Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Monday, December 23, 2024

AI Summary. The authors model artificial intelligence in the knowledge economy and find that non-autonomous AI acting only as a co-pilot tends to benefit the least knowledgeable workers most, while autonomous AI that can also act as a co-worker primarily benefits the most knowledgeable. Job-posting evidence shows declines in low-knowledge white-collar postings alongside increases in high-knowledge roles.

Enrique Ide and Eduard Talamàs Arxiv
Date Posted:

Enrique Ide and Eduard Talamàs model the transition of AI from a “co-pilot” giving helpful advice to an autonomous “co-worker” generating useful output, and argue that autonomous AI will primarily benefit the most knowledgeable individuals.

Does AI autonomy determine which workers gain from it?

Core argument: Non-autonomous AI, limited to acting as a co-pilot advising workers, benefits the least knowledgeable individuals the most, while autonomous AI, which can also function as a co-worker, primarily benefits the most knowledgeable.

The impact of AI on labor outcomes critically depends on its autonomy. Autonomous AI can function both as a co-worker and as [a co-pilot advising workers] while non-autonomous AI is limited to acting exclusively as a co-pilot. Our main finding is that non-autonomous AI tends to benefit the least knowledgeable individuals the most, in contrast to autonomous AI, which primarily benefits the most knowledgeable individuals. In fact, non-experimental evidence suggests that firms perceive current iterations of generative AI more as a basic co-worker than as a co-pilot. For instance, using high-frequency job posting data from LinkUp, Berger et al. document a marked decline in job postings for white-collar roles requiring low levels of knowledge, such as low-level office jobs, following the introduction of ChatGPT in November 2022. At the same time, job postings for high-knowledge roles, such as executive positions, increased. This trend indicates that firms view generative AI as a technology that complements high-skilled knowledge workers while substituting for their low-skilled counterparts.

Takeaways by Macro Roundup® AI

  1. Non-autonomous AI, limited to acting as a co-pilot advising workers, benefits the least knowledgeable individuals the most, while autonomous AI, which can also function as a co-worker, primarily benefits the most knowledgeable.
  2. Using high-frequency LinkUp job posting data, Berger et al. document a marked decline in postings for low-knowledge white-collar roles such as low-level office jobs following ChatGPT's introduction in November 2022, alongside increased postings for executive positions.
  3. Non-experimental evidence suggests firms perceive current iterations of generative AI more as a basic co-worker than a co-pilot, complementing high-skilled knowledge workers while substituting for low-skilled ones.

Related Articles:

  • Centaurs and Cyborgs on the Jagged Frontier — In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.
  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.
  • The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market — Freelancers in occupations most exposed to generative AI saw employment and earnings decline, with the authors estimating a 2% drop in jobs and a 5.2% drop in monthly earnings on an online labor platform. Offering high-quality service did not mitigate the effect, and top-rated freelancers appear disproportionately hurt.

AI Summary. J.P. Morgan Chase analysts estimate global non-bank investors hold 49% of their portfolios in equities, just below the 2007 peak, with cash allocations at a record low. The cyclically adjusted price-earnings yield on the S&P 500 is 2.6%, a level from which the index has never delivered a positive 10-year return since 1900.

Economist Staff The Economist
Date Posted:

J.P. Morgan estimates the aggregate equity allocation of the world’s non-bank investors is 49%, while cash allocation is at an all-time low. “Those looking for willing buyers with the cash to keep bidding prices up will need to hunt hard.”

How stretched are equity allocations and valuations in America's stockmarket?

Core argument: J.P. Morgan Chase analysts estimate the aggregate equity allocation of the world's non-bank investors at 49%, just below the 2007 peak that had itself been surpassed only during the dotcom bubble, while cash allocation sits at an all-time low.

Analysts at J.P. Morgan Chase estimate that the aggregate equity allocation of the world’s non-bank investors stands at 49%. That is only a shade below a previous peak reached in 2007, which itself was only surpassed during the dotcom bubble. Investors’ cash allocation, meanwhile, is at an all-time low. Those looking for willing buyers with the cash to keep bidding prices up will need to hunt hard. The CAPE ratio for America’s stockmarket is higher than it has been for 98% of the time since 1900. Historically, since 1900, the lower the CAPE yield has been, the worse returns have been over the subsequent decade. At present, the CAPE yield for the S&P 500 is 2.6%. From starting points where the yield was at this level or lower (which it has only been during the late 1990s and early 2000s), the index has never had a positive return over the following ten years. When the CAPE yield has been between 2% and 3%, the average annualised return has been -1.5% in nominal terms, and -4% in real terms.

