Edward Conard

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Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, April 30, 2025

AI Summary. This review argues that alarm over the effect of expanded trade with China on US workers is unwarranted given the ambiguity of the evidence, and that economic theory holds freer trade tends to benefit a country even when other countries erect trade barriers. Evidence linking Chinese imports to manufacturing employment lacks clarity.

Scott Winship First World Problems
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Scott Winship revisits the “China Shock” analysis and finds that its extension to conclusions about national declines in manufacturing employment may be overstated. His paper provides a useful survey and summary of the related literature.

Is alarm over trade with China's effect on US workers warranted?

Core argument: The review argues that the debate over how increased trade with China since its WTO accession and grant of permanent normal trade relations status affected workers has been unduly alarmist given the ambiguity of the available evidence.

The message from this review is that the debate around the effect on workers of increased trade with China since it joined the WTO and was granted permanent normal trade relations status has been unduly alarmist given the ambiguity of the evidence we have at hand. Economic theory offers a variety of reasons to think that voluntary exchange benefits both parties in a trade and that freer trade tends to benefit a country even in the face of trade barriers erected by other countries. If the evidence clearly contradicted the theory, we would want to strongly question the theory. But even confining ourselves narrowly to the evidence on manufacturing employment and Chinese imports—ignoring all the other channels whereby trade affects Americans—we see no such clarity.

Takeaways by Macro Roundup® AI

  1. The review argues that the debate over how increased trade with China since its WTO accession and grant of permanent normal trade relations status affected workers has been unduly alarmist given the ambiguity of the available evidence.
  2. Economic theory offers reasons that voluntary exchange benefits both parties to a trade and that freer trade tends to benefit a country even when other countries erect trade barriers.
  3. Even confined narrowly to evidence on manufacturing employment and Chinese imports, setting aside other channels through which trade affects Americans, the review finds no clear contradiction of that theory.

Related Articles:

  • Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization — Analysis of U.S. register data finds that employment levels in places exposed to Chinese import competition more than fully rebound, while employment-to-population ratios stay depressed and manufacturing employment continues to shrink. The authors find the recovery comes almost entirely from young adults and foreign-born immigrants taking first jobs in lower-wage service sectors, with both in- and out-migration remaining depressed.
  • The China Shock Revisited: Job Reallocation and Industry Switching in U.S. Labor Markets — Using U.S. Census Bureau administrative data, the authors find that rising Chinese import penetration shifted jobs from manufacturing to services far more in high human capital areas, where within-firm industry switching occurs almost exclusively, producing a net positive employment effect; in low human capital, manufacturing-dependent areas, service gains barely offset manufacturing losses.
  • Trading Places: Mobility Responses of Native and Foreign-Born Adults to the China Trade Shock — U.S. local labor markets more exposed to import competition from China saw substantially larger net reductions in their foreign-born populations, with no significant reduction among native-born residents. Within exposed areas, foreign-born and native-born workers had comparably sized declines in employment-to-population ratios.

AI Summary. Recent moves in stocks, bond yields, the yield curve, and the dollar are small relative to the 15-year run in asset prices and to the scale of underlying shifts underway. The US share of world stock market value went from 50% to almost 75%, and recent underperformance barely undoes a couple of months of that gain.

Karen Karniol-Tambour and Jim Haskel Bridgewater Associates
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Bridgewater’s Karen Karniol-Tambour argues that changes in equity prices and bond yields do not reflect the “magnitude of underlying tectonic shifts that are underway” that imply “all US assets are under exceptional risks” from lower foreign inflows.

Are recent market moves small relative to the past 15 years?

Core argument: Karen Karniol-Tambour notes the US share of world stock markets rose from 50% to almost 75%, against which recent market moves are barely noticeable.

