Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Monday, March 10, 2025

AI Summary. Large US venture rounds are concentrated in a few high-growth, well-known companies such as OpenAI and Anduril, while most start-ups cannot access similar capital. Industry researchers describe this as an untested departure from traditional venture investing, which backs very early companies on the expectation that one outsized winner covers portfolio losses.

George Hammond Financial Times
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US VCs invested $80B in Q4 ‘24, the highest since 2021, with 40% of total funding going to six large firms including OpenAI, xAI, and Databricks. Q1 ‘25 follows a similar pattern, with $30B raised so far and OpenAI in talks to raise $40B.

Is venture capital abandoning early-stage bets for a few giant companies?

Core argument: US venture funding may reach $80bn this quarter, with $40bn of that from a single round, a concentration PitchBook's Kyle Stanford says dwarfs even the outliers of 2021.

The huge funding rounds being carried out mark a significant departure from traditional venture capitalism, which targets nascent companies and is governed by the “power law” that states the best start-up in a portfolio will more than pay off the losses from the remainder that fail. “We’ve always thought [a venture fund’s] 50x return will come from a seed investment which they exit at IPO,” said Kyle Stanford, director of research at PitchBook. In a largely untested experiment, that logic is now being applied to companies that are orders of magnitude larger. “If you’re OpenAI or Anduril — a high-growth, named brand — you are very well positioned. The money is there for you . . . If you’re on the other side, as most companies are, the money is not there,” said Stanford. “Maybe it ends up at $80bn [raised this quarter], but $40bn of that is just one round…even the outliers in 2021 were minuscule compared to that.”

Takeaways by Macro Roundup® AI

  1. US venture funding may reach $80bn this quarter, with $40bn of that from a single round, a concentration PitchBook's Kyle Stanford says dwarfs even the outliers of 2021.
  2. The scale of these rounds departs from traditional venture capital's "power law," under which, as Stanford describes, a fund's 50x return comes from a seed investment exited at IPO, covering losses from portfolio companies that fail.
  3. Stanford says high-growth, named brands such as OpenAI and Anduril can access abundant capital while most other companies cannot, an application of venture logic to far larger companies that remains largely untested.

Related Articles:

  • Probabilities and Payoffs — 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.
  • 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.
  • The Unicorn Boom Is Over, and Startups Are Getting Desperate — 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.

AI Summary. The high-yield bond market has stayed at about $1.4tn while private credit assets have grown to as much as $2tn, and the highest-rated BB portion of the high-yield index has risen from 41% to 51%. Private markets have shifted riskier borrowers out of high yield, making that index safer.

Greg Obenshain Verdad
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As the riskiest borrowers have been absorbed by the $2T private credit market, high-yield spreads have fallen to a historically low level since 2022. @GregObenshain

Has the growth of private credit made high-yield bond indexes safer?

Core argument: Private credit lenders hold as much as $2tn of assets, according to McKinsey, exceeding both the $1.4tn Bloomberg High-Yield Index and the $1.3tn leveraged loan market measured by Fitch.

The numbers are staggering. While the Bloomberg High-Yield Index has about $1.4 trillion of bonds, it is matched by the leveraged loan market with $1.3 trillion of loans, according to Fitch, and is now exceeded by private credit lenders with as much as $2 trillion of private credit assets, according to McKinsey. While the private credit market has experienced rapid growth in the past ten years, the high-yield market is the same size as it was in 2014. Furthermore, over the same period, the share of BBs, the highest-rated portion of the index, has climbed from 41% to 51% of the high-yield index. The high-yield market has gotten safer as private markets have removed risky borrowers from high yield and expanded the pool of risky borrowers in the private credit market.

Takeaways by Macro Roundup® AI

  1. Private credit lenders hold as much as $2tn of assets, according to McKinsey, exceeding both the $1.4tn Bloomberg High-Yield Index and the $1.3tn leveraged loan market measured by Fitch.
  2. The high-yield market is the same size as it was in 2014, while private credit has grown rapidly over the same ten years.
  3. BBs, the highest-rated portion of the high-yield index, climbed from 41% to 51% of the index as private markets drew risky borrowers out of high yield and expanded the pool of risky borrowers in private credit.

Related Articles:

  • Downside Risks Intensifying — Federal workforce layoffs and contract cuts are projected by consensus to eliminate 300,000 jobs, but with studies showing two contractors for every federal employee, total job losses could approach 1mm. Economic policy uncertainty is spiking while credit spreads have not widened and incoming data remain strong.
  • The Calm Before the Storm — Private credit and direct lending have not rewritten the rules of credit risk, and much financial innovation amounts to repackaging risk in higher-fee wrappers. High-yield bonds followed a comparable path: after the 1980s boom, below-investment-grade default rates reached roughly 10.4% and 9.1% before the market matured.
  • Corporate Debt, Boom-Bust Cycles, and Financial Crises — Using a dataset on sectoral credit exposure for 115 economies, the authors find corporate debt accounts for two-thirds of credit expansion before financial crises and three-quarters of nonperforming loans during busts, and that corporate debt expansions predict crises similarly to household debt. Recoveries are slower after corporate debt booms.

