
Back-of-the-envelope estimates of next quarter’s unemployment rate - fdye
https://www.stlouisfed.org/on-the-economy/2020/march/back-envelope-estimates-next-quarters-unemployment-rate
======
H8crilA
BTW, the St. Louis Fed has one of the biggest blessings for your "I can't
afford neither Bloomberg nor Refinitiv" amateur economist. The amount of time
series and the basic ability to do pointwise arithmetic operations is great!

All series sorted by popularity:
[https://fred.stlouisfed.org/tags/series](https://fred.stlouisfed.org/tags/series)

I wish other central banks (in other countries) stepped up to this amazing
level.

~~~
yingw787
Seconded. I (think? don't remember) I did Fed Challenge back in the day, and
the econ resources I trusted most was Bloomberg/Economics, CNBC/Economics, and
FRED by far:
[https://en.wikipedia.org/wiki/National_Fed_Challenge](https://en.wikipedia.org/wiki/National_Fed_Challenge)

~~~
baryphonic
I second that. When I did the College Fed Challenge, FRED was my team's go-to
source, followed by the Bureau of Labor Statistics and National Bureau of
Economic Research. We had a little pipeline where we'd take their data and
make nicer-looking charts in Excel that we could import into our slide deck.
When I'm taking to laymen about economics, I still refer to FRED charts
because they're so accessible and the number of series is enormous.

------
TheCowboy
There's not enough pressure on politicians in both parties to ensure a solid
and fast as possible recovery.

It could end up that members of mostly one party in the Senate end up blocking
most of these bare minimum measures.

Look at what some European countries are doing as the minimum:
[https://www.nytimes.com/2020/03/28/business/nordic-way-
econo...](https://www.nytimes.com/2020/03/28/business/nordic-way-economic-
rescue-virus.html)

Here are some (for the most part) good ideas that should be considered:
[https://www.nytimes.com/2020/03/30/opinion/coronavirus-
econo...](https://www.nytimes.com/2020/03/30/opinion/coronavirus-economy-saez-
zucman.html)

~~~
tathougies
America has given full unemployment plus extra money, plus free money. How is
that different from privatizing payroll?

Why is an 'employment guarantee' any better than what is happening in most of
America -- layoffs with an explicit promise to rehire once the business is
allowed to operate? It's not like paying companies to keep people on payroll
in jobs that are not producing economic value really reduces unemployment
anymore than not testing for coronavirus makes it go away.

I don't know why americans are so afraid of 'mass unemployment'. Most
businesses will survive this crisis, due to debt suspensions or new debt at a
very low rate or via direct government aid (which the government has so far
provided plentifully, and will likely do more). Businesses have promised to
rehire. However, a business that cannot right now provide a job that has value
to the business ought to lay off people and let the social safety net take
care.

The articles make some good points regarding healthcare, but aside from that,
it makes no good argument why unemployment + the unemployment insurance that
workers have paid into for exactly this scenario is worse than paying
businesses to keep people on payroll who wouldn't be there otherwise.

~~~
Afforess
Employment guarantees may include benefits (FMLA/Healthcare), which you
definitely will not have with unemployment. The American system of tying
healthcare to employment is showing it's huge weakness right now - when
Americans need healthcare the most, they lose it.

"Rehiring" can also be slow because it forces employers HR departments to
screen candidates all over again. If employees stay on the payroll, they can
all report back to work once the crisis has passed. Instead, businesses that
survive have to spend their first weeks "hiring" back employees if they can,
instead of making profits. This delay will hurt the recovery further.

~~~
tathougies
Yes, I agree with healthcare. FMLA doesn't make sense. If you're unemployed,
you don't need to ask for time off. Plus, this is paid leave.

> "Rehiring" can also be slow because it forces employers HR departments to
> screen candidates all over again.

No it doesn't. Just call your old employees and give them a job back.

~~~
TheCowboy
The POV that there will be some idealistic point in the future where companies
call all of their employees back is absurd. There might be some chance of this
happening, but it's not large. And the times we're wrong then we're very
wrong.

This isn't going to be unpaused. The economy will be spun back up gradually
for everyone's safety. People will likely still be getting sick. Some at-risk
people may not be able to safely re-enter the workforce for a long time.

------
jedberg
I don’t think any of their models can accurately predict what will happen. We
don't have any good prior examples to base the models on. I don't think the
economy will recover, but I also don't think it is possible to guess how bad
it will be.

I don’t think there is any model that can predict pent up demand.

I know a lot of my friends who still have jobs are talking about going out
every night when the quarantine lifts so they don’t have to cook.

