Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


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
Date Posted:

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
Date Posted:

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
Date Posted:

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
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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.

Related Articles:

  • China Offers First Hint of Devaluation With Weak Renminbi Fix — China's central bank set the renminbi's daily fixing rate just below 7.2 to the dollar, its weakest level in 18 months, signaling it may permit depreciation to offset US tariffs. Many economists believe Beijing will avoid a large devaluation because it would risk capital outflows and domestic instability.
  • 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.

Friday, May 2, 2025

AI Summary. U.S. firms in industries targeted for encouragement by China's Five-Year Plans show significant declines in employment, investment, and output beginning a year after a plan's release, with plant closures following a year later. The authors find firms with existing operations upstream or downstream of encouraged industries, or able to offshore into them, fare better.

Xiao Cen, Vyacheslav Fos and Wei Jiang National Bureau of Economic Research
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A year after a Chinese “5 Year Plan,” employment, investment, and output of US establishments in industries designated by China for increased subsidies begin to drop significantly, followed by plant closures.

How do U.S. firms withstand foreign industrial policy targeting their industries?

Core argument: U.S. firms in industries "encouraged" by China's 10th–13th Five-Year Plans (2001–2016) showed significant declines in employment, investment, and output beginning one year after a Plan's release, with plant closures following a year later.

The global economic disruption on U.S. firms studied in this paper originated from China’s [10th to 13th] Five-Year Plans that came into effect [btw] 2001 and 2016. U.S. markets did not appear to anticipate the imminent shocks and treated [US] firms [those operating in industries “encouraged” in a Plan] did not show any slowdown in job postings up to the year of a Plan. In treated firms (compared to controls) employment, investment, and output begin to drop significantly one year after the release of the Plans, and plant closures follow another year later. U.S. firms that are in the upstream (or downstream) of the Plan-encouraged industries become perhaps unintended beneficiaries of industrial policies in China. Treated firms with preexisting segments in these “beneficiary industries” are in a more favorable position due to the positive spillover effects. Indeed, multisegment treated firms increase investment and employment in the beneficiary industries and experience fewer plant closures. Similarly, firms in “offshorable” industries are able to set up operations in China in the encouraged industries so that they could even become direct beneficiaries of China’s industrial policies.`

Takeaways by Macro Roundup® AI

  1. U.S. firms in industries "encouraged" by China's 10th–13th Five-Year Plans (2001–2016) showed significant declines in employment, investment, and output beginning one year after a Plan's release, with plant closures following a year later.
  2. U.S. markets did not appear to anticipate the shocks from China's Five-Year Plans, and treated firms showed no slowdown in job postings up to the year of a Plan.
  3. U.S. firms upstream or downstream of Plan-encouraged industries emerge as possibly unintended beneficiaries of China's industrial policies, and multisegment treated firms with preexisting segments in those beneficiary industries raised investment and employment there while experiencing fewer plant closures.

Related Articles:

  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.
  • US Efforts to Contain Xi’s Push for Tech Supremacy Are Faltering — Research by Bloomberg Economics and Bloomberg Intelligence finds that of 13 key technologies tracked, China has reached global leadership in five and is catching up in seven others, with clear leads in electric vehicles, automotive software and lithium battery technology. China still struggles to develop manufacturing processes for advanced semiconductors, the main focus of US export controls.
  • Which Country Should Design U.S. Industrial Policy? — Manufacturing is 15% of global GDP but 11% of U.S. GDP versus 19% in Germany, 21% in South Korea, 26% in mainland China, and 34% in Taiwan, according to World Bank data. The author argues this gap stems from trade and industrial policies in surplus economies that effectively force households to subsidize manufacturing, drawing global manufacturers toward the largest subsidies.

AI Summary. US manufacturing output has risen over four decades even as factory jobs declined, with America ranking first among major economies in value added per worker — estimated at nearly 7x China's — and second to China in share of global manufacturing output. Over a fifth of US manufactured exports are research-intensive goods.

