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IMF Says Great Lockdown Recession Likely Worst Since Depression

106 points by ajay-d 7y ago

ccffpphh 7y ago
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 7y ago
  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.
  - fock 7y ago
    and not accounting all the stuff we have accumulated, which (at some point) has/had a lifespan of multiple recessions. But hey, just picture these hungry, ragged children - some Covid deaths are just to be accepted with thie outlook.
  - ccffpphh 7y ago
    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.
- nopriorarrests 7y ago
  well, yes you are? This is why people measure in percentages, as opposed to absolute numbers, such as dollars of GDP.
- eru 7y ago
  From the article: > That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis. Growth would have an impact on the decline in absolute dollar values (inflation adjusted or not). But wouldn't have much of an impact on relative decline measured in percentage.
anilshanbhag 7y ago
Stock market doesn't seem to agree with this conclusion.
- patentatt 7y ago
  Stock market != “The Economy”
  - as-j 7y ago
    Kai is that you? :)
- baq 7y ago
  trillions of dollars injected into it may have that effect.
  - fallingfrog 7y ago
    Gotta reinflate the bubble at any cost
    - WJW 7y ago
      It pays for pensions and old people vote a lot. So you can see why it might be a priority for politicians.
      - hcurtiss 7y ago
        A lot of us mid-career folks have retirement funds too. And a goal.
      - dd36 7y ago
        Or, donors are heavily invested and politicians work for donors.
    - fallingfrog 7y ago
      Oh come on guys, I know that was a flippant comment but you see my point right? Due to the short term election cycle every politician has an incredibly short time horizon; in this case trump is trying to make things go back to normal by November and it’s just an impossible task. So the only thing he can do is massive stimulus and prayer. I guess this being HN people are more used to long winded soliloquies than single sentence terse remarks, served me right I suppose.
OscarCunningham 7y ago
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.
- eli 7y ago
  Of course. Many businesses that have closed will not reopen.
  - tyingq 7y ago
    I'm curious about the effects of all the consolidation. The top 5 retail giants will, for example, absorb more market share.
    - m_mueller 7y ago
      wouldn't be so sure. small businesses probably have a somewhat higher ability to go into a sleeper mode where operative costs are reduced to a minimum.
      - tyingq 7y ago
        Right, but their customers are exploring new options, and maybe liking them, whilst the business sleeps.
      - leesalminen 7y ago
        Minimum operative costs are still in the thousands of dollars per month for even the smallest of meat-space businesses. I don't know many hairdressers, nail stylists and massage therapists that can afford $1-3k/mo for the next several months with $0 revenue. Anecdotal, sure, but I have at least one of each of those in my family.
        tyingq 7y ago
        "hairdressers, nail stylists and massage therapists" Most of those folks are contractors that pay rent (for their "small spot") or some sort of cut to the entity that owns the physical salon, right? Though your point stands for the owners of such places, many of them probably working owners.
jordanpg 7y ago
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 7y ago
  >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...
- eru 7y ago
  You already got a good replay from coldtea. To expand a bit on how to think about the problem in general: Don't focus on revenue when looking at the situation, focus on productivity and what people can and do produce. A few people are busier, some are just as busy as before. Most are less busy and severely restricted in what economically useful activities they can do.
fallingfrog 7y ago
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-Jobs-Report-1-820x493.png https://www.whitehouse.gov/wp-content/uploads/2019/05/April-... 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 7y ago
  It seems likely though that lots of people after the lockdowns will simply be re-hired once lockdowns are over.
  - TheHypnotist 7y ago
    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.
  - vlunkr 7y ago
    Boy I wish I could edit that for grammar now.
- jdhn 7y ago
  A decade or more? Really? I honestly think that we're going to see a U shaped recovery as the amount of people who want to get out and do things is increasing every day.
arkanciscan 7y ago
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?
- codenesium 7y ago
  From what I've read they think it's already around 15%. It just takes a while after the fact to figure out what it is.
- Izkata 7y ago
  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)
- FalconSensei 7y ago
  I think that's the case. Even when lockdowns start being lifted, people won't have money to spend, meaning more companies closing doors...
- samfisher83 7y ago
  16 million people filled for unemployment. We are way over 10% now. They haven't announced the new rate.
- arkanciscan 7y ago
  Whoa... https://tradingeconomics.com/united-states/unemployment-rate https://tradingeconomics.com/united-states/unemployment-rate
chadlavi 7y ago
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 7y ago
  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?
  - TheHypnotist 7y ago
    Basically a single month so far.
  - jcranmer 7y ago
    A recession is where your neighbor loses their job. A depression is where you lose your job too.
  - chadlavi 7y ago
    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-jobless-rate-great-depression.html https://www.nytimes.com/2020/04/03/upshot/coronavirus-jobles...
    - throwawaylolx 7y ago
      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".
  - 7y ago
justinzollars 7y ago
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.
- dijit 7y ago
  If you feel like coming over to this side of the pond I’m hiring. We assist in relocation. https://www.massive.se/job/online-infrastructure-engineer-site-reliability-engineer-743999687955339/ https://www.massive.se/job/online-infrastructure-engineer-si...
