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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, May 13, 2026

AI Summary. Comparing the United States, France, and Germany at current purchasing power parity prices shows the European economies roughly constant relative to America since 2000, but current-price measures miss output gains in sectors where prices fall, such as software. The author argues constant-price comparisons, the standard approach for growth over time, reveal greater European stagnation.

Pieter Garicano and Luis Garicano Silicon Continent
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Granting that falling US tech prices limited Europe’s welfare decline relative to the US, the Garicanos argue “Europe is being pushed away from the next round of technology industries,” – a long‑run drag on wages, profits, and strategic influence.

Do constant-price comparisons reveal greater European stagnation?

Core argument: Krugman's comparison of the United States, France, and Germany at purchasing power parity in current prices shows French and German positions relative to America roughly constant since 2000.

Krugman bases his analysis on the comparison of the United States, France, and Germany at purchasing power parity in current prices. If we use this metric, France’s and Germany’s position relative to America has been roughly constant since 2000. [first figure in gallery] But current price comparisons miss productivity gains in sectors where prices fall. Imagine America produces twice as much software, while the price of each unit of software halves. At current prices, the value of American software output looks unchanged even though the volume of software produced has doubled. For comparisons of growth over time, most economists commonly use constant prices: they fix the base-year PPP price level and apply each country’s own real output growth on top of it. In the previous example, you would use the relative prices from 2000 to measure both 2000 and 2024 output and correctly identify that American output of software has doubled [featured image]. If American leadership in technology is the product of agglomeration in Silicon Valley, Seattle, and Austin, then Europe is not merely consuming the same iPhones at the same price as Americans. Europe is being pushed away from the next round of technology industries, because those industries will emerge in existing clusters. The measures Krugman uses understate European stagnation.

Takeaways by Macro Roundup® AI

  1. Krugman's comparison of the United States, France, and Germany at purchasing power parity in current prices shows French and German positions relative to America roughly constant since 2000.
  2. Current-price comparisons miss productivity gains in sectors where prices fall, as when American software output doubles while unit prices halve, leaving measured value unchanged.
  3. Most economists use constant prices for growth comparisons over time, fixing the base-year PPP price level and applying each country's own real output growth, a method suggesting Krugman's measures understate European stagnation.

Related Articles:

  • Is Europe in Economic Decline? — French gross domestic product per person, adjusted for purchasing power, was 74% of the US level in 2001 and 73% in 2024, while Germany closed some of the gap, indicating European living standards have not fallen behind. Higher measured US growth is attributed to rapid productivity growth in information technology, a sector the US dominates.
  • Ed Conard Debates Furman On “The Expected Value of Risk Taking” — A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
  • The Two Europes — The International Monetary Fund projects Eastern European economies will close much of the gap with US per capita GDP — Poland from 34% to 67%, Romania 27% to 60%, Lithuania 29% to 69% — while Western Europe slips, with France falling from 86% to 71% and Italy from 93% to 68%.

AI Summary. US inflation exceeded year-over-year growth in average hourly earnings, with wages up 3.6% against 3.8% inflation pushed up by surging fuel costs, according to the Labor Department. After seasonal adjustment and rounding, that leaves inflation-adjusted hourly wages down 0.3%.

Harriet Torry and Drew An-Pham Wall Street Journal
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As prices have risen over the past two months, real wages have fallen for the first time since spring 2023. Real hourly earnings are down 0.3% y/y.

Are rising fuel costs pushing inflation above wage growth?

Core argument: Inflation-adjusted hourly wages fell 0.3% year over year in April, after seasonal adjustment and rounding, as inflation of 3.8% outpaced average hourly earnings growth of 3.6%, according to the Labor Department.

