Edward Conard

Top Ten New York Times Bestselling Author

  • “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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, April 21, 2025

AI Summary. Across countries, a one-standard-deviation rise in self-made billionaires' wealth relative to GDP is associated with 1.87 percentage points faster total factor productivity growth over the next seven years, while the same rise in inherited billionaire wealth is associated with a 1.28-point decline.

Bordin Bordeerath Social Science Research Network
Date Posted:
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Forbes data on billionaires from 57 countries over 1986-2011 show that a 1 standard deviation in founders’ aggregate wealth/GDP yields a 1.87 ppt rise in TFP growth over the next 7 yrs, vs. 1.28-ppt lower TFP growth for a 1 standard deviation rise in billionaire heirs’ wealth/GDP. Via Jim Pethokoukis.

Does the source of billionaire wealth determine productivity growth?

Core argument: A one-standard-deviation rise in billionaire founders' aggregate wealth relative to GDP is associated with a 1.87-percentage-point increase in total-factor productivity growth over the following seven years.

I demonstrate that inequality impedes economic efficiency when it arises from rent-seeking by entrenched elites. However, I also show that inequality can be beneficial when driven by creative destruction. A one-standard-deviation increase in the ratio of billionaire founders' aggregate wealth to GDP is associated with a 1.87-percentage-point (ppt) rise in total-factor productivity (TFP) growth over the next seven years. In contrast, a one-standard-deviation increase in billionaire heirs' wealth ratio correlates with a 1.28-ppt decline in TFP growth over the same period. Further the positive relationship between founders' wealth and TFP is stronger in more financially developed countries. By contrast, consistent with the rent-seeking equilibrium, the negative relationship between heirs' wealth and TFP is more pronounced in countries that are less financially developed, less open to foreign capital, and less democratic. One way to [further] identify the sources of wealth driving inequality might be to examine the institutional settings that enable the rich to amass their fortunes.

Takeaways by Macro Roundup® AI

  1. A one-standard-deviation rise in billionaire founders' aggregate wealth relative to GDP is associated with a 1.87-percentage-point increase in total-factor productivity growth over the following seven years.
  2. A one-standard-deviation rise in billionaire heirs' wealth-to-GDP ratio correlates with a 1.28-percentage-point decline in total-factor productivity growth over the same seven-year horizon.
  3. The positive founders' wealth–productivity relationship is stronger in more financially developed countries, while the negative heirs' wealth relationship is more pronounced in countries that are less financially developed, less open to foreign capital, and less democratic.

Related Articles:

  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.
  • 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.
  • A Preliminary Report on Taxing the Great Wealth Transfer: Revenue and Distributional Effects of Taxes on Estates, Inheritances, and Unrealized Capital Gains at Death — The authors argue that replacing the estate tax, paid by those who die, with an inheritance tax, paid by recipients, could raise more revenue and increase progressivity because it targets large individual transfers rather than estates divided among several family members. They also note unrealized capital gains held until death escape income tax entirely.

AI Summary. The author estimates a 90% chance of a US recession triggered by an abrupt shift to very high tariffs, which importers must pay when goods arrive. Small businesses lacking the working capital to cover tariffs face canceled orders and bankruptcies, and account for more than 80% of US employment and capital spending.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues if tariffs aren’t deferred, there is a 90% chance of a “Voluntary Trade Reset Recession” since “small businesses account for 80% of US employment and capex,” and with limited working capital are unequipped to make rapid adjustments.

Will an abrupt shift to very high tariffs cause a recession?

Core argument: The author puts the probability of a "Voluntary Trade Reset Recession" at 90%, tied to the overnight imposition of extremely high tariffs on US businesses.

There is now a 90% chance of what can be called a Voluntary Trade Reset Recession (“VTRR”). Implementing extremely high tariffs overnight hurts many businesses; particularly small businesses because the tariff must be paid by the business when the imported goods arrive in the US. Small businesses that have for decades relied on a stable US system will have to adjust immediately and do not have the working capital to pay tariffs. Expect ships to sit offshore, orders to be canceled, and well-run generational retailers to file for bankruptcy. To make exceptions for large businesses that have the flexibility and resources to handle unforeseen expenses but not small businesses does not make sense. The challenges for small- and medium-sized enterprises are now a macro problem for the US economy, where small businesses account for more than 80% of US employment and capex.

