Figure 1 shows that the ambitious mission to send a manned crew to the Moon led to a massive expansion of federal investment in R&D – NASA received over 0.7 percent of GDP at the peak of the Space Race.  Space Race spending was economically large so we might expect local effects through a fiscal multiplier channel even without technological spillovers. We compare the fiscal multiplier for NASA contractor spending implied by our estimates to the literature to get a sense of this. We find that R&D contractor spending on the Space Race had a similar impact as typical government expenditures. There is no credible empirical estimate of the space mission’s contribution to economic growth. The magnitudes of the estimated effects seem to align with those of other non-R&D types of government expenditures.

The S&P has had a strong first half of 2023, increasing 15.91%, the NASDAQ has delivered almost twice that return, with its tech focus.After a year for the record books, in 2022, when the expected return on stocks (the cost of equity) increased from 5.75% to 9.82%, the largest one-year increase in that number in history, we have had not just a more subdued year in 2023, but one where the expected return has come back down to 8.81%. In the process, the implied equity risk premium, which peaked at 5.94% on January 1, 2023, is back down to 5% at the start of July 2023. Even after that drop, equity risk premiums are still at roughly the average value since 2008. If the essence of a bubble is that equity risk premiums become "too low", the numbers, at least for the moment, don't seem to be signaling a bubble. Related: Data Update 2 for 2023: A Rocky Year for Equities

46 million Americans owe some money to the Department of Education for their student loans. The vast majority of borrowers also have comparatively small balances remaining, with 3/4 of debtors having balances less than $40k and 1/2 having balances under $20k. The small contingent of borrowers with large balances holds a disproportionately large share of the outstanding debt—although they make up only 16% of total borrowers, those with balances in excess of $60,000 hold the majority of student loan debt. Related: Debt Moratoria: Evidence from Student Loan Forbearance

Social sciences researchers hoping to become public influencers have one clear path: through the mainstream media. Unfortunately, journalists aren’t unbiased arbiters. For more than a decade, the media has praised economists Saez, Zucman and Piketty. Their data purport to show the income share of the top 1% of [US] earners climbed to 21% in 2019 from 9% in 1970. In a recent paper that has received far less attention, Auten of the U.S. Treasury and Splinter of Congress’s Joint Committee on Taxation find the income share of the top 1% climbed to 13.7% in 2019 from 9.2% in 1970. and, incorporating increases in redistributive government policy, the income share of the top 1% only increased to 8.8% in 2019 from 6.8% in 1970. In 2017, [Harvard’s Raj Chetty]  published findings that U.S. trends in the likelihood of children achieving a higher income status than their parents has grown progressively worse, a point that received intense media coverage. Research published by Scott Winship of the American Enterprise Institute shows the fall in mobility was a direct consequence, not of inequality, but of slowing economic growth that began in the 1970s. Journalists’ propensity to ignore research that refutes their beliefs encourages academics to pander to the liberal tilt of mainstream news organizations, leading to the general public’s misunderstanding of important policy issues.

The general political environment poses perhaps the greatest threat to technological momentum. In the last few months, I’ve chatted with a good number of Chinese undergrads in the US, who almost to a person tell me that their parents are urging them not to return to the mainland. China retains considerable strengths, one which doesn’t depend so much on slowing economic growth or demographic drags. The main one is its entrenched workforce that continues to advance manufacturing complexity. I think about the humming engine that is outlined by Kevin Kelly’s concept of the “technium” that describes an ecosystem of intertwined, co-dependent, and complex technologies with a mind of its own. But I grow less certain that a third-Xi term China will sustain an innovative drive. Related: 2022 Letter and U.S. Bound Migrants Surge at Darien Jungle Crossing in Panama 

Chinese growth in 2023 has been anemic, especially relative to the starting point. So far this year, economic output was just 5.5% higher than in the first half of 2022, which in turn was up only 2.5% compared to the first half of 2021. Officially, China’s Gross Domestic Product (GDP) grew just 0.8% between 2023Q1 and Q2 compared to the 2017-2019 quarterly average of 1.6%. That would be bad enough, but there is also reason to think that output may actually have shrunk in the most recent quarter. Nominal spending in March-June 2023 was 16.6% higher than in March-June 2019, which corresponds to an average yearly growth rate of just 3.9%. Before the pandemic, Chinese consumer spending was rising about 7.4% a year. Related: Can China’s Long-Term Growth Rate Exceed 2–3 Percent? and The Neoclassical Growth of China 

The US current account deficit, the largest deficit of all, is mainly financed via portfolio debt flows. Geographically, the financing of the US current account deficit has become increasingly mediated by financial centers in recent years. This contrasts with the pre-GFC period, when the US current account deficit was financed largely through reserve accumulation from surplus countries. Balance-of-payments data show a declining role for China. Related: Brad Sester On The Balance Of Payments  and How Was the U.S. Current Account Deficit Financed In 2022? 

The link between extreme heat and population growth was strongly positive in the 1980s.  That relationship weakened substantially over the subsequent two decades and vanished entirely over 2010-2020. The projections for the decades ahead show a continuation of this pivot.  “Hot” climate counties have gotten considerably hotter -  to a point where they are no longer as tolerable.  The 90th percentile county over 1951-1980 averaged about 62 days per year of daily average temperatures above 80◦F. That number grew to 72 days from 1991-2020. The projected climate changes are predicted to cause a general shifting of population from the Southeast and parts of the Southwest to the North, the Mountain West, and most of the Pacific coastline. Related: Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets and Young Families Have Not Returned to Large Cities Post-Pandemic 

Artificial intelligence could exert downward pressure on consumer prices if it provides the sort of large, sustained boost to productivity growth that we expect. In the late 1990s and early 2000s, a similar productivity boom led by the technology sector enabled the Fed to let the labor market become quite tight by historical standards without running into an inflation problem. A future productivity boom should have similar effects. Artificial intelligence is likely to boost productivity by lowering production costs and improving consumer goods and services in more qualitative ways. These effects should also lower measured consumer prices. Related: Summers and Blanchard Debate the Future of Interest Rates and What Have We Learned About the Neutral Rate?

This paper documents the economic consequences of a large amnesty program implemented in France. In July 1981, the newly elected government of President François Mitterrand proposed to regularize all undocumented workers. The regularized workers were predominantly male, low-skill, and lived disproportionately in the Paris region. The regularized immigrants composed 2.0% of workers in Paris and nearly 1% of all workers in France. In short, by reducing monopsony power in the undocumented labor market, a regularization program improves labor market efficiency and can generate a substantial increase in output, a “regularization surplus.” Our empirical analysis of employment, wage, and output data in the French labor market confirms that the regularization program indeed had positive effects on the employment and wages of many groups, and particularly for male, low-skill workers. Moreover, there was a sizable jump in the growth rate of per-capita GDP in the affected region, suggesting an increase in total French GDP of around 1%. Related: Immigration to Drive All US Population Growth Within Two Decades and Immigrants & Their Kids Were 70% of U.S. Labor Force Growth Since 1995

The total number of Americans dying each day — from any cause — is no longer historically abnormal. During Covid’s worst phases, the total number of Americans dying each day was more than 30% higher than normal, a shocking increase. For long stretches of the past three years, the excess was above 10%. But during the past few months, excess deaths have fallen almost to zero, according to three different measures. The Human Mortality Database estimates that slightly fewer Americans than normal have died since March, while The Economist magazine and the Center for Disease Control both put the excess-death number below 1% percent. Related: Our Model Suggests That Global Deaths Remain 5% Above Pre-Covid Forecasts 

Since 40%-60% of IPOs generate negative returns even in good times, their value proposition is whether a small subset of winners offsets all the losers. A highly skewed investment universe is characterized by average returns that are much higher than median. As shown below, IPOs are an example of that; in many years, average net returns were positive while median net returns were close to zero. But these positive average returns are highly skewed: look how quickly they decline when excluding the best 3%, 5%, and 7% of IPOs. Even when only excluding the top 3%, average net returns become negative, and average absolute returns fall by more than half. In other words, long-term IPO survival odds are low and skewed to a small number of mega-winners.

In East Asia and Europe, extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them. Not only are Asian countries aging much faster, but some are also becoming old before they become rich. While Japan, South Korea, and Singapore have relatively high income levels, China reached its peak working-age population at 20 percent the income level that the United States had at the same point. Vietnam reached the same peak at 14 percent the same level. Slightly higher fertility rates and more immigration mean the United States and Australia, for example, will be younger than most other rich countries in 2050. In both the United States and Australia, just under 24 percent of the population is projected to be 65 or older in 2050, according to U.N. projections — far higher than today, but lower than in most of Europe and East Asia, which will top 30 percent. Related: The Forever Labour Shortage and Fully Grown - European Vacation!

At the end of 2021 and the beginning of 2022, nominal consumer spending was rising about 7% annualized. So far this year, nominal PCE is rising about 6% annualized. The change in spending has been negligible compared to the slowdown in inflation, which suggests that improvements in the match between real production and demand have been more important than any shift in monetary policy. None of this is to suggest that interest rates should have stayed at zero, but it does suggest that the bulk of the disinflation that we have experienced so far can be attributed to benign developments in businesses’ ability to produce the real goods and services that consumers want.

The New Tenant Repeat Rent (NTRR) Index uses the same underlying microdata as the CPI to look at price changes for only the subset of units where new tenants have signed leases. That gives a much better picture of where the housing market is right now, and by proxy where official rent inflation is headed. Critically, the NTRR tends to lead the official CPI rent components by one year—and right now, it is saying we should expect significant disinflation over the next three quarters. Inflation is now mostly a housing phenomenon—rising rents are the single-largest contributor to the CPI by a wide margin, and outside of shelter headline inflation has completely flatlined over the last year. Related: New Tenant Repeat Rent Index 

The eurozone economy grew about 6% over the past 15 years, measured in dollars, compared with 82% for the U.S., according to International Monetary Fund data. That has left the average EU country poorer per head than every U.S. state except Idaho and Mississippi. Private consumption has declined by about 1% in the 20-nation eurozone since the end of 2019 after adjusting for inflation. In the U.S., where households enjoy a strong labor market and rising incomes, it has increased by nearly 9%. The European Union now accounts for about 18% of all global consumption spending, compared with 28% for America. Fifteen years ago, the EU and the U.S. each represented about a quarter of that total. Related: From Strength To Strength and The Economics Of Inequality In High-Wage Economies 

Americans’ growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers, while complicating the Federal Reserve’s efforts to tame price increases. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases. Related: US Job and Wage Growth Beat Expectations, Making the Fed’s Job Harder and Low Earners in the US Enjoy Fastest Wage Growth

The return of money funds as major investors in bills provides a mechanism where banking system reserves can be replenished and removes a significant obstacle to QT. While the recent bout of bill issuance was largely used to replenish the Treasury General Account (TGA), future bill issuance will be used to finance ongoing government spending. This means that money will flow out of the RRP, into the TGA, and then be spent into the banking system through fiscal spending. Bank reserves can remain abundant for an extended period of time, and net deposit outflows will be smaller than expected. QT can continue for the expected two more years given that bank reserves are likely to remain abundant. Related: Probing LCLoR and How Was the U.S. Current Account Deficit Financed In 2022? 

