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“The fundamental problem with the economy right now is the pandemic” not the stay at home orders

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Ernie Tedeschi, a former economist for the U.S. Treasury, told The New York Times that it is the coronavirus itself – and not state orders to shut down businesses – that is the driving force behind the apparent recession now.

“States that haven’t yet closed businesses or put their populations on some sort of lockdown aren’t escaping enormous spikes in unemployment,” he said. “The pain is not just deep, it’s wide. This punctuates that the fundamental problem with the economy right now is the pandemic.”

That is my thinking as well. First fix or at least significantly mitigate the underlying problem and the economy will hopefully come back. It ain’t gonna come back if the problem is not fully addressed.

* WalletHub…

As the U.S. has embraced social distancing policies in order to minimize the spread of COVID-19, many businesses have shut their doors either voluntarily or by government order. […]

In order to find out the states whose unemployment percentages are most and least affected, WalletHub compared the 50 states and the District of Columbia across two key metrics. These metrics compare unemployment claim increases for the week of March 30 to both the same week in 2019 and the first week of 2020.

WalletHub also looked at this…

In order to find out where the pandemic has caused businesses to struggle most, WalletHub compared the 50 states and the District of Columbia across 12 key metrics. Our data set ranges from the share of small businesses operating in high-risk industries to small-business credit conditions and the state’s small-business friendliness.

* Here are a few states with their stay at home order dates, their rankings for unemployment insurance (UI) application increases and WalletHub’s small business rankings. In both instance, the higher the number, the better off the states are. Illinois stacks up well in both counts, even though it was one of the first states to adopt a stay at home order…

March 21: Illinois - Rankings: UI 42nd, Biz 45th;

March 30: North Carolina - Rankings: UI 7th, Biz 9th;
March 31: Arizona - Rankings: UI 12th, Biz 7th;
April 2: Georgia - Rankings: UI 4th, Biz 12th;
April 2: Maine - Rankings: UI 23rd, Biz 19th;
April 3: Florida - Rankings: UI 18th, Biz 16th;
April 3: Mississippi - Rankings: UI 5th, Biz 4th;
April 4: Alabama - Rankings: UI 24th, Biz 27th;
Still no order: Iowa - Rankings: UI 31st, Biz 31st

This isn’t a perfect metric by any means, but it does show you that economies shut down because of the virus. People essentially voted with their feet.

Until governments at all levels take a serious and effective approach to this virus, people are not going to feel safe.

posted by Rich Miller
Tuesday, Apr 14, 20 @ 2:12 pm

Comments

* People essentially voted with their feet. *

You seem to forget that every bar and restaurant was full up until the very minute they were ordered to close.

Comment by NothingBurger Tuesday, Apr 14, 20 @ 2:33 pm
“You seem to forget that every bar and restaurant was full up until the very minute they were ordered to close.”

You seem to forget how incredibly different the context was a month ago compared to now.

Comment by Montrose Tuesday, Apr 14, 20 @ 2:37 pm
Montrose, please keep up, the article referenced when businesses were closed, which WAS a month ago.

Comment by NothingBurger Tuesday, Apr 14, 20 @ 2:42 pm
Yes, it was a month ago.

Before it was firmly grasped by the majority of Illinois residents what the cost might be: as of last Friday, 20,852 total cases, 720 total deaths.

I mean, it’s possible opening everything up tomorrow would create a surge (which would undoubtedly create a corresponding surge in 5-14 days of cases and deaths). I would not be among them, personally.

Comment by thunderspirit Tuesday, Apr 14, 20 @ 2:48 pm
You could offer me a private dinner at Alinea free of charge and I wouldn’t go today.

Comment by Soccermom Tuesday, Apr 14, 20 @ 2:56 pm
=It ain’t gonna come back if the problem is not fully addressed.=

Which is the problem with simply proclaiming we have to “reopen the country” without a plan in place to adequately address the virus.

How many people commute from the suburbs to downtown Chicago on a daily basis? Are they going to suddenly pile back into Metra trains to reclaim their workspace in shoulder to shoulder downtown office buildings?

Are servers going to suddenly return to their bars so they can navigate crowds sideways to serve beer? And will those patrons come flooding back in the same numbers?

What about our museums, Apple stores, amusement parks? Are people going to suddenly be ok with standing in long lines next to one another?

Reopening the country has to be more than just words. There has to be a plan. The absence of a plan would actually inflict more harm on the economy. We had stores that were open when this whole thing started and before the stay at home order came down. They were turned into ghost towns.

