Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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 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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, March 18, 2025

AI Summary. An analysis of admissions and transcript records at Ivy-Plus colleges finds standardized test scores predict first-year college grades with a normalized slope 4x greater than high school grade point average, controlling for race, gender, and socioeconomic status. The authors find no evidence test scores underpredict college performance for students from less advantaged backgrounds.

John Friedman, Bruce Sacerdote, Douglas Staiger, and Michele Tine National Bureau of Economic Research
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Students at Ivy-plus colleges whose SAT/ACT scores were at the 99th percentile had 1st-year college GPAs 0.43 points higher than those who had scored at the 75th percentile, while high school GPAs had little predictive power. @John_N_Friedman

Do standardized test scores predict college grades better than high school GPA?

Core argument: Analyzing admissions and transcript records at multiple Ivy-Plus colleges, the authors find SAT/ACT scores predict first-year college grades with a normalized slope four times greater than high school GPA, conditional on race, gender, and socioeconomic status.

We analyze admissions and transcript records for students at multiple Ivy-Plus colleges to study the relationship between standardized (SAT/ACT) test scores, high school GPA, and first-year college grades. Standardized test scores predict academic outcomes with a normalized slope four times greater than that from high school GPA, all conditional on students’ race, gender, and socioeconomic status. Standardized test scores do not underpredict college performance for students from less advantaged backgrounds. Collectively these results suggest that standardized test scores provide important information to measure applicants’ academic preparation that is not available elsewhere in the application file. While some of the raw correlation between these variables relates to students’ demographic characteristics, much remains even when controlling for these variables. In contrast, high school GPA does not predict academic performance nearly as well. We also find no evidence of bias against students from less advantaged backgrounds, as students from such backgrounds do not outperform (and in some cases underperform) other students with the same test score

Takeaways by Macro Roundup® AI

  1. Analyzing admissions and transcript records at multiple Ivy-Plus colleges, the authors find SAT/ACT scores predict first-year college grades with a normalized slope four times greater than high school GPA, conditional on race, gender, and socioeconomic status.
  2. Standardized test scores do not underpredict college performance for students from less advantaged backgrounds, who do not outperform and in some cases underperform other students with the same test score.
  3. Much of the correlation between test scores and academic performance remains after controlling for demographic characteristics, which the authors suggest indicates test scores provide information on applicants' academic preparation not available elsewhere in the application file.

Related Articles:

  • Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges — Children from top-1% families are more than 2x as likely as middle-class students with comparable SAT/ACT scores to attend an Ivy-Plus college, with two-thirds of the gap attributable to higher admissions rates. The authors attribute this advantage to legacy preferences, weight on non-academic credentials, and athlete recruitment.
  • Standardized Test Scores and Academic Performance at Ivy-Plus Colleges — Using admissions records and first-year grades at multiple Ivy-Plus colleges, the authors find SAT and ACT scores substantially predict college academic success even among students with the same high school grades, while high school grade point average does little to predict it. Conditional on test scores, students from lower- and higher-resourced high schools have virtually identical college grades.
  • 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.

AI Summary. The number of computer programmers in the United States is at its lowest level since 1980, a period in which the total U.S. workforce grew about 75%. Programming jobs, which the government classifies as more routine than software development work, fell 27.5%, while software developer jobs fell 0.3%.

Andrew Van Dam Washington Post
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In 2003, the BLS added a new category of “software developer” with responsibilities for design, planning, and requirements gathering. While computer programmer employment is at its lowest since 1980, software developer jobs are down 0.3% from 2019.

Are routine programming jobs disappearing faster than software development jobs?

Core argument: Computer-programming jobs in the United States have fallen 27.5%, leaving fewer programmers than at any point since 1980, a 45-year span in which the total U.S. workforce grew about 75%.

Today there are fewer programmers in the United States than at any point since 1980. That’s a 45-year period in which America’s total workforce has grown by about 75%! Nationwide, software developers haven’t struggled nearly as much as their programming brethren. In the government’s schema, programmers do the grunt work while the much more numerous — and much faster-growing — software developers enjoy a broader remit. They figure out what clients need, design solutions and work with folks such as programmers and hardware engineers to implement them. Their pay reflects this gap in responsibilities. The median programmer earned $99,700 in 2023, compared with $132,270 for the median developer. And while 27.5% of programming jobs vanished, jobs for developers have only fallen 0.3%, similar to the broader industry.

Takeaways by Macro Roundup® AI

  1. Computer-programming jobs in the United States have fallen 27.5%, leaving fewer programmers than at any point since 1980, a 45-year span in which the total U.S. workforce grew about 75%.
  2. Software developer jobs have declined only 0.3%, in line with the broader industry, while programming jobs fell 27.5%.
  3. The median programmer earned $99,700 in 2023, compared with $132,270 for the median software developer, who identifies client needs, designs solutions and works with programmers and hardware engineers to implement them.

