{"id":1691,"date":"2020-03-26T10:58:38","date_gmt":"2020-03-26T14:58:38","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1691"},"modified":"2020-03-26T10:58:38","modified_gmt":"2020-03-26T14:58:38","slug":"weekly-jobless-claims-4th-quarter-gdp-2nd-revision-and-a-commentary-on-planning","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1691","title":{"rendered":"Weekly Jobless Claims, 4th Quarter GDP 2nd Revision and a Commentary on Planning"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Claims: 3.28 million\/ GDP 2.1% (Unchanged)<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe unemployment rate is like to go into the\ndouble-digits.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong> In\nlarge parts of this country the economy has essentially shut down and now we\nare starting to see the data that indicate the extent of that closing.  New claims for unemployment insurance, not\nsurprisingly, skyrocketing to 3.28 million, the highest level on record.  The previous record was 695,000 in October\n1982.<\/em><\/strong>  This is the not the only\nweek we will see extraordinarily high claims numbers as not all shutdowns occurred\nat the same time.  So expect the\nunemployment numbers to rise by millions more. \nIt should also be remembered that many small businesspeople are not eligible\nfor unemployment compensation if they are owners.  Thus, we are likely to be underestimating the\ntrue state of unemployment.  Regardless, we\nare likely to get to double-digits and how high that goes depends upon when the\neconomy starts to reopen.<\/em><\/strong><\/p>\n\n\n\n

The final reading of fourth quarter 2019 GDP came in\nat 2.1%, which is unchanged from the previous estimates.  The economy ended last year growing at trend\ngrowth<\/em><\/strong>,\nwhich is what was expected, and started off this year on a fairly high\nnote.<\/em><\/strong>  Part of that was weather\ndriven, but at least economic conditions were not faltering going into the\nshutdown.       <\/p>\n\n\n\n

Commentary:<\/strong> The Fed vs. the Government:\nPlanning actually works!<\/p>\n\n\n\n

The starkest difference in the reaction to the\npandemic was between the Federal Reserve and the federal government.  The Fed has moved rapidly and strongly and\nthere is a very simple reason: It learned the lessons of the financial market\nmeltdown.  In 2008 – 2009, the Fed had no\nstrategy to deal with what was happening. \nThe near-worldwide financial meltdown was not something that had been\ngame planned. <\/p>\n\n\n\n

But to its credit, the Fed has spent the last decade\nresearching what worked, what didn\u2019t and what needed to be done if there was\nanother massive economic and\/or financial crisis. It didn\u2019t need anyone to tell\nit that a crisis was coming and it moved quickly and effectively to put in place\nthe policies it had already identified as necessary.  The Fed had a game plan, it was not caught\nflatfooted and it moved to make sure the financial markets got the liquidity\nthey needed.  There is still more to be\ndone, but research and planning worked. \nKudos to past Fed Chairs Bernanke and Yellen, as well as current Chair\nPowell for getting the Fed as ready as possible for the current crisis.<\/p>\n\n\n\n

And then there is the federal government.  It started first with denial that there was\nan issue, moved to disbelief that the problem could be large and finally to\nragged, uncertain and uncoordinated reactions. \nThere doesn\u2019t seem to have been a plan in place, despite warnings as\nrecently as 2017 that a pandemic was possible and strategies had to be\ndeveloped.<\/p>\n\n\n\n

The implications of the failure of the federal\ngovernment to have a plan to deal with a crisis similar to the current one are\nenormous.  Without a plan, policies to address\nthe problems have lagged.  While other\ncountries ramped up their testing, we are still well behind the curve.  Two nights ago, I was on a Zoom meeting and a\nsenior manager at a major local hospital said that it was still taking four to\nsix days to get test results back and that was for patients admitted because\ntheir symptoms mirrored those of Covid-19. \nThat required the hospital to treat the patients as if they had the virus\nand therefore critical, limited resources were wasted on patients that ultimately\ntested negative.   <\/p>\n\n\n\n

In addition, the failure to ramp up testing and\nincrease availability of critical medical supplies, as we saw in other\ncountries, have created significant issues going forward.  Knowing who has the virus, who had the virus\nand who hasn\u2019t had the virus is key if we are going to reopen the economy.  Otherwise, we don\u2019t know the risk of\npotentially reopening early.  There is a\ndebate going on that asks the question \u201cwhen should we start reopening\nbusinesses?\u201d  We all want the economy to\nreopen as soon as possible, but we also don\u2019t want a relapse.  <\/p>\n\n\n\n

If we are forced to shut down a second time, the\nattempts to stabilize the economy that have passed Congress will largely be\nwasted.  If we have to shut down again,\nit will come when the economy was greatly weakened and therefore less capable\nof handling the shutdown.  And if we have\nto shut down again, federal, state and local budgets will largely be\nbusted.  And those are just the economic\nimplications.  Clearly, the death toll\nwill rise sharply if there is a relapse as it is not clear if the health care\nsystem could handle a second surge.  <\/p>\n\n\n\n

My view is that it is better to err on the side of\nsafety than on the side of speed.  We\nneed to be as reasonably certain as possible that a relapse has a relatively\nlow chance of occurring.  We will not be\nable to know with certainty, but that means this decision has to be made by\nexperts.  The short-term economic costs of\nopening later may be greater but the longer-term economic and social costs are\nlikely to be less.  That is my view.  Everyone needs to determine for themselves\nthe risks of opening too soon and express those views, as this debate is raging\nright now.   <\/em><\/strong>   \n\nAnd going forward, the federal government cannot\nbe caught flat-footed again. \n\n\n\n<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Claims: 3.28 million\/ GDP 2.1% (Unchanged) IN A NUTSHELL:  \u201cThe unemployment rate is like to go into the double-digits.\u201d WHAT IT MEANS: In large parts of this country the economy has essentially shut down and now we are starting to see the data that indicate the extent of that closing.  New claims for … Continue reading Weekly Jobless Claims, 4th Quarter GDP 2nd Revision and a Commentary on Planning<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,1],"tags":[],"class_list":["post-1691","post","type-post","status-publish","format-standard","hentry","category-economic-indicators","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1691","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1691"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1691\/revisions"}],"predecessor-version":[{"id":1692,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1691\/revisions\/1692"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1691"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1691"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1691"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}