Takeaways by Macro Roundup® AI

  1. The author puts the probability of a "Voluntary Trade Reset Recession" at 90%, tied to the overnight imposition of extremely high tariffs on US businesses.
  2. Small businesses must pay tariffs when imported goods arrive in the US and lack the working capital to do so, leading the author to expect ships sitting offshore, canceled orders, and generational retailers filing for bankruptcy.
  3. Small businesses account for more than 80% of US employment and capital expenditure, which the author argues makes the strains on small- and medium-sized enterprises a macro problem for the US economy.

Related Articles:

  • ‘This Mindless Flailing Creates Recessions’: Four Economists Dissect Trump’s Tariffs — Economists argue the tariffs will shrink the US trade deficit by making the country an unattractive destination for capital, since foreign capital inflows require a trade deficit. They warn the policies could mark a break for the dollar comparable to the Suez crisis for the British pound, portending higher borrowing costs, less investment and more stagnation.
  • Bear Market Anatomy – The Path and Shape of the Bear Market — Cyclical and event-driven bear markets have both averaged declines of roughly 30%, but cyclical ones last about two years and take five to recover, versus about eight months and one year for event-driven; structural bear markets average 60% declines over three-plus years and take a decade to recover.
  • Consumer Confidence Is Weaker than During the 2008 Financial Crisis — The University of Michigan survey of consumers shows sentiment declining among households earning both above and below $100,000, job-loss worries at levels normally seen in recessions, a record-high share saying business conditions are worsening, falling income expectations, and rapidly rising inflation expectations. The concern is that weak sentiment spills over into weaker actual spending.

AI Summary. High tariffs on direct US-China trade combined with lower tariffs on third countries will likely re-route goods through hubs such as Mexico, Singapore, and Vietnam, leaving China's overall trade surplus and the aggregate US trade deficit little changed. Efforts to decouple the two economies would mainly make existing transactions more inconvenient.

Matt Klein The Overshoot
Date Posted:

China-US trade flows will likely persist even with punitive tariffs in both countries, due in part to re-routing of goods through Mexico, Singapore, and Vietnam. @M_C_Klein

Do high tariffs on direct trade actually shrink trade imbalances?

Core argument: Punitive tariffs on direct U.S.–China trade combined with modest tariffs on third countries will likely re-route goods through transit hubs such as Mexico, Singapore, and Vietnam, leaving China's overall trade surplus and the aggregate U.S. trade deficit largely unchanged.

Despite the apparent best efforts of policymakers in both countries, trade between China and the U.S. is likely to persist. The combination of punitive tariffs imposed on direct cross-border trade and relatively modest tariffs on trade with third countries will likely encourage the re-routing of goods through transit hubs such as Mexico, Singapore, and Vietnam. This would have little to no impact on the size of China’s overall trade surplus, nor on the size of the aggregate U.S. trade deficit. The good news is that this should reduce the impact on prices and shortages relative to a literalist interpretation. The bad news is that those aiming for a “conscious uncoupling” of two of the world’s largest economies will probably only succeed in making existing transactions marginally more inconvenient. U.S. agricultural and energy exports will still end up contributing to the satisfaction of Chinese demand one way or another even if the Chinese curtail their direct purchases of U.S. goods.

Takeaways by Macro Roundup® AI

  1. Punitive tariffs on direct U.S.–China trade combined with modest tariffs on third countries will likely re-route goods through transit hubs such as Mexico, Singapore, and Vietnam, leaving China's overall trade surplus and the aggregate U.S. trade deficit largely unchanged.
  2. Re-routing of China–U.S. trade through third countries should reduce the impact on prices and shortages relative to a literalist interpretation of the tariffs, while making existing transactions only marginally more inconvenient.
  3. U.S. agricultural and energy exports will likely still contribute to satisfying Chinese demand even if China curtails direct purchases of U.S. goods, leaving proponents of a "conscious uncoupling" of the two economies unlikely to succeed.