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.
  • A Data-Driven Case That AI Has Already Changed The U.S. Labor Market — Retail employment began declining in the early 2010s after holding steady for more than two decades, coinciding with heavy big tech investment in deep learning and the commercial adoption of AI-directed warehouse robots and predictive pricing and inventory tools. The author argues this circumstantial evidence suggests AI has already affected the US labor market, but does not constitute proof.
  • How AI Will Divide the Best From the Rest — New evidence indicates that in complex tasks such as research and management, high performers are best positioned to work with AI, since evaluating model output requires expertise and judgment. AI is likely to widen workforce divides rather than narrow them, commoditising skills and automating the repetitive tasks of lower-skilled roles such as customer service.

AI Summary. Large, volatile shifts in US trade policy are argued to be dampening business sentiment and consumer spending while leaving the Federal Reserve reactive, waiting for concrete signs of deterioration before cutting rates. The author argues this path implies a period of overtightening followed by rapid cuts that would push the 10-year Treasury yield into the 3% range.

Joseph Wang Fed Guy Blog
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.@FedGuy12 notes “slowing business activity and softer consumer spending are beginning to show up in the economic data…This would imply a 3 handle” on the 10-year yield in “the coming months.”

Will trade policy shifts and a reactive Fed push long-term yields lower?

Core argument: The author argues the S&P 500's 10% decline is insufficient to trigger a Fed policy reaction, particularly with Fed staff perceiving valuations as elevated, though further declines should eventually shift that view toward an accommodative stance.

The Administration's policies are on track to deliver a promised lower ten-year yield by weakening demand and forcing the Fed to overtighten. The significant and volatile trade policy shifts have dampened business sentiment and contributed to the recent decline in equity prices. Slowing business activity and softer consumer spending are beginning to show up in the economic data. Furthermore, the rapid policy shifts are causing the Fed to freeze into a position of reactiveness. Fed officials are looking to err to the side of caution by waiting to see concrete signs of economic deterioration. This suggests rapid cuts, but only after a period of overtightening. The 10% decline [in the S&P] so far is not enough to get a policy reaction, especially when Fed staff perceive valuations to be elevated. But further declines should eventually change their view and lead to [an] accommodative policy stance, which would be 4 to 6 cuts away. This would imply a 3 handle on the 10 year yield and significant progress towards the Administration’s goal of a lower 10 year yield.

Takeaways by Macro Roundup® AI

  1. The author argues the S&P 500's 10% decline is insufficient to trigger a Fed policy reaction, particularly with Fed staff perceiving valuations as elevated, though further declines should eventually shift that view toward an accommodative stance.
  2. An accommodative Fed stance lies 4 to 6 cuts away, which the author argues would imply a 3 handle on the 10-year yield and significant progress toward the Administration's goal of a lower 10-year yield.
  3. Volatile trade policy shifts have dampened business sentiment and contributed to the decline in equity prices, with slowing business activity and softer consumer spending beginning to appear in the economic data while the Fed waits for concrete signs of deterioration.

Related Articles:

  • Elon Musk Wants Big Bond Market Reward for DOGE Team’s Cuts — The US Treasury aims to cut the federal deficit to 3% of GDP by 2028, paired with 3% sustained growth and an additional 3m barrels a day of oil production, arguing this and deregulation will lower long-term interest rates. The 10-year Treasury yield has traded between 4.3% and 4.7%, above the roughly 3.8% seen earlier.
  • Consumer Sentiment Deteriorating Rapidly — University of Michigan survey data show consumer sentiment declining for households earning both above and below $100,000, with job-loss worries at levels typically seen in recessions and a record-high share of consumers saying business conditions are worsening. Income expectations are falling while inflation expectations are rising rapidly.
  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.

AI Summary. Inexpensive cars from Chinese makers such as BYD, Chery, Great Wall and SAIC are gaining share in emerging markets, reaching nearly 10% of sales in South Africa, 8% in Turkey and close to a third in Chile. Chinese automakers' market share outside China is projected to rise to 13% by 2030 from 3%.

Chester Dawson, Rachel Gamarski, Mpho Hlakudi, and Patpicha Tanakasempipat Bloomberg
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Chinese car exports surged almost 20% in 2024 to 4.9mm, up from 1mm in 2020; 80% of exports were gas-powered.

Are cheap Chinese cars winning market share across emerging markets?

Core argument: AlixPartners projects Chinese automakers' market share outside China will rise to 13% in 2030 from 3% today, with the worldwide share including China reaching 33% and Africa and the Middle East 39%.

