Edward Conard

Top Ten New York Times Bestselling Author

  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “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
  • “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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…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


Tuesday, June 10, 2025

AI Summary. Quality-adjusted real house prices are historically high in many major US markets, especially in the Sunbelt, while homebuilding has fallen sharply, particularly in higher-price, lower-density areas. The authors find high suburban prices in Sunbelt metros no longer stimulate much new construction, possibly because residents have made new projects difficult to permit.

Edward Glaeser and Joseph Gyourko National Bureau of Economic Research
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Supply curves in four key sunbelt areas have become less elastic. “High prices in the suburban parts of these areas no longer stimulate much new building, possibly because the residents of these areas have made it difficult to permit new projects”.

Why have high suburban house prices stopped spurring new homebuilding?

Core argument: Real, constant-quality house prices sit at historically high levels in many major U.S. markets, most notably sunbelt areas, while homebuilding has declined sharply, especially in higher-price, lower-density places.

Real, constant-quality prices are at historically high levels in many major markets, most notably in sunbelt areas. Building levels have declined dramatically, especially in higher price, lower density areas. Figure 10 plots the shifting empirical supply curves [with price on the x axis and change in density on the y axis] over time for the four sunbelt metros. The empirical supply curve among suburban tracts in the 1970s (thick solid line) is always steeper than the supply curve for more central tracts (thick dotted line). Except for Dallas, the suburban line always is above the city line throughout our domain. In addition, the 1970s lines always are above those for the 1990s and 2010s. By the end of our data in the 2010s, the schedules have shifted down and flattened considerably, which is compatible with the decline in homebuilding discussed above. The lines for the 1990s show that this change began before the 2010s. High prices in the suburban parts of these metro areas no longer stimulate much new building, possibly because the residents of these areas have made it difficult to permit new projects.

Takeaways by Macro Roundup® AI

  1. Real, constant-quality house prices sit at historically high levels in many major U.S. markets, most notably sunbelt areas, while homebuilding has declined sharply, especially in higher-price, lower-density places.
  2. Empirical supply curves for four sunbelt metros shifted down and flattened considerably by the 2010s relative to the 1970s, with the change already visible in the 1990s.
  3. In the 1970s, suburban tracts in these sunbelt metros had steeper supply curves than more central tracts, and high suburban prices no longer stimulate much new building, possibly because residents have made new projects difficult to permit.

Related Articles:

  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.
  • America’s Housing Affordability Crisis and the Decline of Housing Supply — Housing production intensity has fallen substantially, especially in fast-growing Sunbelt markets once known for building, converging toward the low rates long seen on the coasts and in declining industrial centers. The authors argue incumbent-controlled regulation explains the weakening link between high prices, high demand areas, and new construction.
  • This Is How to Fix the Housing Crisis — US homebuilding falls short of demand, particularly in high-demand coastal markets, with per-person permitting running at less than half the level of two and five decades ago. The author argues Washington could unlock construction by conditioning federal highway funds on state housing reform, the same lever used to push states to set the drinking age at 21.

AI Summary. Faster loan growth at lightly regulated smaller banks, credit unions, and private credit compared with large banks suggests post-2008 rules that raised capital and liquid-asset requirements with bank size have constrained large-bank lending. With loan growth currently limited more by demand than supply, easing large-bank requirements may mainly shift existing loans toward large banks.

Joseph Wang Fed Guy Blog
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The surge in alternative lending sources suggests that the financial system “rewired itself” around the regulatory constraints imposed on large institutions. Less regulation may restore large bank lending at the expense of small banks and private credit.

Would easing large-bank capital rules boost lending or just shift it?

Core argument: Faster loan growth at more lightly regulated small banks and credit unions than at large banks during the pandemic boom, alongside rapid private credit expansion, suggests post-2008 regulations have been a significant constraint on large-bank lending.

