Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a 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
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, July 18, 2025

AI Summary. Capital spending on AI data centers is around 20% of railroads' peak spending as a share of GDP and is rising quickly, having already surpassed the dot-com era peak in telecom investment. Unlike long-lived rail infrastructure, data centers are short-lived assets requiring frequent hardware replacement, and the capital is being reallocated from other sectors.

Paul Kedrosky Applied Complexity
Date Posted:
Is Database:
Database

Kedrosky estimates capex related to the datacenter buildout is ~20% of the railroad buildout in the 1880s and rising, though he cautions AI datacenter depreciation is high: “we aren’t building century-long infrastructure…datacenters are short-lived.”

How does AI data center spending compare with past infrastructure booms?

Core argument: AI data center capital expenditures run at roughly 20% of the peak spending on railroads as a share of GDP and are still rising quickly, having already surpassed the dot-com-era peak in telecom spending.

Capital expenditures on AI data centers is likely around 20% of the peak spending on railroads, as a percentage of GDP, and it is still rising quickly. And we've already passed the decades ago peak in telecom spending during the dot-com bubble. Regardless of what one thinks about the merits of AI or explosive datacenter expansion, the scale and pace of capital deployment into a rapidly depreciating technology is remarkable. These are not railroads—we aren’t building century-long infrastructure. AI datacenters are short-lived, asset-intensive facilities riding declining-cost technology curves, requiring frequent hardware replacement to preserve margins. And this surge has unintended consequences. Private capital expenditures don't, for the most part, come from nowhere. While governments can print money to spend, companies generally can't. Capital is being aggressively reallocated—from venture funding to internal budgets—at the expense of other sectors.

Takeaways by Macro Roundup® AI

  1. AI data center capital expenditures run at roughly 20% of the peak spending on railroads as a share of GDP and are still rising quickly, having already surpassed the dot-com-era peak in telecom spending.
  2. Unlike century-long railroad infrastructure, AI data centers are short-lived, asset-intensive facilities on declining-cost technology curves that require frequent hardware replacement to preserve margins.
  3. Private capital for the AI buildout is being reallocated from venture funding to internal corporate budgets at the expense of other sectors, since companies, unlike governments, cannot print money to spend.

Related Articles:

  • Back to Our Regularly Scheduled Programming — The four largest US hyperscalers spent $440bn on capital expenditure and research in 2024, with $596bn projected for 2025, a 35% increase, leaving large gaps between AI spending and AI revenues. These firms account for more than half of all capital expenditure growth in the US equity market.
  • AI Adoption Is Accelerating In 2025 — Nvidia's data center revenue growth is used as a simple extrapolation to project the broader capital-expenditure impact of AI-specific investment on GDP. The aim is not precision but a timely sense of whether the growth contribution from AI capital spending is accelerating or potentially peaking.
  • SPVs, Credit, and AI Datacenters — Companies funding AI data centers through jointly owned special purpose vehicles keep the borrowing off their own balance sheets while retaining shared control and use of the facilities. AI data center spending already exceeds telecom spending during the dot-com bubble, and weak returns would quickly wipe out the thin equity cushion above the vehicles' debtholders.

AI Summary. The US unemployment rate for recent male graduates has risen from below 5% to 7% over the past year while the rate for recent female graduates is unchanged or slightly lower, leaving young male graduates jobless at the same rate as non-graduates. Entry-level coding employment, however, has rebounded.

John Burn-Murdoch Financial Times
Date Posted:
Is Database:
Database

The unemployment rate for recent male college graduates (22–27) has risen from <5% to 7%. Recent male graduates “are now unemployed at the same rate as their non-graduate counterparts,” while the rate for their female peers is unchanged.

Is rising graduate unemployment concentrated among young men?

Core argument: Unemployment among recent male US graduates has risen from under 5% to 7% over the past 12 months, while joblessness for recent female graduates is unchanged or slightly falling.

The unemployment rate for recent male graduates has risen steeply from less than 5% to 7% over the past 12 months. For young female graduates in the US, joblessness is unchanged over the same period, if not falling slightly. Most striking of all, recently graduated young men are now unemployed at the same rate as their non-graduate counterparts, completely erasing the college employability premium. At first glance, this lines up neatly with the theory that we’re looking at the leading edge of a wave of AI-driven job displacement. But drill down into sector-specific employment, and the evidence doesn’t seem to fit the narrative. The much-remarked-upon contraction in hiring entry-level programmers and software developers in the US has sharply reversed in recent months. In fact, relative to the pre-generative AI era, early-career coding employment is now tracking ahead of the rest of the economy.