A new Pew Research Center analysis of verified voters and nonvoters in 2022, 2020, 2018, and 2016 finds that partisan differences in turnout – rather than vote switching between parties – account for most of the Republican gains in voting for the House last year. Overall, 68% of those who voted in the 2020 presidential election turned out to vote in the 2022 midterms. Former President Donald Trump’s voters turned out at a higher rate in 2022 (71%) than did President Joe Biden’s voters (67%). Relatively small shares of voters defected from their partisan affiliation or 2020 presidential vote. Among those who voted for both president in 2020 and for a House representative in 2022, just 6% crossed party lines between elections or voted for third-party candidates in either election. Related: What Happened In 2022 and Millennials Are Not an Exception. They’ve Moved to the Right

The value of US energy exports is now a significant component of total US exports. US exports last year hit $3,108 billion, making energy’s $420 billion 13.5% of the total. The growth contribution from energy is even more impressive. US exports jumped $541 billion last year from 2021’s level of $2,567 billion, which means the energy export advance of $143 billion easily comprised more than 25% of total export growth. Related: Portfolio Nuclear and Energy and the Presidents 

Insurance companies can be exposed to climate-related physical risk through their operations and to transition risk through their $12T of financial asset holdings. We assess the climate risk [CRISK] exposure of property and casualty [P&C] and life insurance companies in the U.S. In terms of transition risk for life insurers, we observe a notable increase in their transition climate beta during the 2019-20 fossil fuel price collapse. The aggregate transition CRISK for life insurers in the U.S. also significantly rose by more than $ 150B, equivalent to around 28% of their market cap. Excluding concurrent undercapitalization, the marginal CRISK attributed solely to climate stress increased by more than $ 85B during the same period. In terms of physical risk for P&C insurers, we find that the top ten P&C insurers mostly had negative CRISK values [excess reserves], indicating no sign of potential systemic under-capitalization under physical climate stress. As of the end of 2020, their aggregate marginal CRISK stood at $15B, equivalent to approximately 7% of their market cap. Related: Farmers Insurance Limits Sales in Florida, California Amid Storm, Wildfire Risks, Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse and Florida Ocean Temperatures At ‘Downright Shocking’ Levels

The cost of servicing US government debt jumped by 25% in the first nine months of the fiscal year, reaching $652 billion and contributing to a major widening in the budget deficit. For the nine months through June, the federal deficit hit $1.39 trillion, up some 170% from the same period the year before, according to Treasury Department data released on Thursday. As lower-yielding securities mature, the Treasury faces steady increases in the rates it pays on outstanding debt. The weighted average interest for total outstanding debt by the end of June was 2.76%, the highest level since February 2012, according to the Treasury. That’s up from 1.80% a year before, the department’s data show. Related: Net Interest Payments On External US Debt and Interest Costs Will Grow the Fastest Over the Next 30 Years

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 

This inflationary crisis was caused by excessive fiscal spending and it needs to be corrected by reducing fiscal spending. Demographic forces now act in the other direction [vs. the 1970s] and they are pushing up the pace of mandatory spending, even as growing geopolitical pressures demand ever more military spending. The inevitable conclusion is that Central Banks will ultimately have to purchase more and more government debt, or in other words create monetary inflation. Monetary inflation may not be the same thing as high street inflation, but over the long term, it runs close. Our two key criteria are: (1) rising Global Liquidity and (2) falling underlying inflation. Our analysis shows that a 2% point fall in trend inflation is equivalent to a 60% jump in Global Liquidity. Related: The Return Of Quantitative Easing 

23% percent of all mortgages outstanding have an interest rate below 3%, 38% are between 3% and 4%, and only 9% of all mortgages outstanding were originated with an interest rate above 6%. The bottom line is that homeowners across America do not have any incentive to move and get a new mortgage with mortgage rates currently at 7.25%. This is a key reason why the supply in the housing market continues to be so low. Related: Inflation Adjusted House Prices 3.8% Below Peak and The Great Pandemic Mortgage Refinance Boom

Mexico became the top U.S. trading partner at the beginning of 2023, with total bilateral trade between the two countries totaling $263 billion during the first four months of this year. Mexico’s gains mirror its rise in manufacturing, a key component of goods moving between it and the U.S. During the first four months of 2023, total trade of manufactured goods between Mexico and the U.S. reached $234.2 billion. Overall, Mexican imports to the U.S. totaled $157 billion; U.S. exports to Mexico reached $107 billion. Mexico–U.S. trade during the first four months of 2023 represented 15.4 percent of all the goods exported and imported by the U.S.; the Canada–U.S. share followed at 15.2 percent and then the China–U.S. share at 12.0 percent. Related: Pettis on “Friend-Shoring”  and Global Trade Is Shifting, Not Reversing

The production of war minerals is extremely concentrated. For each of our 13 war materials, the top three exporters account for more than 60% of global supply. China is the biggest producer, by far, for eight of these minerals; Congo, a troubled mining country, tops the ranking for another two; Brazil, a more reliable trading partner, produces nine-tenths of the world’s niobium, though most of it is sent to China. Many minerals are impossible to replace in the near term, especially for cutting-edge military uses. When substitution is possible, performance usually suffers. The combination of concentrated production, complex refining, and critical uses means trading happens under the radar.  All this makes building new supply chains much more difficult. Related: The U.S. China Rare Earths Battle and China’s Curb On Metal Exports Reverberates Across Chip Sector

As a share of global economic output, manufacturing has dropped from 19% in 1997 to 16% today, with the fall steepest in rich countries. In China and India industry’s share of economic output appears to be roughly where it was three decades ago, but even in these countries, it has slipped in recent years.  In recent decades there has been next to no relationship between economic growth and manufacturing’s share of the economy among countries in the OECD. Related: Why Laws Meant To Create Jobs Can Be So Destructive For Our Cities and New York State Built Elon Musk a $1 Billion Factory. ‘It Was a Bad Deal.’

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

During the first half of 2022, the LFP rate of partnered women with children increased by 1.06 percentage points. Our results suggest that had it not been for rising child care worker wages, we would have likely seen an even stronger LFP rate of partnered women with children today. One reason why this group dramatically increased their market work, despite the rising child care prices, may be related to the rise in the prevalence of telecommuting jobs for which this particular group has a high preference. Related: How Child Care Impacts Parents’ Labor Force Participation

Farmers Insurance is limiting sales of homeowners policies in Florida and California, becoming the latest big insurer to pull back from the hurricane- and wildfire-prone states. In Florida, Farmers is ending sales of home, auto, and umbrella insurance policies under its own brand, representing about 30% of the policies it sells in the state, the company said. It will continue offering insurance through other brands, including those for high-risk drivers, according to the statement. The ending of Farmers-branded sales in Florida affects around 89,000 policies, a person familiar with the matter said. Related: Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse and Florida Ocean Temperatures At ‘Downright Shocking’ Levels

The paint’s properties are almost superheroic. It can make surfaces as much as eight degrees Fahrenheit cooler than ambient air temperatures at midday, and up to 19° cooler at night, reducing temperatures inside buildings and decreasing air-conditioning needs by as much as 40%. It is cool to the touch, even under a blazing sun, Dr. Ruan said. Unlike air-conditioners, the paint doesn’t need any energy to work, and it doesn’t warm the outside air. Jeremy Munday, a professor of electrical and computer engineering at the University of California, Davis, calculated that if materials such as Purdue’s ultra-white paint were to coat between 1% and 2% of the Earth’s surface, slightly more than half the size of the Sahara, the planet would no longer absorb more heat than it was emitting, and global temperatures would stop rising.

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

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

As of February 2023, the number of child care workers in the U.S. was about 6% below its pre-pandemic level while the cost of child care was up by 14%. The shortage of child care workers and rising child care prices have been deemed partly responsible for the lackluster rebound of labor force participation rates. Consistent with this hypothesis, a larger share of nonworking parents of young children and those working only part time currently report child care needs as the main reason for their low work hours. This fraction increased from about 15% prior to the pandemic to 18% in February 2023.  Interestingly, women with a partner and young children—the group we expected to be most sensitive to child care prices—showed the strongest rebound with their LFP index having surpassed its pre-pandemic level. As a result, we do not see clear evidence for weaker labor supply rebounds among households with small children by early 2023.

Related: Understanding The Missing Millions

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.

Related: Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets

The headline is CPI inflation fell to 3.0%. But mostly this is the huge June 2022 # dropping out & what is almost certainly a transitory 17% fall in energy prices over the last yr. But underneath the #s show moderation, with the lowest core reading of the inflationary period. Overall what is happening is that service price growth is gradually slowing--as was predictable and predicted given the lags in the shelter measure. And goods price growth which was unusually (and likely transitorily) high in recent months turned back down again.  The collapsing of "supercore," which excludes food, energy, shelter, and used cars (the narrowest category BLS publishes) is even more dramatic. Overall, core PCE inflation is still running well above Fed's target. Economy is very strong. Interest rates are not that high & most of the relevant increases happened a while ago. The banking sector stabilized. Fiscal policy may be mildly expansionary. Fed should still do more.

The Fed has raised the Fed funds rate to 5%, and the lagged effects of Fed hikes will continue to drag down growth over the coming 12 months. See chart above, which shows a simulation with the impact of a 5% increase in the Fed funds rate on the level of GDP done on a variant of the Fed’s FR/BUS model of the US economy. In other words, the transmission mechanism of monetary policy takes time, and the drag on growth from lagged Fed hikes over the coming year will be significant. That is why a recession is a more likely outcome than a soft landing, no matter what happens to inflation.

The late, great Rudi Dornbusch once opined, “The crisis takes a much longer time in coming than you think, and then it happens much faster than you would have thought.”. This idea got me thinking about what I am calling “slow burn Minsky moments.” Recall that Minsky’s financial instability hypothesis holds that stability begets instability. In essence, I am referring to situations characterized by economically unsustainable processes or systemic vulnerabilities that build up during “good times” but carry within them either the seeds of their own destruction or create fragilities that exacerbate any external shock far beyond what may have been commonly expected. Richard Vague suggests that a ratio of private sector debt to GDP in excess of 150% is an important threshold. As Exhibit 1 shows, the U.S. has spent most of the last 20 years at or above this level! No wonder we have experienced a litany of financial crises over this period.

As of February, retail employment in New York City sagged 38,000 jobs (11%) from its pre-pandemic level of 340,000 with no gain since, according to the Center for an Urban Future. The sector has declined since peaking at 360,000 jobs in 2015. Manhattan has been hardest hit, with a 20% decline. The other boroughs had single-digit declines. Subsectors facing the stiffest online competition have been hardest hit, with clothing employment down 34%, department stores off 20%, and general merchandise declining about 13%. The sector’s struggles are a key reason for the city’s high Black unemployment rate of 12.2%, compared to just over 1% for white workers. Workers of color account for 7 of 10 retail employees in the city.