The strong relative growth in lending by smaller banks and private credit suggest that regulations have been a significant constraint on bank lending. Post-2008 banking regulations sought in part to end “To Big to Fail” by imposing regulatory burdens that increased with the size of a bank. Large banks had to significantly increase capital and were also forced to hold a lot of low yielding liquid assets. This framework put large banks at a structural disadvantage relative to more lightly regulated small banks and credit unions. The impact can be seen in the rapid loan growth in more lightly regulated banks compared to large banks during the pandemic economic boom and in the rapid growth in private credit. Bowman, the Fed’s new Vice Chair of Supervision, is signaling upcoming changes that would lower regulatory costs on large banks. The current environment suggests that loan growth is more constrained by demand rather than supply. [Thus] lower capital requirements and the removal of WFC’s asset cap may simply redistribute the outstanding loans from small banks and private credit towards the large banks.

Takeaways by Macro Roundup® AI

  1. Faster loan growth at more lightly regulated small banks and credit unions than at large banks during the pandemic boom, alongside rapid private credit expansion, suggests post-2008 regulations have been a significant constraint on large-bank lending.
  2. Post-2008 rules aimed at ending "Too Big to Fail" imposed regulatory burdens that rose with bank size, requiring large banks to significantly increase capital and hold large amounts of low-yielding liquid assets.
  3. With loan growth more constrained by demand than supply, lower capital requirements and removal of Wells Fargo's asset cap may simply redistribute outstanding loans from small banks and private credit toward large banks.

Related Articles:

  • The Secular Decline of Bank Balance Sheet Lending — Traditional bank balance sheet lending has declined as a share of credit intermediation, with credit increasingly channeled through arms-length transactions such as securitization. A structural model attributes falling lending shares to lower securitization costs, savers' behavior driving bank balance sheet size, and implicit bank costs and subsidies shaping balance sheet composition.
  • Private Credit Growth and Monetary Policy Transmission — Private credit — direct lending to businesses by nonbank institutions — accounts for about 15% of private companies' outstanding debt, with volumes comparable to leveraged loans and high-yield corporate bonds. The authors find monetary policy transmission through private credit may be muted relative to bank lending and public bond markets, given resilient credit supply.
  • How the Banking System Changed Post-SVB — American banks have tightened lending standards and reduced credit availability for both business and household loans, amid a weaker macroeconomic environment, limited liquidity, and elevated financial risks. The degree of tightening matches levels previously seen only during the 2008 recession and the onset of the COVID-19 pandemic.

AI Summary. Balance-of-payments data from major creditor economies and the US indicate that recent inflows into dollar assets have come largely from private investors seeking yield rather than official reserve accumulation. In East Asia reserve flows tracked current account surpluses closely until 2014 and have since fallen well short, while Europe's outflows have long come from institutional investors and banks.

Brad Setser Council on Foreign Relations
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East Asian “reserves tracked the current account surplus almost perfectly until 2014,” but in the past 10 years outflows were driven by private investors seeking yield, “not state investors who are forced to hold safe assets.” @Brad_Setser

Are private investors, not official reserves, financing the US deficit?

Core argument: Data from both major creditor countries and the U.S. show that flows into dollar assets in recent years came largely from private investors seeking yield rather than state investors compelled to hold safe assets.

The actual data—from both the main creditor countries and the U.S.—is quite consistent here: it shows that the flow into dollar assets in the last few years has largely come from private investors seeking yield, not state investors who are compelled to hold safe assets. That’s true of Asia. Look at a chart of cumulative reserve flows from the balance of payments against the cumulative current account surplus of the largest East Asian surplus economies, setting aside the city-state financial centers. Reserves tracked the current account surplus almost perfectly until 2014, but have subsequently fallen well-short. If the analysis is extended to Europe, the same conclusion holds: reserve-related outflows never were the main counterpart to the euro area’s external surplus. The main outflow has long come from European institutional investors and banks looking for yield in fixed income markets abroad.

