Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “…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
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, March 31, 2026

AI Summary. The authors estimate that declining U.S. military procurement spending from the 1950s to the 1990s explains roughly 18–30% of the decline in manufacturing employment and just under 10% of the rise in top-decile income inequality. They argue Cold War procurement raised demand for manufacturing workers and helped sustain tight labor markets for low-skill workers.

Ilyana Kuziemko, Donato Onorato and Suresh Naidu National Bureau of Economic Research
Date Posted:
Is Database:
Database

Defense spending played a major role in sustaining tight labor markets for low-skill workers following the Second World War. Drops in procurement spending between the 1950s and the 1990s explain between 18 and 30% of the decline in manufacturing employment.

How much did falling military procurement drive manufacturing decline and inequality?

Core argument: The authors estimate the 1950s–1990s decline in U.S. military procurement spending explains roughly 18–30% of the decline in manufacturing and just under 10% of the rise in top-ten inequality.

We have shown that in the decades immediately following World War II, the Cold War was a major factor sustaining tight labor markets. On the labor demand side, military procurement increased demand for manufacturing workers and put downward pressure on the share of income flowing to the richest households. We can explain roughly between 18 and 30% of the decline in manufacturing and just under ten percent of the rise in top-ten inequality by the 1950s to 1990s decline in procurement spending. We thus conclude that Cold War procurement—while under-studied in the modern, quantitative economics literature on inequality—played a major role in sustaining tight labor markets for low-skill workers in the decades immediately after World War II and creating political coalitions in support of hawkish foreign policy and military expenditure. Figure 8 panel (a) shows that manufacturing employment is highly sensitive to defense spending, consistent with our state-year evidence. As is well known, manufacturing booms during World War II, but, less discussed, plummets in the years between World War II and Korea. After bouncing back during Korea, it slowly declines alongside the declining defense share of GDP until both series experience an uptick during Vietnam. Overall, the relationship remains highly significant even after taking out a linear time trend and dropping the World War II period.

Takeaways by Macro Roundup® AI

  1. The authors estimate the 1950s–1990s decline in U.S. military procurement spending explains roughly 18–30% of the decline in manufacturing and just under 10% of the rise in top-ten inequality.
  2. The authors conclude that Cold War military procurement raised demand for manufacturing workers, pressured the share of income flowing to the richest households downward, and sustained tight labor markets for low-skill workers after World War II.
  3. U.S. manufacturing employment booms in World War II, plummets before Korea, rebounds during Korea, then declines alongside the defense share of GDP until an uptick during Vietnam, a relationship that remains highly significant after removing a linear time trend.

Related Articles:

  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.
  • The Old Economy Begins To Take Its Revenge — The author argues that capital rotates between the financial economy's asset-light booms and the physical economy, with commodity capacity constraints and the use of critical materials as geopolitical leverage now making returns on physical investment more attractive. In this view, higher interest rates reflect the better returns and capital spending needed to expand production capacity.
  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.

AI Summary. Ten-year Treasury yields and inflation-protected Treasury yields moving together indicate markets are pricing higher real interest rates rather than an inflation premium, since higher expected inflation would raise nominal yields alone. A forecast recession would instead show up as lower real and nominal interest rates.

John Cochrane The Grumpy Economist
Date Posted:

Since the start of the war, the nominal ten-year and the TIPS yield moved up in concert (25–30bps), indicating a rise in long real rates, reflecting expected monetary tightening along with loose fiscal policy due to the war.

Are rising bond yields signaling higher real rates rather than inflation?

Core argument: Plotting 10-year Treasury yields against 10-year inflation-indexed Treasurys, with the lower line shifted up by 2% to fit the same graph, suggests no direct inflation premium, since higher expected inflation would raise nominal yields while leaving inflation-protected yields alone.

I plotted here the path of 10 year Treasurys along with 10 year indexed Treasurys. The lower line is shifted up by 2% so they fit on the graph together. This graph suggests that we are not seeing a direct inflation premium. Higher expected inflation would directly raise the Treasury yield, leaving the inflation-protected yield alone. So the lower line is forecasting higher real interest rates. It may be forecasting that the Fed will raise interest rates, and prices being sticky, that won’t have an effect on inflation. If it’s the end of the world, (I don’t think so) that would be an end with explicit write-down, and we are seeing a default premium, not a premium for default via inflation. These graphs are also not suggesting a forecast recession: that would be revealed by lower real and nominal interest rates. Investors are betting that public finances across the Eurozone “are going to deteriorate,” said Jean-François Robin, global head of research at Natixis CIB, as countries spend “a lot of public money” to absorb the shock.

