DeLong's Grasping Reality Weblog

Torsten Slok is right: There is no “AI” in the TFP data. But he's wrong to stop there. "No sign of AI in the productivity data" is a headline that confuses the scoreboard with the game.

He presents an SFFed chart:

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Torsten Slok: No Signs of AI in the Productivity Data <https://www.apollo.com/wealth/insights-news/insights/daily-spark/No-signs-of-AI-in-the-productivity-data>: ‘Hundreds of billions of dollars are flowing into data centers, chips and model training, and that capital deepening should mechanically lift output per hour. The harder question is whether AI is also raising TFP, meaning whether it is making the economy fundamentally more efficient. So far, the data says no. The chart below shows utilization-adjusted TFP from the San Francisco Fed, and it is currently sitting slightly below zero with no sign of acceleration since the AI capex cycle began. Output per hour, by contrast, is running near 2.5%, comfortably above its post-2005 average, and that strength is exactly what gets cited as evidence that AI is already working. But strong output per hour alongside flat TFP is the signature of capital deepening, not of a technology shock. The AI boom is clearly visible in investment data and in equity valuations, but it is not yet visible in the productivity statistics, which means the productivity payoff from AI remains a forecast rather than an observation…

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A technology shock can show up in three places:

1. User surplus — enabling better-quality goods and services that statistical agencies never fully capture in measured output (without truly heroic hedonic adjustments).

2. Capital deepening — enabling more investment that clears the hurdle rate but not by much, thus lifting output per hour.

3. TFP — enabling more output from the same inputs, the thing economists actually mean by “total factor productivity.”

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“AI” is certainly doing (1) (and will keep doing so unless it goes horribly wrong the way so much social media did, and our brains are hacked to our detriment by AI-slop). And AI is certainly doing (2): that is growing wedge over the past three years between the “labor productivity growth” and the “TFP growth” line. What "AI” is not (or not yet) doing is (3)—delivering a supernormal increase in measured labor productivity over and above what we would have expected to see given the hurdle rate capital-deepening projects need to earn.

Slok's chart doesn't show that AI isn't working. It shows that AI isn't yet working in the one way TFP measures. That's worth knowing. It is not quite the same as "no signs of AI in the productivity data".

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Much better for the world and, almost surely, for Lenin, had he been a little less quick-witted, a little less a practical man of affairs, and a better Marxist theorist, like. Someone like, say, the Menshevik Yuliy Martov:

Adam Tooze has, I think, picked up the wrong quote about Lenin this morning.

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Tariq Ali wants to give us a highly-cultured Vladimir Lenin, a man of dilemmas and revolutionary possibility tragically overtaken by circumstances—looking past the dissolved parliaments, the secret police terrors, and the shootings of hostages. Like, on a much larger and more terrible scale, the verbal and artistic portraits of Kindly General Lee.

Adam picks this one up from Tariq Ali from nearly a decade ago <https://adamtooze.substack.com/p/top-links-1245-jobs-in-health-care>:

Tariq Ali (2017): How Lenin’s love of literature shaped the Russian Revolution: The father of the Soviet Union was also a Latin buff who adored Goethe and liked to compare his enemies to figures in novels <https://www.theguardian.com/books/2017/mar/25/lenin-love-literature-russian-revolution-soviet-union-goethe>: ‘This, then, was the intellectual atmosphere in which Lenin came of age. His father, a highly cultured conservative, was the chief inspector of schools in his region and much respected as an educationalist. At home, Shakespeare, Goethe and Pushkin, among others, were read aloud on Sunday afternoons. It was impossible for the Ulyanov family—“Lenin” was a pseudonym adopted to outwit the tsarist secret police—to escape high culture. At high school, Lenin fell in love with Latin. His headteacher had high hopes that he might become a philologist and Latin scholar. History willed otherwise, but Lenin’s passion for Latin, and taste for the classics, never left him. He read Virgil, Ovid, Horace and Juvenal in the original, as well as Roman senatorial orations. He devoured Goethe during his two decades in exile, reading and rereading Faust many times.

Lenin put his knowledge of the classics to good use in the time leading up to the October revolution of 1917. In April of that year, he broke with Russian social-democratic orthodoxy and, in a set of radical theses, called for a socialist revolution in Russia. A number of his own close comrades denounced him. In a sharp riposte, Lenin quoted Mephistopheles from Goethe’s masterwork: “Theory, my friend, is grey, but green is the eternal tree of life”…

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Much better to have picked up this quote from Edmund Wilson:

Edmund Wilson (1940): To the Finland Station: A Study in the Writing & Acting of History <https://cdnrepositorios.march.es/sites/default/files/images/node-5451-document.pdf>: ‘[Lenin] and [Maksim] Gorky were listening to Beethoven’s Appassionata: “I know nothing [Lenin said] that is greater than the Appassionata; I’d like to listen to it every day. It is marvelous superhuman music. I always think with pride—perhaps it is naive of me—what marvelous things human beings can do!’

Then screwing up his eyes and smiling, he added, rather sadly: ‘But I can’t listen to music too often. It affects your nerves, makes you want to say stupid nice things and stroke the heads of people who could create such beauty while living in this vile hell. And now you mustn’t stroke anyone’s head—you might get your hand bitten off. You have to hit them on the head, without any mercy, although our ideal is not to use force against anyone. Hm, hm, our duty is in- fernally hard’”…

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Of course, the most ironic thing Tariq Ali is that he still, writing 100 years after Lenin’s coup, is trying to pretend that Lenin won something of value with that classical allusion to Goethe of his.

We, more than 100 years later, know that the Marxist theory-based condemnations of Lenin by Rosa Luxemburg and others were not 100% accurate. If anything was wrong with them, it was that they did not go nearly far enough. They imagined disaster. They did not imagine the worst régimes in human history.

Marx wanted a revolution in a rich technologically advanced industrial society that would create a temporary dictatorship of the industrial proletariat that would lead to a utopian free society of associated producers.

