“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts

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Prospects For A Soft Landing: What Could Make The Fed’s Job Easier Or Harder

Jan Hatzius, Alec Phillips, David Mericle, Spencer Hill, Joseph Briggs, Ronnie Walker and Manuel Abecasis Goldman Sachs

Date Posted:: June 27, 2022
Is Database:: Database

@GoldmanSachs reports a 2.85mm workforce decline: aging accounts for 700,000, early retirements for ~850,000, and 1.3mm exits depress labor force participation by 1.1pp from pre-pandemic levels.

The labor force has seen a 2.85m reduction, with 700,000 due to population aging, 850,000 from early retirements, and 1.3m from other factors like Covid fears and financial cushions. This has depressed the labor force participation rate by 1.1pp compared to pre-pandemic levels. Our baseline forecast anticipates that 1m workers will return to the labor force, including some early retirees and others who left for various reasons. This return could slow wage growth by 0.2pp, aiding the Fed's efforts to manage inflation without triggering a recession. However, to achieve wage growth of 3.75%, further reductions in labor demand are necessary, potentially requiring GDP growth of 1-1.5%, which is below potential but not recessionary.

Our baseline forecast assumes that the fading effects of fiscal transfers and pandemic bonuses will lower wage growth by 0.75pp; inflationary shocks will gradually diminish, bringing down short-term inflation expectations by enough to slow wage growth by another 0.5pp; 1 million workers will return to the labor force, slowing wage growth by another 0.2pp; and the job openings rate will fall 0.5pp due to natural normalization, reducing wage growth by just over 0.1pp (Exhibit 9). To return wage growth the rest of the way to 3.75%, policymakers would need to further reduce labor demand by enough to lower the job openings rate by another 1pp and raise the unemployment rate by 0.3pp. We previously estimated that this would require GDP growth of about 1-1.5%, below potential but not in recessionary territory. The labor force participation rate remains depressed by 1.1pp relative to its pre-pandemic rate, equivalent to a 2.85mn reduction in the labor force. We estimate that 700k of this is due to natural population aging, 850k is due to early retirements that are less likely to reverse, and 1.3mn is due to a combination of other reasons including Covid fears, a larger financial cushion due to pandemic savings and house and stock price appreciation, and changes in lifestyle (Exhibit 5). Our baseline forecast assumes that 1mn people will return to the labor force in the next year, including a modest share of the early retirees and most of the others who left. Encouragingly, most prime-age workers who left the labor force during the pandemic still intend to search for work in the next 12 months (Exhibit 6).

Jan Hatzius, Alec Phillips, David Mericle, Spencer Hill, Joseph Briggs, Ronnie Walker and Manuel Abecasis, “Prospects For A Soft Landing: What Could Make The Fed’s Job Easier Or Harder,” Goldman Sachs, June 5, 2022

3% vs. 60%

Torsten Sløk Apollo

Date Posted:: April 8, 2026
Is Database:: Database

Torsten Sløk notes the direct lending market is ~$2T or 3% of household and non-financial debt outstanding. To provide context, he shows that in 2006, on the eve of the crisis, mortgages accounted for ~60% of such debt.

The direct lending market is roughly $2 trillion, or about 3% of total debt outstanding for US households and businesses. By comparison, mortgages accounted for about 60% of total household and corporate debt at the peak of the housing bubble in 2006.

Takeaways by Macro Roundup^® AI

Direct lending represents a small but growing alternative to traditional bank financing for businesses and households.
The mortgage market’s dominance has shifted dramatically since the 2006 housing peak, reducing systemic risk concentration.
Non-bank lenders now capture meaningful market share in credit provision across the economy.

Top 10% of Earners Drive a Growing Share of US Consumer Spending

Jonnelle Marte Bloomberg

Date Posted:: September 17, 2025
Is Database:: Database

Mark Zandi finds Americans in the top 10% of the income distribution accounted for 49.2% of consumer spending in Q2, the highest level since 1989.

Consumers in the top 10% of the income distribution accounted for 49.2% of total spending in the second quarter, up from 48.5% in the first quarter, reaching the highest level in data going back to 1989, according to an analysis of Federal Reserve data by Mark Zandi, chief economist for Moody’s Analytics. In contrast, the bottom 80% of the income distribution, or consumers making less than roughly $175,000 a year, have seen their spending merely keep pace with inflation since the pandemic.

Litigation Nation, Engineering Empire

Jonathon Sine Cogitations

Date Posted:: September 2, 2025
Is Database:: Database
Is Important:: Important

Jonathon Sine argues China “is moving beyond its breakneck industrial prime, facing similar dilemmas to those America confronted in the 1960s and 70s.” The ratio of science/engineering to humanities undergraduate majors is 2:1 in both the PRC and US.