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

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

The foundational idea of our approach is that innovation in any one industry relies on complementary innovations in—and subsequent productivity gains from—its input and idea suppliers. Our framework yields a simple estimating equation that links growth in sectoral TFP to both the average TFP and the dispersion (variance) of TFP among that sector’s inputs. We estimate this equation using 462 manufacturing industries between 1977 and 2007, and also for the entire US economy between 1987 and 2007 by combining our manufacturing data with 42 non-manufacturing industries. Our estimates indicate that greater dispersion of TFP growth among an industry’s suppliers exerts a powerful negative influence on its own growth opportunities. At face value, our evidence implies that the bulk of the productivity slowdown in the United States (and several other industrialized economies) can be explained by the sizable increase in the cross-industry variance of TFP growth and innovation. Related: The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends? and The Economics of Inequality in High-Wage Economies

We find substantial white flight from Asian students entering high-socioeconomic status suburban districts: on average, the arrival of one Asian student in a suburban school district leads to the departure of 1.5 white students, a rate of white flight that is somewhat lower but not too dissimilar from flight from Black/Hispanic We find substantial white flight from Asian students entering high-socioeconomic status suburban districts: on average, the arrival of one Asian student in a suburban school district leads to the departure of 1.5 white students, a rate of white flight that is somewhat lower but not too dissimilar from flight from Black/Hispanic populations documented in different settings. Academic performance also rises with Asian entry to high-SES suburban districts. After ruling out correlated patterns of Black/Hispanic entry and direct racial animus, and confirming that housing market dynamics cannot account for the observed departure rate, we suggest that white flight from high-SES districts may be due to parental concerns about academic competition, particularly in a state like CA where entry to public colleges and universities is determined in part by relative high school performance. This pattern is consistent with qualitative sociological evidence about white-Asian encounters in suburban settings. Related: Can Democrats Survive the Looming Crisis in New York City’s Outer Boroughs? and Where New York’s Asian Neighborhoods Shifted to the Right 

In the figures and tables that follow, NATO also uses economic and demographic information available from the Directorate-General for Economic and Financial Affairs of the European Commission (DG ECFIN), and the Organisation for Economic Co-operation and Development (OECD). In view of differences between both these sources and national GDP forecasts, and also the definition of NATO defence expenditure and national definitions, the figures shown in this report may diverge considerably from those which are quoted by media, published by national authorities, or given in national budgets. Equipment expenditure includes expenditure on major equipment as well as on research and development devoted to major equipment. Personnel expenditure includes pensions paid to retirees. Related: The Cost of the Global Arms Race and The Age-Old Question: How Do Governments Pay For Wars?

Delays at naval shipyards mean that nearly 40% of US attack submarines are out of commission for repairs, about double the rate the Navy would like, according to new data released by the service. As of this year, 18 of the US Navy’s 49 attack submarines — 37% — were out of commission, according to previously undisclosed Navy data published by the Congressional Research Service. That leaves the US at a critical disadvantage against China’s numerically superior fleet. That’s up from 28% overall in 2017 and 33% in 2022, and below the industry best practice of 20%. Related: Weapons Makers Can’t Hire Enough Workers as Ukraine War Drives Demand and US Can’t Keep Up with China’s Warship Building, Navy Secretary Says

In the desolate and oil-rich region of the Northwest Territories, nestled in the wooded Taiga Plains about 300 miles from the Arctic Ocean, the small town of Norman Wells hit 100 degrees on Saturday. It was “easily the farthest north in Canada with a reading of 37C (99F) or higher in the Canadian climate record,” tweeted climatologist Brian Brettschneider, before the mercury ultimately ticked up to 100. The scorching temperatures over western Canada exacerbated the country’s unprecedented wildfire crisis. A record 22.7 million acres (9.2 million hectares) have burned so far, according to the Canadian Interagency Forest Fire Centre, blowing past the previous high mark of 17.5 million acres (7.1 million hectares) in 1995. There are months of the wildfire season to go. Related: Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse and Global Temperatures Have Broken Records Three Times In A Week

Much of Florida is seeing its warmest year on record, with temperatures running 3 to 5 degrees above normal. While some locations have been setting records since the beginning of the year, the hottest weather has come with an intense heat dome cooking the Sunshine State in recent weeks. That heat dome has made coastal waters extremely warm, including “downright shocking” temperatures of 92 to 96 degrees in the Florida Keys, meteorologist and journalist Bob Henson said Sunday in a tweet. “That’s boiling for them! More typically it would be in the upper 80s,” tweeted Jeff Berardelli, chief meteorologist and climate specialist at WFLA-TV in Tampa. The hot waters around Florida are connected to record-breaking ocean heat worldwide. About 40 percent of the world’s oceans are facing a marine heat wave, NOAA reported. That is the highest percentage on record, and it could reach 50 percent by September. Related: Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse and Global Temperatures Have Broken Records Three Times In A Week

The pandemic was a significant negative labor supply shock because it led to a wave of early retirements. This sudden labor shortage led to a spike in wages, which appeared to draw in people who were otherwise not looking for a job. The prime-age labor force participation rate has risen to multi-year highs and is not too far from all-time highs last seen in the 1990s. This suggests that there is very little slack in the labor market and additional workers will be increasingly difficult and expensive to find. While that shock has been digested, workers continue to retire and place increasing demand on a stagnant worker pool. In this scenario, moderating employment growth reflects labor scarcity and would be accompanied by reacceleration of wages similar to that seen in the most recent non-farm payroll report. Related: “The Great Retirement Boom”: The Pandemic-Era Surge in Retirements and Implications for Future Labor Force Participation and Unions’ Inflation Warning?

Statistics released last month by the US Bureau of Labor Statistics from the annual American Time Use Survey show that the time young men spent “playing games” — the survey doesn’t differentiate between electronic and non-electronic games, but most researchers assume it’s chiefly the former — rose by nearly three-quarters of an hour from 2019 to 2022, more than it had increased over the previous 16 years. It does appear that, since the pandemic, most of the additional gaming time has come from work and sports/exercise/recreation. American men 65 and older spent an average of just more than five hours a day watching TV in 2022, up from just more than four in 2003. Related: Is Technology Changing The Value Of Leisure? and Are We Ready For The Approaching Loneliness Epidemic?

This is how the imports to the US from Mexico and China have moved over the last three decades. For both countries, trade agreements made a huge difference, with Mexico suffering grievously from lost share after China entered the World Trade Organization in 2001. Now, it appears to be benefiting from the retreat from China. These numbers are shown as 12-month moving averages to avoid the distortions that come with the Chinese lunar new year holiday. The last three months, on an un-smoothed basis, actually show Mexican imports exceeding those from China for the first time in 20 years. Related: Global Trade Is Shifting, Not Reversing and Globalization Isn’t Dead. But It’s Changing

Financial investors are snubbing copper. As interest rates rise, they prefer to hold cash-generating assets rather than commodities, which yield nothing. For much of this year,, “non-commercial” net positioning on copper-futures markets has been in the red, implying that more investors are betting prices will fall than recover. Yet today’s prices remain $2,500 a tonne above production costs at the marginal mine. This implies that the recent correction has taken froth out of the market, rather than pushed prices too low, suggesting they could stay subdued for a while. Supply may struggle to keep up. The average age of the world’s ten biggest mines is 64, which is forcing miners to dig deep for ores of ever lower quality, making each new tonne of refined copper costlier to produce. New mines are scarce. Assuming all certain and probable projects go ahead, McKinsey, a consultancy, forecasts that supply will hit 30m tonnes by 2031, 7m tonnes short of estimated demand. Related: Copper Mine Flashes Warning of ‘Huge Crisis’ for World Supply and Glencore Says This Time Is Different for Coming Copper Shortage

For EBITDA margins, we notice that PE firms tend to target companies outperforming their industries: EBITDA margin is on average 0.5% above industry standard in the three years before the deal. In the year the transaction is completed, the metric drop sharply. We hypothesize that major LBO transactions are distracting to management and lead to suboptimal outcomes from a sales and margin perspective during the deal year. Once the deal has been completed, growth and margins recover, but do not on average return to pre-deal levels. EBITDA margin averages out to exactly the industry standard, 50bps lower than pre-acquisition. While PE firms are typically praised for their efficiency and cost-control, the graph on EBITDA margins shows a negligible difference in actual profitability. The supposed efficiency and cost-cutting isn’t showing up in the numbers. Instead, PE firms appear to be buying slightly higher-performing companies that then experience some mean reversion post-acquisition. Related: Private Equity Fundamentals 

On July 3rd the average global air temperature reached a new record. On July 4th the average global air temperature reached a new record. And on July 6th the average global air temperature reached a new record. The biggest influence on the Earth’s temperature, aside from global warming, is the El Niño-Southern Oscillation (ENSO). This is the first El Niño in seven years. Previous highs have often occurred towards the end of a strong El Niño, when the warming pattern has heated the Earth. The recent switch to El Niño, therefore, is unlikely to be the cause of the latest record-breaking temperatures. Its effect should be in full swing next summer, when more records could be set. That would be the first time new records have been attained in two consecutive years. Related: Earth Keeps Breaking Temperature Records Due to Global Warming and Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse

During the 11-year period, the suicide rate among children aged 5 to 14 increased from about 0.2 to about 0.8 per 100,000 people, according to the study published June 23 in China CDC Weekly, the official journal of the Chinese Center for Disease Control and Prevention. The study also found that the suicide rate for 15- to 24-year-olds fell by 6.8% per year from 2010 to 2017, but then surged at an annual rate of 19.6% to 2021, the latest available data. Related: Youth Risk Behavior Survey and China Urges Jobless Graduates To ‘Roll Up Their Sleeves’ and Try Manual Work

In May, 20.8% of 16 to 24-year-olds were unemployed, the largest proportion since the data series started in 2018 and higher than in European countries such as France and Italy. China’s grueling national civil service examination, drew a record 2.6mn applicants this year, nearly twice the number in 2019. The success rate was just 1.4%. Why Has Youth Unemployment Risen So Much in China? and Can China Fix Youth Unemployment Woes With Military Recruitment Drive?

According to the Congressional Budget Office’s (CBO) long-term baseline, federal spending as a percentage of GDP will grow to 29.1% over the next three decades. Driving a large part of that growth is spending on interest payments to service the national debt. Net interest payments hit a nominal dollar record of $475B Fiscal Year (FY) 2022 and will nearly triple by FY 2033 to $1.4T, growing to $2.7T in 2043 and $5.4T 2053. As a share of the economy, net interest will rise from 1.9% of GDP in FY 2022 to hit a record 3.2% by 2030 and more than double to 6.7% by 2053. By 2051, spending on interest will be the single largest line item in the federal budget, surpassing Social Security, Medicare, Medicaid, and all other mandatory and discretionary spending programs. Related: The 2023 Long-Term Budget Outlook and American Gothic

Production improvements since 2014 have pushed down the cost of drilling and fracking in the U.S. shale patch by 36%, according to J.P. Morgan, even as recovered oil volumes have increased. A major producer, EOG Resources, said it bored a well over 5 miles deep and nearly 3 miles long in South Texas early this year—a record length for the company. The increased efficiency means EOG can earn as much from oil priced at $42 a barrel today as it would have from oil trading at $86 nine years ago. People familiar with Saudi oil policy have said the government’s budget requires an estimated $81 a barrel. Brent crude is trading around $76 a barrel, down 13% from the start of the year.  Related: Portfolio Nuclear and Energy and the Presidents 

In 2021, US unemployment was 5.5% for those born in the country, and 5.6% for those born overseas. Black and white employment rates are now neck and neck. In France, unemployment is 7% among those born in the country, but 12% for immigrants, rising past 17% among those who arrived in the last ten years. Comparisons with Britain, whose demographics and colonial history perhaps make for a fairer benchmark, are similarly damning. Related: From Strengh To Strengh and France Has Poor Income Mobility Compared To US, Study Shows 

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.

