Peder Beck-Friis and Richard Clarida @PIMCO argue that fiscal policy has been a key driver of the current temporary inflationary episode, consistent with @JohnHCochrane fiscal theory of the price level.
In advanced economies, there’s a significant positive relationship between core inflation and sovereign debt growth since the start of the pandemic. The fiscal expansions delivered this decade will likely lead to price levels adjusting permanently higher. But this is not the same thing as permanently higher inflation: Our base case is that as temporary pandemic-related deficits gradually normalize, inflation is likely to diminish – and today’s restrictive monetary policies aim to accelerate this process. And unlike in the 1970s, monetary policy credibility appears intact, with medium-term inflation expectations still anchored around central bank targets. Related: The Second Great Experiment Update, Inflation and Debt Across Countries and Waining Inflation, Supply and Demand
.@M_C_Klein notes that robust nominal wage growth is not consistent with inflation returning to target.
The main reason to worry is that nominal wages have consistently been rising about 5%-6% a year since last summer. The drop in the share of workers quitting their jobs for better opportunities elsewhere and the declining wage premium for workers switching jobs do not seem to be having an impact (yet). Regardless of what I want to happen, the experience of the past three years makes me reluctant to conclude that something fundamental has changed after only a few months of somewhat encouraging data. Broad price inflation cannot remain disconnected from nominal income growth by very much over any meaningful time horizon. At this point, the hope is that the current bout of disinflation buys time for wage growth to (somehow) slow down on its own without the need for any active measures to hurt the economy. The alternative does not seem to be priced in. Related: Furman On CPI Report
.@JohnHCochrane argues that current conditions of trillion-dollar deficits with 3.6% unemployment are not consistent with a persistent decline in inflation.
There was a big expansion in M2 before the US inflation. Monetarists took a victory lap. M2 has since fallen a lot. There is not much correlation between monetary expansion and inflation across countries, however. The slope of the regression also clearly depends on one or two points. Money or debt, which is it? When governments print money to finance deficits (or interest-bearing reserves), fiscal theory and monetary theory agree, there is inflation. Printing money (helicopters) is perhaps particularly powerful, as debt carries a reputation and tradition of repayment, which money may not carry. A core issue separating monetary and fiscal theory is whether a big monetary expansion without deficits or other fiscal news would have any effects. Would a $5 trillion QE (buy bonds, issue money) with no deficit have had the same inflationary impact? Monetarists, yes; fiscalists, no. Related: The Second Great Experiment Update,Waining Inflation, Supply and Demand and Fiscal Arithmetic and the Global Inflation Outlook
.@TheEconomist argues that policymakers are overestimating the importance of manufacturing. In recent years, there has been no significant relationship between economic growth and manufacturing’s share of the economy in OECD countries.
Ronnie Walker of @GoldmanSachs estimates that only 25% of $365B in pledged new semiconductor and battery investments has been spent.
Continued strength in manufacturing structures investment—which has grown at an average annualized rate of 43% over the last three quarters on the back of investment in battery and semiconductor facilities—should at least partly offset these headwinds to structures investment. The White House reports that companies have pledged $365bn of new battery and semiconductor investments over the last two years. So far, only $90bn of investment has been tallied in the relevant construction spending category for battery and semiconductor facilities since the start of 2021, suggesting that the level of spending could remain elevated for quite some time (the current monthly annualized rate stands at $112bn vs. ~$10bn two years ago, or 0.40% of annual GDP vs. 0.05% of GDP). Related: Making Manufacturing Great Again and Unpacking the Boom in U.S. Construction of Manufacturing Facilities
New York state’s foray into industrial policy was a white elephant; $1 billion investment in a Tesla facility earned 0.54 cents on the dollar. External auditors have written down nearly all of New York’s investment.