April marked the first time inflation topped year-over-year growth in average hourly earnings since April 2023, according to the Labor Department. While hourly wages rose a seasonally adjusted 3.6% on the year through April, the pace has mostly slowed over the past four years as hiring cooled from a post pandemic hot streak. Meanwhile, inflation was 3.8% year over year, pushed up by surging fuel costs. After seasonal adjustment and rounding, the Labor Department said this leads to a 0.3% decline in inflation-adjusted hourly wages, also known as real hourly earnings.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted hourly wages fell 0.3% year over year in April, after seasonal adjustment and rounding, as inflation of 3.8% outpaced average hourly earnings growth of 3.6%, according to the Labor Department.
  2. April marked the first month since April 2023 in which year-over-year inflation topped growth in average hourly earnings, with surging fuel costs pushing inflation up.
  3. Average hourly wage growth has mostly slowed over the past four years as hiring cooled from a post-pandemic hot streak, reaching a seasonally adjusted 3.6% on the year through April.

Related Articles:

  • 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%.
  • A Q&A on Our Economic Forecasts Amid the Evolving War with Iran — The authors forecast that the drag on US growth from higher oil prices will roughly offset the boost from recent tax cuts, and have lowered their GDP growth projection by 0.5 percentage points to 2.0%. Their baseline now runs about half a percentage point below estimated potential growth, with adverse scenarios three-quarters to a full point below.
  • US Inflation Accelerates as Gas, Rent and Food Prices Climb — US consumer prices rose 3.8% from a year earlier, driven by higher gasoline and grocery costs, according to the Bureau of Labor Statistics. Inflation outpaced wage growth, leaving inflation-adjusted wages lower than a year earlier for the first time in three years.

AI Summary. US net exports of crude and refined products have reached a record average of 5.9m barrels a day, up from 3.3m a year earlier, versus net imports above 5m a decade ago. Strategic Petroleum Reserve releases hit a record weekly pace above 1.2m barrels a day, which would leave the reserve at 242m barrels.

Javier Blas Bloomberg
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Over the past four weeks, American net exports of crude and refined products have averaged 5.9mm bpd, an ~79% y/y increase. Half of the net increase is a function of the SPR release, which at its current rate has 117 more days to run.

How long can the US keep supplying oil to global markets?

Core argument: US net exports of crude and refined products averaged a record 5.9 million barrels a day over the past four weeks, up from 3.3 million a year earlier, compared with net imports above 5 million a decade ago.

Over the last four weeks, US net exports of crude and refined products have averaged a record high of 5.9 million barrels a day, up from 3.3 million a year ago. Only a decade ago, the US was a net importer in excess of 5 million. Last week, the US put into the market more than 1.23 million barrels a day from the SPR, the highest weekly volume ever — and well above naysayers’ predictions that the emergency stockpile wouldn’t be able to do anything near 1 million, let alone more. Through last week, the SPR has released about 31 million barrels since Trump tapped it. Assuming the release rate of about 1.2 million barrels a day continues until the final drop, Washington has another 117 days — or the beginning of September. Trump could order further releases, but that will push an already weakened SPR to its limit. After the full loan is released, the reserve would be left with 242 million barrels, the lowest since the early 1980s.

Takeaways by Macro Roundup® AI

  1. US net exports of crude and refined products averaged a record 5.9 million barrels a day over the past four weeks, up from 3.3 million a year earlier, compared with net imports above 5 million a decade ago.
  2. The Strategic Petroleum Reserve supplied more than 1.23 million barrels a day last week, the highest weekly volume ever and above predictions that the stockpile could not approach 1 million.
  3. The Strategic Petroleum Reserve has released about 31 million barrels since Trump tapped it, and at roughly 1.2 million barrels a day Washington has another 117 days, after which the reserve would hold 242 million barrels, the lowest since the early 1980s.

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.
  • You Can’t Print Molecules — Rebuilding after a disruption to a key shipping strait would require governments to finance defense, strategic reserves, domestic energy production, and infrastructure at the same time that inflation expectations are raising funding costs. The author argues capital will rotate out of asset-light sectors that thrived on open sea lanes and cheap energy into asset-heavy physical ones.
  • China’s Invisible Hand Is Rebalancing the Oil Market — Chinese state-owned oil companies have been reselling cargoes to European and Asian buyers, a sign of surplus that has capped benchmark crude prices and collapsed the premiums paid for physical barrels from about $30 above benchmarks to as little as $1. Satellite data show Chinese commercial stockpiles still rising.