AI Summary. The author argues the United States holds the upper hand in a trade conflict because it runs large trade deficits, giving it more imports to tariff than exports and more to gain if companies shift investment and supply chains home. Surplus countries in Europe are argued to suffer most, since their key industries overlap with China's strongest.

Karen Karniol-Tambour New York Times
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Karen Karniol-Tambour argues that if the US reduces its trade deficit, “Europe will suffer most, because their most important industries are exactly those where China has built the biggest advantages.”

Do trade deficits give a country the upper hand in trade wars?

Core argument: The United States holds the upper hand in the trade conflict because its large trade deficits leave it with more imports to tariff than exports, and more to gain if American companies increase domestic investment and bring supply chains home.

If the United States is unwilling to continue to run big trade deficits, it means that the “pie” available to everyone else to produce more than they consume is shrinking. The United States has the upper hand in this trade conflict precisely because it currently runs large trade deficits. It has more imports to tariff than exports, and it has more to gain should American companies respond by increasing domestic investment and bringing supply chains back home. This is the opposite of its positioning during the Great Depression-era trade war, which began with the Smoot-Hawley Tariff Act of 1930. The United States was the one running a trade surplus at the time, so it was more vulnerable to tariffs and protectionist measures. As tariffs ramp up, every country running a surplus with America will find it harder to sell its products in the United States, but those in Europe will suffer most, because their most important industries are exactly those where China has built the biggest advantages.

Takeaways by Macro Roundup® AI

  1. The United States holds the upper hand in the trade conflict because its large trade deficits leave it with more imports to tariff than exports, and more to gain if American companies increase domestic investment and bring supply chains home.
  2. If the United States stops running big trade deficits, the "pie" available to other countries to produce more than they consume shrinks.
  3. European surplus countries stand to suffer most from rising U.S. tariffs because their most important industries are those where China has built the biggest advantages, unlike the Smoot-Hawley era of 1930, when a surplus-running United States was the vulnerable party.

Related Articles:

  • 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.
  • Global Economies, Converging on Equilibrium, Confront a Geopolitical Regime Shift — Global economies are converging on a reasonable equilibrium, with developed-world central banks gradually cutting rates toward what they view as neutral, China prioritizing domestic demand after a deflationary stretch, and artificial intelligence showing potential to enhance productivity. Markets are discounting that stability, with US equity indexes pricing an even more exceptional decade than the last.
  • We Are All Mercantilists Now — The postwar free-trade system depended on American soft power and broad respect for its rules, and as countries defected to mercantilist policies each defection pushed others to respond in kind. China's economic size and its use of currency management, public procurement, state subsidies and protectionism to build leading industries in electric vehicles, solar power and batteries broke the existing order.

AI Summary. The US went from an irrelevant supplier of liquefied natural gas to the world's largest in about seven years, and BloombergNEF estimates its export capacity will expand 60%, with nearly 1 in 3 tankers of the fuel originating in the US by the end of the decade.

Kevin Crowley and Ruth Liao Bloomberg
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Bloomberg estimates that US LNG production capacity will grow 60% over the next two years, and forecasts that by 2030, ~ 1/3 of global exports will be American.

How did the US become the world's largest LNG exporter?

Core argument: BloombergNEF estimates US LNG production capacity will expand 60% during the first half of Donald Trump's second presidency, after the US went from an irrelevant LNG supplier to the world's largest in about seven years.

The US, which in the span of about seven years transformed itself from an irrelevant supplier of LNG into the world’s largest, is set to expand its production capacity by 60% in the first half of Donald Trump’s second presidency, according to an estimate from BloombergNEF. By the end of the decade, almost 1 in every 3 tankers carrying the super chilled fuel will originate in the US, giving Trump his best chance to attain the energy dominance his campaign promised. US natural gas prices have averaged $3.55 per million British thermal units over the past five years, about 70% lower than the European average, providing the economy with a major competitive advantage and helping to underpin both Biden and Trump’s policies to bring US manufacturing back from overseas

Takeaways by Macro Roundup® AI

  1. BloombergNEF estimates US LNG production capacity will expand 60% during the first half of Donald Trump's second presidency, after the US went from an irrelevant LNG supplier to the world's largest in about seven years.
  2. By the end of the decade, almost 1 in every 3 tankers carrying liquefied natural gas will originate in the US, giving Trump his best chance to attain the energy dominance promised in his campaign.
  3. US natural gas prices averaged $3.55 per million British thermal units over the past five years, about 70% below the European average, a competitive advantage that helps underpin Biden and Trump policies to bring manufacturing back from overseas.

Related Articles:

  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • Electricity 2025 — 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.
  • Europe Grapples With Energy Crisis, Three Years After Ukraine Invasion — 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.