New York state paid to build a quarter-mile-long facility with 1.2 million square feet of industrial space, which it now owns and leases to Tesla for $1 a year. It bought $240 million worth of solar-panel manufacturing equipment. Musk had said that by 2020 the Buffalo plant each week would churn out enough solar-panel shingles to cover 1,000 roofs. A state comptroller’s audit found just 54 cents of economic benefit for every subsidy dollar spent on the factory, which rose on the site of an old steel mill. External auditors have written down nearly all of New York’s investment. Related: Making Manufacturing Great Again and Why Laws Meant To Create Jobs Can Be So Destructive For Our Cities
While China’s overall unemployment rate is stable at 5.2% in May, but youth unemployment at nearly 21% is above now even higher than Italy. China’s civil service exam had twice as many applicants as in 2019.
.@Brad_Setser argues that net interest payments will top their pre-crisis level of 1.5% of GDP.
The US is the world's big net debtor -- with net external debt of around 50% of its GDP. The US is now getting 4% on average on its loans, while only paying 3% on its borrowing (mostly bonds) the implied net interest rate on US external debt works out to be 2.4% -- well below any current US interest rate. And as a result, net interest payments as a share of US GDP are only up 15 bps of US GDP or so (not much really). These predictable dynamics slow the adjustment in the U.S. balance of payments to higher interest rates, but they don't eliminate it. Net interest payments have a lot further to rise. They certainly will top their pre-GFC peak as a share of US GDP (1.5% or so). Related: Interest Costs Will Grow The Fastest Over The Next 30 Years and American Gothic
Families with young children continue to migrate out of America’s large urban areas. The under-five population in large urban counties shrank 1.8% last year, vs. a 0.7% decline nationwide.
Since the beginning of the pandemic, the cumulative decline of under-five populations in large urban counties is now more than 6% —nearly twice the rate of decline nationally. Large urban areas are losing families with young children substantially faster than they are losing population overall. While the under-five population in such counties fell 6.1% between April 2020 and July 2022, the overall population declined by just 0.9%. In some of the country’s very largest counties, including New York, Cook County, IL, and Los Angeles, the population of young children is more than 10% smaller than in April 2020. Out-migration of young families from large and small urban counties has been more severe in the Mid-Atlantic and West Coast, while the under-five population actually grew in urban counties in the Southeast last year.
Gregory Clark @PNASNews finds that social status in England was strongly correlated across generations between 1600 and 2022, consistent with a theory of genetic transmission of characteristics influencing status.
Using a large genealogical database of 422,374 people with rarer surnames in England the paper examines patterns of inheritance of social status in England. These correlations reveal four things. First status persists strongly across even very distant relatives, across all measures of status. Second the decline in status correlations with each step outward in the lineage is a constant 0.79, for different measures of status, and epochs from 1600 to 2022. Third of the correlations conform closely to those predicted by Ronald Fisher in 1918, for familial correlations in the presence of strong assortment in mating. In particular, the correlation in mating in the genetics underlying social outcomes [must] be 0.57 to generate the persistence rate of 0.79. Since these are observational data, there is no proof that additive genetic transmission causes social status. [Only] that whatever social processes are producing the observed outcomes have a form of transmission which mimics that of additive genetic effects, in the presence of the important social institution of strong assortative mating. [Fourth,] the constancy of status persistence across the interval 1600 to 2022 does suggest social interventions have surprisingly modest effects.”
Torsten Sløk @apolloglobal notes the Fed has been increasing its estimate of the long-run Federal Funds rate. However, their estimate is only back at its 2019 level.
The Fed has started to increase its estimate of the long-run Fed funds rate. The implication is that the Fed is beginning to see the costs of capital as permanently higher. A permanent increase in the risk-free rate has important implications for investors. Related: What Have We Learned About the Neutral Rate
The @BIS_org annual report notes that real wages have declined in 2022-23 by more than in past deflationary episodes, but tight labor markets could threaten the disinflation process.