AI Summary. Census Bureau microdata analysis finds that in Illinois annual out-migration by households earning under $50K fell by 104K while out-migration by households earning over $200K rose by 54K. Across the Midwest, adults with a bachelor's degree or higher now make up 57% of out-migrants, up from around 40%.

Aziz Sunderji Home Economics
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The “Brain Drain” is ongoing in the Midwest. The fraction of adult out-migrants with at least a bachelor’s degree is now 57%, up from ~40% in 2005. “It’s the most educated and highest-earning that are still leaving in droves.”

Are the most educated and highest-earning residents leaving the Midwest?

Core argument: Annual out-migration by Illinois households earning over $200K rose by 54K between 2014–15 and 2023–24, according to the author's analysis of Census Bureau microdata.

Take Illinois, the most populous Midwestern state: my analysis of Census Bureau microdata shows that between 2014–15 and 2023–24, annual out-migration by households earning under $50K fell by 104K. Out-migration by Illinois households earning over $200K rose by 54K over the same period. Across the region, the trend along educational lines is the same: the bachelor’s-or-higher share of adult out-migrants is now 57%, up from around 40% in 2005. It’s the most educated and highest-earning that are still leaving in droves.

Takeaways by Macro Roundup® AI

  1. Annual out-migration by Illinois households earning over $200K rose by 54K between 2014–15 and 2023–24, according to the author's analysis of Census Bureau microdata.
  2. Annual out-migration by Illinois households earning under $50K fell by 104K between 2014–15 and 2023–24, according to the author's analysis of Census Bureau microdata.
  3. Adults with a bachelor's degree or higher make up 57% of out-migrants from the Midwest, up from around 40% in 2005.

Related Articles:

  • Housing and the American Worker — Wages net of housing costs were once substantially higher in high-density areas than low-density areas for workers both with and without college education, but over the past half-century that urban wage premium has persisted only for college-educated workers, not for those with a high school degree or less.
  • Where is Standard of Living the Highest? Local Prices and the Geography of Consumption — The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.
  • The Determinants Of Declining Internal Migration — A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.

AI Summary. US inflation driven by energy prices, tariffs, and immigration restrictions is proving stickier than the Federal Reserve expected, limiting rate cuts, while the Treasury funds record deficits almost entirely with short-term bills to avoid pushing up long-term yields. The author argues rates stay higher for longer, so investment returns must come from operational improvement rather than valuation expansion.

Torsten Sløk Apollo
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The lack of fiscal space in the US implies to Sløk that a recession would not bring down rates. “Rates are staying higher for longer across the curve, and the traditional path to value creation through multiple expansion is largely closed.”

Do sticky inflation and bill-funded deficits keep rates higher for longer?

Core argument: The Treasury is funding record deficits almost entirely through T-bills to avoid pushing long yields higher, a strategy that cannot continue indefinitely; when coupon issuance eventually rises, the supply shock will push long yields higher.

In the front end, inflation driven by higher energy prices, tariffs, and immigration restrictions is proving stickier than the Fed expected, constraining how aggressively it can cut. At the long end, the fiscal trajectory is structurally bearish for bonds. The Treasury is already funding record deficits almost entirely through T-bills to avoid putting upward pressure on long yields, a strategy that cannot continue indefinitely. When coupon issuance eventually has to increase, the supply shock will push long yields higher, not lower. And in a recession, the deficit blows out further, requiring even more issuance at precisely the moment when market appetite for duration is most uncertain. The bottom line is that rates are staying higher for longer across the curve, and the traditional path to value creation through multiple expansion is largely closed. Value will have to come from the hard work of operational improvement, i.e., earnings growth, margin expansion, and cash generation, and not from the discount rate doing investors a favor.