Takeaways by Macro Roundup® AI

  1. Data from both major creditor countries and the U.S. show that flows into dollar assets in recent years came largely from private investors seeking yield rather than state investors compelled to hold safe assets.
  2. Cumulative reserve flows of the largest East Asian surplus economies, excluding city-state financial centers, tracked their cumulative current account surplus almost perfectly until 2014 but have since fallen well short.
  3. Reserve-related outflows were never the main counterpart to the euro area's external surplus, which has long been matched instead by European institutional investors and banks seeking yield in foreign fixed income markets.

Related Articles:

  • How China is Quietly Diversifying From US Treasuries — 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.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. Seasonally adjusted monthly tourist arrivals to the US from Germany, Italy, Spain, and the UK show no collapse in foreign travel, with arrivals from Italy reaching an all-time high. The UK accounts for by far the largest share of arrivals among these four countries, followed by Germany and Italy.

Robin Brooks Robin Brooks Substack
Date Posted:

Foreign tourist arrivals in the US–especially from Europe–remain buoyant. Italy posted a new all-time high in April 2025; data provide evidence contrary to the narrative warning of a collapse in travel to the US.

Have European tourist arrivals to the US declined?

Core argument: Seasonally adjusted monthly tourist arrivals to the US from Germany, Italy, Spain and the UK show no collapse in foreign travel through April 2025, based on National Travel and Tourism Office data from January 2015 onward.

[The charts show] monthly tourist arrivals into the US from January 2015 to April 2025, the latest month for which data are available. Source for these data is the National Travel and Tourism Office (NTTO). Travel is highly seasonal, so I seasonally adjust these data. This means you can compare arrivals during the peak summer vacation season with arrivals at other times of the year. Data are for Germany (top left), Italy (top right), Spain (bottom left) and the UK (bottom right). The scale of these charts is different, with tourism from the UK by far the most important across these four countries, followed by Germany and Italy. What’s notable is that there’s no collapse in foreign travel to the US. In fact, in one case - Italy - arrivals posted a new all-time high in April 2025.

Takeaways by Macro Roundup® AI

  1. Seasonally adjusted monthly tourist arrivals to the US from Germany, Italy, Spain and the UK show no collapse in foreign travel through April 2025, based on National Travel and Tourism Office data from January 2015 onward.
  2. Italian arrivals to the US posted an all-time high in April 2025, the latest month for which National Travel and Tourism Office data are available.
  3. The UK is by far the largest source of US-bound tourists among Germany, Italy, Spain and the UK, followed by Germany and then Italy.

Related Articles:

  • European Travellers Cancel US Visits As Trump’s Policies Threaten Tourism — Overnight visitors from western Europe to the US fell 17% year-on-year, with declines of more than 20% from countries including Ireland, Norway and Germany, according to the International Trade Administration. Total overseas visitors dropped 12% year-on-year, the steepest decline since pandemic travel restrictions.
  • U.S. Is Top Investment Destination Despite Falling Inflows — United Nations data show the U.S. remained the top destination for foreign direct investment even as inflows fell to $285bn from $388bn, driven mainly by a drop in foreign purchases of American companies. China recorded its highest-ever inflow at $189bn, a 5% increase, much of it from European businesses.
  • European Travellers Cancel US Visits As Trump’s Policies Threaten Tourism — Overnight visitors from western Europe to the US fell 17% year-on-year, with declines of more than 20% from countries including Ireland, Norway and Germany, according to the International Trade Administration. Total overseas visitors dropped 12% year-on-year, the steepest decline since pandemic travel restrictions.

AI Summary. U.S. total energy production reached a record of more than 103 quadrillion British thermal units, a 1% increase over the prior record, with natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind each setting domestic production records. Natural gas accounted for about 38% of total production and crude oil 27%.

Mickey Francis US Energy Information Administration
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In 2024, the US produced a record amount of energy, a 1% increase from the previous record set in 2023. Natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind all set domestic production records.

Has U.S. energy production reached a new record high?

Core argument: U.S. total energy production reached more than 103 quadrillion British thermal units in 2024, a record and a 1% increase over the prior record set in 2023, according to the Monthly Energy Review.

