Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, June 23, 2026

AI Summary. Women starting GLP-1 weight-loss treatment lose 1.4–2.5 BMI points, rising to 2.7–4.2 points after 1.5 years or more, and those who are single increase their probability of being married or cohabiting by 18.3 percentage points, with no change for women already partnered. Women not employed at the outset raise their employment rate by 13 percentage points.

Rebecca Diamond Harvard University
Date Posted:
Is Database:
Database

Women who began treatment with GLP-1 drugs when not currently married or partnered saw an increased probability of marriage or cohabitation of ~29pp after 6 quarters. Those not initially employed were 27pp more likely to be working after 6 quarters.

Does weight-loss medication improve women's marriage and employment outcomes?

Core argument: Women who were single when starting GLP-1 treatment raised their probability of being married or cohabiting by 18.3 pp overall and 28.6 pp (s.e. 7.1) at six or more quarters, building gradually as they lost weight.

BMI is flat before women start [GLP-1 treatment] and then falls (Figure 2, Panel A). All groups lose between 1.4 and 2.5 BMI points in the post period. These effects grow to between 2.7 and 4.2 BMI points at 1.5+ years after initiation. The largest magnitude change is in the marriage market. Women who are single when they start (Figure 2, Panel B) increase their probability of being married or living with a partner by 18.3 pp overall and 28.6pp (s.e. 7.1) at six or more quarters, building gradually as they lose weight. Partnered women’s relationships, by contrast, are stable. Their partnership probability barely moves (0.1 points, s.e. 1.8), and there is no excess relationship dissolution (0.0, s.e. 1.7). The marriage-market response is the making of new matches, not the breaking or remaking of old ones. In contrast, single women’s weight loss seems to dramatically affect first impressions of potential partners, leading to a large increase in marriage and cohabitation. This is consistent with prior work on the obesity penalty negatively affecting women in the marriage market. Figure 2, panels C and D show that women not employed at baseline move into work: their employment rate rises 13pp overall and 27pp after six or more quarters, and their weekly hours rise by nearly ten hours at the longer horizon.

Takeaways by Macro Roundup® AI

  1. Women who were single when starting GLP-1 treatment raised their probability of being married or cohabiting by 18.3 pp overall and 28.6 pp (s.e. 7.1) at six or more quarters, building gradually as they lost weight.
  2. Partnered women's relationships remained stable after GLP-1 initiation, with partnership probability moving 0.1 points (s.e. 1.8) and no excess dissolution (0.0, s.e. 1.7).
  3. Women not employed at baseline moved into work after GLP-1 initiation, with employment rates rising 13 pp overall and 27 pp after six or more quarters and weekly hours up nearly ten at the longer horizon.

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  • Today’s Most Important Technology — The share of patients taking semaglutide for weight control rather than type 2 diabetes rose from under 10% in 2019 to 41.7%. Obesity and overweight, affecting 1 in 8 people worldwide, cost the global economy $2tn — nearly 70 cents on the dollar from premature mortality and lost productivity — an impact projected to double by 2035 absent intervention.
  • National-Level and State-Level Prevalence of Overweight and Obesity Among Children, Adolescents, and Adults in the USA — An estimated 15.1m US children aged 5–14, 21.4m older adolescents aged 15–24, and 172m adults aged 25 and over had overweight or obesity, with adult prevalence highest in North Dakota for males (80.6%) and Mississippi for females (79.9%). Obesity prevalence among adolescents rose roughly 158–186% over three decades.

AI Summary. Inflation has outstripped wage growth in key private-sector industries including healthcare, finance, and retail for two straight months, largely because of a surge in energy prices driven by the Iran war. Gasoline prices have fallen since an interim US-Iran peace deal but remain nearly $1 a gallon above pre-conflict levels.

Augusta Saraiva and Maya Prakash Bloomberg
Date Posted:

Americans’ real disposable income has declined over the past two months as wage gains were offset by inflation. Bloomberg expects the dynamic to continue, as higher prices in sectors like food and transportation have “not fully materialized.”

Are rising energy prices eroding workers' real wages?

Core argument: Inflation has exceeded wage growth for two straight months in key private-sector industries including healthcare, finance, and retail, according to data compiled by Bloomberg, cutting workers' buying power.

