The post-coronavirus economy - Printable Version

The post-coronavirus economy - Printable Version

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The post-coronavirus economy - Mick - 04-20-2020

In the past five weeks the United States has lost more than 22 million jobs. It took two years in the Great Depression to reach that level of misery.

It is clear that most on this board don’t understand that we are now entering a devastating period of mass unemployment, corporate failures and a disintegration of the American dream, so let me offer you a glimpse into the future.

1) The coming unemployment crisis will worsen for workers who remain unemployed. Yes, companies will rehire workers. They’ll use this opportunity to replace their former workers with cheaper and more contingent labor. Lowering labor costs is easy when the economy is stalled and workers are grateful for any opportunity.

2) More broadly, the crisis will accelerate some long-running market trends toward industry consolidation (which reduces one’s choice of potential employers).

3) Same with greater automation (in which machines replace human labor), and worker precarity (which happens when the convenience of employers and customers entirely overrides the well-being of individual workers).

4) Even with the payroll subsidies that the stimulus legislation provides to small businesses, the prolonged shutdown will destroy mom-and-pop businesses that suffered from decades of brutal competition with the likes of Walmart and Amazon.

5) There was a sense that customers prefer human interaction, but social distancing has enhanced the appeal of self-service kiosks—and even delivery drones.

6) Once the pandemic subsides, people may go back to their old habits, but corporations do not typically let such opportunities for cutting costs go to waste—as we have seen whenever efforts to organize workers prompt employers to suddenly bring in more computers and robots, outsource work to contractors, or move jobs entirely offshore.

7) Real Estate will tank. Many service jobs can be done from home, employers are finding. And downtown real estate and utilities are expensive.

8) Companies will not hire back older/more experienced workers because companies want to cut labor costs.

9) During the second phase of the coronavirus recession, America’s temporarily strengthened social safety net will revert to its usual bare-bones form as the money runs out. Every worker for him/herself.

10) The broader group of freelancers, temps, and subcontractors who have few legal protections will be the first to go when the economy sputters.

11) The safety net is in tatters, and it wasn’t enough to begin with.

12) And tens of millions will lose their health insurance. Of course, the good news is they won’t be able to afford food for long enough to need the health insurance. So there’s that.

13) Companies won’t have access to capital. Inflation will go up. Too many people for too few resources.

14) Nearly 300 million guns in this country.

Given how employers are likely to act in response to the economic downturn, many of those now laid off may well remain unemployed for a prolonged period. The old stigmas against unemployed workers will resurface, as memories of the coronavirus crisis fade and people find new reasons to fault others for not pulling themselves up by their bootstraps.

Even during the Great Depression, a global economic catastrophe that drove the U.S. unemployment rate to 25% at its worst (it’s now 17%) resentment of the unemployed grew as the doldrums persisted. Critics of the Roosevelt administration excoriated the long-term unemployed as malingerers and reprobates and assailed New Deal programs as socialist schemes to tax the middle class into poverty.

In my opinion, we are completely and totally screwed. It’s too late to switch the economy back on as the desperate protestors want to do. In three months, the articles will be general astonishment at the inability of the American economy to bounce back as the death knell sounds for millions of unemployed and underemployed. The media elite, the political elite, the rich and those who fed the shelter-in-place-until-America-is-ruined concept who lied about all of us being in this together will have created a second-tier, ripped-apart-at-the-seams nation. Martial law will be declared within a year. And we’ll deserve it.

That's my opinion. Would love to hear from you how wrong I am and why. And since I am the low-watt bulb on this board, I would love to hear your fix and how America will quickly return to 3.5% unemployment and 3%+ GDP growth.

RE: The post-coronavirus economy - Snorlax94 - 04-20-2020

One false choice I keep hearing in this debate is that people who think re-opening the economy before adequate tracking, tracing, and testing are in place — all part of the Trump Administration’s Step 1 — will somehow help the economy.

People aren’t going to start traveling abroad, packing movie theatres, and filling sports arenas. Those are lost for a year. Without a time machine and a Time Caper, there is no scenario where those magically come back in less than a year.

The argument for reopening things in a prudent manner — and whenever enough testing and tracing is in place — is to avoid an Italy-style catastrophe that would be even worse for the economy.

