
IMF Says Great Lockdown Recession Likely Worst Since Depression - ajay-d
https://www.bloomberg.com/news/articles/2020-04-14/imf-says-great-lockdown-recession-likely-worst-since-depression
======
webbruce
Based on some of these comments, the degree to which so many are out of touch
is unbelievable. 17 MILLION people have filed for unemployment and I'm sure
this week will be another 6M as companies don't keep this much cash on hand.

Tech's been living in a bubble for a long time and reality is starting to hit.
Get out and talk to real people, not your Slack buddies working in SF.

~~~
Ididntdothis
I agree with you but the high number of unemployment claims is also a feature
of the bailout plans. Let’s hope people will get hired back quickly.

~~~
anonanon42
My employer has just furloughed 30% of the company for 6 months. 6 freakin'
months. And we were very profitable. This cut was not necessary to maintain
neutral profit/loss...they want to keep profits up.

We're a software company backed by a brand name VC in SF. The board is in
total meltdown.

~~~
Ididntdothis
Our system rewards people who relentlessly pursue their own advantage at the
expense of others. The official talk is about shared sacrifice but the real
winners are the ones who make others sacrifice. My company has a lot of
problems but I really appreciate that they set out a goal to not lay off
anybody. They could easily have laid off a lot of people but they didn’t. This
will probably not get rewarded in the stock market but it shows that the
company is not run by complete sociopaths like many others.

------
justinzollars
This certainly feels real to me. Yesterday, I was laid off from my job at
Easypost. We had a very big and very painful layoff because my company took on
way too much leverage. The circumstances of COVID19 were tough to foresee but
I really wish we hadn't taken on so much debt while times were good.

I have experience in Go, Ruby, Python and I'm excited to hack again.

~~~
treyfitty
> It was no fault of our own because the circumstances of COVID were
> impossible to foresee.

This is one of the biggest fallacies in modern finance. COVID was merely the
catalyst which exposed terrible finances. The idea of unforeseeable black
swans has become nothing more than a trope of an excuse that it's lost all
meaning. Sure, the pandemic itself is a "black swan" but the subset/collection
of events that lend itself to economic disaster is actually not that rare.
Case in point: 9/11, Tech Bubble burst, Financial Crisis, Covid-19. This was
all in a span of ~20 years.

So let's revisit this: Is economic collapse really that rare? No. But people
construct their businesses as if they are, and we always see these house of
cards tumble. The other group of businesses who acknowledge the possibility of
an economic collapse subscribe to the false pretense that THEIR company is
immune because they're so "essential." In both cases, growth at all costs
seems to be the mantra. How is this sustainable beyond the Fed Lottery? At
this point, it hasn't become a Lottery anymore.

~~~
watwut
Issue is that system in normal state favors "house of cards" companies. Both
as simply value thing, but also in material financial terms.

In values, I have read a lot praise for risk taking over years and rewards for
it. I have read comparatively less praise for prudent decision making or what
happen when risk part of risk happen. People are said to get rich because they
"took the risk" and are poor because they were either lazy or did not took
risk. But the part when people take the risk and become poor is never said, as
if we wanted to pretend it never happens.

In finances, companies that risk a lot and grow and now are about to fail are
way more likely to be saved then a company that was more responsible.

------
fallingfrog
The economy is basically a big network of relationships; employee
relationships, business relationships, etc. Unfortunately such relationships
tend to break quickly and in a self reinforcing cascade but can only be
rebuilt slowly as businesses find that there is enough profit margin and
demand to bring new people in, one at a time. That’s why recessions happen
quickly and recovery time is proportional to how many people lose their jobs.
You look at unemployment data for the last 50 years and the pattern is very
simple: a rapid increase in unemployment and a steady recovery. The higher the
spike, the longer the recovery. That being the case I would guess that the
recovery from this shock will take a decade or more.

[https://www.whitehouse.gov/wp-
content/uploads/2019/05/April-...](https://www.whitehouse.gov/wp-
content/uploads/2019/05/April-Jobs-Report-1-820x493.png)

Edit: I can’t make new posts. Someone has suggested that people will just be
re-hired; historically, that has never happened. Not saying it’s impossible
but this would be the first time. You can’t put a broken egg back together;
entropy doesn’t go in reverse. The old jobs don’t come back, new ones are
created, that’s just the way it works.