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.

Net emigration from China, which had fallen as low as 125,000 in 2012 according to U.N. data, had rebounded to nearly 300,000 by 2018. The latest U.N. forecast puts net emigration in 2022 at over 300,000 again, after a net drain of about 200,000 in 2021. Strikingly, the U.N. data actually lines up surprisingly well with data from private sources looking at a more specific demographic—the wealthy. Data collated by South Africa-based New World Wealth and Henley & Partners, a London-based investment migration consulting firm, show a similar pattern. Net outflows of high net-worth individuals (with more than $1 million in assets) from China were steady at around 9,000 a year for most of the early 2010s. But in the late 2010s, that number started rocketing up: In 2017, net emigration by the wealthy was over 11,000 individuals, and by 2019 it was more than 15,000. Henley  estimate 13,500 wealthy individuals will, on net, leave China this year, following a 10,800 person net drain in 2022. Related: Singapore Asks Banks to Keep Quiet on Wealth Inflows During China Boom and U.S. Bound Migrants Surge at Darien Jungle Crossing in Panama

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.”

The U.S. was the top destination for businesses looking to expand internationally last year but the inflow of capital fell as companies around the world cut foreign investment amid rising uncertainty and borrowing costs.  Foreign investment in the U.S. fell to $285 billion in 2022 from $388 billion in 2021, mainly due to a sharp fall in foreign purchases of American companies, according to United Nations data.  While still behind the U.S., China registered its highest-ever inflow at $189 billion, an increase of 5%. Much of that increase came from European businesses. Related: Financial Fragmentation

In the US, investors financed 3,011 startup funding deals last quarter, about a third fewer than a year ago. And they spent less cash: $39.8 billion, down by nearly half from the same period last year. Take out the more than $6.5 billion investors spent on payments company Stripe, and the total looks even worse, said PitchBook analyst Kyle Stanford. The biggest drop came in angel or seed deals. In that category, there were half as many funding deals as there were a year earlier. Those early funding rounds — when young companies are either nurtured or starved — are generally considered to be critical to the health of the venture ecosystem.

The boom in domestic US chipmaking construction has been coupled with rising demand for semiconductor equipment that can’t be met domestically. The pace of US semiconductor equipment imports over the last few months has been near an all-time high, with Japan, the EU, and Singapore being the major sources. This is part of the reason why the market for semiconductor equipment hasn’t contracted alongside the market for chips themselves. Supercharged domestic investment is perhaps the US’s greatest asset in the current trade war—buying up scarce chipmaking equipment gives America leverage to encourage compliance among its would-be customers and trade partners. Related: Making Manufacturing Great Again and TSMC To Send Hundreds More Workers To Speed U.S. Plant Construction 

Catalist data confirm a nationwide shift among Latinos in 2020. The Democrats’ overall margin among this group dropped by 18 points relative to 2016. Cubans had the largest shift of 26 points, but Puerto Ricans moved by 18 points to Trump, Dominicans by 16 points and Mexicans by 12 points. An overall weak spot for Democrats was among Latino men who gave Trump a shocking 44 percent of their two-party vote in 2020. And in a recent Washington Post-ABC poll, Hispanics preferred the way Trump handled the economy when he was in office to Biden’s performance so far by 55 to 36 percent. What Happened In 2022 and Republicans Really Are the Party of the Working Class

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 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 

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 

Where I disagree with the BIS is over whether “low for long” could have been avoided. The Bank of Japan tried in the early 1990s and the European Central Bank in 2011. Both failed.  Will what we are now experiencing prove an enduring shift in the monetary environment or just a temporary one? We just do not know. It depends on how far high inflation has been just the product of supply shocks. It depends, too, on whether societies, long unused to inflation, decide that bringing it back down is too painful, as happened in so many countries in the 1970s. It depends, as well, on how far the fragmentation of the world economy has permanently lowered elasticities of supply. It depends not least on whether the era of ultra-low real interest rates is over. If it is not, this could indeed be a blip. If it is, then significant stresses lie ahead, as higher real interest rates make current levels of indebtedness hard to sustain. Related: Annual Economic Report and The Future of Interest Rates Is a Riddle

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.

Trade officials were assessing the fallout from the latest escalation in the US-China technology battle after Beijing said it would impose curbs on exports of metals used in chipmaking.   Gallium and germanium are among dozens of minerals classified by the US government as critical to economic and national security. The US state department did not respond to a request for comment. Related: The U.S.-China Rare Earths Battle

Despite their name, most rare earths are relatively abundant -- although they are not always easy to extract. China is now the world's largest producer of rare earths by far, thanks to its decades long effort to develop the industry. Last year it accounted for an estimated 70% of output, according to the United States Geological Survey. China also has the world's largest reserves, totaling 44 million tonnes of rare-earth-oxide (REO) equivalent -- about double those of Vietnam, Brazil,, or Russia.  Related: China’s Curb On Metal Exports Reverberates Across Chip Sector

Two of India’s most business-friendly southern states, Karnataka and Tamil Nadu, recently amended laws to allow an increase the length of working shifts from eight to 12 hours in a reform urged by investors, including Apple and its contract manufacturer Foxconn. No sooner than India appears to be heading down the same path of more business-friendly working hours, a backlash is forming. After an outcry from trade unions and opposition parties, Tamil Nadu’s chief minister MK Stalin announced on the May 1 Labour day public holiday in India that he was putting the state’s legislation on hold. In Karnataka, the opposition Indian National Congress last month trounced Modi’s Bharatiya Janata party in a state election. In its manifesto it said it would repeal the factories law amendment there too. Related: Apple India iPhone Output Soars to $7 Billion in China Shift and China Finally Has a Rival as the World’s Factory Floor

Toyota claimed it had made a “technological breakthrough” to resolve durability issues and “a solution for materials” that would allow an EV powered by a solid-state battery to have a range of 1,200km [746 miles] and charging time of 10 minutes or less. By reducing the number of processes required to make battery materials, the cost of solid-state batteries could be lowered to similar or cheaper levels than liquid-based lithium-ion batteries, he added.

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 

TSMC and its suppliers are in talks with the U.S. government to assist with the application process for non-immigrant visas in a bid to dispatch more than 500 experienced workers as early as July to expedite the construction of cleanroom facilities and the installation of pipelines and other equipment, three chip supply chain executives said. One of the main aims is to "improve work efficiency and help make up for lost time" in the construction processes, they said. The U.S.-bound workers will include contract technicians and workers with hands-on experience in cleanroom setup, pipeline installation, mechanical and electrical systems for chip plants, and other specialized areas. "There are not enough U.S. workers who have good first-hand experience specifically on building semiconductor manufacturing facilities, and many are not familiar with the requirements for chipmaking plants," one executive told Nikkei. "That has caused delays in multiple installation works." Related: TSMC to Triple U.S. Chip Investment to $40bn to Serve Apple, Others 

A review of the use of the dollar globally over the last two decades suggests a dominant and relatively stable role. To illustrate this stability, we construct an aggregate index of international currency usage. This index is computed as the weighted average of five measures of currency usage for which time series data are available: Official currency reserves, FX transaction volume, foreign currency debt instruments outstanding, cross-border deposits, and cross-border loans. The dollar index level has remained stable at a value of about 70 since 2010, well ahead of all other currencies. The euro has the next-highest value at about 23, and its value has remained fairly stable as well. While international usage of the Chinese renminbi has increased over the past 20 years, it has only reached an index level of about 3, remaining even behind the Japanese yen and British pound, which are at about 7 and 6, respectively.

Six fast-growing states in the South — Florida, Texas, Georgia, the Carolinas and Tennessee — are contributing more to the national GDP than the Northeast, with its Washington-New York-Boston corridor, in government figures going back to the 1990s. The Southeast accounted for more than two-thirds of all job growth across the US since early 2020, almost doubling its pre-pandemic share. And it was home to 10 of the 15 fastest-growing American large cities. Related: Small Towns Chase America’s $3 Trillion Climate Gold Rush and Black Americans Are Leaving Cities in the North and West

Chery, currently China’s biggest exporter of cars, plans to sell up to 15,000 vehicles next year in the UK alone, a level that would see it overtake Jeep, Jaguar and Suzuki from a standing start. According to KPMG, Chinese groups could snatch a 15 percent market share of new car sales in Europe — larger than France’s Renault — within the next two years. Already, Chinese companies are establishing a presence. Chery expects to open 50 showrooms in the UK alone next year, doubling by 2025.  Last October, when BYD announced it had entered a partnership with Sixt. By 2028, Germany’s largest car rental company has agreed to buy 100,000 BYD vehicles for its European operations, focusing initially on the Atto 3, a compact sport utility vehicle. Related: China’s Auto Export Wave Echoes Japan's in the ’70s and Can Volkswagen Win Back China?

Antarctica currently has exceptionally little ice—the lowest ever seen in June. On June 12th the continent’s sea ice covered just 10.7m square km. That is 1.15m square km below the previous minimum record for that date, from 2019, and 2.3m square km below the average for 1981-2010. The first difference represents an area a little larger than Colombia; the second an area the size of Mongolia—with three Britains tacked on. It is not yet clear why there has recently been such a precipitous drop in Antarctica’s sea ice, nor why it rose somewhat before that.

A larger share of Americans disapprove than approve of higher education institutions taking race and ethnicity into account when admitting students, according to several recent Center surveys. In a survey conducted in spring 2023, half of U.S. adults said they disapprove of selective colleges and universities taking race and ethnicity into account in admissions decisions in order to increase racial and ethnic diversity. A third of adults approved of this, while 16% were not sure. Other Center surveys have also found more opposition than support for the consideration of race and ethnicity in college admissions decisions. In the December 2022 survey, for example, 82% of U.S. adults said colleges should not consider race or ethnicity when deciding which students to accept, while only 17% said colleges should take this into account.

Global house prices have certainly come off the boil. They are 3% below their recent peak, or 8-10% lower once adjusted for inflation. This is in line with the average correction since the late 19th century. Yet this slump should have been different because it followed a boom when prices rose at their fastest rate of all time. The upshot is that real house prices remain miles above the level of 2019.  Three factors explain the rich world’s surprising housing resilience: migration, household finances, and people’s preferences.

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

While we may have turned the corner on inflation, it continues to prove much “stickier” than most market watchers expected. As of this writing, inflation was around 5% annually, still way above the Fed’s 2% target.  In our view, that means higher rates for longer, and an elevated cost of capital through the remainder of 2023 and well into 2024. The increase in borrowing costs since SVB failed corresponds to a 200-basis-point Fed hike for regional banks and a 50-basis-point increase for large banks. Weighing these estimates together using the shares of loans and leases accounted for by small and large banks, respectively, gives an economy-wide Fed tightening equivalent of a bit more than 100 basis points for the entire banking sector.

