Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Tuesday, February 18, 2025

AI Summary. The International Monetary Fund estimates Europe's internal barriers are equivalent to tariffs of 45% on manufacturing and 110% on services, leaving trade across European Union countries at less than half the level of trade across US states. Regulation of digital services is estimated to have cut profits for small European tech firms by up to 12%.

Mario Draghi Financial Times
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The IMF estimates that Europe’s internal barriers act like tariffs of 45% on manufacturing and 110% on services, “a sector that makes up around 70% of EU GDP;” such barriers limit trade across EU countries to less than half that across US states.

How much do Europe's internal barriers cost its own economy?

Core argument: The IMF estimates Europe's internal barriers are equivalent to tariffs of 45% for manufacturing and 110% for services, and trade across EU countries is less than half the level of trade across US states.

The IMF estimates that Europe’s internal barriers are equivalent to a tariff of 45% for manufacturing and 110% for services. These effectively shrink the market in which European companies operate: trade across EU countries is less than half the level of trade across US states. And as activity shifts more towards services, their overall drag on growth becomes worse. At the same time, the EU has allowed regulation to track the most innovative part of services — digital — hindering the growth of European tech firms and preventing the economy from unlocking large productivity gains. The costs of complying with GDPR, for example, are estimated to have reduced profits for small European tech firms by up to 12%. Europe has been effectively raising tariffs within its borders and increasing regulation on a sector that makes up around 70% of EU GDP. This failure to lower internal barriers has also contributed to Europe’s unusually high trade openness. Since 1999, trade as a share of GDP has risen from 31% to 55% in the eurozone, whereas in China it rose from 34% to 37% and in the US from 23% to just 25%. This openness was an asset in a globalising world. But now it has become a vulnerability. The paradox is that while internal barriers remained high, external barriers fell as globalisation accelerated. EU companies looked abroad to substitute for lack of domestic growth and imports became relatively more attractive.

Takeaways by Macro Roundup® AI

  1. The IMF estimates Europe's internal barriers are equivalent to tariffs of 45% for manufacturing and 110% for services, and trade across EU countries is less than half the level of trade across US states.
  2. Compliance costs from GDPR are estimated to have reduced profits for small European tech firms by up to 12%, with EU regulation falling on services, a sector making up around 70% of EU GDP.
  3. Eurozone trade as a share of GDP rose from 31% in 1999 to 55%, versus 34% to 37% in China and 23% to 25% in the US, an openness that was an asset in a globalising world but has become a vulnerability.

Related Articles:

  • 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.
  • 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.
  • How German Industry Can Survive the Second China Shock — The European Union has 30mm manufacturing jobs, and China has grown from a $4tn economy producing under 15% of global manufacturing output to an $18tn economy producing over a third, with well over 50% of global capacity in many sectors. European tariffs on Chinese electric vehicles limit import competition but do not offset lost export markets.

AI Summary. Eleven studies find declines in life satisfaction and happiness among young adults in the US, Australia, Canada, Ireland, New Zealand, and the UK. In these countries life satisfaction now rises with age across the lifespan, as young people's life satisfaction dropped sharply while that of people 45 and over stayed flat.

Jean Twenge and David Blanchflower National Bureau of Economic Research
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.@jean_twenge and David Blanchflower cite 11 studies confirming a decline in life satisfaction particularly among the unmarried young. “The U-shape in wellbeing by age that used to exist…is now gone, replaced by a crisis in wellbeing among the young.”

Is life satisfaction falling among young adults in English-speaking countries?

Core argument: Eleven studies show declining life satisfaction and happiness among young adults over the past decade or so in the U.S., Australia, Canada, Ireland, New Zealand, and the UK.