Rosa Luxemburg (and many others!) pointed out that trying to run that playbook in a poor technologically retarded agricultural society would produce nothing good. And she was right:

(1) Rosa Luxemberg:

The tacit assumption… is… socialist transformation is something for which a ready-made formula lies completed in the pocket of the revolutionary party…. [But] what we possess… is nothing but a few main signposts which indicate the general direction… and the indications are mainly negative in character…. Socialism by its very nature cannot be decreed or introduced by ukase…. The whole mass of the people must take part in it. Otherwise, socialism will be decreed from behind a few official desks by a dozen intellectuals…. Decree, dictatorial force of the factory overseer, draconian penalties, rule by terror… demoralizes…. Without general elections, without unrestricted freedom of press and assembly, without a free struggle of opinion, life dies out in every public institution, becomes a mere semblance of life, in which only the bureaucracy remains as the active element…. A few dozen party leaders of inexhaustible energy and boundless experience direct and rule…. An elite of the working class is invited from time to time to meetings where they are to applaud… and to approve proposed resolutions unanimously… The dictatorship of a handful of politicians… caus[ing] a brutalization of public life: attempted assassinations, shooting of hostages, etc… <https://www.marxists.org/ebooks/luxemburg/The_Russian_Revolution_-_Luxemburg.pdf>

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(2) Also worth noting: Felix Somary on Max Weber & Josef Schumpeter:

On my return journey I stopped briefly in Vienna to report to the Rothschild bank on the Bucharest negotiations. Apart from that, Max Weber had asked me to be present at the discussion he was to have with Schumpeter about the succession to his chair at the University of Vienna, Weber wanted to return to Germany and he was thinking of Schumpeter as his successor, but the two men knew each other only superficially although Schumpeter had written an outstanding history of ideas to accompany Weber’s handbook on social sciences. I was worried about the meeting, because a greater contrast between two personalities was hard to imagine.

Max Weber was a restless, nervous type, full of ‘drive’, a Huguenot with deeply-held convictions, for which he strove with every atom of his energy. He battled on without letting up, even when only minor issues were at stake. He was explosive in temperament, verging on intolerance; those who did not know him well could easily have been put off or even frightened at first meeting him. Hugo von Hofmannsthal tried to explain him by saying: ‘He has the gifts of a Caesar who is unable to find a field large enough for his energies.’ There was much truth in that observation: Weber was never in his life able to give his tremendous intellectual and spiritual powers full expression. He took nothing lightly.

Schumpeter on the other hand took nothing hard. He had been educated at the Vienna Theresianum, where the pupils were taught to stick to subjects, and not get personally involved. The rules of the game in every party and ideology were to be learned thoroughly, but nobody should join a party or subscribe to adogma. And Schumpeter was a virtuoso at playing any political game, from the extreme left to the extreme tight. He had worked briefly on the Socialisation Commission in Berlin, which met under the leadership of our Vienna University colleague Hilferding, who at the time led the German independent socialists, for whom the official Social Democrats were too moderate. Hilferding often told me of his astonishment at Schumpeter’s radicalism; but Schumpeter was not radical at all, he merely followed through to the appropriate conclusions, given the premises. He felt that if socialism were to be introduced at the end of the war, it should be in a consistent way.

We met in the Café Landmann opposite the University. Ludo Hartmann, a historian of the Classical world and son-in-law of Mommsen, accompanied Weber, and I came with Schumpeter. I took no notes of our conversation, but can recall the elements of it that impressed me most strongly. The talk turned to the Russian Revolution, and Schumpeter expressed satisfaction that socialism was no longer an abstract theoretical notion, but would now be tested in the real world. Weber said with some heat that communism at the Russian stage of development was a crime — he knew the language and followed Russian affairs closely. He added that developments in Russia would lead to unheard-of human misery and end in a terrible catastrophe.

‘That may well be,’ said Schumpeter, ‘but it would be a good laboratory to test our theories.”

‘A laboratory heaped with human corpses!’ Weber rejoined.

‘Every anatomy classroom is the same thing,’ Schumpeter shot back.

To change the subject, I commented that the war had altered the direction of social developments that would otherwise have gone quite differently. Weber agreed, but unfortunately chose Great Britain as his example, referring to its swing away from Liberalism. But Schumpeter disputed this view. Weber became more vehement and raised his voice, as Schumpeter for his part became more sarcastic and lowered his. All around us the café customers stopped their card games and listened eagerly, until the point when Weber sprang to his feet and rushed out into the Ringstrasse, crying ‘This is intolerable!’ Hartmann followed with Weber’s hat, and vainly tried to calm him down. Schumpeter, who had remained behind with me, only smiled and said ‘How can someone carry on like that in a coffee house!’

I felt unhappy about the incident. Here were two individuals of rare gifts, who were not far apart in their fundamental views on the economy, and in their deep intellectual seriousness. But it was the curse of the German and Austrian haute bourgeoisie that its all too few original personalities, if they ever met at all, immediately became deadly enemies. They all had too much temperament to compromise on issues… <https://archive.org/details/the-raven-of-zurich/>

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(3) & more from Max Weber:

Take as an extreme example the authoritative power of the State or of the municipality in a monarchical constitution: it is strikingly reminiscent of the ancient kingdom of Egypt, in which the system of the ‘minor official’ prevailed at all levels. To this day there has never existed a bureaucracy which could compare with that of Egypt. This is known to everyone who knows the social history of ancient times; and it is equally apparent that to-day we are proceeding towards an evolution which resembles that system in every detail, except that it is built on other foundations, on technically more perfect, more rationalized, and therefore much more mechanized foundations. It is still more horrible to think that the world could one day be filled with nothing but those little cogs, little men clinging to little jobs and striving towards bigger ones—a state of affairs which is to be seen once more, as in the Egyptian records, playing an ever-increasing part in the spirit of our present administrative system… <https://faculty.rsu.edu/users/f/felwell/www/Theorists/Weber/Weber1909.htm>

and:

A progressive elimination of private capitalism is theoreticalIy conceivable, although it is surely not so easy as imagined in the dreamging of some literati who· do not know what it is all about…. Let us assume that some time in the future it will be done away. with. What would be the practical mult? The destruction of the steel frame of modem industrial work? No! The abolition of private capitalism would simply mean that also the top management of the nationalized or socialized enterprises would become bureaucratic.

