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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, February 3, 2025

AI Summary. Analysis of U.S. register data finds that employment levels in places exposed to Chinese import competition more than fully rebound, while employment-to-population ratios stay depressed and manufacturing employment continues to shrink. The authors find the recovery comes almost entirely from young adults and foreign-born immigrants taking first jobs in lower-wage service sectors, with both in- and out-migration remaining depressed.

David Autor, David Dorn, Gordon Hanson, Maggie Jones and Bradley Setzler National Bureau of Economic Research
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US regions hit by China trade shocks rebounded in jobs but not in employment rates: recovery came from young workers and immigrants entering low-wage roles in health care, education, retail, and hospitality while manufacturing jobs kept shrinking.

How do places hit by import competition regain employment?

Core argument: Using U.S. register data for 2000–2019, employment levels more than fully rebound in places exposed to Chinese import competition after 2010, while employment-to-population ratios remain depressed and manufacturing employment further atrophies.

This chapter analyzes the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000–2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to-population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service sectors such as medical services, education, retail, and hospitality. Contrary to standard models, trade shocks reduce geographic mobility, with both in and out migration remaining depressed through 2019. The employment recovery stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas.

Takeaways by Macro Roundup® AI

  1. Using U.S. register data for 2000–2019, employment levels more than fully rebound in places exposed to Chinese import competition after 2010, while employment-to-population ratios remain depressed and manufacturing employment further atrophies.
  2. The adjustment of trade-exposed U.S. places is generational, with recovery coming primarily from workers who were below working age when the shock occurred entering non-manufacturing jobs in relatively low-wage services such as medical services, education, retail, and hospitality.
  3. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019, and the employment recovery stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas.

Related Articles:

  • The China Shock Revisited: Job Reallocation and Industry Switching in U.S. Labor Markets — Using U.S. Census Bureau administrative data, the authors find that rising Chinese import penetration shifted jobs from manufacturing to services far more in high human capital areas, where within-firm industry switching occurs almost exclusively, producing a net positive employment effect; in low human capital, manufacturing-dependent areas, service gains barely offset manufacturing losses.
  • Manufacturing Jobs Boom Not Reaching Places Hit By The China Shock — U.S. manufacturing job growth since the pandemic is occurring disproportionately in counties least exposed to Chinese import competition in the 2000s, according to an analysis of federal employment and wage data. The counties hardest hit by that import competition still have fewer manufacturing jobs than before the pandemic.
  • Trading Places: Mobility Responses of Native and Foreign-Born Adults to the China Trade Shock — U.S. local labor markets more exposed to import competition from China saw substantially larger net reductions in their foreign-born populations, with no significant reduction among native-born residents. Within exposed areas, foreign-born and native-born workers had comparably sized declines in employment-to-population ratios.

AI Summary. Imports and exports make up about a quarter of U.S. gross domestic product, less than in Germany, Japan, and the United Kingdom, and U.S. imports come from a fairly broad set of countries. Trade accounts for roughly 70% of Canadian and Mexican output, giving the U.S. significant leverage in negotiations with both.

Shannon O'Neil and Julia Huesa Council on Foreign Relations
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Canada and Mexico are highly dependent on the US market: in 2023, 78% of Canadian goods exports and 80% of Mexican goods exports went to the US. 14% of US goods imports came from Canada, 15% from Mexico, and 14% from China. @shannonkoneil

Does lower trade reliance give the US leverage over neighbors?

Core argument: Imports and exports account for about a quarter of U.S. GDP, leaving the United States less reliant on trade than industrialized peers including Germany, Japan, and the United Kingdom.

The United States is less reliant on trade than many other industrialized economies, including Germany, Japan, and the United Kingdom. Imports and exports make up just a quarter of U.S. gross domestic product (GDP), and the United States sources what it does import from a fairly broad set of nations. Tariffs will hit Canada and Mexico much harder, as trade makes up about 70% of both economies’ GDP. Asymmetries in the cost of tariffs at home give the U.S. significant leverage over its North American partners in negotiations.