Eleven studies show declines in life satisfaction and happiness among young adults in the last decade or so. We found evidence for this in the U.S, and in Australia, Canada, Ireland. New Zealand and the UK. There is broad evidence across all of these English-speaking countries that happiness and life satisfaction since 2020 rise with age. There is an initial hump in the data in the early 20s before the life satisfaction declines to a low in midlife and then picks up. This is shown in Chart 1 using single year of age data. By 2022-2024 life satisfaction rises in age across the lifespan. Parts 2 and 3 of the table report data for the married and the nonmarried. The evidence of the initial hump is present for the married but not the non-married, where there is an obvious U-shape through 2015-2018. These phenomena have not been observed in any other country, which in general had lower marriage and divorce rates. [But] by 2022-2024 everything had changed, and both the married and unmarried show rising satisfaction in age. The life satisfaction of the young dropped sharply between 2016-2018 and 2022-2024. For those age 45 and over it remained basically flat.

Takeaways by Macro Roundup® AI

  1. Eleven studies show declining life satisfaction and happiness among young adults over the past decade or so in the U.S., Australia, Canada, Ireland, New Zealand, and the UK.
  2. Life satisfaction of the young dropped sharply between 2016–2018 and 2022–2024, while for those aged 45 and over it remained basically flat.
  3. Through 2015–2018 an initial hump in life satisfaction in the early 20s appeared among the married but not the non-married, who showed a U-shape; by 2022–2024 both groups show satisfaction rising with age.

Related Articles:

  • The Declining Mental Health of the Young in the UK — The authors find the incidence of mental ill-health in the UK has been rising, especially among young people and particularly in Scotland, with well-being of the young declining sharply from around 2013 and women most affected. Because the growth began in the 1990s, the authors argue smartphones cannot account for all of the increase.
  • 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%.
  • Gen Z Really Does Have a Work Ethic Problem — Long-running nationally representative surveys of U.S. 12th graders show the share saying they want to do their best at a job "even if this sometimes means working overtime" fell from 54% to 36%, a relative drop of 33% in two years, after work ethic measures had recovered among Gen Z in the 2010s.

AI Summary. US electricity demand is projected to grow about 2% annually over 2025-2027, an upward revision from an earlier 1% forecast. A study commissioned by the US Department of Energy found data centre electricity use rose from about 60 TWh in 2014 to 176 TWh in 2023, and could reach 325-580 TWh by 2028.

Eren Çam, Marc Casanovas and John Moloney International Energy Agency
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.@IEA expects US electricity demand growth of 2% annually from 2025-2027, up from a prior 1% forecast, largely driven by data centers. Currently, data centers consume 4% of US electricity and could reach between 6.7-12% of total demand by 2028.

How fast is US electricity demand growing as data centers expand?

Core argument: US electricity demand is forecast to grow about 2% annually over 2025–2027, an upward revision from the 1% growth projected for 2025–2026 in January 2024, putting 2026 demand roughly 100 TWh higher than previously forecast.

We expect US electricity demand to grow at an average annual rate of about 2% over the period 2025-2027. This is an upwards revision from our forecast in January 2024, which had projected 1% growth for the 2025-2026 period. With this revision, forecast US electricity demand in 2026 is now around 100 TWh higher than in our previous forecast a year ago. A recent study commissioned by the U.S. Department of Energy highlights the strong growth in electricity consumption by data centres, which rose from about 60 TWh in 2014 to 176 TWh in 2023, and constituted more than 4% of the country's total electricity use. Their scenarios indicate this consumption could rise by an additional 150 TWh to 400 TWh by 2028, reaching about 325 TWh to 580 TWh, and accounting for 6.7% to 12% of total US electricity demand. The growth trend is supported by the record pace of new data centre announcements. In the first half of 2024 alone, announced data centre projects were associated with nearly 24 GW of power capacity needs – triple the amount stated during the same period in 2023.

