Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Thursday, January 30, 2025

AI Summary. U.S. net borrowing was 7% of GDP across the first three quarters of 2024 versus 5.4% in 2019, with higher interest payments accounting for about 1.4 percentage points of that 1.6-point increase. The largest recent buyer of Treasury notes and bonds has been the rest of the world.

Matt Klein The Overshoot
Date Posted:

.@M_C_Klein paints a scenario where growing fiscal deficits and debt relative to GDP—unprecedented at this point in the business cycle—are merely offset by a decline in private sector debt with little effect on consumption or investment while raising concerns about a “Brazil”-like unwinding.

What explains the rising U.S. deficit, and who is buying Treasuries?

Core argument: The "rest of the world" has been the single biggest buyer of U.S. notes and bonds in recent quarters.

Net borrowing was 5.4% of GDP in 2019, compared to 7% in 2024 Q1-Q3.  [An] increase in interest payments explains about 1.4 percentage points of the total 1.6pp increase in the deficit. The single biggest buyer of notes and bonds in the past few quarters has been the “rest of the world.” The simplest assumption is that receipts will keep pace with GDP, non-interest spending will gradually rise relative to GDP thanks to population aging and the tendency of healthcare costs to rise faster than other prices, and that the overall deficit will continue to expand. The benign scenario is that private indebtedness continues to fall but that private spending remains robust. In this case, the unusually large budget deficit would  [cause] a slow unwinding of the decades-long run-up in private indebtedness that preceded the global financial crisis. The “Brazil” alternative is that policymakers feel compelled to embrace fiscal austerity as the private sector gets squeezed by high real interest rates and tight credit.

Takeaways by Macro Roundup® AI

  1. The "rest of the world" has been the single biggest buyer of U.S. notes and bonds in recent quarters.
  2. Under the benign scenario, the unusually large budget deficit drives a slow unwinding of the decades-long pre-crisis run-up in private indebtedness while private spending stays robust; the "Brazil" alternative has policymakers embracing fiscal austerity as high real interest rates and tight credit squeeze the private sector.

Related Articles:

  • The Budget and Economic Outlook: 2025 to 2035 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (6.2% of GDP) to $2.7tn by 2035, well above the 3.8% of GDP average of the past 50 years. Outlays are projected to rise to 24.4% of GDP, driven by growth in Social Security and Medicare spending and rising net interest costs, while revenues reach 18.3%.
  • 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.
  • 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.

AI Summary. More efficient AI model training and falling compute costs pose a near-term risk of lower AI-related capital spending, which equity analysts project will rise to $325bn by the end of 2025, though that risk is seen as limited. Cheaper, more competitive models could instead speed the buildout of AI platforms and applications, raising macroeconomic upside.

Goldman Sachs Joseph Briggs
Date Posted:

Joseph Briggs argues that the DeepSeek AI breakthrough creates limited risks to Goldman’s forecast of $325B AI capex by Q4 ‘25. Increased competition could accelerate the buildout of productivity-enhancing AI applications “raising macroeconomic upside.”

Do cheaper AI models threaten AI capital spending or boost growth?

Core argument: Equity analysts project AI-related capex will rise to $325bn by 2025Q4, and the main near-term GDP risk is that more efficient model training and falling compute costs reduce that spending.

The main near-term risk to GDP is that more efficient model training and declining compute costs could lower AI-related capex, which [our] equity analysts project will rise to $325bn by 2025Q4. However, we view this risk as limited. Our equity analysts do not expect companies to significantly adjust capital allocation on the back of the recent DeepSeek news. While they acknowledge some risk that the build-out of AI infrastructure could be negatively affected should current leaders reassess their forward capex plans, they also highlight that DeepSeek could catalyze higher levels of real hardware spending if it pushes incumbents to invest more to maintain their lead in AI capability. More fundamentally, if the novel computational techniques employed by DeepSeek’s models indeed increase competition and lower costs, they could catalyze a faster buildout of AI platforms and applications that have so far posed a bottleneck to adoption and the impact on productivity, thereby raising macroeconomic upside.