If a lot of people do that, we’ll suddenly need a lot of waiters back. And
then they’ll have money.

Or maybe everyone will have learned that they love cooking at home and never
go out again.

I don’t think there is any way to tell. We don’t have any good prior data.

All the previous models assumed unemployment claims and stock market drops
when it was possible for everyone to work.

Right now there are a lot of jobs that are temporarily suspended skewing the
numbers.

~~~
mcphilip
But will your friends get haircuts, manicures, massages, etc every day when
the quarantine lifts? Pent up demand only helps certain industries,
unfortunately. Imagine being a hair dresser with a stack of bills from the
shutdown and no big boost to income after the quarantine lifts to help pay
things off.

Rough times ahead for many, sadly.

~~~
jedberg
> Imagine being a hair dresser with a stack of bills from the shutdown

Presumably all of those bill are owed to other businesses, who are run by
people. People with empathy. People who realize that keep a good customer is
better than losing them, even if it means cutting them a break.

I think people will surprise others with how this pain will spread through the
entire supply chain so it does't kill any one business. I think all the
businesses in the supply chain know that killing everyone at the end of the
chain isn't a good idea.

~~~
adpirz
This is a fundamental question we are being and will be forced to answer more
directly:

Are we willing to trust our collective empathy or do we need the social
contract to fill in the gaps for collective protection from this harm?

I believe many will benefit from empathy, but it will be disproportionate and
many communities who will need it the most will not receive it.

------
legitster
What is happening to the US economy is completely unprecedented. The
comparison I most hear is to WWII - but instead of pivoting to support sending
people to war and supporting their needs, our economy is pivoting to sending
them home.

But as near as I can tell, we only ever sent about 10% of the population to
WWII. This is 3x the hit of WWII! (I get that we don't have to make guns and
tanks for people, just feed and house them).

~~~
viklove
Instead of pivoting to support the needs of Americans, we're shoveling money
into massive corporations. Obviously it's not the American labourer who needs
help. No, it's the shareholders and execs who run big companies. I love this
country!

~~~
ccktlmazeltov
This is truly insane, the most impacted people are the ones who are living
paycheck to paycheck, and leading small businesses. Yet, the only thing the
government cares about is SP500. This truly shows how corrupt the
establishment is.

~~~
H8crilA
This is a common misconception. The Fed doesn't care about the S&P500 (the
president does, though, judging by his tweets ...). You may be projecting
because you care about it.

Fed cares about the credit market, not the stock market. It's amazing how many
people don't even know that the credit market is much bigger than the stock
market. Since these days everything is an ETF you can look up $LQD (investment
grade corporate bonds) and $HYG (low grade/junk corporate bonds) to see
"what's really going on". You can also look up spreads for each rating grade
on FRED.

------
bpodgursky
The most infuriating part of the shutdown is the disconnect I see between
comments on Twitter, where the shutdown is basically a game because everyone
has a WFH-capable tech job, and in real life, where I have family members
suddenly unemployed, with wild uncertainty about whether they'll get their job
back (in a month? two? three?). It's incredibly stressful, and not a fun joke.

Like, independent of whether you think the shutdown is the right risk / reward
tradeoff, please at least think about the 70% of the workforce that cannot
work from home, because they work in restaurants or physical service jobs. If
you are still working (or at least pulling a paycheck), you're incredibly
lucky -- please don't act like you have the only voice of moral authority
about when and how this should end, and the calculus that goes into that
tradeoff.

~~~
rossdavidh
Thank you for stating what my mind couldn't quite put into words. I see lots
of people with professional-class, WFH jobs being very sanctimonious about any
suggestion that we should in any way take into account the financial impact
when making the risk-reward decisions. Which, taken to its logical conclusion,
would suggest that a worse-than-average flu season should also shut everything
down, since tens of thousands of lives could be at stake. If this were somehow
a pandemic which impacted the professional class more than the working class,
I suspect we would see a very different moral calculus at work.

~~~
SeyelentEco
I agree with the grandparent that we aren't worried enough about the large
percentage of people that can't work at home but your statement that "would
suggest that a worse-than-average flu season" is not backed by any science.
There are 12-60k deaths a year from the flu according to the CDC (last year is
in the 24-60k range). There are 37k deaths from COVID right now and the number
is still increasing at non-linear rates. This is /on-top/ of the flu deaths.
So this isn't just "a slightly worse flu season".

~~~
bpodgursky
I don't mean to suggest that this won't be worse than the flu when all is
done, but you're comparing global COVID-19 deaths to US-only flu deaths (US
COVID deaths are about 3,000 right now, not 37,000).