I do not know of any path where the US is at 3.5% growth and 3% unemployment in Q3.

In the CA plan, the state moves to increase testing, tracing and ppe as quickly as it can, then reopens in 2-6 weeks, worst case 10 weeks.

Covid is contained in CA, and life resumes as it continues in places like Taiwan and Korea, where people are shopping, eating out, working, meeting friends. Kids go to school in Taiwan, and I’m told the theme park is open. In Korea, the numbers are so low I hear some are getting complacent and wearing masks less frequently. No apocalypse. No end of the economy. No Ragnarok. Maybe along the way, another short SIP is needed, but otherwise, many face 2-5 months unemployment (with benefits) along the way and eventually are re-hired. Many former baristas and waiters are now grocery deliverers. Hotel investors, event planners, sports-dependent places, small entertainment centers are unavoidably wiped out. AMC declares bankruptcy, assets are acquired and theatres re-opened by Regal Cinemas in time for the March 2021 release of Black Widow. 12-18 months from now, people are vaccinated.

Here’s how I see a full-on, go straight to herd immunity path looks, assuming you never flinch. For 2 weeks, Georgians bask with well-coiffed hair, freshly manicured nails, and gym-scuplted physiques. But quietly, the Ro is now > 2 again. A fee weeks later, many under 60 feel mild symptoms, and it turns out, with actual cases being 40x confirmed cases for young people, 98% of those under 60 don’t need the hospital. But 2% of the young do. Another 2 weeks later, silently, now 20% of the state’s population is infected, but they don’t know it yet. Another week passes, and the hospitals are overrun. But in this scenario, the state stays the course. The hospitals are overrun. .2% people under 60 die without medical treatment even though the ifr in other states is less than .1%. Another .3% of people 50-60 die without treatment for heart disease or cancer. Another 1% of everyone 25-60 has permanent lung damage that will plague their now-shortened lives. It turns out the brobdingnagian divisor for seniors doesn’t exist — 15% of the elderly die from covid, another 5% die for lack of treatment for other conditions. As the medical system collapses around them, everyone is terrified to leave their home. Even young people — everyone knows someone from their high school who is now dead and was unable to get any treatment. People start eating fish tank cleaner hoping it will cure them, more die. Trump blames China and oddly, the governor of Michigan, calling her “nasty.” Infection rates are so high, even grocery workers and food distributors refuse to work, and tons of food goes to waste. Now people don’t have enough food, but they do have all those guns...

RE: The post-coronavirus economy - chrisk - 04-20-2020

Of course, we are going to have more severe consequences than Taiwan. We waited 2 months longer to take serious social distancing and isolation steps.

But loosening up restrictions so that R0 stays above 1, without adequate testing and tracing, is going to drag out the more pain longer and ultimately cost more. The higher short-term cost to fund the social safety net until effective tracking/tracing is in effect will be less than funding required to keep the economy limping along until a vaccine is widely available at some indeterminate time.

Let’s see how many red states blow up over the next 2 months. If a couple or more blow up, I’m glad California didn’t jump the gun.

RE: The post-coronavirus economy - BostonCard - 04-20-2020

First quarter GDP comes out next week (April 29th to be exact). It will reflect the slowdown in March, and it will be bad.
Buckle up, though, for the second quarter GDP when it comes out in late July. Estimates range from -25% from JP Morgan to -38% by Morgan Stanley. If you want to feel a bit better, remember that these estimates are annualized. Then again, the GDP drop in the midst of the financial crisis was -2.54%

BC

RE: The post-coronavirus economy - OutsiderFan - 04-21-2020

Thank you Snorlax, for making me LOL at your Georgia prediction. Very well played, sir!

RE: The post-coronavirus economy - burger - 04-21-2020

(04-20-2020, 11:17 PM)Snorlax94 Wrote: People aren’t going to start traveling abroad, packing movie theatres, and filling sports arenas. Those are lost for a year. Without a time machine and a Time Caper, there is no scenario where those magically come back in less than a year.

Snorlax, I agree with everything you said. I don't think things will be normal for a long, long time. But, in California at least, I think things will start to resemble normal by June or early July. You will be able to play sports, go to a park, maybe take a day trip, etc. That's not that far in the future.

