Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “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, June 19, 2025

AI Summary. Foreign holdings of US Treasuries totaled $9.01tn, the second-highest on record and down $36bn from the prior month, with the decline mainly reflecting net sales of US notes and bonds by foreign private investors while official entities were net buyers of longer-term Treasuries. Japan remained the largest foreign holder at $1.13tn.

Chris Anstey and Ye Xie Bloomberg
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Foreign holdings of Treasuries at $9.01T held close to a record high in April, down just $36B from March. Private selling accounted for all of the decline; official entities were net buyers.

Did foreign investors pull back from US Treasuries during April's market turmoil?

Core argument: Foreign holdings of US Treasuries totaled $9.01tn in April, the second-highest on record and down just $36bn from March, with the decline mainly reflecting net sales of US notes and bonds by foreign private investors.

Foreign holdings totaled $9.01 trillion in April, the second-highest figure on record and down just $36 billion from March. The drop mainly reflected net sales by foreign private investors of US notes and bonds. Official entities were net buyers of longer-term Treasuries. Japan, the biggest foreign holder of Treasuries, saw its holdings tick up by $3.7 billion in April, to $1.13 trillion. China, which in March slipped to become the No. 3 foreign holder, behind the UK, had $757 billion of Treasuries in April, down $8.2 billion from the previous month. Belgium, whose holdings include Chinese custodial accounts according to market analysts, went up by $8.9 billion, to $411 billion. The UK’s holdings climbed by $28.4 billion, to $807.7 billion. Holdings of the Cayman Islands — viewed as a popular domicile for leveraged investors such as hedge funds — dipped $7 billion. Canada’s holdings slide by $57.8 billion, to $368.4 billion. That still leaves it up from January’s level. Foreign investors were net sellers of long-term agency bonds – a category that includes Fannie Mae and Freddie Mac debt – and of equities, while they were net buyers of long-term corporate bonds.

Takeaways by Macro Roundup® AI

  1. Foreign holdings of US Treasuries totaled $9.01tn in April, the second-highest on record and down just $36bn from March, with the decline mainly reflecting net sales of US notes and bonds by foreign private investors.
  2. Japan remained the largest foreign holder with $1.13tn in April, up $3.7bn, while the UK climbed $28.4bn to $807.7bn and China, in third place, held $757bn, down $8.2bn.
  3. Foreign investors were net sellers of long-term agency bonds, a category including Fannie Mae and Freddie Mac debt, and of equities, while buying long-term corporate bonds; official entities were net buyers of longer-term Treasuries.

Related Articles:

  • Rapidly Growing Treasury Supply Crowding Out Other Types of Credit Growth — Roughly half of all fixed income issuance coming to market over the past year has been US Treasuries, meaning investors must allocate a growing share of dollars to financing the government. The argument is that lower government debt would free up more funds for consumer borrowing and business investment.
  • 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.
  • US Fiscal Sustainability Once More — US federal interest payments were projected to rise from 18% of tax revenues to about 22% by 2034 under the Congressional Budget Office's prior baseline. The author estimates that if the yield curve stays at current levels and policy is unchanged, that ratio would exceed 25% by 2032 and approach 30% by 2035.

AI Summary. US corporate bond issuance has grown rapidly, retail investors are entering alongside traditional institutional buyers through bond mutual funds and exchange-traded funds, and trading is shifting toward electronic platforms that compete with the dealer-based model. Post-crisis capital and liquidity rules made banks less willing to hold large bond inventories, leaving unresolved who supplies liquidity when it is most needed.

Maureen O’Hara and Xing (Alex) Zhou Journal of Economic Perspectives
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Corporate bond trading has changed from “a relationship-based business to a more transaction-based [one],” reducing search costs in “normal times,” while replacing the broker dealers who held inventories needed to provide liquidity in times of stress.

How is the growing corporate bond market changing who provides liquidity?

Core argument: Primary issuance in the US corporate bond market has exploded, and retail investors are entering a market long dominated by institutional buyers such as insurance companies and pension funds, associated with rapid growth of bond mutual funds and exchange-traded funds.