AI Summary. A poll of 28 eurozone economists estimated that Germany could raise its debt from 63% to 86% of GDP over a decade without repercussions for growth, implying about €1.9tn of fiscal space. The calculation assumes German nominal output grows 2% a year, from €4.3tn to €5.4tn.

Olaf Storbeck Financial Times
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According to an FT poll of Eurozone economists, Germany could increase debt from 63% of GDP in 2024 to 86% in 2035 “without repercussions on growth.” That translates to €1.9T of fiscal spending for infrastructure and defense in the next decade.

How much more debt can Germany take on without hurting growth?

Core argument: Germany could take on just under €2tn in debt over the next decade without risking damage to growth, according to a Financial Times analysis of a poll of Eurozone economists that supports likely-chancellor Friedrich Merz's fiscal plans.

The German government could take on just under €2tn in debt over the next decade without running the risk of damaging growth, according to a Financial Times analysis of a Eurozone economists poll that supports likely-chancellor Friedrich Merz’s fiscal bazooka. An economists’ poll conducted last week estimated that Europe’s largest economy could raise its fiscal burden from its current level of 63% of GDP to 86% of GDP over the next decade without negative repercussions. The 28 economists’ responses imply fiscal space of €1.9tn. The FT calculations of the €1.9tn in fiscal space assume that German nominal GDP will increase by 2% per year from €4.3tn to €5.4tn by 2035. This estimate is likely to be conservative, as it does not account for any real GDP growth, should inflation match the European Central Bank’s 2% target. The findings were based on 28 quantitative responses given to a question on whether, leaving aside any legal borrowing limits, Germany could raise its federal debt without repercussions on growth.

Takeaways by Macro Roundup® AI

  1. Germany could take on just under €2tn in debt over the next decade without risking damage to growth, according to a Financial Times analysis of a poll of Eurozone economists that supports likely-chancellor Friedrich Merz's fiscal plans.
  2. The 28 economists polled estimated Germany could raise its fiscal burden from 63% of GDP to 86% of GDP over the next decade without negative repercussions, implying €1.9tn of fiscal space.
  3. The Financial Times' €1.9tn estimate assumes German nominal GDP rises 2% a year from €4.3tn to €5.4tn by 2035, and is described as likely conservative because it excludes real GDP growth if inflation matches the European Central Bank's 2% target.

Related Articles:

  • German Borrowing Costs Soar By Most Since 1997 on ‘Historic’ Debt Deal — Germany's incoming governing partners agreed to exempt defense spending above 1% of GDP from the constitutional borrowing limit, create a €500bn off-budget vehicle for debt-funded infrastructure, and loosen borrowing rules for states. Goldman Sachs estimated the package could lift German growth to as much as 2%, versus its 0.8% forecast, if approved and implemented quickly.
  • 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.
  • Forget the US — Europe has Successfully Put Tariffs on Itself — 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%.

AI Summary. The proposed Mar-a-Lago Accord would have the US offer allies security guarantees and market access in exchange for their intervening to weaken the dollar, expanding US manufacturing, and swapping existing US government debt for new 100-year Treasury bonds. Questions remain about the transition costs, inflation from higher US wage costs, and allies' incentives to participate.

Torsten Sløk Apollo
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Torsten Sløk argues that “the rest of the world may over time begin to decrease its reliance on US markets and also increase their own defense spending,” reducing prospects for “Mar-a-Lago Accord” to weaken the dollar and boost US manufacturing.

Can the US trade security and market access for a weaker dollar?

Core argument: The proposed Mar-a-Lago Accord would trade US security guarantees and market access for the G7, Middle East, and Latin America in return for their agreement to depreciate the dollar, expand US manufacturing, and swap existing US government debt into new Treasury century bonds.

The Mar-a-Largo Accord is the idea that the US will give the G7, the Middle East, and Latin America security and access to US markets, and in return, these countries agree to intervene to depreciate the US dollar, grow the size of the US manufacturing sector, and solve the US fiscal debt problems by swapping existing US government debt with new US Treasury century bonds. For markets, this raises three questions: 1) The changes that are required to existing US manufacturing production, including eliminating Canada and Mexico from all auto supply chains, will take many years. Can the US achieve the long-term gain without too much short-term pain? 2) Will a more segmented global economy with a much bigger manufacturing sector in the US put too much upward pressure on US inflation, given the higher wage costs in the US than in many other countries? 3) With tariffs, the rest of the world may over time begin to decrease its reliance on US markets and also increase their own defense spending. [If so,] what are the incentives for the rest of the world to sign a Mar-a-Lago Accord?