Tej Parikh Financial Times
Date Posted:

Relative to 2000, American manufacturing production has moved up the value chain. @tejparikh90 finds the US “ceded the top spot….by outsourcing lower wage jobs,” leaving US manufacturing productivity almost 7x that of China.

Is US manufacturing still strong despite falling factory employment?

Core argument: US manufacturing ranks first among major economies in value added per worker, estimated at almost seven times China's level, while ranking second only to China in share of global manufacturing output.

US manufacturing output has actually risen over the past four decades, even as factory jobs have declined. American industry is more productive today. It makes higher-value products at higher wages with fewer workers (and more robots). In fact, measured by value added per worker, US manufacturing ranks first among the major economies (estimated to be almost seven times that of China). Over one-fifth of US manufactured exports are products with high research and development intensity, such as advanced tech and aerospace products. The US ranks second only behind China in its share of overall global manufacturing output. By most measures, America is already “a manufacturing superpower”. It ceded the top spot in part by outsourcing lower wage jobs and shifting into higher value added economic activities: services, research and development, and advanced manufacturing. This has allowed incomes, jobs and the economy to grow.

Takeaways by Macro Roundup® AI

  1. US manufacturing ranks first among major economies in value added per worker, estimated at almost seven times China's level, while ranking second only to China in share of global manufacturing output.
  2. US manufacturing output has risen over the past four decades even as factory jobs declined, with industry making higher-value products at higher wages using fewer workers and more robots.
  3. Over one-fifth of US manufactured exports are products with high research and development intensity, such as advanced tech and aerospace, and the shift into services, R&D, and advanced manufacturing has allowed incomes, jobs, and the economy to grow.

Related Articles:

  • 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.
  • 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.
  • The R&D Puzzle in U.S. Manufacturing Productivity Growth — Research and development spending in U.S. manufacturing has been rising relative to output and hours worked while productivity has been flat, which suggests the ability of research and development to boost productivity growth has been declining.

AI Summary. US Treasury data show China cut its official holdings of US Treasuries by more than 27% to $759bn, a faster decline than the preceding period, while raising holdings of higher-yielding agency bonds issued by government-sponsored entities such as Fannie Mae. Analysts argue China's true Treasury holdings may be higher, masked by intermediary custodians.

Cheng Leng, Sun Yu and Joe Leahy Financial Times
Date Posted:

China’s real holdings of Treasuries are likely both higher than the reported totals and ~ stable relative to 2012, given China’s use of intermediary custodians such as Euroclear in Belgium and Clearstream in Luxembourg to mask direct ownership.

Is China shifting from US Treasuries into higher-yielding agency bonds?

Core argument: China cut its official US Treasury holdings by more than 27% to $759bn between January 2022 and December 2024, according to US Treasury data, outpacing the 17% decline recorded between 2015 and 2022.

Between January 2022 and December 2024, China cut its official Treasury holdings by more than 27% to $759bn, US Treasury department data shows, far outpacing the 17% decline between 2015 and 2022. One strategy has been to increase holdings in so-called agency bonds issued by government-sponsored entities such as Fannie Mae. These offer similar credit ratings to Treasuries, but slightly higher yields. Between 2018 and early 2020, China’s holdings of US agency bonds rose 60% to $261bn. “Clearly, agencies are the obvious substitute in the US market for Treasuries,” says Brad Setser, a senior fellow at the Council on Foreign Relations. “[Safe’s] general interest in agencies is well known, more so than most major central banks.” Setser and others argue that China’s real holdings of Treasuries could still be considerably higher than the reported totals, given its use of intermediary custodians such as Euroclear in Belgium and Clearstream in Luxembourg to mask direct ownership. Even so, the overall long-term Treasury position has gradually declined in recent years, they say.