Takeaways by Macro Roundup® AI

  1. US electricity demand is forecast to grow about 2% annually over 2025–2027, an upward revision from the 1% growth projected for 2025–2026 in January 2024, putting 2026 demand roughly 100 TWh higher than previously forecast.
  2. US data centre electricity consumption rose from about 60 TWh in 2014 to 176 TWh in 2023, more than 4% of total US electricity use, according to a study commissioned by the U.S. Department of Energy.
  3. Data centre projects announced in the first half of 2024 were associated with nearly 24 GW of power capacity needs, triple the amount stated in the same period of 2023.

Related Articles:

  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • Grid Infrastructure Investments Drive Increase in Utility Spending Over Last Two Decades — Annual spending by major US utilities to produce and deliver electricity rose 12% over two decades to $320bn in inflation-adjusted terms, driven mainly by capital investment in infrastructure, which more than doubled. Capital spending on the distribution system that delivers power to end users increased 160%, or $31.4bn.
  • World Energy Outlook 2024 — U.S. electricity demand grew 4.4% from 2011 to 2023 but is projected to rise 25% by 2035 under current stated policies, an increase of nearly 1,000 terawatt-hours. Electric vehicles account for nearly 60% of that projected growth, followed by industry, while data centres tied to artificial intelligence contribute a modest share.

AI Summary. More than 354 companies reached $1bn valuations in a single year, but only six have since held initial public offerings, four went public via blank-check mergers, and 10 were acquired, several for less than $1bn. Fewer than 30% of that cohort has raised financing in the past three years, and nearly half of those did so at lower valuations.

Katie Roof Bloomberg
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.@Katie_Roof describes “the era of the zombie unicorn,” noting that of 354 VC-backed firms newly valued over $1B in 2021, only 10 went public via IPOs or SPACs. Many are now facing “down rounds” at lower valuations or worse—becoming “unicorpses.”

Are billion-dollar startups struggling to go public or raise new funding?

Core argument: Of the more than 354 companies that reached billion-dollar valuations in 2021, only six have since held IPOs, four went public via SPACs, and 10 were acquired, several for less than $1 billion, says Stanford's Ilya Strebulaev.

In 2021 more than 354 companies received billion-dollar valuations, thus achieving unicorn status. Only six of them have since held IPOs, says Ilya Strebulaev, a professor at Stanford Graduate School of Business. Four others have gone public through SPACs, and another 10 have been acquired, several for less than $1 billion. Fewer than 30% of the unicorns from 2021 have raised financing in the past three years, according to data provided by Carta Inc., a financial technology company working with startups. Of those, almost half have done so-called down rounds, where investors value their companies at lower levels than they’d received in the past. There are a record 1,200 venture-backed unicorns that have yet to go public or get acquired, according to CB Insights, a researcher that tracks the venture capital industry.

Takeaways by Macro Roundup® AI

  1. Of the more than 354 companies that reached billion-dollar valuations in 2021, only six have since held IPOs, four went public via SPACs, and 10 were acquired, several for less than $1 billion, says Stanford's Ilya Strebulaev.
  2. Fewer than 30% of 2021's unicorns have raised financing in the past three years, and almost half of those did down rounds at valuations below prior levels, according to Carta Inc. data.
  3. CB Insights counts a record 1,200 venture-backed unicorns that have yet to go public or be acquired.

Related Articles:

  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.
  • AI Investments Are Booming, but Venture-Firm Profits Are at a Historic Low — U.S. venture firms returned $26bn worth of shares to their investors in a year, the lowest amount since 2011, according to data provider PitchBook, and invested $60bn more than they collected — the largest such deficit in 26 years of PitchBook data. Investment remains high while acquisitions and initial public offerings are few.
  • Data Update 6 for 2025: From Macro to Micro – The Hurdle Rate Question — Valuation errors stem mainly from mistaken forecasts of growth, profitability, or reinvestment rather than from the discount rate, and no great company achieved greatness by finessing its cost of capital. The author suggests valuing a mature US company using the 8.35% median cost of capital and focusing analysis on growth and profit prospects.