Takeaways by Macro Roundup® AI

  1. J.P. Morgan Chase analysts estimate the aggregate equity allocation of the world's non-bank investors at 49%, just below the 2007 peak that had itself been surpassed only during the dotcom bubble, while cash allocation sits at an all-time low.
  2. The CAPE ratio for America's stockmarket is higher than it has been for 98% of the time since 1900, with the S&P 500's CAPE yield at 2.6%.
  3. From starting points where the CAPE yield was 2.6% or lower — seen only in the late 1990s and early 2000s — the S&P 500 has never delivered a positive ten-year return, and yields of 2–3% have averaged -1.5% nominal and -4% real annualised.

Related Articles:

  • US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat — US companies need about 7% earnings-per-share growth to deliver a normal 4% equity risk premium above the risk-free rate, versus about 3% for other developed markets, with the highest expectations embedded in technology and the largest US tech firms. Chinese companies could generate a 4% risk premium over Chinese bonds with no earnings growth.
  • Updating Our Long-Term Return Forecast For US Equities to Incorporate the Current High Level of Market Concentration — The authors estimate the S&P 500 will deliver an annualized nominal total return of 3% over the next 10 years, roughly 1% in real terms, modeling long-term returns as a function of starting valuation, market concentration, frequency of economic contractions, corporate profitability, and interest rates. The index returned 13% annualized over the past decade, above its 11% long-term average.
  • Stock Market Concentration — Over 2014–2023 the 10 largest U.S. stocks averaged 19% of market capitalization while generating 47% of total economic profit, and by 2023 they were 27% of market capitalization and 69% of economic profit. The S&P 500 returned above its average when concentration was rising and below it when concentration was falling.

AI Summary. Global bond funds attracted more than $600bn of inflows, topping the previous high of nearly $500bn, as investors bet that slowing inflation would prompt major central banks toward easier monetary policy. The flows came despite a broad global index of sovereign and corporate debt falling 1.7% over the year.

Ian Smith and George Steer Financial Times
Date Posted:

Bond funds have attracted more than $600B in inflows so far in 2024 as investors have rotated into fixed income.

Are record bond fund inflows arriving despite negative bond returns?

Core argument: Global bond funds attracted more than $600bn in inflows so far this year, according to EPFR, topping the previous record of almost $500bn in 2021, as investors bet major central banks would shift toward easier monetary policy.

Investors poured record amounts into global bond funds this year as they bet on a shift towards easier monetary policy by major central banks. Bond funds attracted more than $600bn in inflows so far this year, according to data provider EPFR, topping the previous high of almost $500bn in 2021, as investors sensed that slowing inflation would be a turning point for global fixed income. The record flows came despite a patchy year for bonds, which rallied over the summer before giving up their gains by the end of the year on rising concerns that the pace of global rate cuts will be slower than previously expected. The Bloomberg global aggregate bond index — a broad benchmark of sovereign and corporate debt — surged in the third quarter of the year but has slumped over the past three months, leaving it down 1.7% for the year.

Takeaways by Macro Roundup® AI

  1. Global bond funds attracted more than $600bn in inflows so far this year, according to EPFR, topping the previous record of almost $500bn in 2021, as investors bet major central banks would shift toward easier monetary policy.
  2. The Bloomberg global aggregate bond index, a broad benchmark of sovereign and corporate debt, surged in the third quarter but slumped over the past three months, leaving it down 1.7% for the year.
  3. Record bond fund inflows came despite a patchy year for bonds, which rallied over the summer before surrendering those gains amid rising concerns that global rate cuts will proceed more slowly than previously expected.

Related Articles:

  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
  • Fiscal Policy Under Trump II: The Role of Scott Bessent and Basic Budget Math — US federal debt has risen from 105% to 123% of GDP, the budget deficit has doubled from 3.1% to more than 6%, and government interest expense has grown from 1.3% to about 3.1% of GDP. The author argues this makes expansive fiscal policy harder to pursue than in the past.
  • Debt Risks That Lured Bessent to US Treasury Now Loom Large — Ten-year US Treasury yields are around 4.4%, and the weighted average interest rate on outstanding federal debt is about 3.3% — a 15-year high, yet still below the over-4% yields the Treasury now pays on new debt across all maturities. Bloomberg Economics projects the fiscal deficit widening to 7% of GDP.

AI Summary. Evidence suggests gambling — including sports betting, stock trading, and crypto — has become a national epidemic in the United States, with apps making it steadily easier to gamble. One investor argues social media can coordinate crowds rather than keep them independent, undermining market wisdom.

Paul Krugman Krugman Wonks Out
Date Posted:

.@paulkrugman argues gambling has become a national epidemic, and cites @CliffordAsness, “Has there ever been a better vehicle for turning a wise, independent crowd into a coordinated clueless, even dangerous, mob than social media?”

Has gambling on sports, stocks, and crypto become a national epidemic?

Core argument: Evidence suggests gambling in the U.S. — spanning sports betting, stock trading, and crypto — has become a national epidemic, possibly as serious in its own way as the opioid epidemic.

