Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “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
  • “…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 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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a 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
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, October 28, 2024

AI Summary. In an experiment randomly assigning preschool access and then randomly assigning elementary school classmates, the authors find that fade-out of preschool gains is linked to the share of classmates who also had preschool access. Each additional preschool classmate is estimated to raise cognitive skills by about 0.10 standard deviations.

John List and Haruka Uchida National Bureau of Economic Research
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List and Uchida find that the “fade-out effect” of early childhood education programs “is critically-linked to the share of classroom peers assigned to preschool access—with enough treated peers the classic fade-out effect is muted.” @Econ_4_Everyone @haruka__uchida

Do preschool classmates determine whether early education gains persist?

Core argument: Holding class size constant, one additional preschool-program classmate raises preschool children's cognitive skills by roughly 0.10 SD, linking the fade-out effect to the share of classroom peers assigned preschool access.

We first randomly assign preschool access to children, and then partner with the local school district to randomly assign the same children to classmates throughout elementary school. We find that the fade-out effect is critically-linked to the share of classroom peers assigned to preschool access. Preschool children benefit greatly from having other Preschool children in the same class. Holding constant the total number of students in class, one additional Preschool classmate significantly increases cognitive skills by roughly 0.10 SD. Immediately after program implementation, Preschool CHECC children had 0.13 standard deviations higher cognitive skills than control children (leftmost bar of Figure 3). Second, turning to the impacts of Preschool on cognitive skills during elementary school, the two rightmost bars of Figure 3 reveal that during grades 2-5, when Preschool children are exposed to many Preschool classmates, they have roughly 0.26 standard deviations higher cognitive skills than control children.

Takeaways by Macro Roundup® AI

  1. Holding class size constant, one additional preschool-program classmate raises preschool children's cognitive skills by roughly 0.10 SD, linking the fade-out effect to the share of classroom peers assigned preschool access.
  2. Immediately after program implementation, children randomly assigned preschool access scored 0.13 SD higher on cognitive skills than control children.
  3. During grades 2–5, when preschool children are exposed to many preschool classmates, they score roughly 0.26 SD higher on cognitive skills than control children.

Related Articles:

  • Perry Preschool at 50: What Lessons Should Be Drawn and Which Criticisms Ignored? — The authors argue that studies of the Perry Preschool and Carolina Abecedarian early childhood programs yield general lessons about quality resting on adult-child interactions rather than credentials or formal curricula. Across both programs, a one standard deviation increase in measured parenting is associated with a half standard deviation increase in midlife skills.
  • Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children — The authors estimate that Finland's Home Care Allowance, which pays mothers to stay home with children under three, reduces maternal employment in the short and long run and is associated with lower early childhood cognitive test scores, less academic high school enrollment, and more youth crime.

AI Summary. France's government bond yield spread widened by 0.29 percentage points, more than Italy's 0.22 and Spain's 0.2, which the authors attribute to political uncertainty created by the calling of a snap national election. The French spread has remained elevated, while the Italian and Spanish spreads have come down.

Jesper Rangvid Rangvid's Blog
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Jesper Rangvid notes French politics are impacting yields suggesting bond vigilantes may be returning. “The developments serve as a cautionary signal for other nations with similarly unsustainable debt paths, including the US.”

Does political uncertainty raise a country's bond yield spread?

Core argument: France's yield spread widened by 0.29 percentage points between 7 June and 14 June 2024, exceeding Italy's 0.22 points and Spain's 0.2 points, following the 9 June conclusion of the European Parliament elections.

We see a sharp rise in all yield spreads following 9 June 2024, the final day of the 2024 European Parliament elections. Yet French yields increased the most. From the Friday preceding the elections (7 June) to the following Friday (14 June), the French yield spread widened by 0.29 percentage points, compared to 0.22 points for Italy and 0.2 points for Spain. The primary reason for this larger increase in French yields was President Macron’s announcement of a general election in France in response to the European Parliament election results, introducing further uncertainty to France’s political landscape. As Figure 1 indicates, the French yield spread has remained elevated since then, while the Italian and Spanish spreads have come down.