~~~
vlunkr
It seems likely though that lots of people after the lockdowns will simply be
re-hired once lockdowns are over.

~~~
TheHypnotist
Particularly a large portion of the service industry. Perhaps not all with
some establishments potentially closing, but most will be called back. Large
retail that has closed down as well.

------
nanna
From the horse's mouth:
[https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/we...](https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-
april-2020)

------
OscarCunningham
The important question is whether the recession due to the lockdown (which is
at least useful for stopping the virus) will continue after the virus has
passed and the lockdown is lifted.

~~~
nabla9
There will be huge shift in structure of business.

Many small mom and pop shops are not coming back. Big chains, and franchises
survive.

Permanent changes in customer behavior. Many people with resistance and habits
against 'new ways' are forced to learn internet shopping and delivery. Their
habits can change permanently.

~~~
mantap
The change in habits cuts both ways. I've bought from many small online stores
recently as a result of the big retailers (inc Amazon) being totally sold out.

~~~
timr
Similarly, I've been buying a lot more from smaller, local stores because the
major chains are disasters. It's worth it to pay a few dollars more for
groceries to avoid waiting in an hour-long line, for example.

Just as companies are re-thinking the fragility of supply chains that depend
on a single country, maybe this will help counter-balance the consumer trends
toward huge retail.

------
chadlavi
I don't get what the point of still using the term "recession" is. Even if
it's temporary, this is a full-blown depression right?

~~~
throwawaylolx
How is it a depression if it's only been a few months? Also the IMF article
predicts a 3% contraction for 2020 and a 5.8% growth in 2021, so by what
definition is this a depression?

~~~
chadlavi
An unemployment rate of around 13% (as of two weeks ago[1], so probably even
higher now) doesn't seem like it's going to just magically resolve itself, and
it's going to have drastic effects.

1\. [https://www.nytimes.com/2020/04/03/upshot/coronavirus-
jobles...](https://www.nytimes.com/2020/04/03/upshot/coronavirus-jobless-rate-
great-depression.html)

~~~
throwawaylolx
That's just an estimate. From your link:

>Be warned, these numbers yield an imprecise estimate of today’s unemployment
rate, and the truth could easily be quite a lot higher or lower. This is not
an estimate of the official unemployment rate for March, which reports the
state of the economy a few weeks ago when the labor market was in better
shape, nor is it a forecast for the official rate in April.

I don't find it useful to implicitly embed a financial forecasting model in
the use of the term "depression".

------
DCKing
As a total dummy on macroeconomics, I find myself having the positive take
"hey, we were probably moving towards some recession anyway, might as well get
it over with in one go". I'm saying this because the graphs go up again in the
not too distant future. Besides the obvious personal suffering that is going
to be the consequence of this event on at least the short term, and under the
uncertain assumption that we're making some return to normal life in 2020, is
there any merit towards my naive optimism?

~~~
nl
_hey, we were probably moving towards some recession anyway,_

That's a take that is gained from reading two many doom and gloom writers and
not looking at the data.

The data shows that economies - on average - expand and have done
consistently, long term since the renaissance.

Once you look at that, you see recessions as _mistakes_. Most large ones since
the start of the 20th century have been caused by errors in the capital
markets (1929, 1987, 2008) or commodity price shocks (1970s).

Perhaps the run up in stock prices should have been corrected. But that would
have been a recession caused by a financial market correction, so another 2001
"dot com crash" style thing. Nothing like this.

 _is there any merit towards my naive optimism_

By most measurements this is the biggest economic shock since 1929 (and
possibly larger). It's the first time we've have economic activity stop this
quickly across so many industries all across the world ever (perhaps the black
death in the 1300s was similar because many farms went unharvested because of
the lack of labor - up to 80% of people died in some areas[1]).

It's possible this will turn around quickly. We certainly stopped things
quicker than I would have believed was possible a 4 months ago.

But provided you understand that is an optimistic view and isn't really
supported by history it's ok.

[1] [https://eh.net/encyclopedia/the-economic-impact-of-the-
black...](https://eh.net/encyclopedia/the-economic-impact-of-the-black-death/)

~~~
djohnston
this is also different because there isn't an economic causal factor. we
intentionally stopped everything. that didn't happen in 1929 or 2008 or the
70's, we collectively got together and said shut it down until we get a hold
on this disease

~~~
ModernMech
> this is also different because there isn't an economic causal factor. we
> intentionally stopped everything.