Takeaways by Macro Roundup® AI

  1. The proposed Mar-a-Lago Accord would trade US security guarantees and market access for the G7, Middle East, and Latin America in return for their agreement to depreciate the dollar, expand US manufacturing, and swap existing US government debt into new Treasury century bonds.
  2. Restructuring US manufacturing production under the Accord, including eliminating Canada and Mexico from all auto supply chains, would take many years, raising the question of whether the US can secure long-term gains without excessive short-term pain.
  3. A more segmented global economy with a much larger US manufacturing sector may put upward pressure on US inflation given higher US wage costs, while tariffs may lead other countries to reduce reliance on US markets and increase their own defense spending, weakening their incentive to sign such an accord.

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.
  • How to Manage the Dollar (Part III) — Policy options for influencing the dollar fall into four overlapping categories: acting on the current account, acting on the financial account, monetary policy, and coordinated global policies affecting saving-investment balances. Because the US current account is driven by the economy's overall saving-investment balance, any policy affects the external imbalance only by shifting those decisions.
  • Budget Cuts Can Solve Trump’s Trade Deficit Problem — An International Monetary Fund study of 33 countries found that for a large economy like the U.S., each dollar of deficit reduction shifts the current account—trade in goods, services and investment income—by 30 to 50 cents. Applying that math, cutting the U.S. federal deficit from 6.4% of GDP to 3% would trim $300bn–$500bn from the roughly $900bn goods-and-services trade deficit.

AI Summary. The Stockholm International Peace Research Institute reports that the US supplied 64% of arms imported by European members of NATO over a five-year period, up from 52% in the prior five years, while those imports more than doubled.

Sylvia Pfeifer, Jana Tauschinski and Charles Clover Financial Times
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Almost two-thirds of arms imports by European NATO members over the past five years were produced by the US; import substitution may reduce this share if Europe follows through on remilitarization.

Is Europe's reliance on US-made weapons growing?

Core argument: The US supplied 64% of arms imported by European NATO members in 2020–2024, up from 52% in 2015–2019, according to data from the Stockholm International Peace Research Institute.

Almost two-thirds of the arms imported by European members of Nato over the past five years were produced by the US, according to new research that underlined the continent’s deep reliance on American-made weapons. Arms imports by the European nations more than doubled between 2020 and 2024 compared with the previous five years, as the region responded to Russia’s full-scale invasion of Ukraine in 2022, according to data from the Stockholm International Peace Research Institute. The US supplied 64% of these arms, up from 52% between 2015-2019. Industry executives have echoed calls that the region needed to reduce dependency on non-European suppliers in order to boost its resilience. There are growing concerns that the US could even decide to withhold critical support for key weapon systems, such as the advanced F-35 fighter jet.

Takeaways by Macro Roundup® AI

  1. The US supplied 64% of arms imported by European NATO members in 2020–2024, up from 52% in 2015–2019, according to data from the Stockholm International Peace Research Institute.
  2. Arms imports by European NATO members more than doubled in 2020–2024 versus the prior five years, as the region responded to Russia's full-scale invasion of Ukraine in 2022.
  3. Industry executives have echoed calls for Europe to reduce dependency on non-European arms suppliers, amid growing concerns that the US could withhold critical support for key weapon systems such as the F-35 fighter jet.

Related Articles:

  • What Military Catch-Up? — Years of European defence underspending have created a stock problem—depleted weapons, hardware, and technology, plus gaps in operational capacity, full-spectrum battlefield capability, and personnel—that higher spending can only fill slowly. Europe's cumulative shortfall against NATO's 2% of GDP target is about €850bn, and exceeds €2,650bn measured against US spending near 3.5% of GDP.
  • European Defence Shares Jump As Blistering Rally Gathers Pace — European defence stocks and the euro rose as investors bet governments will increase military spending and take on more responsibility for the continent's security, with shares in major contractors including Rheinmetall, Leonardo, Thales, BAE Systems and Saab gaining. European government bonds sold off on expectations of higher spending.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.

Tuesday, March 11, 2025

AI Summary. Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.

Dylan Patel, Reyk Knuhtsen, Niko Ciminelli, Jeremie Eliahou Ontiveros, Joe Ryu and Robert Ghilduta Semianalysis
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While higher US labor costs create a greater incentive to automate, @dylan522p argues China is the only country currently positioned to achieve full-scale factory automation. Building a similar robotic arm costs ~2.2x more in the US than in China.

Is China positioned to dominate intelligent robotic automation?

Core argument: Building a robotic arm identical to the Universal Robots UR5e in the US costs roughly 2.2x more than in China.

Automation and robotics is currently undergoing a revolution that will enable full-scale automation of all manufacturing and mission-critical industries. These intelligent robotics systems will be the first ever additional industrial piece that is not supplemental but fully additive– 24/7 labor with higher throughput than any human—, allowing for massive expansion in production capacities past adding another human unit of work. The only country that is positioned to capture this level of automation is currently China, and should China achieve it without the US following suit, the production expansion will be granted only to China, posing an existential threat to the US as it is outcompeted in all capacities. Today, building an exactly identical robotic arm (modeled after the Universal Robots UR5e) in the US is ~2.2x more expensive than in China. Under the hood, the situation is even more alarming. Even if those components are labeled “Made in USA”, they rely heavily upon China-made parts and materials - with no viable scalable alternative.

