Althouse: At Arthur's Café...

April 22, 2020

At Arthur's Café...

... you can see what's new.

290 comments:

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heyboom said...: Anne-I-am aka S.C.U.D. (if I recall):

It just so happens that I have a tee time on Sunday afternoon with three of my other golf buddies. Playing a course in Simi Valley. Our last round was on 3/16. Can't wait!; 4/23/20, 12:14 AM
Mark said...: Again!

But it figures. The only kind of luck I get is useless and pointless.

Unless there is some money involved?? Is there??? Some kind of commenting bonus??; 4/23/20, 12:14 AM
Birkel said...: "...temporary halt of economic activity..."

That right there is ignorance. It's just so God damned stupid as to require the reader to physically smack their own forehead with an open palm.

How long and at what growth rate do you suppose we will make up that (low end estimate) of 40% loss over Q2 and Q3?

How long will LA County employees have to take a 10% cut to their pay? University of Michigan employees?; 4/23/20, 12:14 AM
Josephbleau said...: To my observation this blog seems to have gone through the 50th anniversary of Earth Day without a real mention? I thought there would be more of crono is the Earth’s way of telling humans to f o and d.; 4/23/20, 12:14 AM
walter said...: Anne,
WI has golf now too! (I don't care for that)
But it has a "plan" that's a self-licking ice cream cone.
So..not a strong indicator beyond the desire of the protected class's desire to hit the courses.; 4/23/20, 12:15 AM
Yancey Ward said...: People with big money on the line don't see a V-shaped recovery. The big negative prices in the front month contract for oil got all the headlines Monday afternoon into today, but the real message of the oil market was completely ignored in the media- it is the sort of thing they are completely blind to. That front month contract was an anomaly, yes, but what happened Tuesday was more important- the entire curve shifted down significantly. Every futures contract out to January 2023 is under $40/barrel- every one out to this October is under $30/barrel. This is the oil market predicting a deep depression, not a recession.

New and continuing claims for unemployment are on the schedule tomorrow. The expectation is between 3-5 million more unemployed, which would be 19-21 million total in just 4 weeks. This is already a 15% unemployment rate, and the claims aren't likely to abate until the first week in May, and even then it is likely that continuing claims still grow after the reopening- it is very unlikely that even 2 million of the laid off get call back immediately. The secondary effects aren't even accounted for yet- governments will have to start laying off people this week, and tax revenues are not going to be bouncing back anytime soon- state and local governments will likely lay off millions in total by August.

20%+ unemployment by June is pretty much set in stone- 30% is completely possible.; 4/23/20, 12:16 AM
Mark said...: What?

I cheered Earth. I said, "Go Earth!"

I said it was my favorite planet, too.; 4/23/20, 12:16 AM
J. Farmer said...: @Ken B:

And we'd be in a better place if Trump had not run gigantic deficits in a boom.

At the risk of increasing my vulnerability, I should admit I don't actually believe that either. Now his budget priorities were not mine, but we should basically spend the money we think we need for that year and be done with it. A recurring feature in the GOP has been to use deficits to fund reductions in tax rates and increased military spending but then act like a deficit hawk on almost all other spending, demanding that we "live within our means" or "tighten our belts." Trump should've used the budget as an opportunity to present a populist case to the American public. Instead, he settled on the same formula of tax cuts and more defense spending. But as previous administrations have learned, reductions in entitlement spending are very politically difficult. Luckily, I don't think we should bother with trying to reduce them.; 4/23/20, 12:16 AM
Birkel said...: Yancey Ward,
We are already at 20% unemployment. 22 million the last four weeks out of a work force of 165 million workers adds ~13.3 percent to the 3.8 percent we had a month ago. That gets us to 17% without considering how many people did not file when immediately eligible for benefits.

This unemployment data point will give us cumulative 27 million newly unemployed. That's 1/6 of the people who were working in late February.