Takeaways by Macro Roundup® AI

  1. Imports and exports account for about a quarter of U.S. GDP, leaving the United States less reliant on trade than industrialized peers including Germany, Japan, and the United Kingdom.
  2. Trade makes up about 70% of GDP in both Canada and Mexico, so U.S. tariffs would hit those economies much harder than the United States itself.
  3. The United States sources its imports from a fairly broad set of nations, and asymmetries in the domestic cost of tariffs give it significant leverage over its North American partners in negotiations.

Related Articles:

  • Gramm and Summers: A Letter on Tariffs From Economists to Trump — 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.
  • 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.
  • 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.

AI Summary. Canadian oil is shipped to the midwestern United States because pipelines make it a nearby market, while North American manufacturing, especially autos, relies on an integrated just-in-time production system in which lower-wage Mexico specializes in labor-intensive stages. These exports, which account for the bilateral trade deficits, make America richer by lowering energy costs and making U.S. manufacturing more competitive.

Paul Krugman Krugman Wonks Out
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.@paulkrugman notes both Canada and Mexico run overall current account deficits, and that “Canadian oil makes our energy cheaper; by handling the labor-intensive aspects, Mexico makes US manufacturing more competitive.”

Do trade deficits with neighboring countries make America richer?

Core argument: Canada's tar sands oil flows to the midwestern United States because pipelines make it a nearby accessible market, and Krugman argues such exports account for the bilateral deficit while making U.S. energy cheaper.

Oil from Canada’s tar sands is shipped to the midwestern United States because it’s a nearby market that can be accessed by pipelines. Mexico’s story is a bit subtler. Much of North American manufacturing, especially autos, reflects a highly integrated production system that sprawls across all three countries. This system relies on just-in-time production — that is, automotive factories have to be located close enough that their inputs and outputs can arrive quickly by road and rail, rather than taking several weeks to cross the Pacific. Mexico, which has much lower wages than the U.S. or Canada, specializes in the more labor-intensive aspects of production. And I’m reasonably sure that Mexico’s exports of labor-intensive segments of the value chain play a similar role in bilateral imbalances to that played by Canada’s oil exports. Pretty clearly, the Canadian and Mexican exports that account for our bilateral deficits make America richer than it would be without them. Canadian oil makes our energy cheaper; by handling the labor-intensive aspects of production, Mexico makes U.S. manufacturing more competitive.

Takeaways by Macro Roundup® AI

  1. Canada's tar sands oil flows to the midwestern United States because pipelines make it a nearby accessible market, and Krugman argues such exports account for the bilateral deficit while making U.S. energy cheaper.
  2. North American manufacturing, especially autos, operates as a highly integrated production system across the United States, Canada, and Mexico that depends on just-in-time delivery by road and rail rather than multi-week Pacific shipping.
  3. Mexico, with much lower wages than the United States or Canada, specializes in labor-intensive segments of the value chain, which Krugman argues makes U.S. manufacturing more competitive and plays a role in bilateral imbalances similar to Canadian oil.

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. The European Union has grown 5% since the end of 2019 while the U.S. expanded 12%, and seven U.S. stocks are worth more than the combined stock markets of Britain, Germany, France, Italy, Spain, the Netherlands and Switzerland. The bloc's priorities shifted from prosperity toward protection of privacy, data and the climate, followed by extensive regulation.

Greg Ip Wall Street Journal
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Since the end of 2019, the US economy has grown by 12% vs. 5% for the EU. @greg_ip notes that seven US stocks are worth more than the combined market capitalization of major European stock markets.

Has Europe's shift from prosperity to protection slowed its economic growth?

Core argument: The EU economy has grown 5% since the end of 2019, compared with 12% expansion in the U.S. over the same period.

Since the end of 2019 the EU has grown 5% while the U.S. has expanded 12%. Seven U.S. stocks are worth more than the stock markets of Britain, Germany, France, Italy, Spain, the Netherlands and Switzerland, combined. Europeans see their mess as mostly their own making. At the founding of the European project in 1958, its overriding purpose was to tear down barriers to competition and trade among members and to create an internal market with the same freedom of movement, scale and efficiency as the U.S. But sometime in the last 15 years, the bloc’s priorities shifted, from prosperity toward protection—of privacy, of data, of the climate. A tsunami of regulation on everything from website disclosures to carbon emissions followed. Those priorities look badly out of step with today’s reality.