We believe that there are three major equilibriums and two major policy levers that interact to drive markets and economies: 1) Spending in line with output, which is in line with capacity. 2) Incomes in line with debts. 3) Normal risk premiums across assets If these conditions don’t exist, intolerable circumstances will ensue that will drive changes toward these equilibriums being reached. For example, if an economy’s usage of capacity (e.g., labor and capital) remains low for an extended period of time, that will lead to social and political problems as well as business losses, which will produce further changes until these equilibriums are reached. The two levers are monetary policy and fiscal policy.

The U.S. was missing an average of about 1.39 million foreign workers in 2021 relative to the expected level based on the pre-pandemic trend. The number of foreign workers has recovered in 2023. The percentage point change in vacancy rates between 2019 and 2021 versus the number of missing workers as a share of employment for industries and states. In neither case is there a statistically significant relationship between the change in vacancy rates and the number of missing workers. (Though the line of best fit is upward sloping for the industries case, it is not statistically significant, meaning that, on average, the industries with more missing workers did not see larger increases in the vacancy rate.) Related: Immigration Playing a Key Role in the Labor Market and The Role of Immigration in U.S. Labor Market Tightness

All told, institutions that report to China’s central government probably have closer to $6 trillion in foreign assets than the $3.12 trillion SAFE reported in December 2022. The scale of these hidden reserves — foreign current currency assets that aren’t formally counted as “reserves” — also highlights an important fact that is often forgotten amid all the talk of China’s domestic debt problems. The main way China has hid its reserves has been its big state banking system. Globally China is still a massive creditor, and the weight of China’s massive accumulation of foreign exchange is still felt around the globe. 

Astronomers have found an extra-low hum rumbling through the universe. The discovery, announced today, shows that extra-large ripples in space-time are constantly squashing and changing the shape of space. These gravitational waves are cousins to the echoes from black hole collisions first picked up by the Laser Interferometer Gravitational-Wave Observatory (LIGO) experiment in 2015. But whereas LIGO’s waves might vibrate a few hundred times a second, it might take years or decades for a single one of these gravitational waves to pass by at the speed of light. The finding has opened a wholly new window on the universe, one that promises to reveal previously hidden phenomena such as the cosmic whirling of black holes that have the mass of billions of suns, or possibly even more exotic (and still hypothetical) celestial specters.

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 Rising and American Gothic

Put simply, “harmonizing” means using the same consumer basket in all countries. The result is close to a truly apples-to-apples inflation concept that allows for international comparisons. Harmonized inflation generally rose and peaked earlier in the pandemic than the rest of the G7, measured on a 12-month basis. Though inflation remains elevated across all countries in this analysis, the U.S. now has the lowest 12-month harmonized inflation in the G7, both for overall and core inflation. That said, inflation going forward remains considerably uncertain across all G7 nations, including the U.S.

Many of the benefits of that tight labor market have been negated by inflation. It soared from 2% just before the pandemic to a peak of 9.1% last year as gasoline prices leapt in the wake of Russia’s invasion of Ukraine. It has since retreated to 4% as gasoline prices dropped, but underlying inflation persists around 4% to 5%. Inflation is the main reason voters disapprove of Biden’s handling of the economy by a two-to-one ratio, according to a May poll by the Associated Press and NORC Center for Public Affairs Research. If inflation doesn’t fade of its own accord, the Federal Reserve might have to raise interest rates further and push the economy into recession, which won’t help Biden’s approval ratings. Related: Jason Furman On Employment Cost Index and Real Wage Growth at the Individual Level In 2022 

Americans, Chinese, and Europeans have curtailed their lending and investing abroad—while also selling commensurately fewer financial claims to foreigners. In 2021, the gross value of cross-border financial transactions involving the U.S., China, and the euro area was worth about $7.9 trillion. In 2022, that figure was just $2.8 trillion. U.S. data for the first three months of this year suggest that cross-border transactions volumes have continued to shrink. International financial transactions involving the world’s three largest economies are smaller relative to their combined output than at any point other than the trough of the financial crisis.

Goldman Sachs forecasts that energy storage, opened up by China’s energy policies, will be part of a more than $7tn infrastructure investment opportunity through to 2040. Goldman forecasts that China requires about 520 gigawatts of energy storage by 2030, with as much as 410GW coming from batteries. That reflects a 70-fold increase from battery storage levels in 2021.  The number of Chinese enterprises registered as energy storage companies has more than doubled in the past three years to nearly 109,000, according to data from Chinese companies information provider Aiqicha.

Today, the computer/electronic segment is the dominant component of U.S. manufacturing construction. Importantly, the boom in this segment has not been offset by reduced spending on other manufacturing construction segments, which are largely consistent with long-term levels. In fact, construction for chemical, transportation, and food/beverage manufacturing is also up from 2022, albeit much less than the computer/electronic sector. The same surge in manufacturing construction is not apparent in other advanced economies. No harmonized data series provides an exact comparison to the United States, but comparable data indicators help unveil the relevant trends. Other advanced economies have not experienced similar increases, according to roughly analogous data sets measuring some concept of real construction for manufacturing purposes. Related: Making Manufacturing Great Again

AI investments in the US dwarf that of China, totaling $26.6 billion in the year to mid-June versus China’s $4 billion, according to previously unreported data collated by consultancy Preqin. Yet that gap is already gradually narrowing, at least in terms of deal flow. The number of Chinese venture deals in AI comprised more than two-thirds of the US total of about 447 in the year to mid-June, versus about 50% over the previous two years. China-based AI venture deals also outpaced consumer tech in 2022 and early 2023, according to Preqin. Related: The Race of the AI Labs Heats Up 

Here is a graph showing affordability, and the 5-year real return (red) on the house purchase (annualized). The 5-year real return is the future return on the Case-Shiller index, adjusted for inflation. When affordability was poor in the early ‘80s, it was actually a good time to buy (and that was before refinancing!). Another good time to buy was in the mid-to-late ‘90s. And another good time was around 2011 or 2012 and also the next several years. The worst time to buy (using a 5 year real return) was in the runup to and during the housing bubble. Since the real return is based on 5 years, we don’t know the return after April 2018. Unaffordability and the low level of inventory are pushing prices in opposite directions!

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.

Artificial intelligence is a familiar-looking monster, say Henry Farrell and Cosma Shalizi [that] began at least two centuries ago with the industrial revolution, when human society was transformed by vast inhuman forces. Markets and bureaucracies seem familiar, but they are actually enormous, impersonal distributed systems of information-processing [with minds of their own]. Economist Friedrich Hayek argued, any complex economy has to somehow make use of a terrifyingly large body of disorganised and informal “tacit knowledge” … [that] no individual brain or government can possibly comprehend. These vast machineries are simply incapable of caring if they crush the powerless or devour the virtuous. The modern world has been built by and within monsters, which crush individuals without remorse or hesitation. We eke out freedom by setting one against another, deploying bureaucracy to limit market excesses, democracy to hold bureaucrats accountable, and markets and bureaucracies to limit democracy’s monstrous tendencies.

We define marginal propensity to consume (MPC) as the share of the stimulus payment a household spent, marginal propensity to save (MPS) as the share a household saved, and marginal propensity to repay debt (MPRD) as the share used to pay down their debt. With these measures we document three main facts. First, households used one third of their transfers to pay down debt. This is higher than the average marginal propensity to consume (MPC), which usually takes center stage. Second, households with low net liquid wealth-to-income ratios are more likely to pay down debt and more likely to adjust their net wealth positions. Third, and relatedly, households with lower net liquid wealth-to-income ratios have lower MPCs. We show these two latter facts in the chart below. Note that we define net liquid wealth as the sum of liquid assets minus non-housing debt. For income, we use annual household income.

Orders placed with US factories for business equipment rose in May for a second month, indicating companies continue to make longer-term investments despite high borrowing costs and economic uncertainty. The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 0.7% last month after a downwardly revised 0.6% gain in April, Commerce Department figures showed Tuesday. The data aren’t adjusted for inflation.

Related: An American Investment Boom Would Be Good for the World and America Is Back in the Factory Business

Given its reputation for low-cost, clean and stable generation, gas dethroned coal in 2016 as the US’s No. 1 source of electricity. This year, it will make up a record 41% of power production, more than solar, wind, hydro and coal combined. Although natural gas is often promoted as a “bridge fuel” to span the transition from coal power to renewable energy, the country’s vast network of gas plants, pipelines and the regulations that govern them were largely built without the realities of extreme weather in mind. Facilities aren’t uniformly winterized, and some rely on a single gas pipeline for supply.  Between plant malfunctions and fuel shortages, natural gas accounted for about 47% of outages.

More than 90% of this year’s recruitment to the Chinese military could be drawn from fresh graduates and high school students, in a bid to meet the People’s Liberation Army’s modernisation targets and ease the country’s record youth unemployment. Analysts said that a drive to encourage educated young people to join the PLA was likely to have a twin purpose, with Beijing determined to achieve a world-class military by 2050 and more than 11 million graduates expected to swell the job market this year. The army is still finding it difficult to attract the country’s most outstanding young people, according to Zhou Chenming, a researcher with the Beijing-based Yuan Wang military science and technology think tank “Compared with top public universities like Peking and Tsinghua, military academies are less attractive to outstanding high school students in first-tier cities like Beijing and Shanghai.”

Related: China Youth Jobless Rate Hits Record 20.8% in Challenge for Policymakers and Why Has Youth Unemployment Risen So Much in China?

Twenty-five percent of all US government debt outstanding has been added since the beginning of 2020. And with higher debt levels and higher interest rates, debt servicing costs have increased from $1 billion per day in 2020 to almost $2 billion per day in 2023, see charts below.

Net purchases of marketable securities by “households and nonprofits” have soared, more than offsetting sales and redemptions by money market funds, the Federal Reserve, and banks.  In practice, much of this buying likely reflected purchases by hedge funds. The U.S. Treasury borrowed about as much in 2022Q2-2023Q1 ($1.02 trillion) as it did in 2018 ($1.13 trillion) and 2019 ($1.06 trillion). The sources of financing have changed dramatically as bond prices plunged. Compared to 2019 or the first years of the pandemic, the newest crop of buyers most closely resembles those who stepped up in 2018, when rising interest rates encouraged relative value hedge funds and securities dealers to fill in for the Federal Reserve as it ran down its bond portfolio.

Broker JLL estimates that office buildings in New York have lost $76B in value from their most recent sales prices. Seventy-three were now worth less than their loan balances. An exception is a new group of the most modern and luxurious offices, such as SL Green’s One Vanderbilt, which are fetching record rents. More common are buildings like 1330 Avenue of the Americas, recently sold by Blackstone and RXR for $320M, a 1/3 less than the price it commanded in 2006. One broker estimated that only the top 10% of office buildings in New York were not distressed — either in terms of the level of debt or occupancy. “I think we are on the front edge of forced sales,” this person said.  The financial damage may be masked because so few buildings have been sold in the past year, with deal volumes for commercial real estate down by more than half year on year in the first quarter.