And now municipal and white collar workers are getting furloughs/layoffs/pink slips.; 4/23/20, 12:23 AM
narciso said...: Well venus is blazing hot (james hamsen was an expert on venus's atmosphere) and mars is cold (because of the atmosphere) and dusty.; 4/23/20, 12:23 AM
Birkel said...: Obama ran year-over-year debt increases of $1.25 trillion, on average.
Trump's were well below that.

Ken B is a liar and a Concern Troll.; 4/23/20, 12:25 AM
Yancey Ward said...: Birkel, you are correct- I omitted last week from my calculations. Mea culpa.; 4/23/20, 12:25 AM
Yancey Ward said...: Surveys for May's employment report wrapped up last week, so they only capture the state in the first two weeks of April. That report is likely to look "promising" because it will completely miss 16 days of layoffs, and only show around 10-12 unemployment.; 4/23/20, 12:27 AM
narciso said...: So tell me how this ends well, or not horribly.; 4/23/20, 12:27 AM
J. Farmer said...: @Birkel:

That right there is ignorance. It's just so God damned stupid as to require the reader to physically smack their own forehead with an open palm.

Without endorsing everything it says, this part is what I am referring to that has inspired such self-abuse:

"It’s tempting to compare the economic fallout from the coronavirus pandemic to prior business cycle downturns, particularly the Great Recession. However, such comparisons may not be particularly apt—as evidenced by the unprecedented surge in initial jobless claims over the past three weeks. Recessions typically develop gradually over time, reflecting underlying economic and financial conditions, whereas the current economic situation developed suddenly as a consequence of a fast-moving global pandemic. A more appropriate comparison would be to a regional economy suffering the effects of a severe natural disaster, like Louisiana after Hurricane Katrina or Puerto Rico after Hurricane Maria."

-The Coronavirus Shock Looks More like a Natural Disaster than a Cyclical Downturn; 4/23/20, 12:28 AM
Josephbleau said...: “People with big money on the line don't see a V-shaped recovery. “ we can’t deny science and Econ is almost a science, at least a social science.

F500 leadership teams are clear on what they are hearing from the best minds. No vee, long L. We have F’ed the golden goose for a long time. Once you damage the psychology it takes a long time to go back to fooling yourself. If we let FDR type pols run the show we may need a future war to create prosperity again. But that won’t work now because weapons are too powerful. Rosie the riveter won’t work in the welding shop for 4 years making tanks, she would rather be killed by precision weapons or anthrax.; 4/23/20, 12:29 AM
Birkel said...: Yancey Ward,
What you said was correct. 19-21 million in four weeks is true. But that first week was 6 million plus.

Everything you said about oil was also correct. The ROW is hella-fuct. The US will be lucky to reach last year's GDP in many years.

Smug, did you figure out what the looking forward growth rate ought to be? And how quickly we recover that temporary economic loss? (I grant that if you intended temporary to mean along the timescale for geological transformation you were correct.); 4/23/20, 12:30 AM
Yancey Ward said...: "A more appropriate comparison would be to a regional economy suffering the effects of a severe natural disaster, like Louisiana after Hurricane Katrina or Puerto Rico after Hurricane Maria."

The reason those aren't big overall impact events, Farmer, should be obvious to you, right? Right?; 4/23/20, 12:31 AM
eddie willers said...: I saw who posted first and decided to go to bed.

'Night.; 4/23/20, 12:32 AM
Birkel said...: Smug,
That is the sort of Happy Talk the New York Fed must produce. They are institutionally bound to talk positively so as to avoid a panic.

But if you were those guys' brokers (like the execrable Burr or Feinstein) you would be consummating a lot of sell orders.; 4/23/20, 12:34 AM
J. Farmer said...: @Josephbleau:

we can’t deny science and Econ is almost a science, at least a social science.