Dan Wang’s “big idea” [is] “China is an engineering state, building big at breakneck speed, in contrast to the United States’ lawyerly society, blocking everything it can, good and bad.” I re-group US college majors according to Chinese disciplines to allow for rough comparison. Surprisingly, the ratio of science/engineering to humanities/social sciences is 2:1, the same as in China (if one groups management with science/engineering, as I also do for China). As with China today, America’s breakneck building phase was decidedly winding down by the 1960s. Urbanization went from 40% in 1900 to 70% by 1960, and grew much more incrementally over the next 60 years to 85% by 2020. The country simply did not need to continue building dams, expressways, and energy production facilities at breakneck pace. It became much more a matter of maintaining and upgrading (which has not gone well, at least according to the American Society of Civil Engineers’ report card). The American [building/investment slowdown that started after the 1970s] may be more about structural economic shifts than lawyers.

How America’s AI Boom Is Squeezing The Rest Of The Economy

Economist Staff The Economist

Date Posted:: August 19, 2025
Is Database:: Database
Is Important:: Important

As AI-related investment has risen since 2023, residential and nonresidential investment have declined or flatlined. This may suggest that a relatively rate-insensitive AI buildout is crowding out more interest-sensitive forms of investment.

Something like a sixth of the 2% rise in American real GDP over the past year has come from investments in computer and communications equipment, including chips, and data centres. Add in the grid upgrades to power AI models, plus the intellectual-property value of the software itself, and one estimate puts the boom’s contribution to real GDP growth at 40%. The trouble is that the very sector powering so much of America’s economic growth is squeezing the rest of its output. Housebuilders, for instance, cannot afford to be blithe about higher borrowing costs. Data centres have also constrained the rest of the economy by keeping energy prices high. Average American electricity bills have risen by 7% so far in 2025, at least in part due to the extra strain data centres have put on the grid. Real consumption has flatlined since December. Housebuilding has slumped, as has non-AI business investment.

Is it Over?

Joseph Wang Fed Guy Blog

Date Posted:: August 18, 2025
Is Database:: Database

Following tepid reactions to the release of GTP-5, Joe Wang observes, “It is looking more like companies are spending hundreds of billions on rapidly depreciating GPUs that produce a commoditized product that most clients only modestly benefit from.”

GPT-5 users widely expressed disappointment in the capabilities of the new release, which seemed in some ways a step back. This sentiment is reflected in benchmarks that show a modest improvement in capabilities since the significant improvement in version 4 released two years ago. In addition, the benchmarks suggest a broader convergence in the capabilities of AI models. Commentary suggests this could be due to inherent limitations in the LLM technology and exhaustion of new training data. AI is fascinating technology, but it may not justify the enormous sums spent in its pursuit. It is looking more like companies are spending hundreds of billions on rapidly depreciating GPUs that produce a commoditized product that most clients only modestly benefit from. The entire macro landscape would look very different without the support of the AI boom.

US Households and Firms Are in Great Shape

Torsten Sløk Apollo

Date Posted:: March 31, 2025
Is Database:: Database

Torsten Sløk notes that US household and banking sector debt has fallen to its lowest level in decades as a % of GDP, while corporate leverage has moved sideways. “The bottom line is that the private sector in the US is in incredibly good shape.”

Household sector leverage and banking sector leverage have declined significantly since 2008. Over the same period, federal government leverage has increased significantly, and corporate leverage has moved sideways. The bottom line is that the private sector in the US is in incredibly good shape.

@GoldmanSachs reports a 2.85mm workforce decline: aging accounts for 700,000, early retirements for ~850,000, and 1.3mm exits depress labor force participation by 1.1pp from pre-pandemic levels.

Torsten Sløk notes the direct lending market is ~$2T or 3% of household and non-financial debt outstanding. To provide context, he shows that in 2006, on the eve of the crisis, mortgages accounted for ~60% of such debt.

Takeaways by Macro Roundup® AI

Related Articles:

Mark Zandi finds Americans in the top 10% of the income distribution accounted for 49.2% of consumer spending in Q2, the highest level since 1989.

Related Articles:

Jonathon Sine argues China “is moving beyond its breakneck industrial prime, facing similar dilemmas to those America confronted in the 1960s and 70s.” The ratio of science/engineering to humanities undergraduate majors is 2:1 in both the PRC and US.

Related Articles:

As AI-related investment has risen since 2023, residential and nonresidential investment have declined or flatlined. This may suggest that a relatively rate-insensitive AI buildout is crowding out more interest-sensitive forms of investment.

Related Articles:

Following tepid reactions to the release of GTP-5, Joe Wang observes, “It is looking more like companies are spending hundreds of billions on rapidly depreciating GPUs that produce a commoditized product that most clients only modestly benefit from.”

Related Articles:

​​Torsten Sløk notes that US household and banking sector debt has fallen to its lowest level in decades as a % of GDP, while corporate leverage has moved sideways. “The bottom line is that the private sector in the US is in incredibly good shape.”

Related Articles:

Takeaways by Macro Roundup^® AI

Torsten Sløk notes that US household and banking sector debt has fallen to its lowest level in decades as a % of GDP, while corporate leverage has moved sideways. “The bottom line is that the private sector in the US is in incredibly good shape.”