AI Summary. Startup fundraising split by stage on the Carta platform: seed-stage capital raised fell 12.5% and Series A fell 6.7% year over year, while Series B rose 17.3%, Series C rose 41.8%, and Series D rose 78.8%. Across all stages, startups raised $89bn, an 18.4% increase.

Ashley Neville and Kevin Dowd Carta
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.@cartainc finds venture valuations have undergone a reset in the last two years with the rate of “down rounds” running ~ 20% in the last two years up from ~ 10% between 2019 and mid-2022.

Is startup fundraising rising at later stages while early stages decline?

Core argument: Startups on Carta raised $89 billion across all stages in 2024, an 18.4% increase from 2023.

The venture fundraising landscape of 2024 was a tale of two markets. In the early-stage market, fundraising activity pulled back slightly from the year before, even as median valuations ticked up. Seed-stage startups on Carta raised 12.5% less capital in 2024 than they did in 2023. At Series A, capital raised decreased by 6.7%. In the middle- and late-stage markets, on the other hand, 2024 was a year of recovery. Capital invested at Series B rose by 17.3% last year. Series C startups raised 41.8% more capital than the year before, while Series D saw a 78.8% spike. Back in 2022 and 2023, these more-mature companies felt the sharpest pains from the post-pandemic slowdown in fundraising activity. In 2024, they experienced what could be the beginnings of a resurgence. And if we take the market as a whole, the impact of this resurgence is clear. Across all stages, startups on Carta combined to raise $89 billion in new funding in 2024, an 18.4% increase from 2023.

Takeaways by Macro Roundup® AI

  1. Startups on Carta raised $89 billion across all stages in 2024, an 18.4% increase from 2023.
  2. Middle- and late-stage fundraising on Carta recovered in 2024, with capital invested rising 17.3% at Series B, 41.8% at Series C, and 78.8% at Series D.
  3. Early-stage fundraising on Carta pulled back in 2024, with seed-stage capital raised down 12.5% and Series A down 6.7% from 2023, even as median valuations ticked up.

Related Articles:

  • State of Private Markets: Q3 2024 — More than 20% of new venture investments on the Carta platform were down rounds, in which startups raise capital at reduced valuations, one of the highest quarterly shares since at least 2019. Venture-backed valuations have undergone a reset after reaching all-time highs, and the average interval between priced rounds has lengthened.
  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.
  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.

AI Summary. China's imports of manufactured goods have grown by an average of only $15bn a year over six years — flat after inflation — while its manufactured exports have grown by over $150bn a year, with export volume rising three times as fast as global trade. The article argues this leaves other countries unable to compete and dependent on Chinese-made goods.

Brad Setser New York Times
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.@Brad_Setser notes that China’s exports of manufactured goods have grown over $150B/year over the past six years, while its imports have grown only $15B/year, and argues “Mr. Xi has a one-way vision of trade.”

Is China's manufacturing trade a one-way street that leaves others dependent?

Core argument: China's manufactured exports grew by over $150 billion a year over the past six years, more than 10 times the $15 billion average annual rise in its imports of such goods, which is essentially flat after inflation.

Over the past six years, China’s imports of such goods increased by an average of only $15 billion a year, essentially no change at all when inflation is taken into account. Its manufactured exports, on the other hand, have grown more than 10 times as fast, by over $150 billion a year. When it comes to manufactured goods, trade with China is virtually a one-way street. All told, Chinese export volume is growing three times as fast as global trade. This means China’s success is directly coming at the expense of manufacturers in other countries, which increasingly cannot compete and face pressure to abandon sectors that China targets. With China’s real estate market still in the doldrums, the pattern shows no signs of changing. This points to a world economy in which China has no need for the industrial inputs of other countries while leaving those countries dependent on Chinese-made goods — and vulnerable to Beijing’s political and economic pressure.