Economics is not even "almost a science." It's nowhere near being a science. Cognitive psychology is much closer to a science, and even it barely qualifies. The variables involved are mindbogglingly astronomical. Economics uses statistical modeling based on all kinds of assumptions. Even more assumptions than what are required for epidemiological models. Consider this, no economist has been able to predict economic downturns with a degree of accuracy better than random guessing. Yes, in any downturn, you can find a few who did, whose careers usually benefit, and then they make news by predicting downturns that don't occur.; 4/23/20, 12:35 AM
J. Farmer said...: @Yancey Ward:

The reason those aren't big overall impact events, Farmer, should be obvious to you, right? Right?

I copied one paragraph from a much larger article. That point is clearly addressed. They are not comparing the size of the effect.; 4/23/20, 12:36 AM
Birkel said...: Yancey Ward,
I tried to talk nice to Smug about why the regional comparison was stupid. It didn't help.

Seriously, which market sectors are leading any recovery? Two-thirds of GDP is consumer spending. Which group of spenders is out there?; 4/23/20, 12:37 AM
Lukman Hakim said...: This is what this amateur observer understands to work the best, according to the reports:

Onset of significant symptoms: hydroxychloroquine-plus.

Really severe cases: remdesivir.

And another study showed that instead of intubation full-scale ventilators, using less intrusive and vigorous positive-pressure equipment, such as CPAPs.; 4/23/20, 12:38 AM
J. Farmer said...: @Birkel:

That is the sort of Happy Talk the New York Fed must produce. They are institutionally bound to talk positively so as to avoid a panic.

That doesn't actually contradict any of the points they addressed. I could just as easily retort that what you are saying is a "sort of sad talk."; 4/23/20, 12:38 AM
Yancey Ward said...: Just for perspective, since so many of us seem to have lost it: in the Great Recession, GDP only shrank 2.5% during the entire recession, and only 2% in the 1982 recession that had 10% unemployment. We are already looking at something far, far worse for just the 2nd quarter and 3rd quarter.; 4/23/20, 12:40 AM
J. Farmer said...: I tried to talk nice to Smug about why the regional comparison was stupid. It didn't help.

That point is addressed in a much longer argument. The link is there. Try taking a breath and considering a different perspective for a second, instead of immediately thinking how you can insult and belittle and stay steadfast to your own opinion.; 4/23/20, 12:40 AM
walter said...: Trump hasn't tweeted for 9 hrs. A record?; 4/23/20, 12:40 AM
narciso said...: The mirage is there, the reality is something much more painful and unwarranted, in large part; 4/23/20, 12:42 AM
J. Farmer said...: @Yancey Ward:

Just for perspective

What was the last downturn resulting from a huge section of the population staying home for a couple of months?

The biggest threat we face is the lack of political will to do the spending. We have the resources to float for a couple of months before they return to what they were doing before.; 4/23/20, 12:42 AM
Yancey Ward said...: This is like a Hurricane Maria across the entire world. There isn't another world out there to help rebuild this one. A more serious and mature people wouldn't have panicked like we have. Americans wouldn't have panicked like this even 25 years ago. That is how far we have fallen.; 4/23/20, 12:45 AM
narciso said...: So what will people spend if they have a sword of damocles hanging over them. Wake the hell up, au viedersen for now.; 4/23/20, 12:45 AM
bagoh20 said...: So Sweden is different from other European countries around it and in the E.U. so much that it can succeed with a very different response, but New York and all the states in the plains, deserts, and mountains are so similar that they must all have the same response. Sounds more like crabs in a bucket.; 4/23/20, 12:49 AM
Josephbleau said...: Kids already can’t buy houses, how can consumer debt be paid by unemployed people who were spending their paycheck before they got it. We were not even fully out of the 2008 pit yet. Does anyone think discretionary consumer spending is going to lead the way? For the next 2 years we will be flat, and even professionals will suffer as business won’t need their services. I am not saying we will all die. But it will not be pretty, and a generation of young folks will be further damaged. We will be back to what we think is normal in a few years.; 4/23/20, 12:50 AM
J. Farmer said...: This comment has been removed by the author.; 4/23/20, 12:52 AM
J. Farmer said...: @narciso:

So what will people spend if they have a sword of damocles hanging over them. Wake the hell up, au viedersen for now.