Takeaways by Macro Roundup® AI

  1. Plotting 10-year Treasury yields against 10-year inflation-indexed Treasurys, with the lower line shifted up by 2% to fit the same graph, suggests no direct inflation premium, since higher expected inflation would raise nominal yields while leaving inflation-protected yields alone.
  2. The inflation-indexed line points to higher real interest rates, possibly forecasting that the Fed will raise rates while sticky prices blunt any effect on inflation, and neither line suggests a recession, which would show up as lower real and nominal rates.
  3. Investors are betting that public finances across the Eurozone "are going to deteriorate" as countries spend "a lot of public money" to absorb the shock, said Jean-François Robin, global head of research at Natixis CIB.

Related Articles:

  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
  • Why Did Inflation Rise And Fall In 2021-24? Channels And Evidence From Expectations — Across countries, unexpectedly higher government deficits relative to earlier International Monetary Fund forecasts are associated with unexpectedly higher inflation, measured by each factor's contribution to the increase in public debt, a relationship the author finds statistically significant. This evidence is consistent with a fiscal channel for inflation.
  • Fiscal Influences on Inflation in OECD Countries, 2020-2022 — Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.

AI Summary. Foreign official institutions' Treasury holdings in custody at the New York Federal Reserve have fallen by $82bn to $2.7tn, the lowest level since 2012, as countries sell US government bonds to support their economies and currencies. Analysts attribute the selling to currency market intervention aimed at limiting depreciation and higher local-currency oil prices.

Kate Duguid, Michelle Chan and Ian Smith Financial Times
Date Posted:

The value of Treasuries held at the New York Fed by official institutions has fallen by $82B since February. Brad Setser speculates that the selling was driven by countries such as Turkey, India and Thailand who need additional dollars to purchase oil.

Why are foreign central banks selling US Treasuries?

Core argument: Treasuries held in custody at the New York Federal Reserve for official institutions fell $82bn since February 25 to $2.7tn, the lowest level since 2012, according to Fed data.

Foreign central banks have slashed their holdings of Treasuries at the New York Federal Reserve to the lowest level since 2012, as countries sell the US government bonds to prop up their economies and currencies in the wake of the Iran war. The value of Treasuries held in custody at the New York Fed by official institutions — a group that is largely made up of central banks but also includes governments and international institutions — has dropped by $82bn since February 25 to $2.7tn, according to Fed data. “A number of countries...don’t want their currencies to weaken further because it pushes up the local currency price of oil — and either means more fiscal subsidies or more pain for households. Hence the widespread decision to intervene in the currency market to try to limit depreciation and higher local currency oil prices,” Setser said.

Takeaways by Macro Roundup® AI

  1. Treasuries held in custody at the New York Federal Reserve for official institutions fell $82bn since February 25 to $2.7tn, the lowest level since 2012, according to Fed data.
  2. Foreign central banks are selling US Treasuries to prop up their economies and currencies in the wake of the Iran war, with official institutions also including governments and international institutions.
  3. Setser said countries intervened widely in currency markets to limit depreciation, which raises the local currency price of oil and means either more fiscal subsidies or more pain for households.

Related Articles:

  • $14 Trillion in IG Supply Coming to the Market — About $14tn of investment-grade fixed income supply is coming to market, combining roughly $10tn of US government debt to be refinanced over the next 12 months, a budget deficit near $2tn, and about $2tn of gross corporate bond issuance boosted by data-center builders. The author argues this growing supply is putting upward pressure on interest rates and credit spreads.
  • Foreigners Rebuff ‘Sell America’ and Buy a Net $1.6 Trillion in Assets — Treasury Department data show overseas investors bought a net $1.55tn of long-term US financial assets, up from $1.18tn the prior year, including $720bn in equities and just under $409bn in Treasury notes and bonds. China was a net seller of $208.6bn, with its Treasury holdings ending at $683.5bn.
  • China Is Not Dumping US Treasuries — China's state-owned financial institutions added $100bn in foreign assets in one month and $70bn the next, absorbing dollars from the country's trade surplus as exporters sought to sell dollars for renminbi. The author argues dollar accumulation has shifted from China's foreign exchange agency to state banks, which either buy Treasuries or lend to investors who do.

