That’s from this morning’s Wall Street Journal, which also notes that eight in 10 U.S. counties are under lockdown orders, and those counties represent nearly 96% of national economic output.
The Journal’s analysis estimates economic output on an annualized basis has fallen at least 29% — a decline greater that the drop in annual production during the Great Depression, and at least seven times the decline during the Great Recession.
The story also notes that food services such as restaurants and bars have seen output fall by three-quarters. And while President Trump has repeated said he expects the economy to come roaring back once the Covid-19 stay-at-home orders are lifted, layoffs arising from prevention efforts will impede that effort, as laid-off workers first reduce their spending to new levels and, second, seek to rebuild their financial position once the emergency has passed.
Meanwhile, the Conference Board said the March jobs report, showing a “staggering loss of 701,000 jobs, one of the biggest monthly losses in history,” doesn’t begin to paint the full story. It notes the 10 million people who filed for unemployment benefits in the last two weeks of March weren’t counted in the just-released report. Conference Board said it expects a 15% unemployment rate in May.
It noted that almost 60% of the entire job loss came from one industry: food services and bars. Other notes from the Conference Board’s analysis of the jobs report:
- Some industries that were expected to weather the storm are in fact likely to shed many jobs due to social distancing. For example, 61,000 jobs were lost in the health care and social assistance sector.
- Average hourly earnings posted a significant jump, but for the wrong reasons. As was the case in the Great Recession, large layoffs of mostly low paid workers raised the average pay.
- The increase in the number of part-time workers for economic reasons, those who preferred a full-time job but had to settle for a part-time one, was larger than the increase in the number of unemployed. The increase in the unemployment rate would only partly reflect the growth in labor market slack.
- The increase in the unemployment rate was higher for occupations that typically do not require a bachelor’s degree, the exact opposite of pre-COVID-19 trends.
The Longer View: The current emergency demonstrates the danger of seeking short-term gains at the expense of long-term goals. Hospitals, like grocery stores and nearly all the rest of the American economy, have perfected “just in time” supply chains.
While there is no doubt JIT reduces the cost of carrying inventory, it also assumes there won’t be any disruptions. A short-term disruption – anywhere from a few days to a couple of weeks – is an inconvenience. What JIT ignores is the huge economic cost of a longer-term disruption, such as we are now experiencing. The cost now being borne – in terms of lost jobs (hospitality alone lost 495,000 jobs in March, according to the Bureau of Labor Statistics), failed businesses and reduced economic output in general, to say nothing of deaths – will be far greater than the cost of maintaining a reasonable inventory stockpile.