When you then just go and step back and look at these market moves in the context since 2010 or so—since this run we had in the last 15 years in assets—they are very small. The magnitude of what has actually occurred in pricing is very small relative to what I really believe is the magnitude of underlying tectonic shifts that are underway here. If you look at the stock market, the US moved from 50% to almost 75% of world stock markets. What’s happened recently is barely noticeable. The US has been outperforming every single country in the world massively. The last few weeks have felt like dramatic underperformance, but it barely undoes a couple of months of this. The bond yield, the moves feel large because we’re not used to them happening on days like these, but the bond yield’s kind of right in the range it has been for a while. The yield curve slope, it’s certainly sharper than it was—and that was a fast move—but this is not a major risk premium yet. This is not anything like a steep yield curve. And in the currency markets, the run that the dollar has had has just barely started to reverse in the recent moves.

Takeaways by Macro Roundup® AI

  1. Karen Karniol-Tambour notes the US share of world stock markets rose from 50% to almost 75%, against which recent market moves are barely noticeable.
  2. Karniol-Tambour argues the magnitude of recent price moves is very small relative to the underlying tectonic shifts she believes are underway, with the bond yield still within the range it has occupied for a while.
  3. Karniol-Tambour says the yield curve slope is sharper than it was after a fast move but does not yet reflect a major risk premium, and the dollar's run has only barely started to reverse.

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.
  • 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.

AI Summary. Even if US tariffs on China are lowered from 145%, the author argues the likely landing point is a still-high rate near 50%, closer to the campaign proposals of 60% on China and 10% on other countries. Such tariffs would be partly absorbed by historically high corporate margins but still cause economic disruption through lower growth and employment.

Joseph Wang Fed Guy Blog
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Potential reductions in the level of the China tariffs suggest the White House is “settling down for an extended trade war,” @FedGuy12 argues. This suggests that the equity market has further to fall as near-record margins are compressed.

Will lower tariffs on China still disrupt growth and employment?

Core argument: De-escalation from 145% tariffs on China likely settles near 50%, a level the author argues remains economically disruptive despite the positive market reaction.

A de-escalation away from 145% tariffs on China may be cheered by the markets, but the end result is likely a still high ~50% tariff that will be economically disruptive. The positive market sentiment suggests a capitulation on the trade war, but Trump’s multi-decade vision on trade is unlikely to melt away due to a month of a commotion. It is more likely that he walks back the bluster of Liberation Day and settle towards tariffs that are high but not ridiculous, such as the 60% on China and 10% on everyone else he had campaigned on. That is not disaster and can in part be absorbed by the historically high corporate margins. But it will also still result in widespread economic disruption that will show up in lower growth and employment in the coming months. That suggests the lows of the stock market are not yet in.

Takeaways by Macro Roundup® AI

  1. De-escalation from 145% tariffs on China likely settles near 50%, a level the author argues remains economically disruptive despite the positive market reaction.
  2. Trump's campaign platform of 60% tariffs on China and 10% on all other countries is the more likely landing point, walking back the bluster of Liberation Day without abandoning a multi-decade trade vision.
  3. Historically high corporate margins can absorb part of the tariff burden, but the author expects widespread disruption in the form of lower growth and employment, and argues the stock market's lows are not yet in.

Related Articles:

  • On Bubble Watch — Data from J.P. Morgan Asset Management covering monthly observations over a 27-year period show a strong relationship between the S&P 500's starting price-to-earnings ratio and its annualized return over the following ten years, with higher starting valuations consistently followed by lower returns. Purchases at a multiple near today's 22x were followed by ten-year returns between +2% and -2%.
  • 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.
  • Data Update 2 for 2025: The Party Continues (for US Equities)! — Applying an internal-rate-of-return approach to the S&P 500 using consensus earnings and payout estimates implies an expected stock return of 8.91% and an equity risk premium of 4.33%. Assuming the premium reverts to 4.5% yields an index value about 12% below current levels, with an estimated 80% chance stocks are overvalued.

AI Summary. An analysis attributes the pre-pandemic decline in the U.S. neutral real interest rate to international factors and population aging, with fiscal spending pushing rates up; since 2019 international factors have instead put upward pressure on U.S. real rates. The estimates suggest productivity growth has played a very minor role.