There’s a lot of evidence that gambling — not just traditional forms like sports betting, but gambling on stocks and, yes, crypto — has become a national epidemic, possibly as serious in its own way as the opioid epidemic. About those apps: if it has become ever harder to be a smoker, it has become ever easier to be a gambler. The veteran investor Cliff Asness has a paper on how social media are degrading markets: "But what if the crowd isn’t independent, but acts in unison? Well, this has the potential not just to destroy the magical crowd wisdom but to turn it into a negative. So, has there ever been a better vehicle for turning a wise, independent crowd into a coordinated clueless, even dangerous, mob than social media?" How much damage will the national gambling epidemic do? We won’t know the full extent of the damage until those natural Ponzi schemes collapse, which they will.

Takeaways by Macro Roundup® AI

  1. Evidence suggests gambling in the U.S. — spanning sports betting, stock trading, and crypto — has become a national epidemic, possibly as serious in its own way as the opioid epidemic.
  2. Gambling apps have made it ever easier to be a gambler, even as it has become ever harder to be a smoker.
  3. Investor Cliff Asness argues in a paper that social media degrade markets by turning a wise, independent crowd into a coordinated, clueless, even dangerous mob.

Related Articles:

  • The Less-Efficient Market Hypothesis — Markets are never perfectly efficient because betting against other investors' errors carries risk, and the author argues social media, investor overconfidence, and gamified 24/7 trading have made markets meaningfully less efficient, with indexing and very low interest rates a smaller contributor. The recommended response is to adopt the longest possible investment time horizon.
  • More Men Are Addicted to the ‘Crack Cocaine’ of the Stock Market — Trading in options contracts that expire the same day has risen to more than half of all trades in the market for S&P 500 index options, according to data from SpotGamma. These contracts are the riskiest type, able to surge or fall to zero within minutes as traders speculate on intraday moves.
  • It’s Time to Talk About America’s Disorder Problem — A meta-analysis of 56 studies found that disorder policing consistently reduces crime, but that indiscriminate "aggressive order maintenance" arrests did not significantly reduce crime while problem-oriented strategies targeting specific sources of disorder often had sizable effects without spillovers. The authors note that a large share of disorder comes from a small number of people and places.

AI Summary. Trading in options contracts that expire the same day has risen to more than half of all trades in the market for S&P 500 index options, according to data from SpotGamma. These contracts are the riskiest type, able to surge or fall to zero within minutes as traders speculate on intraday moves.

Gunjan Banerji Wall Street Journal
Date Posted:

Options trading hit a new record, with trading in contracts that expire the same day making up more than half of all trades in the S&P 500 options market.

Are same-day options now more than half of index options trading?

Core argument: Contracts expiring the same day, the riskiest options, have risen to make up more than half of all trades in the S&P 500 index options market this year, according to SpotGamma figures.

Activity in options is on track to smash another record this year. Trading in contracts expiring the same day, which are the riskiest, has soared to make up more than half of all trades in the market for S&P 500 index options this year, according to figures from SpotGamma. These trades are more electric than traditional stocks, with the potential to rocket higher or plunge to zero within minutes. Similar to wagering on how many points Mavericks point guard Luka Dončić will score in the first quarter of an NBA game, traders are increasingly using options to speculate how stocks will fare during the trading session, rather than at the closing bell.

Takeaways by Macro Roundup® AI

  1. Contracts expiring the same day, the riskiest options, have risen to make up more than half of all trades in the S&P 500 index options market this year, according to SpotGamma figures.
  2. Overall options activity is on track to set another record this year, with same-day contracts able to rocket higher or plunge to zero within minutes.
  3. Traders are increasingly using options to speculate on how stocks will move during the trading session rather than at the closing bell, akin to wagering on how many points Luka Dončić scores in an NBA game's first quarter.

Related Articles:

  • It’s Time to Talk About America’s Disorder Problem — A meta-analysis of 56 studies found that disorder policing consistently reduces crime, but that indiscriminate "aggressive order maintenance" arrests did not significantly reduce crime while problem-oriented strategies targeting specific sources of disorder often had sizable effects without spillovers. The authors note that a large share of disorder comes from a small number of people and places.
  • Young Men Are Gaming More. Are They Working Less? — US Bureau of Labor Statistics time-use data show time young American men spent playing games rose by nearly three-quarters of an hour from 2019 to 2022, exceeding the increase over the prior 16 years, with most of the added gaming time coming from work and sports, exercise and recreation.

AI Summary. Economists warn that annual home insurance policies cannot always be reconciled with 30-year mortgages, noting that reinsurance costs rose more than 100% from 2017 to 2023 and insurers passed those costs to homeowners. The Insurance Information Institute reports insurers paid $1.11 in claims per dollar of premiums in 2023, with a fifth straight year of underwriting losses expected.