What is the potential threat you are referring to as a "sword of damocles"?; 4/23/20, 12:53 AM
Yancey Ward said...: "The biggest threat we face is the lack of political will to do the spending."

What lack of will? We have already shoveled out an entire year's budget in spending on top of this year's spending. If the shut down doesn't end soon, we will have to shovel out another $4 trillion dollars in the 2nd half of the year, and the again next year. There are nothing but bad consequences here- it isn't just the government spending- it is the lost production and the lost time. If we don't end the shutdown next month, the costs are going to exceed $25 trillion dollars, and if they continue through into next year, the costs will be be double that. This is a calamity that can be ameliorated, but we can't sit at home while we try to do it.

I had a hard time understanding why people didn't get into the lifeboats on the Titanic when they had the chance still to do so, but I get it now- I understand it completely. Humans have screwed up perspectives when it comes to danger- it is the ones they can't explicitly see in front of them that get them injured or killed- the danger has to be right in their faces before they will act.; 4/23/20, 12:55 AM
J. Farmer said...: @Josephbleau:

As social distancing eases, people will return to the work they were doing before it started. What the government needs to do is put money in their hands, which they can use to pay the bills they would've paid had they not voluntarily stopped working in order to practice social distancing. The source of the economic contraction during the Great Recession is fundamentally different from the source of the contraction we will be experiencing. Some industries (i.e. movie theaters, restaurants) will have a longer time because people will be avoiding for a bit longer. We have several tools available for assisting them through the drop in their customer base.; 4/23/20, 12:57 AM
Birkel said...: Smug: I expect the worst. Also, the Fed says we'll bounce back. Compare. Contrast.

Ask yourself: Why has the Fed pledged trillions of dollars to stop credit markets from seizing? The reason is to reassure the banks, the markets, and people. But the underlying reason is because credit markets could seize. And much more will be needed.

You blithely wave toward tens of trillions as an answer. That's just plain old dumb.; 4/23/20, 12:59 AM
J. Farmer said...: @Yancey Ward:

What will be the "nothing but negative consequenes" if the government put $4 trillio into the economy to smooth the disruption from distancing?; 4/23/20, 1:00 AM
Birkel said...: I'm negative about the future.
-also-
We must spend tens of trillions of paper money.

Contrarian for the giggles, one supposes.; 4/23/20, 1:02 AM
J. Farmer said...: @Birkel:

You blithely wave toward tens of trillions as an answer. That's just plain old dumb.

You still haven't explained to me why it wouldn't work, other than merely insulting the argument. Let's do a thought experiment: take the people who had to stop working for two months, take the amount of money they would have earned in that period, and imagine that the government reimburses it to them. How would that not significantly help reduce the shock?; 4/23/20, 1:03 AM
J. Farmer said...: @Birkel:

Contrarian for the giggles, one supposes.

We wouldn't need to spend "tends of trillions." But we most likely will need to put several trillion back into the economy.

You can scoff and mock all you wish, but you still haven't told me why the plan wouldn't work.; 4/23/20, 1:05 AM
Birkel said...: Negative consequences?
You mean like the ones that crazy-ass spending Japanese tried to stop a recession in 1989? And then they had "The Lost Decade" that saw 0% GDP growth between 1989 and 2019?

And now Japan is below where it was in 1989?

No negative consequences of which to speak, surely.; 4/23/20, 1:06 AM
Birkel said...: We have already pledged $9 trillion.
Are you ill informed on purpose or accident?; 4/23/20, 1:07 AM
Yancey Ward said...: Farmer, most of those laid off won't be going back to their old jobs. Many of those businesses will never reopen, and those that do will only be taking back a fraction of those workers during this coming year. It will take years to recover to just to just February's employment levels. This is far worse than the disruption of the Great Recession. This is the thing you are apparentlys blind to- you seem to believe the different causes are relevant. The causes aren't relevant here- the relevant thing is the deepness of the contraction- the ensuing destructive effects come because of that contraction, not the cause of the contraction.; 4/23/20, 1:07 AM
Birkel said...: The magic money from nowhere theory of economic growth.
Let's just add a few zeroes and we can all be millionaires.