Takeaways by Macro Roundup® AI

  1. France's yield spread widened by 0.29 percentage points between 7 June and 14 June 2024, exceeding Italy's 0.22 points and Spain's 0.2 points, following the 9 June conclusion of the European Parliament elections.
  2. The authors attribute France's larger yield increase primarily to President Macron's announcement of a general election in response to the European Parliament results, which introduced further uncertainty to France's political landscape.
  3. The French yield spread has remained elevated since the June 2024 European Parliament elections, while Italian and Spanish spreads have come down.

Related Articles:

  • US Interest Burden Hits 28-Year High, Escalating Political Risk — US Treasury net interest payments reached $882bn in a fiscal year, equal to 3.06% of gross domestic product — the highest ratio since 1996 — and about 18% of federal revenues. The net interest bill exceeded Defense Department spending on military programs for the first time.
  • The Fiscal Impact of the Harris and Trump Campaign Plans — The national debt stands at 99% of Gross Domestic Product and is projected to reach 125% by 2035 under current law, exceeding the record 106% share set in 1946 within three years. Central estimates put debt at 134% of GDP under the Harris plan and 143% under the Trump plan.
  • 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.

AI Summary. The national debt stands at 99% of Gross Domestic Product and is projected to reach 125% by 2035 under current law, exceeding the record 106% share set in 1946 within three years. Central estimates put debt at 134% of GDP under the Harris plan and 143% under the Trump plan.

CRFB Staff Committee for a Responsible Federal Budget
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An updated @BudgetHawks forecast shows a rise in federal debt by 2035 from 125% of GDP under current law to 134% of GDP under Harris’s plan and 143% of GDP under Trump’s. The point estimates are flanked by wide confidence intervals. @MarcGoldwein

How much would rival campaign plans raise debt relative to GDP?

Core argument: Under the authors' central estimates, Trump's plan would push federal debt to 143% of GDP by FY 2035, an increase of 18% of GDP 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 percent 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 134% of GDP in FY 2035 – a 9% of GDP increase. We estimate President Trump’s plan would push debt to 143 percent of GDP in 2035 – an 18% of GDP increase.

Takeaways by Macro Roundup® AI

  1. Under the authors' central estimates, Trump's plan would push federal debt to 143% of GDP by FY 2035, an increase of 18% of GDP over the CBO current-law baseline of 125%.
  2. Harris's plan would raise debt to 134% of GDP in FY 2035 under the authors' central estimates, a 9% of GDP increase relative to current law.
  3. Federal debt stands at 99% of GDP and is projected to exceed its 1946 record of 106% within three years, rising from 102% at the start of FY 2026 to 125% by the end of 2035 under CBO's current-law baseline.

Related Articles:

  • The Fiscal Impact of the Harris and Trump Campaign Plans — 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%.
  • Assessing the Budgetary Effects of the Presidential Candidates’ Proposals — An analysis of the two US presidential candidates' fiscal plans finds neither has made deficit reduction a priority, with the Democratic candidate's acceptance of tax increases on higher earners giving more room to fund policy goals. The Republican candidate's proposed offsets—tariffs and cuts to clean energy subsidies—are described as insufficient to cover the cost of his tax plans.
  • 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.

AI Summary. Analysis argues higher fiscal spending implies stronger nominal growth and higher inflation, contributing along with stronger-than-expected economic data to a higher expected path of Federal Reserve policy. The UK's violent rise in yields and currency depreciation after announcing fiscal expansion shows wealthy countries can face the emerging-market-style fiscal limits the analysis sees eventually reaching the US.

Joseph Wang Fed Guy Blog
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.@FedGuy12 cites online betting data and the 2-year yield and argues Treasury yields are rising as investors anticipate higher fiscal deficits in a second Trump term. Until a fiscal crisis arrives he expects that big deficits will boost equities.

Can wealthy countries hit emerging-market-style limits on fiscal expansion?

Core argument: The analysis argues a Trump victory would bring higher fiscal spending, implying stronger nominal growth and higher inflation, with the rising probability of a Trump win, alongside stronger than expected economic data, contributing to a higher expected path of Fed policy.

Analysis suggests that a Trump victory would bring even higher levels of fiscal spending, which implies stronger nominal growth and higher inflation. Along with stronger than expected economic data, the rising probability of a Trump win appears to be contributing to shift higher in the expected path of Fed policy. The UK discovered the limits of its fiscal policy without warning, and that moment will eventually arrive for the U.S. The former superpower saw its yields rise and currency depreciate violently in late 2022 after announcing plans for further fiscal expansion. That is a reaction often seen in emerging markets when investors flee the country over fiscal concerns. While fiscal crises are typically associated with emerging markets, it can also happen to wealthier countries that behave like developing countries. That is inevitably in the future of the U.S., but until then big deficits will be risk positive.