Takeaways by Macro Roundup® AI

  1. Equity analysts project AI-related capex will rise to $325bn by 2025Q4, and the main near-term GDP risk is that more efficient model training and falling compute costs reduce that spending.
  2. Equity analysts do not expect companies to significantly adjust capital allocation following the DeepSeek news, while noting DeepSeek could catalyze higher real hardware spending if incumbents invest more to maintain their lead in AI capability.
  3. If DeepSeek's novel computational techniques increase competition and lower costs, they could catalyze a faster buildout of AI platforms and applications that have so far bottlenecked adoption and productivity, raising macroeconomic upside.

Related Articles:

  • DeepSeek FAQ — Consumers and businesses stand to gain most from a future of effectively free AI products, along with big consumer tech companies, since a world of free AI makes product and distribution the decisive advantages they already hold. China also benefits, and the United States faces a choice between expanding chip export restrictions and permission-based regulation or allowing itself to compete.
  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.
  • Gen AI: Too Much Spend, Too Little Benefit? — The author argues generative AI is unlikely to drive revenue expansion because it helps employees find information faster rather than find better information. If AI's benefits remain limited to efficiency gains, competitors can adopt the same tools, so cost savings get arbitraged away rather than raising prices or margins.

AI Summary. Rebound effects, where efficiency gains are partly offset by increased use, are typically too small to fully cancel out the original savings, and the Jevons paradox — where rebounds exceed the initial savings — is rare. Basing a bullish case for artificial intelligence on that paradox is a bet on demand rather than on the technology's efficiency.

Economist Staff The Economist
Date Posted:

Claims that AI adoption will follow the Jevons paradox depend on rebound effects from energy efficiency gains —like DeepSeek’s— outweighing initial savings. Yet, AI demand forecasts remain highly uncertain.

Does the bullish AI case rest on a rare rebound effect?

Core argument: Rebound effects from improved energy efficiency are typically not large enough to fully offset the initial savings, and the Jevons paradox — where the sum of all rebounds exceeds those savings — is quite rare.

The Jevons paradox is a form of a broader phenomenon known as “rebound effects”. These are typically not large enough to fully offset savings from improved efficiency. Usually they are examined by academics and policymakers keen to use less energy: environmental worries about peak coal turned into worries about peak oil and then into worries about greenhouse gases. Sometimes the effect is straightforward: tighter fuel standards, designed to lower emissions, lead American drivers to travel longer distances. Sometimes it is less direct: better-insulated houses have increased the size of windows in Europe, offsetting efficiency gains. Sometimes it is macroeconomic: less energy use by one industry frees up supply for another. The Jevons paradox occurs when the sum of all the rebounds is larger than the initial energy savings—and it is really quite rare. Basing the bull case for AI on the Jevons paradox is, therefore, a bet not on the efficiency of the technology but on the level of demand.

Takeaways by Macro Roundup® AI

  1. Rebound effects from improved energy efficiency are typically not large enough to fully offset the initial savings, and the Jevons paradox — where the sum of all rebounds exceeds those savings — is quite rare.
  2. Rebound effects operate through direct channels such as tighter fuel standards leading American drivers to travel longer distances, indirect ones such as better-insulated European houses gaining larger windows, and macroeconomic ones as freed-up energy supply shifts to other industries.
  3. Resting the bull case for AI on the Jevons paradox amounts to a bet on the level of demand rather than on the efficiency of the technology.

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.
  • Use of Artificial Intelligence and Productivity: Evidence from Firm and Worker Surveys — A survey of Japanese firms and workers finds that firms using artificial intelligence have higher productivity, mean wages, and expected medium-term growth, and that more-educated firms and workers are more likely to use it. Workers using artificial intelligence report their own productivity rose by about 20% on average.
  • Accurate Structure Prediction of Biomolecular Interactions With AlphaFold 3J — AlphaFold 3, a single deep learning model with a diffusion-based architecture, jointly predicts the structures of complexes containing proteins, nucleic acids, small molecules, ions, and modified residues. The authors report accuracy exceeding specialised tools for protein-ligand docking, protein-nucleic acid interactions, and antibody-antigen prediction.

AI Summary. 52% of single American women say they would be less likely to date a supporter of Donald Trump, compared with 36% of single men, with 47% of men saying it would make no difference. The gap widens with education: 73% of college-educated single women report such hesitancy, versus under half of those without a degree.

Daniel Cox and Kelsey Eyre Hammond American Enterprise Institute
Date Posted:

New @AEIecon polling finds that 73% of college-educated single women are less likely to date a Trump supporter vs. 42% of non-college single women. AP exit data shows that 39% of single women voted for Trump vs. 53% of single men. @dcoxpolls

Do single women reject partners over politics more than men?