In 2024, the United States produced a record amount of energy, according to data in our Monthly Energy Review. U.S. total energy production was more than 103 quadrillion British thermal units in 2024, a 1% increase from the previous record set in 2023. Several energy sources—natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind—each set domestic production records last year. Natural gas accounted for about 38% of U.S. total energy production in 2024 and has been the largest source of U.S. domestic energy production every year since 2011. Domestic crude accounted for 27% of production; coal accounted for 10%; NGLP accounted for 9%; solar and wind production accounted for 25 and 8%, respectively. Biofuels, wind, and solar set record production in 2024, up 6% from 2023.

Takeaways by Macro Roundup® AI

  1. U.S. total energy production reached more than 103 quadrillion British thermal units in 2024, a record and a 1% increase over the prior record set in 2023, according to the Monthly Energy Review.
  2. Natural gas, crude oil, natural gas plant liquids, biofuels, solar, and wind each set U.S. domestic production records in 2024, with biofuels, wind, and solar up 6% from 2023.
  3. Natural gas supplied about 38% of U.S. total energy production in 2024 and has been the largest source of U.S. domestic energy production every year since 2011, followed by crude oil at 27%, coal at 10%, and natural gas plant liquids at 9%.

Related Articles:

  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • How Xi Sparked China’s Electricity Revolution — Electricity has risen to 30% of China's final energy use while plateauing near 22% in Europe and the US, supported by a decades-long grid expansion and upgrade program projected to cost as much as $800bn by 2030. Chinese grid investment is forecast to grow about 5% annually through 2030, faster than projected economic growth.
  • Economic Growth Now Depends on Electricity, Not Oil — Average annual electricity load growth reached 3% and is projected to continue at that rate for five years, with utilities raising expected peak demand for 2029 by 12%, or 101 gigawatts, driven by data centers, new factories, electric vehicles, heat pumps, and hydrogen production.

Wednesday, June 11, 2025

AI Summary. US Treasury bond yields exceed the rates on synthetic fully secured bonds built from market instruments, with the spread widening by maturity to 0.84% at 30 years. Interpreting that gap as credit risk, and assuming a default would cut promised payments by 50%, the authors calculate cumulative default probabilities of roughly 10% at 10 years and 50% at 30 years.

Victor Haghani and James White Elm Wealth
Date Posted:

US Treasury rates exceed “secured, extra-safe yields for synthetic bonds” computed from market swaps by 51 bps at a 10-year horizon and 84 bps at 30-years, possibly indicating “default to 10-year and 30-year horizons at about 10% and 50%, respectively.”

What does the Treasury yield spread imply about default probabilities?

Core argument: US Treasury yields exceed the rates on fully secured synthetic bonds built from market instruments, with the spread widening by maturity to 0.84% at 30 years.

Table 2 shows normal US Treasury bond yields to the right of secured, extra-safe yields for synthetic bonds we’ve put together from market instruments so that these bonds are fully secured and even safer than normal Treasury bonds. [The swap rates underlying the table are from this link.] Notice that Treasury bonds have higher yields than the rates for secured, extra-safe bonds, and that the spread gets higher with maturity, reaching 0.84% at 30 years. One way to interpret these rates is to see the higher yields as representing some combination of expected loss from a default on US Treasury obligations, and a risk premium for bearing that risk of loss. Assuming that a default would result in a 50% hit to promised payments, and assuming that three-quarters of the spread represents an expectation of default and the other quarter is a risk premium, we calculate the cumulative probability of default to 10-year and 30-year horizons at about 10% and 50%, respectively. To the extent one sees prices of US Treasury bonds through the lens of credit risk, the message being sent by long-term Treasury yields being close to 1% higher than corresponding interest rate swaps is a very sobering one.