AI Summary. A worker-quality index built from US household survey data stayed within 1% of its starting level despite a shift toward more immigrant workers, while official nonfarm business productivity rose 8.2%. Lower predicted wages among Central American arrivals were offset by European and Asian immigrants, whose predicted wages exceed the US-born average by about 20%.

Serdar Ozkan and Nicholas Sullivan Federal Reserve Bank of St. Louis
Date Posted:
Is Database:
Database

Labor productivity increased 8.2% over the 2023–2025 period, while a CPS-based measure of worker quality has stayed within 1% of its Q1 2023 level, despite significant changes in the immigrant-intensity of the labor force over the period.

Does a more immigrant-heavy workforce lower average labor productivity?

Core argument: The authors' CPS-based worker quality index stayed within less than 1% of its first quarter 2023 level across the three-year period, while BLS nonfarm business productivity rose 8.2% over the same span.

On net, the U.S. workforce became meaningfully more immigrant-heavy from 2023 to 2024 and then partially reversed, all within a three-year window. Despite these compositional changes, our CPS-based worker quality index barely moved. It hovered within less than 1% of its first quarter 2023 level throughout the entire period, while BLS nonfarm business productivity climbed 8.2% over the same span. Why would swings in workforce composition leave average productivity nearly unchanged? Two reasons. First, the shifts in employment shares by place of birth, while noticeable, are small in absolute terms. Even with a 1pp rise in the U.S. employment share of lower-productivity, Latin American-born workers moved the needle on aggregate worker quality only modestly—far less than the roughly 8% productivity gain recorded by the BLS over the period. Second, not all immigrants are less productive than U.S.-born workers. Central American immigrants—who accounted for the largest single increment of the foreign-born workforce share—earn wages that fall about 25% below the U.S.-born average. In isolation, their growing employment shares put modest downward pressure on average productivity. But workers arriving from Europe, Asia, and other high-income regions display the opposite pattern: Their predicted wages exceed the U.S.-born average by about 20%, reflecting higher educational attainment and more highly compensated occupations.

Takeaways by Macro Roundup® AI

  1. The authors' CPS-based worker quality index stayed within less than 1% of its first quarter 2023 level across the three-year period, while BLS nonfarm business productivity rose 8.2% over the same span.
  2. A 1 percentage point rise in the U.S. employment share of lower-productivity Latin American-born workers shifted aggregate worker quality only modestly, far less than the roughly 8% productivity gain recorded by the BLS.
  3. Central American immigrants, the largest single increment of the foreign-born workforce share, earn wages about 25% below the U.S.-born average, while workers from Europe, Asia, and other high-income regions have predicted wages about 20% above it.

Related Articles:

  • An AI Productivity Boom? Don’t Count Your (Productivity Data) Chickens — Measured productivity can rise from compositional effects when lower-wage, lower-productivity workers leave the labor force, as happened during Covid and 2009, and immigration policy changes could produce a similar effect. Much of the recent productivity boost appears to come from capital utilization tied to increased investment in AI rather than workers becoming more productive using AI.
  • Macroeconomic Implications Of Immigration Flows In 2025 And 2026: January 2026 Update — 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.
  • Trump’s Immigration Crackdown Fails to Deliver Jobs for US-Born Workers — Researchers at the American Enterprise Institute and the Brookings Institution estimate net migration into the US may have turned negative for the first time in at least 50 years. That decline coincided with rising joblessness among US-born workers, whose labor force participation has fallen in recent months to near its lowest level since 2021.

AI Summary. China has moved to ban the burial of cremated remains in empty apartments as rapid urbanisation and population ageing strain limited city cemetery plots. Annual deaths have risen to 11.3mn from 9.8mn a decade earlier, outpacing 7.9mn births, while average funeral costs of about $5,400 rank second globally after Japan.

Joe Leahy and Wenjie Ding Financial Times
Date Posted:

Chinese funeral expenses were 45% of the mean annual wage in 2020. As real estate prices declined, many families started using empty apartments as “bone ash apartments.” The practice is being outlawed this week.

Are aging and urbanization straining China's burial capacity and costs?

Core argument: China recorded 11.3mn deaths in 2025, up from 9.8mn in 2015 and outpacing the 7.9mn births last year, as the country's population ages at one of the fastest paces in history.