Core argument: 52% of single American women say they would be somewhat or a lot less likely to date a Trump supporter, compared with 36% of single men who report being less inclined to date a Trump supporter.

Among single Americans, men and women have pronounced preferences regarding their partner’s politics, specifically whether they support Trump. 52% of single women say they would be somewhat less likely or a lot less likely to date a Trump supporter. Only 36% of single men say they would be less inclined to date someone who supports Trump, while 47% report that it would make no difference to them. Education further accentuates the gender divide in dating preferences. 73% of college-educated single women would be less likely to date a Trump supporter, including 52% who say they would be a lot less likely to. Less than half of single women without a college degree report that they would be hesitant to date a Trump supporter.

Takeaways by Macro Roundup® AI

  1. 52% of single American women say they would be somewhat or a lot less likely to date a Trump supporter, compared with 36% of single men who report being less inclined to date a Trump supporter.
  2. 47% of single men say a partner's support for Trump would make no difference to them, while a majority of single women report being less likely to date such a partner.
  3. Among college-educated single women, 73% would be less likely to date a Trump supporter, including 52% who say a lot less likely, compared with under half of single women without a college degree.

Related Articles:

  • The Politics of Progress and Privilege: How America’s Gender Gap Is Reshaping the 2024 Election — Survey data show 35% of Americans say the term "feminist" describes them somewhat or very well, down from 51% earlier. Women are more likely than men to identify as feminist (42% vs 27%), with the widest gap among those age 18–29, where 55% of women but 31% of men claim the label.
  • The Anti-Social Century — Americans spend less time with other people than in any period with reliable data back to 1965, with in-person socializing down more than 20% from 2003 to 2023 according to the Bureau of Labor Statistics' American Time Use Survey. Among unmarried men and people under 25, the decline exceeded 35%.
  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.

AI Summary. Samples returned from the asteroid Bennu contain salt minerals—including sodium-bearing phosphates and sodium-rich carbonates, sulfates, chlorides and fluorides—that the authors report formed as a late-stage brine evaporated early in the history of Bennu's parent body. Detecting these salts required sample return and careful curation, because they decompose with prolonged exposure to Earth's atmosphere.

T.J McCoy, S.S. Russell et al. Nature
Date Posted:

Samples from the asteroid Bennu contain key components necessary for life, including all five nucleobases that make up DNA and RNA, and 14 of 20 amino acids found in proteins on Earth, suggesting life on Earth may have been “seeded” by asteroids.

Do asteroid samples show salts left behind by evaporated brine?

Core argument: Samples of asteroid (101955) Bennu returned by OSIRIS-REx contain sodium-bearing phosphates and sodium-rich carbonates, sulfates, chlorides and fluorides formed during evaporation of a late-stage brine early in the history of Bennu's parent body.

Evaporation or freezing of water-rich fluids with dilute concentrations of dissolved salts can produce brines, as observed in closed basins on Earth and detected by remote sensing on icy bodies in the outer Solar System. The mineralogical evolution of these brines is well understood in regard to terrestrial environments, but poorly constrained for extraterrestrial systems owing to a lack of direct sampling. Here we report the occurrence of salt minerals in samples of the asteroid (101955) Bennu returned by the OSIRIS-REx mission. These include sodium-bearing phosphates and sodium-rich carbonates, sulfates, chlorides and fluorides formed during evaporation of a late-stage brine that existed early in the history of Bennu’s parent body. Discovery of diverse salts would not be possible without mission sample return and careful curation and storage, because these decompose with prolonged exposure to Earth’s atmosphere. Similar brines probably still occur in the interior of icy bodies Ceres and Enceladus, as indicated by spectra or measurements of sodium carbonate on the surface or in plumes.

Takeaways by Macro Roundup® AI

  1. Samples of asteroid (101955) Bennu returned by OSIRIS-REx contain sodium-bearing phosphates and sodium-rich carbonates, sulfates, chlorides and fluorides formed during evaporation of a late-stage brine early in the history of Bennu's parent body.
  2. Discovery of these diverse salts required mission sample return with careful curation and storage, because the minerals decompose with prolonged exposure to Earth's atmosphere.
  3. Similar brines probably still occur inside the icy bodies Ceres and Enceladus, as indicated by spectra or measurements of sodium carbonate on their surfaces or in plumes.