Takeaways by Macro Roundup® AI

  1. Building a robotic arm identical to the Universal Robots UR5e in the US costs roughly 2.2x more than in China.
  2. US-built robotic components labeled "Made in USA" rely heavily on China-made parts and materials, with no viable scalable alternative.
  3. China is the only country positioned to capture full-scale automation of manufacturing and mission-critical industries, and if it does so without the US following suit, the resulting production expansion poses an existential threat to the US.

Related Articles:

  • Global Robot Density in Factories Doubled in Seven Years — Global factory robot density reached a record 162 robots per 10,000 manufacturing employees, more than double the level of seven years earlier. The European Union averages 219 units per 10,000 employees, North America 197, and Asia 182, with Korea, Singapore, mainland China and Japan among the ten most automated economies.
  • How AI & Robots are Smashing Economics, and Why It Matters — As artificial intelligence and robots make wages less responsive to employment conditions, the link between tight labor markets and inflation weakens, undermining central banks' inflation-targeting frameworks. The author argues central banks would then need far larger interest-rate moves to achieve the same effect, producing more volatile and less predictable outcomes.
  • What Progress Has There Been In Industrial Robots? — Industrial robot repeatability improved little between 1972 and 1984, with a typical 1-meter reach, 10kg payload arm accurate to about 1 mm in both years, but a comparable 2023 robot achieves roughly 0.01–0.02 mm, 50 to 100x more precise. Such a robot cost 2 to 3x more in the 1980s than today, before accounting for cheap Chinese robot arms.

AI Summary. After roughly 30 years of flat productivity, real labor productivity at U.S. restaurants rose over 15% during the COVID pandemic and has persisted. The authors find this gain is strongly correlated with shorter customer dwell times, and the aggregate decline in dwell time can explain almost all of the increase.

Austan Goolsbee, Chad Syverson, Rebecca Goldgof and Joe Tatarka National Bureau of Economic Research
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Labor productivity in the restaurant industry rose sharply during the pandemic and remains 10-15% higher than pre-Covid, driven by take-out and delivery. The fraction of customers spending 10 minutes or less in-house rose 10 ppt. @Austan_Goolsbee

Why did restaurant productivity jump after decades of no growth?

Core argument: Real labor productivity at U.S. restaurants surged over 15% during the COVID pandemic after remaining almost constant for nearly 30 years, and the gain has persisted even as many conditions returned to pre-pandemic levels.

We document that, after remaining almost constant for almost 30 years, real labor productivity at U.S. restaurants surged over 15% during the COVID pandemic. This surge has persisted even as many conditions have returned to pre-pandemic levels. Using mobile phone data tracking visits and spending at more than 100,000 individual limited service restaurants across the country, we explore the potential sources of the surge. It cannot be explained by economies of scale, expanding market power, or a direct result of COVID-sourced demand fluctuations. The restaurants’ productivity growth rates are strongly correlated, however, with reductions in the amount of time their customers spend in the establishments, particularly with a rising share of customers spending 10 minutes or less. The frequency of such ‘take-out’ [and “delivery service”] customers rose considerably during COVID, even at fast food restaurants, and never went back down. The magnitude of the restaurant-level relationship between productivity and customer dwell time, if applied to the aggregate decrease in dwell time, can explain almost all of the aggregate productivity increase in our sample.

Takeaways by Macro Roundup® AI

  1. Real labor productivity at U.S. restaurants surged over 15% during the COVID pandemic after remaining almost constant for nearly 30 years, and the gain has persisted even as many conditions returned to pre-pandemic levels.
  2. Using mobile phone data on visits and spending at more than 100,000 limited-service restaurants, the authors find the productivity surge cannot be explained by economies of scale, expanding market power, or a direct result of COVID-sourced demand fluctuations.
  3. Restaurant-level productivity growth is strongly correlated with reductions in customer dwell time, particularly a rising share of customers staying 10 minutes or less, a relationship that, applied to the aggregate dwell-time decline, can explain almost all of the aggregate productivity increase in the sample.

Related Articles:

  • 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.
  • Does Worker Scarcity Spur Investment, Automation and Productivity? Evidence from Earnings Calls — The authors estimate that a one-unit increase in a firm's labor issues, as measured by earnings calls, raises its investment by 28 basis points, implying roughly $55bn in additional US investment attributable to tighter labor markets. The effect is concentrated in industries relying heavily on routine manual tasks, such as manufacturing assembly and warehouse packaging.
  • Labor Shock and Pay Raises Fuel a Dining Transformation — US full-service restaurants appear to have restructured toward operating with less labor, with higher minimum wages likely factoring into those decisions. Labor productivity, measured as real output per hour worked, grew at a 1.2% annualized rate over an earlier six-year stretch, then jumped 21% in a single year, retaining most of that gain after a slight pullback.