The corporate bond market is changing rapidly. Primary issuance has exploded. The buyers in bond markets have long been dominated by institutional investors like insurance companies and pension funds, but retail investors are now entering the market in greater volume, [associated with the] rapid growth of bond mutual funds and exchange-traded funds. Trading is shifting to electronic markets, adding competition to the traditional dealer-based model. Prior to the 2008 global financial crisis, many dealers, particularly large banks, were ready to expand their balance sheets to accommodate customer bond trades. But the financial crisis revealed solvency and liquidity issues for many banks, [resulting in] reforms, including the US Dodd-Frank Act and Basel III international banking regulations, to raise bank capital requirements and increase liquidity. While these regulatory reforms arguably made banks safer and increased the resilience of the financial system, they also increased the cost of capital and restricted risk-taking in a way that made banks less willing to hold large inventories of corporate bonds. Few of the changes in the market address the problem of who is going to provide liquidity when it is particularly needed.

Takeaways by Macro Roundup® AI

  1. Primary issuance in the US corporate bond market has exploded, and retail investors are entering a market long dominated by institutional buyers such as insurance companies and pension funds, associated with rapid growth of bond mutual funds and exchange-traded funds.
  2. Post-crisis reforms including the US Dodd-Frank Act and Basel III raised bank capital and liquidity requirements, increasing banks' cost of capital and restricting risk-taking in a way that made them less willing to hold large corporate bond inventories.
  3. Corporate bond trading is shifting to electronic markets that add competition to the traditional dealer-based model, but few of the changes in the market address who will provide liquidity when it is particularly needed.

Related Articles:

  • The Growing Role of Private Credit: The Outlook for Corporate Finance — Banks provide a smaller share of corporate credit than before the financial crisis, with bank lending falling from about 27% of total non-financial corporate debt to about 20%.
  • 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.
  • Who Buys Treasuries When the Fed Reduces its Holdings — Analysis of Federal Reserve balance sheet reduction finds that households and broker-dealers absorbed the additional supply of Treasury securities during the 2017–2019 episode, with household holdings correlated with hedge fund holdings. In the first year of the reduction begun in 2022, households purchased a large share while hedge funds did not, and insurance companies and foreign investors also increased holdings.

AI Summary. U.S. public companies have cut their white-collar workforces by a collective 3.5% over three years, with managers down 6.1% and executive-level roles down 4.6%, according to employment data-provider Live Data Technologies. About one in five S&P 500 companies employ fewer people than a decade ago, including firms whose sales have climbed.

Chip Cutter and Lauren Weber Wall Street Journal
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American public firms have reduced their white-collar workforce by 3.5% over the past three years; managers and executives were more impacted, falling 6.1% and 4.6%, respectively, over the period.

Are the largest U.S. companies shrinking their white-collar workforces?

Core argument: U.S. public companies cut their white-collar workforces by a collective 3.5% over the past three years, according to employment data-provider Live Data Technologies.

U.S. public companies have reduced their white-collar workforces by a collective 3.5% over the past three years, according to employment data-provider Live Data Technologies. Over the past decade, one in five companies in the S&P 500 have shrunk. In all, about one in five S&P 500 companies have fewer employees today in both offices and the field than a decade ago, and it isn’t all due to selling or spinning off some operations, according to a Wall Street Journal analysis of public filings. That includes bellwether names such as Walmart, General Motors and Bank of America, whose sales have all climbed over that time. Managers have been an especially ripe target for cutting, though Live Data Technologies’s data show public companies have pared back their nonmanagerial ranks recently, too. The number of managers dropped 6.1% between May 2022 to May 2025. Executive-level roles fell 4.6%.

Takeaways by Macro Roundup® AI

  1. U.S. public companies cut their white-collar workforces by a collective 3.5% over the past three years, according to employment data-provider Live Data Technologies.
  2. The number of managers at public companies fell 6.1% between May 2022 and May 2025 and executive-level roles fell 4.6%, with nonmanagerial ranks also pared back recently, according to Live Data Technologies.
  3. About one in five S&P 500 companies employ fewer people in offices and the field than a decade ago, including Walmart, General Motors and Bank of America, whose sales all climbed, according to a Wall Street Journal analysis of public filings.

