Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Friday, April 25, 2025

AI Summary. Hedge funds running "relative-value" trades borrow heavily in short-term funding markets to exploit small price gaps between Treasury bonds and related derivatives, making them central players in the $29tn Treasury market and helping restrain US government borrowing costs. Many observers fear this leverage also leaves Treasuries vulnerable to sudden shocks.

Robin Wigglesworth, Kate Duguid, Costas Mourselas and Ian Smith Financial Times
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Swaps and the basis trade now hold as much US government debt as the Bank of Japan; demand from hedge funds is an important driver of Treasury’s current clearing level, which may “ make Treasuries vulnerable if foreign investors pull back.”

Does hedge fund leverage lower government borrowing costs while raising shock risk?

Core argument: Hedge funds running "relative-value" trades have become vital pillars of the $29tn US Treasury market, helping restrain the federal government's borrowing costs as interest rates have risen.

“Relative-value” trades usually seek to take advantage of often tiny differences in prices between Treasury bonds and various derivatives contracts linked to them. Using short-term funding markets to borrow extreme amounts of money, they can transform small profits into large ones. These trades have helped turn the club of big hedge funds that pursue them into vital pillars of the $29tn Treasury market, helping restrain the US government’s borrowing costs at a time when interest rates have been rising. Their importance is only likely to climb.. However, many fear that they also make Treasuries vulnerable tf foreign investors pull back from the Treasury market, as many analysts and fund managers po sudden shocks.

Takeaways by Macro Roundup® AI

  1. Hedge funds running "relative-value" trades have become vital pillars of the $29tn US Treasury market, helping restrain the federal government's borrowing costs as interest rates have risen.
  2. Relative-value trades exploit often tiny price differences between Treasury bonds and linked derivatives, borrowing extreme sums in short-term funding markets to turn small profits into large ones.
  3. Many fear that reliance on hedge fund leverage leaves Treasuries vulnerable to sudden shocks, even as the importance of these trades is likely to climb further.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • A Global Rebalancing Is Well Underway as Investors Sell Off U.S. Bonds — 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.
  • What Is the Basis Trade? — The Treasury basis trade — leveraged hedge fund bets, sometimes up to 100x, on convergence between Treasury cash and futures prices — stands at roughly $800bn within $2tn of outstanding prime brokerage balances. An exogenous shock could force a rapid unwind of these positions, disrupting broker-dealer market functions.

AI Summary. Daily container traffic from China to the US is collapsing, and the author projects empty shelves, Covid-like shortages of consumer goods and Chinese intermediate inputs, and higher inflation in product categories where China is the main supplier to the US market. The author expects significant layoffs in trucking, logistics, and retail, sectors employing 9m and 16m people respectively.

Torsten Sløk Apollo
Date Posted:

Container traffic from China to the US is “collapsing.” Torsten Sløk argues this means consumers will likely start to see empty shelves in US stores “in a few weeks” and “significant” layoffs in trucking in May.

Will collapsing container traffic from China cause shortages, inflation, and layoffs?

Core argument: Daily container traffic from China to the US is collapsing, which the author argues will produce empty US store shelves within weeks and Covid-like shortages for consumers and for firms using Chinese goods as intermediate inputs.

Daily data for container traffic from China to the US is collapsing. The consequence will be empty shelves in US stores in a few weeks and Covid-like shortages for consumers and for firms using Chinese products as intermediate goods. In addition, we will soon begin to see higher inflation because there are a significant number of product categories where China is the main provider of certain goods into the US market. In May, we will begin to see significant layoffs in trucking, logistics, and retail—particularly in small businesses such as your independent toy store, your independent hardware store, and your independent men’s clothing store. With 9 million people working in trucking-related jobs and 16 million people working in the retail sector, the downside risks to the economy are significant.

Takeaways by Macro Roundup® AI

  1. Daily container traffic from China to the US is collapsing, which the author argues will produce empty US store shelves within weeks and Covid-like shortages for consumers and for firms using Chinese goods as intermediate inputs.
  2. The author expects higher inflation because China is the main supplier into the US market across a significant number of product categories.
  3. With 9 million people in trucking-related jobs and 16 million in retail, the author expects significant layoffs in trucking, logistics, and retail, particularly among independent toy, hardware, and men's clothing stores, posing significant downside risks to the 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.
  • Probability of VTRR 90% — 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.
  • 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.