While nominal wage growth has not been exceptionally strong so far, this should not provide too much comfort. Wage adjustments are still influenced by the lingering effects of the norms prevalent in the low-inflation regime, but this could change quickly. The inflation surge has severely eroded the purchasing power of households (Graph 14.A), even more than in past disinflation episodes (Graph 14.B). Some catch-up is on the cards, particularly given the strength of labour markets. While labour’s bargaining power declined significantly over the years of low inflation, recent strikes and calls for unionisation suggest that the environment is evolving. What’s more, the pass-through from prices to wages has been somewhat higher when labour markets have been tight. Related: Inflation’s Return Changes the World
.@JoanMonrasEcon argues that immigrants cluster in cities with higher wages to support remittances to family members in their native countries, and are deterred less by higher living costs than US-born workers.
A large share of immigrants keeps ties with their origin countries. Many send money, known as remittances, to family members in those countries, while others plan to eventually return to their birthplace. In either case, this means that a substantial part of immigrants’ spending, now or in the future, takes place in their origin country rather than in the city where they currently work. Hence, for immigrants, the local prices in the city where they work only matter for the fraction of their total budget spent there. This means, that, relative to native-born workers, immigrants are equally attracted to high wages in select cities but less deterred by high local prices—particularly housing. This simple mechanism can explain why immigrants concentrate so much in a small number of select cities, and why these cities tend to have the highest costs of living.
.@KarstenMueIIer and @EmilVerner find that credit growth to non-tradable industries like real estate is predictive of a boom-bust output pattern and financial fragility, while credit to the tradable sector is associated with productivity growth.
Credit expansions lead to disproportionate credit growth toward non-tradable sector firms and households. This pattern is in line with theories in which these sectors are more sensitive to relaxations in financing conditions and to feedbacks through collateral values and domestic demand. The sectoral allocation of credit, in turn, has considerable predictive power for the future path of GDP and the likelihood of systemic banking crises. Credit growth to non-tradable industries predicts a boom-bust pattern in output and elevated financial fragility. Credit to the tradable sector, on the other hand, is less prone to large booms and is associated with higher future productivity growth. Our evidence suggests that previous work, which could not differentiate between different types of corporate credit, has missed an important margin of heterogeneity. Figure 7 plots the average yearly change in sectoral credit-to- GDP for five years before and after a systemic banking crisis, relative to non-crisis times. The sample includes 59 crises. Non-tradable sector credit expands more than twice as rapidly relative to GDP as tradable sector credit, surpassing the growth of household debt in the three years immediately before crises.
.@M_C_Klein is skeptical that “immaculate disinflation” can be achieved, noting that the Fed’s preferred inflation measure is consistently 2-3 percentage points higher than pre-pandemic.
The Fed’s preferred inflation measure is services excluding energy services and housing. That inflation rate has consistently been 2-3 percentage points faster than it was before the pandemic, with remarkably little volatility. The combined picture is not terrible, in the grand scheme of things, but it is also consistent with the claim that the last bit of excess inflation will not be squeezed out without some significant disruption to the real economy. I still hope that a truly immaculate disinflation can be achieved, but I am increasingly skeptical that it is the likeliest outcome.
.@Edsall notes that former President Trump’s core constituency of whites without college degrees fell by 2.1M from 2016-22. During that same period, the number of white college graduates increased by 13.2M.
One of the most significant developments in the run-up to the 2024 presidential election has emerged largely under the radar. From 2016 to 2022, the number of white people without college degrees — the core of Donald Trump’s support — has fallen by 2.1 million. Over the same period, the number of white people who have graduated from college — an increasingly Democratic constituency — has grown by 13.3 million. These trends do not bode well for the prospects of Republican candidates, especially Trump. President Biden won white people with college degrees in 2020, 51 to 48 percent, but Trump won by a landslide, 67 to 32 percent, among white people without degrees, according to network exit polls. Related: The Road To A Political Realignment In American Politics and What Happened In 2022
The world’s global mean temperature reached a record 63°F on July 4th, topping a previous record of 62°F set in 2016.
The average worldwide temperature reached 17C (63F) on Monday, just above the previous record of 16.9C in August 2016, according to data from the National Centers for Environmental Prediction. The threshold only lasted a day. On Tuesday, the average temperature hit 17.2C. Related: Antarctic Sea Ice Has Shrunk By An Area Nine Times The Size Of Britain
.@crossbordercap argues that quantitative easing will soon return as central banks in advanced economies will be needed to help fund deteriorating fiscal positions that will be driven by defense spending, demographics, and entitlements.
