Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


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
Date Posted:
Is Database:
Database

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
Date Posted:

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
Date Posted:

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.

Wednesday, October 30, 2024

AI Summary. A survey of truck drivers finds 44% are very or somewhat worried about driverless trucks and 56% expect autonomous vehicles to dominate US roads in coming decades. Drivers most concerned about automation are more likely to intend further investment in trucking careers, except among those who correctly perceive community college as inexpensive.

Daniel Shoag, Michael Strain and Stan Veuger American Enterprise Institute
Date Posted:

A study of long-haul truck drivers finds that the 44% concerned about losing jobs to self-driving trucks are most likely to “double down” on investment in trucking, particularly when they overestimate the cost of retraining. @MichaelRStrain @stanveuger

How do truck drivers respond to the risk of automation?

Core argument: Surveyed truckers are split on automation risk, with 44% very or somewhat worried about driverless trucks and 56% not worried, while 56% believe autonomous vehicles will be the dominant vehicles on US roads in the coming decades.

We find that truckers have mixed views on the risk they face, with around half (44%) very or somewhat worried about driverless trucks and around half (56%) not. 56% believe that AVs will be the dominant vehicles on US roads in the coming decades. The respondents to our survey who are most concerned about automation are also the most likely to report intentions to invest in trucking as an occupation. This finding does not hold among drivers who are most familiar with the low costs of community college. This suggests that providing information on retraining can have large welfare consequences. Column 1 of Table 3 [shows] that respondents who both are very concerned about AVs and correctly perceive community college to be inexpensive are 39.8% less likely to invest more in their trucking career by seeking additional endorsements [qualifications such as the right to transport dangerous chemicals] relative to respondents who do not share both characteristics. The coefficient on the interaction term between concern and perceiving community college to be relatively cheap is large and negative. This report suggests that policymakers may want to focus on the decisions of workers in at-risk occupations before risks fully materialize.

Takeaways by Macro Roundup® AI

  1. Surveyed truckers are split on automation risk, with 44% very or somewhat worried about driverless trucks and 56% not worried, while 56% believe autonomous vehicles will be the dominant vehicles on US roads in the coming decades.
  2. Truckers most concerned about automation are the most likely to report intentions to invest further in trucking as an occupation, a pattern that does not hold among drivers most familiar with the low costs of community college.
  3. Respondents who are both very concerned about autonomous vehicles and correctly perceive community college to be inexpensive are 39.8% less likely to invest in their trucking career by seeking additional endorsements, suggesting that information on retraining can carry large welfare consequences.

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.
  • How AI & Robots are Smashing Economics, and Why It Matters — As artificial intelligence and robots make wages less responsive to employment conditions, the link between tight labor markets and inflation weakens, undermining central banks' inflation-targeting frameworks. The author argues central banks would then need far larger interest-rate moves to achieve the same effect, producing more volatile and less predictable outcomes.

AI Summary. Long-term US interest rates are rising even as markets price in five Federal Reserve rate cuts over the coming 12 months and oil prices fall, disconnecting long rates from those drivers. This pattern suggests long rates are being pushed up by emerging concerns about US fiscal sustainability.

Torsten Sløk Apollo
Date Posted:

The 10-year yield has decoupled from Fed expectations, and the term premium is rising. Torsten Sløk suggests long rates are moving higher due to “emerging worries about fiscal sustainability.”

Are fiscal worries pushing long-term interest rates higher?

Core argument: US long-term interest rates are rising even as markets price in five Federal Reserve rate cuts over the coming 12 months, a disconnect from Fed expectations.

US long rates are disconnecting from Fed expectations and oil prices. Despite the market still expecting five Fed cuts over the coming 12 months, long rates are moving higher. And despite oil prices falling, long rates are moving higher. This suggests that long rates are rising because of emerging worries about fiscal sustainability.

Takeaways by Macro Roundup® AI

  1. US long-term interest rates are rising even as markets price in five Federal Reserve rate cuts over the coming 12 months, a disconnect from Fed expectations.
  2. US long rates are moving higher despite falling oil prices, a break from their usual relationship.
  3. The disconnection of US long rates from both Fed expectations and oil prices suggests they are rising on emerging worries about fiscal sustainability.

Related Articles:

  • C’est la vie: Bond Vigilantes Are Back — 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.
  • 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. The authors estimate that inflation-adjusted employee compensation per person aged 16 or older remained 4.6% below the linear trend established from early 2017 through late 2019. They attribute about three-fourths of that shortfall to lower real wages and the remainder to lower employment.