AI Summary. Apple plans to shift assembly of all US-sold iPhones to India, aiming to source the more than 60mn units sold annually in the US from Indian plants, which would require doubling its iPhone output there. The US accounted for about 28% of Apple's 232.1mn global iPhone shipments in 2024.

Michael Acton, Stephen Morris, John Reed and Kathrin Hille Financial Times
Date Posted:

Apple is planning on shifting assembly of all US-sold iPhones, 28% of total production, to India by 2026. This will require a doubling of Indian iPhone output.

Will all US-sold iPhones be assembled in India instead of China?

Core argument: Apple plans to source from India the entirety of the more than 60mn iPhones sold annually in the US by the end of 2026, according to people familiar with the matter.

Apple plans to shift the assembly of all US-sold iPhones to India as soon as next year, according to people familiar with the matter. The push builds on Apple’s strategy to diversify its supply chain but goes further and faster than investors appreciate, with a goal to source from India the entirety of the more than 60mn iPhones sold annually in the US by the end of 2026. The target would mean doubling the iPhone output in India, after almost two decades in which Apple spent heavily in China to create a world-beating production line that powered its rise into a $3tn tech giant. The US accounted for about 28% of Apple’s 232.1mn global iPhone shipments in 2024, according to the International Data Corporation.

Takeaways by Macro Roundup® AI

  1. Apple plans to source from India the entirety of the more than 60mn iPhones sold annually in the US by the end of 2026, according to people familiar with the matter.
  2. Meeting the target would require doubling iPhone output in India, following almost two decades in which Apple spent heavily in China to build a production line that powered its rise into a $3tn company.
  3. The US accounted for about 28% of Apple's 232.1mn global iPhone shipments in 2024, according to the International Data Corporation.

Related Articles:

  • Apple India Produces $22 Billion of iPhones in Shift From China — Apple assembled $22bn of iPhones in India over a 12-month period, up nearly 60% from the prior year, and now makes about one in five of its iPhones there. Most India-made iPhones are assembled at a Foxconn factory in southern India, with Tata Group's electronics arm another key supplier.
  • China and India Decoupling — After decades of moving together, the business cycles of China and India have decoupled.
  • Where Can Investors Find Geographic Diversification Today? — Japan offers investors geographic diversification, with among the lowest correlation in economic conditions to the US of any developed country, reflecting trade exposure split between the US, China, and the broader Asia region. Most sales of Japanese-listed companies are domestic, and investors remain underweight Japanese assets.

AI Summary. Using Danish register data, the authors classify education programs by graduates' starting wages and wage growth and estimate that marital sorting on this "educational ambition" rose about 20% over four decades, while sorting by education level and field stayed flat. Holding ambition-based sorting constant would have cut between-household inequality growth 40%.

Frederik Almar, Benjamin Friedrich, Ana Reynoso, Bastian Schulz, et al. National Bureau of Economic Research
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In Danish data, assortative mating on “ambition types” proxied by the wage paths attached to detailed educational programs rose ~20% over 1980-2018. Sorting on educational ambition rather than level explains >40% of the rise in HH inequality since 1980.

Does marriage sorting by career ambition drive household income inequality?

Core argument: Marital sorting based on "educational ambition" types rose about 20% between 1980 and 2018 in Danish register data, while sorting based on education level and field of study stayed close to its 1980 levels.

Using detailed data from Danish education and labor market registers, we cluster education programs by average starting wages and wage growth of graduates to define four educational ambition types. We show that educational ambition better reflects both wage dynamics and work-life balance measures than categorizations based on educational levels and fields of study. An increase of about 20% in sorting based on the educational ambition categorization between 1980 and 2018. In contrast, sorting based on the level and field of education remains close to its 1980 levels throughout this period. Had the configuration of households based on educational ambition types stayed at their 1980 levels over the last four decades, between-household inequality growth would have been mitigated by approximately 40%. In contrast, changes in marriage market sorting patterns based on education level and field of study contributed less to income inequality growth. Overall, our analysis suggests that considering richer type classifications than the level or field of education can be a promising direction for future research on the relationship between marriage and labor markets.