Quantitative easing is coming back. The US government will need to sell an average of $2T of Treasuries each year over the next decade. And according to latest Congressional Budget Office forecasts the Fed will be required to chip in. The CBO estimates that Fed holdings of US Treasuries will have to rise to $7.5T by 2033 from current levels of nearly $5T. No QT here, but worse, these CBO spending projections are likely too low — especially for defence outlays. More realistic numbers point to required Fed Treasury holdings of at least $10T. That translates pro rata into a doubling of its current $8.5T balance sheet size and will mean several years of double-digit growth in Fed liquidity. Related: Government Debt and Debt Servicing Costs Risingand American Gothic
.@USCBO projects a deficit of 5.8% of GDP in 2023 which will decline to 5% by 2027 and then accelerate to 10% of GDP by 2053 when federal debt will be 181% of GDP.
In CBO’s projections, the deficit equals 5.8% of gross domestic product (GDP) in 2023, declines to 5.0% by 2027, and then grows in every year, reaching 10% of GDP in 2053. Over the past century, that level has been exceeded only during World War II and the coronavirus pandemic. The increase in the total deficit results from faster growth in spending than in revenues. The primary deficit, which excludes interest costs, equals 3.3% of GDP in both 2023 and 2053, but the total deficit is boosted by rising interest costs. By the end of 2023, federal debt held by the public equals 98% of GDP. Debt then rises in relation to GDP: It surpasses its historical high in 2029, when it reaches 107% of GDP, and climbs to 181%% of GDP by 2053. Related: The Return of Quantitative Easing
.@YuTingChiang4 and @JesseLaBelle11 find that overall households in the top quintile of net worth, who tend to be older, have taken the biggest hit from inflation due to their Treasury holdings.
For households in the top wealth quintile, Treasuries become a more important element of their balance sheets, topping at 6% for the oldest and wealthiest group (the fifth quintile). However, for the second to fourth wealth quintiles, holdings of Treasuries as a share of net worth tend to fluctuate with age: increasing from the 20s age group to middle age, but then decreasing gradually. This transition likely reflects the change in household asset holdings over the life cycle. We can interpret the numbers in the second figure as showing how much households’ wealth in each group is exposed to the implicit inflation tax through their Treasury holdings. Overall, the older, wealthiest households and the groups that are both middle-aged and middle wealth seem to be the most exposed.
The wave of murders associated with the pandemic has seemingly crested. Homicide rates are still well above the pre-pandemic level, but 2022 homicides were down 5% from 2021. @foxjust
The shocking rise in murders that began in the summer of 2020 looks as if it may have played out. In the nearly complete tally of 2022 homicide statistics from 93 US cities compiled by AH Datalytics, murder and non-negligent manslaughter was down 5% from the year before. There were still many more people murdered in the US in 2022 than before the pandemic in 2019 — going by the AH Datalytics estimates it was 4,764, or 28.7%, more. Murder rates are also much, much higher in the US than in other wealthy nations. But with weekly crime statistics from the three biggest US cities showing a continuing and possibly accelerating murder decline so far in 2023, it does look as if a return to the awful conditions of the 1970s through early 1990s probably isn’t in the cards.
A strong rebound in immigration in 2022 helped offset tight U.S. labor markets, contributing to a 6-percentage point reduction in the ratio of job vacancies to unemployed workers. @sffed
Immigration flows into the United States slowed significantly following immigration policy changes from 2017 to 2020 and the onset of the COVID-19 pandemic. Analysis of state-level data shows that this migration slowdown tightened local labor markets modestly, raising the ratio of job vacancies to unemployed workers (V-U) 5.5 percentage points between 2017 and 2021. More recent data show immigration has rebounded strongly, helping to close the shortfall in foreign-born labor and ease tight labor markets. Data for 2022 show a strong rebound in immigration that has helped offset tight U.S. labor markets by contributing a 6-percentage point reduction in the V–U ratio.
