Public Comment

Many of us are falling for the following false picture of our current coronavirus predicament. The half-true, half-wildly-false story goes something like this, in two parts:

1. We will all hunker down to slow the spread and save lives. After a time, new cases and deaths will drop to near 0. The disease won't be gone, but with lots of testing and care we can keep it from being an epidemic. At some point some mix of treatments and vaccines will come along and the COVID-19 will not be such a threat anymore.

So far so good. All of that is plausible, although there is no strong assurance at all a successful vaccine will ever arise. Otherwise, it is well grounded in medical and epidemiological science given the data currently available. It's a slightly optimistic but reasonable guess.

But the second part of the story, a bit more problematic, goes like this:

2. When the all-clear is given for some or all idled workers, governments will rush in with stimulus spending to kick start the economy, demand will return to the market, and the economy will come roaring back.

The Republican and Democratic parties are reported to be quibbling, more or less over the details of future stimulus packages. This is the drama that occupies all of the popular media you are likely to read.

The problem is that policy makers and policy analysts at the highest levels are painting a very different, darker picture. In this note, I'll mention just two data points. Just two, but they pack a lot of punch.

1. A rough estimate of U.S. corona-related job loss in May, April, and June will top 30% of the entire U.S. workforce. This estimate is from the St. Louis Fed. Sound implausible? In just the past three weeks (21 whole days), 16,500,000 new unemployment claims were filed. That's already more than 10% of the entire workforce!
2. A rough estimate of global job lost starts at 6.7% of all jobs globally, and this is likely a major underestimate. This estimate is from the U.N. International Labor Organization.

It is important to note that the jobs lost are not being mothballed. They can't just wait three or four or six months and then, blow of the dust and voila, they're back again. 

On the contrary, neither demand or supply can return evenly and old patterns of trade - and the jobs associated with them - are gone. 

So we will soon face more than a third of the U.S. workforce unemployed, and some huge proportion of the global workforce, with no immediate demand for labor. 

There is no historic precedent for ths, not even the Great Depression was this large. 

Yet, this is the world in which we now really live. 

Our way of life - the one we knew as late as February, is gone forever.