Carlos Carvalho, Andrea Ferrero, Felipe Mazin and Fernanda Nechio Federal Reserve Bank of San Francisco
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Since 2019, aging has continued to put modest downward pressure on US real rates, but has been offset by fiscal policy, leaving real rates elevated relative to their pre-pandemic level.

What drives changes in the U.S. neutral interest rate?

Core argument: The estimates associate most of the pre-pandemic decline in U.S. real rates with both domestic and foreign developments: international factors captured by the global rate and U.S. population aging pushed r-star down, while fiscal spending pushed it up.

Figure 3 reports the contributions of potential trends behind U.S. r-star before the pandemic (blue bars) and since the pandemic (red bars). The bulk of the pre-pandemic decline in U.S. real rates can be associated with both domestic and foreign developments. International factors, as captured by the global rate, and U.S. population aging contributed significantly to pushing U.S. real rates down. In contrast, fiscal spending put upward pressure on U.S. real rates. Since 2019, however, international factors have put upward pressure on U.S. real rates. Population aging has continued to put a modest downward pressure on U.S. real rates, while fiscal spending has continued to put upward pressure on U.S. rates. In both periods, the estimates suggest that TFP has played a very minor role in driving r-star.

Takeaways by Macro Roundup® AI

  1. The estimates associate most of the pre-pandemic decline in U.S. real rates with both domestic and foreign developments: international factors captured by the global rate and U.S. population aging pushed r-star down, while fiscal spending pushed it up.
  2. Since 2019, international factors have put upward pressure on U.S. real rates, while population aging has continued to exert modest downward pressure and fiscal spending continued upward pressure.
  3. Total factor productivity played a very minor role in driving U.S. r-star in both the pre-pandemic and post-pandemic periods, according to the estimates reported in Figure 3.

Related Articles:

AI Summary. West Texas Intermediate crude fell as much as 4%, briefly dipping below $59 a barrel, after a report that Saudi officials have told allies and industry experts the kingdom can withstand a sustained period of depressed prices. The report added to concerns that Saudi Arabia would steer OPEC+ toward another supply increase.

Mia Gindis and Alex Longley Bloomberg
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West Texas fell under $59 a barrel amid reports that OPEC+ will increase production.

Are oil prices falling on signs producers will maintain higher output?

Core argument: West Texas Intermediate crude fell as much as 4% to briefly dip below $59 a barrel after Reuters reported that Saudi officials have told allies and industry experts the kingdom can endure a sustained period of depressed prices.

West Texas Intermediate fell as much as 4% to briefly dip below $59 a barrel on Wednesday after Reuters reported that Saudi Arabian officials have been telling allies and industry experts that the kingdom can endure a sustained period of depressed prices. The drop is putting futures on pace for the largest monthly decline since November 2021. The report added to existing concerns that Saudi Arabia planned to steer OPEC+ to agree on another supply surge next week.

Takeaways by Macro Roundup® AI

  1. West Texas Intermediate crude fell as much as 4% to briefly dip below $59 a barrel after Reuters reported that Saudi officials have told allies and industry experts the kingdom can endure a sustained period of depressed prices.
  2. West Texas Intermediate futures are on pace for their largest monthly decline since November 2021.
  3. The Reuters report added to existing concerns that Saudi Arabia planned to steer OPEC+ toward agreeing on another supply surge next week.

Related Articles:

  • The Petrodollar Is Dead, Long Live the Petrodollar — Saudi Arabia has no surplus left to recycle and is instead borrowing heavily in sovereign debt markets and selling assets, including stakes in its national oil company, to fund its economic plans. The International Monetary Fund projects the Saudi current account surplus narrowing to 0.5% of GDP before shifting into deficit through the end of the decade.
  • Texas Oil Executives Are Frustrated at Trump for Crushing Crude Prices — West Texas Intermediate crude near $57 sits below the price US oil executives say new wells need to break even, according to a Federal Reserve Bank of Dallas survey, discouraging them from expanding supply. S&P Global Commodity Insights projects $50 oil could cut output by over 1m barrels a day.
  • Oil Was Written Off. Now It’s the Most Productive US Industry — US oil and gas extraction productivity nearly tripled in a decade, and crude output reached a record 13.3m barrels a day — 48% above Saudi Arabia — with under a third of the rigs. BloombergNEF projects production growth of 600,000 barrels a day on higher well productivity.