Inflation has outstripped wage growth in key private-sector industries for two straight months, according to data compiled by Bloomberg. The sharp drop in buying power for employees in sectors ranging from healthcare to finance and retail was largely the result of a surge in energy prices driven by the Iran war, but the dynamic is likely to stick even as gasoline gets cheaper. Gas prices, which have dropped since the US and Iran agreed to an interim peace deal, are still almost $1 a gallon higher on average than they were before the conflict started at the end of February, based on American Automobile Association data. But war-driven inflation in other parts of the economy, like food and transportation, has yet to fully materialize.

Takeaways by Macro Roundup® AI

  1. Inflation has exceeded wage growth for two straight months in key private-sector industries including healthcare, finance, and retail, according to data compiled by Bloomberg, cutting workers' buying power.
  2. Gasoline prices remain nearly $1 a gallon above their average level before the Iran war began at the end of February, based on American Automobile Association data, despite falling since the US-Iran interim peace deal.
  3. War-driven inflation in food and transportation has yet to fully materialize, and the erosion of buying power is likely to stick even as gasoline gets cheaper.

Related Articles:

  • The Record Divide Between Corporate Profits and Worker Pay — Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.
  • US Consumer Sentiment Picks Up on Easing Gasoline Prices — US consumer sentiment rose for the first time in four months as lower gasoline prices offered some relief from a surge in inflation, with the University of Michigan's preliminary sentiment index increasing to 48.9 from a record low of 44.8. The reading beat most economists' expectations but remains the second lowest in data going back to the 1970s.
  • Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections — An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.

AI Summary. The author argues that negative narratives, including pessimism about new technology, played an underappreciated role in the economic climate of the Great Depression, alongside more widely studied causes such as sweeping bank failures, a weak initial Federal Reserve response, and a tariff regime that reduced global trade.

Robert Shiller New York Times
Date Posted:

Shiller argues that fears around the potential impact of AI – often fostered by the words of AI executives themselves – are reducing consumer confidence and risk a negative feedback loop. “There is a risk that fear can actually help birth the reality.”

Did pessimistic narratives about technology deepen the Great Depression?

Core argument: The Great Depression, the decade of economic ruin following the 1929 stock market crash, stemmed from multiple factors including a lack of banking regulation and monetary policy that led to sweeping bank failures.

Such pessimism was present in the Great Depression, the decade of economic ruin that followed the stock market crash of 1929. There were many factors that contributed to making that period as difficult as it was. A lack of banking regulation and monetary policy led to sweeping bank failures, the Federal Reserve’s initial response was weak and ineffective, and a punishing tariff regime reduced global trade. Many of these causes have been widely studied; less understood is the role I believe negative narratives, including negative narratives about new technology, had on the economic climate.

Takeaways by Macro Roundup® AI

  1. The Great Depression, the decade of economic ruin following the 1929 stock market crash, stemmed from multiple factors including a lack of banking regulation and monetary policy that led to sweeping bank failures.
  2. The Federal Reserve's initial response to the Great Depression was weak and ineffective, and a punishing tariff regime reduced global trade.
  3. The author argues that negative narratives, including those about new technology, shaped the economic climate of the Great Depression, a role less understood than the widely studied causes.

Related Articles:

  • Emotions and Subjective Crash Beliefs — Using investor survey data and option prices, the authors decompose beliefs about stock market crashes into fundamental and subjective components, finding the subjective part is volatile and almost always positive. Investor sentiment, measured from survey narratives with a large language model, is correlated with this subjective component and with non-fundamental variation.
  • US Consumer Sentiment Picks Up on Easing Gasoline Prices — US consumer sentiment rose for the first time in four months as lower gasoline prices offered some relief from a surge in inflation, with the University of Michigan's preliminary sentiment index increasing to 48.9 from a record low of 44.8. The reading beat most economists' expectations but remains the second lowest in data going back to the 1970s.
  • Have We Entered an Era of High Productivity Growth? — Labor productivity has grown solidly while the San Francisco Federal Reserve's total factor productivity index, which adjusts for the equipment and technology workers use, has grown modestly, suggesting gains so far reflect better tools rather than broader advances. A regime-switching model puts the probability of a high-productivity regime at 57% using labor productivity and 21% using total factor productivity.