Related Articles:

  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • Pettis On New Round Of American Tariffs — Bilateral tariffs mostly divert trade rather than shrink the overall US trade deficit, because they address neither the internal imbalances driving surplus countries' surpluses nor the US role in accommodating them. After an earlier round of US tariffs, the US deficit with China fell while both the overall US deficit and China's overall surplus rose.

AI Summary. Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds over a two-week period, while U.S.-based funds saw $11.4bn of outflows from U.S. fixed income. Analysts note that large institutions such as pension funds and insurers often take many months to implement such portfolio shifts.

Patti Domm Barron’s
Date Posted:

While foreigners resumed buying US stocks, bond investors continued selling through April 16, contributing to the dollar depreciation. Insurance companies and pension funds are not hedge funds, and do not make quick asset reallocations. @jnordvig

Are investors pulling money out of U.S. bonds?

Core argument: Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds in the two weeks ending April 16, while U.S.-based funds recorded $11.4bn of outflows from U.S. fixed income over the same period.

Foreign funds sold $10.7 billion in U.S. stocks between April 3 and April 9, when Trump announced a 90-day pause on some tariffs. U.S.-based funds were net buyers of $37.5 billion in U.S. stocks in that period. Bond sales were more consistent. Foreign funds pulled an estimated $14.2 billion from U.S. Treasuries and corporate bonds in the two weeks ending April 16. In the same period, U.S.-based funds had outflows of $11.4 billion from U.S. fixed income. U.S.-based stock funds, meanwhile, saw outflows of $9.5 billion from U.S. equities in the week that ended April 16, while foreign funds were net buyers of $8.5 billion. Jens Nordvig, CEO of Exante Data,“When these big institutions like pension funds and insurance companies move, it often takes many months before they really implement the shift…It’s not like a hedge fund where they make a decision and a couple of hours later, they have shifted.”

Takeaways by Macro Roundup® AI

  1. Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds in the two weeks ending April 16, while U.S.-based funds recorded $11.4bn of outflows from U.S. fixed income over the same period.
  2. Foreign funds sold $10.7bn of U.S. stocks between April 3 and April 9, when Trump announced a 90-day pause on some tariffs, while U.S.-based funds bought a net $37.5bn.
  3. Jens Nordvig, CEO of Exante Data, says large institutions such as pension funds and insurance companies often take many months to implement portfolio shifts, unlike hedge funds that move within hours.

Related Articles:

  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.
  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.

AI Summary. The authors argue globalization requires a new trade regime in which countries resolve their production, consumption, and investment imbalances domestically rather than exporting them to trade partners. They propose starting with a customs-union-style bloc of major deficit countries, which would force surplus countries to raise domestic consumption or investment or cut overproduction.

Michael Pettis Foreign Affairs
Date Posted:

“American trade policy must either reverse the savings imbalance in the rest of the world, or it must limit Washington’s role in accommodating it.” @michaelxpettis argues “Bilateral tariffs do neither.”

How should a new trade regime handle countries' domestic imbalances?

Core argument: The authors argue globalization can thrive only under a regime where countries export in order to import and resolve production, consumption, and investment imbalances domestically rather than shifting them onto trade partners.

If globalization is to thrive, the world must revert to a kind of globalization where countries export in order to import and where a country’s production, consumption, and investment imbalances are resolved domestically—not foisted onto trade partners. The world requires, in other words, a new global trade regime where countries agree to restrain their domestic imbalances and match domestic demand with domestic supply. Only then will states no longer be forced to absorb one another’s internal imbalances. Organizers could start by gathering a small group of countries that comprise the bulk of global trade deficits—such as Canada, India, Mexico, the United Kingdom, and the United States—and bringing them into it. The result would be like a customs union, initially proposed by Keynes at Bretton Woods. These states would have every incentive to join, and once they did, the rest of the world would eventually have to participate. If deficit countries refuse to run permanent deficits, after all, surplus countries cannot run permanent surpluses. They would instead be forced to raise domestic consumption or domestic investment—either of which would be good for global demand—or they would have no choice but to reduce domestic overproduction.

