The coronavirus crisis in the United States quickly went beyond a public health emergency to become a dire economic threat.
It’s not hard to see why. Coronavirus has led governments to urge residents to stay out of physical offices, work from home if they can, avoid restaurants and other in-person services, not gather in groups of 10 or more, and otherwise make choices for the sake of public health that dramatically reduce economic activity.
But the situation is graver than just shutdowns spurred by public health concerns. In addition to the supply of workers and goods falling, demand has collapsed too. People aren’t spending enough to spur economic growth in areas where the country needs it right now, like ventilator or mask production, or staffing grocery deliveries.
The result is a recession, and probably only the beginning of it. While the Federal Reserve and Congress’s stimulus measures can help cushion the blow, this is likely just the start of the economic suffering the coronavirus crisis will unleash.
Here are nine charts that show just how severe the economic crisis ahead is.
1) Jobless claims have reached literally unprecedented heights
Christina Animashaun/VoxThe federal government has been collecting data on how many people apply for unemployment benefits since at least 1967. Prior to this month, the worst week in the history of this data came on September 18, 1982, when 680,000 people claimed unemployment. The week ending March 28, 2009 came close to topping that record, with 665,000 new claims.
The week ending March 21, 2020 shattered these records, posting a number five times higher than any in the history of the data: 3,283,000 new claims. That’s nearly 3.3 million new people out of work.
As my colleague Matt Yglesias notes, this was even worse than Goldman Sachs’ projection of 2.25 million claims, a number considered shocking and extreme when it came out a week earlier.
2) And things are set to get even worse
Two economists, the University of Minnesota’s Aaron Sojourner and Yale’s Paul Goldsmith-Pinkham, have built a model for predicting unemployment claims based on news reports. Their initial model nearly nailed the 3.3 million number, predicting 3.4 million new claims. They now project 4.7 million new claims for the week ending March 27, a huge spike from an already record number:
Employment and Training Administration / Paul Goldsmith-Pinkham and Aaron Sojourner 2020The initial numbers might not be this high when they’re first announced on Thursday, April 2, Goldsmith-Pinkham cautions; slow processing speeds and low-balled initial estimates mean that he and Sojourner expect the official data announcement to be more like 3.54 million new claims. But 4.7 million is their estimate of the real, worse number.
3) Google Trends are a leading indicator of the gravity of the recession
One thing Goldsmith-Pinkham and Sojourner have discovered through their research is that the correlation between Google searches for “file for unemployment” and ultimate unemployment claims data is, in Goldsmith-Pinkham’s words, “absurdly high.”
Dylan Matthews/Vox/Data via GoogleThat makes the Google Trends data especially alarming right now, because searches for “file for unemployment” are far, far higher than they were in the depths of the Great Recession.
4) This looks more like a natural disaster than a normal recession
One way to understand what’s happening now is by analogy not to a prior recession — none have hit this hard, this suddenly — but to a natural disaster. In a way the coronavirus is a natural disaster, too, and you can see the parallels if you look, as economist Justin Wolfers and reporter Quoctrung Bui did in a valuable New York Times piece, at what happened in Louisiana.
In 2005, Louisiana was brutally affected by Hurricane Katrina and the subsequent bungled federal response. The hurricane physically destroyed many businesses and forced huge numbers of people to relocate; about 1.1 million people left Louisiana in the aftermath of the storm. As families struggled to recover, unemployment benefit claims shot up to record levels, hitting a peak of 73,702 for the week ending September 17, 2005. That’s far above the Great Recession peak for the state, reached on September 20, 2008, of 28,080 new claims, even accounting for lost population due to the hurricane.
But it’s not far above the jobless figures that Louisiana just posted: 72,620 new claims for the week ending March 21, 2020. The coronavirus crisis has taken a similar bite out of Louisiana’s job market as Katrina did at its peak, and it’s possible that next week’s claims report will be worse still.
5) One in three Americans say a household member has been laid off or had their pay cut
Sometimes direct data on a problem like unemployment can underestimate the share of people affected; after all, whole families, households, and communities can be hurt badly by a single person’s layoff.
