Things aren’t going so great on the economic front



The Washington Post puts out a few excellent newsletters that I turn to first every morning. Today’s Today’s Opinions newsletter linked to a few very good – and disturbing - pieces on the economy.

The most important of these was about the Federal Reserve’s monthly meeting on June 9-10, the minutes of which were just released. Note that this meeting occurred before the recent spike in new cases (and BTW, yesterday the US had more than 50,000 new cases, for the first time ever). Even then, they were very concerned about the fragility of the current economic “recovery”:

Fed Chair Jerome H. Powell has repeatedly said that the path out of this recession will depend on containing the virus and giving Americans the confidence to resume normal work and spending habits. But the notes from the two-day meeting reveal how interconnected Fed officials view a prolonged economic recession with the pandemic’s continued spread — and why Powell often asserts that lawmakers will need to do more to carry millions of Americans out of this crisis.

According to the minutes of this meeting, Fed officials looked at a scenario in which “a second wave of the coronavirus outbreak” forces “another round of strict limitations on social interactions and business operations.” This would result in “a decrease in real GDP” and “a jump in the unemployment rate” next year, the minutes said.

In other words, the officials were saying two important things. The first is that the economy won’t be able to recover until people have confidence that the virus has been contained. They say that “if” there’s a second wave that forces another round of limitations on social interactions and business operations, people will lose whatever confidence they had.

Guess what? Within about a week of their meeting, the US entered this “second wave” (really just a continuation of the first wave, but this time across the South and West (so much for the hope that the summer heat will kill the virus, which even I expressed once or twice). The first part of the wave was along I-80. The second part is along I-10). Some people had just returned to work – especially in restaurants – and now are unemployed again. This is going to be a tremendous blow to confidence and thus to growth. Once again, we can’t fix the economy until we fix the virus.

The second point was that there needs to be another big round of support to carry Americans through this new crisis. More on that tomorrow.

As I wrote this, the news came out that 4.8 million more people were working in mid-June (when the data were compiled) than in mid-May. This is of course good news, but it needs to be balanced by the fact that weekly new unemployment insurance claims in the two full weeks since then have been about 1.5 million each week, for a total of about 2.9 million. We don’t know the number for this week yet, but it will probably be around 1.5 million again, meaning that 4.4 million jobs were lost – and given the new wave of shutdowns in the South and California, it’s very unlikely things will turn around next week. In other words, while we had 4.8 million new jobs in June, the July report could well be an even bigger loss than 4.8 million. Fix the virus, and we’ll fix the economy. Don’t fix the virus, and we’ll never fix the economy.


The numbers
Because the projected deaths numbers didn’t change very much from yesterday to today, I left that table out. The actual numbers below are updated as usual.

I. Total deaths
Total US deaths as of yesterday: 130,798
Increase in deaths since previous day: 675
Yesterday’s 7-day rate of increase in total deaths: 5% (This number is used to project deaths in the table above; it was 5% yesterday. There is a 7-day cycle in the reported deaths numbers, caused by lack of reporting over the weekends from closed state offices. So this is the only reliable indicator of a trend in deaths, not the three-day percent increase I used to focus on, and certainly not the one-day percent increase, which mainly reflects where we are in the 7-day cycle).

II. Total reported cases
Total US reported cases: 2,780,152
Increase in reported cases since previous day: 52,156 First time over 50,000.
Percent increase in reported cases since yesterday: 2%
Percent increase in reported cases since 7 days previous: 13%

III. Deaths as a percentage of closed cases so far in the US:
Total Recoveries in US as of yesterday: 1,164,794
Total Deaths as of yesterday: 130,798
Deaths so far as percentage of closed cases (=deaths + recoveries): 10% (vs. 10% yesterday)
For a discussion of what this number means – and why it’s so important – see this post. Short answer: If this percentage declines, that’s good. It’s been steadily declining since a high of 41% at the end of March.


I would love to hear any comments or questions you have on this post. Drop me an email at tom@tomalrich.com

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