AI Summary. China's urban jobless rate for 16-to-24-year-olds excluding students fell to 15.6% from 16.3%, above the 14.9% recorded a year earlier, while the overall urban unemployment rate edged down to 5.1% from 5.2%. A record 12.7m students, about 4% more than the prior year, are expected to graduate over the summer.

Xinyi Wu South China Morning Post
Date Posted:

China’s youth unemployment (16–24) fell to 15.6% in May, down from 16.3% in April, but up from 14.9% last year. 12.7mm students will graduate this summer, ~4% more than last year.

Is China's youth unemployment rate still higher than a year ago?

Core argument: China's jobless rate for 16-to-24-year-olds excluding students fell to 15.6% in May from 16.3% in April, according to the National Bureau of Statistics, but remained above the 14.9% recorded in May of the prior year.

The jobless rate for the 16-to-24 age group, excluding students, fell to 15.6% in May from 16.3% in April, according to data released by the National Bureau of Statistics on Monday. The reading was higher than the 14.9% recorded in the same month last year. The outlook appears grim as a record 12.7 million students are expected to graduate this summer – around 4 per cent more than last year – suggesting that market conditions could tighten further in the coming months. The unemployment rate for those aged 25 to 29, also excluding students, stood at 7.2% in May, down from 7.4% in April. China’s overall urban unemployment rate inched down to 5.1% in May, from 5.2% in April, official data showed.

Takeaways by Macro Roundup® AI

  1. China's jobless rate for 16-to-24-year-olds excluding students fell to 15.6% in May from 16.3% in April, according to the National Bureau of Statistics, but remained above the 14.9% recorded in May of the prior year.
  2. A record 12.7 million Chinese students are expected to graduate this summer, around 4% more than last year, suggesting labour market conditions could tighten further in the coming months.
  3. China's unemployment rate for those aged 25 to 29, excluding students, stood at 7.2% in May, down from 7.4% in April, while the overall urban rate eased to 5.1% from 5.2%.

Related Articles:

  • China Says Hostile Foreign Forces Are Driving Its Youth to Slack Off — China's Ministry of State Security attributes youth disillusionment to ideological infiltration by foreign anti-China hostile forces, calling young people the primary targets of such efforts. Millions of young Chinese have embraced a "lying flat" mindset, rejecting pressure to overwork or leaving work entirely in an economy with limited well-paying jobs.
  • China Punishes ‘Excessively Pessimistic’ Social Media Users — China's internet regulator has launched a campaign to remove online content that incites "excessively pessimistic sentiment," panic, or defeatist ideas such as "hard work is useless." Authorities have punished bloggers who advocated working less, an influencer who said forgoing marriage and children made financial sense, and a commentator who said China's quality of life lags Western countries.
  • Macro Outlook 2026: Sturdy Growth, Stagnant Jobs, Stable Prices — China's growth is forecast at 4.8%, above the 4.5% consensus, with robust manufacturing offset by a housing drag on output estimated at about 1.5 percentage points as property sales run 60% below peak. Strong manufacturing and weak domestic demand are projected to lift China's current account surplus toward 1% of global output.

AI Summary. China sold about $4.5tn in goods and services to the rest of the world while spending just $3.4tn on foreign output, a gap the authors attribute not to improved competitiveness but to systematic transfers of spending power from Chinese households to businesses, local governments, and foreign consumers, which depress consumption and imports relative to production and exports.

Matt Klein The Overshoot
Date Posted:

Klein stresses the crucial role that Chinese underconsumption plays in China’s huge and growing trade surplus. If pre‑pandemic consumption trends had continued, retail sales would be 23% higher and living standards correspondingly better.

Does China's trade surplus stem from suppressed household spending rather than competitiveness?

Core argument: Chinese residents sold roughly $4.5T in goods and services to the rest of the world in 2025 while spending just $3.4T on foreign-produced goods and services, a gap the author argues improved competitiveness cannot explain.