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

AI Summary. Sudden jumps or accelerations in a time series most often reflect changes in how a phenomenon is measured—definitions, detection technology, reporting incentives, or data coverage—rather than real-world change. Examples include apparent rises in sepsis driven by billing incentives, Lyme disease cases driven by revised surveillance rules, and recorded natural disasters driven by satellite monitoring and cataloguing efforts.

Cremieux Cremieux Recueil
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Citing a number of examples from medicine and meteorology, @cremieuxrecueil argues that “hard-to-explain trend[s]” are often artifacts of shifts in measurement methodology resulting from institutional changes and, in some cases, economic incentives.

Do sudden breaks in data trends usually reflect measurement changes?

Core argument: Reported Lyme disease cases rose 70% in 2022 versus 2017–19 after surveillance methods changed, letting certain jurisdictions report on laboratory evidence alone without clinical confirmation.

When a time-series suddenly jumps, plummets, or accelerates, the likeliest cause is a shift in how the phenomenon is measured—its definition, detection technology, reporting incentives, or data coverage—rather than a real-world change in the phenomenon itself. One common example is “sepsis”. A stark rise in sepsis noticed in insurance claims was not supported when looking at the incidence recorded in electronic health records, deaths, or discharges to hospice. The purported ‘rise of sepsis’ was due to Medicare incentives to upcode patients and the adoption of other billing practices that raised the number of charts labeled “sepsis” without a parallel mortality rise. Similarly, did Lyme disease cases rise 70% in 2022 compared to 2017-19? No! Surveillance methods changed because they began allowing certain jurisdictions to start reporting based on laboratory test-based evidence alone, without the need for clinical confirmation. The frequently-touted 4 to 5-fold increase in natural disaster numbers over the past half-century has more to do with the adoption of satellite monitoring, improved communications technology, the spread of the Internet, and intentional and recent efforts to catalogue disasters.

Takeaways by Macro Roundup® AI

  1. Reported Lyme disease cases rose 70% in 2022 versus 2017–19 after surveillance methods changed, letting certain jurisdictions report on laboratory evidence alone without clinical confirmation.
  2. The apparent rise in sepsis seen in insurance claims was not reflected in electronic health records, deaths, or hospice discharges, and is attributed to Medicare incentives to upcode patients and billing practices that increased charts labeled "sepsis.".
  3. The often-cited 4- to 5-fold increase in natural disaster counts over the past half-century is attributed to satellite monitoring, improved communications technology, the spread of the Internet, and recent efforts to catalogue disasters.

Related Articles:

  • r-g before and after the Great Wars 1507-2023 — Historical reconstructions show the gap between long-term interest rates and trend growth across four major economies rose by an average 7 basis points a year over 1931-2023, reversing a 2.7bp annual decline over 1507-1931. The authors argue assumptions of favorable debt-sustainability dynamics are questionable, citing sharp historical reversals alongside surging wartime spending.
  • Rethinking Short-Term Real Interest Rates and Term Spreads Using Very Long-Run Data — Multi-century data on short-maturity real interest rates show consistent reversion toward a long-run trend, relatively fast adjustment, and few structural breaks, suggesting caution about claims of a break in short-term real rate behavior. The authors find term spreads secularly rising while inflation volatility trends downward, driven by faster declines in short-maturity yields.
  • Long-Run Trends In Long-Maturity Real Rates, 1311–2022 — Analyzing long-maturity real interest rates across eight advanced economies over seven centuries, the authors find rates are trend stationary with a persistent downward trend since the Renaissance. They argue demographic and productivity factors are not convincing drivers, finding population and output growth negatively predict real rates over long spans.

AI Summary. China accounts for 70-80% of global commercial drone supply and 79% of approved drone patents globally, according to industry analysts and a patent study. The Civil Aviation Administration of China projects the low-altitude economy, which includes flying cars, will grow fivefold to $490bn by 2035.