Are the daily working conditions of the salaried employees and the workers in the state-owned Prussian mines and railroads really perceptibly different from those in big business enterprises? It is true that there is even less freedom, since every power struggle with a state bureaucracy is hopeless and since there is no appeal to an agency which as a matter of principle would be interested in limiting the employer’s power, such as there is in the case of a private enterprise. That would be the whole difference. State bureaucracy would rule alone if private capitalism were eliminated. The private and public bureaucracies, which now work next to, and potentially against, each other and hence check one another to a degree, would be merged into a single hierarchy.

This would be similar to the situation in ancient Egypt, but it would occur in a much more rational—and hence unbreakable—form…. Objectified intelligence is also that animated machine, the bureaucratic organizatlon, with its specialization of trained skills, its division of jurisdiction, its rule and hierarchical relations of authority. Together with the inanimate machine it is busy fabricating the shell of bondage which men will perhaps be forced to inhabit some day, as powerless as the fellahs of ancient Egypt…. It would be made all the more indestructible if in the social sphere a status order were then to be imposed upon the ruled, linked to the bureaucracy and in truth subordinate to it, as in the forced-labor states of the past. An “organic” social stratification, similar to the Oriental-Egyptian type, would then arise, but in contrast to the latter it would be as austerely rational as a machine. Who would want to deny that such a potentiality lies in the womb of the future?…

and:

When one has discussions with present-day socialists… in good faith… it will be found that, except in Russia, they all adhere to this standpoint… the time is as yet nowhere ripe…. When asked for an honest reply, every socialist intellectual will have to give this answer…. In Russia… the so-called Mensheviks… think that the Bolshevik experiment of imposing a socialist order from above, at the present stage of bourgeois society is not only nonsense but also a sin against Marxist dogma. The terrible hatred of these two parties for one another has its roots in this dogmatic accusation of heresy….

It is obviously justifiable to ask[:]… what can a revolution under these circumstances be expected to achieve, expecially during the war? It may well cause a civil war… but it could not bring about a socialist society… <https://opendocs.ids.ac.uk/articles/report/Socialism/26481607/1/files/48256639.pdf>

No more time this AM, but I would note that I have always found Tariq Ali to be a really weird and somewhat sinister dude.

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To know who will control the House, forget the national polls and zoom in on the five districts of PA-10, AZ-6, PA-7, NY-17, and WI-3. Nate Silver and co. see those five as having a 12% chance that seat #218 in terms of vote margins will turn out to be one of those five come November:

A Republican vote-share edge of 2.5% in the popular vote for translating that into House of Representative seats, or so Nate Silver and co. guesstimate. And the five most likely House seats to be #218? They are: PA-10 (Janelle Stelson vs. Scott Perry*), AZ-6 (JoAnna Mendoza vs. Juan Ciscomani*), PA-7 (Bob Brooks vs. Ryan Mackenzie*), NY-17 (Cait Conley vs. Mike Lawler*), WI-3 (Rebecca Cooke vs. Derrick Van Orden*):

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Yes, I have done the natural thing, and I have subscribed to Nate Silver and co.’s “Silver Bulletin”:

• <https://www.natesilver.net/p/nate-silver-2026-midterm-election-polls-model>

• <https://www.natesilver.net/>

Silver BulletinFLIPR 2026 midterm election forecast📈 Our latest midterm forecast…Read more7 days ago · 608 likes · 359 comments · Nate Silver and Eli McKown-DawsonSilver BulletinEssays and analysis about elections, media, sports, poker, and all the other things I care about.By Nate Silver

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At least for the next month.

Nate Silver cares, above all, about getting the percentages right—of getting 75% of his 75% predictions coming true. Thus he is the only person on the planet who does not succumb to wishful thinking in assessing American electoral politics.

And the House and Senate taken together? The guesstimates:

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Nate is also very good on resisting the incredibly stupid framing of any of this as a “horserace”. Now this candidate is ahead—not that one—now this one again. That is not how it works. Overwhelmingly, the things that will turn out to have mattered and decided the forthcoming election have already happened. We just do not know what they will turn out to have been yet.

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Digital arts are bleeding jobs while live entertainment grows. The pattern is suggestive, not conclusive. Yet it is very suggestive indeed:

200,000 fewer in paid creative-arts employmnet today than at the post-plague peak.

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300,000 fewer than the 2010-2019 level. 100,000 is a fall in employment in movie and TV production. But how much of that 100K is the streaming disruption, how much is “AI”, and how much is something else? And how much of the remaining 200K decline can be traced to “AI”?

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And we have:

Joey Politano: AI & the Fall? of the Creative Class <https://www.apricitas.io/p/ai-and-the-fall-of-the-creative-class>: ‘Media firms are decidedly coy about their AI use…. The effects of AI are also hard to disentangle from other factors currently affecting arts businesses…. Yet perhaps the clearest evidence of AI’s influence is just that all subsectors of the digital arts industry are losing jobs, while in-person entertainment is still growing at a healthy pace…. The worst-hit sector [is] movie & sound recording, which has been bleeding jobs at a nearly unprecedented pace over the last three years.

Hollywood has never seen a stretch as bad as the last four years….The streaming era has proven an extremely difficult transition, with traditional films and TV shows losing watch time to user-generated and increasingly AI-assisted or AI-generated content flows….

it’s difficult to meaningfully predict how new technologies will interact with existing arts businesses. Take the unexpected resurgence in book sales over the last four years…. The unlikely savior of the printed word came from perhaps its polar opposite—TikTok… [with] “BookTok” became a new way to source reviews, analysis, discourse, and community in a way that boosted the reading experience and absolutely turbocharged book sales. It’s possible that AI tools could have those same totally unpredictable spillovers….