Takeaways by Macro Roundup® AI

  1. The analysis argues a Trump victory would bring higher fiscal spending, implying stronger nominal growth and higher inflation, with the rising probability of a Trump win, alongside stronger than expected economic data, contributing to a higher expected path of Fed policy.
  2. The UK's late-2022 announcement of further fiscal expansion was followed by violently rising yields and a depreciating currency, a reaction the analysis says is often seen in emerging markets when investors flee over fiscal concerns.
  3. The analysis holds that a fiscal crisis lies inevitably in the future of the U.S., since wealthier countries behaving like developing ones can face one, but until then big deficits will be risk positive.

Related Articles:

  • The Fiscal Impact of the Harris and Trump Campaign Plans — The national debt stands at 99% of Gross Domestic Product and is projected to reach 125% by 2035 under current law, exceeding the record 106% share set in 1946 within three years. Central estimates put debt at 134% of GDP under the Harris plan and 143% under the Trump plan.
  • 10 Facts About the US Treasury Market: Monitoring Demand For US Government Debt — US government debt is projected to rise from 100% to 200% of GDP, with deficits above $1tn annually over the next decade and $9tn of debt maturing within 12 months. Debt servicing costs equal 12% of total government outlays, and interest payments have doubled from about $1bn per day before the pandemic to nearly $2bn per day.
  • 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.

AI Summary. Research finds that profitability varies more among companies within the same industry than across industries, so a company's long-run performance is not primarily determined by which industry it operates in. Even in low-profitability industries, some companies earn returns well above their cost of capital.

Greg Obenshain Verdad
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.@GregObenshain cites a @mjmauboussin analysis that finds profitability varies more within industry than across industries, and argues “Industry is not destiny. Great companies can emerge from mediocre industries.”

Does a company's industry determine its long-run profitability?

Core argument: Mauboussin's study shows that profitability varies more within industries than across them, indicating that a company's long-run fate is not primarily determined by the industry it operates in.

Mauboussin’s study includes a chart that is difficult to unsee once you’ve seen it. This chart shows that profitability varies more within industry (the vertical bars) than across industries (the dots). Over the long run, the fate of a company is not primarily determined by its industry—a finding consistent with Chicago school research from the 1980s that dealt a death blow to structure-conduct-performance theory in antitrust law. Industries with higher overall profitability have more companies that are profitable, but even within industries with low profitability, there are still companies that have returns well above the cost of capital and some companies that have profitability substantially above. Industry is not destiny. Great companies can emerge from mediocre industries.

Takeaways by Macro Roundup® AI

  1. Mauboussin's study shows that profitability varies more within industries than across them, indicating that a company's long-run fate is not primarily determined by the industry it operates in.
  2. Even within low-profitability industries, Mauboussin finds companies earning returns well above the cost of capital, some substantially above, so great companies can emerge from mediocre industries.
  3. The finding that industry is not destiny is consistent with Chicago school research from the 1980s that dealt a death blow to structure-conduct-performance theory in antitrust law.

Related Articles:

  • Measuring the Moat: Assessing the Magnitude and Sustainability of Value Creation — Analysis of returns on invested capital by industry from 1963 to 2023 finds that variation in value creation within industries exceeds variation across industries, with every industry containing both value-creating and value-destroying companies. Adjusting returns for intangible investment pulls the highest and lowest results toward the middle, narrowing the distribution.
  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. An analysis of census and American Community Survey microdata compares the average income of full-time workers in specific demographic groups and occupations with the national average for full-time workers, showing how each group's relative economic standing has shifted over the decades.

Emily Badger, Robert Gebeloff and Aatish Bhatia New York Times
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In 1980 white non-college men employed full-time earned 7% more than the average full-time US worker. In 2022, their inflation-adjusted income has remained relatively flat, and they earned less than women with a college degree.

How have demographic groups' incomes shifted relative to the national average?

Core argument: The Upshot measured the relative economic standing of demographic groups and occupations using income microdata from the decennial census and American Community Survey for 1980, 1990, 2000, and the 2010 and 2022 five-year samples.