Friday, January 31, 2025

AI Summary. The White House said the US would impose 25% tariffs on Mexico and Canada and a 10% levy on China. Economists warn a trade war would raise costs for imported materials used by US manufacturers, increase consumer prices, and redirect or reduce trade flows, with particularly stark effects on the auto and energy sectors.

Justin Sink Bloomberg
Date Posted:

Effective Saturday the US intends to impose 25% tariffs on Mexico and Canada and a 10% levy on China.

Will new tariffs raise US manufacturing and consumer costs?

Core argument: The White House said President Donald Trump will proceed on February 1 with 25% tariffs on Mexico and Canada and a 10% levy on China, denying a report that implementation would be delayed by a month.

President Donald Trump intends to move ahead with plans on Saturday to impose 25% tariffs on Mexico and Canada and a 10% levy on China, the White House said, denying a report that he planned to delay the implementation by a month. In the first 11 months of 2024, US trade with Canada totaled $699 billion and $776 billion with Mexico. Economists warn a trade war would raise the cost of imported materials used by US manufacturers, hike prices for American consumers and redirect or reduce trade flows. The 25% rate Trump has set for the North American countries would likely have stark impacts on particular sectors, such as the auto and energy industries.

Takeaways by Macro Roundup® AI

  1. The White House said President Donald Trump will proceed on February 1 with 25% tariffs on Mexico and Canada and a 10% levy on China, denying a report that implementation would be delayed by a month.
  2. US trade with Canada totaled $699 billion and with Mexico $776 billion in the first 11 months of 2024.
  3. Economists warn a trade war would raise the cost of imported materials for US manufacturers, hike prices for American consumers and redirect or reduce trade flows, with the 25% rate likely hitting the auto and energy industries.

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.
  • Tariffs and Exchange Rates (and Stephen Miran) — 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.
  • 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. Economists argue protective tariffs divert labor and capital toward goods available more cheaply abroad, lowering productivity, wages and growth while raising prices. They contend American manufacturing has not been hollowed out: U.S. industrial production is at an all-time high, 2.5x its level at the last trade surplus, with the smallest manufacturing workforce share since full industrialization.

Phil Gramm and Larry Summers Wall Street Journal
Date Posted:

Phil Gramm and @LHSummers argue that tariffs should not be used as a “general tool of economic policy” as they distort domestic production decreasing American productivity and could “inflict long-term harm on the economy.”

Do protective tariffs lower productivity, wages and growth while raising prices?

Core argument: Gramm and Summers argue U.S. industrial production is at an all-time high, with real industrial output 2.5 times its level in 1975, the last year the U.S. ran a trade surplus, contradicting claims that American manufacturing has been hollowed out.

Our united opposition to non-defense-related tariffs is based not on our faith in free trade but on evidence that tariffs are harmful to the economy. Protective tariffs distort domestic production by inducing domestic producers to commit labor and capital to produce goods and services that could have been acquired more cheaply on the international market. That labor and capital are in turn diverted from producing goods and services that couldn’t be acquired more cheaply internationally. In the process, productivity, wages and economic growth fall while prices rise. Contrary to the repeated claim, there has been no hollowing out of American manufacturing. Industrial production in the U.S. is at an all-time high. The U.S. is producing 2.5 times as much real industrial output as it did when we last ran a trade surplus in 1975. We are producing that record output with the smallest percentage of the labor force involved in manufacturing since America became fully industrialized. This has been a great success for productivity and not a failure of trade, as today’s full employment attests.

Takeaways by Macro Roundup® AI

  1. Gramm and Summers argue U.S. industrial production is at an all-time high, with real industrial output 2.5 times its level in 1975, the last year the U.S. ran a trade surplus, contradicting claims that American manufacturing has been hollowed out.
  2. Gramm and Summers write that record U.S. industrial output is produced with the smallest share of the labor force in manufacturing since America became fully industrialized, which they call a productivity success rather than a failure of trade.
  3. Gramm and Summers argue protective tariffs divert labor and capital toward goods obtainable more cheaply abroad and away from goods that aren't, lowering productivity, wages and growth while raising prices, and they oppose non-defense-related tariffs on that evidence.