AI Summary. The National Association of Homebuilders estimates labor costs influence about 25% of a new home's final price, with labor making up 20–40% of construction costs and construction 60–70% of the sale price. Texas employs an estimated 400,000 undocumented construction workers, nearly half its construction workforce, and immigrants make up 63% of New York City's construction workforce.

Aziz Sunderji HomeEconomics
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.@AzizSunderji argues that deporting undocumented workers will make housing more expensive and reduce housing supply, noting that labor typically accounts for 20-40% of total construction costs, and that ~25% of construction laborers are undocumented.

Does the deportation of undocumented construction workers raise housing costs?

Core argument: ICE arrested nearly 600 people daily during the first three weeks of February, more than double the average pace under the Biden administration.

[Immigration] enforcement is ramping up dramatically. ICE arrested nearly 600 people daily in the first three weeks of February. That’s more than double the average during Biden's administration. Labor typically accounts for 20% to 40% of total construction costs. Construction costs represent 60% to 70% of a new home's sale price. On average, the National Association of Homebuilders estimates that labor costs directly influence around 25% of the final price of a new home. Two states in particular stand out. Texas and California (and, to a lesser extent, Florida and New York) rely heavily on undocumented labor, with Texas alone employing an estimated 400,000 undocumented construction workers—nearly half of its workforce. But the effects would be widespread. In New York City, immigrants make up 63% of the construction workforce, with approximately 40% being undocumented. While removing undocumented workers might increase wages for some American workers, these gains would be outweighed by broader negative effects: increased housing costs, reduced housing supply, construction delays, and overall economic inefficiency.

Takeaways by Macro Roundup® AI

  1. ICE arrested nearly 600 people daily during the first three weeks of February, more than double the average pace under the Biden administration.
  2. The National Association of Homebuilders estimates labor costs influence about 25% of a new home's final price, with labor at 20–40% of construction costs and construction at 60–70% of the sale price.
  3. Texas employs an estimated 400,000 undocumented construction workers, nearly half its construction workforce, while in New York City immigrants are 63% of construction workers and roughly 40% of those are undocumented.

Related Articles:

  • Construction Industry Braces for One-Two Punch: Tariffs and Deportations — Immigrants make up more than half of construction trade workers in Texas, California, New Jersey, and the District of Columbia, and undocumented workers are estimated at 13% of the construction industry, more than twice their share of the overall workforce. Roughly 130,000 newly arrived immigrants have joined the industry, bringing foreign-born construction employment to a record.
  • The “Neutral” Rate and Implications for 30-year Mortgage Rates — 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.
  • 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.

AI Summary. Chinese startup Manus AI launched a preview of what it calls a general AI agent that can screen resumes, build trip itineraries, and analyze stocks from basic user instructions, claiming better performance than OpenAI's Deep Research on some measures. The company has not published technical papers, code, or model weights alongside the release.

Saritha Rai, Julie Zhu and Edwin Chan Bloomberg
Date Posted:

Manus AI, a Chinese startup, announced a “truly autonomous” general AI agent that can screen resumes, create trip itineraries, and analyze stocks in response to basic user instructions. Manus did not publish detailed papers with its release.

Are Chinese startups challenging the US lead in autonomous AI agents?

Core argument: Chinese startup Manus AI launched a preview of what it calls a general AI agent that screens resumes, builds trip itineraries and analyzes stocks from basic user instructions, claiming better performance than OpenAI's Deep Research on some fronts.

For months, many leading artificial intelligence developers in the US have been racing to develop sophisticated AI agents that can carry out more complex tasks on a user’s behalf. Now, a lesser-known Chinese startup is claiming to have vaulted ahead of them. Manus AI last week launched a preview version of what it called a general AI agent capable of screening resumes, creating trip itineraries and analyzing stocks in response to basic instructions from the user. The company said its service performed better on some fronts than OpenAI’s Deep Research, another recently released agent. While some AI agents require a certain amount of hand-holding and supervision, Manus co-founder and chief scientist Yichao Ji said its product is “truly autonomous.” Unlike DeepSeek and some US companies, Manus did not publish detailed papers alongside its release to provide details about how the technology was developed. It also hasn’t publicly released any of the code or weights associated with its AI for people to use independently.

Takeaways by Macro Roundup® AI

  1. Chinese startup Manus AI launched a preview of what it calls a general AI agent that screens resumes, builds trip itineraries and analyzes stocks from basic user instructions, claiming better performance than OpenAI's Deep Research on some fronts.
  2. Manus co-founder and chief scientist Yichao Ji described the product as "truly autonomous," in contrast to AI agents that require hand-holding and supervision.
  3. Manus, unlike DeepSeek and some US companies, published no detailed papers explaining how its technology was developed and has not publicly released the code or weights behind its AI.