Takeaways by Macro Roundup® AI

  1. China's manufactured exports grew by over $150 billion a year over the past six years, more than 10 times the $15 billion average annual rise in its imports of such goods, which is essentially flat after inflation.
  2. Chinese export volume is growing three times as fast as global trade, which the author argues comes at the expense of manufacturers elsewhere that cannot compete and face pressure to abandon sectors China targets.
  3. With China's real estate market still in the doldrums, the author sees the pattern continuing toward a world economy in which China does not need other countries' industrial inputs while those countries depend on Chinese-made goods and are vulnerable to Beijing's political and economic pressure.

Related Articles:

  • China’s Stunning 2024 Export Growth — Chinese export volumes are up 13% year-over-year while import volumes are up only 2%, a gap that with exports at about 20% of GDP implies a net exports contribution to Chinese growth of close to 2% of GDP. Falling Chinese export prices mean export volumes are growing much faster than the dollar value of exports.
  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.
  • 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.

Wednesday, February 19, 2025

AI Summary. Across more than 31,000 global venture capital deals, 62% lost money and over half lost 50–100% of invested capital, offset by tails far fatter than those of public equities or buyouts. The U.S. venture industry held $1.3tn in assets under management and owned more than 58,000 companies in aggregate.

Michael Mauboussin and Dan Callahan Morgan Stanley
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.@mjmauboussin finds that venture capital, as an asset class, loses more frequently than it wins: 62% percent of global venture capital deals from the mid-1990s to 2018 lost money. But the wins “are so large they offset the losses in the aggregate.”

Do most venture capital deals lose money?

Core argument: Across more than 31,000 global venture capital deal observations from the mid-1990s to 2018, 62% lost money and over half of all deals lost 50–100% of invested capital.

The venture capital industry had $1.3 trillion in AUM in the U.S. in mid-2024, according to PitchBook, a financial data company that tracks private markets. Venture capital funds commonly make 10-50 investments per fund, with funds that invest in later stages on the low side and those that invest in earlier stages on the high side, and own more than 58,000 companies in aggregate. Exhibit 17 shows in excess of 31,000 observations of returns, measured as multiples of invested capital at the beginning of the period, for global venture capital deals. These results are also from the mid-1990s to 2018. 62% percent lose money and more than one-half of all deals lost 50 to 100% of invested capital. The offset is that the tails are much fatter than those for public equities or buyouts.

Takeaways by Macro Roundup® AI

  1. Across more than 31,000 global venture capital deal observations from the mid-1990s to 2018, 62% lost money and over half of all deals lost 50–100% of invested capital.
  2. Venture capital deal returns have much fatter tails than those for public equities or buyouts, offsetting the majority of deals that lose money.
  3. U.S. venture capital had $1.3 trillion in assets under management in mid-2024, according to PitchBook, with funds commonly making 10–50 investments each—fewer at later stages, more at earlier stages—and owning more than 58,000 companies in aggregate.

Related Articles:

  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • 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. Using regional variation in technology exposure, the authors estimate that digital technology adoption is associated with employment declines concentrated among high-skill and female workers, a departure from earlier information technology and robot adoption, which mainly affected male and low-skill workers. Effects vary by industry, with the largest declines in non-information-technology services.

Sangmin Aum and Yongseok Shin National Bureau of Economic Research
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In cross-regional data on adoption of AI, big data, and IoT in Korea, Aum and Shin find employment fell for high-skill and female workers – especially in non-IT services – but rose for those with a high school education or less.

Does digital technology adoption reduce employment for high-skill and female workers?

Core argument: Exploiting regional variations in technology exposure, the analysis finds digital technology adoption has significantly reduced employment of high-skill and female workers, a departure from the IT revolution and robot adoption, which primarily affected male and low-skill workers.