Takeaways by Macro Roundup® AI

  1. The Treasury is funding record deficits almost entirely through T-bills to avoid pushing long yields higher, a strategy that cannot continue indefinitely; when coupon issuance eventually rises, the supply shock will push long yields higher.
  2. Inflation driven by higher energy prices, tariffs, and immigration restrictions is proving stickier than the Fed expected, constraining how aggressively the Fed can cut rates at the front end of the curve.
  3. In a recession the deficit blows out further, requiring even more issuance when market appetite for duration is most uncertain, leaving rates higher for longer across the curve and largely closing the traditional path to value creation through multiple expansion.

Related Articles:

  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
  • Data Update 5 for 2026: Risk and Hurdle Rates — A histogram of costs of capital across all publicly traded firms shows what typical, high, and low hurdle rates look like, with the cost of capital best understood as an opportunity cost—the return available elsewhere on equally risky investments. US dollar risk-free rates have remained near 4% for a fourth year.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.

AI Summary. Countries running persistent trade surpluses, such as China, Germany and Japan, have built their economies around an excess supply of tradeable goods and services, leaving them dependent on deficit countries to absorb it. That dependence gives deficit countries bargaining power and exposes surplus countries to pressure to expand domestic demand.

Martin Wolf Financial Times
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Chinese aggregate debt relative to GDP is now on par with the US level. As a surplus country, China is subject to pressure (external and internal) to expand domestic demand, reducing deflationary pressure.

Do trade deficit countries hold bargaining power over surplus countries?

Core argument: Surplus countries face external and internal pressure to expand domestic demand and so reduce deflationary pressure on trading partners, as happened to the US in the 1920s, Japan in the 1980s, and China after the 2007–09 financial crisis.

Surplus countries are not in as controlling a position as one might suppose. One source of weakness is that they will be subject to pressure (external and internal) to expand domestic demand (as was the US in the 1920s) and so reduce deflationary pressure on their partners. Exactly that happened to Japan in the 1980s and to China after the financial crisis of 2007-09. The implication is that deficit countries, while ostensibly in a weaker position, have power, too. Yes, credit to them can be cut off. But countries with structural surpluses of savings over investment and so external surpluses (such as China, Germany and Japan) have built their economies around excess supply of tradeable goods and services. Suddenly losing these may inflict a slump. Moralists in surplus countries complain about the profligacy of deficit countries. But they need them.

Takeaways by Macro Roundup® AI

  1. Surplus countries face external and internal pressure to expand domestic demand and so reduce deflationary pressure on trading partners, as happened to the US in the 1920s, Japan in the 1980s, and China after the 2007–09 financial crisis.
  2. Deficit countries hold power despite their ostensibly weaker position, since countries with structural savings surpluses such as China, Germany, and Japan have built their economies around excess supply of tradeable goods and services.
  3. Suddenly losing deficit-country demand for tradeable goods and services could inflict a slump on surplus economies, whose moralists complain about deficit-country profligacy while needing those countries.

Related Articles:

  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.
  • Imbalances Are Back On The Global Agenda — China's current account surplus remains about the same size relative to the world economy as it was in 2008, while net US liabilities reached 24% of global output in 2024 versus 6% in 2008, with government borrowing now the domestic counterpart of US external deficits. Such imbalances drive protectionist sentiment and have preceded financial crises.
  • Debt, Deficits & Global Imbalances — Taxes or restrictions on short-term capital inflows were argued to be a more direct and potentially superior tool than tariffs for shrinking the trade deficit, since tariffs risk retaliation and supply-chain distortions. Proponents said such measures could reduce reliance on household and government borrowing to sustain employment, if paired with efforts to strengthen domestic demand and tradables capacity.