Takeaways by Macro Roundup® AI

  1. Marital sorting based on "educational ambition" types rose about 20% between 1980 and 2018 in Danish register data, while sorting based on education level and field of study stayed close to its 1980 levels.
  2. The authors estimate that had household configurations by educational ambition type remained at 1980 levels, growth in between-household inequality would have been mitigated by roughly 40%, whereas sorting shifts by education level and field contributed less.
  3. Educational ambition types, defined by clustering education programs on graduates' average starting wages and wage growth, better reflect wage dynamics and work-life balance measures than categorizations based on educational levels and fields of study.

Related Articles:

  • Bachelors Without Bachelor’s: Gender Gaps in Education and Declining Marriage Rates — Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men declined, with the overall decline in marriage driven almost entirely by fewer marriages between non-college women and non-college men. The education gap in women's marriage rates is larger in areas where non-college men face the highest joblessness and incarceration.
  • American Women Are Giving Up on Marriage — An analysis of census data by the Aspen Economic Strategy Group finds 51.4% of US women ages 18 to 40 were single—neither married nor cohabitating—up from 41.8% in 2000. Research estimates marriage rates by age 45 for women without a college degree fell from 79% to 52% across those born between 1930 and 1980.
  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.

AI Summary. The collapse of China's property sector, which had contributed roughly a quarter of GDP, has been the most severe constraint on the country's growth, with new property sales down 60%, construction starts down 70%, and prices down a cumulative 16%. The flow of new credit appears sufficient for steady but not strong growth.

Jeffrey Dawson and Hunter Clark Federal Reserve Bank of New York
Date Posted:

Since 2021, Chinese property prices have fallen 16%, and total sales and new starts are down 60% and 70%, respectively – a residue of tight borrowing conditions in 2020. The flow of new credit is now likely sufficient to allow China to “muddle through.”

How much is the property sector collapse constraining China's growth?

Core argument: China's new property sales and construction starts have fallen 60% and 70% respectively, with active construction floor area down 20% and prices down a cumulative 16% despite government price controls, in a sector that contributed roughly one-quarter of GDP.

China’s economy has faced major headwinds since the beginning of 2020. Yet the most severe constraint on growth has been the collapse of the country’s property sector. This crisis had its beginnings in the summer of 2020 when Chinese authorities tightened borrowing requirements on property developers. Financial strains subsequently spread to a large swath of other developers, with attendant spillovers to creditors, suppliers, local governments, and households.The downturn in the property sector—a sector that had contributed roughly one-quarter of GDP—has been severe, as illustrated in the chart below. Total sales and starts of new property construction have fallen by 60% and 70%, respectively, while the total floor area of active construction has fallen by 20%. Property prices, notwithstanding artificial support by government price controls, have fallen by a cumulative 16%. At present, China’s “credit impulse”—the change in the flow of new aggregate credit to the economy relative to GDP—appears likely sufficient to allow it to muddle through with steady but not strong growth over the next year despite the intensifying trade conflict.

Takeaways by Macro Roundup® AI

  1. China's new property sales and construction starts have fallen 60% and 70% respectively, with active construction floor area down 20% and prices down a cumulative 16% despite government price controls, in a sector that contributed roughly one-quarter of GDP.
  2. The collapse of China's property sector has been the most severe constraint on growth since the start of 2020, with the crisis beginning when Chinese authorities tightened borrowing requirements on property developers in the summer of 2020.
  3. Financial strains spread from Chinese property developers to creditors, suppliers, local governments, and households, yet China's credit impulse—the change in the flow of new aggregate credit relative to GDP—appears likely sufficient for steady but not strong growth over the next year despite intensifying trade conflict.

Related Articles:

  • China is Suffering its Own ‘China Shock’ — Academic analysis of 12 labour-intensive Chinese manufacturing industries estimates average employment fell about 14%, or nearly 4mn jobs, between 2011 and 2019, with textile roles down 40%; a further analysis of the same sectors found 3.4mn more jobs lost through 2023. Researchers argue industrial upgrading and automation are cutting demand for lower-skilled workers and depressing their wages.
  • Economist Michael Pettis on China’s Consumption Paradox and the Pitfalls of a Trade War — China's low household consumption share of GDP is not an oversight but is integral to its manufacturing competitiveness, so raising one requires lowering the other. Japan's experience shows consumption share fell for five years after it pledged to raise it, then took 17 years to rise 10 percentage points as manufacturing's share shrank.
  • Peak China Housing — Real estate and related industries account for roughly 29% of China's GDP, a level of dependence the authors estimate exceeds that of Ireland and Spain before their financial crises. A 20% decline in housing activity could reduce economic output by 5-10%.