Thursday, May 1, 2025

AI Summary. The author argues the US is likely to see another burst of inflation within roughly five to seven years, cumulatively 20–25% above the 2% target, which would erode the debt as an earlier episode did. He expects markets to respond by demanding higher interest rates, forcing difficult choices.

Ken Rogoff and Tyler Cowen Conversations with Tyler
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Rogoff argues that the unsustainability of US debt has not yet “come to roost” due to the low real interest rates of 2007-2021, but that over the next 5-7 years cumulative above-target inflation of 20-25% will erase a significant portion of the debt.

Will another burst of inflation erode the US debt?

Core argument: Kenneth Rogoff expects another big inflation within five to seven years, cumulatively 20–25% above the 2% target, versus roughly 10–12% cumulative excess under Biden, which he says brought the debt down.

Eventually — not necessarily in a planned or coherent way — I think we’re going to have another big inflation soon, next five to seven years, maybe sooner with what’s going on, and that’s going to bring [the debt] down just like it did under Biden. It brought the debt down. Then the markets are, fool me once, shame on you. Fool me twice, no, we’re raising the interest rate, and then we’ll have to make choices. Last time we probably had a bonus 10% inflation over the 2% target cumulatively, maybe 12%. I think this time, it’ll be more on the order of cumulatively over the 2% target, 20%, 25%. There’s going to be an adjustment. I don’t think the debt is going to be the sole contribution to that. There are many factors. You have to impinge on Federal Reserve independence. Probably, there’ll be some shock, which will justify it. I don’t know how it’s going to play out. I know that for years, people have said the US debt is unsustainable, but it hasn’t come to roost because we’ve lived through this post-financial crisis, post-pandemic era of very, very low and negative real interest rates. That is not the norm. There’s regression to mean.

Takeaways by Macro Roundup® AI

  1. Kenneth Rogoff expects another big inflation within five to seven years, cumulatively 20–25% above the 2% target, versus roughly 10–12% cumulative excess under Biden, which he says brought the debt down.
  2. Rogoff says such an inflation would require impinging on Federal Reserve independence, probably justified by some shock, with markets then raising interest rates and forcing choices.
  3. Rogoff attributes the failure of long-predicted U.S. debt problems to materialize to the post-financial-crisis, post-pandemic era of very low and negative real interest rates, which he says is not the norm given regression to the mean.

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 Downgrade — The author argues that rising 10- and 30-year US Treasury yields do not show up in long-term inflation expectations, judging by the spread between inflation-indexed and non-indexed Treasury bonds. The author attributes the increase instead to a shift in demand away from long-dated US debt, reinforcing higher long-term real interest rates.
  • The Inflationary Risks of Rising Federal Deficits and Debt — Simulations of the Federal Reserve's main macroeconomic model estimate that debt-financed deficits raise core prices about 0.2 percentage points over five years absent a central-bank response. With the central bank reacting, the cost shifts to interest rates: short rates roughly 0.25% higher, mortgage rates 23 basis points higher, and real household wealth 1.2% lower.

AI Summary. The Department of Government Efficiency cited $160bn in total savings, but itemized grant, contract and real estate savings total far less, with the gap likely reflecting unitemized workforce reductions. Even taken at face value, $160bn equals 0.5% of GDP and 2.3% of projected government spending, and the authors project the reconciliation bill will widen the deficit.

Michael Cembalest J.P. Morgan
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A J.P. Morgan analysis notes that taken at face value, the $160B in DOGE savings would be only 2.3% of projected 2026 spending prior to the Reconciliation Bill.

Do claimed government efficiency savings meaningfully reduce the federal deficit?