Yes we intentionally stopped things, but that would have happened either way
as the disease spread and people got sick.

Look at the meat packing plant in SD where 1 case turned into ~300 and they
had to shut down [1]. If we had not shut down things, that would be the story
at workplaces across the country. Think about schools and universities
throughout the country. If they had not shut down as the pandemic was ramping
up, they would have become breeding grounds for the disease and would have had
to shut down anyway as students and teachers fell ill.

Yes we shut down things intentionally but our hand was forced. The flip side
of this is we cannot re-open things just as intentionally because the result
will be a flare-up of cases. So while it may seem like we have control over
when we start/stop the economy here, really the virus is controlling the
timeline.

[1] [https://abc7news.com/smithfied-foods-coronavirus-meat-
packin...](https://abc7news.com/smithfied-foods-coronavirus-meat-packing-
plant-covid-19-industry-in-pork/6099688/)

~~~
squillesque
I can't find the studies at the moment but there's at least one looking at
previous pandemics that supports your suggestion. They found that economies
that instituted weaker public health responses had bigger casualties from
illness directly, and longer times to economic recovery because of bigger
losses in personnel etc.

I wonder if lack of public health infrastructure in the us will come to haunt
it in the coming months as other countries recover faster and get a head
start. That sort of economic opportunity cost from not having more public
health infrastructure tends to have been left out of past discussions
completely.

------
ccffpphh
I mean, by default, any economic crisis is always going to be worse
than/bigger than the previous, just due to growth. Am I wrong for thinking
this way?

~~~
kd5bjo
This sort of thing is usually measured in percentage lost from the previous
peak, or some other relative measure that corrects for the overall growth over
time.

~~~
ccffpphh
I'm not even talking about econometrics. As our supply chains become more and
more integrated globally, as the amount of services built on top of each other
continue to grow, and as the global economic system continues to use, build,
and develop these services, any significant disruption is going to be more
catastrophic than the previous which didn't rely on as much integration as it
currently does.

------
LatteLazy
Except it can stop after 3months...

~~~
bobongo
> it can stop after 3months

life?

~~~
LatteLazy
Quarantine.

------
thewileyone
It's going to be worse than the Great Depression.

~~~
hnarn
Nobody _knows_ for a fact how this will turn out, and if they say they do they
are lying and vastly overestimating their own knowledge.

There are no modern equivalents to compare to, so the best thing we have is
the Great Depression; but when you look at the circumstances, it's not exactly
a comparison that gives you a lot of confidence.

First of all, the GD had purely financial causes. Over-speculation in the
stock market, high debts, combined with a struggling agriculture sector. As
reality dawned, a mass sell-off took place that snowballed into what we now
know as "the Great Depression".

If we for the sake of argument assume that what's happening now is exactly
what happened during the GD, you still have to take into account how different
the world is today. We are no longer in a mostly industrial, manufacturing
economy. Our capacity for producing everything that keeps people alive is
higher than it has ever been, which is another way of saying that our economy
is more efficient than it has ever been. This is why most people can "get
away" with not producing essential goods: many, many people work in "non-
essential" jobs (for survival) like the service sector.

The only sane thing to say right now is that noone knows exactly how this will
turn out, but saying that things will be _worse_ than the GD is not only
saying that the circumstances are way worse (that's absolutely not obvious to
me), but also that our economy is _weaker_ than it was 100 years ago, which to
me sounds quite absurd.

------
anilshanbhag
Stock market doesn't seem to agree with this conclusion.

~~~
twomoretime
I don't know how anyone can trust the stock market right now. We're living in
unprecedented uncertainty and on top of that, [literally] everything's closed
and no one is buying anything, how can the economy possibly be growing like
the market right now?

Hot air that will crash eventually.

~~~
baq
'analysts' say that a 'V-shaped' recovery is 'priced in'.

same 'analysts' mostly didn't notice a 11M city going into full lockdown.

~~~
frockington1
Compared to the begging news wave that everyone was going to get infected and
millions of death per state, an 11M city going into lockdown was definitely
priced in

------
arkanciscan
The unemployment rate isn't even close to the 10% we saw after the '08
recession. Only about half. Does that mean that twice as many people are going
to become unemployed, than are right now?