Speaking of future, today I learned a new phrase: "time caper." Thanks for that. :)

RE: The post-coronavirus economy - stupac2 - 04-21-2020

(04-20-2020, 10:45 PM)Mick Wrote: It is clear that most on this board don’t understand that we are now entering a devastating period of mass unemployment, corporate failures and a disintegration of the American dream, so let me offer you a glimpse into the future.

It's clear that someone on this board doesn't understand something, but you've picked the wrong people and thing. I would love to see you actually respond to Snorlax's post, but since you've made a point of completely ignoring those points every time someone says them, I doubt we'll see it.

I'd also love to know what you're trying to accomplish with these threads that assume we're all morons and you hold god's truth on this stuff, when you're just repeating the same inane, rebutted talking points over and over, but I doubt we'll ever see that either.

RE: The post-coronavirus economy - Goose - 04-21-2020

(04-20-2020, 11:35 PM)chrisk Wrote: But loosening up restrictions so that R0 stays above 1, without adequate testing and tracing, is going to drag out the more pain longer and ultimately cost more. The higher short-term cost to fund the social safety net until effective tracking/tracing is in effect will be less than funding required to keep the economy limping along until a vaccine is widely available at some indeterminate time.

Unfortunately, it isn't entirely clear to me that this is true. I don't think we know this, but I strongly suspect the ECONOMIC cost may be lower if a state has few areas that will be hit hard and many that will not. The social cost of many people dying isn't included in that calculation. A "mixed" strategy of this type could be a reasonable choice, with more business activity, contact tracing and testing in areas with "manageable" disease and a few areas that are war zones. Obviously, NY city being a war zone wouldn't work, and making sure you contain the spread to other areas would be a issue, but it could work, at least in theory.

Quote:Let’s see how many red states blow up over the next 2 months. If a couple or more blow up, I’m glad California didn’t jump the gun.

What will it mean if some do and some don't? Was it bad (too early, under resourced etc.) execution where it did and great execution where it didn't? Or just bad luck? We shall possibly get to find out.

RE: The post-coronavirus economy - cardcrimson - 04-21-2020

(04-21-2020, 06:10 AM)OutsiderFan Wrote: Thank you Snorlax, for making me LOL at your Georgia prediction. Very well played, sir!

Yeah it was a real hoot. Unfortunately, his opening premise, "Here’s how I see a full-on, go straight to herd immunity path looks, assuming you never flinch." , isn't what they're planning in Georgia at all. But why let the facts get in the way of a good narrative that makes a red state look like it's filled with a bunch of stupid rednecks. . . .

RE: The post-coronavirus economy - Mick - 04-21-2020

(04-20-2020, 11:17 PM)Snorlax94 Wrote: I do not know of any path where the US is at 3.5% growth and 3% unemployment in Q3.

Goldman Sachs said a month ago that we'll see 12% annualized growth in Q3.

https://www.goldmansachs.com/insights/pages/us-daily-20-march-2020.html

RE: The post-coronavirus economy - 2006alum - 04-21-2020

(04-21-2020, 11:57 AM)Mick Wrote:
(04-20-2020, 11:17 PM)Snorlax94 Wrote: I do not know of any path where the US is at 3.5% growth and 3% unemployment in Q3.

Goldman Sachs said a month ago that we'll see 12% annualized growth in Q3.

https://www.goldmansachs.com/insights/pages/us-daily-20-march-2020.html

It gets worse - Goldman is now predicting an annualized growth of 19% in Q3.

Like, seriously? Q3 is July-September, which is prime vacation season. They think there's going to be 20% more trips to Disneyland, plane flights, movie theater admissions, restaurant meals, hotel bookings, etc. than in 2019?

Or do they think everyone's pent up need for haircuts, manicures, and dental cleanings will offset it and then some? They do understand that if you go without your monthly haircut for 3 months, you don't get three haircuts back to back to make up for it, right?

I'm utterly baffled. Does anyone who pays more attention to macroeconomics than I do care to posit a rationale for yielding that prediction?

