Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…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
  • “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 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
  • “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 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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, January 14, 2026

AI Summary. The article argues that the hiring downturn in occupations most exposed to generative AI reflects interest-rate sensitivity rather than AI itself, since roughly 38% of workers in the most AI-exposed quintile work in information, finance and insurance, and professional and technical services, versus under 2% in the least-exposed quintile.

Zanna Iscenko and Fabien Curto Millet Agglomerations
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The downtick in hiring in AI-exposed occupations started 6 months prior to the release of ChatGPT, and is “perfectly” aligned with the start of Fed rate hikes in Spring 2022. Sectors in the most AI-exposed quintile tend to be interest-sensitive.

Is the hiring slowdown in AI-exposed jobs driven by interest rates?

Core argument: Roughly 38% of workers in the most AI-exposed quintile of occupations work in Information, Finance and Insurance, or Professional and Technical Services, versus under 2% in the least-exposed quintile, according to an analysis of 2023 Census data.

The sharp downturn in hiring for AI-exposed occupations aligns perfectly with the Federal Reserve’s monetary policy timeline. The key to understanding the misattribution of this downturn to AI is that “AI exposure” and “interest rate sensitivity” are deeply correlated variables. The occupations rated as most exposed to generative AI are not randomly distributed across the economy. An analysis based on 2023 Census data reveals that occupations in the top quintile of AI exposure are overwhelmingly concentrated in sectors like “Information”, “Finance and Insurance”, and “Professional and Technical Services”. Approximately 38% of workers in the most AI-exposed quintile are employed in these sectors, compared to less than 2% in the least-exposed quintile. These are precisely the sectors most sensitive to capital costs and broad economic uncertainty.

Takeaways by Macro Roundup® AI

  1. Roughly 38% of workers in the most AI-exposed quintile of occupations work in Information, Finance and Insurance, or Professional and Technical Services, versus under 2% in the least-exposed quintile, according to an analysis of 2023 Census data.
  2. The author argues that the hiring downturn in AI-exposed occupations has been misattributed to AI because "AI exposure" and interest rate sensitivity are deeply correlated, with the most exposed sectors also the most sensitive to capital costs and economic uncertainty.
  3. The author contends that the sharp downturn in hiring for AI-exposed occupations aligns with the Federal Reserve's monetary policy timeline.

Related Articles:

  • Canaries in the Coal Mine? Six Facts about the Recent Employment Effects of Artificial Intelligence — Using payroll records covering millions of US workers, the authors find employment for workers aged 22–25 in occupations most exposed to artificial intelligence, such as software developers and customer service representatives, declined 6%, while employment for older workers in those occupations rose 6–9%. Employment in less-exposed occupations grew comparably across age groups.
  • AI and Jobs: The Final Word (Until the Next One) — Unemployment has risen by 0.30 percentage points for the fifth of workers most exposed to artificial intelligence, compared with 0.94 percentage points for the least exposed fifth, leaving no visible AI effect on jobs. The share of workers leaving the labor force within a year is lowest among the most AI-exposed workers and roughly flat.
  • Our Favorite Charts of 2025 — Wage growth is slowing more for lower-paid workers than for higher earners, limiting those households' ability to keep spending, while hiring is concentrated in select industries such as healthcare and among larger firms as small private firms shed workers. Layoffs remain low, but the number of workers unemployed for 27 weeks or more has only rarely been higher.

AI Summary. The authors estimate that job growth consistent with full employment was 20,000–50,000 a month in the second half of 2025, while reported nonfarm payroll growth averaged about 14,500 and unemployment rose 0.3 percentage points. They project immigration policy changes will keep potential employment growth low, reducing GDP growth by roughly 0.2 percentage points in 2025 and 0.1 in 2026.

Wendy Edelberg, Stan Veuger, and Tara Watson Brookings Institution
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Brookings estimates that in 2025, net immigration to the US was btw -10,000 and -295,000, and will be btw 185,000 and -925,000 in 2026. They estimate that sustainable monthly job growth was btw 20k and 50k last year and will be btw -20k and 50k in 2026.

