16/4/20: Four Weeks of True Unemployment Numbers: #Covid19

The U.S. has added 5.245 million more unemployment claims in the week ending April 11, 2020, with additional 9,000 claims added to the April 4, 2020 week total. In summary,

• Week ending March 21: official unemployment figures rose 3,307,000
• Week ending March 28: new claims 6,867,000
• Week ending April 4: new claims 6,615,000
• Week ending April 11: new claims 5,245,000

Four weeks total is now 22,034,000. As noted here: https://trueeconomics.blogspot.com/2020/04/1342020-four-weeks-of-unemployment.html last four weeks of increases in unemployment in the U.S. have fully erased all cumulative jobs gained during the 2009-2019 'recovery' period.

This is by a mile not a fully accurate picture of true extent of jobs losses. As noted by the researchers in the https://bfi.uchicago.edu/insight/blog/key-economic-facts-about-covid-19/#unemployment-rate: many unemployed do not seek unemployment benefits, opting to drop out of the labor force instead. Why?

1. Eligibility for unemployment assistance is quite restrictive in the U.S.
2. States' unemployment support systems are both cumbersome and severely overloaded in the present environment.
3. Many unemployed fear Federal retribution against their migrant spouses (including legal migrants) and many are themselves on green cards, making them a potential target for removals.
4. Many unemployed become severely discouraged by the lack of potential jobs to continue job-seeking.

University of Chicago researchers used data from Nielsen survey to estimate the impact of early stage Covid pandemic on labor force participation rates. These numbers imply a drop in labor force participation from the officially-reported 64.2% to 57%. 

The research conducted through April 8th suggested that some 20 million Americans have lost their jobs due to COVID19. Adding to these 3 days to get us through April 11 would have pushed the total number of unemployed to around 3,140,000-3,969,000 more unemployed to the 22,034,000 total reported above. Splitting the difference, we can estimate new claims filed, pending and not filed due to reasons (1)-(4) above at closer to 25,500,000. 

My estimates are roughly in line with those prepared by Alexander Bick of ASU, who estimated (https://azbigmedia.com/business/unemployment-rate-jumps-from-4-5-to-20-2-asu-analysis-shows/) that through the second week of April:

• The employment rate decreased from 72.7% to 60.7%, implying 24 million jobs lost
• The unemployment rate increased from 4.5% to 20.2%
• Hours worked per working age adult declined 25% from the second week of March.

14/4/20: Re-Opening America: A Long Road Ahead

In our Financial Systems class, yesterday, we were discussing the potential trajectories for 'exit' from COVID19 restriction and easing of economic constraints. Handily, yesterday, Morgan Stanley published this analytical timeline of the pandemic evolution:

Their analysis is based on the following assumed timings:

1. They expect U.S. coastal regions to peak in the next 3-5 days (so March 15-17),
2. The rest of the U.S. will lag these by "around 3 weeks", leading to a "second peak" that promises to be not as severe as the first peak.
3. The MS are expecting the second peak to result in the US cases peaking at x4 China and x2 Italy.
4. MS therefore describe the U.S. trajectory as having "a very long tail".
5. Based on comparisons to Korea testing, the MS research suggests the earliest 'reopening' date for the U.S. as mid-to-late May.

Here is MS note on re-opening:

Bleak. 

Key takeaway on the future developments: "only a vaccine will provide a true solution to this pandemic" and that means that we are likely to see - best case scenario - scaled delivery of the vaccine for the 2021 flu season. 

This is a long road ahead...

13/4/20: Four Weeks of Unemployment Spikes: U.S. Jobs Losses in #Covid19

COVID-19 social toll: according to Deutsche Bank Research, since the end of the 2008-2009 Great Recession through mid-March 2020, the U.S. total new jobs creation amounted to ca 22 million jobs. Since then, the economy has lost over 16.8 million jobs over the first three weeks of the pandemic, and according to the DB forecast, the U.S. is now on-track to lose 25 million jobs over the four weeks, once last week numbers come in.

• Week ending March 21: official unemployment figures rose 3.3 million
• Week ending March 28: official unemployment claims rise 6.9 million
• Week ending April 4: additional 6.6 million new unemployment claims
• Week ending April 11: ???

Note: claims filed do not fully reflect actual unemployment levels in the economy. In fact, they underestimate, severely, the true extent of unemployment.

Now, remember, the Millennials entered their careers in the periods of the Global Financial Crisis, the Great Recession and the Eurozone debt crisis. They are now going through career maturation stage (faster growth in income stage) amidst this pandemic. Or as I asked on Twitter a few minutes ago: who is going to buy Boomers' properties inherited by X-ers if the Millennials are skinned?..

11/4/20: Covid19 vs Seasonal Deaths: End of an Argument

A large number of social media pontificators have been making various claims that COVID-19 pandemic is in some ways related to the seasonal flu. One of the arguments made in this context is that the pandemic-related deaths are similar to those produced by a seasonal flu and therefore do not warrant drastic measures deployed by the governments around the world.

Setting this argument to rest, the NY Times have published this analysis: https://twitter.com/sangerkatz/status/1248685404775239680?s=20 with an associated chart:

Others make an argument that people dying from COVID-19 are somehow the same people who would have died from a different condition anyway, without the virus pandemic.

Given the levels of utilization of hospital beds in countries like France, Italy, the UK, and the U.S., and in fact across the entire range of advanced economies, it is hard to imagine how anything about the COVID-19 pandemic can be considered at even remotely related to 'normal' or 'seasonal'.