Takeaways by Macro Roundup® AI

  1. The authors argue globalization can thrive only under a regime where countries export in order to import and resolve production, consumption, and investment imbalances domestically rather than shifting them onto trade partners.
  2. The proposal would begin by gathering a small group of countries accounting for the bulk of global trade deficits—Canada, India, Mexico, the United Kingdom, and the United States—into an arrangement resembling the customs union Keynes proposed at Bretton Woods.
  3. If deficit countries refuse to run permanent deficits, surplus countries cannot run permanent surpluses, and would instead have to raise domestic consumption or investment—either of which would support global demand—or cut domestic overproduction.

Related Articles:

  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • Trump’s Tariffs Are Designed for Maximum Damage—to America — The US goods trade deficit, 4.2% of GDP in 2024, reflects Americans spending more than they produce and will persist until spending falls relative to income, such as through a narrower federal budget deficit. Targeting bilateral deficits can only shift them between countries while curtailing gains from trade.
  • Without Spending Cuts, Brace for Slow Growth — The author argues that US trade deficits have funded debt-financed consumption rather than domestic business investment, noting that since 2000 real interest rates have tended to fall as trade deficits widen while business investment has been uncorrelated with both. If tariffs shrink trade deficits, interest rates could rise and worsen America's fiscal balance.

AI Summary. China's Ministry of Commerce warned that it opposes any country reaching a trade deal with the US at the expense of Chinese interests and will take reciprocal countermeasures if that occurs.

Josh Xiao and Lucille Liu Bloomberg
Date Posted:

China has warned countries currently negotiating new trade agreements with the US that Beijing “resolutely opposes any party reaching a deal at the expense of China’s interests,” and gave notice of potential “reciprocal countermeasures.”

Will China retaliate against countries striking US trade deals harming its interests?

Core argument: China's Ministry of Commerce said Beijing "resolutely opposes any party reaching a deal at the expense of China's interests" and will "resolutely take reciprocal countermeasures" against countries that do so.

China warned countries against striking deals with the US that could hurt Beijing’s interests, upping the ante in the trade war with Washington and showing how others risk getting caught in the middle. While it respects nations resolving their trade disputes with the US, Beijing “resolutely opposes any party reaching a deal at the expense of China’s interests,” the Ministry of Commerce said in a statement Monday. If that happens, Beijing “will never accept it and will resolutely take reciprocal countermeasures,” the ministry added. “China is willing to strengthen solidarity and coordination with all parties, jointly respond and resist unilateral bullying acts.

Takeaways by Macro Roundup® AI

  1. China's Ministry of Commerce said Beijing "resolutely opposes any party reaching a deal at the expense of China's interests" and will "resolutely take reciprocal countermeasures" against countries that do so.
  2. China's Ministry of Commerce said Beijing respects other nations resolving their own trade disputes with the US, while warning that agreements harming Chinese interests will never be accepted.
  3. China's Ministry of Commerce said Beijing is willing to strengthen "solidarity and coordination with all parties" to jointly respond to and resist unilateral bullying acts.

Related Articles:

  • China Orders Boeing Jet Delivery Halt as Trade War Expands — China has ordered its airlines to stop taking deliveries of Boeing jets and to halt purchases of aircraft equipment and parts from US companies. China is forecast to account for 20% of global aircraft demand over the next two decades, though Boeing has redirected some 737 Max jets built for Chinese carriers to Indian airlines.
  • A New ‘China Shock’ Is Destroying Jobs Around the World — Indonesia's textiles and apparel industry lost roughly 250,000 jobs over two years, with an industry association estimating another 500,000 at risk, amounting to one in four jobs in the sector. Researchers describe this as a new "China Shock," faster than the earlier wave that eliminated as many as 2.4m US jobs.
  • Cheap Chinese Cars Are Taking Over Roads From Brazil to South Africa — 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%.

AI Summary. Monthly Border Patrol arrests for illegal crossings fell from a record peak of about 250,000 to roughly 48,000 and then to just over 7,000. The administration credits deploying thousands of active-duty troops to the border and ending an appointment program migrants used to request asylum, leaving tens of thousands stranded in Mexico.