Thursday, May 14, 2026

AI Summary. Applying historical base rates to OpenAI's published sales forecasts, the authors find that no U.S. public company in roughly 18,900 firm-period observations from 1950 to 2024 achieved five-year sales growth as fast as the company projects. Reported forecasts imply compound annual growth rates ranging from 85% to 118%.

Michael Mauboussin and Dan Callahan Morgan Stanley
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Mauboussin and Callahan note that OpenAI’s 2030 earnings forecast implies a 5 year compound annual growth rate of 85%, which would be unprecedented if realized. “No company has ever grown that fast from beginning sales of that amount.”

Has any public company ever matched the sales growth AI firms project?

Core argument: Press-reported forecasts of OpenAI sales reaching $145 billion in 2029 from $3.7 billion in 2024 imply a 108% five-year compound annual growth rate, later raised to $184 billion, or a 118% rate.

We applied base rates to the projected sales growth rates of a couple of companies, including OpenAI, a leader in artificial intelligence research. In particular, we focused on forecasts published in the press that suggested the company would have sales of $145 billion in 2029, up from $3.7 billion in 2024. That is a compound annual growth rate (CAGR) of 108%. Shortly after the report was written, the company increased its sales projection for 2029 to $184 billion. That is a CAGR of 118% from 2024. We asked how plausible these forecasts are in the context of history. To answer, we looked at the 5-year sales growth rates for all U.S. public companies from 1950 to 2024, which included about 18,900 firm-period observations. No company had ever grown that fast. OpenAI is reported to have had sales of $13.1 billion in 2025. The company forecasts $284 billion in 2030, a 5-year CAGR of 85%. Here again, no company has ever grown that fast from beginning sales of that amount.

Takeaways by Macro Roundup® AI

  1. Press-reported forecasts of OpenAI sales reaching $145 billion in 2029 from $3.7 billion in 2024 imply a 108% five-year compound annual growth rate, later raised to $184 billion, or a 118% rate.
  2. Across roughly 18,900 firm-period observations of five-year sales growth for all U.S. public companies from 1950 to 2024, no company had ever grown as fast as OpenAI's projected rates.
  3. OpenAI is reported to have had sales of $13.1 billion in 2025 and forecasts $284 billion in 2030, an 85% five-year compound annual growth rate that no company has achieved from that starting sales level.

Related Articles:

  • Bayes and Base Rates — Investment in artificial intelligence infrastructure has reached a scale comparable to some of the largest investment booms in U.S. history, with firms issuing historically high growth forecasts. Among U.S. public companies with $2–5bn in starting sales from 1950 to 2024, none sustained the roughly 108% five-year annual growth rate implied by OpenAI's revenue projection.
  • One Hundred Years in the U.S. Stock Markets — Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
  • An AI IPO Impact Update: The AnthroPix Effect May Be $5-Trillion+ — A closed-end fund holding small private stakes in OpenAI, SpaceX, and Anthropic has more than doubled in under two weeks and trades at nearly triple its last reported net asset value. The author argues this reflects investor appetite for any exposure to pre-IPO artificial intelligence companies, which will pull money out of other assets.

AI Summary. The US Treasury sold $25bn of new 30-year bonds at a high yield of 5.046%, the first time 30-year debt has been issued at a 5% yield since 2007. Yields rose after official data showed wholesale inflation at 6%, its highest since 2022, while consumer inflation reached a three-year high of 3.8%.

Myles McCormick and Kate Duguid Financial Times
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A Treasury sale of $25B of new 30-year debt saw yields reach 5.046%, the first time since 2007 a 30-year auction saw yields with a 5 handle, as new data showed that wholesale inflation had jumped to 6% in April, its highest level since 2022.

Are rising inflation readings pushing long-term Treasury yields to 5%?

Core argument: The US Treasury sold $25bn of new 30-year bonds at a high yield of 5.046%, the first time since 2007 that US 30-year debt cleared at a 5% yield.