William Langley Financial Times
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China produces 70–80% of commercial drones and accounted for 79% of approved drone patents globally in 2024.

How dominant is China in commercial drone production and patents?

Core argument: China accounts for 70–80% of global commercial drone supply, according to Drone Industry Insights, and 79% of approved drone patents globally last year, according to a report by law firm Mathys & Squire.

China dominates the production of commercial drones, accounting for 70-80% of global supply, according to analytics provider Drone Industry Insights. The country also has a stranglehold on research and development, accounting for 79% of approved drone patents globally last year, according to a report by London-based law firm Mathys & Squire. DJI alone filed 64 patents among the 7,890 total. The Civil Aviation Administration of China expects the market size of the low-altitude economy, which includes other innovations such as flying cars, to grow fivefold to Rmb3.5tn ($490bn) by 2035. There were nearly 2.2mn drones registered with the CAAC at the end of last year, according to the latest available figures. About a third of the country’s industrial drones are used in agriculture or forestry, while more than a fifth are used for geographical surveys. The next biggest uses are patrols, security monitoring, firefighting and disaster relief, according to 2022 figures from analytics provider Guanyan Tianxia Data Center.

Takeaways by Macro Roundup® AI

  1. China accounts for 70–80% of global commercial drone supply, according to Drone Industry Insights, and 79% of approved drone patents globally last year, according to a report by law firm Mathys & Squire.
  2. The Civil Aviation Administration of China expects the low-altitude economy, which includes innovations such as flying cars, to grow fivefold to Rmb3.5tn ($490bn) by 2035, and nearly 2.2mn drones were registered with the agency at the end of last year.
  3. About a third of China's industrial drones are used in agriculture or forestry and more than a fifth in geographical surveys, followed by patrols, security monitoring, firefighting and disaster relief, according to 2022 figures from Guanyan Tianxia Data Center.

Related Articles:

  • A US Drone Maker Tries to Take Back the Country’s Skies — US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.
  • China Is Cutting Off Drone Supplies Critical to Ukraine War Effort — Manufacturers in China have begun limiting sales to the US and Europe of key components used to build drones, a prelude to broader export restrictions on drone parts that Western officials expect Beijing to enforce. China controls nearly 80% of the commercial drone market, according to the Center for Strategic and International Studies.
  • Chinese Sanctions Hit US Drone Maker Supplying Ukraine — China imposed sanctions on Skydio, the largest US drone maker and a supplier to Ukraine's military, barring Chinese firms from supplying it with critical components including batteries from its sole provider. The company is seeking alternative suppliers and has asked the US government for help.

Friday, June 20, 2025

AI Summary. Euro area affiliates of US multinational companies account for over 5% of euro area value added and 2% of employment, with higher shares in Ireland. The European Central Bank estimates these affiliates were involved in almost 30% of the euro area goods surplus with the US and about 90% of its services deficit.

Lorenz Emter, Michael Fidora, Fausto Pastoris, Martin Schmitz, et al. European Central Bank
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An ECB analysis finds Euro Area affiliates of US multinationals account for >5% of EA value added and are responsible for ~ 30% of the EA 2024 goods surplus vis-a-vis the US. Overall, the EA-US current account was ~ at par in 2024.

How much do US multinationals shape euro area trade balances?

Core argument: Euro area affiliates of US multinationals account for over 5% of euro area value added, gross operating surplus and purchases of goods and services, and 2% of persons employed, with substantially higher shares in Ireland.

Euro area [EA] affiliates of US multinational enterprises [MNEs] account for over 5% of euro area value added, gross operating surplus and purchases of goods and services, and 2% of persons employed, with substantially higher shares for Ireland. The euro area current account with the United States was nearly balanced in 2024, as the increasing surplus in goods trade was almost entirely offset by deficits in services trade and foreign direct investment income, with US MNEs contributing significantly to these components. ECB estimates suggest that almost 30% of the euro area goods surplus with the United States in 2024 involved trade by euro area affiliates of US MNEs, while these companies accounted for around 90% of the euro area deficit in services trade.