Kejal Vyas, Elizabeth Findell and Santiago Pérez Wall Street Journal
Date Posted:
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Crossings at the MX border have now dropped to their lowest level since the 1960s. The change seemingly implies the surge in illegal immigration via the southern border during Biden’s first three years was a policy choice.

Have tougher enforcement policies sharply reduced illegal border crossings?

Core argument: Border Patrol arrests fell from a peak of 250,000 in a single month to about 48,000 in December, the last full month of Joe Biden's term, and to just over 7,000 in March.

Illegal border crossings declined significantly in the final year of the Biden administration, from a period of record highs that at one point saw 250,000 Border Patrol arrests in a single month. That number dropped to around 48,000 in December, the last full month of former President Joe Biden’s term, and to just over 7,000 in March.The administration has credited the drop in crossings to its decision to send thousands of active duty troops to the border as a deterrent and its move to shut down a program known as CBP One, which migrants used to make appointments to ask for asylum. As a result, tens of thousands of migrants who were awaiting a turn are now stranded in Mexico. Many are now heading back to their communities.

Takeaways by Macro Roundup® AI

  1. Border Patrol arrests fell from a peak of 250,000 in a single month to about 48,000 in December, the last full month of Joe Biden's term, and to just over 7,000 in March.
  2. The Trump administration credits the decline in crossings to deploying thousands of active duty troops to the border as a deterrent and shutting down CBP One, the program migrants used to schedule asylum appointments.
  3. Tens of thousands of migrants awaiting asylum appointments are stranded in Mexico after CBP One was shut down, and many are heading back to their communities.

Related Articles:

  • Foreign-Born Number and Share of U.S. Population at All-Time Highs in January 2025 — The U.S. foreign-born population reached 53.3m, or 15.8% of the population, the highest level in American history, exceeding the shares recorded in 1890 (14.8%) and 1910 (14.7%) during the "Great Wave" of immigration. A four-year increase of 8.3m is larger than that of any four-year period in American history and exceeds the 7.9m increase over the prior 12 years.
  • Recent Immigration Surge Has Been Largest in U.S. History — An analysis of government data finds the recent U.S. immigration surge is the largest on record, with net migration averaging 2.4m people a year from 2021 to 2023 and the foreign-born share of the population reaching 15.2% in 2023, up from 13.6% in 2020. About 60% of immigrants arriving since 2021 entered without legal authorization.
  • How Trump’s Hard-Line Tactics Are Driving Down Migration — U.S. Border Patrol apprehensions of people crossing the southern border illegally have fallen to about 8,300 a month, down from a record of more than 225,000 in a single month. Crossings through the Darién Gap, the land bridge between South and Central America, fell to 408 from more than 37,000 a year earlier.

Tuesday, April 22, 2025

AI Summary. American workplaces are segregated by education, with workplace isolation particularly high for young and male workers without college degrees. The share of non-college coworkers around the average non-college worker fell from 0.787 to 0.767, but after adjusting for the rising national share of college-educated workers, relative isolation rose from 0.108 to 0.147.

Francis Dillon, Edward Glaeser and William Kerr National Bureau of Economic Research
Date Posted:

Over 2000-2020, exposure of non-college workers, particularly young males, to college-educated workers failed to keep pace with the overall increase in college graduation rates, limiting opportunities for on-the-job learning. @william_r_kerr

Are workers without college degrees increasingly isolated in their workplaces?

Core argument: The isolation index, measuring the share of non-college workers at the establishment of the average non-college worker, fell from 0.787 in 2000 to 0.767 in 2020, suggesting slightly less exposure to fellow non-college workers.

American workplaces show an educational segregation, measured by the degree to which the establishment has mostly workers of similar education levels. Workplace isolation was particularly high for young and male workers without college degrees. Table 1 considers the level of education and the workplace segregation by education over time. The first column shows the well-known fact that American workers are becoming more educated. Column 2 shows that the isolation index, [which] measures the share of non-college workers in the establishment of the average non-college worker,has declined from 0.787 in 2000 to 0.767 in 2020, suggesting that non-college workers are exposed to slightly fewer non-college workers than in the past. The third column reports an adjusted isolation index, which subtracts the total share of non-college workers in the LEHD sample from the basic isolation index and shows an increase over time from 0.108 to 0.147. Non-college workers are being exposed to more college educated workers over time, but the increase in exposure is less than what one might expect given the overall increase nationally in education levels.