To calculate the relative economic standing of various demographic groups and workers over time, The Upshot analyzed income reported in microdata from the decennial census and American Community Survey for the years 1980, 1990, 2000, and the 2010 and the 2022 five-year sample. The average full-time worker benchmark shown is the average personal income of full-time workers in America who worked at least 50 weeks and 35 hours per week in the previous year. Relative incomes for each demographic group or occupation are calculated by comparing the average income of full-time workers in that group to the national benchmark. A result of 1 represents a group with an average income comparable to the average full-time worker nationwide. A higher figure represents a group earning more on average than the typical full-time American worker; a lower number is a group earning less.

Takeaways by Macro Roundup® AI

  1. The Upshot measured the relative economic standing of demographic groups and occupations using income microdata from the decennial census and American Community Survey for 1980, 1990, 2000, and the 2010 and 2022 five-year samples.
  2. The Upshot's benchmark is the average personal income of American full-time workers who worked at least 50 weeks and 35 hours per week in the prior year, with each group's average income compared to that figure.
  3. A ratio of 1 in The Upshot's analysis marks a group earning about the same as the average full-time American worker, while higher values indicate groups earning more and lower values groups earning less.

Related Articles:

  • Understanding Trends in Worker Pay over the Past 50 Years — Productivity growth has been unequal across industries, across firms within industries, and across workers within firms, slowing growth in both the productivity and the pay of the median worker. The authors argue that working- and middle-class men earlier received "breadwinner rents"—pay above their marginal value to employers—and then endured slow wage growth as women's workforce participation rose.
  • 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%.
  • 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.

AI Summary. Polling finds men aged 18 to 24 are far less likely to identify as feminist and liberal than men aged 25 to 29, and young men hold very different views from their female peers about how the world treats women. The author argues this divergence leaves young men's worldview less aligned with Democrats' current values and priorities.

Daniel Cox The Liberal Patriot
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Trump will likely improve on his 2020 performance of 41% with young men 18-29. @dcoxpolls notes the political consequences of a growing divergence btw young men and women “will be immediate, but the societal repercussions may be felt for years.”

Are the youngest men drifting away from liberal politics?

Core argument: Donald Trump won 41% of men aged 18–29 in 2020, and the author expects him to improve on that showing in 2024, coming close to or winning an outright majority of young male voters.

I’m inclined to believe that Trump will do well with young men in 2024; certainly, he is likely to improve on his 2020 performance, when he won 41% of men aged 18 to 29. And if he does not win an outright majority of young male voters, he will probably come close. In a poll conducted by the Survey Center on American Life this fall, men ages 18 to 24 were far less likely to identify as feminist and liberal than those ages 25 to 29. Early partisan attachments are malleable, but there’s a good reason to believe that the worldview of young men is less aligned with the current values and priorities of Democrats. Compared to their female peers, young men have very different views about how the world treats women. Regardless of the election’s outcome, the trajectories of young men and women appear less aligned than perhaps they have ever been. The political consequences of this growing divergence will be immediate, but the societal repercussions may be felt for years.

Takeaways by Macro Roundup® AI

  1. Donald Trump won 41% of men aged 18–29 in 2020, and the author expects him to improve on that showing in 2024, coming close to or winning an outright majority of young male voters.
  2. In a Survey Center on American Life poll, men aged 18–24 were far less likely to identify as feminist and liberal than men aged 25–29.
  3. The author argues that the trajectories of young men and women appear less aligned than perhaps ever before, with young men holding very different views from their female peers about how the world treats women.

Related Articles:

  • America’s Young Men Are Falling Even Further Behind — 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%.
  • The Politics of Progress and Privilege: How America’s Gender Gap Is Reshaping the 2024 Election — Survey data show 35% of Americans say the term "feminist" describes them somewhat or very well, down from 51% earlier. Women are more likely than men to identify as feminist (42% vs 27%), with the widest gap among those age 18–29, where 55% of women but 31% of men claim the label.
  • 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.

Tuesday, October 29, 2024

AI Summary. Multi-century data on short-maturity real interest rates show consistent reversion toward a long-run trend, relatively fast adjustment, and few structural breaks, suggesting caution about claims of a break in short-term real rate behavior. The authors find term spreads secularly rising while inflation volatility trends downward, driven by faster declines in short-maturity yields.