Monday, April 28, 2025

AI Summary. The cost of insuring against a US government default has surged while the cost for France, Germany, and Italy has remained broadly stable, leaving US debt twice as expensive to insure as Italian debt. Italy is the more indebted country, with public debt around 135% of GDP versus 121% for the US.

Jesper Rangvid Rangvid's Blog
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Since “Liberation Day” a 5-year CDS premium on US debt has risen sharply from 37bps to 52bps with little change in the price of insurance against Eurozone defaults. The premium remains well under the 2023 spike associated with the debt ceiling showdown.

Is US debt now more expensive to insure than Europe's?

Core argument: Insuring US debt against default now costs twice as much as insuring Italian debt, even though Italian public debt stands at about 135% of GDP versus 121% in the US.

A way to observe the loss of investor confidence [in the US] is by comparing the movements in US CDS premiums to those of other major economies. There has been virtually no change in the cost of insuring against a default by France, Germany, or even Italy since early April—CDS premiums for those countries have remained broadly stable. In stark contrast, the cost of insuring against a US default has surged. It is now twice as expensive to insure US debt as it is to insure Italian debt. This is striking, given that Italy is more indebted than the US: Italian public debt stands at around 135% of GDP, compared to 121% in the US.

Takeaways by Macro Roundup® AI

  1. Insuring US debt against default now costs twice as much as insuring Italian debt, even though Italian public debt stands at about 135% of GDP versus 121% in the US.
  2. Credit default swap premiums for France, Germany, and Italy have been broadly stable since early April, while the cost of insuring against a US default has surged.
  3. Comparing US credit default swap premiums with those of other major economies offers a way to observe the loss of investor confidence in the US.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • 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.
  • The Dollar has Further to Fall — The author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.

AI Summary. The author projects that new US tariffs will trigger a cascade: container departures from China slow, ship arrivals at US ports stop, trucking demand halts as shelves empty, and layoffs follow in trucking and retail. The projected end point is a recession.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues the US will likely be in recession by this summer. The slowdown in shipping will drive a collapse in trucking demand starting in mid to late May, which in turn will lead to widespread layoffs in trucking/retail by early June.

Will tariffs set off a chain reaction from shipping to recession?

Core argument: Following the April 2 "Liberation Day" tariffs, container departures from China to the US slow rapidly, with container ship transit times of 20–40 days delaying the effect on US ports until early to mid-May.

April 2: "Liberation Day" tariffs. Container departures from China to the US slowing rapidly (20-40 days container ship transit time). Early May/Mid May: Container ships to US ports come to a stop. (1-10 days truck/rail transit time to cities). Mid-May/Late May: Trucking demand comes to a halt. (Empty shelves and companies respond to lower sales). Late May/Early June: Layoffs in trucking and retail industry. Summer 2025: Recession.

Takeaways by Macro Roundup® AI

  1. Following the April 2 "Liberation Day" tariffs, container departures from China to the US slow rapidly, with container ship transit times of 20–40 days delaying the effect on US ports until early to mid-May.
  2. The projected timeline has container ships to US ports coming to a stop in early to mid-May, followed by trucking demand halting in mid to late May, with truck and rail transit to cities taking 1–10 days.
  3. Empty shelves and companies responding to lower sales are projected to bring layoffs in the trucking and retail industries in late May and early June, followed by recession in summer 2025.

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. US ports and air freight are seeing weaker demand as importers draw down stockpiled inventories, hold goods in duty-free bonded warehouses, or divert them to nearby countries such as Canada rather than bring in new Chinese stock. One of the world's largest container shipping lines said Chinese customers cancelled roughly 30% of bookings out of China.