Exploiting regional variations in technology exposure, our analysis reveals several key findings. First, digital technology adoption has had a significant negative impact on high-skill and female workers, marking a departure from earlier technological changes, such as the IT revolution and robot adoption, which primarily affected male and low-skill workers. [Employment of workers with high school or less has significantly risen in the Table 1 data.] Employment effects vary by industry, with the most pronounced negative impacts observed in the non-IT services industry. The occupations most affected differ across industries: Craft jobs in manufacturing, professionals in IT services, and elementary occupations in other services have all experienced significant declines. The analysis of job vacancies shows an interesting dynamic. While digital technologies reduce employment in certain sectors, they simultaneously increase demand for workers with new skill sets, particularly in IT services, where vacancies for professionals have increased even as their employment declined.

Takeaways by Macro Roundup® AI

  1. Exploiting regional variations in technology exposure, the analysis finds digital technology adoption has significantly reduced employment of high-skill and female workers, a departure from the IT revolution and robot adoption, which primarily affected male and low-skill workers.
  2. The most pronounced negative employment effects of digital technology appear in non-IT services, with significant declines in craft jobs in manufacturing, professionals in IT services, and elementary occupations in other services.
  3. Vacancies for professionals in IT services have increased even as their employment declined, indicating digital technologies raise demand for workers with new skill sets while reducing employment in certain sectors.

Related Articles:

  • Is Software Eating the World? — Using Korean firm- and establishment-level data, the authors estimate that equipment and labor are complements (elasticity 0.6) while software and labor are substitutes (1.6). They find production reallocates toward software-intensive firms, which have higher markups and lower labor shares, raising the aggregate markup and reducing the aggregate labor share.
  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.
  • Technological Disruption in the Labor Market — The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.

AI Summary. Germany has lost nearly 250,000 manufacturing jobs since the start of the Covid pandemic, and energy-intensive companies are producing nearly 20% less than before Russia's war in Ukraine, according to the Federal Statistical Office. Volkswagen, Thyssenkrupp and BASF together shed €50bn, or 34%, of their market value over five years.

Patricia Nilsson, Patrick Mathurin, and Laura Pitel Financial Times
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Germany has lost ~250K manufacturing jobs since COVID. High energy costs, weak demand, and competition from China hit the auto and energy-intensive sectors hardest, with energy-intensive firm production down 20% since 2022.

How steep are Germany's manufacturing job and output losses?

Core argument: Germany has lost almost 250,000 manufacturing jobs since the start of the Covid pandemic, with companies and politicians warning that Europe's industrial heartland faces irreversible decline.

Germany has lost almost a quarter of a million manufacturing jobs since the start of the Covid pandemic as companies and politicians sound the alarm that Europe’s industrial heartland is suffering an irreversible decline. Energy-intensive companies in Germany are now producing nearly 20% less than before [The Russo-Ukraine War], according to the Federal Statistical Office. The contraction of Germany’s industry is evident in the fall of market value in the sector. Together, Dax constituents Volkswagen, Thyssenkrupp and BASF have lost €50bn, or 34%, in market capitalisation over the past five years. From 2010 to 2014, carmakers on the Dax index were more valuable on average than their peers in any other sector, but valuations have slipped as demand has started to falter. VW’s deliveries to customers last year slumped by nearly a fifth compared with the pre-pandemic year of 2019. In other industrials, steelmaker Thyssenkrupp has announced plans to reduce its production capacity by up to a quarter and cut 40% of jobs.

Takeaways by Macro Roundup® AI

  1. Germany has lost almost 250,000 manufacturing jobs since the start of the Covid pandemic, with companies and politicians warning that Europe's industrial heartland faces irreversible decline.
  2. Energy-intensive German companies are producing nearly 20% less than before the Russo-Ukraine war, according to the Federal Statistical Office.
  3. Dax constituents Volkswagen, Thyssenkrupp and BASF have together lost €50bn, or 34%, in market capitalisation over the past five years, and Thyssenkrupp plans to cut production capacity by up to a quarter and 40% of jobs.