In 2025, the last full year for which we have data, Chinese residents sold about $4.5T in goods and services to people in the rest of the world, but spent just $3.4T on goods and services produced outside of China. Improved “competitiveness” simply cannot explain the rise in China’s economy-wide trade surplus with the rest of the world. Instead, the source of China’s post-pandemic surplus is systematic transfers of spending power from ordinary Chinese to businesses, local governments, and foreign consumers. These transfers depress consumer spending and imports relative to production, investment, and exports. The best way to address (many of) the concerns of China’s trade partners is to raise the living standards of most Chinese people. It is better to start from the beginning and remember that the trade balance is the same thing as domestic production minus domestic demand. The initial downturn was caused by the (planned) withdrawal of consumer subsidies, which were completely ended in 2020. That coincided with falling spending on new vehicles, and therefore falling production by Chinese producers. Production gradually recovered, but domestic demand did not. Instead, the additional output all went towards exports.

Takeaways by Macro Roundup® AI

  1. Chinese residents sold roughly $4.5T in goods and services to the rest of the world in 2025 while spending just $3.4T on foreign-produced goods and services, a gap the author argues improved competitiveness cannot explain.
  2. The author attributes China's post-pandemic surplus to systematic transfers of spending power from ordinary Chinese to businesses, local governments, and foreign consumers, which depress consumer spending and imports relative to production, investment, and exports.
  3. China's consumer subsidies ended completely in 2020, coinciding with falling spending on new vehicles and falling domestic production, and while production gradually recovered, domestic demand did not, sending the additional output to exports.

Related Articles:

  • 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.
  • 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.
  • 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.

AI Summary. China has added 10 American companies to its "entities list," restricting trading with firms central to US efforts to build a rare earth supply chain rivaling Beijing's, including USA Rare Earth, MP Materials, and motor manufacturer Aveox.

Edward White Financial Times
Date Posted:

In an attempt to slow the American project to develop an independent rare earths supply chain, China sanctioned several US rare earths miners, processors, and battery manufacturers.

Is China restricting trade with US rare earth companies?

Core argument: China added 10 American companies to its "entities list," restricting trading with firms central to US efforts to build a rare earth supply chain rivaling Beijing's, according to a statement from the commerce ministry in Beijing.

China has restricted trading with several American companies, in a retaliatory move that targets some groups central to US attempts to build a rare earth supply chain to rival Beijing’s. USA Rare Earth and MP Materials, as well as high-tech motor manufacturer Aveox, were among the 10 American companies added to China’s “entities list,” according to a statement issued by the commerce ministry in Beijing.

Takeaways by Macro Roundup® AI

  1. China added 10 American companies to its "entities list," restricting trading with firms central to US efforts to build a rare earth supply chain rivaling Beijing's, according to a statement from the commerce ministry in Beijing.
  2. USA Rare Earth, MP Materials, and high-tech motor manufacturer Aveox are among the American companies covered by China's trading restrictions, a retaliatory move.

Related Articles:

  • How to Fight an Economic War — China earned about $3.4bn from exporting rare-earth elements and magnets in a year, while the U.S. Geological Survey estimates a 30% disruption to U.S. supply of the rare-earth element neodymium alone would cut U.S. GDP by 2.2%, over $600bn. This asymmetry gives Chinese export controls their leverage.
  • China Hatches Plan to Keep U.S. Military From Getting Its Rare-Earth Magnets — China is designing a "validated end-user" system that would fast-track rare-earth and other restricted material export approvals for U.S. firms while excluding companies tied to the U.S. military. The arrangement would let China ease export flows while keeping the materials away from U.S. military suppliers.
  • How Japan Built a Rare-Earth Supply Chain Without China — Japan has reduced its reliance on Chinese rare earths, with industry estimates putting China's share of Japanese rare-earth imports at roughly 60% to 70%, down from 90% or more. Japan's alternative chain runs from an Australian open-pit mine through a separation plant in Malaysia to Japanese magnet makers supplying automakers.

Wednesday, June 24, 2026

AI Summary. Leading artificial-intelligence labs are moving to usage-based token pricing on a cost-plus basis that includes total ownership costs, pushing token prices higher and giving some enterprises reason to migrate to cheaper open models. Frontier models remain necessary for cybersecurity, distillation training, agents, and scientific discovery, where maximum performance is required.

Michael Cembalest J.P. Morgan
Date Posted:

Cembalest notes the “cost vs performance tradeoffs appear to provide ample incentive for open model adoption” as usage costs for frontier models rise. Enterprise tokens, and in turn models, will likely be commoditized.