Takeaways by Macro Roundup® AI

  1. Unemployment among recent male US graduates has risen from under 5% to 7% over the past 12 months, while joblessness for recent female graduates is unchanged or slightly falling.
  2. Recently graduated young men in the US are unemployed at the same rate as their non-graduate counterparts, erasing the college employability premium.
  3. The contraction in US hiring of entry-level programmers and software developers has sharply reversed, with early-career coding employment now tracking ahead of the rest of the economy relative to the pre-generative-AI era.

Related Articles:

  • 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%.
  • 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.
  • 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.

AI Summary. Nominal wage income is growing about 1–1.5 percentage points faster than before the pandemic, implying somewhat more inflation than in 2017–2019 if most of that extra income is spent and businesses cannot ramp up production. Cutting interest rates enough to reverse the budget deficit increase, without offsetting fiscal tightening, would be extraordinarily inflationary.

Matt Klein The Overshoot
Date Posted:

Wage growth for the typical US worker has been steady at 1–1.5pp above the pre-pandemic level, paralleling inflation. Matt Klein argues Trump’s desired 300bp drop in the FFR to lower the costs of debt service would be “extraordinarily inflationary.”

Does faster nominal wage growth mean more inflation ahead?

Core argument: Nominal wage income is rising about 1–1.5 percentage points faster than before the pandemic, which implies somewhat more inflation than in 2017–2019 so long as most of that extra income is spent and businesses have not improved their ability to ramp up production.

Nominal wage income is still rising about 1-1.5 percentage points faster than before the pandemic. That means somewhat more inflation relative to 2017-2019 as long as the bulk of this extra income is spent on goods and services, and as long as businesses have not magically improved their ability to ramp up production of goods and services significantly since the pandemic. In theory, there is a set of interest rates on federal government debt that would reverse the increase in the budget deficit and potentially prevent public debt from rising relative to national income. The problem is that lowering interest rates by that much [Trump has said the FFR is "at least 3 points too high"] without an offsetting fiscal tightening would be extraordinarily inflationary. If interest rates fell, spending would likely pop as households saved less and monetized a big chunk of the wealth that has been built up over the past five years.

Takeaways by Macro Roundup® AI

  1. Nominal wage income is rising about 1–1.5 percentage points faster than before the pandemic, which implies somewhat more inflation than in 2017–2019 so long as most of that extra income is spent and businesses have not improved their ability to ramp up production.
  2. Cutting interest rates enough to reverse the increase in the budget deficit, without offsetting fiscal tightening, would be extraordinarily inflationary, though in theory a set of rates on federal debt exists that could keep public debt from rising relative to national income.
  3. Trump has said the federal funds rate is "at least 3 points too high," but lower interest rates would likely cause spending to pop as households saved less and monetized a large share of the wealth built up over the past five years.

Related Articles:

  • U.S. Inflation Still Robust Even Before Tariff Impact — U.S. consumer price inflation has run at a 2.3% annualized rate, close to the pre-pandemic average of 2.1%, but personal consumption price and hourly pay data suggest underlying inflation is stuck 1–1.5 percentage points above its pre-pandemic pace. Producer price data for manufactured goods point to upside inflation risk from higher input costs.
  • The Tariff Inflation Shock Starts To Hit — Monthly core goods inflation — a category making up about 25% of the core consumer price index basket — ran roughly 80 basis points above its typical seasonal level, which the author attributes to tariffs. The author argues this effect will keep building as pre-tariff inventories are depleted and transshipments are curbed.
  • Treasury Issuance Growing — US Treasury auction metrics show no current weakness in demand, with stable bid-to-cover ratios and no systematic tailing, even as debt-to-GDP rises, the term premium increases, and the government must refinance $9tn over the next year. The author argues Treasury issuance will keep outgrowing the economy, likely pushing long-term interest rates higher.

AI Summary. France's government proposed a €44bn fiscal package for 2026 that freezes spending across government except defence, freezes pensions and welfare benefits, tightens unemployment benefit eligibility, and scraps two national holidays to raise an estimated €4.2bn. The plan aims to narrow a deficit of 5.85% of GDP to 4.6%, a target analysts doubt will be met.