Arts jobs might be a microcosm for other “creative-adjacent” work… AI-driven job displacement has been relatively minor…. Some white-collar sectors that looked prime for AI automation have even been on a hiring spree over the last few years…. Yet if the economic impact of AI ends up being anywhere near large enough to validate the trillions of dollars investors are currently betting on it, these economic disruptions will only spread from here…

Brad DeLong here: With marginal-cost pricing, Jevons’s Law’s operation requires a price-elasticity of demand greater than one. The problem with the arts is that demanders pay not just with money but also with attention-time. Creative-arts attention-time is also, already, a very high proportion of non-work non-sleep time. Those two factors make the creative-arts sector perhaps the heaviest of heaviest lifts as far as paid employment and technological change are concerned.

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The core hardware cost collapsed to $0.12/W — so why is a California rooftop still costing $3.00/W, and the market shrinking while Pakistan’s is booming? Soft costs, a dead tax credit, and a net-billing rule rewrote the arithmetic: in the U.S., policy and plumbing now matter more than the price of a panel. Chinese export deflation liberated the Punjab and electrified Perth; in California it ran straight into the Net Billing Tariff and stalled:

Globally, solar's rise is a supply-side story: Chinese overcapacity, panels at $0.12/W, households and businesses defecting from the grid.

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But here in California the drivers of stagnation are policy shifts: a repealed tax credit, and a backflow compensation rule that turned the battery, not the panel, into the thing worth buying.

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And the context, from the FT:

Rachel Millard, Humza Jilani, Monica Mark, & Krishn Kaushik: ‘Offensively Cheap’: Solar Power Is Looking Up <https://www.ft.com/content/8b704ae0-1fa2-4303-925f-170fa5d935b3?syn-25a6b1a6=1>: ‘In the badlands of Chakwal, in north-central Pakistan, Bestway Cement is transforming plots of dry earth and olive and peach groves into a forest of solar panels. Its efforts will add 6.34 megawatts of generation capacity by the end of the year…. Already, solar generates over a quarter of the electricity powering its cement plant…. The solar revolution made possible by cheap Chinese photovoltaic panels — and the rise of small-scale, individual power generation — is transforming energy…. Cheaper panels enabled a vast rollout in China itself and helped solar generation evolve from a subsidised technology deployed mostly in markets looking to decarbonise to a vital source of electricity in areas where power is scarce, expensive or unreliable. That process started in countries like Pakistan, Brazil and South Africa and has now spread….

The fallout from the US-Iran war has led to more interest in rooftop solar in Britain, where since the end of August households have been able to buy 800-watt solar panels in supermarkets or DIY stores to plug in at home…. Plug-and-play panels are proving popular in the US despite President Trump’s general antipathy to renewables and his decision to eliminate a tax credit for rooftop solar systems….

“Perth, for example, is covered in rooftop solar,” says Pierluigi Mancarella, chair professor of electrical power systems at the University of Melbourne. “If you have a massive cloud formation, the rooftop PV production can drop by so much that it looks like you have lost basically almost a nuclear power station.”… The system operator has very little visibility over the aggregate gigawatt of generation capacity thus created…

Two big questions:

• First, is $0.12/W Chinese solar-panel export price a stable equilibrium price, one that is going to fall further, or a temporary low driven by overcapacity, dumping, and state subsidy?

• Second, what is going on here in the United States, where things seem to have stalled even as they accelerate elsewhere?

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I do not know the answer to the first. I think I understand the second (but I may not). Let me put this under the fold for now because I am not sure I am right here:

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J.D. Vance promised seven million sidelined men would come roaring back into work. A year of data says native-born male employment ran below its 2024 level—and the “women took all the jobs because men replaced deported immigrants” story turns out to be pure invention":

Mike Konczal assesses the false restrictionist “promise” that mass deportation would pay off for native-born workers.

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Ten hypotheses:

• lower native-born unemployment,

• higher prime-age native-born employment,

• a native-born male-employment rebound,

• gains for the native-born least-educated,

• state-level correlations between deportations and native-born labor-side outcomes,

• faster native-born bottom-end wage growth,

• quicker native-born job-finding,

• rising labor share,

• tighter market for native-born,

• a construction-employment boom for the native-born.

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He checks each. Every one fails. The pattern vindicates the “complementarity view” of East & al. 2023, Cox & East 2026, and many, many more: removing immigrant workers tends to lower, not raise, native-born employment and wages. Complementarity beats substitution, exactly as the empirical literature from the Mariel Boatlift to Miami through the Obama-era “Secure Communities” absolute disaster said that it would.

Deportation shrank the pie rather than redistributing it. Surprise! Surprise!—or, rather, not surprise. The verdict is a clean sweep of nulls and negatives: no employment boom, no wage boom, no market-tightening, no construction windfall. The policy wasn’t a transfer to natives; it was a deadweight loss with casualties:

Mike KonczalData-driven, theory-informed analysis of economics and public policy.CROSSPOST: MIKE KONCZAL: Can We Find Literally Any Sign Deportations Are Helping Native-Born Workers?

<https://newsletter.mikekonczal.com> <https://newsletter.mikekonczal.com/p/can-we-find-literally-any-sign-deportation>

Mike KonczalCan We Find Literally Any Sign Deportations Are Helping Native-Born Workers?In response to my recent post on women gaining 101% of net payroll jobs under the Trump administration, commentators argued that this was largely about immigration, about native-born male workers taking jobs formerly held by deported immigrants and showing up as no net-new jobs. This turned out to be a total fabrication, it never happened, it’s fiction …Read more17 days ago · 45 likes · 1 comment · Mike KonczalShoot the moon! Ten hypotheses, ten charts, and no payoff for native-born workers.Mike KonczalSep 23, 2026

In response to my recent post on women gaining 101% of net payroll jobs under the Trump administration, commentators argued that this was largely about immigration, about native-born male workers taking jobs formerly held by deported immigrants and showing up as no net-new jobs. This turned out to be a total fabrication, it never happened, it’s fiction (see Hypothesis 3 below).