Takeaways by Macro Roundup® AI

  1. The isolation index, measuring the share of non-college workers at the establishment of the average non-college worker, fell from 0.787 in 2000 to 0.767 in 2020, suggesting slightly less exposure to fellow non-college workers.
  2. An adjusted isolation index, which subtracts the total share of non-college workers in the LEHD sample, rose from 0.108 to 0.147, indicating non-college workers gained less exposure to college-educated coworkers than the national rise in education levels would suggest.
  3. Workplace isolation by education was particularly high for young and male workers without college degrees.

Related Articles:

  • They Used to Be Ahead in the American Economy. Now They’ve Fallen Behind — An analysis of census and American Community Survey microdata compares the average income of full-time workers in specific demographic groups and occupations with the national average for full-time workers, showing how each group's relative economic standing has shifted over the decades.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.
  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.

AI Summary. U.S. corporate profits reached $4tn, 2.3 percentage points higher as a share of national income than before the COVID-19 pandemic, an increase driven by domestic nonfinancial industries and offset mainly by declines in net interest and miscellaneous asset payments and in income of unincorporated businesses. Employee compensation's share edged down, and higher profits mostly went to shareholders through dividends.

Ricardo Marto Federal Reserve Bank of St. Louis
Date Posted:

Corporate profits averaged 13.9% of national income over the 2010-19 period, rising to 16.2% of national income as of the last quarter of 2024.

What is driving the rise in corporate profits' share of national income?

Core argument: The rise in corporate profits as a share of national income began in late 2020, mostly at the expense of net interest and miscellaneous payments on assets and proprietors' income, while employee compensation slipped from a 2010–19 average of 61.8% to 61.6%.

Corporate profits have been elevated since the onset of the COVID-19 pandemic. As of the last quarter of 2024, they were $4 trillion—2.3 percentage points higher as a fraction of national income than they were prior to the pandemic. The increase was entirely driven by domestic nonfinancial industries. The surge in corporate profits as a share of national income began in late 2020, mostly at the expense of a decline in net interest and miscellaneous payments on assets (interest paid less interest received and royalty payments) and proprietors’ income (income earned by unincorporated businesses). In contrast, employee compensation as a share of national income marginally decreased. It averaged 61.8% of national income over the 2010-19 period and was 61.6% in the last quarter of 2024. Notably, retail and wholesale trade, construction, manufacturing and health care experienced a marked increase in profitability. Higher corporate profits mostly went to rewarding shareholders via higher dividends.

Takeaways by Macro Roundup® AI

  1. The rise in corporate profits as a share of national income began in late 2020, mostly at the expense of net interest and miscellaneous payments on assets and proprietors' income, while employee compensation slipped from a 2010–19 average of 61.8% to 61.6%.
  2. Retail and wholesale trade, construction, manufacturing, and health care showed marked increases in profitability, and higher corporate profits mostly went to shareholders via higher dividends.

Related Articles:

  • Corporate Profits in the Aftermath of COVID-19 — Nonfinancial corporate profit margins—profits as a share of gross value added—rose to about 19% before easing to 15%, compared with about 13% before the pandemic. The authors attribute much of the increase to large direct government support for small and medium-sized U.S. businesses and to lower net interest expenses under accommodative monetary policy.
  • The Curious Incident of the Elevated Profit Margins — The US fiscal deficit averaged just under 3% of gross national product from 1950 to 2011 but 6.6% from 2012 to 2022, driven mainly by health and social security spending, a pattern that holds excluding pandemic years. Even assuming permanently elevated profit margins, US equity valuations imply low long-run returns.
  • 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. Despite shaken confidence in US assets, no alternative matches the depth and liquidity of the nearly $29tn Treasury market, with the dollar involved in about 90% of foreign-exchange trades and almost 60% of central bank reserves. The euro lacks the depth of debt instruments required of a reserve asset, and China's yuan is government-managed.