Takeaways by Macro Roundup® AI

  1. US Treasury yields exceed the rates on fully secured synthetic bonds built from market instruments, with the spread widening by maturity to 0.84% at 30 years.
  2. The authors interpret that spread as a combination of expected loss from a US Treasury default and a risk premium for bearing that risk.
  3. Assuming a default cuts promised payments by 50% and that three-quarters of the spread reflects default expectations, the authors calculate cumulative default probabilities of about 10% at 10 years and 50% at 30 years.

Related Articles:

  • Interest Rates are Normal, the World is Not — Markets in safe assets are not signaling imminent default or high inflation: the gap between yields on inflation-indexed and conventional US debt is around 2.3%, barely above its 2.1% average since early 2003. The gap between the cyclically adjusted earnings yield on US equities and the real interest rate was last this low in 2007.
  • 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.
  • Political Risks to the U.S. Safe Harbor Premium — The authors estimate a "shadow" country risk premium for the US of 25–35 basis points rather than the zero conventionally assumed, reflecting US political and institutional risk. If the US premium rose to current UK levels, they project real equity wealth per household would be $50,000 lower and real GDP 1% smaller after 10 years.

AI Summary. China's exports to Indonesia, Malaysia, Thailand and Vietnam hit record highs while its imports from them stayed subdued, which the author reads as evidence of transshipment to circumvent US tariffs. The author argues that as long as US demand stays strong, Chinese goods will reach the US, and decoupling would require curbing domestic demand.

Robin Brooks Robin Brooks Substack
Date Posted:

“China has begun to transship goods to the US via all kinds of countries. April data already showed a big rise in exports. Most of these goods are likely to be transshipments designed to circumvent US tariffs.” @robin_j_brooks.

Do rising Chinese exports to Southeast Asia show tariff circumvention?

Core argument: China's exports to Indonesia, Malaysia, Thailand and Vietnam all hit all-time highs in April 2025, the month US tariffs on China briefly reached 150 percent, while China's imports from those four countries remained subdued.

The charts show China’s exports (black) and imports (blue) to and from various countries in Asia: Indonesia (top left), Malaysia (top right), Thailand (bottom left) and Vietnam (bottom right). In all cases, China’s exports in April 2025 - the month in which US tariffs on China briefly went to 150 percent - reached new all-time highs, while imports remained subdued. This is - in all likelihood - evidence of big transshipments that are seeking to circumvent US tariffs. These transshipments are painful for Chinese exporters…that likely eat into margins and profitability of Chinese firms. In the face of tariffs, transshipments are thus an inevitable reality. If the US really wants to decouple from China, it needs to cut domestic demand, which a consumption tax or VAT would do. If the Russians can figure out how to get their hands on German cars - even in the face of export controls - China is certainly smart enough to get its goods to the US. If US demand remains strong, Chinese goods will find a way here.

Takeaways by Macro Roundup® AI

  1. China's exports to Indonesia, Malaysia, Thailand and Vietnam all hit all-time highs in April 2025, the month US tariffs on China briefly reached 150 percent, while China's imports from those four countries remained subdued.
  2. The divergence between surging Chinese exports to Southeast Asia and subdued imports is, in all likelihood, evidence of large transshipments circumventing US tariffs, at a cost to Chinese firms' margins and profitability.
  3. Genuine US decoupling from China would require cutting domestic demand through a consumption tax or VAT, since strong US demand will draw Chinese goods in regardless of tariffs.

Related Articles:

  • China Circumvents US Tariffs By Shipping More Goods Via Mexico — An analysis of trade data indicates China is shipping more goods to the US via Mexico, circumventing US tariffs, with containers shipped from China to Mexico rising to 881,000 from 689,000 over comparable nine-month periods. Mexico has overtaken China as the largest exporter of goods to the US.
  • Trump’s Tariffs and China Collide to Shock the $115 Trillion Global Economy — Bloomberg Economics projects that if US tariffs stand and targeted countries retaliate with duties half as large, US goods imports would be about 30% lower by 2030 than otherwise, with China's exports to the US falling 85%. China is expected to redirect most of those exports to other markets, amplifying pressure on economies already losing US sales.