I won't argue with this sort of refined ignorance.; 4/23/20, 1:08 AM
Josephbleau said...: We were becoming like the fictional town where everyone made a living doing each other’s laundry. I am afraid that a 2 or 3 month break in the action Is going to focus people into a retrenchment that will damage the service approach to US wealth, mass psychology is a real effect, a placebo. The ones really hurt will be Foreign nations who have built excess capacity to service North American demand, people in the US will loose their fixation with having the latest cool stuff for a while.; 4/23/20, 1:08 AM
Birkel said...: Josephbleau,
Correct! I have said for weeks that the ROW will suffer untold loss. Millions of vulnerable people will die because of our collective overreaction.; 4/23/20, 1:10 AM
narciso said...: That we have to explain this to a psychologist is bewildering.; 4/23/20, 1:11 AM
J. Farmer said...: @Birkel:

No negative consequences of which to speak, surely.

Explain how the effects of a massive asset bubble bursting are comparable to what we've experienced over the last few months.; 4/23/20, 1:12 AM
Yancey Ward said...: Farmer,

There are limits to what the US government can spend, and if we try to exceed them, there are limits to what all that money can actually buy. In short, there are no free lunches. We are looking at going from 100% debt to GDP to 200%+ debt to GDP in just 2-3 years in the future now. And that is with all the unfunded liabilities the US government doesn't even count as debt under their accounting rules. People thinking like you will lead us to complete ruin, and I am no longer convinced it can be stopped.; 4/23/20, 1:15 AM
J. Farmer said...: @narciso:

That we have to explain this to a psychologist is bewildering.

I know enough logic to know that insulting someone does't make them wrong. Explain to me why my suggestion wouldn't work. I understand that you believe it won't work, in which case tell me why you believe it.; 4/23/20, 1:15 AM
bagoh20 said...: If the government can simply reimburse us for lost wages, why should it ever stop doing so? Hell, why not pay us 10X what we lost, and do it forever. That's way better.; 4/23/20, 1:18 AM
J. Farmer said...: @Yancey Ward:

There are limits to what the US government can spend, and if we try to exceed them, there are limits to what all that money can actually buy.

That is the inflation argument, in which case explain how excess debt will result in inflation.

Yes, there are limits. We need to be able to manage the service of that debt. But we have strong fiscal institutions, good taxing authority, and huge productive capacity. At those rates we can maintain a balance for an extremely long time.; 4/23/20, 1:19 AM
Yancey Ward said...: "Explain how the effects of a massive asset bubble bursting are comparable to what we've experienced over the last few months."

This will be my last attempt. It will be years before we reach last February's employment levels. We are looking at 10%+ unemployment well into next year, and likely into 2022. You don't lay off 30% of the employment force and then just have all them return to their jobs after taking a few months off. It doesn't work like that, and it never has. We never fully recovered from the recession of 2009- we never reobtained the previous growth trend line that went back to the 1960s- in short, after 2009, we are at least $6 trillion dollars of GDP off that old trend line as of this year- cumulatively, it probably is $20 trillion or more of lost product/wealth- just from that mild recession, and the anemic recovery that followed it. Now, we are facing something much, much worse.

You were wrong, Farmer, and so was I- you aren't a pessimist, but this is where you should be one.; 4/23/20, 1:21 AM
J. Farmer said...: @bagoh20:

If the government can simply reimburse us for lost wages, why should it ever stop doing so? Hell, why not pay us 10X what we lost, and do it forever. That's way better.

Because there is not unlimited productive capacity in the economy, I don't deny that our ability to borrow is limited, only that is is much higher than what we are borrowing currently.

Six months ago everyone around here was high-fiveing over the great economy. Was anyone here complaining about the debt-to-gdp ration?; 4/23/20, 1:22 AM
Yancey Ward said...: "Yes, there are limits. We need to be able to manage the service of that debt. But we have strong fiscal institutions, good taxing authority, and huge productive capacity. At those rates we can maintain a balance for an extremely long time."