  - justinzollars 7y ago
    thanks I'll check it out
- kypro 7y ago
  Best of luck finding your next job. It can be hard while you're searching, but some how it always works out for the best.
- Dumblydorr 7y ago
  Nothing personal, but how is it not a company's fault to take on tons of leverage and not have cash reserves? I know this is typical SV growth mindset, but it isn't conventional financial wisdom. Seems to me companies need to get lucky if they go growth at all costs, because if you havent flipped the profit switch before a recession, your balance sheets are too red.
  - dustingetz 7y ago
    When one org takes on too much leverage it is the org's fault When every org, smb, landlord and individual takes on too much leverage, it is the macro economic system we exist in that is at fault
nanna 7y ago
From the horse's mouth: https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020 https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/we...
mcv 7y ago
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.
- arkades 7y ago
  If people aren't working and creating a functioning economy, all of those things you described go away. They're tax-dependant. They aren't just whistled up from the wild blue yonder.
- deleted 7y ago
  [deleted]
- rolling_roland 7y ago
  I think you are underestimating the effects of real depression even in a wealthy first world country. Finland went through depression in the 90s when the Soviet Union collapsed and it left behind a cohort of people who never really recovered or gained employment. You seem to think that being poor in a first world country is just skipping few vacations and luxury items but otherwise life can be wonderful. I think you severely underestimate how poor people can get even in countries with strong social security, like the nordic countries. Also the idea that misery is mostly political decision sounds just silly. Most of Europe hardly recovered from 2008 financial crisis and are already cracking under the demographic shift, baby boomers retiring. Add a covid depression into the mix and things can get really bad. There's just not enough money in the economy to share for both the retirees and a large number of unemployed. This can cause a vicious cycle as the increasing social spending will increase taxes, increased taxes will go to increased labour cost, increased labour cost will drive down demand on European goods increasing the unemployment even more etc... There's always a cynic to rain on your optimism :)
DCKing 7y ago
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 7y ago
  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-death/ https://eh.net/encyclopedia/the-economic-impact-of-the-black...
  - djohnston 7y ago
    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
londons_explore 7y ago
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 7y ago
  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.
  - BiteCode_dev 7y ago
    Recession in rich a country push people into poverty as well. In a country where health care is privatized, you die from being poor. So recession in the US will lead to people dying.
  - logicchains 7y ago
    Poverty leads to higher suicide rates, e.g. https://www.usnews.com/news/healthiest-communities/articles/2020-01-27/higher-poverty-tied-to-increased-youth-suicide-risk-study-shows https://www.usnews.com/news/healthiest-communities/articles/... . It also leads to people being generally less healthy and dying earlier: https://www.sciencedaily.com/releases/2018/11/181123135003.htm https://www.sciencedaily.com/releases/2018/11/181123135003.h... . 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.
    - deleted 7y ago
      [deleted]
  - nomercy400 7y ago
    Does that also imply that if many people die from economic slowdown, that country should be considered 'poor' or 'undeveloped'? Maybe countries that feel developed but still experience this should reconsider their policies.
webbruce 7y ago
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.
- sebazzz 7y ago
  Those companies that fire people, do they also file for support money from the government? If that is the case, is that fair? Thinking from the perspective of a country which has actually good worker protection, so not as many people get fired and companies get support in paying their workers.
  - user5994461 7y ago
    Speaking from a country that may have one of the best worker protection (France) in the world, it's all smokes and mirrors. If your small-medium business is in trouble, the only sane thing to do for your employees is to layoff as quickly as possible, so they can register to unemployment benefits (and count in statistics). You think any government is going to give you money as a business owner? Maybe if you're lucky but how much time and paperwork is it gonna take? You're not guaranteed to see any of it or when. Meanwhile, you're accruing significant debt from each employees and suppliers day over day, with no end in sight.
  - jlaurend 7y ago
    The legislation being enacted's main goal is to keep people employed. The PPP (payment protection plan) is directed at small businesses (< 500 employees) and can be forgiven if it's used toward payroll, rent, etc. In order for the loan to be forgiven, in the 8 weeks following taking the loan out, your employee headcount "cannot decline from average monthly levels during 2019 or during the past 12 months" [1] Now, the larger company / industry bailouts -- those seem less well-defined. I haven't seen the latest on those but I'm sure the government would _like_ to tie them to employment as much as possible but we'll have to wait to see. [1] https://smartasset.com/financial-advisor/paycheck-protection-program-ppp-loans https://smartasset.com/financial-advisor/paycheck-protection...
LatteLazy 7y ago
Except it can stop after 3months...
- bobongo 7y ago
  > it can stop after 3months life?
  - LatteLazy 7y ago
    Quarantine.
thewileyone 7y ago
It's going to be worse than the Great Depression.
- hnarn 7y ago
  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.