Related Articles:

  • 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.
  • Europe is Pricing Itself Out of Existence — Europe paid 166.3% more for its primary energy mix than it would have using conventional sources, equal to 5.6% of GDP rather than 3.37%, which the author argues largely explains minimal European growth. European Union primary energy consumption has fallen 17.47% from its peak, with renewables at 16.6% of the mix and renewable electricity priced at 5x conventional.
  • How German Industry Can Survive the Second China Shock — The European Union has 30mm manufacturing jobs, and China has grown from a $4tn economy producing under 15% of global manufacturing output to an $18tn economy producing over a third, with well over 50% of global capacity in many sectors. European tariffs on Chinese electric vehicles limit import competition but do not offset lost export markets.

AI Summary. Whether real U.S. infrastructure investment rose or fell depends on the inflation index used: the Bureau of Economic Analysis's official price index implies real highway spending rose 11% since 2019, while the National Highway Construction Cost Index, an outlier showing much higher cost inflation, implies a decline. Physical measures of highway miles also show increases.

Ernie Tedeschi and Eric Van Nostrand Briefing Book
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.@ernietedeschi & @vannostrand criticize @jasonfurman’s use of the National Highway Construction Cost Index, “an outlier,” to conclude that real highway spending fell under Biden. Using the BEA’s deflator, real highway spending has risen 11% since 2019.

Has real U.S. infrastructure investment risen or fallen since 2019?

Core argument: Real U.S. highway spending has risen 11 percent since 2019 when deflated with the official Bureau of Economic Analysis price index, according to the authors.

Whether real infrastructure investment rose significantly or fell turns on the specific price index used to adjust for inflation. We find that using the official price index that the Bureau of Economic Analysis (BEA) uses to deflate these data, real highway spending has risen 11 percent since 2019. Professor Furman’s claim that it has fallen depends on using something different, the National Highway Construction Cost Index (NHCCI). The NHCCI is an outlier relative to other measures of highway spending costs. It has shown much more inflation than the official price index, therefore showing less real investment than BEA’s official published series. We also explore non-spending measures of real infrastructure, including miles of highway measured by the Federal Highway Administration and inferred from OpenStreetMap. These measures both show an increase in highway construction since the BIL was passed.

Takeaways by Macro Roundup® AI

  1. Real U.S. highway spending has risen 11 percent since 2019 when deflated with the official Bureau of Economic Analysis price index, according to the authors.
  2. Professor Furman's claim that real highway investment has fallen depends on the National Highway Construction Cost Index, which the authors call an outlier relative to other highway cost measures, showing more inflation and thus less real investment than BEA's series.
  3. Non-spending measures — highway miles from the Federal Highway Administration and miles inferred from OpenStreetMap — both show an increase in highway construction since passage of the Bipartisan Infrastructure Law.

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  • The Post-Neoliberal Delusion — An expansionary policy agenda focused on demand while neglecting supply-side impediments such as permitting obstacles, and the author argues a surge in public spending crowds out private investment. Highway spending rose 36% over a five-year period, but construction costs rose more, leaving real infrastructure spending down 17%.
  • So, Why Didn’t the 2009 Recovery Act Improve the Nation’s Highways and Bridges? — Federal highway grants under the 2009 US Recovery Act raised state highway spending by only about 19 cents per dollar, with states cutting their own contributions by roughly 81 cents per federal dollar amid recession-driven budget stress. The share of structurally deficient or functionally obsolete bridges moved little, from 26.9% to 25.4%.
  • Infrastructure Costs — Building one mile of interstate highway cost 3x more in the 1980s than in the 1960s after adjusting for inflation, an increase not attributed to geography or material and labor prices. The authors find rising incomes and housing prices statistically explain nearly all of the change, with states also building more ancillary structures and complex routes.

AI Summary. Economists at Bank of America argue the neutral interest rate has risen much more than previously thought, so policy may not be restrictive at all. The 30-year mortgage rate, typically 175–200 basis points above the 10-year Treasury yield, now carries a spread of about 250 basis points, which would narrow if the yield curve steepens.