But it did make me realize that it’s been a little bit since I took a dive into the immigration debates. I’m nervous doing this because I know the Trump administration are not exactly “preponderance of the evidence” people. If they find one thing, one way to pitch the data favorable to them, they’ll run with it. Indeed, they spent a lot of 2025 arguing off the CPS raw levels, even though Jed Kolko spent a lot of time politely and ultimately correctly explaining why that was not a good idea. What are the chances we shoot the moon and find that all ten of our different hypotheses turn out to go against the restrictionist case?

Pretty good, actually. I crank through ten indicators where we might expect to see that payoff. But there is no employment or wage-growth boom for native-born workers in this data. I can’t find it. This mirrors what others are finding with more careful work than this speedrun, including Cox and East, 2026 (“The number of male U.S.-born workers at work also declines in the face of ICE activity”) and Herbst and Tekinfind, 2025 on decreased child care workers.

We’re going to move pretty fast through this. There’s a GitHub here where you can go ahead and ask your AI to download it and check it yourself. As we go, let’s channel our inner Jonathan Frakes on Beyond Belief: Fact or Fiction, telling us none of it ever happened. It’s a fake.

Hypothesis 1: Native-born unemployment would fall.

It never happened. It’s higher instead. (Not seasonally adjusted, published BLS series.)

Hypothesis 2: Prime-age employment would rise for native-born workers.

Not this time. Instead, it is lower. (Not seasonally adjusted, aggregated published BLS categories.)

Hypothesis 3: Prime-age employment would rise for native-born male workers. The native-born prime-age employment rate is lower, but maybe men did better. This was the response to the gender split mentioned at the start. During the 2024 election, in response to a question about deportations, J.D. Vance said, “You would take, let’s say for example, the seven million prime-age men who have dropped out of the labor force” and “re-engage folks into the American labor market.” He later noted, “we have seven million—just men, not even women, just men—who have completely dropped out of the labor force.” Has that translated into an employment boom?

It’s a made-up tale. This employment rate has run roughly around 2024 values, being higher over the last winter but much lower this summer. (Not seasonally adjusted, author’s IPUMS calculation.) Note that Hypotheses 2 and 3 together means that female employment rates have fallen even more, potentially tied to the decreased child care availability mentioned above.

Hypothesis 4: Least-educated native workers would do better. Native-born workers without a college degree should have the most to gain when it comes to unemployment rates.

It’s totally pure fiction. (Not seasonally adjusted, author’s IPUMS calculation.)

Hypothesis 5: States with larger declines in noncitizen employment should see larger native-born employment gains.

Not a chance. States with larger measured declines in noncitizen employment as a share of their prime-age population don’t see larger increases in native-born employment rates. This shouldn’t surprise us, East et al. (2023) found that Secure Communities reduced employment and hourly wages among U.S.-born workers. (Author’s IPUMS calculation.)

Hypothesis 6: Native-born wage growth would pick up for lower-wage workers. Let’s stick with nominal wage growth for native-born workers, since the Iran war caused inflation to skyrocket (and real wages to fall), which is very bad for these workers but separate from what we want to explore here.

It’s a fake. Whether it is the 10th, 20th, or 40th percentile, wage growth slowed. Some rebound for 10th percentile, but still against an overall collapse; the wage compression was earlier during the reopening. (Not seasonally adjusted, author’s IPUMS calculation.)

Hypothesis 7: Unemployed native workers could at least find work faster because immigrants were out of the way.

We made it up. The smoothed job-finding rate for unemployed, native-born, prime-age workers slid through 2024, held roughly flat in 2025, and has fallen again in 2026 to its lowest level since 2021.

Hypothesis 8: Immigration is behind the fall in the labor share, so mass deportations should push it back up. That immigration was driving down the labor share was something I remember Batya Ungar-Sargon bringing up during the 2024 election as a reason to support President Trump. I assume other conservatives think this.

It’s a total fabrication. The labor share actually fell suddenly and dramatically starting at the beginning of Trump’s second term starting in 2025 and continued into 2026, as we discussed in a recent post.

Hypothesis 9: Deportations would tighten the labor market. Job openings per unemployed worker and the quits rate should both rise.

We created it. Both measures are at or below their 2024 levels in 2026. Vacancies per unemployed worker have ticked up this year, but only back to where they were in late 2024.

Hypothesis 10: Native-born workers in construction should particularly benefit. It has a very high foreign-born labor share, and it’s hard to automate with AI.

It’s an urban legend. The measured foreign-born share of construction employment fell. But the overall share of native-born prime-age adults working in construction didn’t rise. It stayed roughly flat.

This doesn’t surprise me, and yet I remain surprised by how hard it is to find a broad payoff for native-born workers here. I bet the Trump administration, whose approval now appears to have a 2 handle, is also surprised by how unpopular it and its handling of the economy have become. If they expected these deportations to have such amazing upsides that they’d balance out $1 trillion in health-care cuts and brand new neocon wars, simple economic theory and a well-developed empirical literature would all have told them otherwise.

<https://newsletter.mikekonczal.com/p/can-we-find-literally-any-sign-deportations?utm_source=substack&utm_campaign=post_embed&utm_medium=web&embedding_publication_id=35345> <https://newsletter.mikekonczal.com>

Mike KonczalCan We Find Literally Any Sign Deportations Are Helping Native-Born Workers?In response to my recent post on women gaining 101% of net payroll jobs under the Trump administration, commentators argued that this was largely about immigration, about native-born male workers taking jobs formerly held by deported immigrants and showing up as no net-new jobs. This turned out to be a total fabrication, it never happened, it’s fiction …Read more17 days ago · 45 likes · 1 comment · Mike KonczalMike KonczalData-driven, theory-informed analysis of economics and public policy.

