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I don't understand why Wall Street estimated that unemployment would continue to 20% (would have been a post-WWII high), despite the news that multiple states h

I don't understand why Wall Street estimated that unemployment would continue to 20% (would have been a post-WWII high), despite the news that multiple states had already opened back up. Anecdotally, I can attest that the married couples in our suburb are desperate to go out on date-nights again. I imagine that's similar everywhere - and the news certainly confirms that people aren't afraid of the virus (even if they should be). ...and since restaurants are desperate to re-open to pay the bills, it seems clear that they'd want to re-hire staff. The real question is whether the re-openings and/or the protests will cause a large enough 2nd peak of the virus to cause additional closures over the summer - or impact the expectation of closures again in the fall.

joeyrideout 6y ago
Wall Street is simply acutely aware that the global economy is highly leveraged and switching off the entire economy is likely to end very badly if a de-leveraging were to take place. Thankfully that did not happen. EDIT: Of course, some hedge funds that were leveraged something like 100x on risk parity and correlation blew up almost instantly and caused a momentary liquidity crisis, but that was bound to happen :)
Izkata 6y ago
> I don't understand the Wall Street estimates that unemployment would continue to 20%, despite the news that multiple states had already opened back up. It came from adding up numbers on [0], and I also came up with about 19.7% - so the unemployment rate dropping from 14.7% in Apr to 13.3% in May [1] is very surprising. [0] https://fred.stlouisfed.org/series/ICSA https://fred.stlouisfed.org/series/ICSA [1] https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE
ceejayoz 6y ago
> I don't understand the Wall Street estimates that unemployment would continue to 20%, despite the news that multiple states had already opened back up. The aftershocks are going to go on for a while. Evictions, pay cuts, restrictions on restaurant capacity in the reopenings, bankruptcies, collapses of a bunch of small businesses.
- ethbro 6y ago
  Musical chairs only call when the music stops. And the central bank is the band.
  - danesparza 6y ago
    IMO you are oversimplifying things... but even with your analogy, the Fed is predicting a more dire future: https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf https://www.frbatlanta.org/-/media/documents/cqer/researchcq...
    - LegitShady 6y ago
      ...that document days it's not an official forecast just data model numbers without any adjustments
    - ethbro 6y ago
      "GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model."
  - xxpor 6y ago
    I think people who aren't making less than say, $50k a year are wildly underestimating the positive impact the extra $600 a week in unemployment is having. It was a huge win that (probably fortunately) slipped under the table during the bill negotiation.
    - jrs235 6y ago
      Since most states unemployment insurance (UI) only pays a percent of full regular wages, it should have been "up to an additional $600 / week up to 100% (including state UI) of previous average weekly reported wages." So, if Bob made on average $800 per week, and his state pays UI at 60%, his state UI would be $480 / week leaving him $320 short per week. The additional federal money should have paid $320 / week to get him back to 100% of his $800 / week average.
SpicyLemonZest 6y ago
The desire to go out is very unevenly distributed. I know people who are desperate to go out, but I also know people who plan to mostly stay in until there's a vaccine, and they struggle to believe the first group really means what they're saying. ("They must be trolling", I've heard from multiple friends.)
- guscost 6y ago
  We are not. You’re free to throw away another year of your life cooped up indoors because of a miniscule (for most people) risk that is not going anywhere, but most people will choose otherwise.
  - SpicyLemonZest 6y ago
    Oh yeah, don't get me wrong, I'm very aware of that. But I think a lot of smart people aren't, and I think that's affecting their predictions of how quickly the economy will open up.
  - mdjfbrodn 6y ago
    Another year? You know how to tell time right; it is taught in grade school. It’s been _three_ months. It’ll be a “miniscule risk” until it’s your family member dying. Go jump off a bridge.
  - nkozyra 6y ago
    It seems unfair to characterize anyone's response this way ("cooped up," "throw away"). People have adjusted to situations that are not ideal. People will have different comfort levels over time, and they will attempt to reconcile those two things. To imply that a life without Sunday brunch is somehow lesser or worse is myopic.
    - guscost 6y ago