Which is what every debtor claims to be true of themselves. By the way, I wasn't making the inflation argument- inflation only arises if the thing you want to buy was produced. When it isn't, you can't buy it. Japan manage to grow not at all for 3 decades now doing what you propose. That is our future, too, and we might have to get lucky to even get that.

Our progeny will curse us.; 4/23/20, 1:26 AM
J. Farmer said...: @Yancey Ward:

This will be my last attempt. It will be years before we reach last February's employment levels. We are looking at 10%+ unemployment well into next year, and likely into 2022.

You are assuming that this unemployment is comparable to all past unemployment. It isn't. This is not unemployed arising from a downturn in the business or systemic imbalances throughout the economy. The jobs, not all but a big majority, are waiting for them to leave their homes and go back to them. That is not the same thing as unemployment because your business ran out of customers or because drops in consumer spending hurt your margins. You stopped working because everybody went home. When they go back out to society, the services or products you were providing then will still need to be provided.

and it never has. We never fully recovered from the recession of 2009

It never has because we never had those numbers as a result of people taking two months off. There is nothing comparable about the 2009 recession, because the cause was completely different.; 4/23/20, 1:26 AM
Josephbleau said...: I guess the reason that kids starved in the 1930s is because Roosevelt was too dumb to print trillions then. Perhaps at that time no one knew of that option. I am sure the US can get away with printing loads of money, but there is an implicit sham that must be respected in international finance. Money is intended to make demand efficient, to replace the crudity of barter. The US is in charge of world money now, because everyone is used to believing in the dollar. That belief depends on a tissue of shams and lies. The more we use the dollar to advantage ourselves the more that tissue is stressed and torn.; 4/23/20, 1:31 AM
Jon Ericson said...: Some people get their kicks in ways we find difficult to understand.; 4/23/20, 1:31 AM
Churchy LaFemme: said...: I don't see it. We just had a restaurant regarded as a local institution close because they couldn't do enough take-out to offset their sitdown loss. Those jobs aren't coming back. Maybe eventually someone will buy the building and start another restaurant. But not anytime soon.; 4/23/20, 1:32 AM
Josephbleau said...: and it never has. We never fully recovered from the recession of 2009

It never has because we never had those numbers as a result of people taking two months off. There is nothing comparable about the 2009 recession, because the cause was completely different.

I never claimed it was different, I claimed that is is additive, there is a difference, two lightning bolts in the same place.; 4/23/20, 1:36 AM
bagoh20 said...: Simple. Just imagine if we all got paid for not working. What would you do with that money? What would you buy with it, and where would those things come from? Who made them, and if someone did have something, would they exchange it for that money everyone gets for nothing?; 4/23/20, 1:37 AM
Josephbleau said...: I never claimed it was NOT different, I claimed that IT is additive, there is a difference, two lightning bolts in the same place.

A quick correction.; 4/23/20, 1:40 AM
J. Farmer said...: @Blogger Josephbleau:

I guess the reason that kids starved in the 1930s is because Roosevelt was too dumb to print trillions then. Perhaps at that time no one knew of that option.

He couldn't because of the gold standard.

I am sure the US can get away with printing loads of money, but there is an implicit sham that must be respected in international finance.

If they want to export their products to us, they will. And considering that we have a huge population of productive workers and tons of productive capacity, they will want to do that.

The US is in charge of world money now, because everyone is used to believing in the dollar.

We are not "in charge of world money now." We play a huge role because we are a huge economy, but many others play a role, too, including the Euro, the pound, the Australian Dollar, the Yen, etc.; 4/23/20, 1:40 AM
J. Farmer said...: @bagoh20:

Simple. Just imagine if we all got paid for not working. What would you do with that money? What would you buy with it, and where would those things come from? Who made them, and if someone did have something, would they exchange it for that money everyone gets for nothing?