Will rising token prices push enterprises toward cheaper open models?

Core argument: Cursor and Anthropic charge 6x more for tokens delivered 2.5x faster, indicating some enterprises will pay a premium for ultra-fast tokens.

The frontier labs are shifting to usage-based token pricing. It’s expected to become the norm, at least for enterprises, on a cost-plus basis that includes total costs of ownership. This will increase frontier lab token prices, a trend that is already underway. As a result, some enterprises may seek to avoid frontier lab token price increases by migrating to cheaper open models. Frontier models are here to stay since they’re needed for cybersecurity, distillation training, agents, and scientific discovery, all of which require maximum performance. There are enterprises even willing to pay up for ultra-fast tokens. For example, Cursor and Anthropic charge 6x more for tokens that are 2.5x faster. That said, many tokens consumed in the future may not come from frontier models but from smaller open models that are up to the tasks.

Takeaways by Macro Roundup® AI

  1. Cursor and Anthropic charge 6x more for tokens delivered 2.5x faster, indicating some enterprises will pay a premium for ultra-fast tokens.
  2. Frontier labs are shifting to usage-based token pricing on a cost-plus basis that includes total cost of ownership, which is expected to raise frontier token prices, a trend already underway.
  3. Frontier models remain necessary for cybersecurity, distillation training, agents, and scientific discovery, though many tokens consumed in the future may come from smaller open models that enterprises adopt to avoid frontier price increases.

Related Articles:

  • Chart of the Day: Small Models are Closing the Gap to Frontier AI — Achieving 60% on MMLU, a test of academic reasoning, once required a 540bn-parameter model but was reached by a 3.8bn-parameter model two years later, a 142x reduction in parameters. Models small enough to run on phones or sensors shift inference from data centers to devices, weakening the case for paying cloud providers per token.
  • Commoditization, Orchestration, and the New AI Stack — The author argues that as incremental gains from larger AI training runs shrink, the return on additional computing power falls, weakening the case for the training spending that dominates data center demand. Survivors of model commoditization will be those owning the orchestration layer or the applications where outcomes are priced.
  • The Geopolitics of AI: Decoding the New Global Operating System — The performance gap between the top American and Chinese AI models narrowed from 9.3% to 1.7%, with Chinese firms relying on cheaper open-source models—DeepSeek prices usage 20-40x below OpenAI's ChatGPT. This price advantage could win adoption in developing countries and build dependency on Chinese AI ecosystems.

AI Summary. Artificial intelligence models' capability gains are shrinking in percentage terms, falling from about 15% relative to the baseline early on to roughly 10% for the same absolute increment, narrowing the gap between frontier and good-enough models. The author argues this points to a commoditizing market where price, not minor model differences, becomes the main differentiator, pressuring frontier firms' margins.

Paul Kedrosky Applied Complexity
Date Posted:

Citing the Epoch’s Capabilities Index, Kedrosky notes “the gap from the model frontier to the 90th percentile is under 6%. The gap from the #1 to the #2 model is roughly zero. The premium that the best models command [are] collapsing with declining variance.”

Do shrinking relative AI capability gains turn models into a commodity?

Core argument: AI model gains that once delivered about 15% improvement relative to the baseline now buy roughly 10%, so progress continues while its rate declines.

Even if the absolute capability gain per unit of time is constant, the percentage gain is not. Early in the data, models improved by about 15% relative to the baseline. At the end of the data, the same increment buys a 10% relative gain. Progress is real, but its rate is declining. The economic implications are clear. When the variance is wide, being the frontier model meant something. You could, after all, be almost 50% better than the average model. And you could, in theory, price like it. The distance between frontier and good-enough was wide enough that it looked like an early moat. This is what maturing commodity markets look like. Price will become the main differentiator, not minor model differences. This will have huge implications, from the continuing and inexorable rise of China in AI, as we are already seeing with DeepSeek's massive pricing advantage, to the resulting margin pressure on frontier companies, and the implications for said companies' post-IPO performance.

Takeaways by Macro Roundup® AI

  1. AI model gains that once delivered about 15% improvement relative to the baseline now buy roughly 10%, so progress continues while its rate declines.
  2. Wide variance across AI models once let a frontier model be nearly 50% better than the average and, in theory, price accordingly, a gap that looked like an early moat.
  3. The author argues AI is maturing into a commodity market where price, not minor model differences, becomes the main differentiator, citing DeepSeek's pricing advantage, margin pressure on frontier companies, and implications for their post-IPO performance.