Kevin Hassett and Casey Mulligan Wall Street Journal
Date Posted:

In Q2 of 2024, real per income capita from work was 4.6% under the 2017-2019 trend. 75% of the shortfall is due to slower real wage growth rather than reduced employment and work hours. @caseybmulligan

How far has real compensation per person fallen below trend?

Core argument: Real employee compensation per person aged 16 or older stood 4.6% below its 2017 Q1–2019 Q4 linear trend as of 2024 Q2, the most recent national accounts data.

The chart shows inflation-adjusted real employee compensation per person 16 or older. It is an index taking the value of 100 for the first quarter of 2017. Although we don’t know for sure what would have happened if Mr. Trump had begun a second term in 2021, our chart shows a linear trend from the first quarter of 2017 through the fourth quarter of 2019. The trend is a good model of what happened after the second full quarter of the pandemic into late 2021. Then inflation hit and employee compensation—and national income more broadly, which isn’t shown in the chart—couldn’t keep up. That’s when we began to see the deleterious effects of Mr. Biden’s policies. By the second quarter of 2024 (the most recent national accounts), real per capita income from work remained 4.6% below the trend. The 4.6% shortfall is due to both low employment and low real wages. The real-wage part accounts for three-fourths of the shortfall.

Takeaways by Macro Roundup® AI

  1. Real employee compensation per person aged 16 or older stood 4.6% below its 2017 Q1–2019 Q4 linear trend as of 2024 Q2, the most recent national accounts data.
  2. Low real wages account for three-fourths of the 4.6% shortfall in real per capita income from work, with low employment accounting for the remainder.
  3. The authors argue the pre-pandemic linear trend modeled actual compensation well from the second full pandemic quarter into late 2021, until inflation hit and employee compensation and national income could not keep up.

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.
  • 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.
  • 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%.

AI Summary. The International Energy Agency now estimates coal consumption in 2030 will be 6% higher than it projected a year earlier — an increase equal to Japan's entire coal use — and above 2010 levels. Fossil fuels met two-thirds of the recent global increase in energy demand.

Javier Blas Bloomberg
Date Posted:
Is Database:
Database

The International Energy Agency has raised their 2030 forecast for global coal consumption by 6% vs. last year’s forecast. Fossil fuels represented ⅔ of the increase in energy demand in 2023 vs. 2022. @JavierBlas

Is coal consumption rising even as clean power expands?

Core argument: The IEA now estimates 2030 coal consumption 6% higher than its estimate a year ago, an increase equivalent to adding the consumption of Japan, the world's fourth-largest coal burner.

Coal consumption in 2030 is now estimated 6% higher than only a year ago. That may sound small, but it amounts to adding the equivalent of the consumption of Japan, the world’s fourth-largest coal burner. By 2030, the IEA now believes coal consumption will remain higher than it was back in 2010. Two-thirds of the total increase in energy demand in 2023 was met by fossil fuels, according to the IEA. Yes, clean power is the future. For now, however, fossil fuels remain the present — especially when electricity demand is accelerating this fast. Between 2023 and 2030, electricity consumption is expected to grow six times faster than total energy demand, compared with two times faster in the 2010-2023 period and 1.4 times faster in 2000-2010. According to the IEA, the equivalent of the electricity use of the world’s 10 largest cities is being added to global demand each year.

Takeaways by Macro Roundup® AI

  1. The IEA now estimates 2030 coal consumption 6% higher than its estimate a year ago, an increase equivalent to adding the consumption of Japan, the world's fourth-largest coal burner.
  2. The IEA projects coal consumption in 2030 will remain above its 2010 level, and reports that fossil fuels met two-thirds of the total increase in energy demand in 2023.
  3. Electricity consumption is expected to grow six times faster than total energy demand between 2023 and 2030, versus two times faster in 2010–2023 and 1.4 times faster in 2000–2010.

Related Articles:

  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.
  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • The Climate Short: Hedge Funds Pile Up Huge Bets Against Green Future — An analysis of positions voluntarily disclosed by roughly 500 hedge funds found more funds are net short batteries, solar, electric vehicles and hydrogen than long them, while more are net long fossil fuels than short oil, gas and coal. This comes despite large green stimulus programs in the US, Europe and China.

AI Summary. The US national average gasoline price of $3.13/gallon is 37 cents below a year earlier, and crude oil fell about 6% in a week after Israel's retaliatory strikes on Iran spared energy facilities. Adjusted for inflation, that price is lower than in 78% of the past two decades, and the average production worker needs 6.4 minutes of work per gallon.