Takeaways by Macro Roundup® AI

  1. The EU economy has grown 5% since the end of 2019, compared with 12% expansion in the U.S. over the same period.
  2. Seven U.S. stocks are worth more than the combined stock markets of Britain, Germany, France, Italy, Spain, the Netherlands and Switzerland.
  3. The EU's priorities shifted over the last 15 years from prosperity toward protection of privacy, data and the climate, followed by extensive regulation spanning website disclosures to carbon emissions, departing from the European project's 1958 purpose of tearing down barriers to competition and trade.

Related Articles:

  • Why the U.S. Economy Is Trouncing Europe’s — Only about 12% of Americans score at the highest levels on international academic tests versus 34% at the lowest, yet the U.S. has created nearly 250 companies worth over $10bn ($30tn in value) against Europe's 14, and median U.S. disposable household income is 25% above Germany's. The author argues expanding high-skilled immigration is the fastest way to accelerate growth.
  • 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.
  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.

AI Summary. Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men declined, with the overall decline in marriage driven almost entirely by fewer marriages between non-college women and non-college men. The education gap in women's marriage rates is larger in areas where non-college men face the highest joblessness and incarceration.

Clara Chambers, Benjamin Goldman, and Joseph Winkelmann Harvard University
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The rise in female college enrollment from 1930-80 hasn’t reduced marriage rates for college women. “The overall decline in marriage rates is driven almost entirely by a sharp drop in marriages between non-college women and non-college men.”

Are declining marriage rates concentrated among women without college degrees?

Core argument: Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men steadily declined, counter to the prediction that growing gender education gaps would reduce their marriage prospects.

We show that historical trends over the past half-century and cross-area comparisons from recent cohorts do not support the prediction that growing gender gaps in education will reduce marriage rates for college-educated women. Instead, the data suggest that worsening male outcomes primarily diminish the marriage prospects of non-college women. We show that marriage rates for college-educated women have remained stable over the past fifty years, even as the relative supply of college-educated men has steadily declined. The overall decline in marriage rates is driven almost entirely by a sharp drop in marriages between non-college women and non-college men, who have experienced significant declines in economic and social outcomes over this period. Second, we show that data from recent cohorts across different regions of the U.S. align closely with these historical patterns. In particular, the education gap in marriage rates for women is substantially larger in areas where non-college men face the highest rates of joblessness and incarceration. [Further analysis] shows a consistent and clear correlation across all racial and ethnic groups between the outcomes of men from low-income families and the marriage rates of women from low-income families.

Takeaways by Macro Roundup® AI

  1. Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men steadily declined, counter to the prediction that growing gender education gaps would reduce their marriage prospects.
  2. The overall decline in marriage rates is driven almost entirely by a sharp drop in marriages between non-college women and non-college men, who experienced significant declines in economic and social outcomes over this period.
  3. Across U.S. regions, the education gap in women's marriage rates is substantially larger where non-college men face the highest rates of joblessness and incarceration, with a consistent correlation across all racial and ethnic groups between outcomes of men from low-income families and marriage rates of women from low-income families.

Related Articles:

  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.
  • Men’s Falling Labor Force Participation Across Generations — Each successive generation of prime-age men has shown higher rates of not participating in the labor force, with millennials starting at a higher level and declining more steeply into their mid-30s, a pattern driven by school enrollment. Given rising educational attainment, the authors suggest the sustained rise in male nonparticipation may slow, which could benefit economic growth.
  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.

AI Summary. Marriage and coupling rates are declining across many countries, with the marriage rate for people under 30 in England and Wales down by more than 50% and annual marriages in Iran falling 40% over a decade. The author argues rising expectations among women and falling fortunes for lower-income men are subverting marriage's traditional role as economic insurance.

Derek Thompson The Atlantic
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Globally the rise in women’s expectations and a decline in lower-income men’s fortunes is “subverting the traditional role of straight marriage, in which men are seen as necessary for the economic insurance of their family.” @DKThomp

Why are marriage rates falling around the world?