From Bangkok to Johannesburg to Sao Paulo, the streets are increasingly jammed with inexpensive compacts, crossovers and SUVs made by companies like Great Wall Motor Co., BYD Co., Chery Automobile Co. and SAIC Motor Corp. While the Trump administration is expected to shield the US’s Big Three from Chinese rivals at home, and Canada and the European Union have placed tariffs on Chinese-made electric vehicles, buyers in emerging markets have welcomed Chinese cars and trucks with open arms — posing a new threat to growth-hungry global automakers. In South Africa, China-made vehicles account for nearly 10% of sales, or about five times the volume sold in 2019. In Turkey, Chinese brands claimed an 8% share in the first six months of 2024, up from almost none in 2022. In Chile, they have accounted for nearly a third of auto sales for several years running. Global market share for Chinese automakers outside their home country is expected to climb to 13% in 2030 from 3% today, according to AlixPartners. Including China, that worldwide share jumps to 33%, and in Africa and the Middle East it’s projected to hit 39% by then.

Takeaways by Macro Roundup® AI

  1. AlixPartners projects Chinese automakers' market share outside China will rise to 13% in 2030 from 3% today, with the worldwide share including China reaching 33% and Africa and the Middle East 39%.
  2. China-made vehicles account for nearly 10% of sales in South Africa, about five times the 2019 volume, 8% in Turkey in the first half of 2024 from almost none in 2022, and nearly a third in Chile for several years running.
  3. While the Trump administration is expected to shield the US Big Three from Chinese rivals at home and Canada and the EU have tariffed Chinese-made electric vehicles, emerging-market buyers have embraced cars from Great Wall Motor, BYD, Chery and SAIC.

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.
  • Analysis: Chinese Cars Pour Into Mexico, Rattling The USMCA — Mexico's 2020 decree cutting car import tariffs from 20% to 0% has been followed by a surge of Chinese vehicles, with China shipping close to 500,000 cars to Mexico this year and displacing the United States as Mexico's top supplier. One in three new cars sold in Mexico this year will be built in China, up from 4% in 2020.
  • 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. Germany's post-election fiscal proposals mark a change in the country's likely fiscal impulse, prompting forecast upgrades of 0.2 percentage points to 0.2% German growth and 0.1 points to 0.8% Euro area growth. The shift reduces the risk of very weak Euro area growth and very low European Central Bank policy rates.

Dominic Wilson and Kamakshya Trivedi Goldman Sachs
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A Goldman Sachs analysis argues fiscal expansion in Germany may create more balanced growth globally and raise 10-year Bund yields to their pre-crisis range. Stronger German growth may reduce US equities’ outperformance.

Does Germany's fiscal shift raise European growth and interest rate forecasts?

Core argument: Economists raised their 2025 German GDP growth forecast by 0.2pp to 0.2% and their Euro area forecast by 0.1pp to 0.8% following the incoming coalition government's post-election fiscal proposals.

The post-election fiscal proposals from the incoming coalition government represent a sea change in the likely fiscal impulse in Germany. Nothing is simple in Europe, and the details will have an important bearing on the degree to which GDP growth increases in 2025—our economists have raised their German GDP forecast by 0.2pp to 0.2% in 2025 and their Euro area forecast by 0.1pp to 0.8% in 2025. These policy shifts are larger and faster than most pre-election investor/analyst expectations. Given the security imperative it is highly likely that some form of substantial fiscal expansion will be implemented. Germany’s aggressive response to the new security outlook shifts the Overton Window for what is possible in terms of Euro area spending. Taken together, this supports a shift in the distribution of market outcomes in the Euro area—sharply reducing the tail of very poor growth and low ECB policy rates. And while some of the market optimism looks to have run too far relative to likely 2025 real outcomes, they do not look out of line with the potential sustained fiscal shift, which would further open up right tails in European equities, Bund yields and the Euro.

Takeaways by Macro Roundup® AI

  1. Economists raised their 2025 German GDP growth forecast by 0.2pp to 0.2% and their Euro area forecast by 0.1pp to 0.8% following the incoming coalition government's post-election fiscal proposals.
  2. The German fiscal policy shifts are larger and faster than most pre-election investor and analyst expectations, and the security imperative makes some form of substantial fiscal expansion highly likely.
  3. Germany's response to the new security outlook shifts what is considered possible for Euro area spending, sharply reducing the tail of very poor growth and low ECB policy rates, with a sustained fiscal shift potentially opening right tails in European equities, Bund yields and the euro.

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.
  • Germany Can Spend Almost €2tn Without Harming Growth, Economists Say — 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.
  • Repatriation Flows — 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.

