What’s really going on with the economy

“Six months ago, public health experts were arguing that if the United States set up robust surveillance testing, contact tracing, case isolation, and rigorous mask usage, a version of economic normalcy could return without incurring grave risks to human life. Looking across the globe, this seems to be correct — many countries have achieved much better outcomes in terms of less loss of life without incurring any clear economic cost relative to the United States.

At the same time, the view (once widespread among economists) that failing to control the outbreak would necessarily have dire economic consequences looks like it may have been overstated. While the US public health situation looks terrible in an international context, the economy is going okay.”

“Had the country spent May and June pursuing a strategy to suppress the virus, we might have been able to reopen most things in July and August and enjoyed a strong economic rebound without too much danger to public health. That didn’t happen. But despite the lost opportunity to contain the virus, the economy did rebound sharply once restrictions began to lift. The CARES Act not only met urgent humanitarian needs during the period of maximum business closures, it also led the economy to behave like a bouncy ball: Even as economic activity collapsed, household finances did not, so when it became easier to go out and spend money, people did — and rapid economic growth ensued.”

“we’ve gotten back only half the jobs lost earlier in the pandemic, and the 8.4 percent unemployment rate is still awfully high.

 But the current job growth really is fast.” 

“One boring technical problem is that people who are on temporary furlough from their jobs are supposed to report themselves as unemployed if a Bureau of Labor Statistics surveyor calls. But many people in this situation, not being experts on labor market statistics, are evidently not doing this. So the real unemployment rate is higher than the official one.

A more serious conceptual issue is that ideally, it would be useful to distinguish between people who are unemployed because they work at a movie theater in a city that won’t let movie theaters open and people who’ve actually lost their jobs on a permanent basis.”

” the improvement in the labor market situation has largely been the result of furloughed workers going back on the job. But while temporary furloughs continue to be a factor in the economy, Furman writes, “Even if individuals on temporary layoff returned to work very quickly, the United States would still have a recessionary level of unemployment for some time to come.””

” if you’re still unemployed, you’re out of luck. And if you’re a low-wage worker, you’re probably gaining nothing from the stock market, you’re taking a big risk with your health every time you report to the job, and the elevated pool of unemployed workers means you have little leverage to bargain for better pay and working conditions.”

“Even worse, as Ford School economist Justin Wolfers points out, the inflation rate has shifted in unusual ways that are unfavorable to low-income people: “People are buying more of the essentials, like groceries, forcing their prices up. And they’re buying fewer airline tickets and less gasoline and clothing, pushing those prices down.”

For white-collar workers with comfortable incomes, the rising price of food is offset by reduced spending on travel and dining out, and in many cases, office workers are no longer burning gas by commuting. But for lower-income workers who always dedicated a larger share of their income to groceries, this is just bad news.”

“The other factor impacting Americans unevenly is the closure of schools in many jurisdictions. For older kids, online learning is a drag. For younger kids, it’s a huge drag on parents’ attention — especially for mothers — or a new source of expense as more affluent parents hire nannies to assist with visual learning. And for younger kids whose parents have to work outside the house and can’t afford child care, it’s an educational disaster.”

“he Treasury Department stages bond auctions of various kinds from time to time to finance the federal deficit, and on August 20 it held an auction for what’s known as the 30-year Treasury Inflation-Protected Security. This is a bond that pays interest for 30 years. But rather than a flat interest rate, it promises to pay the owner the rate of inflation plus some interest — hence “inflation-protected.”

The price that emerged from the auction was negative 0.272 percentage points.

The buyers of these bonds, in other words, are guaranteeing themselves financial losses. It sounds weird, but negative interest rates have been popping up from time to time in various places for years now”

” it’s clear that there is some level of economic hardship out there, and it’s equally clear that addressing the hardship is extremely affordable. Reasonable people can disagree about what, exactly, would be best to spend money on — or what taxes would be best to cut — but it seems pretty clear that a big increase in the deficit is extremely affordable. So as long as we could find even slightly worthwhile uses of the money, we’d be better off.”


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