The new law comes as China prepares to celebrate the Qingming grave-sweeping festival on Sunday. Rapid urbanisation has raised demand for limited cemetery plots in cities. Coupled with this, China’s population is ageing at one of the fastest paces in history. The number of deaths in 2025 was 11.3mn, up from 9.8mn in 2015 and outpacing 7.9mn births last year. In contrast to apartments, whose prices have fallen sharply since President Xi Jinping’s campaign that “properties are for living in, not for speculation,” cemetery plots have become prohibitively expensive. A global funeral expense survey in 2020 by the insurer SunLife showed that China’s average funeral expenses were the second-highest in the world at about Rmb 37,375 ($5,400), after Japan, accounting for about 45% of average annual wages. While residential properties in China carry 70-year usage rights from the government, cemetery plots come with only a 20-year lease.

Takeaways by Macro Roundup® AI

  1. China recorded 11.3mn deaths in 2025, up from 9.8mn in 2015 and outpacing the 7.9mn births last year, as the country's population ages at one of the fastest paces in history.
  2. SunLife's 2020 global funeral expense survey put China's average funeral cost at about Rmb 37,375 ($5,400), the second-highest in the world after Japan and roughly 45% of average annual wages.
  3. Chinese cemetery plots have become prohibitively expensive and carry only 20-year leases, versus 70-year usage rights for residential property, whose prices have fallen sharply since Xi Jinping's campaign that "properties are for living in, not for speculation.".

Related Articles:

  • A Tale of Two Countries: The Real Estate Crises in 1990s Japan and Contemporary China — The authors argue Japan's prolonged recession reflected the interplay of slowing returns to investment, weak consumption, and negative sentiment, and that China is in the middle stages of a multi-year real estate correction under more difficult macroeconomic and demographic conditions. They note China retains advantages, including a state-dominated financial system with implicit government guarantees capable of large-scale intervention.
  • China Registers Lowest Number Of Births Since Records Began — China recorded 7.92mn births, down from 9.54mn a year earlier and the lowest since 1949, while 11.31mn people died and the population fell 3.39mn to 1.405bn. The figures indicate China is still not seeing benefits from measures to bolster its fertility rate after loosening the "one-child" policy.
  • Depopulation Globally and in the Asia-Pacific: The Shape of Things to Come — Population aging and fertility below replacement levels are connected to a revolution in family structure in which families grow smaller, fewer people marry, and voluntary childlessness becomes common across countries. As a result, families become less able to bear the demands that may be placed on them.

Wednesday, April 1, 2026

AI Summary. Net outflows of unauthorized immigrants have lowered the break-even rate of U.S. payroll growth needed to hold the unemployment rate steady, so smaller job gains that once signalled economic slack are now consistent with a balanced labor market. Recent payroll growth has slightly exceeded that break-even rate on average.

Anton Cheremukhin, Daniel Wilson and Xiaoqing Zhou Federal Reserve Bank of Dallas
Date Posted:
Is Database:
Database
Is Important:
Important

A FRBD analysis finds immigration outflows lowered break-even employment growth to about -3,000 monthly, down from ~250,000 in 2023, “payroll gains that might historically have signaled economic slack are now consistent with a balanced labor market.”

Does immigration outflow lower the break-even rate for job growth?

Core argument: Payroll growth over December 2025–February 2026 slightly exceeded the estimated break-even rate on average, consistent with the unemployment rate remaining stable despite softer headline payroll numbers.

Comparing our break-even estimates with actual payroll growth (Chart 2, blue bars) suggests that job growth over the recent three months—December 2025–February 2026—has slightly exceeded the break-even rate on average, consistent with the unemployment rate remaining stable despite softer headline payroll numbers. Real-time data point to an important change in the U.S. labor market: The benchmark for evaluating payroll growth has moved significantly. As net outflows of unauthorized immigrants reduce employment growth in late 2025, payroll gains that might historically have signalled economic slack are now consistent with a balanced labor market.

Takeaways by Macro Roundup® AI

  1. Payroll growth over December 2025–February 2026 slightly exceeded the estimated break-even rate on average, consistent with the unemployment rate remaining stable despite softer headline payroll numbers.
  2. Net outflows of unauthorized immigrants reduced employment growth in late 2025, lowering the break-even benchmark against which U.S. payroll gains are evaluated.
  3. Payroll gains that would historically have signalled economic slack are now consistent with a balanced U.S. labor market, given the shift in break-even employment.