Core argument: DOGE cited $160bn of total savings as of April 20, equal to just 0.5% of GDP and 2.3% of projected 2026 government spending even if its estimates are taken at face value.

As of April 20, DOGE cited total savings of $160 billion with itemized grant savings of $33 billion, contract savings of $30 billion and real estate savings of $311 million. Total itemized savings are well below total savings; we suspect that a large part of the gap is made up of workforce reductions which are included in DOGE’s total savings figure but which it does not itemize. DOGE cuts of $160 billion to non-defense discretionary spending would be just 0.5% of GDP and 2.3% of projected 2026 government spending, even if we take DOGE savings estimates at face value (which we probably shouldn’t). If our projections are correct, Trump’s Reconciliation Bill will increase the fiscal deficit relative to the CBO baseline rather than reduce it, and may swamp whatever DOGE savings turn out to be.

Takeaways by Macro Roundup® AI

  1. DOGE cited $160bn of total savings as of April 20, equal to just 0.5% of GDP and 2.3% of projected 2026 government spending even if its estimates are taken at face value.
  2. DOGE's itemized savings — $33bn in grants, $30bn in contracts and $311m in real estate — fall well below its $160bn total, and much of the gap is suspected to come from unitemized workforce reductions.
  3. Trump's Reconciliation Bill is projected to increase the fiscal deficit relative to the CBO baseline rather than reduce it, and may swamp whatever DOGE savings turn out to be.

Related Articles:

  • The Long-Term Budget Outlook: 2025 to 2055 — The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.
  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.

AI Summary. Fannie Mae and Freddie Mac back more than 60% of new mortgages, up from roughly 45% before the 2008 financial crisis, and hold a $7.5tn loan portfolio; including Federal Housing Administration and Veterans Affairs loans, the government backs nearly 85% of the mortgage market. The Federal Reserve owns $2.2tn in mortgage-backed securities.

John Cochrane and Amit Seru Wall Street Journal
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Fannie and Freddie now back 60% of new mortgages, up from 45% prior to the financial crisis. Overall, the government backs nearly 85% of the mortgage market. @JohnHCochrane

Has government backing of the mortgage market grown since the financial crisis?

Core argument: Fannie Mae and Freddie Mac back more than 60% of new mortgages, up from roughly 45% before the 2008 financial crisis, with their loan portfolio standing at $7.5 trillion.

Fannie and Freddie now back more than 60% of new mortgages, compared with roughly 45% before the 2008 financial crisis. When you add in Federal Housing Administration and Veterans Affairs loans, the government backs nearly 85% of today’s mortgage market. The GSEs’ loan portfolio stands at $7.5 trillion. They are widely regarded as too big to fail, to let security holders bear some risk. Among those holders, the Federal Reserve owns $2.2 trillion in mortgage-backed securities—effectively a massive infusion of printed money into the housing market, intended to hold down mortgage rates.

Takeaways by Macro Roundup® AI

  1. Fannie Mae and Freddie Mac back more than 60% of new mortgages, up from roughly 45% before the 2008 financial crisis, with their loan portfolio standing at $7.5 trillion.
  2. Including Federal Housing Administration and Veterans Affairs loans, the government backs nearly 85% of the mortgage market, and the government-sponsored enterprises are widely regarded as too big to fail.
  3. The Federal Reserve owns $2.2 trillion in mortgage-backed securities, an infusion of printed money into the housing market intended to hold down mortgage rates.

Related Articles:

  • 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.
  • The Determinants Of Declining Internal Migration — A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.
  • America’s Housing Affordability Crisis and the Decline of Housing Supply — 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.

AI Summary. Young college graduates have almost always had a lower unemployment rate than the overall labor force over the past four decades, but that gap recently hit an all-time low. One interpretation is that firms are replacing young workers with machines, though the surge in productivity growth such a shift would imply is hard to find in the data.

Derek Thompson The Atlantic
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The increase in unemployment of new college graduates relative to overall unemployment, @DKThomp speculates, ”could be an early sign that artificial intelligence is starting to transform the economy.”

Are young college graduates losing their unemployment advantage?