Takeaways by Macro Roundup® AI

  1. Euro area affiliates of US multinationals account for over 5% of euro area value added, gross operating surplus and purchases of goods and services, and 2% of persons employed, with substantially higher shares in Ireland.
  2. The euro area current account with the United States was nearly balanced in 2024, as a rising goods trade surplus was almost entirely offset by deficits in services trade and foreign direct investment income.
  3. ECB estimates suggest euro area affiliates of US multinationals were involved in almost 30% of the 2024 euro area goods surplus with the United States and accounted for around 90% of the euro area services trade deficit.

Related Articles:

  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.
  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.
  • Message to President Trump: We (Europe) Take As Much From You (The US) As You Take From Us — The US trade deficit with the euro area in goods and services combined is about €57bn, under 0.2% of US GDP, and the euro area pays roughly €49bn more in investment income and wages to the US than it receives. Counting these flows, the euro area's current account with the US is effectively balanced.

AI Summary. The authors estimate that eliminating the US manufacturing trade deficit by shifting purchases from foreign to domestic goods would raise manufacturing's share of total US employment by just 1.7 percentage points, from 7.9% to 9.7%. Such gains would be far too small to significantly expand labor market opportunities for men without college degrees.

Robert Lawrence Peterson Institute for International Economics
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The American manufacturing trade deficit in 2024 was $1.2T. Robert Lawrence estimates that closing it would increase the share of manufacturing employment from 7.9% to 9.7% an increase of 1.7pp.

How much would closing the trade deficit raise manufacturing employment?

Core argument: Eliminating the US manufacturing trade deficit by shifting purchases from foreign to domestic goods would raise manufacturing's share of total US employment by 1.7 percentage points, from 7.9% to 9.7%.

In 2024, total US value added in manufacturing was $2.913 trillion. Thus, the manufacturing value added in the trade deficit equaled 21.5% of US production. Had Americans maintained the same level of spending but met their demand with additional domestic production rather than through imports, manufacturing production would have been 21.5% larger. Even if the tariffs and other trade policies eliminate the US manufacturing trade deficit by switching US purchases from foreign to domestic goods, the share of manufacturing employment in total US employment would increase by just 1.7 percentage points, from 7.9 to 9.7%, and the share of workers in production occupations in US manufacturing would increase by just under 0.9 percentage point, from 3.85 to 4.7%. These results point to the dangers of exaggerating the gains that policies directed at closing the trade deficit are likely to induce. The US manufacturing trade deficit of $1.2 trillion is a large number, but it is a relatively small share of an economy with a GDP of $29.1 trillion in 2024. The changes in employment with balanced trade would be far too small to produce a labor market that significantly increases the opportunities for men without college degrees.

Takeaways by Macro Roundup® AI

  1. Eliminating the US manufacturing trade deficit by shifting purchases from foreign to domestic goods would raise manufacturing's share of total US employment by 1.7 percentage points, from 7.9% to 9.7%.
  2. The manufacturing value added embedded in the US trade deficit equaled 21.5% of US production in 2024, when total US manufacturing value added was $2.913 trillion, so meeting that demand domestically would have made manufacturing production 21.5% larger.
  3. The $1.2 trillion US manufacturing trade deficit is a relatively small share of a $29.1 trillion economy, and balanced trade would raise production occupations' share of US employment from 3.85% to 4.7%, too small to significantly expand opportunities for men without college degrees.

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.
  • 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.
  • 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.

AI Summary. Trailing 12-month US federal spending is up $1.4tn in today's dollars, or 25%, since just before the pandemic. Interest payments, Social Security, Medicare and the "health" category (mainly Medicaid) account for 71% of that increase, and adding veterans benefits brings the share to 77%.

Justin Fox Bloomberg
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Since February 2020, real Federal spending has risen 25%. Interest payments account for ⅓ of the increase; that spending along with increases in Social Security, Medicare, Medicaid and veterans benefits account for 77% of the increase.

What drives the increase in federal spending since before the pandemic?