As American energy exports to Europe surge, @DanielYergin notes that, “America is back in the most predominant position it has been in world energy since the 1950s.” @WSJ
Since February 2022, when Russia invaded Ukraine, average monthly seaborne cargoes to the continent jumped 38% compared with the previous 12-month period, according to ship-tracking firm Kpler. According to the White House, U.S. natural gas shipments to Europe more than doubled last year, cushioning the continent’s households and manufacturers after Russia throttled supplies. A fleet of skyscraper-size tankers carried more crude to Germany, France and Italy—the European Union’s largest economies—as well as Spain, which alone boosted purchases by about 88% over the period. The pull of oil shipments from the Gulf Coast to Europe, which Kpler pegged at 1.53 million barrels a day in January, has in recent months made the continent a larger destination for U.S. crude than Asia.
Money flowing into startups globally fell by a third in 2022 as valuations declined; however, there is still $300B of VC dry powder in the US alone. @TheEconomist
The tech-heavy Nasdaq index fell by a third in 2022, making it one of the worst years on record and drawing comparisons with the dotcom bust of 2000-01. According to the Silicon Valley Bank, a tech-focused lender, between the fourth quarters of 2021 and 2022, the average value of recently listed tech stocks in America dropped by 63%. And the plunging public valuations dragged down private ones. The value of older, larger private firms (“late-stage” in the lingo) fell by 56% after funds marked down their assets or the firms raised new capital at lower valuations. What new VC funding there is increasingly flows into mega-funds. Data from PitchBook, a research firm, show that in America in 2022 funds worth more than $1bn accounted for 57% of all capital, up from 20% in 2018.
.@seba_hill documents that almost all the decline in real interest rates since 1980 occurred in a 3-day window around Fed announcements.
A narrow window around Fed meetings fully captures the secular decline in U.S. Treasury yields since 1980. By contrast, yield movements outside this window are transitory and wash out over time. This is surprising because the forces behind the secular decline are thought to be independent of monetary policy. Why did the secular decline in interest rates occur around FOMC meetings? While the Fed might have no direct control of long-term yields, it seems possible that the Fed provides information to the market about the long-run level of interest rates. This long-run Fed information effect might therefore explain why long-term interest rates move around FOMC meetings. In recent decades, this would imply that the market learned about secular interest rate decline – including the trend in r∗– from the Fed.
China’s household savings rate was 33% in 2022, 3pp above the pre-pandemic trend, and big industrial companies added $1.1 trillion in liquid assets on average each year, more than double the $467 billion annual increase in the five years before Covid. @WSJ
Chinese families, constrained by Covid lockdowns, hoarded cash and pushed up the country’s household saving rate to a multiyear high of 33% in 2022. Economists from HSBC and Morgan Stanley say the end of China’s strict zero-Covid policies will at minimum fuel a strong recovery in services spending, lifting consumption growth to at least its prepandemic rate of around 8% a year. A large portion of new deposits accumulated by Chinese households last year was locked up in three-year to five-year deposit instruments, which can’t as easily be converted into spending as short-term deposits can, according to a study by research firm Rhodium Group.
.@paulkrugman argues that Medicare financing is on stable ground as health spending is leveling off: “since 2010 we’ve already done quite a lot to ‘bend the curve.’”
Historically health spending has risen faster than GDP. Excess cost growth has slowed considerably since around 2010 the leveling off is unmistakable. Here’s national health spending as a percent of G.D.P. C.B.O. projections now show social insurance spending as a percentage of G.D.P. eventually rising by about 5 points, which is still a lot but not unimaginably large. And here’s the thing: Half of that is still the assumed rise in health care costs. Since 2010 we’ve already done quite a lot to “bend the curve.” It’s not at all hard to imagine that improving the incentives to focus on medically effective care could limit cost growth to well below what the C.B.O. is projecting, even now.
.@DailyMail reports that 8% of very wealthy New Yorkers (those earning >$25 million per year) left the state during 2021.
