Monday, April 27, 2020

Measuring Employment between Monthly Surveys

The Employment Situation Report by the Bureau of Labor Statistics comes only monthly.  It measures only the seven-day week (or, with the establishment survey, pay period) including the 12th of the prior month, which means that this month four very interesting weeks will be skipped and that the report on that April week will not be released until May 8.

Three data sources provide employment information on at least one of the missing four weeks, with the results shown in the chart below.  The results suggest that employment has fallen more than 20 million and perhaps as much as 36 million by April 11.  This does not begin to count employees who had their hours reduced.

One is an attempt by Bick and Blandin (2020) to imitate the BLS household survey for the week of Sunday March 29 to Saturday April 4.  They sampled 1,118 respondents, finding that employment per adult aged 18-64 was 17.8 percent below what it was in February and 17.4 percent below what it was in January.  They find that hours worked per person (including zeros for those not employed) were 27.7 percent below what they were in January and February.

Coibion, Gorodnichenko, and Weber (2020) surveyed 18,344 members of the Nielsen HomeScan panel during the days Thursday April 2 through Monday April 6.  The respondents were asked “Do you have a paid job?” which is different from the BLS questions but the same as January surveys of the Nielsen panel.  Their sample shows a 12.5 percent decline from January to April.

As a third source, I use the excess of continued UI claims for the week ending April 4 rescaled by 0.4, which is the typical ratio of continued claims to persons unemployed during the 2008-9 recession.[1]  The rescaled amount is 16.1 percent of February employment as measured by the February household survey.  This approach also offers employment estimates for the weeks before and after the week ending April 4.

Especially during the pandemic, “employment” and “unemployment” can vary significantly merely due to definitions.  Is a person on the payroll but told not to work considered employed?  The BLS knows from its experience with Federal shutdowns that surveyors and respondents frequently misclassify relative to the technical definition in the survey.  The practical classification grey areas are also presumably sensitive to question wording.  UI claims also have a grey area that presumably changes as new Federal policies increase the financial reward to unemployed rather than out of the labor force.

These measurement challenges suggest using hours worked rather than employment and using multiple data sources, which are not entirely congruent approaches because only one of the three sources measures hours worked.[2]  I therefore measure the decline in hours worked by averaging the three employment estimates and then applying the Bick-Blandin estimate of the decline in hours per employee.

Regarding initial claims versus continued claims, initial claims may not be granted due to ineligibility and do not show a stable ratio to employment changes during the 2008-9 recession.  Initial claims are reported a week ahead of continued claims.[3]

[1] The average continued claims was 1.7 million in both January and February, which is the baseline from which I calculate the “excess.”
[2] Hours worked are also of interest because many people were under employed in April (Bick and Blandin 2020).
[3] In March and April 2020, continued claims may include an abnormal share of ineligible claims due to abnormal delays in state processing, although this effect should disappear over a horizon long enough for states to process the claims.  On the other hand, the CARES Act passed March 27 will begin distorting the relationship between employment and continued claims because the Act included a large UI bonus that will encourage an abnormally large fraction of the eligible unemployed to apply.

Monday, April 20, 2020

Show us the fevers

By all accounts, hundreds of millions of us are confined to home despite being perfectly healthy.  The purpose of all of this, we're told, is to make sure that we do not bump into people infected with the coronavirus.

The wise people forcing us to do so owe us some evidence that in fact the virus is out there in sufficient quantities to merit draconian measures.  They point us to deaths in New York hospitals, and growing numbers of positive test results.  But those presumably were infections that occurred weeks ago (perhaps also some false positives).

Smart thermometers suggest that hardly anyone has had a fever for a couple of weeks now.  Perhaps this data is faulty or easily misinterpreted, but the wise people owe at least an explanation to the hundreds of millions of people paying the costs of their policies.

The time to be at home is when there is lots of virus outside.  That does not appear to be now.

30+ million out of a job

A one-size-fits-all policy, even at the state level, has been a mistake from the beginning.  Instead policy should be favoring decentralized mechanisms over direct control and ensuring that the chosen regulations deliver more net benefits than less stringent alternatives.  It is too bad that governments are causing so much harm at this critical moment by ignoring these longstanding principles of government regulation.

Expressed at an annual rate, the shutdown is already costing $7 trillion, or about $15,000 per household per quarter.  Employment had already fallen 28 million by April 1 and continues to fall as the shutdown continues.  Not only is the shutdown costly, but it is a cost-ineffective way of reducing the health harms from the virus.  My recommendation is to achieve close to, but somewhat less, of the mortality reduction at dramatically less cost to hundreds of millions of workers, consumers, and business owners.

Here's why I think at least 30 million are out of work as of today.  First, that's where I expected we would be headed based on the fact that workdays as we know them have been eliminated.  Second, as of the week of March 29-April 4 (hereafter "April 1"), the employment rate of persons aged 18-64 fell from 0.738 to 0.607.  Assuming conservatively that the same percentage decline (17.8%) also applied to persons 16, 17, or 65+ years old, the decline is 28 million people as of April 1.

There is no reason to believe that the decline (an average of 1.3 percent per day for two weeks) was finished by April 1.  The stay at home order for Texas and Maine was not until April 2.  FL, GA, MS: April 3.  AL: April 4.  MO: April 6.  SC: April 7.  Even if the decline were only 0.2 percent per day over the two weeks beginning April 5, that would put the cumulative employment decline past 30 million.

Friday, April 17, 2020

Shutdown reduces the flow of GDP by 28 percent

New data from Alexander Bick and Adam Blandin suggest that the flow of real GDP is 28 percent less than it would be under normal circumstances.  Using two entirely different methods, I previously forecasted 25 percent and 26 percent.  Below are the details of my calculations from Bick and Blandin.

Bick and Blandin (2020) find that working hours per working age adult circa April 1 declined 27 percent from February.  Moreover, among those working in February 2020, between 59 and 61 percent are now absent from their workplaces either due to not working or working at home.  If half of the capital in those workplaces is idle and not replaced by utilizing capital located in home offices, then capital utilization has fallen by 30 percent and GDP by 28 percent.

The GDP calculation assumes production-function exponents of 0.3 and 0.7, respectively.

This brings my estimate of the welfare cost of shutdown, relative to a normally functioning economy, of $7.1 trillion per year or $233 per household per workday.  For this purpose I use the average GDP estimate from the "input method" cited above and the output method I used earlier.

Saturday, April 4, 2020

What's Wrong with this Reasoning?

  1. FACT: the population density of NYC is 27K per square mile
  2. FACT: the population density of Indianapolis is 2K per square mile
  3. FACT: COVID-19 was able to be introduced and spread in a city with only 2K susceptible people per square mile (Indianapolis is such a city).
Conclusion: COVID-19 will continue to spread in NYC until either (i) the number of susceptible people falls to 2K per square mile or (ii) a vaccine.  i.e., until more than 90% of NYC has contracted and recovered from COVID-19.  [This conclusion says nothing about time frame; i.e., it could be years]

Does the conclusion follow from the three facts?

Thursday, April 2, 2020

Where did the fevers go?

This website tracks real time fevers using thermometers connected to the internet.  A first glance at their map suggests to me that:

  • fevers spiked two week ago.
  • The timing of the spike is similar across the country,
  • but magnitude greater in those regions with more COVID-19 deaths.
  • The time difference in the peak across counties is at most a few days.

Does this mean that the rest of the country is not significantly lagging NYC?  Or that COVID-19 fevers are a small fraction of all fevers?