Brad DeLong here: The restrictionist case rests on substitutionist logic: remove foreign-born workers, and native-born workers should see lower unemployment, higher employment rates, faster wage growth, and a tighter labor market. But as people who look at evidence out there in the world rather than inside at the nativism in their own heads have known since David Card’s study of the Mariel Boatlift from Cuba to Miami, that does not appear to be the way the modern U.S. labor market works. Deporting immigrants is not just bad for the U.S. land factor of production, and the U.S. capital, entrepreneurship, and risk-bearing factors of production. It is also on-balance bad for the U.S. labor factor of production as well.

Yes, Mike explicitly does a “speedrun”. But surely, at this point, with so much bad-faith bulls*** being thrown at us by the Trumpists, their enablers, those who just want to report “both sides”, and those who will say anything to try to keep their plutocrat tax cuts and benefit from their kleptocrat connections, a speedrun is more than enough?

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Not only are many of our deep relationships increasingly parasocial, but they are also increasingly role-bound and partial: a pleasing shard of the whole personality, which if parts of it were not kept decently draped and thus hidden, would mean that we would fail to maintain the “social interaction… balance between self-expression and the accommodation of others, which means that in the analog world it is a constant struggle to strike a balance between being myself and annoying everyone around me…”

Ben Thompson is very excited about FaceBook’s Muse Agentic System.

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But there is a potential fly in the ointment, and one that should, I think, push him back toward using his own systems and away from his using, or indeed recommending, Muse.

Why? Because of this observation he makes:

Ben Thompson: One More Note on Agents, Meta Connect, Meta Enterprise Platform <https://stratechery.com/2026/one-more-note-on-agents-meta-connect-meta-enterprise-platform/>: ‘How much of ourselves should we show the world?… Do I want you to know that I am a longtime Fortune magazine journalist who covers technology and is now writing a book about Facebook? Or should I tell you I am a fifty-seven-year-old husband of an artist, father of a teenage girl, sometime poet, and former union activist?… On my single Facebook profile, pretty much all is revealed….

Zuckerberg, along with a key group of his colleagues… believes that by openly acknowledging who we are and behaving consistently among all our friends, we will help create a healthier society. In a more “open and transparent” world, people will be held to the consequences of their actions and be more likely to behave responsibly….

I just flat out disagree….

Separating my identities… [is] far superior…. Social interaction… is always a balance between self-expression and the accommodation of others, which means that in the analog world it is a constant struggle to strike a balance between being myself and annoying everyone around me…. [Hence] my enthusiasm for messaging and group chats… I can simultaneously be a Bucks fan with the Fiefdom, be a tech enthusiast with my Slack group, explore ideas with my WhatsApp group, and talk politics with my trusted friends. The fact that I am not my whole self in any of these groups is a feature, not a bug, and one that is uniquely made possible by digital…. I am in private groups with plenty of folks that I disagree with about a whole host of things, but because we share a common interest, and are ok being trusted friends on that vector, I have learned a lot about why they believe what they believe about a bunch of issues…. It helps my analysis, and I think it makes me a better citizen…. What I think is even less debatable is that having separate identities for your private life and work life is not just health[ier], but also a vastly superior product experience…

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That above seems to me to be 100% true.

There is great value in role-bound structured interactions, and in keeping them within the structures, even with close friends.

Of course, there is also value in occasionally breaking out of those role-bound interactions, and giving a hint of the multi-dimensional and multi-faceted deep self.

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But only a hint. And not too often. And mostly as a sign of concern and connection, rather than as a breaking or a widening of the role-structure. Life just works better when one recognizes that there are times and places to be just one of “[1] a longtime… magazine journalist who covers technology… [2] is now writing a book… [3] a fifty-seven-year-old husband of an artist, [4 a] father of a teenage girl, [5 a] sometime poet… [or 6 a] former union activist…”. And yet FaceBook wants very much to stop him from being able to properly shard his self to do that.

Yet Ben Thompson overlooks that when he begins talking about FaceBook’s Muse Agentic System, “provisioning every user in… with a virtual machine with a 2-core processor, 8GB of RAM, and 8GB of storage.., a real-deal computer, which is pretty remarkable, and also the only way to make agents work for most people…” which has gotten him instantly excited, as he had found:

first coding agents, then an overall idea tracker agent… most recently an agent specifically tuned to my company’s needs…. Agents… are an AI that has access to a computer…. AI w[ill] not replace computers, but rather operate them… not that probabilistic LLMs would somehow become deterministic, but rather that LLMs would be able to leverage deterministic computers to do computer things; that’s exactly what an agent does, augmented by its ability to write things down…

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But then he brings himself up short, when he runs into FaceBook’s idea that its Muse Agentic System would be not just for the home but for the office as well:

Having separate identities for your private life and work life is not just health[ier], but also a vastly superior product experience. We just saw Microsoft realize that Copilot for both professional and personal lives was a mistake, and double down on the former; that Meta is risking the possibility of owning the latter to pursue the former, with literally no reason to think they might succeed other than what I believe to be a mistaken understanding of human nature, is crazy to me. Muse is cute and fun; why would you want to associate that with work, and intermingle what you have to do with what you want to do?…

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I am instantly reminded of Erving Goffman. We are no longer in the environment of evolutionary adaptation, where we see and interact with the same 70 people day after day after day. In a typical day I talk and listen in person in interactive exchanges to or move in the same space as step around perhaps 200 people, 180 of whom I have never seen before and will never see again. That works only because almost everybody, almost all the time, stays in their social-role lane.

Goffman’s core argument: that healthy people “segregate the audiences” to whom they perform different roles is how interaction stays coherent, not how it turns dishonest, in the huge amount of human sociality that is simply The Presentation of Self in Everyday Life. A self made legible to all roles at once maximizes role strain rather than resolving it. Role theory’s functionalist strand tells us that society coheres because a bank teller, a teacher, a patient each come with a script, and so most encounters need no negotiation. A role-unbound agent reintroduces negotiation into contexts that used to and ought to run on autopilot. That is friction disguised as personalization. And the “constant struggle to strike a balance between being myself and annoying everyone” that your draft quotes is civility.