The US government has sold 30-year debt at a 5% yield for the first time since 2007 amid mounting signs that Donald Trump’s war in Iran has unleashed a new surge in inflation. The Treasury Department issued $25bn of new 30-year bonds on Wednesday, with the high yield at auction reaching 5.046%. Earlier in the day, yields on US debt, which move inversely to prices, rose after official data showed wholesale inflation had jumped to 6% in April, its highest level since 2022. Wholesale prices are often seen as a forerunner of consumer inflation, which has already risen to a three-year high of 3.8% in April.

Takeaways by Macro Roundup® AI

  1. The US Treasury sold $25bn of new 30-year bonds at a high yield of 5.046%, the first time since 2007 that US 30-year debt cleared at a 5% yield.
  2. US wholesale inflation jumped to 6% in April, its highest level since 2022, and yields on US debt rose after the official data were released.
  3. US consumer inflation reached a three-year high of 3.8% in April, and wholesale prices are often seen as a forerunner of consumer inflation.

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.
  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
  • 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. Prices for locally produced U.S. services are rising about 1–1.5 percentage points faster than in the years just before the pandemic, leaving underlying inflation as far from the Federal Reserve's goals as it was three years ago. Prices for manufacturing components and data-center-related loaded circuit boards have also risen.

Matt Klein The Overshoot
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Notwithstanding the soaring prices of components for manufacturing, Klein argues that “the most important thing to understand about US inflation is that the prices of locally-produced services continue to rise about 1–1.5pp faster” than pre-pandemic.

Is underlying services inflation still running above pre-pandemic rates?

Core argument: Prices of locally produced U.S. services are rising about 1–1.5 percentage points faster than in the years immediately preceding the pandemic, and the pace has accelerated over the past year.

Tariffs, cloud companies’ insatiable demand for (imported) data center equipment, and the disruption to the flow of goods through the Strait of Hormuz rightly get a lot of attention. But the most important thing to understand about U.S. inflation is that the prices of locally-produced services continue to rise about 1-1.5 percentage points faster than in the years immediately preceding the pandemic—and the pace has been accelerating over the past year. Even without the unwelcome “one-time things” pushing up prices, underlying inflation would still be just as far off from the Federal Reserve’s goals as it was three years ago. While higher goods prices are not the most important part of the U.S. inflation story, it is nevertheless striking how much prices have been rising for a range of goods that are not directly affected by the closure of the Strait of Hormuz. “Components for manufacturing” are rising faster than at any point in 2021-2022. Perhaps the most extreme example is a group of goods that are not subject to tariffs, but that are in high demand for their use in data centers: “Printed Circuit Assemblies, Loaded Boards, Modules and Consumer External Modems”. These items, which are part of “supplies to manufacturing”, have tripled in price since last summer.

Takeaways by Macro Roundup® AI

  1. Prices of locally produced U.S. services are rising about 1–1.5 percentage points faster than in the years immediately preceding the pandemic, and the pace has accelerated over the past year.
  2. Even without one-time price shocks, underlying U.S. inflation would remain as far from the Federal Reserve's goals as it was three years ago.
  3. Prices for "components for manufacturing" are rising faster than at any point in 2021–2022, and printed circuit assemblies, loaded boards, modules and consumer external modems, which are not subject to tariffs but are in high demand for data centers, have tripled in price since last summer.

Related Articles:

  • 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%.
  • Prices at the Pump Are Wiping Out Wage Gains — US inflation exceeded year-over-year growth in average hourly earnings, with wages up 3.6% against 3.8% inflation pushed up by surging fuel costs, according to the Labor Department. After seasonal adjustment and rounding, that leaves inflation-adjusted hourly wages down 0.3%.
  • US Inflation Accelerates as Gas, Rent and Food Prices Climb — US consumer prices rose 3.8% from a year earlier, driven by higher gasoline and grocery costs, according to the Bureau of Labor Statistics. Inflation outpaced wage growth, leaving inflation-adjusted wages lower than a year earlier for the first time in three years.