Polly Mosendz and Eric Roston Bloomberg
Date Posted:

Structural changes in flood risk imply that annual insurance policies “cannot always be reconciled with 30-year loans.” In 2023, insurers paid out $1.11 in claims for every $ they made in premiums in the US.

Can annual home insurance policies be reconciled with 30-year mortgages?

Core argument: Reinsurance costs rose more than 100% from 2017 to 2023, a "reinsurance shock" that forced insurers to pass their own costs on to homeowner policyholders.

Economists are beginning to sound warnings, urging the mortgage industry and insurers to face the risky reality that annual insurance policies cannot always be reconciled with 30-year loans Reinsurance costs rose more than 100% from 2017 to 2023. This “reinsurance shock,” as they call it, forced insurers to pass their own costs to homeowner policyholders. The insurance industry is just not making money, according to the Insurance Information Institute. In 2023, insurers paid out $1.11 in claims for every dollar they made in premiums. This year is expected to be the fifth year in a row with underwriting losses, the institute determined.

Takeaways by Macro Roundup® AI

  1. Reinsurance costs rose more than 100% from 2017 to 2023, a "reinsurance shock" that forced insurers to pass their own costs on to homeowner policyholders.
  2. Insurers paid out $1.11 in claims for every dollar earned in premiums in 2023, and the Insurance Information Institute expects this year to be the fifth consecutive year of underwriting losses.
  3. Economists are urging the mortgage industry and insurers to confront the reality that annual insurance policies cannot always be reconciled with 30-year loans.

Related Articles:

  • Growing Costs of Natural Disasters are Stressing Property Insurance Markets — U.S. home insurers posted $15.2bn in net underwriting losses, their worst performance since at least 2000, and are responding by raising premiums and withdrawing coverage. State "last-resort" public insurance plans, backed by a state's policyholders or taxpayers, reached a record of just over $1.3tn in exposure, signaling growing unavailability of private coverage.
  • As Insurers Around the U.S. Bleed Cash From Climate Shocks, Homeowners Lose — Insurers lost money on homeowners coverage in 18 states, up from 12 states five years earlier and eight a decade earlier, according to a New York Times analysis of financial data. In response, insurers are raising premiums by as much as 50% or more, cutting coverage, or exiting entire states.
  • The Great Florida Migration Is Coming Undone — Florida's housing market is cooling amid excess inventory and weaker buyer demand, with analysts warning some cities could see a price correction. Home insurance premiums in parts of the state are up as much as 400% over five years, pricing out some homeowners and prompting institutional investors to sell properties.

AI Summary. Palantir and Anduril are in talks with about a dozen technology companies — including SpaceX, OpenAI, autonomous-ship builder Saronic, and Scale AI — to form a consortium that would jointly bid for US government work in an effort to disrupt the oligopoly of established "prime" defense contractors.

Tabby Kinder and George Hammond Financial Times
Date Posted:

Palantir and Anduril are forming a consortium to compete better with more established, “prime” defense contractors such as Lockheed Martin, Raytheon, and Boeing as they chase a greater share of the $850B defense budget.

Can a tech consortium break the defense prime contractor oligopoly?

Core argument: Palantir and Anduril are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country's oligopoly of "prime" contractors.

Palantir and Anduril, two of the largest US defence technology companies, are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country’s oligopoly of “prime” contractors. The consortium is planning to announce as early as January that it has reached agreements with a number of tech groups. Companies in talks to join include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous-ship builder Saronic, and artificial intelligence data group Scale AI. Palantir’s share price has skyrocketed by 300% in the past year, giving the company a market capitalisation of $169B — larger than Lockheed Martin. The data intelligence group was co-founded by tech investor Peter Thiel, who also provided the initial backing for Anduril, which launched in 2017 and was this year valued at $14B. Meanwhile, SpaceX was valued at $350B this month, making it the world’s largest private start-up, and OpenAI has soared to a valuation of $157B since it was founded in 2015.

Takeaways by Macro Roundup® AI

  1. Palantir and Anduril are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country's oligopoly of "prime" contractors.
  2. Palantir's share price has risen 300% over the past year, lifting its market capitalisation to $169bn, larger than Lockheed Martin's, while Anduril, launched in 2017, was valued at $14bn this year.
  3. Companies in talks to join the consortium include SpaceX, valued at $350bn and the world's largest private start-up, OpenAI at $157bn, autonomous-ship builder Saronic, and Scale AI, with an announcement planned as early as January.