~~~
SeyelentEco
I misread the data. I assumed it was global, but it was US only data I was
looking at.

~~~
akvadrako
For the record global flu deaths some years are about 600k.

There is a good chance the lockdowns are saving more lives due to the normal
flu then covid.

[https://www.euromomo.eu/index.html](https://www.euromomo.eu/index.html)

------
elamje
Mostest Important caveat from the link:

This is not an official St. Louis Fed calculation. The post is titled “back-
of-the-envelop estimate of unemployment”, the data sources are from two blog
posts, and it was written by a researcher on their blog. This is not an
official document, and appears that it likely wasn’t vetted.

~~~
01100011
If you believe the conclusion that 50% of small businesses don't have cash
reserves for a
month([https://news.ycombinator.com/item?id=22719981](https://news.ycombinator.com/item?id=22719981)),
and ~50% of Americans with jobs work for small businesses, it's not far
fetched to think that 25% of people will soon be unemployed. Add in the people
working for larger firms, like travel and vacation related firms, and you can
easily get to 30% unemployment.

~~~
gullyfur
Several businesses near me immediately announced on social media they were
permanently closing for business, the moment the lockdown was announced. They
must have been struggling prior to the lockdown and knew there would be no way
to recover.

------
dcolkitt
Most important caveat from the link:

> [T]hese calculations do not account for any potential effects of fiscal
> measures, such as payroll support measures for small businesses

A $2 trillion stimulus very likely means that the actual figures are
significantly less than what this model calculates.

~~~
sobellian
In fairness the author also gave a massive error bar "between 10.5% and
40.6%." So whether or not the stimulus is sufficient to avert the worst
depends on where we sit between "mild recession" and "social collapse."

~~~
nostromo
10.5% unemployment isn't a mild recession. It's a touch worse than 2008.

~~~
sobellian
True, but I think there's more metrics to a recession than peak unemployment.
It took years for unemployment to dip below 8% after 2008, but only time will
tell what the recovery looks like here.

------
idoh
That would make it higher than the great depression, which peaked at 23%.

~~~
m0zg
Which is why the "model" is 100% certified organic horseshit. If they want to
tell me that a temporary pause in the roaring economy is worse than the
largest systemic collapse to ever happen to it, I say "GTFO".

~~~
itsgrimetime
"Temporary pause" is an incredibly naive way to describe what's happening.
Millions of people (and businesses) will miss their rent/mortgage payments
that are due Wednesday. Some not-insignificant portion of those missed rent
payments will result in more mortgage payments being missed. Many who've lost
their jobs and rack up debt during this won't be able to find a job when the
economy is able to be spun back up. It seems obvious that there's going to be
terrible cascading effects.

~~~
m0zg
And millions of people will go back to work in June. And millions of people
and businesses will receive government support in the interim.

~~~
AaronFriel
That's assuming:

* The correlated decline in productivity, the gaps in mortgage and rent payments, and so on do not result in our financial system breaking in surprising ways, like how a small increase in mortgage default rates did with synthetic collateralized debt obligations in 2007-2008. An increase in fixed rate mortgage defaults from 5% to 10% contributed significantly to the largest recession in nearly a century. I don't think anyone can say with certainty that nothing like this lurks in our financial system, this is like a bug in a program which requires dozens of different code paths to all enter into an invalid state simultaneously, and only _then_ do you see the result.

* That we can actually restore everything to normal by June with the development of a cheap and easy to administer vaccine, which seems extremely unlikely to materialize in only 2 months.

~~~
tathougies
Nah. Most people are going to forgive debts in the interrim. It only makes
sense.

> like how a small increase in mortgage default rates did with synthetic
> collateralized debt obligations in 2007-2008.

What you fail to mention is that most mortgages in 07 and 08 were perfectly
fine and you could find alternate home owners willing to actually pay. This is
completely different. The government has shut down the economy. It's not like
there are a lot of people you could sell a home too. Most debt collectors are
going to let the debt go and not demand it, realising they cannot find any
alternative.

> * That we can actually restore everything to normal by June with the
> development of a cheap and easy to administer vaccine, which seems extremely
> unlikely to materialize in only 2 months.

Unlikely that there is a vaccine, but we won't need it. The country has gone
through much worse pandemics, and they typically do not cause great economic
harm. In fact, they often lead to boom timse.

~~~
AaronFriel
> Most people are going to forgive debts in the interrim

> Most debt collectors are going to let the debt go and not demand it,

I find it hard to believe you're familiar with debt collection in the United
States!