Leila Abboud Financial Times
Date Posted:

A fiscal package spearheaded by French premier Bayrou and intended to reduce the government’s budget deficit from 5.8% of GDP to 4.6% will likely result in a no confidence vote. Socialists “cannot accept” cuts and freezes to welfare programs.

Can a spending freeze and scrapped holidays narrow France's deficit?

Core argument: French premier François Bayrou outlined a €44bn fiscal package for 2026 that freezes spending across all areas of government except defence, including pensions and social welfare benefits, and tightens unemployment benefit eligibility.

French premier François Bayrou unveiled the outlines of a €44bn fiscal package for 2026 that includes a spending freeze on all areas of government, excluding defence, as well as on pensions and social welfare benefits. Among a raft of measures, he also said he wanted to scrap two days of national holiday to generate an estimated €4.2bn more revenue, an idea that prompted howls across the opposition. He suggested cutting Easter Monday and Victory in Europe Day on May 8. Another pledge was to tighten eligibility for unemployment benefits, which has been done twice since 2019 under Macron. The country’s deficit ballooned to 5.85% of GDP last year, the second worst in the Eurozone after Slovakia. The aim is to begin to narrow the deficit to 4.6% next year, although the overall national debt will continue to rise in the coming years. Analysts doubt that Bayrou will hit the 2026 target. Borrowing costs have ticked higher and risk squeezing out other areas of government spending. Interest paid on the national debt reached €44.5bn last year, according to the finance ministry, which is roughly the size of the defence budget.

Takeaways by Macro Roundup® AI

  1. French premier François Bayrou outlined a €44bn fiscal package for 2026 that freezes spending across all areas of government except defence, including pensions and social welfare benefits, and tightens unemployment benefit eligibility.
  2. Bayrou proposed scrapping two national holidays, Easter Monday and Victory in Europe Day on May 8, to generate an estimated €4.2bn in additional revenue, drawing objections across the opposition.
  3. France's deficit reached 5.85% of GDP last year, the second worst in the Eurozone after Slovakia, and Bayrou aims to narrow it to 4.6% next year, a target analysts doubt he will hit.

Related Articles:

  • French Government Under Pressure as Pension Talks Stumble — Talks between French labor unions and business groups on revising the law raising the minimum retirement age from 62 to 64 ended in deadlock, with some opposition parties calling for a no-confidence vote. The government says France needs another €40bn ($46bn) of savings in its 2026 budget, mainly from spending cuts.
  • 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.
  • Why Denmark is Raising its Retirement Age to 70, Europe’s Highest — Denmark's state pension age is tied to life expectancy under a parliamentary agreement that sets adjustments every five years with 15 years' notice and caps increases at one year at a time. Under this system the pension age is set to rise from 67 to 70, keeping public finances healthy long term.

AI Summary. The author argues China has been resisting pressure for the yuan to appreciate against the dollar, citing state bank foreign asset accumulation, balance of payments data, a yuan trading strong relative to its official fix, and positive foreign exchange settlement. Inflows from China's large trade surplus exceed private capital outflows.

Brad Setser Council on Foreign Relations
Date Posted:

China’s state commercial banks added $47 billion to their net foreign asset position in June. Brad Setser argues “the preponderance of evidence suggests that China has been resisting pressure on its currency to appreciate” against the dollar.

Is China resisting upward pressure on its currency?

Core argument: China's state commercial banks added $47 billion to their net foreign asset position in June, which the author reads as evidence that China has been resisting pressure for the yuan to appreciate against the dollar for most of the past year.

For a while now the smart take on China’s currency has been that, if anything, China has been propping its currency up. But the overarching conclusion that the yuan is under pressure to depreciate against the dollar is now, in my view, out of date. The preponderance of evidence suggests that China has been resisting pressure on its currency to appreciate (against the dollar) for most of the past year (the main exception is the month of April, when the U.S. briefly raised tariffs on China to 145%). Consider the following: a) China’s state commercial banks added $47 billion to their net foreign asset position in the month of June. b) The balance of payments data, which covers the policy banks as well, tells a similar story. The yuan is now trading strong relative to the fix. c) FX settlement, which lagged the formal balance sheet numbers, has also now turned positive. These data points all paint a consistent picture: one where the inflows from China’s massive trade surplus ($115 billion of goods in June, which translates to roughly $100 billion in goods and services if June services trade maps to trend) are even larger than the desire of private Chinese firms and investors to get money out of China.