Related Articles:

  • The Crumbling Foundation of America’s Military — A U.S. Army Science Board report warned that the American industrial base may be incapable of meeting the munitions demand created by a potential future conflict with a peer adversary. Much of the reduction in U.S. arms-manufacturing capacity was deliberate, following the collapse of the Soviet Union and the end of the Cold War.
  • The Hidden Threat to National Security Is Not Enough Workers — At Newport News Shipbuilding, half of welders now have less than four years' experience, down from an average of 20 years three decades ago, and inexperience reduces productivity and adds delays. Shipbuilding wages starting at $17 an hour no longer carry a premium over local retail and warehouse jobs paying up to $24.
  • Global Defence Groups Hiring At Fastest Rate In Decades Amid Record Orders — A survey of 20 large and medium-sized US and European defence and aerospace companies found they plan to recruit tens of thousands of workers, with 10 of them seeking to add almost 37,000 positions, or nearly 10% of their combined workforce. Demand spans apprentices to executives, including engineers, software developers, cyber security analysts, welders, and mechanics.

Monday, December 30, 2024

AI Summary. The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.

Rebecca Diamond and Enrico Moretti University of California
Date Posted:
Is Database:
Database

For non-college Americans, high local prices mean lower living standards. “A high school drop-out household moving from the least expensive commuting zone to the most expensive would experience an 18.5% decline in market consumption.” @rebeccardiamond

Do expensive cities lower living standards for less-educated workers?

Core argument: The authors estimate that a high school drop-out household moving from the most affordable US commuting zone to the most expensive one would see market consumption fall 18.5%.

We build local consumption price indices that vary by commuting zone (CZ) and income group. We find that geographical differences in cost of living are especially large for low-income households. When we estimate the standard of living that low- and high-skill households can expect in each US commuting zone once we account both for geographical variation in cost of living and also in expected income, we find marked differences between low- and high-skill households. For high-skill households, we find no relationship between expected consumption and cost of living, suggesting that college graduates living in cities with high costs of living enjoy a standard of living generally similar to college graduates living in cities with low cost of living. For high school graduates and high school drop-outs, we find a significant negative relationship between consumption and cost of living, indicating that expensive cities offer lower standard of living than more affordable cities. The differences are quantitatively large. A high school drop-out household moving from the most affordable commuting zone to the most expensive one would experience a 18.5% decline in market consumption.

Takeaways by Macro Roundup® AI

  1. The authors estimate that a high school drop-out household moving from the most affordable US commuting zone to the most expensive one would see market consumption fall 18.5%.
  2. Using local consumption price indices that vary by commuting zone and income group, the authors find geographical differences in cost of living are especially large for low-income households.
  3. The authors find no relationship between expected consumption and cost of living for high-skill households, while for high school graduates and drop-outs the relationship is significantly negative, implying expensive cities offer them a lower standard of living.

Related Articles:

  • Are Place-Based Policies Targeting The Wrong Distressed Areas? — The rise in geographic income inequality reflects the richest places pulling further ahead rather than the poorest falling behind, and even the lowest-income places have seen gains in inflation-adjusted income since 1980. Including government transfers or adjusting for local cost of living lowers measured geographic inequality but leaves the upward trend intact.
  • The U.S. Low-Wage Structure: A McWage Comparison — Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.
  • Trends in U.S. Spatial Inequality: Concentrating Affluence and a Democratization of Poverty — The authors find that rising U.S. geographic inequality is driven mainly by the concentration of affluence, with top income quantiles diverging across states while median household incomes across counties have dispersed more gradually. Poverty rates and bottom income quantiles have converged across areas, alongside equalization of means-tested transfers.

AI Summary. The author argues that a universal tariff would prompt enough dollar appreciation to make US exports more expensive abroad, reducing trade flows in both directions while leaving the trade deficit roughly unchanged. Attempting to offset the export drag through deregulation would shift production away from import-competing goods, again leaving a similar trade deficit.

Stan Veuger American Enterprise Institute
Date Posted:

.@stanveuger replies to @stevemmiran that though dollar appreciation would reduce tariffs’ upward pressure on US prices, trade volumes would fall “in both directions” [and] “the trade deficit would remain as before,” even if US productivity rises.

Do universal tariffs shrink the trade deficit once currencies adjust?

Core argument: The currency offset from tariffs will likely be minor for low, targeted tariff rates but not for universal tariffs, which is where Stephen Miran probably has the strongest cards.

While the currency offset will likely be minor for low, targeted tariff rates, that will not be the case for universal tariffs. This is where Miran probably has the strongest cards. [But due to the dollar appreciation] US firms will see their exports drop as their products are now more expensive in euro terms. As a result, while trade volumes in both directions would be reduced, the trade deficit would remain as before. US firms will see their exports drop as their products are now more expensive in euro terms [due to dollar appreciation]. Miran argues that “policymakers can in part alleviate any drag on exports by an aggressive deregulatory agenda, which helps make U.S. production more competitive.” This is too clever by half. If US firms started exporting more, this would move the economy away from producing import-competing goods and toward producing more exported goods, [offsetting] the reduction in imports [sought by] our mercantilist friends, [leaving] a similar trade deficit and similar trade volumes as we had before we started.