That analogy makes zero sense. Imagine the virus disappeared tomorrow and all social distancing ends. What would people do? They would go back to what they were doing before. If the government forced you to take a month off, gave you your paycheck, and after a month told you to go back to work, would that cause a great depression?; 4/23/20, 1:44 AM
Josephbleau said...: The US is in charge of world money now, it is a fact. We have other players in the game, but the US is in charge.; 4/23/20, 1:44 AM
J. Farmer said...: The US is in charge of world money now, it is a fact. We have other players in the game, but the US is in charge.

The phrase "in charge" doesn't even make sense. We have certain privileges for a variety of reasons but we can't just tell the world what to do.; 4/23/20, 1:47 AM
Josephbleau said...: If in charge makes no sense, then perhaps, with respect to money, the world must react to whatever the US decides to do about money, the US can ignore what other countries do about money, until structural economic change occurs. A world rebellion is always possible over the medium term.; 4/23/20, 1:57 AM
Josephbleau said...: A world economic rebellion will be more imminent as we stretch the tissue of shams and lies by taking advantage of the rest of the world by expecting them to sell to us as we print ever more money to paper over our bad choices. We print money to feed ourselves because one US life is too precious to loose, and create these dollars to keep children in tennis shoe factories.; 4/23/20, 2:09 AM
exhelodrvr1 said...: Based on autopsies in Santa Clara COunty, CA, coronavirus was likely in the US at least as early as early January. And the testing results there show it to be much more wide-spread than estimated (35-40x, IIRC).

Which seems to support the theory that it is not nearly as deadly as the official estimates have been saying.; 4/23/20, 2:45 AM
exhelodrvr1 said...: "gave you your paycheck, and after a month told you to go back to work, would that cause a great depression?"

Depends - how much weight did I gain, and how do I look in my work clothes?; 4/23/20, 2:47 AM
Josephbleau said...: By N. Gregory Mankiw
April 16, 2020

As an economist, I’m often asked during recessions to divine the path of the recovery that will follow. In the current Covid-19 downturn, I find myself of two minds on this question. I thought I would share them both.
THE PESSIMIST IN ME Economic downturns are often highly persistent. The National Bureau of Economic Research, the official arbiter of turning points in the business cycle in the United States, has not yet declared that the country is in a recession, but it surely is. Like others, this recession may leave scars on the economy for years to come.
THE OPTIMIST IN ME Yes, the economy is often slow to recover from downturns, including the Great Recession of 2008-9. But this recession is different. It is occurring not by accident but by design. Employment and production are falling because we want people to stay at home.
PESSIMIST It sure is different. Look at the most recent jobs report. The employment-population ratio fell by 1.1 percentage points, the largest one-month drop since the data began in 1948. And that record will be broken next month, when the economic carnage of the last few weeks appears in the data. This downturn will be the deepest since the Great Depression of the 1930s.
OPTIMIST But the employment report also offers a glimmer of hope. The number of job losers on temporary layoff increased by a whopping 1.05 million, while the number of permanent job losers increased by only 177,000. That breakdown differs from the pattern in previous recessions, and it bodes well for a quick recovery. Those on temporary layoff can easily return to work when the lockdown is over.; 4/23/20, 2:52 AM
J. Farmer said...: That's just a wordier version of the exact point I've been making. Yes, on the surface, the numbers look terrifying. But it makes no sense to compare the numbers to the Great Recession or Great Depression, because, "this recession is different. It is occurring not by accident but by design. Employment and production are falling because we want people to stay at home."

Mankiw then notes, regarding the job numbers, that the "breakdown differs from the pattern in previous recessions." Of course it does. It differs from every recession, because the cause of this recession is different from all previous recessions. Therefore, there is no reason for this to resemble any previous recession.

