costs 83% of a year's income for the typical family ready to buy, up from 65% on the eve of the 2016 election, according to Bloomberg calculations.
  2. Child care consumes more than a third of the typical family's weekly income, up from about a quarter eight years earlier, and buying a new car takes the median household almost two extra weeks of work.
  3. College costs have declined as a share of income in recent years, with a median household expecting to pay 75% of its annual income for a private college and more than a third for a public in-state university.

Related Articles:

  • The State of the American Middle Class — US households in every income tier had higher inflation-adjusted incomes in 2022 than in 1970, with median income rising 55% for lower-income households, 60% for middle-class households, and 78% for upper-income households. The gap widened: upper-income median income was 7.3x that of lower-income households, up from 6.3x.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Fiscal Influences on Inflation in OECD Countries, 2020-2022 — Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.

AI Summary. Americans aged 65 and older per 100 prime-working-age Americans (20–49) rose from about 27 in 2000 to 39 in 2020 and is projected to reach 54 by 2040, with slower workforce growth as fertility declines. Labor scarcity could raise wages for less-educated workers, but rapid investment in robots has not been matched by investment in workers' skills.

Daron Acemoglu New York Times
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In 2000, there were 27 Americans aged 65+ for every 100 prime-age workers (20-49). In 15 years, there will be 54. Acemoglu argues that investment in human capital is needed to take on new tasks, including technical and advanced precision work.

How will population aging and labor scarcity reshape American wages?

Core argument: Americans over 65 per 100 prime-working-age Americans (20–49) rose from about 27 in 2000 to 39 in 2020 and are projected to reach 54 by 2040, changes driven mostly by declining fertility.

In 2000, there were about 27 Americans above the age of 65 for every 100 Americans of prime working age (between the ages of 20 and 49). By 2020, this number had increased to 39. By 2040, it will have risen to 54. Because these changes are driven mostly by a decline in fertility, the U.S. workforce will also soon begin to grow more slowly. If immigration into the United States is reduced this will only contribute to the aging problem. There’s a scenario in which a shortage of labor could be a boon for the U.S. economy. Wages for lower-educated workers stagnated or even declined between 1980 and the mid-2010s. Scarcity of labor can drive wages up, especially if combined with the right investments in both equipment and people. Alas, this isn’t what is happening in the United States. Investment in robots has increased rapidly, but it hasn’t been accompanied by adequate investments in people. The workforce remains unready for taking on new tasks, including technical and advanced precision work.

Takeaways by Macro Roundup® AI

  1. Americans over 65 per 100 prime-working-age Americans (20–49) rose from about 27 in 2000 to 39 in 2020 and are projected to reach 54 by 2040, changes driven mostly by declining fertility.
  2. The U.S. workforce will soon begin to grow more slowly because of declining fertility, and reduced immigration into the United States would contribute further to the aging problem.
  3. U.S. investment in robots has increased rapidly without adequate accompanying investment in people, leaving the workforce unready to take on new tasks, including technical and advanced precision work.

Related Articles:

  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.
  • 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.
  • A Data-Driven Case That AI Has Already Changed The U.S. Labor Market — 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.

AI Summary. The FBI has reported that a Chinese state-linked firm hacked 260,000 internet-connected cameras, routers, and other devices in the US and other Western nations, and US officials are assessing a breach of systems used for court-authorized wiretapping after Verizon, AT&T, and other broadband networks were compromised. A historian argues Chinese firms must assist state intelligence services on request.

Michael Cembalest J.P. Morgan
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Michael Cembalest argues a “Thucydides Cap” will limit Chinese stock market gains, “Geopolitics are more likely to negatively impact US investments in China in the years ahead than to surprise positively due to some kind of US-China detente.”

Does Chinese state-linked hacking limit the case for Chinese equities?

Core argument: The FBI disclosed that a Chinese state-linked firm hacked 260,000 internet-connected cameras, routers, and other devices in the US and other Western nations.

Consider the following: China is conducting espionage on an unprecedented scale. Last month, the FBI revealed that a Chinese state-linked firm hacked 260,000 internet-connected cameras, routers, and other devices in the US and other Western nations. US officials have launched an effort to understand the consequences of the latest Chinese hack which compromised systems the US government uses for court-authorized network wiretapping requests after Verizon, AT&T, and other broadband provider networks were breached. Chinese businesses are seen as inseparable from intelligence services. According to historian Calder Walton, Chinese businesses are required to work with its intelligence services whenever requested to do so, and these intelligence services are now “effectively silent partners in Chinese commerce with the outside world.”

Takeaways by Macro Roundup® AI

  1. The FBI disclosed that a Chinese state-linked firm hacked 260,000 internet-connected cameras, routers, and other devices in the US and other Western nations.
  2. US officials are assessing the consequences of a Chinese hack that compromised systems the US government uses for court-authorized network wiretapping requests, after Verizon, AT&T, and other broadband provider networks were breached.
  3. Historian Calder Walton says Chinese businesses are required to work with China's intelligence services whenever requested, and that those services are now "effectively silent partners in Chinese commerce with the outside world.".

Related Articles:

  • Behind Xi Jinping’s Pivot on Broad China Stimulus — Officials and advisers say China's near-term policy goal is not to massively stimulate demand but to head off a brewing financial crisis and stabilize the economy around a growth target of about 5%. Reports reaching Beijing describe a liquidity crunch in which cash-strapped local governments struggle to pay civil servants and contractors.
  • U.S. Officials Race to Understand Severity of China’s Salt Typhoon Hacks — Federal authorities are investigating breaches of Verizon, AT&T and Lumen networks attributed to Salt Typhoon, a hacking group tied to Chinese intelligence. Investigators believe the compromises may have given the hackers access to systems the U.S. government uses for court-authorized wiretapping requests, though the severity remains unclear.
  • China Is Rapidly Building Warships. Satellite Images Reveal The Scale — China's shipbuilding capacity now exceeds the United States' by such a margin that it can build more ships in a month than American yards build in a year, with a workforce estimated at nearly 5x the US level. Chinese yards handled more than 1,700 orders in a year, compared with fewer than five for American shipyards.

AI Summary. An election forecast model shows Donald Trump gaining, with Kamala Harris's national polling lead narrowing to 2.3 points from a peak of 3.5 points. The forecast describes the race as exceptionally close.

Nate Silver and Eli McKown-Dawson Silver Bulletin
Date Posted:

The latest @NateSilver538 update shows Harris’s national lead down to 2.3pp from a peak of 3.5pp on October 2; Nate is “confident this is real movement and not statistical noise.” The model gives Trump a 51.6% chance of winning the electoral college.

Is the presidential race narrowing to a near tie?

Core argument: Kamala Harris's lead in national polls has narrowed to 2.3 points, down from a peak of 3.5 points on October 2, according to the Silver Bulletin presidential election forecast.

Does Donald Trump have momentum in the race? Well, that’s a somewhat complicated question depending on what technically you mean by “momentum”. But he’s been gaining in our forecast, and had another good day today after cutting Harris’s lead to 2.3 points in national polls, down from a peak of 3.5 points on October 2. It remains an exceptionally close race, however.

Takeaways by Macro Roundup® AI

  1. Kamala Harris's lead in national polls has narrowed to 2.3 points, down from a peak of 3.5 points on October 2, according to the Silver Bulletin presidential election forecast.
  2. Donald Trump has been gaining in the Silver Bulletin forecast, which still describes the race as exceptionally close.

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