Takeaways by Macro Roundup® AI

  1. The currency offset from tariffs will likely be minor for low, targeted tariff rates but not for universal tariffs, which is where Stephen Miran probably has the strongest cards.
  2. Dollar appreciation would make US products more expensive in euro terms, cutting US exports and reducing trade volumes in both directions while leaving the trade deficit as before.
  3. Miran argues that aggressive deregulation can partly alleviate the drag on exports, but higher exports would shift production away from import-competing goods, leaving a similar trade deficit and similar trade volumes as before.

Related Articles:

  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.
  • Can Trump Reduce the Trade Deficit? — A world of widespread tariffs would also shrink international capital flows, and because the US trade deficit is the counterpart of large capital inflows, reduced capital mobility would narrow that deficit. The author argues this would occur largely by reducing overall investment in the US economy.
  • Fiscal, Macroeconomic, and Price Estimates of Tariffs Under Both Non-Retaliation and Retaliation Scenarios — The authors estimate the modeled tariff proposals would raise $1.2tn–$4.4tn over 10 years, or 0.3–1.2% of average GDP, with foreign retaliation cutting that revenue by 12–26%. They project consumer prices initially rise 1.2–5.1%, equal to $1,900–$7,600 of lost disposable income per household, with real GDP contracting 0.5–1.4% in the medium term.

AI Summary. Germany's fertility rate fell to 1.35 children per woman, below the United Nations' "ultra-low" threshold of 1.4, a level at which falling birth rates become difficult to reverse. Estonia and Austria also dropped below 1.4, joining nine European Union countries including Spain, Greece, and Italy, while France's rate fell to a record-low 1.67 and Finland's to 1.26.

Valentina Romei Financial Times
Date Posted:

Germany’s fertility rate fell to 1.35 in 2023, joining nine EU countries, including Spain and Italy, that fell below the UN’s “ultra-low” threshold of 1.4 in 2022.

How far have European fertility rates fallen below replacement levels?

Core argument: Germany's birth rate fell to 1.35 children per woman in 2023, below the UN's "ultra-low" threshold of 1.4, which characterises a scenario where falling birth rates become tough to reverse, according to official statistics.

Official statistics show Germany’s birth rate fell to 1.35 children per woman in 2023, below the UN’s “ultra-low” threshold of 1.4 — characterising a scenario where falling birth rates become tough to reverse. Estonia and Austria also passed under the 1.4 threshold, joining the nine EU countries — including Spain, Greece, and Italy — that in 2022 had fertility rates below 1.4 children per woman. Birth rates have fallen across Europe — even in countries such as Finland, Sweden, and France, where family-friendly policies and greater gender equality had previously helped boost the number of babies. In Finland, the birth rate was above the EU average until 2010, but it dropped to 1.26 in 2023, the lowest since the record began in 1776, according to official data. France had the highest birth rate at 1.79 children per woman in 2022, but the national figures showed it dropped to 1.67 last year, the lowest on record.

Takeaways by Macro Roundup® AI

  1. Germany's birth rate fell to 1.35 children per woman in 2023, below the UN's "ultra-low" threshold of 1.4, which characterises a scenario where falling birth rates become tough to reverse, according to official statistics.
  2. Estonia and Austria also fell below the 1.4 threshold, joining the nine EU countries — including Spain, Greece, and Italy — that had fertility rates below that level in 2022.
  3. Finland's birth rate dropped to 1.26 in 2023, its lowest since the record began in 1776, while France's fell from 1.79 in 2022 to 1.67, its lowest on record.

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  • The Age of Depopulation: Surviving a World Gone Gray — The United States remains the main outlier among developed countries resisting depopulation, with fertility of just over 1.6 births per woman — high for a rich country but below the 2.1 replacement threshold — plus steady immigration. The Census Bureau projects the U.S. population will peak around 2080 and decline continuously thereafter.
  • The Global Fertility Crisis Is Worse Than You Think — Adjusting United Nations figures for lower recorded births, the author estimates the global fertility rate was 2.18, below the 2.21 replacement threshold. Population is not yet falling because women born in the 1990s and 2000s are having children while older generations live longer, so births still exceed deaths, with a projected peak in about 30 years.
  • Worldwide Efforts to Reverse the Baby Shortage Are Falling Flat — Hungary and Norway devote more resources to family support than almost any other country, yet have fertility rates of 1.5 and 1.4 children per woman, below the 2.1 replacement rate needed to keep population steady; the U.S. rate is 1.6. Demographers suggest reluctance to have children reflects a cultural rather than purely financial shift.