Saleha Mohsin and Carter Johnson Bloomberg
Date Posted:

Given the lack of alternatives to the dollar @EswarSPrasad argues any so-called regime shift away from the dollar “could well hit its limits soon.”

Is there a real alternative to the dollar and Treasury market?

Core argument: The dollar is involved in some 90% of foreign-exchange trades and accounts for almost 60% of central bank reserves, with no real competitor capable of filling any void it leaves.

However much the financial world’s faith in the US has been shaken, it’s short of immediate alternatives. European assets suddenly look somewhat more appealing, but nothing can match the depth and liquidity of the nearly-$29 trillion Treasury market. The dollar is involved in some 90% of foreign-exchange trades and accounts for almost 60% of central bank reserves. It has no real competitor capable of filling any void: The euro still lacks the depth of debt instruments required of a reserve asset and perhaps still the political ties across its 20-strong membership, and China’s yuan is managed by its government. For all these reasons, any so-called regime shift away from the dollar “could well hit its limits soon,” says Eswar Prasad, a professor at Cornell University and author of 2014's "The Dollar Trap." “Rebuilding institutions and foreign investors’ trust in them will be a long and arduous process, if and when it starts,” he says. “But the US certainly has the luxury of not having any serious rival to its financial markets and currency.”

Takeaways by Macro Roundup® AI

  1. The dollar is involved in some 90% of foreign-exchange trades and accounts for almost 60% of central bank reserves, with no real competitor capable of filling any void it leaves.
  2. The nearly-$29 trillion Treasury market is unmatched in depth and liquidity, leaving investors short of immediate alternatives even as European assets look somewhat more appealing.
  3. Cornell University professor Eswar Prasad argues any regime shift away from the dollar "could well hit its limits soon," as the euro still lacks the depth of debt instruments required of a reserve asset and China's yuan is government-managed.

Related Articles:

  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.
  • Top Dollar — Foreign holdings of U.S. financial assets exceed American holdings abroad, making the United States a net debtor whose liabilities are denominated in dollars while its foreign assets are largely in other currencies. U.S. foreign liabilities grew from $30tn to over $51tn while U.S. foreign assets grew from $24tn to $33tn, tripling the net debtor position from $6tn.

AI Summary. Gold reached a record $3,500 a troy ounce as attacks by the US president on the Federal Reserve chair fueled concerns over the central bank's independence and the US economic outlook. The Japanese yen strengthened to ¥140 per dollar, the dollar index sat near a three-year low, and gold has climbed roughly 32% this year.

Arjun Neil Alim, Ian Smith and Emily Herbert Financial Times
Date Posted:

Gold hit a record $3,500 a troy ounce amid Trump’s attacks on Federal Reserve chair Jay Powell. So far this year, gold is up 32%.

Do threats to central bank independence push gold to record highs?

Core argument: Gold climbed as much as 2% to a record $3,500.05 a troy ounce, as Donald Trump's sustained attack on Fed chair Jay Powell added to fears over the central bank's independence and the US economic outlook.

Gold hit a record $3,500 a troy ounce for the first time on Tuesday, as Donald Trump’s sustained attack on US Federal Reserve chair Jay Powell added to fears over the central bank’s independence and the prospects for the world’s largest economy. In a rush to haven assets, gold climbed as much as 2% to $3,500.05, cementing its position as one of the biggest winners from Trump’s return to the White House. The Japanese yen strengthened to ¥140 per dollar for the first time since September, as the dollar index languished near a three-year low. Gold, which some investors rely on as a hedge against inflation, has surged around 32% this year. Investors poured at least $19bn into gold-backed exchange traded funds during the first quarter, according to Standard Chartered.

Takeaways by Macro Roundup® AI

  1. Gold climbed as much as 2% to a record $3,500.05 a troy ounce, as Donald Trump's sustained attack on Fed chair Jay Powell added to fears over the central bank's independence and the US economic outlook.
  2. Gold has surged around 32% this year, with investors pouring at least $19bn into gold-backed exchange traded funds during the first quarter, according to Standard Chartered.
  3. The Japanese yen strengthened to ¥140 per dollar for the first time since September, while the dollar index languished near a three-year low.