~~~
Izkata
We won't have the numbers for sure until the end of the month, but based on
the insane spike in initial claims [0], the US probably hit 10% last week [1].

That said, the past two weeks the claims seem to have hit their processing
limit, with people still not getting through - it's guaranteed to continue
rising for the rest of the month, past the numbers I have here.

[0]
[https://fred.stlouisfed.org/series/ICSA](https://fred.stlouisfed.org/series/ICSA)

[1] 3.3 million + 6.8 + 6.6 = 16.7 million, 16.7 / 160 million (number I've
seen for estimated working-age people) = 10.4%, 10.4% + 4% (previous
unemployment rate) = 14.4%

Quick edit, unemployment rate is updated monthly here:
[https://fred.stlouisfed.org/series/UNRATE](https://fred.stlouisfed.org/series/UNRATE)
\- based on when it updated, that 3.3 million is already included in the 4.4%,
so actually more like 4.4% + ((6.8 + 6.6) / 160) = 12.8%-ish (and more than
likely still rising)

------
jordanpg
On the other hand, new streams of revenue as well as increases in existing
revenue streams are emerging as a result of the lockdowns.

The question is, will these increases fully offset the permanent loss of
existing revenues + the cascading costs of disruption due to things like job
losses.

~~~
coldtea
> _On the other hand, new streams of revenue as well as increases in existing
> revenue streams are emerging as a result of the lockdowns._

For extremely fewer people...

> _The question is, will these increases fully offset the permanent loss of
> existing revenues + the cascading costs of disruption due to things like job
> losses._

It wont even be close...

------
londons_explore
I think historians will look back at COVID-19 as a textbook way not to handle
an emergency.

They will point out that 99% of deaths were related to economic effects of our
response, not the disease itself.

Hundreds of millions will starve or die in failed states in an economic
slowdown, while only hundreds of thousands die of disease.

~~~
codenesium
How do people die from an economic slowdown? Maybe in poor countries but I
don't think in a developed country an economic slowdown should kill anybody.

~~~
logicchains
Poverty leads to higher suicide rates, e.g.
[https://www.usnews.com/news/healthiest-
communities/articles/...](https://www.usnews.com/news/healthiest-
communities/articles/2020-01-27/higher-poverty-tied-to-increased-youth-
suicide-risk-study-shows) . It also leads to people being generally less
healthy and dying earlier:
[https://www.sciencedaily.com/releases/2018/11/181123135003.h...](https://www.sciencedaily.com/releases/2018/11/181123135003.htm)
. If poverty leads someone who's currently 10 years old to die five years
earlier, then in terms of loss-of-life-years it's similar to the loss if e.g.
an 80 year old is killed by the virus.

------
mcv
I find myself less interested in whether or not something is a recession or
not. I mean, sure, the numbers of the economy are going down, but the big
numbers don't necessarily mean much for anyone's personal life. Of course it
can; losing your job is no fun. But the big reason why the Great Depression
was so bad, is that we didn't have any social security back then. Unemployed
meant having no income at all. No health insurance, no pensions, none of the
things that people started fighting for exactly because of the Great
Depression.

And because of that, these recessions and depressions are far less devastating
than they used to.

Of course I'm saying this living in a rich country that does have all of these
amenities; in poorer countries that don't yet take care of their poor (and
possibly the US that chooses not to take care of its poor), things may still
feel like the 1930s. But in a rich, well-organised country, there's really no
need for that anymore. We can easily get through this is we want to. Skip a
vacation, buy a luxury item less, make sure the poorest don't fall through the
cracks (and there will be more cracks of course), and we'll be fine. The
misery is mostly a political decision.

~~~
Dumblydorr
Look into unemployment system tech. In my state, its physically impossible to
access it. Whenever you call or go online, it is straight up broken and dozens
of contact attempts have yielded nothing.

Our economic system is not nearly robust enough for these suddenly 5-10%
unemployed and underemployed citizens. We can not "easily get through this if
we want to".

~~~
SketchySeaBeast
I can't speak to the states, but as a Canadian, my wife and I tried to tackle
the communication problem together - it took us a collective 550 calls over
the day to even make it to the "on hold" queue, and I'm pretty sure making
into the queue was purely by luck - my wife continued trying and never got
through. The system is completely overwhelmed.