Core argument: The marriage rate for people under 30 in England and Wales has fallen by more than 50% since 1990, part of a broader decline in coupling across Europe.

Rates of coupling are declining throughout Europe, as well. In England and Wales, the marriage rate for people under 30 has declined by more than 50% since 1990. And it’s not just Europe. The gender researcher Alice Evans has shown that coupling is down just about everywhere. In Iran, annual marriages plummeted by 40% in 10 years. Some Islamic authorities blame Western values and social media for the shift. They might have a point. When women are exposed to more Western media, Evans argues, their life expectations expand. If I had to sum up this big messy story in a sentence, it would be this: Coupling is declining around the world, as women’s expectations rise and lower-income men’s fortunes fall; this combination is subverting the traditional role of straight marriage, in which men are seen as necessary for the economic insurance of their family.

Takeaways by Macro Roundup® AI

  1. The marriage rate for people under 30 in England and Wales has fallen by more than 50% since 1990, part of a broader decline in coupling across Europe.
  2. Annual marriages in Iran fell 40% over 10 years, a shift some Islamic authorities blame on Western values and social media.
  3. Gender researcher Alice Evans argues coupling is declining nearly everywhere as women's expectations expand with exposure to Western media while lower-income men's fortunes fall, subverting marriage's traditional role of men as economic insurance for the family.

Related Articles:

  • Bachelors Without Bachelor’s: Gender Gaps in Education and Declining Marriage Rates — Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men declined, with the overall decline in marriage driven almost entirely by fewer marriages between non-college women and non-college men. The education gap in women's marriage rates is larger in areas where non-college men face the highest joblessness and incarceration.
  • They Used to Be Ahead in the American Economy. Now They’ve Fallen Behind — An analysis of census and American Community Survey microdata compares the average income of full-time workers in specific demographic groups and occupations with the national average for full-time workers, showing how each group's relative economic standing has shifted over the decades.
  • 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%.

Tuesday, February 4, 2025

AI Summary. Using registration and migration records for 212m U.S. voters, the authors find residential segregation between Democrats and Republicans increased at every geographic level from neighborhoods to Congressional districts. They attribute this less to partisans moving away from each other than to electorate turnover in Democratic-trending areas and party realignment in Republican ones.

Jacob Brown, Enrico Cantoni, Ryan Enos, Vincent Pons and Emilie Sartre National Bureau of Economic Research
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Over 2008-2020 residential segregation along party lines rose at all geographic levels. Increased concentrations of Democrats were driven by the rise of new, younger voters, and of Republicans by established voters’ switching to the GOP. @VinPons

Is rising partisan geographic segregation driven by voters moving apart?

Core argument: Using residential location and migration data for 212 million voters in U.S. states recording partisan registration between 2008 and 2020, the authors find residential segregation between Democrats and Republicans rose year over year at every geographic level, from neighborhoods to Congressional Districts.

Using data on the residential location and migration for every voter in U.S. states recording partisan registration between 2008–2020, we find that residential segregation between Democrats and Republicans has increased year over year at all geographic levels, from neighborhoods to Congressional Districts. We decompose the change in segregation into different sources. In Democratic trending places, the most impactful factors are the transformations of the American electorate: influxes of new Democratic-leaning young voters and older first-time registrants replacing voters who are dying or de-registering. In Republican areas, forces of partisan realignment are the most prominent factor driving partisan segregation: voters leaving the Democratic party and registering as Republicans or unaffiliated. Thus, rising geographic polarization is less about Democrats and Republicans fleeing from each other and more about macro-level forces shaping the types of people each party represents and the demographic composition of the U.S. electorate.

Takeaways by Macro Roundup® AI

  1. Using residential location and migration data for 212 million voters in U.S. states recording partisan registration between 2008 and 2020, the authors find residential segregation between Democrats and Republicans rose year over year at every geographic level, from neighborhoods to Congressional Districts.
  2. In Democratic-trending places, the authors identify transformations of the electorate as the most impactful driver of partisan segregation, with influxes of Democratic-leaning young voters and older first-time registrants replacing voters who die or de-register.
  3. In Republican areas, the authors find partisan realignment is the most prominent factor driving segregation, as voters leave the Democratic party to register as Republicans or unaffiliated, rather than Democrats and Republicans relocating away from each other.