Kenneth Rogoff, Barbara Rossi and Paul Schmelzing National Bureau of Economic Research
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Unlike short recent time series, three centuries of data on private short-term rates in the U.S. and U.K. show that real r* reverts to a smoothly declining trend following shocks and term premia have risen as inflation volatility fell. @paul_schmelzing

Do very long-run data show continuity in short-term real interest rates?

Core argument: Multi-century data on short-maturity real interest rates show strong gravitation toward a long-run trend, relatively fast adjustment speeds, and few structural breaks, results the authors find survive out-of-sample tests.

We analyze empirical evidence on long-run samples of short-maturity real interest rates as well as term spreads based on multi-century data. We find strong and consistent evidence of [gravitation towards the long-run trend] in long horizon series, relatively fast adjustment speeds, and a paucity of structural breaks – results that survive out of sample tests. The use of very long-run data offers a fresh perspective for ongoing monetary policy debates surrounding r*, and also provides a crucial missing link to reconstructing the long-run properties of term spreads. On balance and against limited post-COVID data, our evidence suggests caution on the idea of a break in short-term real interest rate behavior and instead points to elements of continuity over very long time periods. Relatedly, we show that term spreads are secularly rising while inflation volatility trends in the exact opposite direction – a finding questioning the emphasis of influential term structure models. The faster decline in short-maturity yields [not a rise in long yields] accounts for rising term premia.

Takeaways by Macro Roundup® AI

  1. Multi-century data on short-maturity real interest rates show strong gravitation toward a long-run trend, relatively fast adjustment speeds, and few structural breaks, results the authors find survive out-of-sample tests.
  2. The authors argue that limited post-COVID data warrants caution about a break in short-term real interest rate behavior, pointing instead to continuity over very long time periods and offering a fresh perspective on r* debates.
  3. Term spreads are secularly rising while inflation volatility trends in the opposite direction, and the authors attribute rising term premia to a faster decline in short-maturity yields rather than a rise in long yields.

Related Articles:

  • Long-Run Trends In Long-Maturity Real Rates, 1311–2022 — Analyzing long-maturity real interest rates across eight advanced economies over seven centuries, the authors find rates are trend stationary with a persistent downward trend since the Renaissance. They argue demographic and productivity factors are not convincing drivers, finding population and output growth negatively predict real rates over long spans.
  • Global Natural Rates in the Long Run: Postwar Macro Trends and the Market-Implied r* in 10 Advanced Economies — Estimates for 10 advanced economies show natural interest rates have declined over the long run, though not steadily: as recently as the 1990s they ranged from 100 to 600 basis points, while by the end of the sample 4 of 10 countries had a negative natural rate and most others fell between 0 and 50 basis points.

AI Summary. Wage growth has exceeded inflation for more than two years after trailing it earlier, but measures disagree on cumulative gains: inflation-adjusted per-capita after-tax income is up more than 9% since the end of 2019, while median weekly earnings for full-time workers are up 2.5%.

Ben Casselman New York Times
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Real median weekly earnings for full-time employees are now 2.5% above their 2019 level but well below the pre-pandemic trend line. The New York Fed measure of mean pay for both full and part-time workers “has barely risen at all.” @bencasselman

Have wages outpaced inflation equally by every measure?

Core argument: Inflation-adjusted per-capita after-tax income, which covers the whole population and includes income beyond wages and salaries, has risen more than 9% since the end of 2019.

The various data sources agree on the broad strokes: Inflation outpaced wage growth for most workers in late 2021 and early 2022. But when inflation cooled, pay began to catch up. By pretty much any measure, wages have been rising faster than inflation for more than two years. But the sources differ substantially on where workers have ended up after that roller coaster ride. Per-capita after-tax income — a measure that includes not just wages and salaries but also other forms of income, and covers the whole population, not just people who are working — has risen more than 9% since the end of 2019 after being adjusted for inflation. But median weekly earnings — which count only what full-time workers make from their jobs — are up just 2.5% over the same period. And a measure from the Federal Reserve Bank of New York, one that includes both full- and part-time workers and uses average pay rather than median, has barely risen at all.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted per-capita after-tax income, which covers the whole population and includes income beyond wages and salaries, has risen more than 9% since the end of 2019.
  2. Median weekly earnings, which count only what full-time workers earn from their jobs, are up just 2.5% since the end of 2019, while a Federal Reserve Bank of New York measure using average pay for full- and part-time workers has barely risen.
  3. Inflation outpaced wage growth for most workers in late 2021 and early 2022, but by nearly any measure wages have risen faster than inflation for more than two years.