Core argument: The "recent-grad gap" — the difference between unemployment among young college graduates and the overall labor force — hit an all-time low last month, the relatively worst reading for young graduates in at least four decades of data.

Consider a novel economic indicator: the recent-grad gap. It’s the difference between the unemployment of young college graduates and the overall labor force. Going back four decades, young college graduates almost always have a lower—sometimes much lower—unemployment rate than the overall economy, because they are relatively cheap labor and have just spent four years marinating in a (theoretically) enriching environment. But last month’s recent-grad gap hit an all-time low. That is, today’s college graduates are entering an economy that is relatively worse for young college grads than any month on record, going back at least four decades. The strong interpretation of this graph is that it’s exactly what one would expect to see if firms replaced young workers with machines. Luckily for humans, though, skepticism of the strong interpretation is warranted. For one thing, supercharged productivity growth, which an intelligence explosion would likely produce, is hard to find in the data.

Takeaways by Macro Roundup® AI

  1. The "recent-grad gap" — the difference between unemployment among young college graduates and the overall labor force — hit an all-time low last month, the relatively worst reading for young graduates in at least four decades of data.
  2. Young college graduates have almost always had lower unemployment than the overall economy over the past four decades, because they are relatively cheap labor and have just completed four years in a theoretically enriching environment.
  3. One strong interpretation of the recent-grad gap is that firms are replacing young workers with machines, but skepticism is warranted because the supercharged productivity growth an intelligence explosion would likely produce is hard to find in the data.

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.
  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.

AI Summary. International Labour Organization estimates show the share of Americans aged 15 to 24 not in employment, education or training has risen since 2019. A separate analysis of US monthly labor-force survey microdata that excludes those with potential care obligations finds a striking increase in the share of Americans in their 20s, especially their late 20s, not engaged in such activities.

Justin Fox Bloomberg
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In 2024, 11.2% of American men aged 15-24 were neither working nor in education or training, up 1.3pp from 2019. The corresponding share of American women rose 1.1pp to 12%. @foxjust

Are more young Americans neither working nor in school?

Core argument: International Labour Organization estimates show the NEET rate — not in employment, education or training — among Americans aged 15 to 24 has risen since 2019.

International Labour Organization estimates of the NEET rate — for not in employment, education or training — among Americans 15 to 24 show an increase since 2019. Economist Julie Yixia Cai of the Center for Economic and Policy Research in Washington has done a more recent and granular analysis using microdata from the monthly Current Population Survey (the source of most US labor-force statistics). She excluded those with potential care obligations (that is, they a have disability, live with a disabled adult or live with children younger than 18), and the resulting increase since before the pandemic in the percentage of Americans in their 20s, especially their late 20s, who don’t seem to be doing much of anything, is pretty striking.

Takeaways by Macro Roundup® AI

  1. International Labour Organization estimates show the NEET rate — not in employment, education or training — among Americans aged 15 to 24 has risen since 2019.
  2. Economist Julie Yixia Cai of the Center for Economic and Policy Research finds an increase since before the pandemic in the share of Americans in their 20s, especially their late 20s, who are not in employment, education or training.
  3. Cai's analysis uses microdata from the monthly Current Population Survey, the source of most US labor-force statistics, and excludes people with potential care obligations: those with a disability, living with a disabled adult, or living with children under 18.

Related Articles:

  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.
  • Wage Inequality and the Rise in Labor Force Exit: The Case of US Prime-Age Men — Among US prime-age men without college degrees, a 10% rise in expected earnings is associated with a 0.12 percentage point lower labor force exit rate, while a 10% rise in peers' reference earnings is associated with a 0.13 percentage point higher exit rate, fully offsetting the earnings effect.
  • Is College Still Worth It? — The estimated return to a college degree has held between 12–13% for three decades, reaching 12.5% recently, compared with long-term returns of about 8% for stocks and 4% for bonds. Median earnings for bachelor's degree holders were about $80,000 versus $47,000 for high school graduates, a premium near its all-time high.