Core argument: Trailing 12-month U.S. federal spending has risen $1.4 trillion in today's dollars, or 25%, since February 2020, just before the pandemic.

Trailing 12-month federal spending is up by $1.4 trillion in today’s dollars, or 25%, since just before the pandemic in February 2020. One-third of the spending increase is interest payments, which have doubled in real terms because pandemic spending programs drove up the federal debt, and interest rates are higher. Another 23% comes from the country’s two giant social insurance programs for the elderly, Social Security and Medicare, where real spending has risen roughly in line with enrollment as more members of the gigantic baby boom generation, currently 60 to 79, have entered the years of eligibility. An additional 15% of the increase comes from the budget category labeled “health,” which is mainly Medicaid, the federal-state health insurance program for the poor, for which federal grants to the states have risen 25% in real terms since just before the pandemic, right in line with the overall federal spending increase. Interest, Social Security, Medicare and health together account for 71% of the spending increases. Add in veterans benefits and services, which are also mostly health care and are not slated for sharp cuts in current budget legislation, and that gets us up to 77%.

Takeaways by Macro Roundup® AI

  1. Trailing 12-month U.S. federal spending has risen $1.4 trillion in today's dollars, or 25%, since February 2020, just before the pandemic.
  2. Interest payments account for one-third of the federal spending increase since February 2020, having doubled in real terms as pandemic spending programs drove up the federal debt and interest rates rose.
  3. Interest, Social Security, Medicare and "health" together make up 71% of the spending increase, rising to 77% once veterans benefits and services — mostly health care and not slated for sharp cuts in current budget legislation — are added.

Related Articles:

  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • Americans Are More Reliant Than Ever on Government Aid — Research from the Economic Innovation Group finds that in 1970, fewer than 1% of US counties drew at least 25% of personal income from government safety-net and social programs, compared with 53% of counties by 2022, a shift the group associates with population aging.
  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.

AI Summary. Film production in Los Angeles benefits from network effects that keep top actors, directors, agents and studio executives clustered together, mirroring finance in New York and technology in Silicon Valley. In those industries a prosperous top coexists with a shrinking middle, as mid-tier jobs and hardware manufacturing move to cheaper locations.

Greg Ip Wall Street Journal
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Middle-income jobs in the US’s leading sectors are migrating out of high-cost cities. Headcount at securities dealers in New York fell 21% btw 2008 and 2024, film production fell 16% in LA, and tech manufacturing fell 32% in Silicon Valley.

Do network effects keep industry elites clustered while middle-tier jobs relocate?

Core argument: Film production in Los Angeles benefits from network effects, since top actors, lawyers, agents, studio executives and directors must be co-located to work with one another.

​​Like finance in New York and tech in Silicon Valley, film in Los Angeles benefits from the economics of network effects. The top actors, lawyers, agents, studio executives and directors have to be here to work with each other. But New York and Silicon Valley are cautionary tales: in both, a prosperous top masks a shrinking middle. While Wall Street’s top executives, traders and investment bankers are still in New York, mid-tier jobs migrate to places with cheaper housing and lower taxes such as Denver, Miami and Dallas. The top tech firms such as Nvidia, Apple and HP are still in Silicon Valley, but they make their hardware elsewhere, predominantly Asia. Richly compensated actors, directors and studio executives will be fine. It’s the grips, camera operators, costume and set designers, makeup artists and editors, mostly middle-class, being squeezed between a shrinking pool of work and the high cost of living.

Takeaways by Macro Roundup® AI

  1. Film production in Los Angeles benefits from network effects, since top actors, lawyers, agents, studio executives and directors must be co-located to work with one another.
  2. New York finance and Silicon Valley tech show a prosperous top masking a shrinking middle, as Wall Street mid-tier jobs migrate to Denver, Miami and Dallas and top tech firms such as Nvidia, Apple and HP make hardware predominantly in Asia.
  3. Richly compensated actors, directors and studio executives will be fine, while mostly middle-class grips, camera operators, costume and set designers, makeup artists and editors are squeezed between a shrinking pool of work and the high cost of living.