The number of those earning more than $25 million that fled the state in 2021 is 1,453, just 520 less than the amount that left at the height of lockdowns and intense social distancing [implying 17% of this cohort over two years]. The top one percent of earners in New York account for close to half of the state's income tax revenue. Between 2019 and 2020, New York City lost six percent of those earning between $150,000 and $750,000. EJ McMahon of the Empire Center for Public Policy claimed the data showed a 1.3 percent decline in the number of New Yorkers with adjusted gross annual income of more than $1 million. The precise figure fell from 55,100 to 54,370 - 730 individuals, while the national number climbed from 554,340 to 608,549 - a nearly 10 percent jump. According to new Census Bureau data, New York experienced the largest population decline of any US state this year - losing 0.9 percent of its residents.
.@Birdyword reports that Asian alternatives to China (including India, Indonesia, Bangladesh, and Vietnam) have larger working age populations and exported more goods to the United States in the 12 months ending Q3 ‘22: $634B vs. China’s $614B.
Chinese labor is no longer that cheap: between 2013 and 2022 manufacturing wages doubled, to an average of $8.27 per hour. More important, the deepening techno-decoupling between Beijing and Washington is forcing manufacturers of high-tech products, especially those involving advanced semiconductors, to reconsider their reliance on China. Alternative Asian supply chain—call it Altasia—looks evenly matched with China in heft, or better. Its collective working-age population of 1.4bn dwarfs even China’s 980m. Altasia is home to 154m people aged between 25 and 54 with a tertiary education, compared with 145m in China—and, in contrast to ageing China, their ranks look poised to expand. In many parts of Altasia wages are considerably lower than in China: hourly manufacturing wages in India, Malaysia, the Philippines, Thailand, and Vietnam are below $3.
A new @NBERpubs paper shows that newer firms have more earnings dispersion than older firms, and that this pattern accounts for a large fraction of the aggregate rise in between-firm earnings inequality. @WallskogMelanie
We plot the between-firm variance of earnings within a cohort over time. We find two striking patterns. First, within a cohort, between-firm earnings inequality declines as the cohort ages. Second, each subsequent cohort of firms enters with a higher level of between-firm earnings inequality before declining on a path approximately parallel to previous cohorts. We find that between-firm pay dispersion declines within a cohort. Second, there are striking cohort patterns: more recent cohorts are more dispersed than older cohorts. This pattern accounts for a large fraction of the aggregate rise in between-firm earnings inequality. As older cohorts are replaced with cohorts with inequality “technology” of the more recent vintage, we expect inequality to continue to rise, even without a change in that underlying technology.
A “demand reallocation shock” associated with the pandemic was responsible for 3.5 percentage points of the rise in inflation. @FedResearch
Our main finding is that the shift in consumption demand from services towards goods can explain a large proportion of the rise in U.S. inflation between 2019:Q4 and 2021:Q4. This demand reallocation shock is inflationary due to the costs of increasing production in goods-producing sectors and because such sectors tend to have more flexible prices than those producing services. The aggregate labor supply shock provides a smaller inflationary impulse, despite the fact that it explains the majority of the decline in employment. The sectoral productivity shocks actually lower inflation slightly, as average productivity grew strongly over this period. Our confidence in the model and its predictions is boosted by the fact that it provides an excellent description of cross-sectional developments in prices and quantities
The median return on capital for an American firm in January 2023 is 7.4%, which is above the 5.6% cost of capital at the start of 2022, but below the 9.6% cost of capital at the start of 2023. @AswathDamodaran
The after-tax returns on capital, at least in the aggregate, are unimpressive, with the median return on capital of a US (global) firm being 7.44% (5.19%). There are a significant number of outliers in both directions, with about 10% of all firms having returns on capital that exceed 50% and 10% of all firms delivering returns that are worse than -50%. A combination of rising risk-free rates and surging risk premiums (equity risk premiums and default spreads) has conspired to push the cost of capital of both US and global companies more than any year in my recorded history (which goes back to 1960). A company generating a 7.44% return on capital (the median value at the start of 2023) in the US, would have comfortably cleared the 5.60% cost of capital that prevailed at the start of 2022, but not the 9.63% cost of capital at the start of 2023.