106 points by ajay-d 7y ago

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 7y ago
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.
- fock 7y ago
  and not accounting all the stuff we have accumulated, which (at some point) has/had a lifespan of multiple recessions. But hey, just picture these hungry, ragged children - some Covid deaths are just to be accepted with thie outlook.
- ccffpphh 7y ago
  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.
nopriorarrests 7y ago
well, yes you are? This is why people measure in percentages, as opposed to absolute numbers, such as dollars of GDP.
eru 7y ago
From the article: > That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis. Growth would have an impact on the decline in absolute dollar values (inflation adjusted or not). But wouldn't have much of an impact on relative decline measured in percentage.

anilshanbhag 7y ago

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

patentatt 7y ago
Stock market != “The Economy”
- as-j 7y ago
  Kai is that you? :)
baq 7y ago
trillions of dollars injected into it may have that effect.
- fallingfrog 7y ago
  Gotta reinflate the bubble at any cost
  - WJW 7y ago
    It pays for pensions and old people vote a lot. So you can see why it might be a priority for politicians.
    - hcurtiss 7y ago
      A lot of us mid-career folks have retirement funds too. And a goal.
    - dd36 7y ago
      Or, donors are heavily invested and politicians work for donors.
  - fallingfrog 7y ago
    Oh come on guys, I know that was a flippant comment but you see my point right? Due to the short term election cycle every politician has an incredibly short time horizon; in this case trump is trying to make things go back to normal by November and it’s just an impossible task. So the only thing he can do is massive stimulus and prayer. I guess this being HN people are more used to long winded soliloquies than single sentence terse remarks, served me right I suppose.