Plus Mark Zuckerberg assures us now that Muse won’t share VM data with ad systems. But isn’t a complete, cross-context dossier of a whole human is the most valuable advertising asset ever assembled? The odds that Zuckerberg will not only change his mind in the future but knows right now that he will change his mind in the future are very very high.

And there is, of course, the very deep problem with the whole FaceBook enterprise: it is there to harvest your eyeballs and eardrums to make money by selling you ads. Ben Thompson may be the only person on earth who likes FaceBook ads—he sees them as just more amusing and informative content. But even Ben has had it up to here with Amazon and Google ads as things that attack and degrade his quality of life in the interest of making mere billionaires into multi-billionaires. And I think he will, someday, come around to recognizing that FaceBook has an even bigger alignment problem vis-à-vis the flourishing of Ben Thompson.

So: No, I am not going to be spending any time with Muse.

• Goffman, Erving. 1959. The Presentation of Self in Everyday Life. Garden City, NY: Doubleday. <https://monoskop.org/images/1/19/Goffman_Erving_The_Presentation_of_Self_in_Everyday_Life.pdf>.

Goffman Presentation Of Self3.43MB ∙ PDF fileDownloadDownload

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Everyone wants to blame the Iran War for 5% yields. But the inflation-breakeven line on my chart that should have jumped if they were right never moved — and that changes the diagnosis. I think we are driven back on (a) the “AI” investment book, and (b) a pronounced expectations-based tail-chasing non-linearity in transformation of the safe-asset shortage into a safe-asset glut:

Why have ten-year US Treasury interest rates jumped to 5.25%? The lazy answer blames the Iran War and the resulting inflation surge. I suspect otherwise. We have the extraordinary “AI”-driven investment boom. We have the erosion of the safe-asset premium that had been the result of the great post-2008 safe-asset shortage. My view: the truth is probably a combination — with the safe-asset piece probably the more worrisome.

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Nominal yield, TIPS yield, and inflation-breakeven: the current ten-year matures in late 2036:

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And we have Paul Krugman writing:

Paul Krugman: Booms, Bombs & Bonds: Interest Rates, Part I <https://paulkrugman.substack.com/p/booms-bombs-and-bonds-interest-rates>: ‘My best guess is that [right now] we’re mainly looking at the effects of the immense boom in AI-driven investment, but that the inflationary impact of the Iran War has reinforced those effects by triggering a change in the policy “narrative”…

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He sees four serious possibilities out there in the literature:

Serious economic analysts are currently telling four main stories…

They are:

1. War & inflation. The Iran war disrupted world oil supplies, compounding the Russia-Ukraine war’s earlier constriction of diesel and refined-product markets. The resulting inflationary surge prompted central banks to raise rates. The conjunction of higher short-term inflation and short-term policy has crystalized a shift in expectations about the longer-run.

2. The AI boom. Firms are investing on a vast scale (even though the ultimate economic payoff remains uncertain). Against the backdrop of an investment boom of this magnitude, interest rates at least this elevated are precisely what we would expect to see.

3. The erosion of the safe-asset premium. The United States has long borrowed cheaply because its debt was regarded as uniquely “safe.” That premium presupposes relative scarcity—and the sheer quantity of debt now outstanding has begun to erode it.

4. Debasement. Finally, the fiscal predicament is not America’s alone: France and the United Kingdom are likewise running large deficits while proving politically incapable of decisive correction. In an emerging economy, one would openly entertain the prospect of engineering inflation to erode the real value of the debt. At least some analysts contend that precisely that is already under way.

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If (1) or (4) were the main factor pushing the rise in long-term interest rates, however, we would expect to see the red inflation-breakeven line tilt up when the bond interest-rate line tilted up. It didn’t. Thus we are driven back to (2) and (3). There is an argument that (3) has to be a gradual process, and that what we are seeing now is not a gradual process. I think that argument is wrong. What we are talking about here is an expectational equilibrium in which the safe asset premium on U.S. Treasuries depends on everyone else believing that there is a safe asset premium on U.S. Treasuries. And such equilibria, when they unwind, can unwind suddenly and completely. So I see (2) and (3) as each live possibilities, and the truth probably a combination of the two.

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A Treasury Secretary who controls neither the budget deficit nor the money supply nor international capital flows is never the “House"“ in financial markets, and anyone who claims to be such is, as Paul Krugman says, beclowning himself:

Paul Krugman sees that Scott Bessent—whom we all remember claimed with confidence and authority in the fall of 2024 that Donald Trump was really a free trader, and that his talk of tariffs was “escalating to deëscalate”—as having has destroyed his reputation by becoming a Trump lickspittle. Thus he is another example of the iron law that anyone who serves Trump destroys his own credibility and dignity—gives them to Trump, Trump takes them, usually does not even say “thank you”, and then moves on, offering nothing in return.

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Bessent, after intervening to support the yen, publicly declared “I am the house now” dared traders to bet against him, then did a small QE operation in 30-year Treasuries to try to push long rates down. But:

Trump’s rejection of an Iranian proposal to end the war
→ crude oil prices spiked back up
→ elevated inflation (diesel near record levels)
→ the Fed keeps short rates high
→ that expectation feeds into long-term rates
→ rates hit new records.

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Bessent’s jawboning was steamrolled by the very administration whose sycophancy he participates in. And Bessent then compounds his idiocy by predicting Iran’s economic collapse “within two weeks”:

Paul KrugmanNotes on economics and moreCROSSPOST: PAUL KRUGMAN: The Beclowning of Scott Bessent

<https://paulkrugman.substack.com/p/the-beclowning-of-scott-bessent> <https://paulkrugman.substack.com>

Paul KrugmanThe Beclowning of Scott BessentOne iron law of current politics is that nobody who associates themselves with Donald Trump emerges with a shred of credibility. For some, that’s not a big loss — it’s not as if anyone respected Pete Hegseth even before he decided that the key to military success in an age of drones and AI was more testosterone. For others, however, the costs are real. …Read more11 days ago · 1512 likes · 255 comments · Paul KrugmanAnother Trump enabler pays the pricePaul Krugman

2026-09-29 04:20 PDT

One iron law of current politics is that nobody who associates themselves with Donald Trump emerges with a shred of credibility. For some, that’s not a big loss — it’s not as if anyone respected Pete Hegseth even before he decided that the key to military success in an age of drones and AI was more testosterone. For others, however, the costs are real. I’m old enough to remember when Marco Rubio was widely considered a reasonable, thoughtful politician.

