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thly gdp monthly thru feb 2020 figure 3 from the monthly treasury statement mts thru march 2020 the vertical gray bars don t indicate recessions feb and march of this year look very much like feb and march of last year no visible effect yet at april 25 2020 1 comment email this blogthis share to x share to facebook share to pinterest friday april 24 2020 covid 19 lights a fuse from the april 2020 global debt monitor covid 19 lights a fuse at the institute of international finance with the covid 19 fiscal response in full swing the global debt burden is set to rise dramatically in 2020 gross government debt issuance soared to a record high of over 2 1 trillion last month more than double the 2017 19 average of 0 9 trillion as social distancing becomes the norm across most mature economies global recession looms a recession which would begin with 87 trillion more in global debt than at the onset of the 2008 financial crisis using a simple top down estimation if net government borrowing doubles from 2019 levels and there is a 3 contraction in global economic activity nominal terms the world s debt pile would surge from 322 of gdp to over 342 this year that s global numbers remember and not just for the us i like the way they say it they make sure we understand that debt is rising and that gdp is liable to decline and that both of these changes contribute to the growth of debt to gdp at april 24 2020 no comments email this blogthis share to x share to facebook share to pinterest one could argue found this on my old blog shortened it tweaked a few words and here ya go opening with conclusions in fiscal consolidation strategy an update for the budget reform proposal of march 2013 john f cogan john b taylor volker wieland and maik wolters write as a consequence of the global financial crisis and great recession government deficits have risen substantially thus creating the need for a fiscal consolidation strategy to reduce deficits and stabilize government debt looking forward sustained spending increases are particularly worrisome because they ultimately require raising tax rates beyond pre crisis levels even after the economic recovery the distortions resulting from higher tax rates would then constrain the economy s trend growth for a long time one could argue that figure 1 consists largely of prediction and that without prediction figure 1 is largely empty graph 2 similar to figure 1 but without prediction one could argue that the starting point for figure 1 was cherry picked to give the greatest effect graph 3 similar to figure 1 but with a different cherry picked start date one could look at all the years in the st louis fed s fred dataset with an elliptical trend line painted on graph 4 maybe this is what the trend looks like on graph 4 you can see the big off trend spike concurrent with the second world war a bit after that you can see a small off trend spike peaking at 20 concurrent with the korean war and you can see a general pattern that follows the red trend line one could argue that the budget balancing of the 1990s and the feeble spending of the 2000s left the federal component low for near two decades and that this insufficiency was the cause of the global financial crisis and great recession i m not prepared to make that argument but one could argue at april 24 2020 no comments email this blogthis share to x share to facebook share to pinterest tuesday april 21 2020 an unexpected recovery robert w fogel in nber working paper no 11125 at the close of world war ii there were wide ranging debates about the future of economic developments historical experience has since shown that these forecasts were uniformly too pessimistic expectations for the american economy focused on the likelihood of secular stagnation this topic continued to be debated throughout the post world war ii expansion you never know our economy came back much better than expected after the second world war what are the chances of a comparable recovery after the pandemic you never know but some things are obvious if congress bickers to death over covid stimulus money it will be the death of our economy they call it a war this fight against the pandemic so let them spend the money to fight it like a war everyone s itching to get out of the house nobody says they want to go out and spend money but spending money is part of the process when the time comes and sheltering in place is behind us consumers may just provide enough demand and business enough supply to drive the economy to exciting new heights you never know the world will be different there is no doubt one wonders how we will manage but here there is an easy answer human ingenuity will pave the way the world is already different many protections are already in place at the grocery story the auto parts place and almost everywhere the changes we have already seen are remarkable and inspiring don t be surprised if the economy turns out better than we expect just saying at april 21 2020 2 comments email this blogthis share to x share to facebook share to pinterest friday april 17 2020 rules of thumb fred gives the unemployment level the number of people unemployed in thousands of people i divide that number by 1000 to get the number of millions unemployed then because it might be interesting i divide the unemployment rate by the number of millions unemployed graph 1 unemployment rate per million out of work starts around 1 6 unemployment for each million people out of work ends around 0 6 population is bigger now that explains it also the percent of the population that s in the labor force and how they count unemployment too probably not a big effect on this graph but that s just a guess here s something odd take the first graph put a second line on it and have the second line show the inverse turn the ratio upside down graph 2 rate to level blue and level to rate the one line starts at 1 6 and ends at 0 6 the other starts at 0 6 and ends at 1 6 pure coincidence anyway these days throw a million people out of work and it adds about 0 6 to the unemployment rate these days for each 1 the unemployment rate goes up figure it means an additional 1 6 million people are out of work so when the unemployment rate increased by 0 9 from 3 5 to 4 4 it meant that 0 9 times 1 6 million people about 1 44 million people had lost their jobs at april 17 2020 1 comment email this blogthis share to x share to facebook share to pinterest thursday april 16 2020 timothy taylor on joshua gans and the pandemic economy tradeoff a covid 19 two pronged choice production possiblity frontiers at conversable economist definitely worth a read plus taylor links to gans s book which is freely available on line in the future when people are looking back to see what was known and argued when the pandemic was hitting this book will be a natural starting point and for the rest of us this framework helps to explain issues like why the social distancing rules were put in place so abruptly why trying to take a half way approach to social distancing would have probably imposed lots of economic costs with few health gains and why choosing to prioritize health helps to avoid the drift that would otherwise occur as the pandemic evolved at april 16 2020 no comments email this blogthis share to x share to facebook share to pinterest wednesday april 15 2020 to your health it was news the other day that the curve was flattening new york and other us states plan for reopening as