How do lower immigration flows affect job growth and GDP?

Core argument: The authors estimate job growth consistent with full employment at 20,000–50,000 per month in the second half of 2025, modestly above the roughly 14,500 average monthly non-farm payroll gain reported by the Bureau of Labor Statistics, with the October–November shutdown affecting data collection.

If we look solely at the second half of 2025, we estimate the rate of job growth consistent with full employment to have been 20,000 to 50,000 in both of our scenarios. Monthly non-farm payrolls as reported by the Bureau of Labor Statistics were just modestly below these estimates. With the caveat that the October–November government shutdown affected data collection, non-farm payroll growth averaged around 14,500 in the second half of the year. Over that same period when employment growth was modestly below our estimate of potential employment growth, the unemployment rate has risen by 0.3 percentage points. Looking toward the current calendar year, 2026, we expect the decline in potential employment growth caused by changes to immigration policy to persist. In our low-immigration scenario, monthly growth for the year will average between –20,000 and +20,000 jobs. In our high-immigration scenario, we expect payrolls consistent with full employment to average between 10,000 and 50,000 jobs. We can translate our estimates of labor force growth into effects on consumer spending and GDP growth. The direct effect on GDP growth owing to less output created by immigrants is roughly 0.2 percentage points in 2025 and 0.1 percentage point in 2026 (top row of Table 2).

Takeaways by Macro Roundup® AI

  1. The authors estimate job growth consistent with full employment at 20,000–50,000 per month in the second half of 2025, modestly above the roughly 14,500 average monthly non-farm payroll gain reported by the Bureau of Labor Statistics, with the October–November shutdown affecting data collection.
  2. The unemployment rate rose 0.3 percentage points in the second half of 2025, a period when employment growth ran modestly below the authors' estimate of potential employment growth.
  3. The authors project payroll growth consistent with full employment in 2026 of –20,000 to +20,000 monthly under low immigration and 10,000–50,000 under high immigration, with direct effects on GDP growth from less output created by immigrants of roughly 0.2 percentage points in 2025 and 0.1 in 2026.

Related Articles:

  • The Demographic Outlook: 2026 to 2056 — The Congressional Budget Office projects the US population rises from 349m to 364m between 2026 and 2056, with annual growth slowing from 0.3% over the next decade to 0.1% thereafter before reaching zero and then shrinking. Declining fertility is projected to push deaths above births starting in 2030, increasingly offsetting net immigration.
  • America’s Immigration Mess: An Illustrated Guide — Current Population Survey estimates indicate America's foreign-born population surpassed 50m for the first time and exceeded 15% of the national population, above the prior peak of 14.8% recorded in 1890. Mass immigration during that earlier wave was associated in contemporary opinion with widening income and wealth gaps and depressed wages for less-skilled native-born men, and sweeping national restrictions followed.
  • The Case for Gradual Population Decline — South Korea's fertility rate fell below 1.7 in 1985 and its share of population aged 20-40 has fallen 20% since 2000, yet it ranked first in Bloomberg's Innovation Index and twelfth in a global soft power ranking. The author argues low fertility does not inevitably cause technological and cultural stagnation.

AI Summary. The share of foreign-born workers in US construction is now nearly twice that of other industries, after being equal in the 1970s and 1980s, and 9 of 10 construction workers are nonunion. Unionized construction workers earn $1.15 for every $1 the average American worker earns hourly, down from $1.71, while nonunion construction workers earn 86 cents.

Ronda Kaysen and Robert Gebeloff New York Times
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Relative to the mean US worker, unionized construction workers earned a 71% premium in 1973, versus 15% in 2024. Nonunion construction workers earned a 7% premium in 1973, but only 86 cents on the dollar in 2024. 90% of construction workers are nonunion.

Have construction wages fallen as foreign-born and nonunion shares rose?

Core argument: Unionized construction workers earned $1.71 for every $1 the average American worker made hourly in 1973, a ratio that has fallen to $1.15.