Ryan Cummings and Neale Mahoney Briefing Book
Date Posted:

Adjusted for inflation, the mean national gas price, $3.13/gal, is lower than it has been for 78% of the past 20 years. @nealemahoney @weakinstrument

Are gasoline prices low relative to wages and inflation?

Core argument: Crude oil prices fell 6%, roughly $5, this week after Israel avoided striking Iranian energy facilities in its retaliatory strikes Friday night.

Crude oil prices plunged 6% (or roughly five dollars) this week after Israel avoided hitting Iranian energy facilities in retaliatory strikes on Friday night. At $3.13/gallon, the national average gas price is down 37 cents from last year. Gas prices are below $3.00/gallon in battleground states of Georgia, North Carolina, and Wisconsin and have declined by more than 50 cents from last year in Arizona and Nevada. Adjusted for inflation or wages, current gas prices are lower than they’ve been for most of the last 20 years. At $3.13/gal, the real (inflation-adjusted) gas price is lower than it has been for 78% of the last 2 decades. Today, the average worker (production and nonsupervisory) needs only 6.4 minutes on the job to earn enough to buy a gallon of gas, less time than 84% of the last 20 years.

Takeaways by Macro Roundup® AI

  1. Crude oil prices fell 6%, roughly $5, this week after Israel avoided striking Iranian energy facilities in its retaliatory strikes Friday night.
  2. The U.S. national average gas price of $3.13/gallon is down 37 cents from a year earlier, with prices below $3.00/gallon in Georgia, North Carolina, and Wisconsin and down more than 50 cents in Arizona and Nevada.
  3. Adjusted for inflation, the $3.13/gallon gas price is lower than it has been for 78% of the last two decades, and the average production and nonsupervisory worker needs only 6.4 minutes of work per gallon, less than 84% of the last 20 years.

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  • The Shale Revolution Helped Make America’s Economy Great — The US produces roughly 13mm barrels per day of crude oil and 3bn cubic metres per day of natural gas, making it the world's largest producer of both. Its need for foreign crude began declining in 2008, and it became a net energy exporter in 2019, recording a net energy surplus of about $65bn last year.
  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.

AI Summary. Research by Bloomberg Economics and Bloomberg Intelligence finds that of 13 key technologies tracked, China has reached global leadership in five and is catching up in seven others, with clear leads in electric vehicles, automotive software and lithium battery technology. China still struggles to develop manufacturing processes for advanced semiconductors, the main focus of US export controls.

Bloomberg Staff Bloomberg
Date Posted:

A Bloomberg analysis finds that after a decade the China 2025 industrial policy initiative has largely been a success: Chinese firms are on the technological frontier in 5 of 13 key sectors including drones, EVs and lithium battery technology.

Are US efforts to contain China's technology advances working?

Core argument: Of 13 key technologies tracked by Bloomberg Economics and Bloomberg Intelligence, China has reached a global leadership position in five and is catching up fast in the other seven, a decade after Made in China 2025 was unveiled.

New research by Bloomberg Economics and Bloomberg Intelligence shows that Made in China 2025 — an industrial policy blueprint unveiled a decade ago to make the nation a leader in emerging technologies — has largely been a success. Of 13 key technologies tracked by Bloomberg researchers, China has achieved a global leadership position in five of them and is catching up fast in seven others. Although China is still struggling to develop manufacturing processes for advanced semiconductors — the main focus of US export controls — it now has a clear lead in EVs, automotive software and lithium battery technology, according to Bloomberg Intelligence.

Takeaways by Macro Roundup® AI

  1. Of 13 key technologies tracked by Bloomberg Economics and Bloomberg Intelligence, China has reached a global leadership position in five and is catching up fast in the other seven, a decade after Made in China 2025 was unveiled.
  2. Bloomberg Intelligence finds China holds a clear lead in electric vehicles, automotive software and lithium battery technology.
  3. China is still struggling to develop manufacturing processes for advanced semiconductors, the main focus of US export controls.

Related Articles:

  • The Surprising Resilience of Globalization: An Examination of Claims of Economic Fragmentation — China's exports have grown faster than its own economy, rising by about 3 percentage points as a share of its GDP, with a nearly $1tn surge over four years. Measured against the GDP of its trading partners, China's manufactured-goods surplus has increased by about three-quarters of a percentage point of world GDP to a record high.
  • Why Europe’s Car Crisis Is Mostly Made In China — 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'.
  • Can the World Make an Electric Car Battery Without China? — China dominates electric-vehicle battery supply chains, controlling 41% of global cobalt mining and the most lithium mining, and is projected to produce more than twice as many batteries as all other countries combined by 2030. It can build battery factories at nearly half the cost of North America or Europe.