Related Articles:

  • Housing and the American Worker — Wages net of housing costs were once substantially higher in high-density areas than low-density areas for workers both with and without college education, but over the past half-century that urban wage premium has persisted only for college-educated workers, not for those with a high school degree or less.
  • 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.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. The unemployment rate for Americans aged 22 to 27 with at least a bachelor's degree is now consistently above the national average, a shift driven by graduates seeking work for the first time. Similar patterns appear in the European Union, Britain, Canada, and Japan, and among business-school graduates.

Economist Staff The Economist
Date Posted:

In the US, recent college graduates have a higher unemployment rate than the overall average; the EU, UK, Canada and Japan are on a similar path.

Are new college graduates facing higher unemployment than the national average?

Core argument: Matthew Martin finds that for the first time in history, the unemployment rate of Americans aged 22–27 holding a bachelor's degree or more is consistently higher than the national average.

Matthew Martin has looked at Americans aged 22 to 27 with a bachelor’s degree or more. For the first time in history, their unemployment rate is now consistently higher than the national average. Recent graduates’ rising unemployment is driven by those who are looking for work for the first time. The trend is not just apparent in America. Across the European Union the unemployment rate of young folk with tertiary education is approaching the overall rate for the age group. Britain, Canada, Japan—all appear to be on a similar path. Even elite youngsters, such as MBA graduates, are suffering. In 2024, 80% of Stanford’s business-school graduates had a job three months after leaving, down from 91% in 2021.

Takeaways by Macro Roundup® AI

  1. Matthew Martin finds that for the first time in history, the unemployment rate of Americans aged 22–27 holding a bachelor's degree or more is consistently higher than the national average.
  2. Rising unemployment among recent American graduates is driven by those looking for work for the first time.
  3. Some 80% of Stanford's business-school graduates had a job three months after leaving in 2024, down from 91% in 2021, while across the European Union the unemployment rate of young people with tertiary education approaches the overall rate for their age group.

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  • Educated but Unemployed, a Rising Reality for College Grads — Recent college graduates aged 22–27 account for 12% of the 60 basis-point rise in US unemployment, more than twice their 5% share of the labor force. In computer and mathematical occupations, employment for that age group has fallen 8% since 2022 while older workers' employment grew 0.8%.
  • 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.

AI Summary. Property-tax bills in Palm Beach County, Florida totaled $359m last year, a 75% increase from five years earlier, and county tax revenue topped $1.4bn in fiscal 2025. The county's proposed budget would raise employee pay by 6%, add up to 175 fire rescue positions, and lift culture and recreation funding to nearly $500m from $226m five years ago.

Anna Kaiser, Ann Choi, and Erin Hudson Bloomberg
Date Posted:

Home prices in Palm Beach have doubled since 2020 reaching a total market value of ~ $40B, according to data from Palm Beach County.

Does an influx of wealthy residents boost local government spending?

Core argument: Total property-tax bills in Palm Beach County reached $359 million last year, a 75% increase from 2018, in a state with no income tax.

Total property-tax bills in Palm Beach County reached $359 million last year, a 75% increase from 2018. In a state with no income tax, that has brought millions more for local government to spend on the island’s upkeep and public services — as well as to address the strains that come with an influx of residents. The county’s tax revenue for fiscal 2025 topped $1.4 billion, up from $951 billion in 2020. As more dollars roll in, the county is looking to increase its employees’ pay by 6% and add as many as 175 new fire rescue positions, according to its most recent proposed budget. It also boosted funding this year toward culture and recreation projects to nearly $500 million, up from $226 million five years ago.

Takeaways by Macro Roundup® AI

  1. Total property-tax bills in Palm Beach County reached $359 million last year, a 75% increase from 2018, in a state with no income tax.
  2. Palm Beach County's tax revenue for fiscal 2025 topped $1.4 billion, and its most recent proposed budget seeks a 6% employee pay increase and as many as 175 new fire rescue positions.
  3. Palm Beach County boosted funding for culture and recreation projects this year to nearly $500 million, up from $226 million five years ago.

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