In the 1970s and 1980s, the share of foreign-born workers in construction was the same as in other industries. But that quickly changed. Today that share is nearly twice as high as in other jobs. As of 2024, nine of 10 workers in the construction industry are nonunion. And with that decline in union strength came a decline in the economic standing for both union and nonunion workers. In 1973, the average union construction worker made $1.71 for every $1 the average American worker earned hourly. Today, unionized construction workers earn $1.15 for every $1 an American worker earns. And nonunion construction workers make just 86 cents for every dollar earned by the average American worker, often without health or retirement benefits.

Takeaways by Macro Roundup® AI

  1. Unionized construction workers earned $1.71 for every $1 the average American worker made hourly in 1973, a ratio that has fallen to $1.15.
  2. Nonunion construction workers earn 86 cents for every dollar earned by the average American worker, often without health or retirement benefits, and nine of 10 construction workers were nonunion as of 2024.
  3. The foreign-born share of construction workers matched that of other industries in the 1970s and 1980s but is now nearly twice as high as in other jobs.

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.
  • Stagnant Construction Productivity Is a Worldwide Problem — Construction labor productivity has been roughly flat or declining since the 1990s across most of Western Europe, Japan, and Korea, a pattern consistent with the flat US trend. Countries often held up as models — Sweden and Japan for prefabrication, China for infrastructure — show little or unremarkable construction productivity improvement.
  • Five Decades of Decline: U.S. Construction Sector Productivity — U.S. construction labor productivity in 2023 was essentially unchanged from 1948, with real output per worker in 2020 more than 30% below its 1970 level, even as aggregate U.S. labor productivity tripled between 1950 and 2020. Construction accounted for about 4.5% of U.S. GDP in 2024.

AI Summary. China reported a record annual goods trade surplus of $1.2tn, with monthly exports growing 6.6% year over year in dollar terms, more than double analysts' average forecast of 3.1%. Chinese customs officials argue that other countries' restrictions on high-tech exports to China are holding down China's imports.

Joe Leahy and Haohsiang Ko Financial Times
Date Posted:

China ran a ~$1.2T surplus in 2025 according to customs data, despite exports to the United States falling 20%.

Are high-tech export restrictions to blame for China's record trade surplus?

Core argument: China reported a record full-year trade surplus of $1.2tn for 2025, despite President Donald Trump's trade war, according to official customs data.

China blamed the US for growing global trade imbalances as the world’s second-biggest economy reported a record full-year trade surplus of $1.2tn for 2025 despite President Donald Trump’s trade war. China’s exports in goods grew 6.6% in dollar terms in December from a year earlier, official data released by the country’s customs administration on Wednesday showed. That was more than double the average forecast from a Bloomberg poll of analysts of 3.1% and greater than November’s growth rate of 5.9%. Wang Jun, vice-minister of the General Administration of Customs of China said “It should be pointed out that some countries politicise economic and trade issues, using various pretexts to restrict exports of high-tech products to China; otherwise, we would import more. There is vast room for import growth.”

Takeaways by Macro Roundup® AI

  1. China reported a record full-year trade surplus of $1.2tn for 2025, despite President Donald Trump's trade war, according to official customs data.
  2. China's goods exports grew 6.6% year on year in dollar terms in December, more than double the 3.1% average forecast in a Bloomberg poll of analysts and above November's 5.9%.
  3. Wang Jun, vice-minister of China's General Administration of Customs, said some countries politicise economic and trade issues and use various pretexts to restrict exports of high-tech products to China, and that otherwise China would import more.

Related Articles:

  • China’s Economy: Rightsizing 2025, Looking Ahead to 2026 — The authors argue China's official growth figures are inconsistent with ten consecutive quarters of deflation, estimating that real GDP is around 11% below official levels, with most of the adjustment in investment. That would imply a drop of roughly 9 percentage points in China's share of global investment, helping explain its export surge.
  • Markets Outlook 2026: Some Like It Hot — China's annual goods trade surplus surpassed $1tn for the first time, and analysts project its current account surplus as a share of global GDP will exceed levels last seen during the mid-2000s "China shock." The Chinese currency is estimated to be undervalued to a comparable degree, and the analysts expect gradual appreciation to continue.
  • Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push — Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.