RE: The post-coronavirus economy - BostonCard - 04-21-2020

There will be some catch-up growth after this is all over. I guess it will depend to an extent how quickly things pass. But, for example, while most people won't return to restaurants anytime soon, if a few people do, that will represent growth (from a low base). People will start getting haircuts again, and while many restaurants/shops/businesses will go bankrupt, the ones that survive will be able to expand into the voids left by the ones that depart.

We won't get back to where we were pre-covid-19, but we will probably have a bit of a bounce from the bottom (maybe the proverbial dead cat bounce). I read your last statement the same way Snorlax did, saying 3.5% growth and 3% unemployment suggested a return to the status quo ante. I could see a 3.5% growth, say in Q4, but even in that context, unemployment is going to be much higher than 3%. The best we can help is that we get back to 200,000 more employed people per month as businesses rehire some of the people they had laid off.

BC

RE: The post-coronavirus economy - 2006alum - 04-21-2020

(04-21-2020, 12:22 PM)BostonCard Wrote:
There will be some catch-up growth after this is all over. I guess it will depend to an extent how quickly things pass. But, for example, while most people won't return to restaurants anytime soon, if a few people do, that will represent growth (from a low base).
BC

Maybe I'm misunderstanding, but I thought annualized GDP was a way to compare to the same quarter of the prior year, so annualized 3Q GDP growth is a comparison to GDP in Q3 of 2019? If so, then catching up compared to Q2 is irrelevant to that calculation, right? The base to compare is Q3 of 2019, when restaurants were still thriving and folks were flying to weddings, vacations, etc., as normal. If that's correct, it seems like a leap of faith to think we'll be outpacing that level of production by 20%?

RE: The post-coronavirus economy - BostonCard - 04-21-2020

(04-21-2020, 12:17 PM)2006alum Wrote:
(04-21-2020, 11:57 AM)Mick Wrote:
(04-20-2020, 11:17 PM)Snorlax94 Wrote: I do not know of any path where the US is at 3.5% growth and 3% unemployment in Q3.

Goldman Sachs said a month ago that we'll see 12% annualized growth in Q3.

https://www.goldmansachs.com/insights/pages/us-daily-20-march-2020.html
It gets worse - Goldman is now predicting an annualized growth of 19% in Q3.

Like, seriously? Q3 is July-September, which is prime vacation season. They think there's going to be 20% more trips to Disneyland, plane flights, movie theater admissions, restaurant meals, hotel bookings, etc. than in 2019?

Or do they think everyone's pent up need for haircuts, manicures, and dental cleanings will offset it and then some? They do understand that if you go without your monthly haircut for 3 months, you don't get three haircuts back to back to make up for it, right?

I'm utterly baffled. Does anyone who pays more attention to macroeconomics than I do care to posit a rationale for yielding that prediction?

"Annualized growth" doesn't mean a growth compared to a year ago. It means quarter on quarter growth extrapolated for a year. So, basically, it means 4.4% growth from the previous quarter (Q2). If extrapolated four quarters, you get 19% growth (1.044 * 1.044 * 1.044 * 1.044 = 1.19).

See this explanation:

https://www.aei.org/economics/no-forecasters-are-not-projecting-that-real-gdp-will-be-34-percent-lower-this-quarter/

BC

RE: The post-coronavirus economy - 2006alum - 04-21-2020

Gotcha. I was looking here, which seemed to suggest annualized growth is a comparison to the prior year. That would make much more sense, theoretically, if all they're claiming is that GDP will grow 4.4% from the previous quarter, because it seems like that would be a very conservative estimate given how low GDP is likely to be for April-June.

RE: The post-coronavirus economy - cardcrimson - 04-21-2020

(04-21-2020, 12:33 PM)BostonCard Wrote:
(04-21-2020, 12:17 PM)2006alum Wrote:
(04-21-2020, 11:57 AM)Mick Wrote:
(04-20-2020, 11:17 PM)Snorlax94 Wrote: I do not know of any path where the US is at 3.5% growth and 3% unemployment in Q3.

Goldman Sachs said a month ago that we'll see 12% annualized growth in Q3.

https://www.goldmansachs.com/insights/pages/us-daily-20-march-2020.html
It gets worse - Goldman is now predicting an annualized growth of 19% in Q3.