covid 19 cases plateau new york by far the hardest hit state will work closely with nearby new jersey connecticut delaware pennsylvania and rhode island to devise strategies for jointly easing stay at home orders imposed last month to curb coronavirus transmission to judge by media reaction people took this as good news and it is good news but that doesn t mean it s time to close the distance it means it s not getting any worse but it also means that right now at the plateau risk of infection is the worst it has ever been go the distance at april 15 2020 no comments email this blogthis share to x share to facebook share to pinterest labels gothedistance monday april 13 2020 life expectancy and the spanish flu totally out of context from scott alexander in 2017 at april 13 2020 no comments email this blogthis share to x share to facebook share to pinterest sunday april 12 2020 making america great again at april 12 2020 no comments email this blogthis share to x share to facebook share to pinterest saturday april 11 2020 how long will the relief check last at the st louis fed how long will the relief check last short to the point and better than i imagined at april 11 2020 no comments email this blogthis share to x share to facebook share to pinterest friday april 10 2020 initial claims thru 4 april initial claims for unemployment at least it s not a bigger increase again at april 10 2020 1 comment email this blogthis share to x share to facebook share to pinterest thursday april 9 2020 the century foundation old news now i guess but tcf on 31 march said what s been on my mind we anticipate in april the largest one month spike in the unemployment rate in history which underscores the critical importance of extending support to working families and those who have recently lost their jobs the cares act passed by congress last week which broadened ui eligibility and increased weekly unemployment benefits by 600 along with providing direct cash payments to americans was a good and needed first step but given the scale and scope of the current crisis much more is needed to give relief to struggling families to struggling families yeah and to the economy if they throw enough money at people they can keep economic forces from compounding the sharp decline created by our response to covid 19 if they don t we re in a world of shit at april 09 2020 4 comments email this blogthis share to x share to facebook share to pinterest tuesday april 7 2020 quarterly changes in the unrate quarterly changes in the unrate the increase in unemployment associated with recession typically takes time to build up this is most easily seen in the 1949 the 1974 and the 2009 recessions but pretty much all the recessions show the same pattern of gradual or at least non instantaneous increase but here we are in the first covid recession hopefully the only covid recession with an instantaneous spike in unemployment that is as big as the biggest increase of the 1975 recession and that was definitely a bad one does this mean the recession that we are falling into just now will be a big bad one jamie dimon thinks so but as the graph shows unemployment has not been building up it took a massive leap because everybody all at once reacted to the covid 19 during the last half of march okay maybe not everybody maybe during the first half of april the massive covid layoffs will continue but that should be it as far as the response to covid 19 is concerned after that we have to go back to the economic consequences of the march and april layoffs the typical buildup effects it is easy to picture a buildup like we saw in the 1949 or 1974 or 2009 recessions only on a massive scale because the first small step this time was so very large easy to picture but not necessarily correct from the october 1973 low of 4 6 it took until july 1974 for the unemployment rate to climb 0 9 percentage points between february and march of 2020 one month unemployment climbed 0 9 percentage points one month instead of eight months from the may 2007 low of 4 4 it took until april 2008 to reach the 5 0 level an increase of 0 6 percentage points and another month to reach 5 4 eleven or 12 months that time one month this time if it normally takes 8 months to a year for the unemployment rate to rise as much as it did between february and march of this year then we simply don t have enough people employed to allow the sort of unemployment buildup that we normally get on the massive scale suggested by the march increase it s not going to happen it should be obvious that the march increase was so big not because a recession was developing but because we are shutting down the economy in order to fight the pandemic granted shutting down the economy has consequences at april 07 2020 1 comment email this blogthis share to x share to facebook share to pinterest monday april 6 2020 the social distancing recession as you know in the past two weeks ten million people signed up for unemployment the typical number before two weeks ago was was less than a quarter million per week so 10 million versus half a million wow egad what s going to happen to the economy how bad will the recession be i expect you ve heard of okun s law okun s law says you can tell what effect a change in unemployment will have on economic growth so if unemployment increases by ten million people or by 20 million or however high it goes in the next few weeks we can estimate how much gdp growth will slow down and how bad the recession will be we ll look into that today i ll be using the growth rate version of okun s law from an old 2006 pdf from miles brian cahill at researchgate in the paper cahill looks at three time periods and figures real gdp trend growth estimates for each from 1949 to 1972 4 09 growth from 1973 to 1996 3 01 growth from 1997 to 2004 3 40 growth i will figure growth from 2010 to the last data before the big jumps in unemployment and compare that to growth after the increase of ten million having gone unemployed i started by figuring the same time periods as cahill my results are close to his from 1949 to 1972 4 16 growth from 1973 to 1996 3 05 growth from 1997 to 2004 3 45 growth my results differ some from his there have been revisions to the data since cahill wrote his paper and i think this explains the differences my results are close enough to cahill s that i am satisfied i got the arithmetic right here are my three graphs graph 1 graph 2 graph 3 i kept the x and y axis limits the same on these graphs so that the window is always the same size what we see in that window changes from one graph to the next on the third graph the cluster is much smaller than on the others in part this is because there are only one third as many dots on graph 3 in part the reduced variation is probably an effect of the great moderation in the trend line equation on each graph the number before the x is the okun s law parameter cahill says that number relates unemployment to gdp growth and we can use it to estimate how bad our social distancing recession might be if the number is close to 2 it means that when the unemployment rate rises by one percentage point gdp falls about two percentage points so far all these parameter values are close to 2 cahill s values are 2 2 1 83 and 1 95 mine are 2 15 1 83 and 1 99 remember though that all these values are for the year 2004 or before i m checking my work before we compare the 2010 2019 economy to the covid 19 economy someth...
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