AI Summary. China's reported 65-point jump in mean international student test scores between testing rounds coincided with a change in which provinces represented the country, swapping the most populous province for a richer, much smaller one. The author argues such swings, including a fall in low performers from 43% to 19% in reading, are unmatched elsewhere.

Nicholas Eberstadt American Enterprise Institute
Date Posted:

The sharp rise in China’s PISA scores btw 2015 and 2018 coincided with “peculiar changes to the roster of provinces representing China,” further underrepresenting rural areas, while “China’s share of low-performing students plummeted” across fields.

Do China's international test score gains reflect changes in which provinces participate?

Core argument: China's PISA mean scores jumped 65 points between the 2015 and 2018 rounds, a gap roughly equal to that separating the Netherlands from Mexico in PISA 2018.

Between PISA’s 2015 and 2018 rounds of testing, “China” students reported an overall leap in mean scores of 65 points – approximately the same gap in scores as that separating the Netherlands from Mexico in PISA 2018. Note the peculiar changes to the roster of provinces representing China between 2015 and 2018. By swapping out Guangdong (the country’s most populous province) for Zhejiang (a richer and much smaller province), PISA and the Ministry of Education opted for a smaller, less representative set of Chinese provinces for 2018 than the already unrepresentative one it had been working with in 2015. A number of anomalies and curiosities from the reported results practically scream for closer attention. Consider a comparison between PISA’s sample of China and that of Massachusetts, America’s top-scoring state. In 2015, Massachusetts’ mean scores exceeded China’s in reading and science. By 2018, however, a redefined China sample vaulted ahead of Massachusetts. Where Massachusetts’s scores did not change dramatically over the short time span under consideration, China’s surged. And between 2015 and 2018 China’s share of low-performing students plummeted from 43% to 19% in reading, from 32% to 9% in math and from 38% to 10% in science. Nothing like these gyrations have been recorded elsewhere in PISA – ever.

Takeaways by Macro Roundup® AI

  1. China's PISA mean scores jumped 65 points between the 2015 and 2018 rounds, a gap roughly equal to that separating the Netherlands from Mexico in PISA 2018.
  2. Between the 2015 and 2018 PISA rounds, PISA and China's Ministry of Education swapped out Guangdong, the country's most populous province, for Zhejiang, a richer and much smaller province, yielding a smaller, less representative sample.
  3. China's share of low-performing students fell from 43% to 19% in reading, 32% to 9% in math and 38% to 10% in science between 2015 and 2018, while Massachusetts, previously ahead in reading and science, changed little.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Exploration of “Knowledge Capital” in the PRC: “Mapping” China’s Knowledge and Skills Terrain — China's reportedly high average IQ is best treated as a stylized fact: few serious studies have measured it across the population, measured IQ levels shift over time, and testing has been concentrated in urban rather than rural areas. Research from Stanford's REAP group reports rural Chinese children average at least one standard deviation below the international norm.
  • 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.

Thursday, January 15, 2026

AI Summary. Hourly wages at the 10th percentile have risen more since 2019 than wages at the median and 90th percentile, and this compression of wage inequality has largely persisted, strengthening when adjusted for worker age, education, and gender. Real wage growth at the bottom appears to have slowed more recently.

Arin Dube Arin's Substack
Date Posted:
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Dube reports that despite slowing real wage growth at the low end in 2025, the reduced inequality between the 10th percentile and the 50th and 90th percentiles due to wage gains “at the bottom” during the tight labor market of 2021–2022 largely remains.

Have wage gains at the bottom held up relative to the top?

Core argument: U.S. hourly wages at the 10th percentile have risen more since 2019 than at the 50th and 90th percentiles, and by 2024–2025 the bottom remains distinctly ahead in cumulative growth.