Related Articles:

  • New Data Show Intensifying Unauthorized Immigration Decline, With Large Local Variations — Individual-level immigration court and parole data indicate net unauthorized immigration has turned increasingly negative, averaging -48,000 per month over the first seven months of the year and reaching -89,000 in July. The authors estimate this pace implies an annual total of -576,000, compared with the Congressional Budget Office's projection of -290,000.
  • What Sweeping Revisions and a Blowout Month Tell Us About the U.S. Job Market — Labor Department revisions lowered previously estimated job gains for the past two calendar years, cutting the combined net change in construction, manufacturing, and retail by 115,000 jobs. Healthcare added about 437,000 jobs and social assistance about 321,000 over 12 months, while all other private-sector jobs combined shrank.
  • Trump’s Immigration Crackdown Fails to Deliver Jobs for US-Born Workers — Researchers at the American Enterprise Institute and the Brookings Institution estimate net migration into the US may have turned negative for the first time in at least 50 years. That decline coincided with rising joblessness among US-born workers, whose labor force participation has fallen in recent months to near its lowest level since 2021.

AI Summary. Shipments of AI hardware rose almost 40%, accounting for about a third of global trade growth, drawing on supply chains running through Taiwan, South Korea, and parts of Southeast Asia. The US added roughly half of the world's new data center capacity, and its AI-related goods trade rose about 66%.

Tiago Devesa, Jeongmin Seong, Olivia White, Nick Leung, et al. McKinsey
Date Posted:

Despite Trump’s tariffs, global trade growth expanded 6.5% last year, outpacing overall economic growth. The largest driver was the AI buildout; McKinsey estimates AI hardware shipments increased ~40% last year and account for 1/3 of the increase in global trade growth.

How much did AI hardware shipments drive global trade growth?

Core argument: Shipments of AI hardware rose nearly 40% in 2025, accounting for about a third of global trade growth, an effect that has drawn less attention than AI's impact on growth, investment, financial markets, or jobs.

Booming AI investment left a clear mark on global trade in 2025. Shipments of the hardware needed to develop and run the technology increased by almost 40% during the year, accounting for about a third of global trade growth—an impact that has received far less attention than AI’s effects on economic growth, investment, financial markets, or jobs. This expansion unfolded amid heightened geopolitical tensions and tighter trade restrictions. The rapid buildout of data centers required large volumes of semiconductors, servers, and networking equipment from tightly linked supply chains running through Taiwan, South Korea, and parts of ASEAN. The United States added roughly half of the world’s new data center capacity in 2025, making it the largest source of demand. US trade of AI-related goods rose by roughly 66%, or an estimated $220 billion. China was the second-largest builder of data centers, but trade restrictions limited its ability to import some of the most advanced chips and semiconductor manufacturing tools for much of 2025, leading it to rely heavily on domestic supplies. As a result, China’s trade in AI-related goods increased by only 16%, or an estimated $85 billion.

Takeaways by Macro Roundup® AI

  1. Shipments of AI hardware rose nearly 40% in 2025, accounting for about a third of global trade growth, an effect that has drawn less attention than AI's impact on growth, investment, financial markets, or jobs.
  2. The United States added roughly half of the world's new data center capacity in 2025, making it the largest source of demand, with US trade in AI-related goods up roughly 66%, an estimated $220 billion.
  3. China, the second-largest builder of data centers, saw its trade in AI-related goods rise only 16%, an estimated $85 billion, as trade restrictions limited imports of some of the most advanced chips and semiconductor manufacturing tools for much of 2025.

Related Articles:

  • Taiwan’s Modern Miracle — Taiwan's economy has grown more than 12% over the past year, its fastest annual pace in nearly 50 years, as AI chip demand lifts net exports and pushes manufacturing to nearly 40% of output. Its trade surplus is flowing into outbound direct investment and foreign lending rather than US bonds.
  • US Notches One of Its Biggest Annual Trade Gaps Since 1960 — The US goods and services trade deficit reached $901.5bn for the year, one of the largest in data going back to 1960. US companies increased imports of computers and accessories by nearly $145bn from the prior year, an acceleration in demand that reflects large-scale artificial intelligence investment.
  • The Dangerous Triumph Of Neo-Mercantilism — Neo-mercantilism is thriving in both China, which pairs infant-industry promotion with large trade surpluses, and in a United States focused on external deficits and protecting domestic markets. The author argues this will likely fracture the world economy, and that a new multilateral treaty could include a mechanism to combat large structural trade surpluses.