.@fuxianyi estimates that the Chinese population is currently 1.28 billion (vs 1.43 billion estimated by World Population Prospects).
While the United Nations’ 2022 World Population Prospects puts the Chinese population at 1.43 billion people, I estimate that it is now smaller than 1.28 billion. Even if China succeeds in increasing its fertility rate to 1.1 and prevents it from declining, its population will likely fall to 1.08 billion by 2050 and 440 million by 2100. The country’s share of the world’s population, which declined from 37% in 1820 to 22% in 1950-80, will fall to 11% in 2050 and 4% by 2100. The share of Chinese people aged 65 and older will rise from 14% in 2020 to 35% in 2050. Whereas five workers aged 20-64 supported every senior citizen aged 65 and older in 2020, the ratio will continue to decline to 2.4 workers in 2035 and 1.6 in 2050.
.@JonHaidt cites the percent of undergraduates diagnosed with a mental illness and argues that an epidemic of anxiety and depression started impacting young Americans in 2012.
There was no sign of a problem before 2010, and the epidemic is well underway by 2015. You can also see that the rate of depression is much higher in girls, as is the absolute increase (since 2010 an additional 18% of girls suffered from depression in 2021, compared to an additional 6% of boys), however, the relative increase is similar in both sexes: around 150%. The rate had more than doubled before the covid epidemic. The 2020 data were collected in early 2020, just before covid restrictions, and the 2021 data were collected a year later before vaccines were widely available. You can see that covid accelerated the rise in depression in that last year, but it was already rising really fast.
According to a @CDCgov survey, 57% of female high school students in 2021 experienced persistent feelings of sadness or hopelessness up from 36% in 2011. Male students saw only an 8 percentage point increase.
As we saw in the 10 years prior to the COVID-19 pandemic, mental health among students overall continues to worsen, with more than 40% of high school students feeling so sad or hopeless that they could not engage in their regular activities for at least two weeks during the previous year—a possible indication of the experience of depressive symptoms. We also saw significant increases in the percentage of youth who seriously considered suicide, made a suicide plan, and attempted suicide. Across almost all measures of substance use, experiences of violence, mental health, and suicidal thoughts and behaviors, female students are faring more poorly than male students. These differences, and the rates at which female students are reporting such negative experiences, are stark.
.@TheEconomist argues that “The crunch caused by the war in Ukraine may, in fact, have fast-tracked the green transition by an astonishing five to ten years” via increased subsidies.
The crunch caused by the war in Ukraine may, in fact, have fast-tracked the green transition by an astonishing five to ten years. Last year global capital expenditure on wind and solar assets grew from $357bn to $490bn, surpassing investment in new and existing oil and gas wells for the first time. America’s Inflation Reduction Act earmarks $369bn of subsidies for green tech; the European Commission has unveiled a “Net-Zero Industry Act”, which will provide at least €250bn ($270bn) to clean-tech companies. China’s 14th five-year plan for energy, released in June, for the first time sets a goal for the share of renewables in power generation (of 33% by 2025). All told, the IEA expects global renewable-energy capacity to rise by 2,400gw between 2022 and 2027, an amount equivalent to China’s entire installed power capacity today. That is almost 30% higher than the agency’s forecast in 2021, released before the war. Renewables are set to account for 90% of the increase in global generation capacity over the period. Carbon-dioxide emissions look set to fall considerably faster than expected just 12 months ago. S&PGlobal, a data firm, thinks emissions from energy combustion will peak in 2027, at a level the world would still be producing in 2028 had the war not happened.