Related Articles:

  • Chart of the Day: Small Models are Closing the Gap to Frontier AI — Achieving 60% on MMLU, a test of academic reasoning, once required a 540bn-parameter model but was reached by a 3.8bn-parameter model two years later, a 142x reduction in parameters. Models small enough to run on phones or sensors shift inference from data centers to devices, weakening the case for paying cloud providers per token.
  • Four Takeaways from Microsoft’s Satya Nadella at WEF Today — Microsoft's chief executive says the price of AI model usage ("tokens") falls by roughly half every three months. Commentary argues that such rapid deflation pulls demand forward, encourages overbuilding, and commoditizes models, shifting competitive advantage to orchestration and context rather than the model layer.
  • Commoditization, Orchestration, and the New AI Stack — The author argues that as incremental gains from larger AI training runs shrink, the return on additional computing power falls, weakening the case for the training spending that dominates data center demand. Survivors of model commoditization will be those owning the orchestration layer or the applications where outcomes are priced.

AI Summary. The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.

Richard Audoly, Miles Guerin, Srinidhi Narayanan, and Rachel Schuh Federal Reserve Bank of New York
Date Posted:
Is Database:
Database

Labor’s share of income is at a post-war low. The 1.6pp post-pandemic decline in the labor share has primarily been driven by within-industry changes as firms improved profits.

Why has the labor share of income fallen to postwar lows?

Core argument: After stabilizing in the 2010s, the labor share declined again during the post-COVID period, falling 1.6 percentage points below its pre-pandemic level and standing at an all-time low for the post-war period.

After stabilizing in the 2010s, the labor share declined again during the post-COVID period, ultimately falling 1.6 percentage points below its pre-pandemic level. The labor share now stands at an all-time low in the post-war period. Labor share’s trajectory post-COVID broadly follows the cyclical patterns observed in earlier recessions, with a decline during the recovery phase that mirrors historical dynamics. The decline in the labor share since COVID is driven primarily by within-industry changes rather than shifts in economic activity across sectors. Taken together, these results suggest that the post-COVID decline follows the same cyclical patterns as earlier recessions and is driven by the same within-industry forces, and they provide little evidence that it will evolve differently from past episodes.

Takeaways by Macro Roundup® AI

  1. After stabilizing in the 2010s, the labor share declined again during the post-COVID period, falling 1.6 percentage points below its pre-pandemic level and standing at an all-time low for the post-war period.
  2. The post-COVID decline in the labor share is driven primarily by within-industry changes rather than shifts in economic activity across sectors.
  3. The labor share's post-COVID trajectory broadly follows the cyclical patterns of earlier recessions, including a decline during the recovery phase, with little evidence that it will evolve differently from past episodes.

Related Articles:

  • The Record Divide Between Corporate Profits and Worker Pay — Labor's share of gross domestic income fell to 51%, the lowest since records began in 1947, while profits' share rose to 12.1%, the highest since 1950. Inflation-adjusted hourly wages are up 3% since the end of 2019, compared with a 50% rise in profits.
  • Why the Labor Share Keeps Falling: Taxes! — The measured corporate labor share fell from 63% in 1978 to 58% in 2017, but the authors estimate that tax-driven reclassification of wages as S corporation profit and the shift of high-labor-share firms into partnerships account for about 1.6 percentage points, roughly a third of the decline.
  • The Rise of Pass-Throughs and the Decline of the Labor Share — The authors estimate that reallocating business activity to its pre-1986 organizational form accounts for one-third of the decline in the corporate sector labor share, which fell from 62.9% to 57.9% between 1978 and 2017. US tax reform encouraged firms to organize as pass-through entities, letting income be characterized as profits rather than labor payments.

AI Summary. Nine Federal Reserve policymakers projected an interest-rate increase in 2026 and the median projection for core inflation in 2027 rose to 2.5%, a hawkish surprise that lifted market pricing for the end-2026 policy rate by 0.2 percentage points. The authors still expect the Federal Reserve to leave its policy rate unchanged this year.