A new poll by the Pew Research Center gets at this phenomenon well:
Pew Research CenterFully a third of Americans have someone in their household who’s been laid off or lost pay. The economic and humanitarian damage here is incredibly widespread, even more than the unemployment claims data suggests.
6) The Dow Jones has not been a good guide to the nation’s economic health
The Dow Jones Industrial Average is sometimes used a shorthand for how “the economy” is doing in the US. This is a habit that only seems to exist because stock prices change multiple times every second, meaning Dow Jones data is faster to move and update than, say, unemployment numbers, and more exciting to watch.
But it’s a terrible habit. Case in point: look at what the Dow did the day the Department of Labor announced that 3.3 million Americans lost work in a single week. Objectively that news should be an absolutely devastating sign for the economy, and if the Dow were a good guide to how the economy’s doing, it would reflect that. Alas:
Google FinanceThe Dow rallied the day of the some of the worst economic news in the nation’s history. There’s a logic to why it did that — it might have been reacting to Congress passing stimulus measures — but the surge still doesn’t suggest that the economy is recovering. It just means speculators on a certain bundle of stocks are more optimistic than they were before. Nor was March 26 the first time this happened — two days prior, the Dow had its biggest single-day gain since … 1933. That didn’t suggest that the economy was doing great in 1933, and it doesn’t suggest that today either.
The Dow is an antiquated, barely weighted average of 30 large companies (not necessarily the largest companies) and you should not pay attention to it. Indeed, you shouldn’t even pay attention to well-constructed stock indices like the S&P 500 if your interest is in how the economy as a whole, and not just the stock market, is doing.
7) Money is fleeing emerging market economies
The coronavirus recession did not start in the US and it will not end here. One of the most notable features of this crisis, tracked in the above chart from the Institute for International Finance’s Jonathan Fortun, is a massive, immediate outflow of investments in “emerging market” economies like China, India, South Africa, and others.
The outflow is much more severe and much more quickly paced than the one that followed the 2008 global financial crisis. China and India and many other emerging market countries survived the 2008-2009 crash okay, avoiding falling into recession even when richer countries were struggling. This time looks likely to be different, not least because the same protective measures keeping Americans stuck inside and not working are being taken in many emerging market countries as well.
The New York Times recently ran a wrenching piece looking at New Delhi, Turkey, Manila, Johannesburg, and Buenos Aires, detailing mounting economic catastrophe in each location. That’s the human toll of the capital flight charted above.
8) The stimulus package’s checks are progressive and coming soon
I won’t be all doom and gloom here — mostly doom and gloom, sure, but there are bright spots. One is the cash transfer of $1,200 per adult and $500 per child dependent approved as part of a congressional stimulus package signed into law by President Trump. In an unusual development, most of the benefit from the policy is going to the poor and middle class, and exactly 0 percent will benefit the richest Americans, according to the widely respected and nonpartisan Tax Policy Center:
The poorest Americans, with household incomes below $25,300, will see their incomes rise by 10.8 percent on average due to the checks. People making between $25,300 and $50,700 will see incomes go up by 4.9 percent. People in the top 5 percent of the distribution, however, get nothing at all.
It’s a surprisingly progressive measure coming out of a Republican Senate, and one that will help a lot of people afford rent and buy groceries while they’re locked down.
9) The unemployment checks that are coming are important too
Dylan Matthews/Vox/Data via Department of LaborEven more valuable than the one-off $1,200 checks for each adult, at least from the perspective of people put out of work by this crisis, is the $600 per week increase in unemployment benefits, which the stimulus bill has funded through the end of July.
To visualize just how drastic a benefits increase this is, I charted the average weekly unemployment benefit amount from 2008 to 2020, and then added $600 to the most recent 2020 datapoint. For the worst parts of the Great Recession, the average weekly benefit was around $300; the benefit gradually grew to $370 by the early months of 2020. Adding $600 nearly triples the benefit for unemployed people.
Note, also, that this actually understates how much the typical person will benefit, because it’s a mean, not a median: this is just the total amount of unemployment money paid out, divided by the number of people getting benefits per week. The median beneficiary gets less per week and will benefit more from the UI benefit hike.
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