AI Summary. Among American voters over 30, the gender gap in presidential support has held at roughly 10%, but among those under 30 it has widened dramatically, with 18-year-old men 23 percentage points more likely than 18-year-old women to support Donald Trump. Similar divides are appearing in other countries.

Ezra Klein and David Shor New York Times
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.@davidshor notes a 23pp gap between 18-year-old men’s and 18-year-old women’s support for Trump in 2024. He argues that overall young people are “potentially the most conservative generation that we’ve experienced in 50 to 60 years.”

Is the political gender gap widening among young voters?

Core argument: 18-year-old men were 23 percentage points more likely than 18-year-old women to support Donald Trump, a gender gap described as completely unprecedented in American politics.

The thing I am most shocked by in the last four years [is] that young people have gone from being the most progressive generation since the baby boomers, and maybe even in some ways more so, to becoming potentially the most conservative generation that we’ve experienced maybe in 50 to 60 years. At the bottom, we have age, and at the top, we have the gender gap and support for Kamala Harris, comparing women and men. What you can see is that, for voters over 30, the gender gap was fairly stable at around 10%, which is roughly where it’s been in American politics. I think that a lot of people underestimate how recent the gender gap is. Historically, Republicans did better with women than with men. That shift happened in the United States during the Clinton era and has remained stable since then. What’s crazy is that if you look at people under the age of 30, the gender gap has exploded. 18-year-old men were 23 percentage points more likely to support Donald Trump than 18-year-old women, which is just completely unprecedented in American politics. I think it’s still too early to say exactly what the cause is. What’s interesting, though, is that this is happening in other countries, as well.

Takeaways by Macro Roundup® AI

  1. 18-year-old men were 23 percentage points more likely than 18-year-old women to support Donald Trump, a gender gap described as completely unprecedented in American politics.
  2. Among voters over 30, the gender gap in support for Kamala Harris stood at roughly 10%, near its level since women shifted toward Democrats during the Clinton era, reversing an earlier Republican advantage among women.
  3. Young Americans may have moved from the most progressive generation since the baby boomers to potentially the most conservative in 50 to 60 years, with similar shifts appearing in other countries and the cause still unclear.

Related Articles:

  • Nearly One in 10 U.S. Adults Identifies as L.G.B.T.Q., Survey Finds — Gallup survey data indicate nearly one in 10 U.S. adults identify as LGBTQ, including nearly a quarter of adults aged 18 to 27, more than half of whom identify as bisexual. Identification is about 21% among liberals versus 3% among conservatives, and women are nearly twice as likely as men to identify as LGBTQ.
  • How To Get Rich in 2025 — Academic estimates compiled by The Economist indicate inheritances, after falling over the 20th century, were worth about 10% of GDP on average by the end of the 2010s, with roughly $6tn inherited across the rich world in a year. Falling family sizes mean each inheritance is spread across fewer heirs.
  • Zero-Sum Thinking and the Roots of U.S. Political Divides — Zero-sum thinking — viewing gains for one group as losses for another — is associated with greater support for liberal economic policies, stronger alignment with the Democratic Party, and weaker alignment with the Republican Party. The authors also find it linked to believing the QAnon conspiracy theory holds some truth and to sympathy for the attack on the U.S. Capitol.

AI Summary. Germany's armed forces commissioner warned the country is not moving closer to its target of 203,000 active troops by 2031, as the military slightly shrank amid high dropout rates, with a quarter of new recruits leaving within six months. Conscientious objector applications reached 2,998, up from 200 in 2021.

Laura Pitel Financial Times
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Germany may face recruiting challenges to achieve its goal of 203k active troops in 2031. The overall size of the armed forces slightly declined last year, as 25% of the 18,810 people who enlisted in 2023 left the armed forces within six months.

Can Germany meet its troop target amid high recruit dropout rates?

Core argument: A quarter of the 18,810 people who joined Germany's armed forces in 2023 left within six months, and armed forces commissioner Eva Högl warned the country is no closer to its goal of 203,000 active troops by 2031.

Germany’s armed forces commissioner, Eva Högl, this week warned the country was not closer to its goal of having 203,000 active troops by 2031, as the overall size of the armed forces slightly declined last year, partly because of a high number of dropouts. A quarter of the 18,810 men and women who signed up in 2023 left the armed forces within six months. But one senior army commander said members of Generation Z — renowned in the business world for their efforts to reshape corporate culture — were also going into the armed forces with different ideas and outlooks. “People are vulnerable, they cry easily,” he said. “They talk about work-life balance.” “I understand that,” the commander added. “They grew up in a different time. It’s not a bad perspective. But it doesn’t match that well with a wartime situation.” Since Russia’s full-scale Ukraine invasion, Germany has had a steep rise in the number of conscientious objectors (including both regular soldiers and part-time reservists). The figure reached 2,998 last year — up from 200 in 2021.