AI Summary. Bank of America payments data show about 3% of its households paid for artificial intelligence services, with median spending of $20 per household, up 10.4% from a year earlier, an adoption rate that remains low relative to subscriptions such as music or on-demand video. Bank of America Global Research projects the US addressable market could scale to $75bn annually.

Taylor Bowley and Joe Wadford Bank of America
Date Posted:

Bank of America internal data suggests ~3% of American households are spending money on AI services in early 2026, a 38% increase from 2024. They forecast the US consumer market could scale to $75B annually.

How many households pay for AI services?

Core argument: Roughly 3% of Bank of America households paid for AI services in 2026, with median household spending of $20 as of February, up 10.4% year-over-year, according to Bank of America payments data.

Approximately 3% of Bank of America households paid for AI services in 2026, with each household spending a median amount of $20 as of February – an increase of 10.4% year-over-year, according to Bank of America payments data. We identify AI services using industry-research merchant names and track transactions via card or automated clearinghouse. Essentially, AI services are digital tools or features that use artificial intelligence – such as machine learning or language models – to assist, automate, or enhance tasks, decisions, or content generation for users, whether offered as standalone products or embedded within broader applications. As AI increasingly becomes embedded in our daily lives, and higher-tier subscriptions emerge, BofA Global Research expects the US addressable market could scale to $75 billion annually, supported by rising consumer willingness to pay for convenience and time-saving utility. Yet, compared to other subscriptions such as music or videos on demand, AI adoption is still relatively low.

Takeaways by Macro Roundup® AI

  1. Roughly 3% of Bank of America households paid for AI services in 2026, with median household spending of $20 as of February, up 10.4% year-over-year, according to Bank of America payments data.
  2. BofA Global Research expects the US addressable market for consumer AI services could scale to $75 billion annually, supported by rising consumer willingness to pay for convenience and time-saving utility as higher-tier subscriptions emerge.
  3. Consumer AI adoption remains relatively low compared with other subscriptions such as music or video on demand, based on Bank of America's identification of AI merchants through industry research and tracking of card and automated clearinghouse transactions.

Related Articles:

  • Everyone’s Looking For A Bubble. No One Sees The Stampede — A proprietary model estimates monthly artificial intelligence revenue grew roughly 18-fold in two years, from $772m to $13.8bn, with AI accounting for an estimated 23% of Google Cloud, 10% of Azure and 5% of Amazon Web Services. The model's ratio of investment to revenue fell from 6.1x to 4.7x, still historically high.
  • Chart of the Day: The Hateful Eight is 85% of S&P 500 Decline — Eight mega-cap technology companies — Microsoft, Nvidia, Google, Apple, Amazon, Meta, Tesla, and Oracle — account for 85% of the S&P 500's decline, subtracting roughly 576 index points, while the remaining ~490 companies collectively added about 100 points. Because of their outsized index weights, benchmark performance reflects a handful of firms rather than broad market breadth.
  • The Macro Implications of the AI Capex Boom — Artificial intelligence capital spending is estimated to add roughly 1.4 percentage points to US growth in one year and about 1.5 points the next, comparable to business investment's contribution during the tech bubble. A material part of that estimate reflects profits at Nvidia and a few other chipmakers that are unlikely to be recycled back into the economy.

AI Summary. Energy-supply disruptions push countries toward domestic production — fossil fuels, renewables, or nuclear — because reliance on imports is seen as risky, weakening long-term demand for liquefied natural gas. In Pakistan, where imports grew about 50% a year on average before an energy price spike priced it out, solar installations surged and imports ran a fifth below their earlier peak.

Carol Ryan Wall Street Journal
Date Posted:

Supply chain risk and higher prices may drive long-term demand destruction for LNG, as Asian buyers stay with coal and turn to renewable power as they seek to generate more energy domestically.

Do energy supply disruptions weaken long-term demand for liquefied natural gas?

Core argument: Pakistan's LNG imports grew an average 50% a year from 2015 to 2021 but ran a fifth below their 2021 peak last year, after the country was effectively priced out of the market during the 2022 energy crisis.