David Mericle Goldman Sachs
Date Posted:

While market pricing for FFR hikes by the end of 2026 increased, Goldman’s “base case is still that the FOMC will leave the policy rate unchanged this year.”

Do hawkish central bank projections signal a rate hike this year?

Core argument: Nine FOMC participants projected a rate hike in 2026 at the June meeting, versus Goldman Sachs' expectation of three, and the median 2027 Q4/Q4 core PCE inflation projection rose to 2.5% against an expected 2.3%.

The June FOMC meeting delivered a hawkish surprise, with nine participants projecting a hike in 2026 (vs. our expectation of three) and the median projection for 2027 Q4/Q4 core PCE inflation rising to 2.5% (vs. our expectation of 2.3%). Market pricing for the fed funds rate at the end of 2026 rose by 20bp in response to the projections and Chairman Kevin Warsh’s press conference. The FOMC meeting raises the risk of interest rate hikes later this year, but our base case is still that the FOMC will leave the policy rate unchanged this year. A majority could support a hike, perhaps for a range of different reasons, if upcoming inflation prints are uncomfortable and job growth remains solid. But we suspect that most of the voters still lean toward an unchanged policy rate and that participants treated the news about a deal with Iran and the reopening of the Strait of Hormuz cautiously for now.

Takeaways by Macro Roundup® AI

  1. Nine FOMC participants projected a rate hike in 2026 at the June meeting, versus Goldman Sachs' expectation of three, and the median 2027 Q4/Q4 core PCE inflation projection rose to 2.5% against an expected 2.3%.
  2. Market pricing for the fed funds rate at the end of 2026 rose 20bp following the June projections and Chairman Kevin Warsh's press conference.
  3. Goldman Sachs' base case remains that the FOMC leaves the policy rate unchanged this year, though a majority could support a hike if upcoming inflation prints are uncomfortable and job growth remains solid.

Related Articles:

  • The Case for Higher U.S. Rates — Underlying U.S. inflation continues to run faster than the Federal Reserve's target and may be accelerating slightly, while growth, consumer spending, and a healthy job market keep wages rising about 1 percentage point faster than in the years just before the pandemic. On that evidence, the author argues rate increases, not cuts, are the appropriate policy.
  • Home Alone: Inflation And The New Fed Chair — Current readings on labor market tightness, manufacturing price pressures, supply chain tightness and the output gap resemble conditions that have historically preceded Federal Reserve rate increases rather than cuts, and futures markets are pricing in hikes. Averaging several monetary policy rules implies a policy rate of 4.00%–4.85% versus the current 3.50%–3.75%.
  • US Workers Lose Buying Power After War Drives Up Prices — Inflation has outstripped wage growth in key private-sector industries including healthcare, finance, and retail for two straight months, largely because of a surge in energy prices driven by the Iran war. Gasoline prices have fallen since an interim US-Iran peace deal but remain nearly $1 a gallon above pre-conflict levels.

AI Summary. The "debasement trade" — favoring gold and Bitcoin over a dollar seen as vulnerable to inflationary, fiscal and monetary excess — has been a defining market narrative, but a new Federal Reserve chairman's emphasis on price stability as the overriding priority lifted the dollar and long-dated Treasuries at the expense of gold and crypto.

Ye Xie, Anya Andrianova, and George Lei Bloomberg
Date Posted:

Despite the lack of fiscal consolidation, the “Debasement Trade” is in retreat; traders are now pricing in two rate hikes by the end of Q1 2027. A troy ounce of Gold has fallen ~19% since it’s peak, but remains up ~60% since January 2025.

Does an inflation-focused central bank leader strengthen the dollar over gold?

Core argument: Kevin Warsh, leading his first policy meeting as Fed chairman, said price stability was his overriding priority, sparking a further resurgence in the dollar and lifting inflation-sensitive long-dated Treasuries at the expense of gold and crypto.

The debasement trade — broadly defined as a strategy favoring assets such as gold and Bitcoin over currencies vulnerable to inflationary, fiscal and monetary excess like the dollar — had been one of the defining market narratives of the past two years. While Warsh got the nod from Trump by advocating for lower interest rates, it was his prior reputation as an inflation hawk that caused [investors] to hedge their bets when he was named. Warsh, leading his first policy meeting as Fed chairman, said price stability was his overriding priority [which] sparked a further resurgence in the dollar and gave a lift to inflation-sensitive long-dated Treasuries, at the expense of gold and crypto. Ray Dalio and Ken Griffin have argued that gold may ultimately prove safer than the dollar and warned that the trajectory of US debt risks a future fiscal crisis.