Related Articles:

  • China’s Very Bad, No Good Trillion-Dollar Trade Surplus — China's high investment rates face diminishing returns and the government is unwilling to promote higher consumer spending, so it compensates for weak domestic demand with large trade surpluses supported by a weaker currency. The author argues this attempt to export its policy failure will provoke a protectionist backlash from Europe, the UK, and others.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.
  • 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.

AI Summary. German defence contractor Hensoldt, a maker of air defence radars, is in talks with car suppliers Bosch and Continental to hire just under 200 employees facing redundancy, as booming defence demand contrasts with a struggling automotive sector. Hensoldt has amassed a record order backlog of €6.5bn.

Patricia Nilsson Financial Times
Date Posted:

German defense contractor Hensoldt is offering jobs to approximately 200 laid-off workers from automotive suppliers, as defense booms while autos struggle. Hensoldt’s order backlog hit €6.5B in 2024.

Are defence firms hiring laid-off auto workers to meet soaring demand?

Core argument: German defence contractor Hensoldt amassed a record order backlog of €6.5bn in the first nine months of 2024, with its shares nearly tripling since early 2022.

German defence contractor Hensoldt has offered to take on laid off workers at car suppliers Bosch and Continental, as the country’s defence industry sees booming demand in sharp contrast to its struggling automotive sector. The Bavarian maker of air defence radars is currently in talks with the two automotive suppliers to take on just under 200 employees who are facing redundancy. Hensoldt has amassed a record order backlog of €6.5bn in the first nine months of 2024 with its shares nearly tripling since early 2022.

Takeaways by Macro Roundup® AI

  1. German defence contractor Hensoldt amassed a record order backlog of €6.5bn in the first nine months of 2024, with its shares nearly tripling since early 2022.
  2. Hensoldt, the Bavarian maker of air defence radars, is in talks with car suppliers Bosch and Continental to take on just under 200 employees facing redundancy.
  3. Germany's booming defence demand contrasts with its struggling automotive sector, as Hensoldt offers to take on workers laid off at Bosch and Continental.

Related Articles:

  • 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.
  • Boeing Battles Brain Drain As Engineers Chase the Allure of Space — The average tenure of a Boeing engineer has fallen from 16.4 years to 12.6 years, according to data from the union representing 12,000 Boeing engineers, with tenure shortening in almost every age bracket. Analysts, recruiters and union officials describe this "brain drain" as a drag on operations that could make launching a new plane harder.
  • Nato’s European Members Discuss 3% Target for Defence Spending — European members of NATO are discussing raising their defence spending target from 2% of GDP to 2.5% in the short term and 3% by 2030, according to people involved in the preliminary talks. Such an increase would strain national budgets and has raised misgivings in many capitals.

AI Summary. The apartment market is projected to shift from renter-friendly to landlord-friendly over the next two to three years as new supply peaks and then falls below prior-cycle levels in every major market. With an estimated 20% of US construction workers undocumented, deportations combined with California rebuilding demand could create a construction labor deficit that raises building costs and rents.

Tracy Alloway, Joe Weisenthal, and Lee Everett Bloomberg
Date Posted:

Lee Everett of Cortland argues rents are likely to rise next year as all major US markets see a slowdown in new supply. Tighter labor markets—due to the deportation of undocumented workers and LA rebuilding—will drive up construction costs and rents.

Will falling apartment supply and construction labor shortages push rents higher?

Core argument: The rental market is expected to shift from renter-friendly to landlord-friendly over the next two to three years, driven by the supply side as deliveries pass their peak.

We're about to transition from what has been a very renter friendly market to again a landlord friendly market over the course of the next two to three years. And that's going to be driven by what we're seeing on the supply side. We're going to have over a million units come to market over a two-year period here in '24 and '25, but peak supply is hitting in the next six months and if you look at relative time from a) peak supply and then b) to getting to a level of lower supply than you saw last cycle, every major market in the country will be there by the end of 2026. It's estimated 20% of construction workers in this country are undocumented labor and I think when you look at a combination of deportation of construction workers as well as the sheer amount of labor it's going to require to rebuild huge swaths of California, I think you could be looking at a massive deficit in labor within the construction space. And when you think about that, that's going to be your strongest lever that's going to hit your cost to build and that's what's going to drive up those rents that are necessary

Takeaways by Macro Roundup® AI

  1. The rental market is expected to shift from renter-friendly to landlord-friendly over the next two to three years, driven by the supply side as deliveries pass their peak.
  2. An estimated 20% of U.S. construction workers are undocumented, and deportations combined with the labor needed to rebuild large swaths of California could create a major construction labor deficit that lifts building costs and rents.