OscarCunningham 7y ago

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.

eli 7y ago
Of course. Many businesses that have closed will not reopen.
- tyingq 7y ago
  I'm curious about the effects of all the consolidation. The top 5 retail giants will, for example, absorb more market share.
  - m_mueller 7y ago
    wouldn't be so sure. small businesses probably have a somewhat higher ability to go into a sleeper mode where operative costs are reduced to a minimum.
    - tyingq 7y ago
      Right, but their customers are exploring new options, and maybe liking them, whilst the business sleeps.
    - leesalminen 7y ago
      Minimum operative costs are still in the thousands of dollars per month for even the smallest of meat-space businesses. I don't know many hairdressers, nail stylists and massage therapists that can afford $1-3k/mo for the next several months with $0 revenue. Anecdotal, sure, but I have at least one of each of those in my family.
      - tyingq 7y ago
        "hairdressers, nail stylists and massage therapists" Most of those folks are contractors that pay rent (for their "small spot") or some sort of cut to the entity that owns the physical salon, right? Though your point stands for the owners of such places, many of them probably working owners.

jordanpg 7y ago

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 7y ago
>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...
eru 7y ago
You already got a good replay from coldtea. To expand a bit on how to think about the problem in general: Don't focus on revenue when looking at the situation, focus on productivity and what people can and do produce. A few people are busier, some are just as busy as before. Most are less busy and severely restricted in what economically useful activities they can do.

fallingfrog 7y ago

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-Jobs-Report-1-820x493.png https://www.whitehouse.gov/wp-content/uploads/2019/05/April-... 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 7y ago
It seems likely though that lots of people after the lockdowns will simply be re-hired once lockdowns are over.
- TheHypnotist 7y ago
  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.
- vlunkr 7y ago
  Boy I wish I could edit that for grammar now.
jdhn 7y ago
A decade or more? Really? I honestly think that we're going to see a U shaped recovery as the amount of people who want to get out and do things is increasing every day.

arkanciscan 7y ago

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?

codenesium 7y ago
From what I've read they think it's already around 15%. It just takes a while after the fact to figure out what it is.
Izkata 7y ago
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)
FalconSensei 7y ago
I think that's the case. Even when lockdowns start being lifted, people won't have money to spend, meaning more companies closing doors...
samfisher83 7y ago
16 million people filled for unemployment. We are way over 10% now. They haven't announced the new rate.
arkanciscan 7y ago
Whoa... https://tradingeconomics.com/united-states/unemployment-rate https://tradingeconomics.com/united-states/unemployment-rate

chadlavi 7y ago

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 7y ago
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?
- TheHypnotist 7y ago
  Basically a single month so far.
- jcranmer 7y ago
  A recession is where your neighbor loses their job. A depression is where you lose your job too.
- chadlavi 7y ago
  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-jobless-rate-great-depression.html https://www.nytimes.com/2020/04/03/upshot/coronavirus-jobles...
  - throwawaylolx 7y ago
    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".
- 7y ago

justinzollars 7y ago

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.

dijit 7y ago
If you feel like coming over to this side of the pond I’m hiring. We assist in relocation. https://www.massive.se/job/online-infrastructure-engineer-site-reliability-engineer-743999687955339/ https://www.massive.se/job/online-infrastructure-engineer-si...
- justinzollars 7y ago
  thanks I'll check it out
kypro 7y ago
Best of luck finding your next job. It can be hard while you're searching, but some how it always works out for the best.
Dumblydorr 7y ago
Nothing personal, but how is it not a company's fault to take on tons of leverage and not have cash reserves? I know this is typical SV growth mindset, but it isn't conventional financial wisdom. Seems to me companies need to get lucky if they go growth at all costs, because if you havent flipped the profit switch before a recession, your balance sheets are too red.
- dustingetz 7y ago
  When one org takes on too much leverage it is the org's fault When every org, smb, landlord and individual takes on too much leverage, it is the macro economic system we exist in that is at fault

nanna 7y ago

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

mcv 7y ago

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.