Takeaways by Macro Roundup® AI

  1. China's state commercial banks added $47 billion to their net foreign asset position in June, which the author reads as evidence that China has been resisting pressure for the yuan to appreciate against the dollar for most of the past year.
  2. China's June goods trade surplus of $115 billion, roughly $100 billion in goods and services if June services trade maps to trend, exceeds the desire of private Chinese firms and investors to move money out of China, in the author's assessment.
  3. Balance of payments data covering the policy banks, a yuan trading strong relative to the fix, and FX settlement turning positive together suggest appreciation pressure, with the main exception the month of April, when the U.S. briefly raised tariffs on China to 145%.

Related Articles:

  • China Chooses Deflation — China's headline consumer price inflation has fallen below zero and core inflation is little better, and the author argues US tariffs will hasten this deflationary dynamic. Because easing monetary policy would weaken the Yuan against the Dollar, China is accepting deflation instead, which the author argues means rising real interest rates.
  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.

AI Summary. China plans to pay a national subsidy of 3,600 yuan (about $500) per child annually until age 3, totaling roughly 100bn yuan, or less than 0.1% of its economic output. Researchers involved in the policy discussions say the amount is half or less of what demographers and economists proposed.

Liyan Qi Wall Street Journal
Date Posted:

To increase China’s fertility rate of 1, Beijing is planning a child subsidy of $500 a year for the first three years of a child’s life. The number of newborns will likely drop to <9mm this year, less than 50% of the 2016 level.

Is China's new birth subsidy large enough to raise fertility?

Core argument: Beijing plans a basic national subsidy of 3,600 yuan (about $500) per child each year until age 3, costing about 100 billion yuan, or less than 0.1% of China's GDP, with no clear start date.

Beijing plans to pay a basic national subsidy of 3,600 yuan (about $500) per child each year until the age of 3. It is unclear when the subsidies would start. Huang Wenzheng, chief researcher of YuWa Population Research Institute, a think tank that was involved in the policy discussions, said the planned subsidy is half or less of what Chinese demographers, economists and researchers proposed. Huang thinks that the planned spending—about 100 billion yuan, or less than 0.1% of China’s GDP—must be 50 times higher to return the fertility rate to the replacement level of around 2.1. The number of newborns in China had plunged for six straight years before a slight, short-term rebound last year following Beijing’s end to Covid-19 restrictions. But only 6.1 million couples registered their marriages in 2024, a 21% fall from the previous year, the latest official data show, marking a record low since the government started releasing such statistics in 1986. The number of newborns will likely drop further this year, below nine million, demographers say, less than half the level of 2016, when China allowed couples to have two children for the first time since the one-child policy was implemented nationwide in 1980.

Takeaways by Macro Roundup® AI

  1. Beijing plans a basic national subsidy of 3,600 yuan (about $500) per child each year until age 3, costing about 100 billion yuan, or less than 0.1% of China's GDP, with no clear start date.
  2. Huang Wenzheng of YuWa Population Research Institute says the planned subsidy is half or less of what Chinese demographers, economists and researchers proposed, and that spending must be 50 times higher to return fertility to the replacement level of about 2.1.
  3. Only 6.1 million Chinese couples registered marriages in 2024, a 21% fall from the previous year and a record low since 1986, and demographers say newborns will likely drop below nine million this year, less than half the 2016 level.

Related Articles:

  • 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.
  • ‘No Marriage, No Children’ Is China’s Ticking Timebomb — China registered about 6.1m marriages in its most recent year, the lowest since public records began in 1986 and less than half the 2013 peak, with roughly 30% of 30-year-olds unmarried versus 15% a decade earlier. Births of 9.54m were the second-lowest since the People's Republic of China was founded in 1949.
  • China Steps Up Campaign For Single People to Date, Marry and Give Birth — Local officials in China are calling married women in their 20s and early 30s to ask about family plans, urge prenatal check-ups, and offer subsidies for additional children, with one resident reporting an Rmb100,000 ($14,000) offer for a second child. State-run outlets have promoted claims that childbirth benefits maternal health.