Right now, however, my candidate for the biggest loser is Scott Bessent, the Secretary of the Treasury. Bessent started out with significant reputation to lose: When Trump selected him, this was the headline in the Financial Times:

Jason Furman, Barack Obama’s chief economist, described him as a “credible Treasury secretary who has a real understanding of the global economy”.

But Bessent has now transformed himself into the Baghdad Bob of bonds.

Three weeks ago, after intervening (for reasons that remain somewhat unclear) to support the Japanese yen, Bessent boasted about his ability to move markets and dared investors to bet against his, declaring “I am the house now.” He then tried to push long-term interest rates down, buying 30-year U.S. Treasuries in a move some have compared to paying down part of your mortgage by running up your credit card balance.

Here’s how that’s going so far:

To get some perspective on how high interest rates have gone, here’s a longer-term perspective:

We haven’t seen interest rates this high since the fading days of the dotcom bubble.

Why are interest rates hitting new records? The backdrop, as I argued in last Sunday’s primer, is the huge AI-driven investment boom; more on that next week. But the immediate cause of the latest interest rate spike was Trump’s rejection of an Iranian proposal to end the war. This rejection sent crude oil prices, which for a while had fallen considerably, shooting back up:

It’s notable, by the way, that oil prices remain high even though a significant amount of oil is now being shuttled through the Strait of Hormuz by night, on smaller vessels. That’s an interesting story, which has a lot to do with the fact that oil from the Hormuz shuttle runs must be transferred to larger vessels before being shipped to markets in Europe and Asia; around 15 percent of the world’s large crude carriers are now parked off the coast of Oman, waiting to be tanked up. This is creating a shipping crunch:

But that’s a topic for another day. For now, the point is that with oil still high and refined products, especially diesel, still close to record levels, inflation will remain elevated. And this in turn means that the Federal Reserve will keep short-term interest rates high, an expectation that is feeding into longer-term rates. Hence Bessent’s bond-market humiliation.

The truth is that Bessent might not have been able to get interest rates down even in the best of circumstances. But he certainly won’t get anywhere as long as Trump keeps believing that he can somehow convert his Iran debacle into a triumphant victory. And Trump will keep believing that as long as he is surrounded by sycophants who tell him what he wants to hear.

Sycophants like, for example, Scott Bessent, who is predicting the imminent collapse of the Iranian economy, possibly within two weeks. Bessent is right to say that the embargo on Iranian oil exports is placing the country under great economic strain. But his implicit prediction that this will quickly produce a deal that Trump can call victory looks no more plausible than his boasts about the bond market.

The big question now is, why would anyone with a reputation to lose work for Donald Trump? As the beclowning of Bessent shows, joining the Trump team won’t just damage your reputation; it will utterly destroy it.

<https://paulkrugman.substack.com/p/the-beclowning-of-scott-bessent> <https://paulkrugman.substack.com>

Paul KrugmanThe Beclowning of Scott BessentOne iron law of current politics is that nobody who associates themselves with Donald Trump emerges with a shred of credibility. For some, that’s not a big loss — it’s not as if anyone respected Pete Hegseth even before he decided that the key to military success in an age of drones and AI was more testosterone. For others, however, the costs are real. …Read more11 days ago · 1515 likes · 255 comments · Paul KrugmanPaul KrugmanNotes on economics and more

Brad DeLong here: Krugman calls it beclowning; the deeper truth is that Bessent torched his reputation long before the bond market got him.

Jason Furman did not have to participate in the sanewashing of the Trump II administration by calling Scott Bessent a “credible Treasury secretary”.

But he did.

Even though at the same time Bessent was setting his credibility on fire by assuring us that a Trump II administration would achieve 3-3-3: 3%/year real GDP growth, 3 million BPD more of oil production, and a 3% federal deficit as a share of GDP. Even though at the same time Bessent was setting his credibility on fire by assuring us that a Trump II administration would truly, surely be a free-trade administration because Trump was, in his heart of hearts, a free-trader, and was only talking about escalating tariffs as a way to strike deals to deëscalate them.

Trump was never a free-trader, and then when the Republican congressional caucus decided to let him play with “emergency” tariff toys, it was very clear from the get-go that Trump was like a pig in shit. And as for “deals”? Well, since Trump never keeps them, they were and are never real.

The days of sanewashing Treasury Secretary Bessent should never have been, and if they had been by now shoud have long been over.

But, still, we do have people overlooking the obvious that:

Bessent has now transformed himself into the Baghdad Bob of bonds.⁠..

Indeed. The not-so-secret secret is that he always was:

• End net immigration—as Trump has—and the possibility of 3%/year real GDP growth goes out the window. And Bessent knew this before he took office. Forecasts of full-year 2026 and 2027 real GDP growth around 2.1%.

• The deficit is twice 3% of GDP and moving the wrong way. Republican congressional caucuses will never vote for Medicare or Social Security or Defense cuts or for tax increases. “Emergency” tariffs by the fiat of the executive are not a serious budget-balancing item, as they are an order of magnitude too small. And even a Republican congressional caucus will only vote for Medicaid cuts if they are immediately passed through to tax cuts. And Bessent knew this before he took office

• Domestic oil production is currently 13.8 million barrels/day, up 0.6 million from the 2024 baseline. Without huge new subsidies, that third “3” was never attainable in the absence of a geopolitical and geoeconomic catastrophe of the sort, well, that it looks like Trump may just be managing to create. And Bessent knew this, too, before he took office.

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