A legacy of the war is likely to be a focus on producing more energy at home. Countries may invest in local production if they have oil, gas or coal resources, or double down on renewable energy or nuclear power. Ramping up reliance on imports will be seen as risky, which isn’t a good sign for LNG demand. Take what happened in Pakistan. Between 2015 and 2021, the country’s LNG imports rose 50% a year on average until Pakistan was effectively priced out of the market during the 2022 energy crisis. Consumers and companies switched to renewable energy. Solar installations began to tick up in 2023 and exploded over the next two years, data from BloombergNEF shows. As battery costs have fallen, short-duration energy storage can now offset the intermittence of wind and solar for some users. Pakistan’s LNG imports last year were a fifth below their 2021 peak.

Takeaways by Macro Roundup® AI

  1. Pakistan's LNG imports grew an average 50% a year from 2015 to 2021 but ran a fifth below their 2021 peak last year, after the country was effectively priced out of the market during the 2022 energy crisis.
  2. Pakistani consumers and companies switched to renewable energy, with solar installations beginning to tick up in 2023 and expanding sharply over the following two years, according to BloombergNEF data.
  3. A likely legacy of the war is a focus on domestic energy production — oil, gas, coal, renewables or nuclear — with growing reliance on imports seen as risky, which is not a good sign for LNG demand.

Related Articles:

  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
  • The Most Amazing Climate Policy Figure — U.S. carbon dioxide emissions from fossil fuels moved closely with GDP from 1992 to about 2005, after which the two decoupled, with GDP continuing to rise while emissions fell.
  • How Natural Gas Became America’s Most Important Export — The US went from an irrelevant supplier of liquefied natural gas to the world's largest in about seven years, and BloombergNEF estimates its export capacity will expand 60%, with nearly 1 in 3 tankers of the fuel originating in the US by the end of the decade.

AI Summary. U.S. crude oil production rose 3%, or 350,000 barrels per day, to an annual record of 13.6m barrels per day, with the Lower 48 states excluding the Gulf accounting for 83% of output. Active rigs fell 5% and wells drilled fell 1% as West Texas Intermediate prices dropped from $77 to $65 a barrel, but efficiency gains still lifted production.

Naser Ameen Energy Information Administration
Date Posted:
Is Database:
Database

American crude production expanded 3% in 2025 to a new record of 13.6mm bpd. The rig count fell 5% in the lower 48 states as productivity improved.

Did US crude output hit a record despite fewer rigs?

Core argument: U.S. crude oil production rose 3%, or 350,000 b/d, in 2025 to an annual record of 13.6 million b/d, with the Lower 48 excluding the Gulf of America supplying 11.3 million b/d, or 83% of the total.

U.S. crude oil production grew by 3%, or 350,000 barrels per day (b/d), in 2025, setting a new annual production record of 13.6 million b/d. Production from the Lower 48 states excluding the Gulf of America (L48) accounted for 11.3 million b/d, or 83% of the total U.S. crude oil production in 2025. The rest of the production came from Federal Gulf of America (GOA) and Alaska. In 2025, the number of active rigs per month in L48 was 5% less than in 2024 and 1% fewer wells were drilled. Despite less rig activity and fewer wells, efficiency improvements that we saw in 2024 continued through 2025 and resulted in a slight increase in crude oil production, with new wells producing 2.9 million b/d of crude oil and wells drilled prior to 2025 producing 8.3 million b/d. Rig and well activity fell in 2025 compared with 2024 because West Texas Intermediate (WTI) crude oil prices fell from $77/barrel (b) in 2024 to $65/b in 2025.

Takeaways by Macro Roundup® AI

  1. U.S. crude oil production rose 3%, or 350,000 b/d, in 2025 to an annual record of 13.6 million b/d, with the Lower 48 excluding the Gulf of America supplying 11.3 million b/d, or 83% of the total.
  2. Active rigs per month in the Lower 48 excluding the Gulf of America fell 5% in 2025 versus 2024 and 1% fewer wells were drilled, as West Texas Intermediate prices dropped from $77 per barrel to $65 per barrel.
  3. Efficiency improvements continuing from 2024 resulted in a slight increase in U.S. crude oil output in 2025 despite reduced drilling, with new wells producing 2.9 million b/d and wells drilled before 2025 producing 8.3 million b/d.

Related Articles:

  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
  • Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World — China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.
  • AI is Changing Oil Country—and Pumping Up Profits — The U.S. produces 60% more oil per day with 40% fewer workers than a decade ago, with annual productivity gains roughly 7x those of the average U.S. business. In the Permian, the break-even oil price has fallen to $40 a barrel from over $90, and AI tools that predict the most productive drilling locations should push it lower.