Related Articles:

  • Real Wage Growth: The Post-Pandemic Labor Market and Beyond — Real wage gains for non-managerial workers, roughly 80% of the private workforce, exceeded both those of all workers and projections based on pre-pandemic trends, which is attributed to labor market tightness and strong demand in low-wage sectors. This compression of wage inequality has persisted even as the labor market cooled and unemployment rose above 4%.
  • 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.
  • Has Pay Kept Up With Inflation? — All four measures of typical and aggregate pay have grown since 2019 when adjusted using the personal consumption expenditures price index, but show smaller increases in three measures and a decline in one when adjusted using the consumer price index. This pattern of smaller gains under consumer price index adjustment holds across time periods.

AI Summary. Volkswagen, which has never closed a factory in its German heartland, is weighing shutting three plants and cutting worker pay by 10% after warning on profits twice in a year. China has overtaken Japan as the world's largest car exporter, with Chinese manufacturers building advanced electric cars at costs said to be 30% below European rivals'.

Kana Inagaki, Edward White and Sarah White Financial Times
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Europe’s automotive sector, which employs almost 14mm people and accounts for 7% EU’s GDP, is facing a dual crisis of flat EU auto demand and increased Chinese competition both in the EU and in China.

Are Chinese carmakers' lower costs driving European automakers to close plants?

Core argument: Volkswagen, which has never closed a factory in its German heartland in its 87-year history, is considering shutting three and cutting workers' pay by 10%, according to plans disclosed by its works council head and not confirmed by the company.

In its 87-year history, Volkswagen has never closed a factory in its German heartland. It is now considering shutting three and cutting workers’ pay by 10%. The plans were disclosed at an employee meeting by the head of VW’s powerful works council and have not been confirmed by the company, which is due to report third-quarter results on Wednesday. But the world’s second-biggest car manufacturer, which also owns Audi, Škoda, and Seat, has already warned on profits twice this year and flagged the previously unthinkable step of closing factories in Germany. Last year, China replaced Japan as the world’s largest exporter of new cars as its own producers looked to diversify away from their overcrowded domestic market. Chinese manufacturers such as BYD, Nio, MG-owner SAIC, Great Wall, and Chery are building more advanced electric cars with costs 30% lower than those of European carmakers, according to Tavares and others. On Chinese showrooms, EVs are nearing price parity with petrol cars.

Takeaways by Macro Roundup® AI

  1. Volkswagen, which has never closed a factory in its German heartland in its 87-year history, is considering shutting three and cutting workers' pay by 10%, according to plans disclosed by its works council head and not confirmed by the company.
  2. Chinese manufacturers including BYD, Nio, SAIC, Great Wall, and Chery are building more advanced electric cars at costs 30% below those of European carmakers, according to Tavares and others, with EVs nearing price parity with petrol cars in Chinese showrooms.
  3. China replaced Japan as the world's largest exporter of new cars as its producers looked to diversify away from an overcrowded domestic market, while Volkswagen, the world's second-biggest carmaker, has warned on profits twice this year.

Related Articles:

  • EU to Impose Tariffs Up to 45% on Chinese Electric Vehicles — The European Union voted to impose tariffs of up to 45% on electric vehicles made in China, lasting five years, with China vowing to protect its companies. Chinese-made electric cars rose from around 3% to more than 20% of EU electric vehicle sales over three years, with Chinese brands accounting for about 8%.
  • China’s Auto Export Wave Echoes Japan’s in the ’70s — The shift from petroleum-fueled internal combustion vehicles to electric vehicles moves resource leverage from Persian Gulf oil producers to critical minerals, with China holding more than half of global processing capacity for lithium, cobalt, and graphite and about a third for nickel. Chinese companies have spent $4.5bn acquiring stakes in nearly 20 lithium mines, mostly in Latin America and Africa.
  • 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. The European Union's tariffs on Chinese electric vehicles are intended to buy time for European carmakers, which report falling behind Chinese competitors at home and abroad, to close the gap in technology and production volume. The author argues this gamble carries greater risk for the EU than the US, since Europe depends on maintaining export market share.