The figure [shows] the 10th, 50th, and 90th percentiles of hourly wages over time, each expressed relative to 2019. The real break comes after 2020: wages at the bottom rose substantially more than at the middle and the top. By 2024 and into 2025, the 10th percentile has pulled distinctly ahead of the median and the 90th percentile in cumulative growth since 2019 - [not only are] wages higher, but the lower tail has moved up more than the middle. The key question is whether the relative gains at the bottom that occurred in 2021/22 were given back. In the cross-sectional distribution, they largely weren’t. The bottom wage that rose sharply in 2021–2023 remains elevated relative to the middle and top through 2025. The sharp reduction in 50–10 and 90-10 inequality—driven by big increases at the bottom—has largely persisted. The second figure [1st in the gallery] adjusts wages for changes in demographic composition—age, education, and gender—so the percentiles better reflect shifts in the wage structure rather than shifts in the mix of workers. The adjustment doesn’t weaken the compression story; it strengthens it. At the same time, real wage growth during 2025 at the bottom seems to have slowed down, whether adjusted for composition or not. This kind of broad-based, compressive wage growth is unusual in recent U.S. history—rare from 1980 to 2016, aside from a late‑1990s burst.

Takeaways by Macro Roundup® AI

  1. U.S. hourly wages at the 10th percentile have risen more since 2019 than at the 50th and 90th percentiles, and by 2024–2025 the bottom remains distinctly ahead in cumulative growth.
  2. The sharp reduction in 50–10 and 90–10 wage inequality driven by large gains at the bottom in 2021–2023 has largely persisted through 2025 rather than being given back.
  3. Adjusting wages for age, education, and gender composition strengthens rather than weakens the compression pattern, though real wage growth at the bottom appears to have slowed during 2025 on both adjusted and unadjusted measures.

Related Articles:

  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
  • U.S. Wages Still Rising Briskly, Employment Holding Up, and Inflation Still Sticky (Probably) — The U.S. job market looks no less healthy than a few months earlier: the rise in unemployment to 4.56% has coincided with more people actively looking for work, while the share of Americans aged 25-54 with a job held near 80.6%. Wages rising about 4% a year can explain inflation running about 1 percentage point above pre-pandemic rates.
  • The ‘No Hire’ Economy — US blue-collar employment shrank by more than 145k over the past year, with warehouse jobs down over 50k and construction job growth flat, while tech employment fell more than 19k. Unemployment rose 2.9 percentage points for teenagers and 1.6 points for young college graduates, versus 0.2 points for workers over 25.

AI Summary. New tax provisions are projected to cut household income taxes by roughly $220bn, or 0.7% of GDP, with a bit more than half of the after-tax income boost coming from retroactive changes and the rest from revised paycheck withholding. The authors estimate this lifts consumer spending by about $90bn, adding roughly 0.3% to GDP.

Michael Pugliese and Shannon Grein Wells Fargo
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Wells Fargo forecasts that tax policy changes made in the One Big Beautiful Bill will reduce household income taxes by ~$220B or .7% of GDP in 2026. They forecast that the tailwind will contribute .3% to what they expect will be 2026 GDP growth of 2.7%.

How much do new tax cuts boost consumer spending and GDP?

Core argument: OBBBA's new provisions are projected to cut household income taxes by roughly $220 billion in 2026, equal to 0.7% of GDP.

The total reduction in household income taxes in 2026 from OBBBA's new provisions will be roughly $220 billion, or 0.7% of GDP, with a bit more than half of the boost to after-tax income coming from retroactive changes for 2025 and the rest coming from the changes to withholding tables for 2026 paychecks. Relying on the broad research literature on the marginal propensity to consume, we ultimately expect the reduction in household income taxes to boost consumer spending by roughly $90 billion this year. This translates to a boost of around 0.3% to 2026 GDP.