AI Summary. Germany recorded 6.43m more arrivals than departures over a decade, the largest inflow of any country outside the US, with migrants at 18.8% of the population versus 15.3% in the US. Noncitizens, 15% of the population, accounted for 41% of crimes, up from 28.7%, according to police statistics.

Bertrand Benoit Wall Street Journal
Date Posted:
Is Database:
Database

In 2021 migrants made up 18.8% of the German population, compared to 15.3% for the US. Sixty percent of people in Germany who “depend on government benefits for income” are either foreign-born or second-generation migrants.

Has large-scale immigration strained Germany's welfare system and public safety?

Core argument: Germany recorded net migration of 6.43 million people between 2013 and 2023, according to Germany's Federal Statistics Office, the biggest inflow of any country outside the U.S., according to the United Nations.

Between 2013 and 2023, 6.43 million more people settled in Germany than left, according to Germany’s Federal Statistics Office—the biggest inflow of any country outside the U.S., according to the United Nations. Migrants, defined as people living for more than 12 months outside their country of birth, made up 18.8% of the population in Germany in 2021, compared with 15.3% in the U.S. in that year. In Germany, 42% of people under age 15 were either foreign-born or had at least one foreign-born parent—Germany’s definition of a statistical category it calls “people with a migration background”—as were 37% of people ages 15 to 24, according to government data for 2022. More than 60% of the people in Germany who depend on government benefits for income are foreign-born or are second-generation migrants. Noncitizens, who make up 15% of the population, perpetrated 41% of all crimes in 2023, up from 28.7% in 2014, according to police statistics.

Takeaways by Macro Roundup® AI

  1. Germany recorded net migration of 6.43 million people between 2013 and 2023, according to Germany's Federal Statistics Office, the biggest inflow of any country outside the U.S., according to the United Nations.
  2. Noncitizens, who make up 15% of Germany's population, perpetrated 41% of all crimes in 2023, up from 28.7% in 2014, according to police statistics.
  3. More than 60% of people in Germany who depend on government benefits for income are foreign-born or second-generation migrants, and government data for 2022 show 42% of people under age 15 were foreign-born or had at least one foreign-born parent.

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  • Germany Pauses Asylum Claims From Syrians — Germany has paused processing more than 47,000 asylum claims from Syrians following the fall of Bashar al-Assad's government, prioritising other asylum decisions while awaiting clarity on conditions in Syria. Germany is the largest host of Syrian refugees in the European Union, with close to 1mn people who fled the civil war.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.

AI Summary. Local officials in China are calling married women in their 20s and early 30s to ask about family plans, urge prenatal check-ups, and offer subsidies for additional children, with one resident reporting an Rmb100,000 ($14,000) offer for a second child. State-run outlets have promoted claims that childbirth benefits maternal health.

Eleanor Olcott, Nian Liu, and Wang Xueqiao Financial Times
Date Posted:

China is launching a campaign to encourage fertility and build a “birth-friendly society,” including a cold-calling campaign targeted at married women in their 20s and 30s. China’s 2024 fertility rate was ~1.

How far is China going to push women to have children?

Core argument: Chinese local officials have been calling married women in their 20s and early 30s across the country to ask about family plans, in some cases requesting they attend prenatal body checks.

Married women in their 20s and early 30s across the country have been receiving calls from local officials asking about their plans to start a family. In some instances, callers asked women to attend prenatal body checks. Other callers were more direct, offering subsidies to women who had more than one child. A Zhejiang resident who declined to be named said officials offered local women a Rmb100,000 ($14,000) subsidy for having a second child. “There is no explicit policy, but if you ask for it, the village will find you a way to get you the subsidy,” she said. The personalised lobbying comes against a background of an intensified media campaign hailing the benefits of childbirth. In recent months, the state-run People’s Daily and Life Times have promoted scientific voices saying childbirth is good for the mother’s health and can even help prevent cancer and treat certain diseases.

Takeaways by Macro Roundup® AI

  1. Chinese local officials have been calling married women in their 20s and early 30s across the country to ask about family plans, in some cases requesting they attend prenatal body checks.
  2. State-run outlets People's Daily and Life Times have promoted scientific voices saying childbirth benefits mothers' health, can help prevent cancer, and can treat certain diseases.
  3. A Zhejiang resident, who declined to be named, said officials offered local women a Rmb100,000 ($14,000) subsidy for having a second child, adding that no explicit policy exists but the village will find a way to provide it.

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  • East Asia’s Coming Population Collapse — United Nations projections show China's population falling 8%, Japan's 18%, South Korea's 12%, and Taiwan's 8% between 2020 and 2050, while the US population rises 12%. Working-age people per person over 65 are projected to drop to about 1.8 in China and 1.2 in Japan and South Korea.
  • Thoughts and Comments on Demographic Aging and Shrinking — As an arithmetic matter, the greying of societies is driven much more by smaller families than by longer lives, which the author attributes to a withering away of the family. Demographic simulations project that by 2040 couples in their 60s in China will likely have at least one living parent to care for, and many will have two or three.
  • A Revolution Is Coming for China’s Families — Prolonged below-replacement fertility in China is projected to produce a "kin crash" in which rising generations have fewer living relatives than ever before in Chinese history. The authors argue this shrinking of extended family networks will erode the Chinese family's role in protecting people from adversity and helping them seize opportunity.