      > To imply that a life without Sunday brunch is somehow lesser or worse is myopic. It is worse. Claiming otherwise would be arguing that immunocompromised, sedentary, etc folks are just as privileged as myself.
guscost 6y ago
Just to recommit to my prediction, there will be no second peak of the virus until the winter (in the northern hemisphere), and even then it will do about as much damage as the regular cold.
- nkozyra 6y ago
  I think there are logical reasons to predict this but it seems flippant if they're not presented. Are you basing this on optimism toward treatment/vaccine?
  - sct202 6y ago
    He has a blog post in his bio of his reasons but most of it is copypasta that I've seen elsewhere with no numbers but a lot of words around every theory.
    - guscost 6y ago
      Most of my claims are speculation, and can only be proven or disproven by the passage of time. The point is that I'm on record making (somewhat poetically non-scientific) predictions. Will you check back in a year? I'm not happy about the "copypasta" insult though. None of my writing is plagiarized, arguments that are not original to me are called out, and I spent a lot of time and effort tracking down the soundest supporting references I could find.
      - koheripbal 6y ago
        Even speculation should be based on some evidence and/or logic. Pure speculation, even when proven by time, is worthless.
        guscost 6y ago
        Non-scientific does not mean unfounded. There are plenty of citations provided (from published journal articles and preprints wherever possible) to support my speculation. They're hyperlinks, which is a bit tongue-in-cheek as an editorial choice. > Pure speculation, even when proven by time, is worthless. I can't agree. This essentially argues that all intuition is worthless unless it can be explained. Maybe true in a structured debate, but surely not in life.
samfisher83 6y ago
Adp said we lost 2.8 million. The government number is saying something else. We have had close 2 millions jobs lost per week for a while. For context 2 million jobs in a week would be highest number ever in the history of the US, and we have been doing that for a while.
- koheripbal 6y ago
  Different date ranges, I believe.
  - drocer88 6y ago
    Here's ADP's latest report : https://adpemploymentreport.com/2020/May/NER/NER-May-2020.aspx https://adpemploymentreport.com/2020/May/NER/NER-May-2020.as... ADP's report has some revised methods, too: https://adpemploymentreport.com/common/docs/ADP-NER-FAQ.pdf https://adpemploymentreport.com/common/docs/ADP-NER-FAQ.pdf
    - koheripbal 6y ago
      Right - but it isn't the same date range as the DoL report.
mdjfbrodn 6y ago
The suburbs, where boring people and dead relationships go to retire. Enjoy your red-lined, cannot-support-itself craphole
citilife 6y ago
It appears to largely be a manipulation / changes in the reporting -- Here's the FAQ attached to the report: https://www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf https://www.bls.gov/cps/employment-situation-covid19-faq-may... > In the establishment survey, workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs. > The household survey is conducted by the Census Bureau and normally includes both in-person and telephone interviews, with the majority of interviews collected by telephone. Interviewing for the household survey began on May 17th, 2020. ... > In May about three-quarters of the interviewers at these centers worked remotely to collect data by telephone. > In April, BLS made changes to the establishment survey net birth-death model used in the estimation process. These changes were continued in May. However, after further research, BLS extended the estimation modifications back to March. This change contributed to the revision for March. > During their review of household survey data for May, BLS staff tested for outliers to determine whether any changes were needed to the seasonal adjustment models. BLS staff determined that, as in April, the vast majority of household survey data series had significant outliers in May. Therefore, BLS staff made adjustments to the models used in seasonal adjustment processing to better account for these outliers. > Of the 8.4 million employed people not at work during the survey reference week in May 2020, 5.4 million people were included in the “other reasons” category, much higher than the average of 549,000 for May 2016–2019 (not seasonally adjusted). BLS analysis of the underlying data suggests that this group included workers affected by the pandemic response who should have been classified as unemployed on temporary layoff. Such a misclassification is an example of nonsampling error and can occur when respondents misunderstand questions or interviewers record answers incorrectly. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are making changes for the June collection. (See item 14 below.)
- awillen 6y ago
  Thanks for this - I figured there had to be at least a partial explanation related to methodology, but this is the first I've seen of the details.
- koheripbal 6y ago