Comment by Pundent Tuesday, Apr 14, 20 @ 2:57 pm
To thunderspirit’s point, you suggestion that all the businesses would be teeming with people just like they were a month ago if we didn’t have a stay at home order is ignoring how things have changed. Look at the UI data. It’s not about when orders are put in place. It’s about people not feeling safe.

Comment by Montrose Tuesday, Apr 14, 20 @ 2:58 pm
I’ve been saying for weeks that people generally, not POTUS or governors, will decide when the country opens up. Personally, I won’t feel comfortable going to a bar or restaurant or any large-scale gathering until there’s a treatment or a vaccine. We go to 25-30 concerts a year, but won’t be doing that even after things “open up.” I won’t be going downtown, I won’t be traveling for work or pleasure, etc.

I’m sure there are a lot of folks out there itching to rush out there and do stuff. I’m fine if those people want to be guinea pigs. But it’s not going to be me and I’m absolutely certain there are many who are similarly situated making the same call. I just don’t want to die.

So this is my prediction - people like me will decide when the country is truly open and past this, and it won’t be until there’s treatment or a vaccine.

Comment by Joe Bidenopolous Tuesday, Apr 14, 20 @ 3:00 pm
To add to Pundent’s point, what happens when one asymptomatic person walks into Union Station, high school, or DMV?

Comment by Jocko Tuesday, Apr 14, 20 @ 3:15 pm
It doesn’t matter when the order is lifted, what matters is when people on an individual level feel safe enough to go back to work, or play.

Lift all the orders you want, and declare the country open, but that’s just so much whistling in the wind now.

Comment by PublicServant Tuesday, Apr 14, 20 @ 3:18 pm
== You seem to forget==

Yeah ok, champ. Anyone else here feel comfortable hanging out with 200-300 complete strangers yet?

Comment by Lester Holt’s Mustache Tuesday, Apr 14, 20 @ 3:18 pm
Also at issue, at whatever point things start opening back up, is that a lot of people will have been underemployed or unemployed for some time. The stimulus $ was necessary to help people from going under, but digging out from the financial hole many will be in will take a long time and likely many will not feel able to dive back in to lots of non-essential spending.

Same goes for people fortunate enough to be weathering the economic tidal wave fairly well…how fast will they want to start making big purchases again?

Comment by WeAreAVillage Tuesday, Apr 14, 20 @ 3:28 pm
The NCAA cancelled the tournament on March 12th.

Comment by Proud Sucker Tuesday, Apr 14, 20 @ 3:31 pm
You… first?

Comment by Dotnonymous Tuesday, Apr 14, 20 @ 3:34 pm
The audience here seems to better informed than most. I have a feeling if the orders were lifted today, the bars would be full tonite.
“Common sense isn’t common”

Comment by Bruce( no not him) Tuesday, Apr 14, 20 @ 3:58 pm
The real problem is going to be when we ‘open back up’ and restaurants are at about 20-30% capacity. Right now, it’s a governmental issue and there are loans, etc. to cover (some) needs. But once we’re ‘reopen’ and a trickle of people come to visit, how’s that going to be handled?

Comment by lakeside Tuesday, Apr 14, 20 @ 4:00 pm
==Anyone else here feel comfortable hanging out with 200-300 complete strangers yet?==

I’ve got tickets to an Alison Krauss concert I already know I’m not gonna use, and the event’s scheduled in mid-May.

Comment by yinn Tuesday, Apr 14, 20 @ 4:07 pm
People won’t engage in normal activity until they know they are safe. That won’t happen until everyone who asks can get tested, plus an RX cure and proven vaccines. Unfortunately and optimistically, that’s probably over a year away.

Comment by Flexible One Tuesday, Apr 14, 20 @ 4:24 pm
=Yeah ok, champ. Anyone else here feel comfortable hanging out with 200-300 complete strangers yet?=

Exactly right.

So those that think that it is the shelter in place order that is at fault ponder this-

Over 800 people dead from the virus in Illinois. The toll in NY is horrible. What do you think would have happened without the shut down?

If you think the bars, restaurants and events would be teeming with people you are either poorly informed or purposely obtuse.

Hospitals would be overwhelmed, I cannot even contemplate the national disaster that would be happening- something out of the movies like Contagion.

When there is some semblance of safety, people will get back out there.

Comment by JS Mill Tuesday, Apr 14, 20 @ 4:43 pm
“until the very minute they were ordered to close”

Last time I went out to eat was March 1. Turned down an invitation on March 10 due to virus worries. I bet the slowdown started earlier than you anticipate based on your casual observations or anecdotes.