AI Summary. China's hukou household registration system restricts migrant workers' access to local services such as healthcare, education, and home purchases in major cities. While two-thirds of Chinese live in cities, only 48% hold urban residency rights, leaving roughly 250m people excluded from many urban benefits; rural disposable income is about $3,000 per capita versus over $7,000 in cities.

Liyan Qi Wall Street Journal
Date Posted:

The hukou system that restricts internal migration in China is amplifying China’s fertility decline by separating migrant workers from their children. In 2020 67mm children were living separately from their parents.

Does China's household registration system shut urban migrants out of local services?

Core argument: Rural Chinese residents had about $3,000 in annual per capita disposable income in 2023, less than half the more than $7,000 of their urban peers, according to official data.

The hukou system was set up to prevent cities from becoming overrun. It limits migrant workers’ ability to put down roots in China’s biggest cities by restricting access to local services such as healthcare and education, or the right to buy an apartment. Rural residents have less than half the annual disposable income of their urban peers, about $3,000 per capita compared with more than $7,000 in cities, official data for 2023 shows. Even though 2/3 of Chinese now live in cities, only 48% have urban residency rights, suggesting that roughly a quarter of a billion people are shut out of many benefits in the cities where they work. “Only in China is the urban-rural divide entrenched by official policy and codified by law,” Scott Rozelle and Natalie Hell wrote in their 2020 book “Invisible China.”

Takeaways by Macro Roundup® AI

  1. Rural Chinese residents had about $3,000 in annual per capita disposable income in 2023, less than half the more than $7,000 of their urban peers, according to official data.
  2. While two-thirds of Chinese people live in cities, only 48% hold urban residency rights, leaving roughly a quarter of a billion people shut out of many benefits in the cities where they work.
  3. China's hukou system, set up to prevent cities from becoming overrun, limits migrant workers' access to local healthcare and education and the right to buy an apartment, a divide Scott Rozelle and Natalie Hell wrote in 2020 is entrenched by official policy and codified by law.

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  • 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.
  • China’s Age Of Malaise — More than 300,000 Chinese people emigrated in a single year, more than double the pace of a decade earlier, with some traveling overland through a half-dozen countries to reach the US. US authorities at the southern border recorded 17,894 encounters with Chinese migrants over ten months, a thirteenfold increase from the prior year.

AI Summary. Genetic sequencing of the H5N1 bird flu virus from a severely ill patient in Louisiana identified the D1.1 genotype and found low-frequency mutations in the hemagglutinin surface protein gene. Those mutations were absent from virus sequences in poultry on the patient's property, suggesting they emerged in the patient after infection.

CDC Staff Centers for Disease Control and Prevention
Date Posted:

A @CDCgov analysis of viral genomic sequences from a patient severely ill with bird flu in Louisiana suggests that mutations to a gene that plays a key role in human infection “emerged in the patient after infection.”

Do bird flu mutations emerge in patients after infection?

Core argument: CDC sequenced the HPAI A(H5N1) viruses from specimens of a Louisiana patient who became severely ill and identified them as the D1.1 genotype after comparison with sequences from dairy cows, wild birds, poultry, and previous human cases.

CDC has sequenced the influenza viruses in specimens collected from the patient in Louisiana who was infected with and became severely ill from HPAI A(H5N1) virus. The genomic sequences were compared to other HPAI A(H5N1) sequences from dairy cows, wild birds, and poultry, as well as previous human cases, and were identified as the D1.1 genotype. The analysis identified low frequency mutations in the hemagglutinin gene of a sample sequenced from the patient, which were not found in virus sequences from poultry samples collected on the patient’s property, suggesting the changes emerged in the patient after infection. [Hemagglutinin is a protein on the surface of the influenza A virus that plays a key role in the early stages of a viral infection.]

Takeaways by Macro Roundup® AI

  1. CDC sequenced the HPAI A(H5N1) viruses from specimens of a Louisiana patient who became severely ill and identified them as the D1.1 genotype after comparison with sequences from dairy cows, wild birds, poultry, and previous human cases.
  2. CDC found low-frequency mutations in the hemagglutinin gene of a sample from the Louisiana patient that were absent from poultry samples collected on the patient's property, suggesting the changes emerged in the patient after infection.
  3. Hemagglutinin, the influenza A surface protein in which CDC identified the mutations, plays a key role in the early stages of viral infection.

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