Monday, July 21, 2025

AI Summary. In a randomized trial, parents receiving $1,000 per month in unconditional cash for three years spent more on their children monthly and reported better parenting behaviors, such as closer supervision, than parents receiving $50 per month. The transfer had no meaningful effect on most educational outcomes, the home environment, child food security, homelessness, or parental satisfaction.

Patrick Krause, Elizabeth Rhodes, Sarah Miller, Alexander Bartik, et al. National Bureau of Economic Research
Date Posted:
Is Database:
Database
Is Important:
Important

A randomized experiment giving 1,000 parents an unconditional $1K/month over 3 years found essentially no differences in family outcomes; treated children showed no significant gains in well-being or education.

Do unconditional cash transfers improve children's outcomes?

Core argument: Parents randomly assigned a $1,000 per month unconditional cash transfer for three years spent more on their children monthly and reported better parenting behaviors, such as closer supervision, than parents receiving $50 per month.

Parents who were randomly selected to receive a $1,000 per month unconditional cash transfer for three years spent more on their children each month and reported better parenting behaviors (such as supervising their children more closely) compared to those randomized to receive $50 per month. The transfer did not have a meaningful effect on most educational outcomes measured in school administrative records, nor did it affect characteristics of the home environment, child food security, exposure to homelessness, or parental satisfaction. Figure A3 shows no significant effect of the transfer on the home environment overall in any year, nor on the probability a child is unhoused. It appears that child food insecurity is [actually] significantly worse for transfer recipients in the third year of the transfer and close to zero in the first two years, [though] this third year effect on child food security does not remain significant after adjusting inference for False Discovery Rates due to repeated testing. Among adult participants, food security improves significantly as a result of the transfer in the first year but worsens over time. Treated families were more likely to move, [but] we did not detect changes in most measures of neighborhood quality,

Takeaways by Macro Roundup® AI

  1. Parents randomly assigned a $1,000 per month unconditional cash transfer for three years spent more on their children monthly and reported better parenting behaviors, such as closer supervision, than parents receiving $50 per month.
  2. The $1,000 monthly transfer had no meaningful effect on most educational outcomes in school administrative records, nor on the home environment, child food security, exposure to homelessness, or parental satisfaction.
  3. Adult food security improved significantly in the first year of the transfer but worsened over time, and child food insecurity was significantly worse for recipients in year three, a result that does not survive False Discovery Rate adjustment.

Related Articles:

AI Summary. Bank of America internal data show median household property insurance payments (auto and home) rose 6% year-over-year and more than 40% over five years, lifting such payments to 5% of income. Younger generations saw the largest increases, though Gen X payments also rose 45%.

David Michael Tinsley and Taylor Bowley Bank of America
Date Posted:

According to Bank of America internal data, median annual property insurance (auto and housing) payments have risen from 4% of household income to 5% over the past four years.

Are rising property insurance costs taking a bigger share of household income?

Core argument: Median property insurance payments for auto and housing rose 6% year-over-year in the year through May 2025 and by over 40% since June 2020–May 2021, according to Bank of America internal data.

Property [auto and housing] insurance payment growth slowed in the year through May 2025, according to Bank of America internal data. But median payments still rose 6% year-over-year and by over 40% since the period June 2020-May 2021. This has taken household property insurance payments as a percentage of income up to 5%. It is not a surprise, perhaps, that younger generations have seen the largest property insurance payment increase. These younger groups, especially Gen Z and Millennials, may be at a stage in their life where they need more space, leading them to buy bigger and more expensive homes and vehicles. But it is noteworthy, in our view, that even Gen X has seen a rise in property insurance payments of 45% relative to June 2020-May 2021.

Takeaways by Macro Roundup® AI

  1. Median property insurance payments for auto and housing rose 6% year-over-year in the year through May 2025 and by over 40% since June 2020–May 2021, according to Bank of America internal data.
  2. Household property insurance payments have reached 5% of income, with Bank of America internal data showing payment growth slowed in the year through May 2025 even as levels kept rising.
  3. Gen Z and Millennials recorded the largest property insurance payment increases, which Bank of America suggests may reflect a life stage requiring more space and thus bigger homes and vehicles, while Gen X payments rose 45% relative to June 2020–May 2021.