Joseph Politano Apricitas Economics
Date Posted:

Tariffs on autos are a greater risk for the EU than the US, as EU-based car manufacturers must maintain “significant market shares abroad just to prevent economic contraction from the loss of exports.” @JosephPolitano

Do tariffs on Chinese electric vehicles carry greater risk for Europe?

Core argument: The EU's tariffs on Chinese electric vehicles push a larger share of China's EV boom toward domestic consumption, exports to non-EU markets, or displacement of Chinese internal combustion vehicle consumption into ICE exports.

The EU’s new tariffs mean that a larger portion of China’s EV boom will have to be absorbed as either increased domestic consumption, increased EV exports to non-EU nations, or further displacement of Chinese ICE consumption into ICE exports. Right now, EU carmakers report they are dramatically falling behind the competition in both domestic and international markets—the gamble is that several years of trade restrictions or some negotiated settlement can buy time for European automakers to catch up to the technological edge and production volume of Chinese EVs. Yet that may make tariffs on Chinese EVs a much larger risk for the EU than they were for the US. The US has also long accepted high trade barriers to support a less-than-cutting-edge domestic car industry and still relies heavily on imports, meanwhile the EU must maintain significant market shares abroad just to prevent economic contraction from the loss of exports.

Takeaways by Macro Roundup® AI

  1. The EU's tariffs on Chinese electric vehicles push a larger share of China's EV boom toward domestic consumption, exports to non-EU markets, or displacement of Chinese internal combustion vehicle consumption into ICE exports.
  2. EU carmakers report falling behind Chinese competition in both domestic and international markets, and the tariff gamble is that trade restrictions or a negotiated settlement buy time to match Chinese EVs' technological edge and production volume.
  3. Tariffs on Chinese EVs may pose a larger risk for the EU than for the US, since the EU must maintain significant market shares abroad to prevent economic contraction from lost exports, while the US has long accepted high trade barriers and relies heavily on imports.

Related Articles:

  • EU to Impose Tariffs Up to 45% on Chinese Electric Vehicles — The European Union voted to impose tariffs of up to 45% on electric vehicles made in China, lasting five years, with China vowing to protect its companies. Chinese-made electric cars rose from around 3% to more than 20% of EU electric vehicle sales over three years, with Chinese brands accounting for about 8%.
  • 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. U.S. stocks of some air-defense missiles are running low, raising questions about the Pentagon's readiness for conflicts in the Middle East, Europe, and a potential Pacific war. The U.S. has launched dozens of Standard Missile interceptors in single months, while the producer can make at most a few hundred a year, shared with at least 14 allied buyers.

Nancy Youssef and Gordon Lubold Wall Street Journal
Date Posted:

Heavy use of the Pentagon’s inventory of air-defense missiles in wars in the Middle East and Ukraine raises risks of running down stockpiles needed for a contingency in the Western Pacific.

Is missile production keeping up with U.S. air-defense demand?

Core argument: The U.S. has launched more than 100 Standard Missiles since Hamas's October 2023 attack on Israel, including dozens in single months of the Middle East conflict, a pace production capacity can't keep up with, according to analysts and defense officials.

The U.S. is running low on some types of air-defense missiles, raising questions about the Pentagon’s readiness to respond to the continuing wars in the Middle East and Europe and a potential conflict in the Pacific. Standard Missiles are among the most common interceptors the U.S. has used to defend Israeli territory from Iranian missile attacks, and are critical for stopping Houthi attacks on Western ships in the Red Sea. The U.S. has launched more than 100 Standard Missiles since Hamas’s October 2023 attack on Israel. The U.S. had built up interceptor stocks over recent years, but the U.S. in any one month of the conflict in the Middle East has launched dozens of missiles, and production capacity can’t keep up, according to analysts and defense officials. RTX, producer of the Standard Missiles, can make a maximum of a few hundred a year, a U.S. defense official said. That production, however, isn’t all for the Pentagon, since at least 14 allies also buy Standard Missiles.