Like, seriously? Q3 is July-September, which is prime vacation season. They think there's going to be 20% more trips to Disneyland, plane flights, movie theater admissions, restaurant meals, hotel bookings, etc. than in 2019?

Or do they think everyone's pent up need for haircuts, manicures, and dental cleanings will offset it and then some? They do understand that if you go without your monthly haircut for 3 months, you don't get three haircuts back to back to make up for it, right?

I'm utterly baffled. Does anyone who pays more attention to macroeconomics than I do care to posit a rationale for yielding that prediction?

"Annualized growth" doesn't mean a growth compared to a year ago. It means quarter on quarter growth extrapolated for a year. So, basically, it means 4.4% growth from the previous quarter (Q2). If extrapolated four quarters, you get 19% growth (1.044 * 1.044 * 1.044 * 1.044 = 1.19).

See this explanation:

https://www.aei.org/economics/no-forecasters-are-not-projecting-that-real-gdp-will-be-34-percent-lower-this-quarter/

BC

BC, don't let the facts get in the way of the narrative. .. . .

RE: The post-coronavirus economy - Snorlax94 - 04-21-2020

Goldman Sachs makes the Quarter-on-Quarter and Q4 2019 vs Q4 2020 predictions clear in the second summary bullet point:
"We expect declines in services consumption, manufacturing activity, and building investment to lower the level of GDP in April by nearly 10%, a drag that we expect to fade only gradually in later months. We now forecast quarter-on-quarter annualized growth rates of -6% in Q1, -24% in Q2, +12% in Q3, and +10% in Q4, leaving full-year growth at -3.8% on an annual average basis and -3.1% on a Q4/Q4 basis."

So even with a 12% quarter-on-quarter growth in Q3 and then another 10% quarter-on-quarter growth in Q4, they still see Q4 '20 being -3.1% from Q4 '19 (the Q4/Q4 basis).

Assuming we need to do only 1 Shelter-In-Place, and we finally ramp up testing and tracing, I find a -3.1% Q4 '20 vs Q4 '19 a little optimistic, but reasonable. I did say in another thread I think things should be OK, *on average* by Q3, assuming we don't screw things up royally, which we may.

You have to remember that -3.1% Q4 could mean -40% or even -100% for some businesses, counteracted by big growth by other firms. Notably and sadly, as Mick initially noted, this will lead to consolidation and smaller firms will suffer disproportionately. The Walmart grocery app usage was up 460% on April 5 -- that 460% growth by the Walmart grocery app will be offset by an even greater loss by thousands of smaller shops.

RE: The post-coronavirus economy - BostonCard - 04-21-2020

(04-21-2020, 12:55 PM)cardcrimson Wrote:
(04-21-2020, 12:33 PM)BostonCard Wrote: See this explanation:

https://www.aei.org/economics/no-forecasters-are-not-projecting-that-real-gdp-will-be-34-percent-lower-this-quarter/

BC

BC, don't let the facts get in the way of the narrative. .. . .

Thought you'd appreciate the AEI link.

BC

RE: The post-coronavirus economy - fullmetal - 04-21-2020

Re: Georgia, there's a joke on twitter:

[tweet]https://twitter.com/actioncookbook/status/1252333750874181633?s=20[/tweet]

If you don't get the joke:
Falcons 2017
Bulldogs 2018
Georgia 2020

RE: The post-coronavirus economy - Mick - 04-21-2020

(04-20-2020, 10:45 PM)Mick Wrote: 1) The coming unemployment crisis will worsen for workers who remain unemployed. Yes, companies will rehire workers. They’ll use this opportunity to replace their former workers with cheaper and more contingent labor. Lowering labor costs is easy when the economy is stalled and workers are grateful for any opportunity.

8) Companies will not hire back older/more experienced workers because companies want to cut labor costs.

10) The broader group of freelancers, temps, and subcontractors who have few legal protections will be the first to go when the economy sputters.

12) And tens of millions will lose their health insurance. Of course, the good news is they won’t be able to afford food for long enough to need the health insurance. So there’s that.

Looks like Ellen Degeneres of the Ellen Show is at the forefront of these changes:
https://www.thedailybeast.com/people-are-finally-starting-to-see-the-real-ellen-degeneres-and-it-isnt-pretty