Household savings rates spiked across several countries following the onset of the COVID-19 pandemic. We construct a measure of excess savings for the United States, advanced foreign economies, and emerging market economies, and compare the COVID-19 recession to past recessionary episodes. While accumulated excess savings during COVID-19 were unprecedented in size, they have been unwound in the United States, declined in the advanced foreign economies, and slowed in the emerging market economies. Relative to COVID-19, past episodes are characterized by smaller increases in excess savings and greater persistence in the stock of excess savings. Absent any further shocks to disposable income or savings behavior, our analysis suggests that the accumulated average AFE excess savings should be unwound by the end of the year. Related: The Rise and Fall of Pandemic Excess Savings and America's "Excess" Household Savings Are Going Away

Figure 3.1 shows real GDP for China, Japan, South Korea, and Taiwan, in which each economy begins at approximately the same per capita income level. The most striking aspect of these data is that the time path of China’s per capita GDP is remarkably similar to those of the three other East Asian miracle economies. After 25 years of becoming middle-income economies, China, Japan, and Taiwan achieved nearly the same per capita real GDP level. The one exception is Korea, which was somewhat ahead of the other three at that point in time. These data show that there is nothing unusual about China’s real GDP growth rate relative to the experiences of these other economies. We use the model and the fitted TFP catch-up process to predict that China’s relative per capita GDP level will asymptote to about 41% of the U.S. level around 2050, reflecting a substantial slowdown in China’s observed TFP catch-up in recent years. Related: How Soon and At What Height Will China’s Economy Peak?

The US is now working on its fifth year of (net) energy independence. The trend began late in the Bush administration, got going more strongly during the Obama administration, and has stayed on trend through the Trump and now Biden administrations. None of these four administrations undertook any policies at all that crimped, suppressed, or held back US domestic production of oil and gas, which are now once again at all time highs. The big game changer came under Obama, when wind and solar ignited. Today, the 15% share of wind and solar on the grid means the US can export even more coal, and more natural gas, through LNG. That too—the LNG export approval wave—also started under Obama in 2014, and it has gone from strength to strength.

The actual share of retirements roughly tracked the predicted share from January 2000 through February 2020, when the actual share was 18.1%. In the first three months of the pandemic, however, actual share quickly increased to 18.6% versus a predicted share of 18.2%, implying just over one million excess retirees in May 2020. The gap between actual and predicted shares of retirements continued to grow throughout the COVID-19 pandemic and peaked in December 2022, implying an estimated 2.95 million excess retirees in that month. Starting in 2023, the model line begins to flatten out.  As of April 2023, we estimate that there were approximately 2.4 million excess retirees in the U.S. Excess retirements are still well above our predicted trend, which may be contributing to a continued tightness in the labor market and low unemployment rate since the recovery from the pandemic recession. Related: Pandemic Labor Force Participation and Net Worth Fluctuations and Retirements, Net Worth, and the Fall and Rise of Labor Force Participation

Ahead of the visit, US officials said India would commit to buying armed MQ-9B SeaGuardian drones, which are produced by US defence contractor General Atomics. The leaders will also announce that memory chipmaker Micron will open a $2.75bn semiconductor assembly and test facility in India, which will include $800mn in investment from the US company. Biden and Modi also signed an agreement that will result in General Electric co-producing fighter jet engines in India.  The agreements, which also include efforts to boost co-operation in space, mark a big push by Washington to draw New Delhi into its orbit as part of a strategy to work with allies and partners to counter China. Related: Indian Stock Market Surges as Foreign Funds Buy Into National Growth Story

Looking at this at a more granular level, we expect the relative share of the US in global equity market cap to decline from 42% in 2022 to 35% in 2030, 27% in 2050, and 22% in 2075. By contrast, we expect China’s share in global market cap to rise from 10% to 15% by 2050, but decline to around 13.5% by 2075. We see the biggest scope for global market cap share increase in India, where our projections imply that India’s global equity market cap share will rise from around 2.5-3% in 2022 to 8% in 2050, and 12% in 2075. Likewise, we project the rest of EMs' share to rise, from 13.5% in 2022 to 17% in 2030, to 24% in 2050, and to 30% in 2075.

Figure 5 compares the estimates for the United States, Canada, and the Euro Area, respectively, from the modified model estimated through 2022:Q4 with estimates from the model with parameter values fixed their 2019:Q4 values. In all three economies, the estimates of the natural rate of interest in 2022 are within a few tenths of a percentage point of the corresponding estimates in 2019. According to the model estimates, the main longer-term consequence from the pandemic period is a reduction in the natural rate of output, but the imprint on the natural rate of interest appears to be relatively modest. We do not find evidence that the era of historically low estimated natural rates of interest has come to an end. Related: What Have We Learned About the Neutral Rate?

The latest U.S. Census Bureau estimates, released Thursday, indicate Black residents are continuing to leave many urban centers in the North and elsewhere, adding to decades of decline. These losses have hit many major cities with historically large Black populations, including Chicago, Detroit, Cleveland and Oakland, Calif. Much of the current shift is driven by younger, college-educated Black people who are relocating from northern and western places to the South, said William Frey, a demographer at the Brookings Institution. Nationwide, Black people haven’t suburbanized at the same level as the broader population, but the share of the Black population living in metropolitan-area suburbs reached 44% by 2020 from 33% two decades earlier. Over the same period, the percentage of the Black population living in central cities declined to 47% from 53%.

Although the High Tech sector still remains more dynamic than the non-High Tech sector of the economy, the gap between the two has gradually faded. Beginning with firm entry rate, we see a long-running decline in both the High Tech sector and the broader economy. The national firm entry rate, hitting a series high of 13.5 percent in 1984, fell below 10% during the Great Recession and has yet to recover. The High Tech sector saw much higher startup rates during the 1980s, peaking at 17.9%, also in 1984. High Tech industries saw another huge surge in new startups in the 1990s, coinciding with the dot-com boom, but their startup rates have yet to recover. In 2018, the gap between the national and High Tech startup rates fell below one percentage point to an all-time low, down from 5 to 6percentage points in the 1990s. The rate of new firm creation in the High Tech sector, once far ahead of other sectors, now looks similar to that of the increasingly sclerotic national economy.

Shortly after graduating, workers with college degrees obtain jobs in professional, non-routine occupations with much greater scope for on-the-job learning and wage growth. Less educated workers hold jobs in similar occupations before and after completing schooling. Occupational sorting causes relative wages to grow especially rapidly for college graduates in the initial phase of their careers. However, after a few years, educated workers are less likely to switch jobs, and nearly 90% of life cycle wage growth occurs within rather than between jobs. Wages increase with job tenure much more in professional, nonroutine occupations, which are disproportionately held by college graduates. I estimate that occupational sorting explains at least half of the life cycle growth in the college wage premium. The college wage premium increases from 22% at age 26 to 49% at age 40 and 56% at age 60. Related: Why Do Wages Grow Faster For Educated Workers?

You will note how this relates to the signaling vs. human capital debates over education.  Signaling your quality may put you in a position to learn more over time, as your initial offer likely will be better if you come out of Harvard.  But over the longer haul, the wages you earn are the result of what you have learned, not just your initial level of quality.  So, most of the return to education is that you learn more over time, and thus most of the return is learning-related rather than initial quality-related.  Overall, signaling models behave rather awkwardly in dynamic rather than purely static settings. Related: Why Do Wages Grow Faster For Educated Workers?

The entries in the table are the change in the growth rate of each element from 1979-1999 to 1999-2019. In Germany (DEU), for example, the annual growth rate of GDP per capita fell by -0.67 percentage points from the earlier period to the later period. That is the slowdown we're trying to understand. The remaining columns are the breakdown of that drop in the growth rate of GDP per capita into different parts. For example, in Germany the fall in the growth rate of productivity subtracted 1.32 percentage points from the growth rate of GDP per capita, and changes in education subtracted 0.43 percentage points. In contrast, changes in hours worked added 0.5 percentage points to the growth rate and increases in labor force participation added 1.38 percentage points. Those latter things helped offset all the other negatives, making the slowdown not as bad as it could have been. Related: Fully Grown - European Vacation! and The Slowdown in Europe via Human Capital

Ministry of Finance data showed governments across China had 37 trillion yuan ($5.1T) in on-book debt outstanding at the end of April, but there is no official total for how much hidden debt there is and who owes it. The International Monetary Fund estimated in February that nationwide there was 66T yuan [$9.2T] of local government financing vehicles (LGFV) hidden debt at the end of 2022, up from 40Tyuan in 2019, with that quick increase underscoring how local governments ramped up off-book borrowing and spending during the pandemic to support their local economies. Local officials will be pressed to come clean about their so-called hidden debt as national leaders attempt to get a fuller picture of liabilities across all levels of government, the people said, asking not to be named discussing private information. The campaign is being led by the Ministry of Finance, one of the people said.

The $440bn increase in the value of Indian equities to more than $3.5tn means India has climbed well above both France and the UK to regain the status of the world’s fifth-largest stock market after the US, China, Japan, and Hong Kong. The Sensex index, which tracks India’s 30 biggest companies by market capitalisation and is weighted towards financial stocks, has been climbing steadily for the past three months and hit a record 63,588 points on Wednesday, spurred by buying from foreign pension and insurance funds. Indian shares have received $9.4bn of net inflows from foreign portfolio investment in the second quarter, according to Bloomberg data. The Kotak Institutional Equities analysts said “the bulk” of the net inflow this year had been passive, meaning fund managers were buying a whole index rather than choosing specific stocks. Related: India Equity: An Unsung Long-Term Performance Story and India Is Getting an Eye-Wateringly Big Transport Upgrade 

For more than two decades she has devoted her life to studying the effects of “endocrine disrupting” chemicals (EDCs), which can interfere with the body’s natural hormones. These include pesticides, bisphenols, which harden plastic so it can be used in food storage containers and baby bottles, and phthalates, which soften plastic for use in packaging and products such as garden hoses. In recent years, traces of EDCs have been found in breast milk, placental tissue, urine, blood, and seminal fluid. The innocuous products in your kitchen cupboard, bathroom cabinet or garden shed may be lowering sperm counts. They could also affect the reproductive systems of your unborn children. The implications of EDCs for human health don’t stop there: they can disrupt thyroid function, trigger cancer and obesity.

We find that it has become easier for a male earner to support a family than it was in 1985. We correct the dollar costs of the Oren Cass' Cost of Thriving Index (COTI) and find that instead of rising by 22 weeks of work, the cost of thriving (for male workers) rose by just over 10 weeks. This improved estimate overstates the increase in COTI, however. Cass’s way of measuring “costs” fails to account for quality improvement in the items he tracks—particularly better health care and nicer cars.  Furthermore, COTI does not take into account taxes—a major flaw. It’s especially important in this case because the kind of family Cass is describing has seen a major reduction in its federal tax burden since 1985, going from a net taxpayer to receiving a subsidy, primarily due to the child tax credit (CTC). After including estimates of the federal tax burden or tax subsidy in both years, we find that the 2022 cost of thriving for a family with one male earner is lower than it was in 1985.

The National Center for Education Statistics (NCES) administered the NAEP long-term trend (LTT) reading and mathematics assessments to 13-year-old students from October to December of the 2022–23 school year. The average scores for 13-year-olds declined 4 points in reading and 9 points in mathematics compared to the previous assessment administered during the 2019–20 school year. Compared to a decade ago, the average scores declined 7 points in reading and 14 points in mathematics. The 2023 mathematics scores for age 13 students at all five selected percentile levels declined compared to 2020. The declines ranged from 6 to 8 points for middle- and higher-performing students to 12 to 14 points for lower-performing students, with larger declines for lower performers in comparison to their higher-performing peers. The percentage of students who reported missing 5 or more days doubled from 5 percent in 2020 to 10 percent in 2023.