Related Articles:

  • The Economic Geography Of The 2024 Elections — Counties where government transfer programs such as Social Security, Medicare, Medicaid, and unemployment insurance make up at least a quarter of personal income gave Trump 63% of the vote, while counties where transfers account for less than 15% gave Harris 56%. Transfers supplied 18% of total US personal income.
  • “Compensate the Losers?” Economic Policy and Partisan Realignment in the US — The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
  • The Demographic Detail of Donald Trump’s Victory — The foreign-born share of a county's population explains half the geographic variation in the electoral swing between the 2020 and 2024 US presidential elections, a stronger predictor than the white-working-class share was of earlier shifts. Because the level of the immigrant population aligns with voting patterns rather than its growth rate, the analysis suggests immigrants themselves changed their votes.

AI Summary. Government spending and fiscal deficits exceeding 23% and 6% of GDP late in the business cycle have absorbed savings and pushed mortgage rates to 7%, according to this argument. Higher rates have driven existing single-family home sales down 20% from their pre-pandemic peak, roughly the financial-crisis trough level.

Edward Conard Macro Roundup
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Who is paying for Biden’s blowout spending that exceeds 23% of GDP w/ 6% deficits that suck down savings, drive mortgage rates to 7%, and sales of existing homes down to their trough at the depths of the financial crisis—20% below their pre-COVID level.

Are government deficits pushing mortgage rates up and home sales down?

Core argument: Sales of existing family homes are down 20% from their pre-COVID peak, placing them approximately at the trough reached during the financial crisis.

Who is paying the price of the Biden administration's blowout spending? Unprecedented government spending and resulting fiscal deficits--which exceed 23% and 6% of GDP late in the business cycle--have sucked up savings, driven mortgage rates up to 7%, which in turn has driven sales of existing family homes down 20% from their recent pre-COVID peak. Home sales are now approximately at the trough of the financial crisis.

Takeaways by Macro Roundup® AI

  1. Sales of existing family homes are down 20% from their pre-COVID peak, placing them approximately at the trough reached during the financial crisis.
  2. Government spending exceeding 23% of GDP and fiscal deficits exceeding 6% of GDP late in the business cycle have absorbed savings and driven mortgage rates up to 7%, according to the author.
  3. The author attributes the 20% decline in existing home sales to mortgage rates rising to 7% as government borrowing consumed available savings.

Related Articles:

  • Inflation Adjusted House Prices 1.1% Below 2022 Peak — Inflation-adjusted US house prices are 1.1% below their 2022 peak, based on the Case-Shiller National Index. An affordability measure combining median income, house prices, and 30-year fixed mortgage rates shows the monthly principal-and-interest payment on the same house rose about 80% over three years, as prices climbed 18% and mortgage rates went from roughly 3.07% to 6.81%.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Why Housing May Be In for Another Cost Shock Next Year — 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.

AI Summary. The U.S. Army missed its recruiting goal by nearly 25%—about 15,000 troops a year—before meeting it after cutting the target by more than 10,000, while the Navy met goals by accepting lower-scoring recruits. A Pentagon study finds more than three-quarters of Americans aged 17–24 are ineligible to serve.

Dexter Filkins The New Yorker
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DoD found over 75% of Americans between 17 and 24 are ineligible for military service due to being “overweight, unable to pass the aptitude test, afflicted by physical or mental health issues, or disqualified by such factors as a criminal record.”

Are most young Americans ineligible for military service?

Core argument: The U.S. Army missed its recruitment goal by nearly 25%—about 15,000 troops a year—in 2022 and 2023, then met its target the following year only after cutting it by more than 10,000.

In 2022 and 2023, the Army missed its recruitment goal by nearly twenty-five percent—about fifteen thousand troops a year. It hit the mark last year, but only by reducing the target by more than ten thousand. The Navy has also fared badly: it failed to reach its goals in 2023, then met them in 2024 by filling out the ranks with recruits of a lower standard; nearly half measured below average on an aptitude exam. Recruiters are contending with a population that’s not just unenthusiastic but incapable. According to a Pentagon study, more than three-quarters of Americans between the ages of seventeen and twenty-four are ineligible, because they are overweight, unable to pass the aptitude test, afflicted by physical or mental-health issues, or disqualified by such factors as a criminal record.