Takeaways by Macro Roundup® AI

  1. OBBBA's new provisions are projected to cut household income taxes by roughly $220 billion in 2026, equal to 0.7% of GDP.
  2. A bit more than half of the boost to after-tax income comes from retroactive changes for 2025, with the remainder from changes to withholding tables for 2026 paychecks.
  3. Drawing on the research literature on the marginal propensity to consume, the lower household income taxes are expected to raise consumer spending by roughly $90 billion and 2026 GDP by around 0.3%.

Related Articles:

  • A Mystery in Fixed Income — Long-term interest rates have drifted higher than short-term rates and oil prices would predict, an unusual pattern during Federal Reserve rate-cutting cycles. Proposed explanations include investor concern about growing Treasury debt issuance or an effective increase in the Federal Reserve's 2% inflation target.
  • The Race Between Asset Supply and Asset Demand — The authors estimate that demand for assets has outpaced supply by roughly 400% of GDP versus 100%, making rising asset demand the leading contributor to falling interest rates. They project that debt sustainability requires fiscal consolidation exceeding 10% of GDP, though debt could reach 250% of GDP without raising interest rates.
  • 2026 Outlook: Tech Tonic — A Broadening Bull Market — Most major equity markets have outperformed the US, with Europe, China and Asia generating almost double US total returns in dollar terms and gains of 54% in Italy, 73% in Spain and 71% in Korea. US returns have been driven by strong earnings, particularly in technology, while Europe's have come largely from rising valuations.

AI Summary. A US tax law expanded deductions for state and local taxes, overtime, tips and seniors retroactively, but withholding tables adjusted only later, so workers get both higher take-home pay and refunds. One analyst estimates this injects nearly $200bn, lifting first-half annualized growth by up to half a percentage point.

Greg Ip Wall Street Journal
Date Posted:

This year, fiscal policy, monetary policy, and credit policy are all “dialed toward stimulus, reflecting a single-minded focus by Trump and congressional Republicans on faster economic growth. The consequences will come later.”

Will fiscal, regulatory, and monetary stimulus combine to accelerate growth?

Core argument: Donald Schneider of Piper Sandler estimates the tax-and-spending law Trump signed in July will inject nearly $200 billion into the economy, as higher take-home pay and refunds on cuts retroactive to the start of 2025 combine, lifting first-half annualized growth by up to half a percentage point.

The tax-and-spending bill Trump signed into law in July delivers new or expanded tax deductions, in particular for state and local taxes, overtime, tips and seniors. Although those tax cuts were retroactive to the start of 2025, tax withholding tables were only adjusted at the start of this year. This will generate a double-barreled stimulus. Many workers will see both higher take-home this month and a refund on last year’s taxes when they file their returns. Donald Schneider, a policy analyst at Piper Sandler, sees this injecting nearly $200 billion into the economy, enough to boost first half annualized growth up to half a percentage point. He also sees stronger investment from the bill’s provisions allowing businesses to fully write off capital spending. Capital requirements are on course to be loosened. Trump just ordered Fannie and Freddie to buy $200 billion in mortgage bonds, which could lower mortgage rates by 0.1 to 0.25 percentage point, according to UBS. Fed officials now see rates falling from their current range of 3.5% to 3.75% by a quarter of a point this year, which would leave rates roughly at “neutral.” Trump doesn’t want neutral, he wants stimulative, and is adamant that the next chairman cut rates by a lot. His two leading candidates have agreed. Perhaps they won’t cut to 1%, as Trump wants. But expect a dovish bias from both.

Takeaways by Macro Roundup® AI

  1. Donald Schneider of Piper Sandler estimates the tax-and-spending law Trump signed in July will inject nearly $200 billion into the economy, as higher take-home pay and refunds on cuts retroactive to the start of 2025 combine, lifting first-half annualized growth by up to half a percentage point.
  2. Trump ordered Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds, which UBS estimates could lower mortgage rates by 0.1 to 0.25 percentage point, while capital requirements are on course to be loosened.
  3. Fed officials see rates falling a quarter point this year from the current 3.5% to 3.75% range, leaving them roughly at neutral, while Trump presses for much deeper cuts and his two leading candidates for chairman have agreed.