The story of the slowdown in Europe is about productivity growth and aging, but with substantial offsets coming from LFP and hours. Changes in labor market activity, in general, prevented the slowdown in Europe from being even more devastating. The gross changes in the components of growth (productivity, labor force participation, etc..) were massive in Europe between 1979-1999 and 1999-2019. They turned out to offset each other in many cases so that the net change in the growth rate of GDP per capita was "only" on the order of minus 1 percentage point for most of Europe. Related: Fully Grown - European Vacation!

In 2021 Queen Creek, [a high-end suburb of Phoenix] paid $30 million for 5,000 acre-feet of water [from] Harquahala, a basin west of Phoenix. It’s negotiating for another 8,000 acre-feet there, though the cost will likely be much higher this time around: Buckeye, [another Phoenix suburb,] approved paying $80 million for 6,000 acre feet from the same area in January.  That’s more than double what Queen Creek paid in 2021. In 1993 the state created the Central Arizona Groundwater Management Replenishment District (CAGRD). Communities would pay to pump water and in return the agency would replenish what they took out with water from the Colorado or other rivers. Households in the district pay bills for water and separate assessments for groundwater replenishment. Those rates have already gone from $154 per acre-foot in 2002 to $768 per acre-foot in 2021.

In 2008, the EU and the US economies were roughly the same size. But since the global financial crisis, their economic fortunes have dramatically diverged. As Jeremy Shapiro and Jana Puglierin of the European Council on Foreign Relations point out: “In 2008 the EU’s economy was somewhat larger than America’s: $16.2tn versus $14.7tn. By 2022, the US economy had grown to $25tn, whereas the EU and the UK together had only reached $19.8tn.” The dollar’s status as the world’s reserve currency gives the Americans the ability to finance their ambitions, without spooking the markets. As one European industrialist puts it: “They can just swipe the credit card.”

Changes in the accumulation of physical capital were not important for Europe's growth slowdown. Changes in human capital growth were important for Europe's growth slowdown, but that effect varies by country. This also doesn't tell me whether it was demographics (as in the US) or some other factor in human capital, like changes in education or working hours. A significant source of the growth slowdown in Europe is due to a drop in productivity growth, pretty much universally. This drop is larger than in the US. If you look at the US, productivity growth rises up until about 2005, and then starts to abate. But if you look at the UK or France, as examples, their productivity growth just sort of tracks 2% up until about 2006, and then it drops down close to zero percent per year, and at times is negative. That's a far more dramatic drop in productivity growth than the US.

The yield on three-month US Treasury bills was 5.3%this week after the Federal Reserve held interest rates at between 5 and 5.25% but signaled that most of its officials expected a further two rate rises this year. That is the same level as the expected 12-month forward earnings yield across the S&P 500, which has risen by more than 15% since January. Although it is one of the best half-years for the index in two decades, it has left investors nervous about the potential for future returns.

The underlying issue is that most consumers’ nominal incomes continue to rise faster than they did before, without any commensurate increases in output or offsetting changes in saving. Strip out the volatile wage changes for managerial workers and the lower-paid workers in industries hit hardest by the pandemic, and the result (red lines below) is that hourly pay has been rising at a 5% yearly rate almost every month for nearly a year.

We ask two questions: how does remote work affect productivity, and how productive are the workers who choose remote jobs? To quantify each factor, we use data from an American Fortune 500 firm that hired both remote and on-site workers prior to Covid-19. Around the office closures of Covid-19, the hourly calls of on-site workers going remote fell by 4% relative to that of already-remote workers, indicating that negative treatment effects accounted for one third of the productivity gap. After the offices were closed, workers who initially chose remote jobs were 8% less productive than those who initially chose on-site jobs, even though all workers were working at home. Thus, two thirds of the initial productivity gap was due to worker selection.

Since SVB collapsed, the Fed has been adding liquidity, and the S&P500 is up more than 10%. The high correlation between Fed net QE and the S&P500 seen in the chart below suggests that Fed liquidity is a crucial driver of the stock market. With the Fed turning more hawkish and continuing QT, the downside risks to equities are growing.

Nearly one in four people in Canada are now immigrants, the largest proportion among the Group of Seven nations. At the current pace of growth, the smallest G-7 country by population would double its residents in about 26 years, and surpass Italy, France, the UK and Germany by 2050.

On the heels of Texas’ worst drought in a decade, a report from the High Plains Underground Water Conservation District shows water levels in the Ogallala Aquifer, also known as the High Plains Aquifer, have dropped consistently in the region over the last five years. With only a finite amount of water to be shared throughout the U.S. High Plains region — Texas, Colorado, New Mexico, Kansas, Nebraska, Oklahoma, Wyoming and South Dakota — the Ogallala running dry could have devastating consequences nationwide. The aquifer provides water for about 30% of the nation’s irrigation systems, boosting up the farms and ranches that supply a quarter of the nation’s agricultural production. And for 82% of the people who live within the aquifer’s boundaries, it supplies their drinking water too.

US venture capitalists have agreed more than 200 defence and aerospace deals in the first five months of this year worth nearly $17bn — more than the sector raised during the entire of 2019, according to data from PitchBook. US venture investment in defence start-ups surged from under $16bn in 2019 to $33bn in 2022, PitchBook data shows. Investors piled a record $14.5bn into such start-ups in the first quarter of this year.

Investors are paying a sizable premium for AI exposure. One example: the 32 stocks in the $CHAT Generative AI ETF have returned 77% this year. The 22 $CHAT ETF stocks that have positive earnings projected for the next 12 months trade at an average P/E of 31x. The other 10 $CHAT ETF stocks have infinite P/Es, either due to negative earnings or trivially positive earnings that create nonsense P/E ratios over 100x. The large language model revolution is going to have to live up to the high end of expectations to justify this. I have seen estimates that AI will eventually add ~10% to the fair value of the S&P 500 due to some combination of augmented employee productivity and staff reductions, but I’m not sure how one would measure that. 

In this report, we look at students in charter schools compared to the experience they would have had in the traditional public schools (TPS) they would otherwise have attended.  Using both student and school level data, our resulting data set included 81% of tested public school students in the United States, making it one of the largest data sets of student-level observations created to date. We used this information to create a matched student data set with over 6,500,000 student-level observations from over 1,853,000 charter students and a matched comparison group. We present our findings about learning outcomes measured in days of learning. The measure uses a benchmark of learning: the average student in TPS will obtain a year’s learning in a year’s time. If a student makes more (or less) progress [during a 180 day school year,] we present that as additional (or fewer) days of learning. 

The “hyperglobalisation” period when world trade and global value networks grew most rapidly ran from the late 1990s until shortly before the global financial crisis began in 2008. By that point the fall in inflation in the rich world had largely already happened. Given that goods are much more highly traded than services, you’d have expected rising inflation differentials between the two. In fact, the gap remained constant until after the financial crisis, when services inflation actually fell while goods inflation rose. As a rough sense check of the impact of cheaper imports, those goods subject to low-cost Chinese competition like clothing, shoes and electronics make up quite small parts of the consumer price basket. In the eurozone, apparel and footwear are about 5% of the total, compared with 15% for housing and utilities and 10% for restaurants and hotels.

In recent years, about 40-45% of China’s manufacturing output has come from exports, while 55-60% has come from domestic demand. This pattern was established in 2009 by China’s massive property-and-infrastructure stimulus in response to the 2008 global financial crisis. Since then, the level of investment activity in the economy has stayed very elevated. So, we can say that China’s manufacturing sector is indeed mainly oriented to domestic demand, but it’s definitely true that the contribution from exports is quite large. A 55-45 split in an economy of China’s size is a pretty significant reliance on external demand. And that reliance has increased more recently. The current edition of the OECD TiVA database ends in 2018; extending the estimates to 2022 shows that the export contribution has probably picked up quite a bit due to the pandemic export boom.  

In 2010, there were 98 nations and territories with fertility rates below 2.1 (known as the replacement rate) according to the United Nations. In 2021, that number had risen to 124, or more than half the countries for which data were available. The world’s 15 largest economies all have fertility rates below the replacement rate. Educated women have for decades tended to have fewer children. But fertility among the less educated is now falling. On a global level the link between national incomes and fertility rates has also weakened. India’s fertility rate, for example, fell below 2.1 in 2020, despite a gross domestic product of less than $3,000 per person.

An additional $1 spent auditing taxpayers above the 90th income percentile yields more than $12 in revenue, while audits of below-median income taxpayers yield $5. We begin by estimating the average initial return to all audits of US taxpayers filing in 2010-2014. On average, $1 in audit spending initially raises $2.17 in revenue. Audits of high-income taxpayers are more costly, but the additional revenue raised more than offsets the costs. Audits of the 99-99.9th percentile have a 3.2:1 initial return; audits of the top 0.1% return 6.3:1. Next, we use randomly selected audits to examine the impact of an initial audit on future revenue. This specific deterrence effect produces at least three times more revenue than the initial audit. Deterrence effects are relatively consistent across the income distribution. This results in the 12:1 return above the 90th percentile. 

Next April, for the first time in more than three centuries, Danes will have to work on the holiday of Great Prayer after the government scrapped the religious day off partly to pay for extra defence spending. The decision, approved in March, was deeply unpopular: in one poll, 70 percent of Danes opposed it. The Stockholm International Peace Research Institute calculates that global defence spending rose by 4 percent to reach a record $2.24tn last year. This year, it is set to continue rising, even as higher rates increase governments’ borrowing costs. During the long decades of the cold war, the west financed its defence spending through higher taxation. 

Seven of the biggest constituents — Apple, Microsoft, Google owner Alphabet, Amazon, Nvidia, Tesla and Meta — have ripped higher, gaining between 40 percent and 180 percent this year. The remaining 493 companies are, in aggregate, flat. Big tech companies dominate the index to an unprecedented degree. Just five of those seven stocks represent nearly a quarter of the market capitalisation of the entire index. At $2.9tn, Apple alone is worth more than the UK’s top 100 listed companies put together. 

West Coast dockworkers reached a tentative labor deal with port employers Wednesday following more than a year of contentious negotiations that have disrupted trade flows from California to Washington state. The International Longshore and Warehouse Union, which represents more than 22,000 dockworkers, and the Pacific Maritime Association, representing employers at 29 ports, said the agreement would run for six years.  

Related: West Coast Dockworkers Making $200K Demand Higher Pay 

India has roughly 1,600 global capability centers (GCC), more than 40% of the number worldwide, according to Nasscom, a trade body for the country’s technology industry. The offices generated about $46 billion in combined revenue in the fiscal year ended March, more than the output of Nepal. Services exports rose to a record for December, leading economists to speculate why. The trend continued. They climbed to about $323 billion in the fiscal year ended March, up 27% from the year before. Analysts reached the same conclusion: It was the GCCs. 

China’s youth jobless rate edged up to a fresh record in May as the economy’s recovery slowed, adding to challenges for policymakers as new graduates join the workforce. The unemployment rate among those aged between 16 and 24 reached 20.8%, up from 20.4% in April, according to data published by the National Bureau of Statistics on Thursday. That’s four times the overall surveyed jobless rate, which was unchanged at 5.2%.