Related Articles:

  • DeepSeek Debates: Chinese Leadership On Cost, True Training Cost, Closed Model Margin Impacts — Estimates put algorithmic progress in artificial intelligence at roughly 4x per year, meaning the compute needed for a given capability level falls 4x annually, with some industry leaders arguing improvements run closer to 10x. The Bank of China announced a $140bn (1tn yuan) five-year subsidy for the AI industry chain aimed at making China self-reliant in science and technology.
  • DeepSeek and the Sincerest Form of Flattery — DeepSeek appears to have trained its models about 45x more efficiently than other leading-edge models, combining existing techniques—activating only 37bn of 671bn parameters at a time, a smaller memory cache, lower-precision training, and multi-token prediction—alongside self-reinforcement learning. Training cost $5.6m, and its interface charges $0.14 per million tokens versus OpenAI's $7.50.
  • DeepSeek FAQ — Consumers and businesses stand to gain most from a future of effectively free AI products, along with big consumer tech companies, since a world of free AI makes product and distribution the decisive advantages they already hold. China also benefits, and the United States faces a choice between expanding chip export restrictions and permission-based regulation or allowing itself to compete.

AI Summary. Efforts to cut U.S. trade deficits and escalate tensions with allies risk deterring foreign capital, and foreigners need only stop buying U.S. assets to hit prices, as China and Russia already have. Bridgewater estimates nonfinancial U.S. firms capture 39% of global profits though the U.S. is 15% of world output.

Greg Jensen Wall Street Journal
Date Posted:

Bridgewater’s Greg Jensen notes US nonfinancial firms capture 39% of global profits while the US economy is 15% of global GDP, adjusted for PPP. He’s concerned the US corporate sector’s earnings will be stressed by the trade war.

Do trade tensions threaten foreign demand for U.S. assets?

Core argument: Nonfinancial U.S. firms capture 39% of all global profits while the U.S. economy accounts for only 15% of global GDP in purchasing-power-parity terms, according to a Bridgewater Associates analysis.

The U.S. push to reduce trade deficits and escalate tensions with key allies puts at risk the ability of U.S. assets to draw in capital from the rest of the world. Foreign countries hold far more U.S. assets than the U.S. holds in foreign assets. Europe and Japan have for years stashed their surpluses in the U.S. Major institutional investors are reassessing the wisdom of having such a disproportionate amount of their assets in the increasingly unreliable U.S. Foreigners don’t need to sell those assets to create a rout; if they stopped buying them it would be devastating for U.S. asset prices. China and Russia stopped accumulating U.S. assets years ago as the risks of holding them became clear. Why wouldn’t Canada and Europe do something similar? American companies depend on global cooperation. Based on a Bridgewater Associates analysis, nonfinancial U.S. firms capture 39% of all global profits while the U.S. economy is only 15% of global gross domestic product in purchasing power parity adjusted terms. U.S. multinationals can expect retaliation from countries facing headaches from Trump administration policies.

Takeaways by Macro Roundup® AI

  1. Nonfinancial U.S. firms capture 39% of all global profits while the U.S. economy accounts for only 15% of global GDP in purchasing-power-parity terms, according to a Bridgewater Associates analysis.
  2. Foreign countries hold far more U.S. assets than the U.S. holds abroad, and foreigners merely halting new purchases, without selling, would be devastating for U.S. asset prices.
  3. China and Russia stopped accumulating U.S. assets years ago, and Canada and Europe may do something similar as major institutional investors reassess concentrating their holdings in an increasingly unreliable U.S.

Related Articles:

  • Global Economies, Converging on Equilibrium, Confront a Geopolitical Regime Shift — Global economies are converging on a reasonable equilibrium, with developed-world central banks gradually cutting rates toward what they view as neutral, China prioritizing domestic demand after a deflationary stretch, and artificial intelligence showing potential to enhance productivity. Markets are discounting that stability, with US equity indexes pricing an even more exceptional decade than the last.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.
  • Message to President Trump: We (Europe) Take As Much From You (The US) As You Take From Us — The US trade deficit with the euro area in goods and services combined is about €57bn, under 0.2% of US GDP, and the euro area pays roughly €49bn more in investment income and wages to the US than it receives. Counting these flows, the euro area's current account with the US is effectively balanced.

AI Summary. U.S. bond and equity markets are vulnerable to European investors repatriating capital, as fiscal policy shifts in Europe weaken the dollar and redirect global capital flows away from U.S. financial assets. Trade conflict is also prompting Chinese fiscal stimulus and Canadian calls for large-scale spending, raising the potential for disorderly repatriation on multiple fronts.

Joseph Wang Fed Guy Blog
Date Posted:

.@FedGuy12 argues that increased European defense and infrastructure spending and possible US fiscal retrenchment are “shifting global capital flows at the expense of US financial assets, heralding a period of US underperformance.”

Are U.S. markets vulnerable to foreign investors repatriating capital?

Core argument: The German DAX is up 13% year to date while the S&P 500 is 2% lower, a divergence attributed to capital flows out of the U.S. and into Europe in search of higher returns.