Takeaways by Macro Roundup® AI

  1. The U.S. Army missed its recruitment goal by nearly 25%—about 15,000 troops a year—in 2022 and 2023, then met its target the following year only after cutting it by more than 10,000.
  2. The Navy failed to reach its recruiting goals in 2023 and met them in 2024 by accepting lower-standard recruits, with nearly half scoring below average on an aptitude exam.
  3. A Pentagon study finds more than three-quarters of Americans aged 17 to 24 are ineligible to serve because they are overweight, cannot pass the aptitude test, have physical or mental-health issues, or are disqualified by factors such as a criminal record.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts — The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.
  • US Attack Submarines to Counter China Are Running Up to Two Years Late — Deliveries of US Virginia-class attack submarines are running an estimated 24 to 36 months behind contracted dates, with builders General Dynamics and HII averaging roughly 1.2 submarines a year against a required two. The Navy projects the contractors will reach the two-a-year rate by 2028.

AI Summary. High European natural gas prices have contributed to inflation and prompted factory closures and relocations, with chemical giant BASF closing some production in Germany while making its largest-ever foreign investment in China, where energy costs up to two-thirds less, and fertilizer maker Yara halting ammonia output in Belgium.

Stanley Reed and Liz Alderman New York Times
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Russia currently provides 8% of natural gas consumed in Europe down from 35% in 2021. Natural gas prices in Europe are ~ 4x the price in the US, which is driving deindustrialization as industrial production shifts to countries with lower-cost energy.

Are high natural gas prices driving European factories to close or relocate?

Core argument: BASF is closing some production at its Ludwigshafen site in Germany while making the largest foreign investment in its history in China, where energy costs up to two-thirds less than in Europe.

Exorbitant gas costs contributed to soaring inflation and led factories that employed thousands in Europe to close or relocate to countries with cheaper energy. Some of the biggest European names are trimming their operations. The German chemical giant BASF said it would close some production at its site in Ludwigshafen near the border with France, while making the largest foreign investment in its history in China, where energy is up to two-thirds cheaper than in Europe. High natural gas prices have translated into higher costs for making ammonia, a crucial component in fertilizers. Yara International, a fertilizer giant based in Norway, is stopping ammonia production at its plant in Tertre, Belgium, potentially leading to more than 100 job losses. “High energy prices are a huge challenge for European competitiveness,” a spokeswoman said.

Takeaways by Macro Roundup® AI

  1. BASF is closing some production at its Ludwigshafen site in Germany while making the largest foreign investment in its history in China, where energy costs up to two-thirds less than in Europe.
  2. Yara International is halting ammonia production at its Tertre plant in Belgium, potentially costing more than 100 jobs, as high natural gas prices raise the cost of making ammonia for fertilizers.
  3. Exorbitant European gas costs contributed to soaring inflation and led factories employing thousands to close or relocate to countries with cheaper energy.

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  • Germany Is Unraveling Just When Europe Needs It Most — After five years of stagnation, Germany's economy is 5% smaller than if its pre-pandemic growth trend had continued, and Bloomberg Economics estimates most of that shortfall will be hard to recover given the loss of cheap Russian energy and German automakers struggling against Chinese rivals.
  • 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. China responded to new US tariffs with a 15% levy on less than $5bn of US energy imports, a 10% fee on American oil and agricultural equipment, an antitrust investigation into Google, and export controls on tungsten and other critical metals used in electronics, aviation, and defense.

Josh Xiao Bloomberg
Date Posted:

Bloomberg characterized China’s response to new US tariffs as “seemingly designed to avoid escalating.” China is taking antitrust actions against Google, adding export controls on strategic minerals, and new levies on US oil and agricultural equipment.

Is China's retaliation to US tariffs narrowly targeted?

Core argument: China imposed a 15% levy on less than $5 billion of US energy imports and a 10% fee on American oil and agricultural equipment, moments after new US tariffs took effect.