Related Articles:

  • More on the “Neutral” Interest Rate (R*) — Private economists and Federal Reserve officials disagree about the level of the "neutral" interest rate—the inflation-adjusted short-term rate expected to prevail with the economy at full strength and stable inflation. Averaging model-based and market-based estimates puts the neutral real rate near 1.5%, and with expected inflation above the Federal Reserve's 2% target, the neutral nominal rate is correspondingly higher.
  • Trump Calls on Fannie and Freddie to Buy $200 Billion in Mortgage Bonds — Government-sponsored mortgage buyers Fannie Mae and Freddie Mac have been urged to purchase $200bn in mortgage bonds, roughly the room they have left under caps allowing each to hold up to $225bn of mortgage-backed securities against a combined $247bn held. The National Housing Conference estimates resuming such purchases could lower mortgage rates by a quarter-percentage point or more.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.

AI Summary. The authors estimate the US dollar remains roughly 15% overvalued and argue a sharper depreciation could follow if US labor-market weakness forces deeper Federal Reserve rate cuts, particularly against a highly undervalued yen. They also flag a derating of US tech exceptionalism as a risk, since demand for US equities has helped fund the current account deficit.

Kamakshya Trivedi, Michael Cahill, Danny Suwanapruti, Teresa AlvesKaren Reichgott Fishman, et al. Goldman Sachs
Date Posted:

Goldman argues that despite the dollar’s “sharp” fall in 2025, it remains ~15% overvalued. They expect a “shallower” dollar descent in 2026 with the EUR/USD moving towards 1.25 from the current 1.16.

What could drive a sharper dollar depreciation from current overvaluation?

Core argument: The dollar remains roughly 15% overvalued even after its sharp 2025 fall, so a shift in concern from "jobless growth" to Sahm rule/recession risks that forces deeper Fed cuts would likely drive sharper depreciation, particularly against the highly undervalued yen.

While our baseline macro/market forecasts are consistent with a small dollar depreciation, a larger move is certainly possible. The Dollar remains ~15% overvalued even after the sharp fall in 2025, so a shift towards greater concern around the US labor market—from “jobless growth” to “Sahm rule/recession” risks—that forces the Fed to cut more deeply should see sharper depreciation, particularly versus the highly undervalued Yen. Deeper rate cuts could also come about without recession concerns if a reshaped Fed pushes further toward the bottom end of the range in the FOMC's dots. Markets have generally relaxed about institutional risks, but deeper USD downside tails, where optionality looks quite cheap again, could be in play if those institutional risks resurface and real policy rates in the US drop more abruptly than in the rest of the world. A different type of downside risk for the Dollar could come from a sharper derating in US tech exceptionalism. Demand for US equity exposure has been increasingly prominent in funding the US current account deficit and supporting the Dollar’s rich valuation in recent years. Even though we expect US productivity to benefit from the spread of AI in the years ahead, a “DeepSeek 2.0” moment may pose a significant challenge to the Dollar, beyond our baseline forecasts.

Takeaways by Macro Roundup® AI

  1. The dollar remains roughly 15% overvalued even after its sharp 2025 fall, so a shift in concern from "jobless growth" to Sahm rule/recession risks that forces deeper Fed cuts would likely drive sharper depreciation, particularly against the highly undervalued yen.
  2. Deeper US rate cuts could also arrive without recession concerns if a reshaped Fed pushes toward the bottom end of the FOMC dots, with deeper dollar downside tails in play should institutional risks resurface and US real policy rates fall more abruptly than elsewhere.
  3. Demand for US equity exposure has increasingly funded the US current account deficit and supported the dollar's rich valuation, so a "DeepSeek 2.0" moment derating US tech exceptionalism may pose a significant challenge to the dollar beyond baseline forecasts.

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AI Summary. Amazon is buying copper from an Arizona project expected to yield 14,000 metric tons of copper cathode over four years, less than the tens of thousands of tons a single large data center requires for its electrical components. S&P Global estimates artificial intelligence will help lift copper demand 50% by 2040 while mining output dwindles, producing a 25% shortfall.