Evidence from Sweden finds a strong relationship between cognitive ability and earnings up to annual earnings of ~$64k. There are no significant differences among the top three income percentiles. @ECSR_Soc
The figure above shows cognitive ability levels expressed with annual wage on the horizontal axis. Cognitive ability plateaus at high levels of occupational success. Precisely in the part of the wage distribution where cognitive ability can make the biggest difference, its right tail, cognitive ability ceases to play any role. Cognitive ability plateaus around €60,000 [$64,200] at under a standard deviation above the mean. There are no significant differences in ability between the three top income percentiles, despite there being 594 cases in each percentile bin and despite those in the 100th percentile earning more than double the wage of those in the 98th percentile. Past a certain wage threshold, having a higher wage is no longer telling of cognitive ability. The average score individuals in the top percentile achieved as adolescents on the cognitive-ability test is 7.15 ± 0.11 (95% confidence interval). On a stanine scale this amounts to less than a standard deviation (+0.86) above average.
.@generaltheorist notes that during the pandemic for every additional $1T in currency and deposits, American households saw $6T in non-monetary wealth driven by equities and real estate.
Household net worth expanded by USD34 trillion from end-2019 through end-2021, an increase of >150% of end-2019 GDP in only 2 years. This wealth increase was mainly due to the increase in financial and non-financial assets (housing). The chart below shows the change in the value of outstanding assets held by households for select items from end-2019. Currency and deposits held by households began the sharp increase in the first quarter of 2020, during the initial lockdowns, and increased by about USD4½ trillion in total. The increase in equity and real estate assets, mainly due to valuation adjustments, followed—and in value terms was a much larger influence on household net worth. At its peak, equity and investment fund shares, which fell in value by USD6 trillion by end-March 2020, increased nearly USD18 trillion by end-2021 on end-2019, or USD24 trillion peak-to-trough. The declines experienced last year during the interest rate normalization have weighed on such wealth since, but the levels remained above pre-pandemic norms. Real estate assets continued to increase in value still in 2022Q3, though at a diminishing pace as housing feels the strain of higher rates. Still, nearly USD13 trillion was added to household wealth through real estate since end-2019. Put another way, at its peak, every additional USD1 trillion in monetary wealth during the pandemic came to be reflected in roughly USD6 trillion in non-monetary wealth, mainly equities and housing.
.@TheEconomist reports that between mid-2020-2022 America’s lower earners saw cumulative inflation of 13.5% whereas middle earners saw 15.5%. The difference was largely driven by car prices and fuel expenditures. @XJaravel
Middle-income earners, not the poorest, appear to have borne the brunt of America’s current bout of inflation. Research by Xavier Jaravel of the London School of Economics has yielded a distinctive shape—an inverted-U curve—that illustrates the distributional effects of inflation in America from mid-2020 to mid-2022. For the lowest earners, inflation was about 13.5%. For those in the middle of the spectrum, inflation was closer to 15.5%. The wealthiest faced inflation of about 14%. Since 2020 nominal wages have increased at an average annual rate of about 4.2% for Americans as a whole. The lowest-earning quartile, however, has seen the biggest gains, with their wages up by 5.3% on average during the same period.
Evidence from Norway shows internet expansion reduced friction associated with finding a job and reduced the steady state unemployment rate by 14%. @AndreasKostol @nberpubs
We found that the internet led more firms to recruit online. It further caused a 9% decline in the duration of posted vacancies and 13% fewer unsuccessful hiring attempts. Next, we showed that the expansion increased job finding rates by 2.4% and starting wages by 6% among the unemployed. However, we found no evidence of changes in job-to-job mobility or wage growth for the employed. Through the lens of the calibrated model, we found that search technology is the primary mechanism behind the quasi-experimental evidence. Our calculations indicated that the broadband internet expansion may have caused a 14% decline in the steady-state unemployment rate. Our paper sheds light on two recent macroeconomic trends. First, the falling rates of worker mobility in the US have fueled a concern about the causes and consequences of declining labor market mobility. Our results suggest that online job search and recruitment may have improved match quality by providing more information about potential jobs and better tools to screen potential candidates. In turn, this improvement may have reduced the need to switch employers in search for a better match – consistent with a more optimistic view of recent trends in job mobility. Second, our evidence helps explain the inward shift in the Beveridge curve observed in Norway and in other countries from the 1990s to the early 2000s. Our evidence suggests that without the near-universal internet adoption rates, the unemployment rate after the Great Recession would have reached even higher levels.