Beijing imposed a 15% levy on less than $5 billion of US energy imports and a moderate 10% fee on American oil and agricultural equipment on Tuesday, moments after new US tariffs entered effect. China said it will also investigate Google for alleged antitrust violations, although Alphabet Inc.’s search services have been unavailable in the country since 2010. New export controls on tungsten and other critical metals used in electronic, aviation, and defense industries were also added. President Xi Jinping’s response appeared carefully calibrated to avoid major blowback on China’s economy while showing Trump an ability to inflict damage on a range of fronts, including by disrupting the key minerals supply chain and hurting US companies with major operations on the mainland.

Takeaways by Macro Roundup® AI

  1. China imposed a 15% levy on less than $5 billion of US energy imports and a 10% fee on American oil and agricultural equipment, moments after new US tariffs took effect.
  2. Beijing added export controls on tungsten and other critical metals used in electronics, aviation, and defense industries, and said it will investigate Google for alleged antitrust violations, though Alphabet's search services have been unavailable in China since 2010.
  3. Xi Jinping's response appeared calibrated to avoid major blowback on China's economy while showing an ability to disrupt the key minerals supply chain and hurt US companies with major operations on the mainland.

Related Articles:

  • China Has a $1 Trillion Head Start in Any Tariff Fight — China accounts for roughly 27% of global industrial production, up from 24% in 2018, and the United Nations projects its share will reach 45% by 2030, supported by cheap loans and subsidies that help manufacturers undercut foreign rivals on price. China's goods surplus with the US stood at $360bn, 23% larger in dollar terms than in 2018.
  • What Trump’s Trade War Would Mean, in Nine Charts — Imports and exports make up about a quarter of U.S. gross domestic product, less than in Germany, Japan, and the United Kingdom, and U.S. imports come from a fairly broad set of countries. Trade accounts for roughly 70% of Canadian and Mexican output, giving the U.S. significant leverage in negotiations with both.
  • 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. Developing countries' opening to world trade involved overhauling foreign exchange regimes — the exchange rate and allocation of foreign currency — as much as cutting tariffs and quotas, since their import restrictions originated in balance-of-payments management. Economists came to favor exchange rate adjustment over import controls, recognizing that controls hurt exports and that postponing devaluation only enlarged the eventual shock.

Douglas Irwin National Bureau of Economic Research
Date Posted:

.@D_A_Irwin argues that exchange rate reform during the 1990s, including the % of developing countries on dual or multiple exchange rates, was a reaction to shortages of foreign currency and a rejection of the distortionary quotas used to manage them.

How did developing countries open to trade beyond cutting tariffs?

Core argument: The paper identifies the balance-of-payments origin of the import restrictions that separated developing countries from the world economy during the 1985–1995 opening to trade.

The decade from 1985-1995 was a historic period in which the opening of developing countries to trade fundamentally transformed the world economy. This paper focuses on the balance of payments origin of the import restrictions that kept developing countries separated from the rest of the world. The process of opening up countries that had been largely closed to world trade involved extensive changes to the foreign exchange regime – the setting of the exchange rate and the disposition of foreign exchange – as much as changes to traditional trade policy instruments such as tariffs and quotas. Early in the postwar period, many development economists warned against devaluations and instead proposed multiple exchange rates to selectively encourage or discourage certain imports and exports. During the 1970s, economists came to recognize the costs of such import control regimes and their adverse effect on exports. Postponing a devaluation did not prevent its eventual occurrence but just ensured that the shock would be that much larger. As a result, more and more economists saw the benefits of exchange rate adjustment over import controls as a way of managing the balance of payments

Takeaways by Macro Roundup® AI

  1. The paper identifies the balance-of-payments origin of the import restrictions that separated developing countries from the world economy during the 1985–1995 opening to trade.
  2. Opening previously closed economies required extensive changes to foreign exchange regimes — the setting of the exchange rate and the disposition of foreign exchange — as much as changes to tariffs and quotas.
  3. Early postwar development economists warned against devaluation and proposed multiple exchange rates to selectively encourage or discourage imports and exports, but by the 1970s economists recognized that import control regimes harmed exports and that postponing devaluation only enlarged the eventual shock.

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