Takeaways by Macro Roundup® AI

  1. China cut its official US Treasury holdings by more than 27% to $759bn between January 2022 and December 2024, according to US Treasury data, outpacing the 17% decline recorded between 2015 and 2022.
  2. China's holdings of US agency bonds issued by government-sponsored entities such as Fannie Mae rose 60% to $261bn between 2018 and early 2020, securities that carry credit ratings similar to Treasuries but slightly higher yields.
  3. Brad Setser of the Council on Foreign Relations and others argue China's actual Treasury holdings could be considerably higher than reported, given its use of intermediary custodians such as Euroclear in Belgium and Clearstream in Luxembourg.

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.
  • China’s Holdings of US Treasuries Fall to Lowest Level Since 2009 — Chinese investors' holdings of US government debt fell by $57bn to $759bn, the lowest level since 2009 according to US Treasury data, which excludes Chinese-owned Treasuries held in accounts in other countries. The reported decline was likely exaggerated by assets shifting to securities depositaries in Belgium and Luxembourg.
  • Foreign Ownership of US Equities, Treasuries, and US Credit — 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.

AI Summary. Inflation-adjusted US house prices stand 0.8% below their 2022 peak, according to an affordability index built from median income, a 15% down payment, the Case-Shiller National Index, and 30-year fixed mortgage rates. With prices up 36% over four years and rates at 6.84%, the monthly payment on the same house rose 117%.

Bill McBride Calculated Risk
Date Posted:

Real house prices are now just 0.8% below the 2022 peak and 12% above the 2006 peak. With house prices up 36% over four years, affordability remains at levels last seen in the early 1980s when 30-year mortgage rates were over 14%. @calculatedrisk

How far have inflation-adjusted house prices fallen from their peak?

Core argument: Inflation-adjusted U.S. house prices stand 0.8% below their 2022 peak, based on the Case-Shiller National Index, seasonally adjusted.

I’ve put together my own affordability index [using] median income from the Census Bureau (estimated 2024 and 2025), assumed a 15% down payment, and used a 2% estimate for property taxes, insurance and maintenance. This is probably low for high property tax states like New Jersey and Texas, and too high for lower property tax states. For house prices, I used the Case-Shiller National Index, Seasonally Adjusted (SA). Also, for the down payment - there wasn’t a significant difference between 15% and 20%. For mortgage rates, I used the Freddie Mac PMMS (30-year fixed rates). So here is what the index looks like (lower is more affordable). The monthly payment for the same house, with house prices up 36% over four years and mortgage rates at 6.84% in February 2025, would be $3,566 - an increase of 117%! More than double for the same house.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted U.S. house prices stand 0.8% below their 2022 peak, based on the Case-Shiller National Index, seasonally adjusted.
  2. The monthly payment on the same house reached $3,566 in February 2025, a 117% increase, as house prices rose 36% over four years and the Freddie Mac 30-year fixed mortgage rate stood at 6.84%.
  3. The affordability index combines Census Bureau median income (2024 and 2025 estimated), a 15% down payment, and a 2% estimate for property taxes, insurance and maintenance, which is probably low for high property tax states such as New Jersey and Texas.

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 Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Fannie and Freddie May Foment Another Crisis — 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.

AI Summary. US nonfarm payrolls rose 177,000 in a month, with downward revisions to the prior two months, while the unemployment rate held at 4.2% and labor force participation ticked up to 62.6%. Economists largely expect layoffs to pick up as economic uncertainty halts expansion plans, with United Parcel Service planning 20,000 job cuts.

Augusta Saraiva Bloomberg
Date Posted:

US nonfarm payrolls increased 177,000 in April, suggesting uncertainty has yet to impact hiring at scale. Prime age labor force participation rose to 83.6%, only slightly below its most recent peak of 83.9% last summer. Unemployment remained unchanged.

Is the labor market holding steady despite economic uncertainty?