9/4/20: Updated: US vs EU28 Covid Cases and Deaths

US vs EU28 Covid cases and deaths update:

Note 1: adjusting for the onset of the Covid cases, US is lagging EU by 7 days. 
Note 2: Any comparatives between the U.S. and EU28 across the disease progression time line (with lags as noted in the Note 1 above) is hazardous, due to differences in methodologies of accounting for death rates earlier on in the pandemic as opposed to the current methodologies.

Currently, the U.S. is not on a trajectory/trend to catch up with the EU28 in terms of deaths within the next 10-12 days. Given the uncertainties in the rates of change in both new cases detection and death cases, there is no feasible accuracy in attempting to predict the rates of deaths convergence for the US at this point in time. That said, U.S. deaths have increased at an average rate of 16% daily in the last 5 days, while EU28 deaths increased at an average rate of 7% daily.

9/4/20: Ifo Eurozone Forecast Q1-Q3 2020: Covid19 Impacts

Germany's ifo Institute joint forecasts for Eurozone growth are out today. Bleak reading. The forecasts below assume that Covid-19 restrictions will be gradually lifted over the summer 2020.

Seasonally and working-day adjusted GDP growth:

From ifo forecast: "The economy in the euro area is expected to slide into a deep recession in the first half of 2020:

• GDP growth is forecast to be -2% in Q1 and -10% in Q2, followed by a recovery in Q3 with +8%. 
• Due to the lack of comparable events in the last decades and the unpredictable course of the pandemic, these estimates are subject to substantial uncertainty."
• "Gross fixed capital formation is also certain to decline, with -2% in Q1 and -10% in Q2, due to supply disruptions, planning uncertainty and a preference for liquidity."
• "Foreign demand is likely to contribute negatively to growth, as a result of the euro area’s exposure to recessive international trade and a struggling global economy."

Inflation environment:

Headwinds and risks: 

• "A more unfavorable course of the pandemic would require longer and possibly stricter containment measures...
• "Despite massive liquidity provision by governments and central banks, a prolonged downturn would then lead to liquidity strains in the economy. 
• Increased debt levels associated with low income flows and asset devaluations are likely to lead to solvency issues for thinly capitalized corporations and private households.
• An ensuing rise in loan defaults could in turn lead to problems in the banking sector." 
• "A resurgence of the European debt crisis on a large scale thus constitutes a non-negligible risk to the forecast."

8/4/20: Ifo Institute Germany Forecast for 2020

A surprisingly 'positive' forecast for Germany from ifo Institute this morning:

While GDP contraction for 2020 looks sharp at -4.2 percent y/y, unemployment figures appear rather robust and employment levels seem to be only weakly impacted. Forecast for current account implies subdued global demand shocks. The swing in the fiscal position is roughly 6.5 percent of GDP, reflecting emergency supports measures. This is significant, and underpins shallower expected effects on employment and unemployment, as well as no deflationary dynamics in labour costs.

My view: Germany entered the pandemic crisis with already weak economy. 2019 growth at 0.6 percent was shockingly weak, with the economy skirting recession. Massive strength in the current account was reflective of weak domestic demand and the economy dependent on growth momentum globally. This momentum is now severely disrupted, and I do not expect robust global recovery outside domestic demand. In other words, my view is that worldwide exports are unlikely to rebound robustly in H2 2020, putting severe pressure on net exporting economies, like Germany and Italy.

So, whilst 4+ percent drop in full year GDP might be fine, I would expect closer to 5-5.5 percent decline (reflective of weaker prices), and much more pronounced impact on unemployment and employment levels.

6/4/20: Mexican and Canadian Perceptions of the U.S.: Leadership With a Negative Exponent

Here is an extraordinary snapshot of Canadian and Mexican perceptions of the U.S. via Pew Research: https://www.pewresearch.org/fact-tank/2020/04/06/the-u-s-in-one-word-canadians-say-trump-mexicans-point-to-money-and-work/.

Pew Research own summary is less damming than my inserts above suggest:

But think of this, for a second: these are two of the U.S. closest trading and cultural and social partners. And their positive perceptions of the U.S. are now at 6% and 11%. What, pray, position of leadership can the U.S. claim with this sort of the numbers coming from its closest neighbours?

5/4/20: US vs EU Coronavirus Update

Here is a visual comparing incidences of (officially reported) and deaths from (officially reported) Novel Coronavirus 2019 or Covid-19 in the EU27 and the US:

Data through 04/04/2020

5/4/20: Effective Corporate Tax Rates in the U.S.: 1980-2019

Evolution of effective corporate tax rates in the U.S. from 1980 through 2019:

Source: Yardeni Research, with my annotations

Effective tax cuts rates rankings by Presidential Administration:
Bush Jr (largest cuts)
Bush Sr (second largest cuts)
Trump (third largest cuts)
Clinton (fourth largest cuts)
Obama (net change approximately zero)
Reagan (net change positive)

Taxes and tax burdens are complicated, folks...

2/4/20: US Record in Covid Response To-Date

Much of the rhetoric coming out of the Washington on COVID19 pandemic is centred around the claims that the U.S. response to the pandemic has been adequately scaled up, with some claims even referencing allegedly 'highest rates of testing' in the world. Here are two charts putting the U.S. Covid pandemic responses to comparatives:

Now, most current data:

Not only the U.S. number of cases has now exceeded double that of Italy, but the U.S. death toll is currently on track to exceed Italy's massive death tool within 4 days, should the trend to-date persist.

'World class' track record this is...

2/4/20: COVID19 in three charts

#COVID2019 economy in three pics:

U.S. unemployment claims, week 2 of filings:

Irish unemployment claims, first month of filings:

 World GDP forecast after one month of Covid pandemic:

FUGLY! All around.