Peter Foster, Chan Ho-him, Patricia Nilsson, Rafe Uddin, et al. Financial Times
Date Posted:

The Port of Los Angeles, the primary entry point for goods from China, expects arrivals next week to be down a third year-over-year. Firms are running down stockpiles in anticipation of a US-China deal leading to a tariff reduction.

Are tariffs cutting shipping demand at US ports and air freight?

Core argument: Hapag-Lloyd, one of the world's largest container shipping lines, said Chinese customers had cancelled roughly 30% of its bookings out of China.

Nathan Strang, ocean freight director at US logistics group Flexport, said companies were waiting to ship goods in anticipation of Washington and Beijing agreeing a deal to mitigate the levies. US importers are looking to use up stockpiled inventories before importing fresh stock from China, said logistics executives. They are also holding stock in bonded warehouses where inventory can be stored duty-free with taxes paid on withdrawal, or diverting it to other nearby countries such as Canada. “They’re sitting on goods at origin, sitting on goods at destination,” Strang said, warning that if a deal was done to cut tariffs, shipping rates would then jump sharply. Hapag-Lloyd, one of the world’s largest container shipping lines, said Chinese customers had cancelled roughly 30% of its bookings out of China.

Takeaways by Macro Roundup® AI

  1. Hapag-Lloyd, one of the world's largest container shipping lines, said Chinese customers had cancelled roughly 30% of its bookings out of China.
  2. Nathan Strang, ocean freight director at Flexport, said companies were delaying shipments in anticipation of a US–China deal to mitigate the levies, sitting on goods at both origin and destination, and warned shipping rates would jump sharply if tariffs were cut.
  3. US importers are using up stockpiled inventories before importing fresh Chinese stock, holding goods in bonded warehouses where duties are paid on withdrawal, or diverting shipments to nearby countries such as Canada, according to logistics executives.

Related Articles:

  • Probability of VTRR 90% — 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.
  • 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. Reported cancellations of about 2GW of Microsoft datacenter capacity cover only non-binding letters of intent, while the company holds roughly 5GW of pre-leased capacity under binding contracts slated to begin operating between 2025 and 2028. The authors estimate Microsoft accounted for more than 60% of all newly leased turnkey datacenter capacity over a recent six-quarter stretch.

Dylan Patel, Jeremie Eliahou Ontiveros and Maya Barkin Semianalysis
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Microsoft accounted for more than 60% of new data center leased turnkey capacity between 2023 Q1 and 2024 Q2. The market’s focus on “2GW of lease cancellations,” which involve non-binding LOIs, not firm contracts, is misplaced.

Do reported datacenter lease cancellations overstate the pullback in capacity?

Core argument: Microsoft accounted for more than 60% of all new leased turnkey datacenter capacity from Q1 2023 through Q2 2024, by estimate, while also locking up non-binding letters of intent across the market.

Microsoft significantly ramped up its self-build efforts, acquiring tens of thousands of acres around the US and the globe, accelerating construction of existing sites and securing gigawatts of power for future sites. Taken together, these moves signaled Microsoft’s preparation for what was the most ambitious infrastructure buildout in history. The market has been focusing on “2GW of lease cancellations” which only covers non-binding LOIs, not firm contracts. This fails to mention that Microsoft has ~5GW of pre-leased capacity under binding contracts that will start operations between 2025 and 2028. Microsoft singlehandedly drove the leasing market in 2023 and the first half of 2024. Not only was it aggressively signing deals, but it was also effectively “freezing” the market by locking up non-binding LOIs across the board. Our estimates suggest Microsoft accounted for more than 60% of all new leased turnkey capacity from Q1 2023 through Q2 2024. In June 2024, Microsoft’s pre-leased capacity was larger than that of the four other major hyperscalers combined.

Takeaways by Macro Roundup® AI

  1. Microsoft accounted for more than 60% of all new leased turnkey datacenter capacity from Q1 2023 through Q2 2024, by estimate, while also locking up non-binding letters of intent across the market.
  2. The widely cited "2GW of lease cancellations" at Microsoft covers only non-binding letters of intent, not the roughly 5GW of pre-leased capacity under binding contracts set to begin operations between 2025 and 2028.
  3. Microsoft's pre-leased datacenter capacity in June 2024 exceeded that of the four other major hyperscalers combined, alongside acquisitions of tens of thousands of acres in the US and globally and gigawatts of secured power.