> Unlikely that there is a vaccine, but we won't need it. The country has gone
> through much worse pandemics,

If we're willing to just let lots of people die, then sure, we "won't need
it".

The case fatality rate (CFR) depends on ventilator and ICU capacity. We'll
have a better estimate for US case fatality rates due to the outbreak in New
York soon, but so far it seems to be that even though deaths lag cases, deaths
have been roughly 2% of confirmed cases for a few weeks. If that holds up as
confirmed cases rise into the millions, that would put this on par with the
1918 pandemic. If it doesn't, New York will give us a better idea of the CFR
in a modern American city's medical system.

~~~
tathougies
> with the 1918 pandemic

which we got through without state-wide lockdowns.

~~~
AaronFriel
"The government response - or lack thereof - to the 1918 pandemic was good,
actually" wasn't a take I was expecting on this site, but perhaps I should
have.

~~~
tathougies
I didn't say it was good. I just said that -- after the flu was over -- it did
not lead to sustained economic depression. The bounce back was phenomenal. The
roaring 20s represented a level of wealth that has henceforth been unmatched.

------
cirgue
Can we get a title change? The actual title of the article is "Back-of-the-
Envelope Estimates of Next Quarter’s Unemployment Rate", which is emphatically
not the St. Louis Fed estimating anything.

~~~
icedchai
Well, it is on the St. Louis Fed's web site...

------
ilamont
From the caveat list:

 _many businesses may send workers home with pay instead of laying them off
outright._

Others may get some other benefit, like the friend of a friend who gets health
insurance but no pay through the beginning of June. Not sure how it impacts
unemployment benefits. I think the hope is that this thing will cycle through,
the economy will recover (like after 9/11) and people can be brought back to
the same job.

------
starpilot
What is their track records for these estimates? Have they accurate in the
past? My impression from GDP growth estimates is that everyone stays close to
the average growth, but actual growth is apparently much more volatile in a
random way. Similar with EPS estimates from stock analysts.

------
bmurray7jhu
"Views expressed are not necessarily those of the Federal Reserve Bank of St.
Louis or of the Federal Reserve System."

------
xiaolingxiao
Is there a breakdown of retail and travel-industry related jobs, versus other
categories?

~~~
thedance
Yes. Consider, for example, any reason why Las Vegas should continue to exist.

------
tempsy
And yet stocks have rebounded 20% since Monday lows last week.

~~~
ccktlmazeltov
You're looking at SP500, which are big companies that are going to be fine.

~~~
gruez
All-cap indices (eg. VB) have seen similar rebounds, although they did rebound
less than the large cap companies (SPY).

------
trixie_
If it's raining you bring an umbrella, if it's hot you wear shorts, if there's
a pandemic you wear a mask - everywhere all the time. They shouldn't of let
people on airplanes, buses, buildings, etc.. without a mask. Don't have one?
Here's some scissors cut up a tshirt, or use a scarf. It doesn't need to be
N95 perfect. Just a barrier to keep you from touching your face, and to catch
a good amount of spit flying out of your mouth every time you open it. Grocery
stores, gas stations, offices that are still open, private social gathering,
etc.. still no one is wearing a mask (in America at least) Asia was way ahead
of us with their health culture on this one, we need to step it up.
Unfortunately it's a message that really needs to come from the highest
levels. The politicians, news casters, etc.. on TV need to be giving
announcements with masks to get the point across.

~~~
chrisseaton
> if there's a pandemic you wear a mask - everywhere all the time

I thought the expert advice from the WHO is to _not_ wear a mask?

> There is no specific evidence to suggest that the wearing of masks by the
> mass population has any potential benefit. In fact, there's some evidence to
> suggest the opposite in the misuse of wearing a mask properly or fitting it
> properly.

Do you know better than the WHO?

~~~
dilap
Yes, it's absolutely essential in these uncertain times that we do not allow
ourselves to be led astray by our own best judgement or common sense, but
instead rely upon the expert guidance of organizations such as the WHO.

[https://mobile.twitter.com/WHO/status/1217043229427761152](https://mobile.twitter.com/WHO/status/1217043229427761152)

~~~
chrisseaton
Maybe that’s what the data supported at the time?

Shouldn’t we be going with data rather than ‘common sense’?

~~~
AnthonyMouse
Sometimes you have the luxury of multiple trustworthy parties having already
each done a large sample size peer reviewed double blind study on just the
question you want to know the answer to and have all come to the same
conclusion.

Other times that hasn't happened yet and you still need to make a decision
about what to do today, not after six months of further study.