Ryan Dezember Wall Street Journal
Date Posted:

Amazon has signed a two-year deal with Rio Tinto to buy the output from the first new US copper mine in a decade – leveraging Rio’s new Nuton venture, “which uses bacteria and acid to extract copper from ore that was previously uneconomical to process.”

Will data center demand outstrip copper supply by 2040?

Core argument: S&P Global estimates AI will help lift copper demand 50% above current levels by 2040 while mining output dwindles, producing a 25% shortfall.

The Nuton copper will satisfy only a sliver of Amazon’s needs. The biggest data centers each require tens of thousands of metric tons of copper for all the wires, busbars, circuit boards, transformers and other electrical components housed there. The 14,000 metric tons of copper cathode that Rio expects the Arizona Nuton project to yield over four years wouldn’t be enough for one of those facilities. It takes more than two decades, on average, to bring a new mine from discovery to production. Although rising prices are likely to boost copper recycling and encourage engineers to cut the amount of the metal needed for various applications, a huge supply deficit is on the horizon. A study published last week by S&P Global estimates that AI will help lift copper demand 50% from current levels by 2040, while mining output dwindles, resulting in a 25% shortfall.

Takeaways by Macro Roundup® AI

  1. S&P Global estimates AI will help lift copper demand 50% above current levels by 2040 while mining output dwindles, producing a 25% shortfall.
  2. Rio Tinto's Arizona Nuton project, whose output Amazon is buying, is expected to yield 14,000 metric tons of copper cathode over four years, less than a single large data center requires.
  3. Bringing a new mine from discovery to production takes more than two decades on average, though rising copper prices are likely to boost recycling and encourage engineers to cut the metal needed per application.

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  • The World’s Copper Squeeze Is Set to Intensify on AI and Defense Spending, S&P Says — S&P Global projects copper demand will rise 50% to 42m tons by 2040 while production peaks near 33m tons in 2030 as ore quality declines at existing mines and new projects face permitting, financing and construction hurdles. The projected 10m-ton gap assumes recycled copper more than doubles to 10m tons.
  • The Hunt For Copper To Wire The AI Boom — Copper demand is being boosted by grid infrastructure for the green transition and by data centres for artificial intelligence, which miner Grupo México estimates require 27–33 tonnes of copper per megawatt, over twice the need of conventional data centres. BHP estimates copper used in data centres worldwide will grow sixfold by 2050.
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AI Summary. The US Department of Labor estimates the shipbuilding industry may need roughly 200,000 to 250,000 additional maritime workers in critical occupations such as welding, soldering, and front-line management to meet demand over the next decade, with a wider gap if demand for ships increases.

Brooke Weddle, Ryan Brukardt, and Wan-Lae Cochran McKinsey & Company
Date Posted:

The American shipbuilding industry will need to hire between 200,000 and 250,000 additional maritime workers over the next decade to meet projected commercial and military demand, Department of Labor data suggest.

How many additional workers does US shipbuilding need this decade?

Core argument: The US Department of Labor estimates the shipbuilding industry may need roughly 200,000 to 250,000 additional maritime workers over the next decade to meet demand in critical occupations.

According to the US Department of Labor, the shipbuilding industry may require about 200,000 to 250,000 additional maritime workers in critical occupations, such as welding, soldering, and front-line management, to satisfy demand over the next decade. If demand for ships increases, the labor gap will be even wider.

Takeaways by Macro Roundup® AI

  1. The US Department of Labor estimates the shipbuilding industry may need roughly 200,000 to 250,000 additional maritime workers over the next decade to meet demand in critical occupations.
  2. Welding, soldering, and front-line management are among the critical shipbuilding occupations cited in the US Department of Labor's assessment of maritime workforce needs.
  3. Increased demand for ships would widen the shipbuilding labor gap beyond the 200,000 to 250,000 additional workers projected.

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