Because the changes in the economy were a result largely of changes in voluntary behavior, we can change them back with different behavior. This isn't the case in all previous recessions.; 4/23/20, 3:18 AM
stevew said...: Say what ill you will about Michigan's governor but with her enhanced lockdown she is attempting to take the government's regime to its logical end. If coronavirus is such a threat, is so contagious and deadly, that we must close all but essential services, then we really should close everything. I've been to the grocery store, the building supply store, the liquor store, the take-out restaurant; the people there are not doing everything recommended to prevent spread of the disease. The justification for closing the non-essential businesses applies equally to all businesses and places

If, on the other hand, we are simply trying to "flatten the curve" of infection and prevent an overwhelming of the healthcare delivery system then the data would indicate that mission is accomplished and we should re-open as rapidly as possible.; 4/23/20, 5:22 AM
BUMBLE BEE said...: Caveat to all the preceding... If a socialist gets elected this fall.; 4/23/20, 5:28 AM
BUMBLE BEE said...: I'm seeing automobile traffic picking back up here. Folks walking and riding bikes mostly without masks. I'm not seeing officers on patrol, haven't seen but maybe 3 in the last 2 weeks.
I think people have had enough bullshit. America was born of protest.; 4/23/20, 5:32 AM
AllenS said...: Mark asked a question earlier at 8:41 PM. I would venture a guess that all states are nearly the same as Minnesota. From Powerlineblog some honest statistics --

LINK TEXT; 4/23/20, 5:45 AM
stevew said...: MA reached the grim milestone of 2000 deaths attributed to Covid with a spike in daily deaths of 221. We've been locked down for about 6 weeks. Is this milestone and spike indicating the lock down is working or failed?; 4/23/20, 6:10 AM
Breezy said...: @stevew, I’ve been wondering the same thing. I am also in MA. Apparently 50% of deaths are nursing home related. How is it we couldn’t avoid that, as it was one of the main goals, to protect the most vulnerable? Plus now we’re in this shutdown thru mid June at least? Ugh.; 4/23/20, 6:35 AM
iowan2 said...: Farmer
And we'd be in a better place if Trump had not run gigantic deficits in a boom.

That's just a talking point you don't or can't understand. Inga does it all the time, media DNC talking point used in the wrong situation.

Republicans do carry a big portion of the burden, because Republicans refused to work with President Trump. Together they could have gotten much better legislation. Republicans got steamrolled.
The President doesn't spend money. Congress does. Civics 101, simple

Enter uninformed talking point.

Good Job.; 4/23/20, 6:43 AM
MadisonMan said...: my greenie socialist public school teacher aunt shared a breathless article about 19 new cases involving poll workers or voters

And absolutely nothing in that article but correlation trying to be pushed as causation.; 4/23/20, 6:59 AM
Paco Wové said...: Suggestion for Althouse: rename café threads "Argument Clinics".; 4/23/20, 7:17 AM
BUMBLE BEE said...: Earth Day

Today
is the 50th anniversary of #EarthDay and the start of 3 days of powerful, collective action online led by youth activists. Join us! Strike, divest, and vote for our future. Tune in to #EarthDayLive here:https://t.co/MV6Di6Tn25 #EarthDay #EarthDay50 pic.twitter.com/wgvUsfBjFI

— Alyssa Milano (@Alyssa_Milano) April 22, 2020; 4/23/20, 7:31 AM
Birkel said...: It will be no solace to say "I told you so" but here we are.

Smug is an economic illiterate.; 4/23/20, 8:24 AM
Original Mike said...: "The ones really hurt will be Foreign nations who have built excess capacity to service North American demand"

Like China? 🎻; 4/23/20, 9:59 AM
J. Farmer said...: @@Birkel:

Smug is an economic illiterate.

Devastating rebuttal as always.I noticed you haven't actually been able to say what exactly is wrong with my argument. Just repeat your same tired assertions over and over.; 4/23/20, 10:13 AM
Birkel said...: Not able =/= Not wasting my time

You're really not good at thinking clearly.; 4/23/20, 11:17 AM
J. Farmer said...: Not wasting my time =/= Unable to

It's clear to me your insults are a form of projection; 4/23/20, 11:33 AM