joeyrideout 6y ago

Wall Street is simply acutely aware that the global economy is highly leveraged and switching off the entire economy is likely to end very badly if a de-leveraging were to take place. Thankfully that did not happen. EDIT: Of course, some hedge funds that were leveraged something like 100x on risk parity and correlation blew up almost instantly and caused a momentary liquidity crisis, but that was bound to happen :)

Izkata 6y ago

> I don't understand the Wall Street estimates that unemployment would continue to 20%, despite the news that multiple states had already opened back up. It came from adding up numbers on [0], and I also came up with about 19.7% - so the unemployment rate dropping from 14.7% in Apr to 13.3% in May [1] is very surprising. [0] https://fred.stlouisfed.org/series/ICSA https://fred.stlouisfed.org/series/ICSA [1] https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE

ceejayoz 6y ago

> I don't understand the Wall Street estimates that unemployment would continue to 20%, despite the news that multiple states had already opened back up. The aftershocks are going to go on for a while. Evictions, pay cuts, restrictions on restaurant capacity in the reopenings, bankruptcies, collapses of a bunch of small businesses.

ethbro 6y ago
Musical chairs only call when the music stops. And the central bank is the band.
- danesparza 6y ago
  IMO you are oversimplifying things... but even with your analogy, the Fed is predicting a more dire future: https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf https://www.frbatlanta.org/-/media/documents/cqer/researchcq...
  - LegitShady 6y ago
    ...that document days it's not an official forecast just data model numbers without any adjustments
  - ethbro 6y ago
    "GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model."
- xxpor 6y ago
  I think people who aren't making less than say, $50k a year are wildly underestimating the positive impact the extra $600 a week in unemployment is having. It was a huge win that (probably fortunately) slipped under the table during the bill negotiation.
  - jrs235 6y ago
    Since most states unemployment insurance (UI) only pays a percent of full regular wages, it should have been "up to an additional $600 / week up to 100% (including state UI) of previous average weekly reported wages." So, if Bob made on average $800 per week, and his state pays UI at 60%, his state UI would be $480 / week leaving him $320 short per week. The additional federal money should have paid $320 / week to get him back to 100% of his $800 / week average.

SpicyLemonZest 6y ago

The desire to go out is very unevenly distributed. I know people who are desperate to go out, but I also know people who plan to mostly stay in until there's a vaccine, and they struggle to believe the first group really means what they're saying. ("They must be trolling", I've heard from multiple friends.)

guscost 6y ago
We are not. You’re free to throw away another year of your life cooped up indoors because of a miniscule (for most people) risk that is not going anywhere, but most people will choose otherwise.
- SpicyLemonZest 6y ago
  Oh yeah, don't get me wrong, I'm very aware of that. But I think a lot of smart people aren't, and I think that's affecting their predictions of how quickly the economy will open up.
- mdjfbrodn 6y ago
  Another year? You know how to tell time right; it is taught in grade school. It’s been _three_ months. It’ll be a “miniscule risk” until it’s your family member dying. Go jump off a bridge.
- nkozyra 6y ago
  It seems unfair to characterize anyone's response this way ("cooped up," "throw away"). People have adjusted to situations that are not ideal. People will have different comfort levels over time, and they will attempt to reconcile those two things. To imply that a life without Sunday brunch is somehow lesser or worse is myopic.
  - guscost 6y ago
    > To imply that a life without Sunday brunch is somehow lesser or worse is myopic. It is worse. Claiming otherwise would be arguing that immunocompromised, sedentary, etc folks are just as privileged as myself.