Related Articles:

  • Gold Breaks Through $3,000 as Trump Turbocharges Record Rally — Gold has risen above $3,000 an ounce, a 10-fold gain over the past quarter century that outpaces the roughly 4-fold rise in the S&P 500 index of US stocks. Anticipation of tariffs pushed US gold prices above international benchmarks, drawing more than 23m ounces worth about $70bn into New York's Comex depositories.
  • The Dollar and the Bond Market’s Ominous Message for Trump — JPMorgan Chase estimates Treasury yields rise a third of a percentage point for each $300bn decline in foreign official holdings of US Treasuries. Carlyle Group notes gold has strongly outperformed inflation-protected Treasuries, suggesting gold is now the world's preferred safe-haven asset as reserve managers grow more hesitant to add Treasury exposure.

AI Summary. The US defense industrial base has consolidated to five major suppliers with annual revenue above $10bn that collectively receive about 70% of defense contract value, with Lockheed Martin alone at 40%. The number of small suppliers to the Defense Department fell more than 40% over a decade, and nearly two-thirds of major defense programs have only a single bidder.

Foreign Affairs Michael Brown
Date Posted:

The “Peace Dividend” at the end of the Cold War resulted in fewer firms competing for defense work, with firms becoming increasingly specialized. Today ⅔ of major defense programs only have a single bidder.

How concentrated has the US defense industrial base become?

Core argument: Five defense firms, each with annual revenue above $10 billion, collectively receive about 70% of defense contracts by value, with Lockheed Martin alone receiving 40%, compared with more than 50 top defense suppliers at the Cold War's end.

At the end of the Cold War, there were more than 50 top defense suppliers. Today, a total of five firms hold significant shares in the defense market, each with annual revenue that exceeds $10 billion. Collectively, they receive about 70% of defense contracts (measured by contract value), with the largest supplier, Lockheed Martin, receiving 40%. Many of the smaller firms that supplied the Defense Department have gone out of business or pivoted away from the Pentagon: in just the last five years, the defense industrial base has lost 17,045 independent companies. The total number of small companies supplying the Defense Department declined by more than 40% over the last decade. Before the end of the Cold War, the government could shop for tactical missiles from 13 suppliers. In 2022, it could source from just three. The number of fixed-wing aircraft suppliers declined from eight to three, and the number of satellite suppliers fell from eight to four. The number of surface ship suppliers declined from eight to two. Nearly two-thirds of major defense programs have only a single bidder.

Takeaways by Macro Roundup® AI

  1. Five defense firms, each with annual revenue above $10 billion, collectively receive about 70% of defense contracts by value, with Lockheed Martin alone receiving 40%, compared with more than 50 top defense suppliers at the Cold War's end.
  2. The defense industrial base has lost 17,045 independent companies in the past five years, and the number of small companies supplying the Defense Department fell by more than 40% over the last decade.
  3. Tactical missile suppliers fell from 13 before the Cold War's end to three in 2022, fixed-wing aircraft suppliers from eight to three, satellite suppliers from eight to four, and surface ship suppliers from eight to two, with nearly two-thirds of major defense programs drawing a single bidder.

Related Articles:

  • Ship Wars — Shipyards tied to China's defense industrial base account for 15% of the country's active shipyards but 40% of commercial output by tonnage, with over 75% of their production built for firms outside China and Hong Kong. The authors argue these commercial revenues offset fixed costs and effectively subsidize China's naval expansion.
  • A US Drone Maker Tries to Take Back the Country’s Skies — US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.
  • Debt Has Always Been the Ruin of Great Powers. Is the U.S. Next? — Historical experience suggests that when a great power spends more on debt interest than on military capability for a sustained period, rivals are likely to challenge its position and domestic stability may suffer as governments fail to satisfy competing claims from the military, bondholders, taxpayers and welfare recipients. U.S. federal interest payments of $1.124tn exceeded defense spending of $1.107tn.