Comment by Jibba Tuesday, Apr 14, 20 @ 4:53 pm
To others’ point, I doubt anyone (save perhaps for Trump) thinks that, if the economy was “opened up,” the economy would magically snap back to its pre-COVID state. I don’t think there is any serious doubt that, if, for the sake of the argument, all of the stay-in-place orders were lifted, everyone would rush back to stores and restaurants. I think folks here may overestimate people’s reluctance, but the number of people avoiding going to stores and dining in at restaurants would be significant anyway.

At this point, I feel like what will will likely see is restrictions being lifted gradually, in stages, on public institutions and private businesses alike. I would be surprised if we see any large-scale events this summer. I would be surprised if schools open up before the 2020-2021 school year. But there will be movement, and as time goes on, the pressure to restart the economy, even if in incremental stages, will increase.

I was there when the Soviet Union collapsed. I was pretty young at the time, but not so young not to see the sheer scale of the devastation. The rampant inflation, grocery stores barely stocking anything because of supply shortages, streets going uncleaned, heat and power outages because the city couldn’t keep it going, my mom and my grandparents going without pension checks and disability checks for months at the time, jobs not paying much. I remember getting all my clothes from humanitarian donations. I got used to just trying to make it through colds and bruises, because medicine was in such short supply. I could go on and on.

I’m not saying that things may necessarily get that bad in United States, but I have a more tangible understanding of how bad things can get when entire industries are shut down and the government doesn’t have the money. I personally would rather not have to experience it again. And I don’t think any government is keen to let things get to that point, either. So, while pandemic works on its own schedule, keeping economies on lockdown for too long isn’t sustainable. It’s only the question of when the governments will try to reopen the economy, one way or another.

Comment by Strannik Tuesday, Apr 14, 20 @ 4:59 pm
If people are voting with their feet and reluctant to venture out, then it seems the stay home order has done its job and is now superfluous. No need to violate our rights in the name of public safety if removing the order will not cause people to come out en masse.

Comment by Captain Obvious Tuesday, Apr 14, 20 @ 5:26 pm
Captain Obvious, there’s really no middle ground with you, is there? And that’s there reason the stay at home order needs to remain in effect for now.

Comment by Jibba Tuesday, Apr 14, 20 @ 7:44 pm
@Strannik,

I want to choose my words carefully, because I don’t want you to feel that I am denigrating your experiences in Russia in the 1990s.

But I find it hard to compare our current situation–capitalism on serious pause, due to the world-wide pandemic of a new virus that presently had no cure–with an economic (Communist, then establishment of an oligarchy by the insider sales of state-owned assets) and political (authoritarian) system that was the Soviet Union from 1917- circa 2000.

Our farmers own their land, or rent it from parties whom they have negotiated agreements with. The farmers own their equipment, and make their choices regarding which crops or animals they will raise. The farmer takes all responsibility for decisions, and profits or losses. That certainly was not how Soviet collectivist agriculture functioned.

Our factories, stores, restaurants are owned by private parties or corporations of some form. Did that happen in the Soviet Union?

Will some businesses not be able to withstand this period and close? Unfortunately, yes.

But Macy’s was already scheduling 30 stores for closure in January, before Covid-19 came to America.

Were dairy farmers dumping milk last year, and going out of business?
Unfortunately, that was happening, due to declining milk sales.

Capitalism is dynamic, and unfortunately not every business is successful, for lots of reasons.

Our economy will be in trouble because many of us are concerned about how stable our income will be over the next year or two. I’m devoting any spare money I have to paying down debt, so that I can lower my cost of living.

The whole world economy is about to become a real-time example of the paradox of thrift.

You have to remember that almost 70% of the American economy is based on consumer spending. Do I think we want to follow the example of the Chinese, where only 50% of the economy is based on consumer spending?

I’m not convinced either level is conducive to long-term economic health. But I also admit that I haven’t been able to figure out what level is. (59.8%? 62.5%? 67.3%?)

I work in a job that will probably be replaced by robots in 5-7 years. My industry is heavily dependent on consumer spending, and I figured consumer spending and my income were going to decline within the next 2 years, anyway, simply because it was time for the economic cycle to turn.

I’m not blaming any of this on the current governor. I just hope I’ll be able to pick up some cheap stocks and grow my long-term net worth.

Comment by Lynn S. Tuesday, Apr 14, 20 @ 11:03 pm