Takeaways by Macro Roundup® AI

  1. A quarter of the 18,810 people who joined Germany's armed forces in 2023 left within six months, and armed forces commissioner Eva Högl warned the country is no closer to its goal of 203,000 active troops by 2031.
  2. The number of conscientious objectors in Germany, including regular soldiers and part-time reservists, rose to 2,998 last year from 200 in 2021, after Russia's full-scale invasion of Ukraine.
  3. One senior German army commander said Generation Z recruits arrive with different ideas and outlooks, crying easily and talking about work-life balance, a perspective he said does not match well with a wartime situation.

Related Articles:

  • Rheinmetall Says it Could Take Over Idle Volkswagen Plants to Produce Tanks — German arms maker Rheinmetall is considering taking over one of Volkswagen's soon-to-be idle German plants as it searches for extra production capacity, though the company says any acquisition would depend on securing more tank orders. Volkswagen decided to halve its German production capacity, idling three plants, because of a slowdown in European car sales.
  • 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 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.

Wednesday, March 19, 2025

AI Summary. Matched employer-employee data show the mean distance from an American worker's home to their employer's worksite rose from 15 miles to 26 miles, with 12% of recent hires living at least 50 miles away, triple the earlier share. Separation and hiring rates are higher for distant employees.

Mert Akan, Jose Maria Barrero, Nicholas Bloom, et al. National Bureau of Economic Research
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Between 2019 and 2023, the mean US distance from work rose from 15 to 26 miles; 12% of employees hired after March 2020 live at least 50 miles from their employers, 3x the % in 2019. High taxes and house prices predicted relocation. @I_Am_NickBloom

How far do American workers now live from their employers?

Core argument: Mean distance from employee home to employer worksite rose from 15 miles in 2019 to 26 miles in 2023 in matched employer-employee data.

We use matched employer-employee data to study where Americans live in relation to employer worksites. Mean distance from employee home to employer worksite rose from 15 miles in 2019 to 26 miles in 2023. Twelve percent of employees hired after March 2020 live at least fifty miles from their employer in 2023, triple the pre-pandemic share. Distance from employers rose more for persons in their 30s and 40s, in highly paid employees, and in Finance, Information, and Professional Services. Among persons who stay with the same employer from one year to the next, we find net migration to states with lower top tax rates and areas with cheaper housing. These migration patterns greatly intensify after the pandemic and are much stronger for high earners. Top tax rates fell 5.2 percentage points for high earners who stayed with the same employer but switched states in 2020. Finally, we show that employers treat distant employees as a more flexible margin of adjustment: Separation and hiring rates are greater, and more responsive to employer growth, for distant employees.

Takeaways by Macro Roundup® AI

  1. Mean distance from employee home to employer worksite rose from 15 miles in 2019 to 26 miles in 2023 in matched employer-employee data.
  2. Twelve percent of employees hired after March 2020 lived at least 50 miles from their employer in 2023, triple the pre-pandemic share, with larger distance increases among people in their 30s and 40s, highly paid employees, and Finance, Information, and Professional Services.
  3. High earners who stayed with the same employer but switched states in 2020 saw top tax rates fall 5.2 percentage points, part of net migration toward states with lower top tax rates and areas with cheaper housing that intensified after the pandemic.

Related Articles:

  • Does Working from Home Boost Productivity Growth? — After controlling for each industry's pre-pandemic productivity trend, there is essentially no statistically significant relationship between how easily an industry's work can be done remotely and its excess productivity growth during the pandemic.
  • Working From Density — Within the same metropolitan-area income quartile, denser neighborhoods have a higher share of jobs that can be done remotely. The authors argue this pattern suggests increased telework raises willingness to pay for housing in high-density places, where leisure amenities and nonwork social interaction are more available.
  • Work From Home and the Office Real Estate Apocalypse — The authors estimate New York City office values fell 45% in 2020 and 39% in the longer run, a $453bn value destruction, with lower-quality buildings hit hardest as tenants shifted to higher-quality space. They argue this has implications for local public finances and financial sector stability.

AI Summary. The authors' Young Family Median Multiple, comparing median incomes of 20-34 year-olds to local median home values, finds that virtually every US metro area met a basic affordability standard in 1969 versus just 21% in 2018-2022. New housing completions trailed new household formations by 3.8m units.

Wendell Cox and Lyman Stone Institute for Family Studies
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Between 1980 and 2023, home ownership for the US 25-35 cohort has fallen from 50% to 25-30%. @lymanstoneky attributes this to high prices, noting that in 1969 the median home cost ~ five years of a young adult’s income vs. nine years today.