Related Articles:

  • Microsoft Pulls Back on Data Centers From Chicago to Jakarta — Microsoft has halted talks for or delayed data center projects in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin. It is unclear how much of the pullback reflects expectations of weaker demand for artificial intelligence and cloud services versus construction constraints such as shortages of power and building materials.
  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.
  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.

AI Summary. Sub-Saharan Africa's working-age population is projected to roughly double, rising about 700m by 2050, and by 2030 roughly half of new entrants to the global labor force will come from the region. About 15m people enter its labor market each year against just 3m formal jobs created.

Economist Staff The Economist
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The sub-Saharan African working age population will rise by ~ 700mm over the next 25 years. Currently, the region creates only 3mm jobs annually for the 15mm people entering the labor market.

Will Africa's working-age population growth reshape the global labor force?

Core argument: Sub-Saharan Africa's working-age population is projected to rise by around 700m by 2050, roughly doubling, with the region decades behind in its demographic transition.

The region is decades behind in its “demographic transition”. Its working-age population will rise by around 700m by 2050, roughly doubling. By 2030 roughly half of new workers entering the global labour force will be from sub-Saharan Africa. They will struggle to find work at home. Sub-Saharan Africa sees around 15m people enter the labour market every year but just 3m formal jobs created. 94% of sub-Saharan Africans—1.1bn people—live in countries with a GDP per person of less than $10,000.

Takeaways by Macro Roundup® AI

  1. Sub-Saharan Africa's working-age population is projected to rise by around 700m by 2050, roughly doubling, with the region decades behind in its demographic transition.
  2. By 2030 roughly half of new workers entering the global labour force will come from sub-Saharan Africa, where 94% of people—1.1bn—live in countries with GDP per person below $10,000.

Related Articles:

  • Europe Hopes Barbed Wire Will Keep Migrants Out. It Won’t — The total length of border fences in the European Union grew from 315km to 2,163km over roughly a decade, yet unauthorised crossings made up just 0.13% of all external crossings into the EU. Most migrants arrive via the Mediterranean rather than the Balkans or the eastern land border.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.
  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.

AI Summary. China's productive capacity is three times that of the United States and exceeds the next nine countries combined, with its share of global manufacturing quintupling to 30% while the U.S. share halved to about 15%. The authors argue Washington must convert its alliances into a platform for pooled capacity building.

Kurt Campbell and Rush Doshi Foreign Affairs
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“China possesses scale, and the [US] does not.” @RushDoshi argues the US can balance China only by “transforming its alliance architecture” to gain scale by pooling the collective capacity of the EU, India, and Japan, which “China cannot match alone.”

How can the US match China's manufacturing scale?

Core argument: China's productive capacity is three times that of the United States and exceeds that of the next nine countries combined, which the article calls a decisive advantage in military and technological competition.

China’s productive capacity is three times as large as that of the United States—a decisive advantage in military and technological competition—and exceeds that of the next nine countries combined. In the two decades after China joined the World Trade Organization, its share of global manufacturing quintupled to 30% while the U.S. share halved to roughly 15%; the United Nations has estimated that, by 2030, the imbalance will grow to 45% and 11%. China leads in many traditional industries—producing 20x as much cement, 13x as much steel, three times as many cars, and twice as much power as the United States—and increasingly in advanced sectors as well. To achieve scale, Washington must transform its alliance architecture from a collection of managed relationships to a platform for integrated and pooled capacity building across the military, economic, and technological domains. In practical terms, that might mean Japan and Korea help build American ships and Taiwan builds American semiconductor plants while the United States shares its best military technology with allies, and all come together to pool their markets behind a shared tariff or regulatory wall erected against China.

Takeaways by Macro Roundup® AI

  1. China's productive capacity is three times that of the United States and exceeds that of the next nine countries combined, which the article calls a decisive advantage in military and technological competition.
  2. In the two decades after China joined the World Trade Organization, its share of global manufacturing quintupled to 30% while the U.S. share halved to roughly 15%; the United Nations has estimated the gap will widen to 45% versus 11% by 2030.
  3. China produces 20 times as much cement, 13 times as much steel, three times as many cars, and twice as much power as the United States, and increasingly leads in advanced sectors as well.

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