Related Articles:

  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • Catastrophe Bond Sales Hit Record as Insurers Offload Climate Risks — Insurers are issuing catastrophe bonds, which transfer risk from events such as wildfires, hurricanes and earthquakes to bondholders, at a record pace, with issuance reaching $18.1bn against a prior full-year record of $17.7bn. A Swiss Re index of total returns on these bonds has risen 14% over the past year.
  • Reinsurers Little Exposed to LA Fires After Retreat From Disaster Risks — Citi analysts estimate reinsurers could absorb less than 3% of insured losses from the Los Angeles wildfires. Reinsurers' share of modelled catastrophe risk has fallen from about 46% over the past 25 years to 33%, following years of wildfire losses that led major reinsurers to reduce their appetite for such risks.

AI Summary. A revamped wage tracker estimates China's wage growth slowed to 4.2% year-over-year in the first quarter and 3.9% in the second, down from 4.5% in the prior fourth quarter and about 1 percentage point below official figures. The authors argue sluggish wage growth may weigh on consumption growth.

Andrew Tilton, Hui Shan, Lisheng Wang, Xinquan Chen, et al. Goldman Sachs
Date Posted:

A GS analysis finds as of Q2, Chinese wages grew 3.9% y/y, ~ 1pp lower than the official level. The Goldman estimates would be the lowest Chinese wage growth on record, excluding the pandemic period.

Is China's wage growth slowing more than official figures show?

Core argument: A revamped wage tracker puts China's wage growth at 4.2% yoy in Q1 and 3.9% in Q2, down from 4.5% in Q4, with the Q2 reading the lowest outside the Covid pandemic.

Our revamped wage tracker suggests the wage growth has been trending down since 2023Q1 when China exited its zero-Covid policy. Most recently, China’s wage growth slowed to 4.2% yoy and 3.9% yoy in Q1 and Q2, respectively, from 4.5% yoy in Q4 last year. These are around 1pp lower than the official wage growth so far this year (vs. 5.2% and 4.7% yoy in Q1 and Q2, respectively, according to the wage component of NBS disposable income). The 3.9% yoy wage tracker in Q2 is the lowest reading outside of the Covid pandemic. Despite the 5.2% real GDP growth in Q2, our wage tracker suggests that sluggish wage growth may impose headwinds to consumption growth in the second half of 2025.

Takeaways by Macro Roundup® AI

  1. A revamped wage tracker puts China's wage growth at 4.2% yoy in Q1 and 3.9% in Q2, down from 4.5% in Q4, with the Q2 reading the lowest outside the Covid pandemic.
  2. The revamped tracker runs around 1pp below official figures, which show wage growth of 5.2% yoy in Q1 and 4.7% in Q2 according to the wage component of NBS disposable income.
  3. Wage growth has trended down since 2023Q1, when China exited its zero-Covid policy, and despite 5.2% real GDP growth in Q2 the tracker suggests sluggish wages may impose headwinds to consumption growth in the second half of 2025.

Related Articles:

  • China Emerges From Trade Chaos With Record Exports, Surplus — China posted a record half-year trade surplus of about $586bn, with exports up 5.8% year-over-year to $325bn and imports up 1.1%. Shipments to the US fell 16.1% from a year earlier, while exports to the 10 Southeast Asian nations in the Asean group rose 17%.
  • Why China’s White-and Blue-Collar Workers Are Worried About Losing Their Shirts — Chinese workers across industries, age groups, and income brackets report fear of layoffs, shrinking wages, and few alternative job options. China's urban unemployment rate was 5%, below the government's 5.5% official target, while joblessness among those aged 16 to 24 excluding students was 14.9%, up from 14.2% a year earlier.
  • 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.

AI Summary. China's growth in its share of global manufacturing has slowed from roughly 1.5 percentage points per year in the early 2010s to just over 0.5 percentage points annually, about one-third the earlier pace. The author argues China's share of global manufacturing is likely near its peak.

Jonathan Sine Cogitations
Date Posted:
Is Database:
Database

Jonathan Sine argues China’s global manufacturing share is likely near its peak as growth has slowed from 1.5% to 0.5% btw 2010 and today due to deglobalization and intensified countermeasures against Chinese industrial policy.

Is China's share of global manufacturing near its peak?

Core argument: China's gains in global manufacturing share have slowed to just over 0.5 percentage points per year on a five-year rolling average, about one-third the roughly 1.5 points annually recorded in the early 2010s.