AI Summary. Undocumented workers make up a substantial share of homebuilding occupations, with construction laborers the most affected by mass deportation, according to estimates from the Center for American Progress. The author argues that any wage gains for some American workers would be outweighed by higher housing costs, reduced housing supply, and construction delays.

Aziz Sunderji Home Economics
Date Posted:

The Center for American Progress estimates that there are 446,000 undocumented construction workers in the US, more than a fifth of the total. Deporting them would cause “increased housing costs, reduced housing supply, [and] construction delays.”

Will deporting undocumented construction workers raise housing costs?

Core argument: Construction laborers would be affected most intensely by mass deportation, according to estimates from the Center for American Progress on employment levels and the share of undocumented workers in each homebuilding occupation.

The chart shows the size of various homebuilding occupations. The vertical height of each bar represents the number of people employed in each occupation, while the horizontal width represents the proportion of each occupation comprised of undocumented workers, according to estimates from the Center for American Progress. The size of each block therefore represents the number of undocumented workers across occupations. Mass deportation would affect construction laborers most intensely. Research shows that immigrant workers often complement rather than compete with native-born workers. The two fill different labor market niches. In fact, foreign workers can actually increase productivity and wages for some domestic workers. While removing undocumented workers might increase wages for some American workers, these gains would be outweighed by broader negative effects: increased housing costs, reduced housing supply, construction delays, and overall economic inefficiency.

Takeaways by Macro Roundup® AI

  1. Construction laborers would be affected most intensely by mass deportation, according to estimates from the Center for American Progress on employment levels and the share of undocumented workers in each homebuilding occupation.
  2. Any wage gains for some American workers from removing undocumented workers would be outweighed by higher housing costs, reduced housing supply, construction delays, and overall economic inefficiency.
  3. Research indicates immigrant workers often complement rather than compete with native-born workers by filling different labor market niches, and foreign workers can increase productivity and wages for some domestic workers.

Related Articles:

  • The Strange and Awful Path of Productivity in the U.S. Construction Sector — U.S. construction sector labor productivity and total factor productivity grew faster than the whole economy in the 1950s and 1960s, then fell, ending 2020 below their 1950 levels while economywide labor productivity and total factor productivity were 290% and 230% higher. Construction labor productivity fell about 1% a year from 1970 to 2020.
  • Construction Industry Braces for One-Two Punch: Tariffs and Deportations — Immigrants make up more than half of construction trade workers in Texas, California, New Jersey, and the District of Columbia, and undocumented workers are estimated at 13% of the construction industry, more than twice their share of the overall workforce. Roughly 130,000 newly arrived immigrants have joined the industry, bringing foreign-born construction employment to a record.
  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.

AI Summary. Japanese births fell to a record low of 686,000 in 2024, dropping below 700,000 for the first time since 19th-century records began and reaching a level Japan's official median population forecast had not projected until 2039. Because the government bases economic and fiscal policy on that median forecast, adopting lower estimates would require revising projections for taxes and pension benefits.

Leo Lewis Financial Times
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Births in Japan fell to < 700,000 in 2024 for the first time since records began in the 19th century, 15 years ahead of the IPSS median forecast. Analysts are urging the government to use lower birth data for policy analysis.

Should fiscal policy adopt lower population forecasts after births undershoot projections?

Core argument: Japanese births fell to 686,000 in 2024, dropping below 700,000 for the first time since record-keeping began in the 19th century, a figure that excludes children born to non-Japanese people.

Births in Japan plunged to a record low: there were a total of 686,000 Japanese births in 2024, falling below 700,000 for the first time since records began in the 19th C. The median forecast produced by the National Institute of Population and Social Security Research (IPSS) in 2023 did not foresee the number of annual births — which does not include children born to non-Japanese people — dropping into the 680,000 range until 2039. The government’s pivotal economic policy document — the first blueprint for macroeconomic management produced by the cabinet of Prime Minister Shigeru Ishiba on June 6 — relies on the median population forecasts. The arrival at that level 15 years ahead of schedule is critical because the government uses that median forecast when formulating economic and fiscal policy. “If the government changes the assumptions for future birth rate and population structure, it would also need to change many forecasts related to future social welfare. Adopt the lower estimate, and the government will need to tell people to accept higher tax and lower pension benefits in the future,” noted Masatoshi Kikuchi, chief equity strategist at Mizuho Securities.