U.S. fixed income markets are vulnerable to repatriation from European investors. European investors are significant holders of Treasuries and U.S. corporate bonds, in part due to relatively high U.S. interest rates and also due to the need to reinvest a chronic dollar trade surplus. The Administration’s foreign policy is compelling fiscal policy changes in the E.U. that [are] successfully weakening the dollar and are likely to narrow the trade deficit. But they are also shifting global capital flows at the expense of U.S. financial assets. The wide trade war is also rousing up Chinese fiscal stimulus and Canadian calls for pandemic level fiscal spending. This raises the potential of capital repatriation on multiple fronts that could become very disorderly. The changing growth trajectories on both sides of the Atlantic isheralding a period of U.S. underperformance that will impact both U.S. equities and bonds. The German DAX is up 13% year to date while the S&P 500 is 2% lower. The recent strengthening of the Euro coincides suggests significant capital flows out of the U.S. and into Europe in search of higher returns.

Takeaways by Macro Roundup® AI

  1. The German DAX is up 13% year to date while the S&P 500 is 2% lower, a divergence attributed to capital flows out of the U.S. and into Europe in search of higher returns.
  2. European investors are significant holders of U.S. Treasuries and corporate bonds, drawn by relatively high U.S. interest rates and the need to reinvest a chronic dollar trade surplus, leaving U.S. fixed income vulnerable to repatriation.
  3. The Administration's foreign policy is compelling E.U. fiscal policy changes that are weakening the dollar, while the wide trade war is rousing Chinese fiscal stimulus and Canadian calls for pandemic-level spending, raising the potential of disorderly capital repatriation on multiple fronts.

Related Articles:

  • German Borrowing Costs Soar By Most Since 1997 on ‘Historic’ Debt Deal — Germany's incoming governing partners agreed to exempt defense spending above 1% of GDP from the constitutional borrowing limit, create a €500bn off-budget vehicle for debt-funded infrastructure, and loosen borrowing rules for states. Goldman Sachs estimated the package could lift German growth to as much as 2%, versus its 0.8% forecast, if approved and implemented quickly.
  • Budget Cuts Can Solve Trump’s Trade Deficit Problem — An International Monetary Fund study of 33 countries found that for a large economy like the U.S., each dollar of deficit reduction shifts the current account—trade in goods, services and investment income—by 30 to 50 cents. Applying that math, cutting the U.S. federal deficit from 6.4% of GDP to 3% would trim $300bn–$500bn from the roughly $900bn goods-and-services trade deficit.
  • 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. The share of US fourth-grade students meeting the National Assessment of Educational Progress reading proficiency standard fell from 35% in 2019 to 33% in 2022 and 30% in 2024. More fourth-graders now score below the basic level than score proficient.

Mark Schneider American Enterprise Institute
Date Posted:
Is Database:
Database

The 2024 NAEP results show that 40% of fourth graders are “below basic” in reading proficiency, relative to 30% who are “at or above proficient.” 39% of American 8th graders are “below basic” in math, vs. 28% who are “at or above.”

Are US fourth-grade reading proficiency rates declining?

Core argument: The share of students meeting NAEP proficiency standards fell from 35% in 2019 to 33% in 2022 and to 30% in 2024.

To fully grasp the seriousness of the 2024 results, it is important to understand what we mean when we say “proficient” and “basic.” According to the National Assessment Governing Board, which sets policy for NAEP, “Students reaching [proficiency] have demonstrated competency over challenging subject matter, including subject-matter knowledge, application of such knowledge to real world situations, and analytical skills appropriate to the subject matter.” For example, fourth-grade students who reach the proficient level in reading can describe the impact of a character’s actions or explain how characters influence one another. The share of students who meet NAEP’s proficiency standards fell from 35% in 2019 to 33% in 2022, and then to 30% in 2024. In other words, there are now more fourth-grade students below basic than there are who are proficient.

Takeaways by Macro Roundup® AI

  1. The share of students meeting NAEP proficiency standards fell from 35% in 2019 to 33% in 2022 and to 30% in 2024.
  2. More fourth-grade students now score below NAEP's basic level than reach proficiency.
  3. The National Assessment Governing Board defines proficiency as demonstrated competency over challenging subject matter, with proficient fourth-grade readers able to describe the impact of a character's actions or explain how characters influence one another.

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.
  • Testing Theories of Why: Four Keys to Interpreting US Student Achievement Trends — US student test scores peaked in the early 2010s; from that peak to the pandemic, scores fell for students at the 10th and 25th percentiles while rising slightly at the 75th and 90th. After the pandemic, scores fell across all percentile groups, with much larger declines among lower-performing students.
  • What the Data Says About Pandemic School Closures, Four Years Later — Among school districts with similar poverty levels, remote learning was associated with greater declines in student achievement, and a district-level analysis found community poverty rates and the length of school closures had roughly equal effects on outcomes. For each week spent remote, students in poor districts experienced steeper math losses than peers in richer districts.