China’s share of global manufacturing is likely near its peak. China’s growth in global manufacturing share has slowed dramatically. In the early 2010s, China was gaining roughly 1.5 percentage points per year (based on a five-year rolling average); today, that rate has fallen to just over 0.5 percentage points annually—about one-third the previous pace. Using manufacturing value added, as I did, is actually generous to UNIDO: China's global share of industrial value add is lower than its global share of manufacturing value add.

Takeaways by Macro Roundup® AI

  1. China's gains in global manufacturing share have slowed to just over 0.5 percentage points per year on a five-year rolling average, about one-third the roughly 1.5 points annually recorded in the early 2010s.
  2. The author argues China's share of global manufacturing is likely near its peak, citing the slowdown in its rate of share gains.
  3. Measuring by manufacturing value added is generous to UNIDO's figures, since China's share of global industrial value added is lower than its share of global manufacturing value added.

Related Articles:

  • China Emerges From Trade Chaos With Record Exports, Surplus — China posted a record half-year trade surplus of about $586bn, with exports up 5.8% year-over-year to $325bn and imports up 1.1%. Shipments to the US fell 16.1% from a year earlier, while exports to the 10 Southeast Asian nations in the Asean group rose 17%.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.
  • 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.

AI Summary. US inflation stayed stable for months after tariff rates rose steeply, which the author attributes to firms stockpiling imports ahead of the tariffs, importers absorbing some added cost through lower profits, and easing inflationary pressures elsewhere. The author argues the first two factors will fade as inventories deplete, pushing consumer prices higher.

Jesper Rangvid Rangvid’s Blog
Date Posted:

Rangvid argues that on top of the slowing of rental-based housing inflation, tariff-driven price increases have been delayed by firms buying ahead of tariffs and stockpiling, basing pricing on historic rather than replacement cost.

Why did inflation stay stable for months after tariffs rose?

Core argument: US inflation remained stable for several months after April's steep tariff increase, which the author attributes to firms front-loading imports early in the year, importers absorbing some tariff costs through lower profits, and an easing of other inflationary pressures.

Despite the steep increase in tariff rates in April, US inflation has remained stable for several months, up until June. I see three main explanations for this. First, US firms significantly increased imports early in the year in anticipation of the new tariffs. Second, firms that have imported goods since the tariffs rose appear to have absorbed some of the additional cost, accepting lower profits instead of passing the burden directly to customers. Finally, other inflationary pressures in the economy have eased, counteracting the effect from higher prices due to higher tariffs. Looking ahead, the first two factors are likely to fade. The stockpiled inventories purchased before tariffs were hiked will eventually be depleted. When firms must start importing again at the new, much higher tariff rates, their costs will rise—costs they are then likely to pass on to consumers. Likewise, while many firms that have imported goods during the new high-tariff regime have so far absorbed these costs, it is unlikely they will do so indefinitely. Taken together, these factors suggest that tariffs will continue to push prices higher. The first signs of this appeared in June—and this trend is likely to persist for some time.

Takeaways by Macro Roundup® AI

  1. US inflation remained stable for several months after April's steep tariff increase, which the author attributes to firms front-loading imports early in the year, importers absorbing some tariff costs through lower profits, and an easing of other inflationary pressures.
  2. The author argues the first two buffers will fade as pre-tariff stockpiles are depleted and firms stop absorbing costs indefinitely, leaving them importing at much higher tariff rates and likely passing costs to consumers.
  3. The author sees the first signs of tariffs pushing prices higher in June and expects that trend to persist for some time.

Related Articles:

  • The Tariff Inflation Shock Starts To Hit — Monthly core goods inflation — a category making up about 25% of the core consumer price index basket — ran roughly 80 basis points above its typical seasonal level, which the author attributes to tariffs. The author argues this effect will keep building as pre-tariff inventories are depleted and transshipments are curbed.
  • Donald Trump Reaps $50bn Tariff Haul As World ‘Chickens Out’ — Most US trading partners have not retaliated against sweeping US tariffs, with only China and Canada hitting back at a minimum 10% global tariff, 50% levies on steel and aluminium, and 25% on autos. US customs duty revenues reached a record $64bn in the second quarter, $47bn more than a year earlier.
  • Are Businesses Absorbing the Tariffs or Passing Them on to Their Customers? — About three-quarters of manufacturing and service firms facing tariff-driven cost increases reported passing at least some of those costs to customers through higher prices, while roughly a quarter of each said they absorbed the full increase without raising prices. Nearly a third of manufacturers and about 45% of service firms reported full pass-through.