Friday, July 03, 2020

How Bad Is It?

This bad.

The horizontal axis shows months since the most recent employment peak of a given business cycle. The teal line plots the Great Recession. Until recently, the depth, duration and sluggish recovery from the Great Recession had put all other postwar downturns to shame. Take a look at the red line, which represents the awful situation the country is now going through.

Things are so much worse than even the Great Recession that the red line almost doesn’t fit on the same chart as the others. It starts with a near-vertical downward drop, followed by a short spike upward.

What does the future look like?  Ugly.

Since mid-June, confirmed coronavirus cases have surged, especially across the Sun Belt. Some states have halted or even reversed their reopening plans, especially in the industries that reported the greatest job gains at mid-June: Leisure and hospitality, which Thursday’s jobs report shows as adding 2.1 million positions in June, accounted for two-fifths of the overall gain in total payroll jobs. But Florida and Texas, for instance, once again shut down on-site bar drinking. On Wednesday, California’s governor directed 19 counties to shut down indoor family entertainment venues (bowling alleys, arcades, etc.) as well as indoor dining at restaurants. In the near term, this will hurt the industry’s business activity and hiring.

And the Trump Campaign said it was surprised people wouldn't come to Tulsa in spite of the health risk?  They shouldn't have been:

A recent working paper from University of Chicago economists Austan Goolsbee and Chad Syverson used cellphone records data from SafeGraph on customer visits to more than 2.25 million individual businesses across 110 industries. They concluded that overall consumer traffic fell by 60 percentage points but that “legal restrictions explain only 7 percentage points of this. Individual choices were far more important and seem tied to fears of infection.”

Turns out people are rational!  Who knew?  And while Trump supporters want to blame Fauci and Birx:

I really think that train has left the station.  Cheerleading for the economy instead of people is not the silver bullet they thought it would be.  Again:  who knew?

Plenty more charts at that link show how buggered the economy is, especially at the retail level.  But that ain't the half of it:

In particular, a major fiscal time bomb is about to detonate.

Enhanced unemployment benefits are scheduled to expire at the end of July, and Republicans have said that no way, no how will the program be renewed, even if unemployment remains in double digits. Some have expressed concerns that the enhanced benefit — a flat $600 federal top-up — might disincentivize work because some workers receive more in benefits than they earned in wages. But that design could be amended.

Additionally, states and localities are going broke. Thanks to covid-19, their tax revenue has plummeted and their expenses have gone up. Lucy Dadayan of the Tax Policy Center estimates that the pandemic will reduce state revenue alone by $200 billion over fiscal 2020 and 2021. Governors (and mayors and other local officials) have pleaded for federal help. Unlike most states and municipalities, after all, the feds don’t have to worry about balanced budgets.

While there is bipartisan support in Congress for providing state aid, it hasn’t happened yet. The Democratic-controlled House passed another stimulus bill that included funding for states, but Republican Senate leaders declined to take it up. They have said they don’t plan to finalize their own bill until the end of July. [Doesn't Congress usually go on recess in August?  Especially in a Presidential election year, with conventions to attend?] Perversely, the gains in Thursday’s jobs report might reduce pressure on lawmakers to pass this needed legislation.

This week, however most states started a new fiscal year. Already, states and localities have laid off about 1.5 million employees since the pandemic began. Unless federal aid comes through soon, expect huge new public-sector layoffs and service cuts in the months ahead, followed by knock-on job losses in the private sector.*

That “scariest jobs chart" could well get scarier.

*You know any other President would be aware of this, and talking to his party members in Congress about it.  Trump, however, is oblivious.  No, really:

With unemployment numbers like that?  Why aren't people spontaneously erecting statues of Dear Leader?  (He is so out of touch with reality it's positively frightening.  And I don't mean just about economics.)

I would not say the Democrats are winning so much as the GOP is losing:  badly.  Like Trump, they are incapable of fundamental change (honestly, worrying about disincentives to work when so many businesses are closed due to the "disincentive" of a pandemic?  What planet are they from?), and that is going to take a chunk out of their electoral ass in November.  I know it's not supposed to happen, but I honestly won't be surprised if Mitch McConnell (and John Cornyn) don't find themselves on the sidewalk in 2020.  A lot of people are energized to vote, as shown by turnout in so many primaries recently (even the Texas runoff primary is showing higher Democratic than GOP turnout).  Those voters are probably not going to vote for anyone with "R" by their names, and doubly so for incumbents.

I still think there's a tidal wave coming, because these economic numbers resemble a shifting of tectonic plates far, far underwater.  And we won't see it until the wave strikes.
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