arkades 7y ago
If people aren't working and creating a functioning economy, all of those things you described go away. They're tax-dependant. They aren't just whistled up from the wild blue yonder.
deleted 7y ago
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rolling_roland 7y ago
I think you are underestimating the effects of real depression even in a wealthy first world country. Finland went through depression in the 90s when the Soviet Union collapsed and it left behind a cohort of people who never really recovered or gained employment. You seem to think that being poor in a first world country is just skipping few vacations and luxury items but otherwise life can be wonderful. I think you severely underestimate how poor people can get even in countries with strong social security, like the nordic countries. Also the idea that misery is mostly political decision sounds just silly. Most of Europe hardly recovered from 2008 financial crisis and are already cracking under the demographic shift, baby boomers retiring. Add a covid depression into the mix and things can get really bad. There's just not enough money in the economy to share for both the retirees and a large number of unemployed. This can cause a vicious cycle as the increasing social spending will increase taxes, increased taxes will go to increased labour cost, increased labour cost will drive down demand on European goods increasing the unemployment even more etc... There's always a cynic to rain on your optimism :)

DCKing 7y ago

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 7y ago
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-death/ https://eh.net/encyclopedia/the-economic-impact-of-the-black...
- djohnston 7y ago
  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

londons_explore 7y ago

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 7y ago
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.
- BiteCode_dev 7y ago
  Recession in rich a country push people into poverty as well. In a country where health care is privatized, you die from being poor. So recession in the US will lead to people dying.
- logicchains 7y ago
  Poverty leads to higher suicide rates, e.g. https://www.usnews.com/news/healthiest-communities/articles/2020-01-27/higher-poverty-tied-to-increased-youth-suicide-risk-study-shows https://www.usnews.com/news/healthiest-communities/articles/... . It also leads to people being generally less healthy and dying earlier: https://www.sciencedaily.com/releases/2018/11/181123135003.htm https://www.sciencedaily.com/releases/2018/11/181123135003.h... . 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.
  - deleted 7y ago
    [deleted]
- nomercy400 7y ago
  Does that also imply that if many people die from economic slowdown, that country should be considered 'poor' or 'undeveloped'? Maybe countries that feel developed but still experience this should reconsider their policies.

webbruce 7y ago

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.

sebazzz 7y ago
Those companies that fire people, do they also file for support money from the government? If that is the case, is that fair? Thinking from the perspective of a country which has actually good worker protection, so not as many people get fired and companies get support in paying their workers.
- user5994461 7y ago
  Speaking from a country that may have one of the best worker protection (France) in the world, it's all smokes and mirrors. If your small-medium business is in trouble, the only sane thing to do for your employees is to layoff as quickly as possible, so they can register to unemployment benefits (and count in statistics). You think any government is going to give you money as a business owner? Maybe if you're lucky but how much time and paperwork is it gonna take? You're not guaranteed to see any of it or when. Meanwhile, you're accruing significant debt from each employees and suppliers day over day, with no end in sight.
- jlaurend 7y ago
  The legislation being enacted's main goal is to keep people employed. The PPP (payment protection plan) is directed at small businesses (< 500 employees) and can be forgiven if it's used toward payroll, rent, etc. In order for the loan to be forgiven, in the 8 weeks following taking the loan out, your employee headcount "cannot decline from average monthly levels during 2019 or during the past 12 months" [1] Now, the larger company / industry bailouts -- those seem less well-defined. I haven't seen the latest on those but I'm sure the government would _like_ to tie them to employment as much as possible but we'll have to wait to see. [1] https://smartasset.com/financial-advisor/paycheck-protection-program-ppp-loans https://smartasset.com/financial-advisor/paycheck-protection...

LatteLazy 7y ago

Except it can stop after 3months...

bobongo 7y ago
> it can stop after 3months life?
- LatteLazy 7y ago
  Quarantine.

thewileyone 7y ago

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

hnarn 7y ago
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.