Has housing affordability for young families declined across US metro areas?

Core argument: The authors' Young Family Median Multiple, comparing median personal incomes of individuals ages 20–34 to local median home values, shows just 21% of metro areas met a basic affordability standard in 2018–2022, versus virtually all of them in 1969.

We developed a new indicator we labeled the Young Family Median Multiple (YFMM). It compares the median personal incomes of individuals ages 20-34 to median home values in their local area. Whereas in 1969, virtually every metro area met a basic standard of affordability for young people, in 2018-2022, just 21% did, and over half of the nation’s metro areas were rated as seriously unaffordable for young families, or worse. Between 2012 and 2023, 13.4 million new housing units were completed, while new household formations were 17.2 million, for a supply gap of 3.8 million housing units. Only 9.5 million of these new completions were single-family units.

Takeaways by Macro Roundup® AI

  1. The authors' Young Family Median Multiple, comparing median personal incomes of individuals ages 20–34 to local median home values, shows just 21% of metro areas met a basic affordability standard in 2018–2022, versus virtually all of them in 1969.
  2. More than half of U.S. metro areas rated as seriously unaffordable for young families or worse in 2018–2022 under the authors' Young Family Median Multiple.
  3. Between 2012 and 2023, 13.4 million new housing units were completed against 17.2 million new household formations, a supply gap of 3.8 million units, with only 9.5 million of the completions single-family.

Related Articles:

  • Inflation Adjusted House Prices 1.3% Below 2022 Peak — Inflation-adjusted US house prices stand 1.3% below their 2022 peak. An affordability index built from median income, national house prices, and 30-year fixed mortgage rates shows that over a three-year span, the monthly principal-and-interest payment on a $500,000 house with 20% down rose 75%, as prices rose 19% and mortgage rates went from 3.07% to 6.43%.
  • 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.
  • This Is How to Fix the Housing Crisis — US homebuilding falls short of demand, particularly in high-demand coastal markets, with per-person permitting running at less than half the level of two and five decades ago. The author argues Washington could unlock construction by conditioning federal highway funds on state housing reform, the same lever used to push states to set the drinking age at 21.

AI Summary. Germany's parliament approved constitutional changes allowing up to €1tn for military and infrastructure spending, including unlimited borrowing for defense and a €500bn, 12-year fund to modernize hospitals, schools, roads and energy networks. The plan could revive Europe's largest economy and boost EU rearmament efforts.

Anne-Sylvaine Chassany Financial Times
Date Posted:

Germany will spend an additional €1T over the current baseline on the country’s military and infrastructure. The Bundestag authorized “unlimited borrowing” for defense and an additional €500B for infrastructure over 12 years.

Will Germany lift borrowing limits to fund military and infrastructure spending?

Core argument: Germany's Bundestag approved Friedrich Merz's plan to inject up to €1tn into the country's military and infrastructure, with 513 lawmakers backing the constitutional changes in an emergency session, exceeding the required two-thirds majority.

Germany’s parliament has approved Friedrich Merz’s plans to inject up to €1tn into the country’s military and infrastructure, in a move that could revive Europe’s largest economy and boost the EU’s rearmament efforts. In an emergency session of the outgoing Bundestag on Tuesday, the chancellor-in-waiting won the support of 513 lawmakers, more than the two-thirds majority required for the constitutional changes. The Christian Democrat and his likely coalition partners the Social Democrats (SPD), are seeking to allow unlimited borrowing for defence spending and create a €500bn, 12-year fund to modernise hospitals, schools, roads and energy networks.

Takeaways by Macro Roundup® AI

  1. Germany's Bundestag approved Friedrich Merz's plan to inject up to €1tn into the country's military and infrastructure, with 513 lawmakers backing the constitutional changes in an emergency session, exceeding the required two-thirds majority.
  2. Merz and his likely coalition partners, the Social Democrats, are seeking to allow unlimited borrowing for defence spending and to create a €500bn, 12-year fund to modernise hospitals, schools, roads and energy networks.
  3. The German spending plan could revive Europe's largest economy and boost the EU's rearmament efforts.

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  • Rheinmetall Says it Could Take Over Idle Volkswagen Plants to Produce Tanks — German arms maker Rheinmetall is considering taking over one of Volkswagen's soon-to-be idle German plants as it searches for extra production capacity, though the company says any acquisition would depend on securing more tank orders. Volkswagen decided to halve its German production capacity, idling three plants, because of a slowdown in European car sales.
  • 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.

AI Summary. Large inflows from abroad have left foreign investors significantly overweight US equities. Combined with the dollar's decline and what the author characterizes as overvaluation of the largest US technology stocks, this creates significant downside risk to the S&P 500 if foreign investors sell.