There is no appetite in the U.S. for boosting investment at the expense of current consumption by redirecting spending, workers, and capital. Nor is there much scope for American producers to export even less than they already do. This means that any realistic scenario in which U.S. investment rises substantially would mostly involve some combination of higher production out of existing labor and capital as well as higher levels of imports. In theory, good investments should boost the capital stock and eventually make it easier to further increase both investment and consumption, but that process takes time. Until then, there will be a mismatch between America’s needs and its productive capabilities that can only be bridged by drawing upon foreign production. Foreigners stand to benefit from this even if some of the specific subsidies encouraging U.S. investment have local-content restrictions.

The industrial policies crafted by Mr. Biden’s administration—notably, incentives and rules to boost the production of semiconductors, renewable energy and electric-vehicles — have catalysed a surge in investment, much of it in the South. S&P Global Market Intelligence calculates that about two-thirds of planned EV jobs will reside there. Might the South’s manufacturing boom have political consequences? The investment surge resulting in part from Mr. Biden’s policies so far looks like the opposite of pork-barrel politics: most of the money has gone to places that do not favour him. According to a database of EV investments announced in the 300 days since the passage of the Inflation Reduction Act more than 80% has gone to Republican-controlled districts. As factories become more automated and less labour-intensive, their political weight may well diminish. Robots do not vote.

This list has a little of everything. It includes Indianapolis, of course, along with perennial powerhouses Dallas-Fort Worth and Phoenix, boomtowns Austin and Nashville and much-discussed up-and-comers Boise, Fayetteville-Springdale-Rogers, Oklahoma City and Raleigh. But there are also some under-the-radar growth stories (Charleston, Huntsville) moderate Midwestern successes (Cincinnati, Columbus, Des Moines) and one true surprise: Philadelphia? Really?! There is not, however, a single city from Florida. What unites the standouts? All but two, Phoenix and Philadelphia, are in states that voted Republican in the 2020 presidential election, while in all but two, Huntsville and Oklahoma City, the mayors of the largest cities are either Democrats or nonpartisan officials who sound a lot like Democrats.

In terms of labor composition, we observe a general upskilling trend associated with larger AI investments. Firms that invest more in AI tend to increase their shares of workers with bachelors, masters, and doctoral degrees (correspondingly decreasing the share of workers without college education). For example, a one-standard-deviation increase in the firm’s share of AI workers translates into a 3.7% increase in the share of workers whose maximal educational attainment is an associates or bachelors degree, a 2.9% increase in the share of workers whose maximal educational attainment is a masters degree, and a 0.6% increase in doctoral degrees. These increases in educated workers correspond to a 7.2% decline in the share of workers without college education.

The deployment of generative AI and other technologies could help accelerate productivity growth, partially compensating for declining employment growth and enabling overall economic growth. Based on our estimates, the automation of individual work activities enabled by these technologies could provide the global economy with an annual productivity boost of 0.2 to 3.3 percent from 2023 to 2040 depending on the rate of automation adoption—with generative AI contributing to 0.1 to 0.6 percentage points of that growth— but only if individuals affected by the technology were to shift to other work activities that at least match their 2022 productivity levels. In some cases, workers will stay in the same occupations, but their mix of activities will shift; in others, workers will need to shift occupations.

The IBM researchers used a quantum processor with 127 qubits to simulate the behavior of 127 atom-scale bar magnets — tiny enough to be governed by the spooky rules of quantum mechanics — in a magnetic field. That is a simple system known as the Ising model, which is often used to study magnetism. This problem is too complex for a precise answer to be calculated even on the largest, fastest supercomputers. On the quantum computer, the calculation took less than a thousandth of a second to complete. Each quantum calculation was unreliable — fluctuations of quantum noise inevitably intrude and induce errors — but each calculation was quick, so it could be performed repeatedly. Altogether, the computer performed the calculation 600,000 times, converging on an answer for the overall magnetization produced by the 127 bar magnets.

Core inflation (which excludes food and energy) rose at about a 5% annual rate for a sixth straight month. But other measures of underlying inflation were much lower reflecting the outsized importance of shelter and used cars (again) this month. Some relief should be coming. Look at the BLS's most narrow measure, sometimes called "supercore," which also excludes shelter (which is lagging) and used cars (which are volatile and posted a big increase in May). At an annual rate: 1 month: 1.1% 3 months: 2.3% 6 months: 3.3% 12 months: 4.2%. What does all of this mean? The most standard measure of core inflation is running at a 5% rate. That almost certainly overstates current underlying inflation. But by how much? How much will it fall? I expect some but have no confidence it is falling to 3% let alone 2%. The Fed has strongly telegraphed a pause/skip & nothing about this will change that. But is mildly unfortunate. Over the last 3 months core CPI is 5.0% annual rate. The employment mandate is fine with 283K jobs per month. Both much hotter than expected. Ought to raise now.

Across the country, well over a dozen states are flashing warning signals, triggering the so-called Sahm rule, which links the start of a recession to when the three-month moving average of the unemployment rate rises at least half a percentage point above its low over the past 12 months. The Sahm rule traditionally applies to national unemployment — not state-level data, which can be distorted by small sample sizes — but the trend across the country suggests labour market conditions have softened. Still, the weakness is not yet broad-based and would need to intensify for the worst prognoses to be realised.

We built a small vector autoregressive model with GDP growth, loan growth, and bank lending standards, and giving a one standard deviation shock to bank lending standards using a standard Cholesky decomposition shows that it takes six quarters before tighter credit conditions have a maximum negative impact on GDP, see chart below. In other words, the negative impact of the SVB collapse on tighter lending standards will continue to accumulate until the second half of 2024 because it takes time for banks to repair their balance sheets.

We document that changes in the perceived cost of capital only modestly affect discount rates, in contrast to the stylized view. Using within-firm variation, we show that, on average, a 1 percentage point increase in the perceived cost of capital leads to a 0.3 percentage point increase in the discount rate. We show that discount rate wedges are associated with investment fluctuations at the firm level. A 1 percentage point increase in the wedge lowers the investment rate by 0.9 points. Many firms rarely change discount rates, so the relation becomes stronger over longer horizons. However, even at the 10-year horizon, 40 percent of firms maintain unchanged discount rates and, even if they change, adjust less than one-to-one with the perceived cost of capital.  These results suggest that discount rates have “a life of their own,” beyond the perceived cost of capital.  The average US firm in our sample has increased its discount rate wedge by 2.5 percentage points between 2002 and 2021.

Before the pandemic, births had been steadily declining for many years. There were almost 600,000 fewer annual births in 2019 relative to 2007—a 13% reduction. The size of the COVID-related baby bust, and subsequent rebound were meaningful in that context, but they also represent short-term deviations from an ongoing trend of considerably greater importance. Birth counts in 2022 are still below what they were in 2019.

There are more than 500 active and planned submarine cables, transporting 99% of intercontinental data, arriving at around 1,400 coastal landing stations around the world. The US has succeeded in preventing Beijing from becoming a major player in the global submarine cable market. Chinese supplier HMN Tech has provided or is set to provide the equipment to only 10% of all existing and planned global cables, where the supplier is known, FT analysis of data supplied by the consultancy TeleGeography shows. Meanwhile, French cable maker ASN has supplied 41 per cent and American company SubCom has supplied 21%. Neither ASN nor SubCom responded to requests for comment.

So people are thinking about inflation a lot less, and their interest will probably recede even further toward normal as grocery prices decrease. The question is, how low does the inflation target have to be for the public to lose interest? I now worry that 4 percent may be a bit too high. But 3 percent almost surely isn’t. In which case, should we be willing to pay a high price to get inflation down from 3 to 2? This isn’t a hypothetical question about a remote possibility. It may very well be exactly the question policymakers face a few months from now.

Put another way, the increase in nominal pretax business income since 2019Q4 is equivalent to just 17% of the increase in consumer spending excluding imputed rent since the eve of the pandemic. For perspective, the total amount of nominal pretax business income generated in the U.S. in any given quarter has historically been worth about 21% of PCE ex-imputed rents, which means that the growth in profits has been a little low relative to what one might have naively expected.

In the US, grid connection requests grew by 40 per cent in 2022, a study led by Lawrence Berkeley National Laboratory found. The researchers discovered that nearly 2,000GW of solar, wind and storage projects were in queues to connect to transmission grids — the long-distance, high-voltage electricity network — far more than the installed capacity of the entire US power plant fleet. Many of these projects will never be built. Developers often submit speculative applications, says lead author Joseph Rand. His research looking at connection requests submitted between 2000 and 2017 found that typically only a fifth of projects were built.

The first row of Table 1 presents the number of US firms that manufacture in-house in 2007 across these four categories. Of the 243,700 US manufacturing firms, only 1,700 have majority-owned foreign establishments (columns 2 to 4). Among these multinationals, 1,200 firms own US and foreign manufacturing plants, versus 350 firms with just domestic plants, and only 150 firms with exclusively foreign in-house manufacturing. Firms with both domestic and foreign manufacturing plants are thus the most prevalent type of US multinational manufacturing enterprise. Panel A of Table 1 presents total sales for these firms. Panel B shows that transnational manufacturers - those that perform in-house physical transformation activities in the United States and abroad - employ more workers than all other firm types, with just over half of these workers employed at their US plants. Firms that manufacture exclusively in foreign plants employ less than one million workers worldwide and account for just 2.5 percent of all US manufacturing firms ' global employment.

A joint study last year by Princeton, Harvard and the Massachusetts Institute of Technology found more than 1,400 US-based ethnic Chinese scientists changed their academic affiliation from American to Chinese institutions in 2021 – a 22 per cent increase on the previous year. According to data published in April by the Organisation for Economic Cooperation and Development, the US lost 896 scientific authors in 2021, while China picked up 3,108. The findings are in stark contrast to 2015, when traffic was reversed, with a gain of 2,920 scientists for the US and a loss of 336 to China.

Related: Creating and Connecting US and China Science: Chinese Diaspora and Returnee Researchers

About 6.8 million couples registered marriages in China last year, down 11% from 2021 and the lowest number since 1985, when available government data begins. The data shows the number of unions peaked in 2013 and has since rapidly declined. In 2021, the number of people aged 20-34 fell below 300 million for the first time since the mid-1980s, and there were more than 10 million more men than women in that age cohort, according to data from the United Nations. That gender imbalance could make it even harder to get married, especially as same-sex marriage isn’t legal in China. The average age of a first marriage in 2020 was almost 29, up almost four years from 2010, local media Yicai reported over the weekend, citing national census data.

Total credit to the nonfinancial sector was $49.9 trillion last September, more than triple the level 10 years ago, according to the Bank for International Settlements, a consortium of global central banks. The figure has begun to drop in dollar terms from $51.4 trillion at the end of 2021, though in local currency, the debt continued to climb. The issue isn’t the central government, whose debts are relatively low as a percentage of gross domestic product, but households, the private sector and local governments. Total debt as a share of GDP hit 295% in China last September, surpassing 257% in the U.S. and an average of 258% in the eurozone, BIS data show.

Related: Can China’s Long-Term Growth Rate Exceed 2-3 Percent?