AI Summary. District-level test score data from the Educational Opportunity Project at Stanford show reading scores down over the past decade in 83% of districts with available data and math scores down in 70%, with declines spanning rich and poor districts and racial and geographic lines. Education experts attribute the declines to no single cause.

Claire Cain Miller, Francesca Paris and Sarah Mervosh New York Times
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Btw 2015 and 2025, 70% of American school districts saw a decline in math scores and 83% a drop in reading scores. The losses cut across demographic groups, and are not merely a consequence of the pandemic.

Are US test score declines widespread across districts and demographics?

Core argument: Reading scores fell over the past decade in 83% of U.S. school districts with available data and math scores fell in 70%, according to district-level data from the Educational Opportunity Project at Stanford.

Almost everywhere in America, students are performing worse than their peers were 10 years ago, according to new district-level test score data released by the Educational Opportunity Project at Stanford. Compared with a decade earlier, reading scores were down last year in 83% of school districts where data was available, and math scores were down in 70%. The declines have affected both rich and poor districts and crossed racial and geographic divides, [though the biggest losses have been among the lowest-achieving students]. From 2017 to 2019, students lost as much ground in reading as they did during the pandemic, and reading scores continued to fall at a similar rate through 2024. Education experts say there is no single reason for the declines. But the timing provides some clues. Students’ test scores had been increasing since 1990 — then abruptly stopped in the mid-2010s. That coincided with two events: an easing of federal school accountability under No Child Left Behind, which was replaced in 2015, and the rise of smartphones, social media and personalized school laptops.

Takeaways by Macro Roundup® AI

  1. Reading scores fell over the past decade in 83% of U.S. school districts with available data and math scores fell in 70%, according to district-level data from the Educational Opportunity Project at Stanford.
  2. The declines spanned rich and poor districts and crossed racial and geographic divides, with the biggest losses among the lowest-achieving students.
  3. U.S. test scores rose from 1990 until abruptly stopping in the mid-2010s, which coincided with the 2015 replacement of No Child Left Behind and the rise of smartphones, social media and personalized school laptops, though education experts point to no single cause.

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  • Testing Theories of Why: Four Keys to Interpreting US Student Achievement Trends — US student test scores peaked in the early 2010s; from that peak to the pandemic, scores fell for students at the 10th and 25th percentiles while rising slightly at the 75th and 90th. After the pandemic, scores fell across all percentile groups, with much larger declines among lower-performing students.
  • How Mississippi Transformed Its Schools From Worst to Best — Adjusted for poverty and student demographics, Mississippi ranks first nationally in fourth-grade reading and math and at or near the top in eighth grade, according to the Urban Institute. The state changed reading instruction and adopted accountability policies that credit schools for student progress, with double credit for the bottom 25%.

AI Summary. The number of recent Chinese graduates returning home to seek jobs has more than doubled in recent years, according to a report by Chinese recruiting platform Zhaopin, with the return of top technology talent carrying implications for American economic competitiveness.

Hannah Miao and Jon Emont Wall Street Journal
Date Posted:

~80% of Chinese nationals who earned a doctorate from a US school btw July 2023 and June 2024 wanted to stay in the US. However, according to Chinese recruiter Zhaopin, the number of Chinese nationals seeking to return home grew 12% y/y in 2025.

Are more Chinese tech graduates returning home, weakening American competitiveness?

Core argument: The number of recent Chinese graduates returning home to seek jobs grew 12% in 2025 from the prior year and has more than doubled since 2018, according to a report by Chinese recruiting platform Zhaopin.

There’s a longstanding name within China for those going back home—“sea turtles,” a pun on the Mandarin term for overseas returnees, haigui, that also evokes female sea turtles’ instinct to return to their natal beach after years of migrating around the world’s oceans. But the trend as it relates to top tech talent today has implications for American economic competitiveness, both now and in the future. The number of recent Chinese graduates returning home to seek jobs grew 12% in 2025 from the previous year, and the figure has more than doubled since 2018, according to a report by Chinese recruiting platform Zhaopin.