Takeaways by Macro Roundup® AI

  1. Kevin Warsh, leading his first policy meeting as Fed chairman, said price stability was his overriding priority, sparking a further resurgence in the dollar and lifting inflation-sensitive long-dated Treasuries at the expense of gold and crypto.
  2. The debasement trade — favoring assets such as gold and Bitcoin over currencies vulnerable to inflationary, fiscal and monetary excess like the dollar — had been one of the defining market narratives of the past two years.
  3. Ray Dalio and Ken Griffin have argued that gold may ultimately prove safer than the dollar and warned that the trajectory of US debt risks a future fiscal crisis.

Related Articles:

  • 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%.
  • Currency Moves Can Drive Rebalancing — Trade responds to exchange-rate changes with a lag of roughly 8 to 12 quarters, and after the dollar fell from its mid-1980s peak the US trade deficit dropped from about 3% to about 1% of GDP while Japan's surplus fell from 4% to 2%. The author argues currency appreciation, not fiscal consolidation, drove that rebalancing.
  • The Dollar has Further to Fall — The author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.

AI Summary. Research from PwC finds the five largest US defence contractors had a combined backlog of undelivered orders of $1.36tn, up 24% from the prior year, as Lockheed Martin, Northrop Grumman, Raytheon and L3Harris invest billions of dollars expanding manufacturing. The US government has signed framework agreements with four companies to produce more than 10,000 low-cost cruise missiles over three years.

Christian Davies Financial Times
Date Posted:

PwC research estimates that major defense contractors have a $1.36T backlog of orders through 2025, an increase of 25% y/y.

Are US defense contractors expanding fast enough to clear record order backlogs?

Core argument: PwC research puts the combined backlog of undelivered orders at the five largest US defence primes at $1.36tn through 2025, up 24% from the prior year.

The backlog in US weapons manufacturing is expected to dominate a White House meeting on Wednesday between Donald Trump and the top American defence companies. Lockheed Martin broke ground last month on a new facility in Alabama, while fellow primary contractors Northrop Grumman, Raytheon and L3Harris are also investing billions of dollars in expanding their manufacturing footprints. According to PwC research the five largest so-called US defence primes had a combined backlog of undelivered orders of $1.36tn through 2025, up 24% on the year before. The government announced framework agreements last month with four companies — Anduril, CoAspire, Leidos and Zone 5 — to produce more than 10,000 low-cost cruise missiles over three years from 2027.

Takeaways by Macro Roundup® AI

  1. PwC research puts the combined backlog of undelivered orders at the five largest US defence primes at $1.36tn through 2025, up 24% from the prior year.
  2. Lockheed Martin broke ground on a new Alabama facility, while Northrop Grumman, Raytheon and L3Harris are investing billions of dollars in expanding their manufacturing footprints.
  3. The US government announced framework agreements with Anduril, CoAspire, Leidos and Zone 5 to produce more than 10,000 low-cost cruise missiles over three years from 2027.

Related Articles:

  • Trump Invokes Cold War-Era Law to Boost Munitions Production — The U.S. has invoked the Defense Production Act to expand munitions output amid doubts that American weapons makers can meet increased demand. U.S. officials say more than 1,000 long-range Tomahawk missiles and 1,500–2,000 air-defense interceptors have been fired in the war with Iran, and replacing those stockpiles could take up to six years.
  • China Restricts Trading With Some US Rare Earth Companies — China has added 10 American companies to its "entities list," restricting trading with firms central to US efforts to build a rare earth supply chain rivaling Beijing's, including USA Rare Earth, MP Materials, and motor manufacturer Aveox.
  • Last Rounds? Status of Key Munitions at the Iran War Ceasefire — U.S. forces may have expended more than half of prewar inventory for four of seven heavily used munitions in the 39-day air and missile campaign against Iran, with rebuilding to prewar levels projected to take one to four years. These munitions are also critical for a potential Western Pacific conflict.