AI Summary. Manufacturing job losses from automation reflect productivity gains, while losses caused by foreign governments reshaping global manufacturing flows in their favor represent displacement rather than higher productivity. On this argument, the declining U.S. share of manufacturing employment reflects other advanced economies deliberately moving into manufacturing rather than a natural shift toward services.

Michael Pettis Wall Street Journal
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.@michaelxpettis argues that the declining share of manufacturing employment is not “a signal that the U.S. should move on from factory-based work,” but the result of “foreign governments actively reshap[ing] global manufacturing flows in their favor.”

Do foreign government policies, not automation, explain lost manufacturing jobs?

Core argument: Manufacturing job losses from automation mark progress, the author argues, while losses caused by foreign governments reshaping global manufacturing flows in their favor produce displacement rather than higher productivity.

When U.S. manufacturing jobs are lost to automation, that’s a mark of progress. When they’re lost because foreign governments actively reshape global manufacturing flows in their favor, the result isn’t higher productivity; it’s displacement. This nuance is too often lost on mainstream economists. They treat the declining share of manufacturing employment as a signal that the U.S. should move on from factory-based work, focusing instead on services or the digital economy. They fail to see that the U.S. isn’t moving on from manufacturing with the rest of the world’s advanced economies. It is moving out, largely because other advanced countries are determined to move in.

Takeaways by Macro Roundup® AI

  1. Manufacturing job losses from automation mark progress, the author argues, while losses caused by foreign governments reshaping global manufacturing flows in their favor produce displacement rather than higher productivity.
  2. Mainstream economists, according to the author, misread the declining share of U.S. manufacturing employment as a signal to shift toward services and the digital economy.
  3. The U.S. is not moving on from manufacturing alongside other advanced economies but moving out of it, the author contends, largely because other advanced countries are determined to move in.

Related Articles:

  • A Note on Trade Deficits and Manufacturing — The U.S. manufactures trade deficit of about 4% of GDP, if eliminated, is estimated to raise manufacturing value-added by roughly 2.5 percentage points of GDP — about a quarter larger than the current 10% share — because manufacturers also buy many services. That would reverse only about 2.5 of the roughly 17-point fall in manufacturing's employment share since 1970.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.
  • 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.

AI Summary. Economists estimate the U.S. market accounts for nearly 21% of China's overseas sales once goods rerouted through other countries are counted, above the roughly 15% share in official Chinese data. Exports make up around 13% of China's economic output, with U.S.-bound sales estimated at about 3%.

Lingling Wei and Raffaele Huang Wall Street Journal
Date Posted:

Macquarie forecasts Chinese exports will likely fall by 10% this year, while its sales to the US, 3% of its GDP, would be “largely wiped out.”

Is China's exposure to the U.S. market larger than official data show?

Core argument: Larry Hu, a China economist at Macquarie, expects China's overall exports to fall 10% this year, with the country's sales to the U.S. "largely wiped out.".

Larry Hu, a China economist at Macquarie, said China’s overall exports are likely to decline by 10% this year while the country’s sales to the U.S. would be “largely wiped out.” China has made much of official data showing the U.S. share of China’s exports has dropped to about 15% from 18% in 2018, the start of the two countries’ earlier trade war. Yet many economists point out that the U.S. market actually makes up nearly 21% of China’s total sales overseas after goods rerouted from other countries are counted. They say it is hard to overstate the importance of U.S. trade to the Chinese economy. Overall exports account for around 13% of China’s gross domestic product, with the U.S. estimated to represent about 3% of China’s GDP.

Takeaways by Macro Roundup® AI

  1. Larry Hu, a China economist at Macquarie, expects China's overall exports to fall 10% this year, with the country's sales to the U.S. "largely wiped out.".
  2. Official Chinese data show the U.S. share of China's exports falling to about 15% from 18% in 2018, but many economists put the figure near 21% once goods rerouted from other countries are counted.
  3. Exports account for around 13% of China's GDP, with the U.S. estimated to represent about 3% of Chinese GDP.

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  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • 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.