Related Articles:

  • Construction Industry Braces for One-Two Punch: Tariffs and Deportations — Immigrants make up more than half of construction trade workers in Texas, California, New Jersey, and the District of Columbia, and undocumented workers are estimated at 13% of the construction industry, more than twice their share of the overall workforce. Roughly 130,000 newly arrived immigrants have joined the industry, bringing foreign-born construction employment to a record.
  • The Strange and Awful Path of Productivity in the U.S. Construction Sector — U.S. construction sector labor productivity and total factor productivity grew faster than the whole economy in the 1950s and 1960s, then fell, ending 2020 below their 1950 levels while economywide labor productivity and total factor productivity were 290% and 230% higher. Construction labor productivity fell about 1% a year from 1970 to 2020.
  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.

AI Summary. Satellite imagery shows China's military constructing a roughly 1,500-acre complex southwest of Beijing that US intelligence assesses will serve as a wartime command center at least 10x the size of the Pentagon. Military experts assess the site's deep excavations will house hardened bunkers to shield Chinese military leaders during conflict, including potentially nuclear war.

Demetri Sevastopulo, Joe Leahy, Ryan McMorrow, Kathrin Hille and Chris Cook Financial Times
Date Posted:

China has begun building the world’s largest military command center in western Beijing—at least 10x the size of the Pentagon. Some US officials call it a “wartime” facility, likely hardened against nuclear strikes. Construction started mid-2024.

Is China building a wartime command center dwarfing the Pentagon?

Core argument: China is building a roughly 1,500-acre military complex 30km south-west of Beijing that US intelligence believes will serve as a wartime command center at least 10 times the size of the Pentagon, according to current and former American officials.

China’s military is building a massive complex in western Beijing that US intelligence believes will serve as a wartime command center far larger than the Pentagon, according to current and former American officials. Satellite images obtained by the Financial Times that are being examined by US intelligence show a roughly 1,500-acre construction site 30km south-west of Beijing with deep holes that military experts assess will house large, hardened bunkers to protect Chinese military leaders during any conflict — including potentially a nuclear war. Several current and former US officials said the intelligence community is closely monitoring the site, which would be the world’s largest military command center — and at least 10 times the size of the Pentagon. Based on an assessment of satellite images obtained by the FT, major construction started in mid-2024. Three people familiar with the situation said some intelligence analysts have dubbed the project “Beijing Military City”.

Takeaways by Macro Roundup® AI

  1. China is building a roughly 1,500-acre military complex 30km south-west of Beijing that US intelligence believes will serve as a wartime command center at least 10 times the size of the Pentagon, according to current and former American officials.
  2. Satellite images obtained by the Financial Times show deep holes at the site that military experts assess will house large, hardened bunkers to protect Chinese military leaders during any conflict, including potentially a nuclear war.
  3. Major construction at the site, which some US intelligence analysts have dubbed "Beijing Military City", started in mid-2024, based on an assessment of satellite images obtained by the Financial Times.

Related Articles:

  • Xi Jinping Says He Is Preparing China for War — China's leadership has emphasized war readiness, announcing a 7.2% increase in the defense budget—which has doubled over the past decade—and plans to reduce dependence on foreign grain imports. China has also opened National Defense Mobilization recruitment offices across the country, while cities in Fujian Province opposite Taiwan build or upgrade air-raid shelters.
  • China Building New Mobile Piers That Could Help Possible Taiwan Invasion — Satellite images of a Chinese state-owned shipyard show six barge-like vessels with extendable ramps under construction, which analysts said could help an invasion force land heavy equipment such as tanks and artillery over Taiwan's mudflats, seawalls and concrete wave-breaking blocks onto firm ground.
  • China Is Ready for War — China's state-owned defense enterprises now account for four of the world's ten largest companies by combined defense and nondefense revenue — including the two largest, Aviation Industry Corporation of China and China State Shipbuilding — and five of the top 12 by defense revenue alone, up from none in the top 100 a decade earlier.