Takeaways by Macro Roundup® AI

  1. Japanese births fell to 686,000 in 2024, dropping below 700,000 for the first time since record-keeping began in the 19th century, a figure that excludes children born to non-Japanese people.
  2. The 2023 median forecast from Japan's National Institute of Population and Social Security Research did not expect annual births to fall into the 680,000 range until 2039, placing the decline 15 years ahead of schedule.
  3. The first macroeconomic blueprint from Prime Minister Shigeru Ishiba's cabinet, produced June 6, relies on the median population forecasts, and Mizuho Securities strategist Masatoshi Kikuchi said adopting the lower estimate would require telling people to accept higher taxes and lower pension benefits.

Related Articles:

  • The Demographic Future of Humanity: Facts and Consequences — The authors estimate the world total fertility rate is around 2.17, below the global replacement rate of roughly 2.21, meaning humanity is already below replacement, with fertility and births falling faster than anticipated. They project middle-income countries' fertility may fall below that of rich countries outside East Asia, with emigration compounding population decline.
  • The Power of Demography and the Fate of East Asia — East Asia's total population has peaked and is projected to decline for at least a generation, with the pace of decline likely accelerating each decade, while US population is projected to keep growing for decades. The author argues such sustained divergence can shift the global balance of power.
  • World Depopulation: Prospects and Implications — The US is projected to account for a growing share of the rich world's labor force, youth, and highly educated talent, with continuing population and labor force growth and only moderate aging through 2050. Its fertility, though below replacement, exceeds that of East Asian and nearly all European countries, and sustained legal immigration is essential to this demographic advantage.

AI Summary. Canada plans to meet the North Atlantic Treaty Organization target of spending 2% of gross domestic product on defense, raising defense outlays to nearly C$63bn from projected expenditures of about C$35bn, after spending 1.37% of output on defense. The government says it will fund the increase through savings across the federal public sector rather than tax increases.

Paul Vieira Wall Street Journal
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To raise Canada’s contribution to NATO from a projected 1.37% to its 2% commitment, Prime Minister Carney will look for savings across the federal public sector.

Can Canada nearly double defense spending without raising taxes?

Core argument: Canada plans to spend nearly C$63 billion on defense in fiscal 2025-26, up from roughly C$35 billion projected in budgetary documents filed last month, to meet NATO's commitment of 2% of GDP.

Carney on Monday unveiled a plan for Canada this year to meet its North Atlantic Treaty Organization commitment to spend 2% of gross domestic product on defense. Canada spent 1.37% on defense in 2024, ahead of only Belgium, Luxembourg, Slovenia and Spain. Canada intends to spend nearly C$63 billion Canadian dollars on defense in the fiscal 2025-26 year—a big jump from projected expenditures of about C$35 billion based on budgetary documents filed in the legislature last month. The Canadian government has no plans to raise taxes to help pay for the increased expenditures on defense, Carney said, adding that his government just cut taxes for middle-income earners. To finance the higher spending, Carney said officials have just started to look for savings across the federal public sector. [He] pledged during his successful campaign to balance the government’s operating budget.

Takeaways by Macro Roundup® AI

  1. Canada plans to spend nearly C$63 billion on defense in fiscal 2025-26, up from roughly C$35 billion projected in budgetary documents filed last month, to meet NATO's commitment of 2% of GDP.
  2. Canada spent 1.37% of GDP on defense in 2024, ahead of only Belgium, Luxembourg, Slovenia and Spain.
  3. Carney ruled out tax increases to fund higher defense spending, noting his government just cut taxes for middle-income earners, and said officials have started looking for savings across the federal public sector.

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