Torsten Sløk Apollo
Date Posted:

Almost $10T of foreign money has flowed into US equities since Q4 2019. Noting foreign investors are “overweight” US equities, Torsten Sløk argues “the downside risks to the S&P 500 as a result of foreigners selling are significant.”

Do overweight foreign investors pose downside risk to US stocks?

Core argument: Foreign investors have poured significant inflows into US equity markets and are now significantly overweight US equities, leaving the S&P 500 exposed to a foreign pullback.

There have been significant inflows from abroad into US equity markets and foreign investors are now significantly overweight US equities. Combined with the dollar’s decline and the ongoing overvaluation of the Magnificent 7 the downside risks to the S&P 500 as a result of foreigners selling are significant.

Takeaways by Macro Roundup® AI

  1. Foreign investors have poured significant inflows into US equity markets and are now significantly overweight US equities, leaving the S&P 500 exposed to a foreign pullback.
  2. The combination of foreign overweight positioning, the dollar's decline, and the overvaluation of the Magnificent 7 creates significant downside risk to the S&P 500 if foreign investors sell.

Related Articles:

  • US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat — US companies need about 7% earnings-per-share growth to deliver a normal 4% equity risk premium above the risk-free rate, versus about 3% for other developed markets, with the highest expectations embedded in technology and the largest US tech firms. Chinese companies could generate a 4% risk premium over Chinese bonds with no earnings growth.
  • Lowering our S&P 500 EPS and Valuation Forecasts As the “Maleficent 7” Pushes the Index to the Brink of Correction — The S&P 500 fell 9% from its record high, with more than half of the decline coming from a 14% drop in the seven largest technology stocks, whose price-to-earnings ratio fell from 30x to 26x. The equal-weighted index declined 6%, leaving it 8% below its own record high.
  • The Trade War Will Pound Stocks — 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.

AI Summary. Foreign assets of China's commercial banks have been rising at roughly $100bn a quarter, or $400bn a year, an amount equal to about a quarter of the roughly $1.5tn in net global financial flows that sustain trade imbalances. The increase is funded domestically, as foreign liabilities have fallen.

Brad Setser @Brad_Setser
Date Posted:
Is Database:
Database

Net foreign assets of China’s commercial banks have been rising at around $400B annually. @Brad_Setser argues these flows are likely “a big part” of how “Chinese surpluses fund [chronic] deficits in the US.”

How much of global financing flows do Chinese banks supply?

Core argument: Foreign assets of China's commercial banks have been rising at roughly $100bn a quarter, or $400bn a year, for more than two quarters, equal to about one-quarter of the roughly $1.5tn net global current account imbalance.

One of the biggest global flows right now is the increase in the foreign assets of China's commercial banks -- it has been running at a pace of about $100b a quarter/ $400b a year for the last two plus quarters. That's real money. The net global current account (or trade imbalance, if you don't trust the current account numbers right now) is something like $1.5 trillion, so $400b is 1/4 of the total net financial flow that sustains trade imbalances. It can also be compared to the bond inflow tied to the era of peak imbalances (and peak reserve accumulation) -- China's purchases of US bonds back then never significantly topped $400b. And to be clear, it is a net flow: foreign assets are up, foreign liabilities are down, so the increase in foreign assets (and fx assets) is being funded domestically. It thus is part of the global net flow of funds that sustains trade imbalances. There is a very technical puzzle here -- the increase in the net foreign asset position in 2020 and 21 came when the CNY was trading strong and settlement showed big purchases (so everything pointed to intervention), and neither is the case now. But taken both literally and seriously, a big part of the global capital flow puzzle now (puzzle = how does a Chinese and Russian surplus fund a deficit in the US/UK/ India) is coming from the not fully transparent Chinese state banks.

Takeaways by Macro Roundup® AI

  1. Foreign assets of China's commercial banks have been rising at roughly $100bn a quarter, or $400bn a year, for more than two quarters, equal to about one-quarter of the roughly $1.5tn net global current account imbalance.
  2. The $400bn annual pace is comparable to China's purchases of US bonds during the era of peak global imbalances and peak reserve accumulation, which never significantly topped $400bn.

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  • The iPhone, the IMF, and China’s Balance of Payments — China's post-pandemic balance-of-payments methodology reports a substantially smaller surplus than its customs trade data, on the rationale that contract manufacturers making goods for foreign firms with offshore intellectual property record inflated export prices. Chinese export prices for smartphones of $300–400 per phone sit near estimated manufacturing costs and well below global wholesale prices, undercutting that rationale.