guscost 6y ago

Just to recommit to my prediction, there will be no second peak of the virus until the winter (in the northern hemisphere), and even then it will do about as much damage as the regular cold.

nkozyra 6y ago
I think there are logical reasons to predict this but it seems flippant if they're not presented. Are you basing this on optimism toward treatment/vaccine?
- sct202 6y ago
  He has a blog post in his bio of his reasons but most of it is copypasta that I've seen elsewhere with no numbers but a lot of words around every theory.
  - guscost 6y ago
    Most of my claims are speculation, and can only be proven or disproven by the passage of time. The point is that I'm on record making (somewhat poetically non-scientific) predictions. Will you check back in a year? I'm not happy about the "copypasta" insult though. None of my writing is plagiarized, arguments that are not original to me are called out, and I spent a lot of time and effort tracking down the soundest supporting references I could find.
    - koheripbal 6y ago
      Even speculation should be based on some evidence and/or logic. Pure speculation, even when proven by time, is worthless.
      - guscost 6y ago
        Non-scientific does not mean unfounded. There are plenty of citations provided (from published journal articles and preprints wherever possible) to support my speculation. They're hyperlinks, which is a bit tongue-in-cheek as an editorial choice. > Pure speculation, even when proven by time, is worthless. I can't agree. This essentially argues that all intuition is worthless unless it can be explained. Maybe true in a structured debate, but surely not in life.

samfisher83 6y ago

Adp said we lost 2.8 million. The government number is saying something else. We have had close 2 millions jobs lost per week for a while. For context 2 million jobs in a week would be highest number ever in the history of the US, and we have been doing that for a while.

koheripbal 6y ago
Different date ranges, I believe.
- drocer88 6y ago
  Here's ADP's latest report : https://adpemploymentreport.com/2020/May/NER/NER-May-2020.aspx https://adpemploymentreport.com/2020/May/NER/NER-May-2020.as... ADP's report has some revised methods, too: https://adpemploymentreport.com/common/docs/ADP-NER-FAQ.pdf https://adpemploymentreport.com/common/docs/ADP-NER-FAQ.pdf
  - koheripbal 6y ago
    Right - but it isn't the same date range as the DoL report.

mdjfbrodn 6y ago

The suburbs, where boring people and dead relationships go to retire. Enjoy your red-lined, cannot-support-itself craphole

citilife 6y ago

It appears to largely be a manipulation / changes in the reporting -- Here's the FAQ attached to the report: https://www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf https://www.bls.gov/cps/employment-situation-covid19-faq-may... > In the establishment survey, workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs. > The household survey is conducted by the Census Bureau and normally includes both in-person and telephone interviews, with the majority of interviews collected by telephone. Interviewing for the household survey began on May 17th, 2020. ... > In May about three-quarters of the interviewers at these centers worked remotely to collect data by telephone. > In April, BLS made changes to the establishment survey net birth-death model used in the estimation process. These changes were continued in May. However, after further research, BLS extended the estimation modifications back to March. This change contributed to the revision for March. > During their review of household survey data for May, BLS staff tested for outliers to determine whether any changes were needed to the seasonal adjustment models. BLS staff determined that, as in April, the vast majority of household survey data series had significant outliers in May. Therefore, BLS staff made adjustments to the models used in seasonal adjustment processing to better account for these outliers. > Of the 8.4 million employed people not at work during the survey reference week in May 2020, 5.4 million people were included in the “other reasons” category, much higher than the average of 549,000 for May 2016–2019 (not seasonally adjusted). BLS analysis of the underlying data suggests that this group included workers affected by the pandemic response who should have been classified as unemployed on temporary layoff. Such a misclassification is an example of nonsampling error and can occur when respondents misunderstand questions or interviewers record answers incorrectly. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are making changes for the June collection. (See item 14 below.)

awillen 6y ago
Thanks for this - I figured there had to be at least a partial explanation related to methodology, but this is the first I've seen of the details.
koheripbal 6y ago