Takeaways by Macro Roundup® AI

  1. The U.S. has launched more than 100 Standard Missiles since Hamas's October 2023 attack on Israel, including dozens in single months of the Middle East conflict, a pace production capacity can't keep up with, according to analysts and defense officials.
  2. RTX can produce a maximum of a few hundred Standard Missiles a year, according to a U.S. defense official, and that output is not all for the Pentagon, since at least 14 allies also buy the missiles.
  3. Low stocks of some U.S. air-defense missiles raise questions about the Pentagon's readiness for the wars in the Middle East and Europe and a potential Pacific conflict, with Standard Missiles among the interceptors used to defend Israeli territory from Iranian attacks and ships in the Red Sea.

Related Articles:

  • The West Badly Needs More Missiles—But The Wait To Buy Them Is Years Long — Each Nasams air-defense system, made by Norway's Kongsberg, takes two years to build and new buyers face a multiyear backlog, prompting the plant to run 24-hour, seven-day shifts. The defense industry faces a prolonged labor crunch, struggling to find workers with niche skills willing to undergo lengthy security checks.
  • Japan, U.S. Form Working Group For Joint Missile Production — Japan and the United States agreed to create working groups on joint missile production, ship and aircraft repair, and supply chain resiliency as part of a defense industry cooperation forum. U.S. officials say Japan's engineering, industrial, and manufacturing capacity is a significant addition for the U.S. defense industrial base.
  • Defence Groups Bet Big On Drone-Destroying Laser Weapons — Major defense contractors including RTX, MBDA, and QinetiQ are investing heavily in high-energy laser weapons to destroy drones, a technology long regarded as science fiction. Britain's Ministry of Defence says its DragonFire laser will be deployed on Royal Navy ships five years ahead of schedule, firing at roughly £10 a shot.

AI Summary. Research group Hurun reports China's number of dollar billionaires fell 36% from a peak of 1,185 to 753 over three years, with a 16% drop in the latest year. The group attributes the decline to government crackdowns, weakness in parts of the economy and depressed equity markets.

Joe Leahy Financial Times
Date Posted:

Over the past three years, the number of Chinese dollar billionaires has fallen by 36%, according to data from research group Hurun. During that period the renminbi lost 10% against the dollar.

Is China's billionaire count shrinking as its economy weakens?

Core argument: China's count of dollar billionaires has fallen 36% from a 2021 peak of 1,185 to 753, according to research group Hurun, amid government crackdowns, weakness in parts of the economy and depressed equity markets.

The number of China’s dollar billionaires has fallen by more than a third in the past three years, according to a “rich list” compiled by research group Hurun, as government crackdowns, weakness in parts of the economy and depressed equity markets take their toll. Since hitting a peak of 1,185 in 2021, Hurun said the number of dollar billionaires had been reduced to 753, with the 36% decline exceeding a 10% fall in the renminbi’s value against the dollar over the same period. In the past year alone, the number of dollar billionaires in China declined by 16%, when the renminbi depreciated only 2.5% against the dollar.

Takeaways by Macro Roundup® AI

  1. China's count of dollar billionaires has fallen 36% from a 2021 peak of 1,185 to 753, according to research group Hurun, amid government crackdowns, weakness in parts of the economy and depressed equity markets.
  2. The 36% three-year drop in China's dollar billionaires exceeds the 10% fall in the renminbi against the dollar over the same period, according to Hurun.
  3. China's dollar billionaire count fell 16% in the past year, while the renminbi depreciated 2.5% against the dollar, according to Hurun.

Related Articles:

  • China to See Biggest Millionaire Exodus in 2024 as Many Head to U.S. — China is projected to see a record 15,200 high-net-worth individuals — those with at least $1m in assets — leave the country, the world's largest such outflow, according to a Henley & Partners report. The prior year's 13,800 departures went mostly to the US, Canada, and Singapore.
  • Mapping Chinese Capital Flight via the Sinaloa Cartel — China’s official balance-of-payments data show a large gap between its customs and foreign-exchange agencies’ estimates of the goods trade balance, and reported returns on Chinese foreign assets have broken from their historical relationship with the 5-year US Treasury yield despite central banks raising interest rates. The author argues both anomalies are consistent with unrecorded capital flight.
  • 2023 Letter — Rising numbers of Chinese nationals are being apprehended at the US-Mexico border, with US officers encountering around 1,000 in one month early in the year and nearly 5,000 by November. Most Chinese emigrants leave through legal means, going primarily to Singapore, Japan, and Thailand.