AI Summary. U.S. officials are expected to factor other countries' value-added taxes on consumption into reciprocal tariff calculations, with Mexico's rate equivalent to a 16% federal sales tax, subject to exemptions and lower rates on some basic goods. The administration views these taxes as discriminatory because they are refunded to exporters but paid by U.S. firms selling into those markets.

Gavin Bade, Josh Dawsey, and Vipal Monga Wall Street Journal
Date Posted:

American reciprocal tariffs will be announced on April 2 and will include value-added taxes (VAT) on consumption as a non-tariff barrier. The Trump Administration argues that VATs are discriminatory as they are refunded to domestic firms that export.

Should foreign value-added taxes count in reciprocal tariff calculations?

Core argument: Trump administration officials expect any reciprocal tariff plan to account for value-added taxes that many other nations charge on consumption within their borders, including Mexico's VAT, equivalent to a federal sales tax of 16%.

No matter what the administration settles on, officials expect they will take into account value-added taxes that many other nations charge on consumption within their boundaries. In Mexico, for instance, the VAT is equivalent to a federal sales tax of 16%, although a number of basic goods and services have exemptions or lower rates. Trump’s team has long viewed those taxes as discriminatory, because they are refunded to companies that export abroad, but still are paid by U.S. firms selling into nations with a VAT.

Takeaways by Macro Roundup® AI

  1. Trump administration officials expect any reciprocal tariff plan to account for value-added taxes that many other nations charge on consumption within their borders, including Mexico's VAT, equivalent to a federal sales tax of 16%.
  2. Trump's team has long viewed foreign value-added taxes as discriminatory because they are refunded to companies exporting abroad while still being paid by U.S. firms selling into nations with a VAT.
  3. Mexico's 16% value-added tax carries exemptions or lower rates for a number of basic goods and services.

Related Articles:

  • Trump Widens Trade Fight to Include Global Taxes and Regulation — The US has directed economic officials to calculate new country-by-country "reciprocal" tariffs based on the total tariff, tax, regulatory, currency and other barriers facing US exports, treating value-added taxes as a trade barrier. If value-added tax rates are added to existing tariff rates, India would face the highest rate at 29%, followed by Brazil and the European Union.
  • 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.
  • Mar-a-Lago Accord, Schmar-a-Lago Accord — Sustainably weakening the dollar would require the Federal Reserve to cut interest rates while foreign central banks raise theirs, which is unlikely given US inflation above the Federal Reserve's 2% target and weak foreign economies. Tariff threats and security-umbrella pressure might sway Japan and Europe, but China would be less willing to comply.

AI Summary. Proposals to reshape the dollar would recreate a global system of exchange rate management, making the shift from Bretton Woods fixed-but-adjustable exchange rates to floating rates a closer parallel than the 1980s Plaza and Louvre Accords, which aimed to manage imbalances within an existing floating-rate regime.

Martin Wolf Financial Times
Date Posted:

Martin Wolf argues the theorized “Mar-a-Lago Accord” is best thought of as a return to the old Bretton Woods system of fixed, but adjustable, exchange rates, not as an attempt to better manage the floating exchange rate regime.

Would remaking the dollar mean returning to managed exchange rates?

Core argument: What is now proposed would recreate a global system of exchange rate management, rather than manage a floating regime as the 1980s Plaza and Louvre Accords did.

The old Bretton Woods system of fixed, but adjustable, exchange rates was replaced by today’s floating exchange rates. Miran applies this perspective to the current predicament of the US. That is why one should view what happened in the 1960s and 1970s as a better parallel to what is being discussed today than the Plaza and Louvre Accords of the 1980s. The latter were aimed at managing a floating exchange rate regime at a time of disequilibrium among the dollar and other currencies, especially the Japanese yen and German mark. What is proposed now is recreating a global system of exchange rate management.

Takeaways by Macro Roundup® AI

  1. What is now proposed would recreate a global system of exchange rate management, rather than manage a floating regime as the 1980s Plaza and Louvre Accords did.
  2. Miran views the current US predicament through the lens of the Bretton Woods system of fixed but adjustable exchange rates, which was replaced by today's floating rates.
  3. The 1960s and 1970s, rather than the Plaza and Louvre Accords of the 1980s, offer the better parallel to current discussions, since those accords addressed disequilibrium among the dollar, the Japanese yen, and the German mark.

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.
  • What Is the Mar-a-Lago Accord? — 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.
  • Mar-a-Lago Accord, Schmar-a-Lago Accord — Sustainably weakening the dollar would require the Federal Reserve to cut interest rates while foreign central banks raise theirs, which is unlikely given US inflation above the Federal Reserve's 2% target and weak foreign economies. Tariff threats and security-umbrella pressure might sway Japan and Europe, but China would be less willing to comply.