Core argument: US nonfarm payrolls rose 177,000 last month, with the prior two months' gains revised lower, while the unemployment rate held at 4.2%, according to Bureau of Labor Statistics data.

Nonfarm payrolls increased 177,000 last month after the prior two months’ advances were revised lower, according to Bureau of Labor Statistics data out Friday. The unemployment rate was unchanged at 4.2%. The participation rate — the share of the population that is working or looking for work — ticked up to 62.6% in April. The rate for those between the ages of 25 and 54, also known as prime-age workers, rose to the highest level in seven months. Economists largely expect layoffs to pick up in the coming months as economic uncertainty puts a halt on expansion plans. United Parcel Service expects to cut 20,000 jobs as it anticipates weaker demand for online shopping. Others including Volvo Group and Cleveland-Cliffs are also moving to shed positions.

Takeaways by Macro Roundup® AI

  1. US nonfarm payrolls rose 177,000 last month, with the prior two months' gains revised lower, while the unemployment rate held at 4.2%, according to Bureau of Labor Statistics data.
  2. The labor force participation rate ticked up to 62.6% in April, and the rate for prime-age workers aged 25 to 54 rose to its highest level in seven months.
  3. Economists largely expect layoffs to pick up in coming months as economic uncertainty halts expansion plans, with United Parcel Service expecting to cut 20,000 jobs on weaker online shopping demand and Volvo Group and Cleveland-Cliffs also moving to shed positions.

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.
  • Something Alarming Is Happening To The Job Market — 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.
  • America’s Young Men Are Falling Even Further Behind — Labor force participation among US men ages 25 to 34 has not grown in a decade, standing at 89%, which one analysis of Bureau of Labor Statistics data estimates is more than 700,000 fewer participants than at 2004 rates; women's participation in that age group is up 6 percentage points over 10 years, to 79%.

AI Summary. McDonald's reported US same-store sales fell 3.6% year on year, its largest drop since the height of the Covid-19 pandemic, driven mainly by lower customer numbers. The company said US fast-food industry visits by low-income consumers fell nearly 10%, with middle-income visits falling at a similar pace.

Gregory Meyer Financial Times
Date Posted:

McDonald’s reported that same-store sales in the US fell 3.6% y/y, which the firm attributed to consumer uncertainty.

Are low- and middle-income consumers pulling back on fast-food spending?

Core argument: McDonald's US same-store sales fell 3.6% year on year in the quarter ended March, its biggest drop since the height of the Covid-19 pandemic five years ago, driven mainly by lower customer numbers.

McDonald’s has posted its biggest drop in US sales since the height of the Covid-19 pandemic five years ago. Same-store sales in its home market fell 3.6% year on year in the quarter that ended in March, driven mainly by lower customer numbers, the world’s biggest burger chain said in results on Thursday. McDonald’s chief executive Chris Kempczinski said “consumers today are grappling with uncertainty.” US fast-food industry visits by low-income consumers fell nearly 10% in the first quarter, according to Kempczinski. Visits among middle-income consumers fell at a similar pace, suggesting broader economic concerns among consumers. “People are just being more judicious about cutting back on visits,” Kempczinski said, adding that some customers were having breakfast at home rather than at McDonald’s — or skipping that meal entirely.

Takeaways by Macro Roundup® AI

  1. McDonald's US same-store sales fell 3.6% year on year in the quarter ended March, its biggest drop since the height of the Covid-19 pandemic five years ago, driven mainly by lower customer numbers.
  2. US fast-food industry visits by low-income consumers fell nearly 10% in the first quarter, with middle-income consumer visits falling at a similar pace, according to McDonald's chief executive Chris Kempczinski.
  3. McDonald's chief executive Chris Kempczinski said consumers "are grappling with uncertainty" and "being more judicious about cutting back on visits," with some customers eating breakfast at home rather than at McDonald's or skipping the meal entirely.

Related Articles:

  • 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.
  • ‘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.