Bill McBride Calculated Risk
Date Posted:

Noting that the natural rate has risen sharply since the pandemic and the 30-year mortgage rate is typically 175-200 bps above the 10-year Treasury yield, @calculatedrisk argues “6% to 7% is the new normal for 30-year fixed mortgage rates!”

Has the neutral rate risen enough that policy isn't restrictive?

Core argument: The 30-year mortgage rate is close to 7%, about 250 bp above the 10-year Treasury yield, compared with a typical spread of 175 to 200 bp, a gap consistent with current volatility and the flat yield curve.

Economists at BofA wrote: “The most reasonable interpretation of the data flow seems to be that the neutral rate has increased a lot more than previously thought, and policy might not be restrictive at all [a view shared by Chairman Powell and much of the FOMC]. The 30-year mortgage rate is typically 175 to 200 bp above the 10-year yield. Here is a graph of the relationship between 30-year mortgage rates and the 10-year yield since 1971. The red dots are for the period Jan 2022 until today. Currently 30-year mortgage rates are close to 7%. This is a spread of about 250 bp to the 10-year yield - something we’d expect given current volatility and the flat yield curve. If the yield curve steepens - either from lower inflation or more growth - then the spread between the 10-year yield and 30-year mortgage rates will decrease.

Takeaways by Macro Roundup® AI

  1. The 30-year mortgage rate is close to 7%, about 250 bp above the 10-year Treasury yield, compared with a typical spread of 175 to 200 bp, a gap consistent with current volatility and the flat yield curve.
  2. BofA economists wrote that the most reasonable interpretation of the data flow is that the neutral rate has risen a lot more than previously thought and policy might not be restrictive at all, a view shared by Chairman Powell and much of the FOMC.
  3. If the yield curve steepens, either from lower inflation or more growth, the spread between the 10-year yield and 30-year mortgage rates will decrease.

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  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.
  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.

AI Summary. Chinese investors' holdings of US government debt fell by $57bn to $759bn, the lowest level since 2009 according to US Treasury data, which excludes Chinese-owned Treasuries held in accounts in other countries. The reported decline was likely exaggerated by assets shifting to securities depositaries in Belgium and Luxembourg.

Arjun Neil Alim, Cheng Leng and Harriet Clarfelt Financial Times
Date Posted:

China’s official US Treasury holdings have dropped to 2009 levels, down ~$550B from their 2011 peak. @Brad_Setser notes that Beijing also holds reserves in Belgium and Luxembourg which have seen Treasury holdings rise ~$676B since 2011.

Does the reported drop in China's Treasury holdings overstate actual selling?

Core argument: Chinese investors' holdings of US Treasuries fell by $57bn to $759bn in 2024, the lowest level since 2009, according to data published by the US Treasury.

The value of US sovereign debt held by Chinese investors fell by $57bn to $759bn in 2024, data published by the US Treasury on Tuesday showed. This does not include Chinese-owned Treasuries held in accounts in other countries. The decline in China’s holdings was likely to have been exaggerated by some assets being moved to securities depositaries such as Belgium-based Euroclear and Luxembourg-based Clearstream, added Brad Setser, which would boost those countries’ holdings in the official data.

Takeaways by Macro Roundup® AI

  1. Chinese investors' holdings of US Treasuries fell by $57bn to $759bn in 2024, the lowest level since 2009, according to data published by the US Treasury.
  2. The US Treasury figures exclude Chinese-owned Treasuries held in accounts in other countries.
  3. Brad Setser said the decline in China's holdings was likely exaggerated by assets moved to securities depositaries such as Belgium-based Euroclear and Luxembourg-based Clearstream, which would boost those countries' holdings in the official data.

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  • The Move in Long Rates Is Very Unusual — The Federal Reserve has cut its policy rate by 100 basis points while 10-year interest rates have risen by 100 basis points over the same stretch, a highly unusual divergence. Possible explanations include fiscal worries, weaker foreign demand for U.S. debt, or rate cuts that were not justified.
  • 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%.