Takeaways by Macro Roundup® AI

  1. The number of recent Chinese graduates returning home to seek jobs grew 12% in 2025 from the prior year and has more than doubled since 2018, according to a report by Chinese recruiting platform Zhaopin.
  2. Returnees to China are long known domestically as "sea turtles," a pun on the Mandarin term haigui that evokes female sea turtles returning to their natal beach after years migrating the world's oceans.
  3. The return of China's top tech talent carries implications for American economic competitiveness both now and in the future.

Related Articles:

  • China and the Future Of Science — China graduates about 5x as many medical and biomedical students as the US each year, 7x as many engineers, and nearly double the number of science and engineering PhDs, while one-sixth to one-fifth of US science and engineering graduates are themselves Chinese. One study found returning Chinese scientists lead-author 2.5x more papers than peers who stay in the US.
  • China Lures Home Its Top AI Talent From Silicon Valley — Elite artificial intelligence researchers have left US firms including Google DeepMind and OpenAI for Chinese companies such as ByteDance, Tencent, and Alibaba. Three China- and San Francisco-based headhunters say they relocated more than 30 US-based researchers to China over 12 months, up from low single digits the prior year.
  • Litigation Nation, Engineering Empire — Regrouping US college majors to match Chinese disciplines yields a 2:1 ratio of science and engineering to humanities and social sciences, the same ratio as in China. The author argues America's building slowdown reflects structural economic shifts—urbanization reached 70% by 1960 and 85% by 2020, shifting needs toward maintenance—rather than a lawyerly culture.

AI Summary. China's export-oriented goods sector is supporting GDP growth of 5% year-on-year, with growth forecast at 4.7% for 2026, though the economy remains highly unbalanced. The authors expect strong production and sluggish demand to push the current account surplus further to record levels as a share of global output, leaving the yuan undervalued by more than 20% against the dollar.

Jan Hatzius Goldman Sachs
Date Posted:

Pointing to China’s current account surplus, GS estimates the Yuan is more than 20% undervalued relative to the dollar and forecasts “significant appreciation, with a new target of 6.50 in 12 months.”

Is China's export strength keeping growth near 5% while imbalances widen?

Core argument: China's Q1 GDP grew 5% year-on-year on strength in the export-oriented goods sector, with the 2026 forecast held at 4.7% though the economy remains very unbalanced.

In the run-up to this week's Trump-Xi summit, China’s economy continues to benefit from strength in the export-oriented goods sector. This kept Q1 GDP growth at 5% year-on-year and our 2026 forecast at 4.7%, but the economy remains very unbalanced. While higher prices for imported energy should temporarily halt the increase in the current account surplus this year, we expect the combination of strong production and sluggish demand to push it further into unprecedented territory as a share of global GDP in subsequent years. The clearest market implication is that CNY is undervalued, especially against the US dollar where our FX strategists estimate a gap of more than 20% and have doubled down on their forecast of significant appreciation, with a new target of 6.50 in 12 months.

Takeaways by Macro Roundup® AI

  1. China's Q1 GDP grew 5% year-on-year on strength in the export-oriented goods sector, with the 2026 forecast held at 4.7% though the economy remains very unbalanced.
  2. Higher prices for imported energy should temporarily halt the rise in China's current account surplus this year, but strong production and sluggish demand are expected to push it further into unprecedented territory as a share of global GDP thereafter.
  3. FX strategists estimate the CNY is undervalued against the US dollar by more than 20% and forecast significant appreciation, with a target of 6.50 in 12 months.

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  • 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.
  • 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.
  • China’s Currency is Now Facing Substantial Appreciation Pressure — China's yuan faces appreciation pressure while Beijing maintains its commitment to currency stability, testing trading partners' willingness to absorb China's growing export surplus. If nominal appreciation is limited to a few percentage points, the real effective exchange rate stays at its depreciated level and China is likely to keep gaining global market share.