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Death Comes To My Old Economics Department

Death Comes To My Old Economics Department

That would be the one at my alma mater, the University of Wisconsin-Madison.  I have learned that on July 6 one of its current members died, Bill Sandholm, an excellent evolutionary game theorist who was about 50 years old.  It is a sign of my age that he always seemed quite young to me, barely older than my oldest daughter, and now he is dead.  He was a very nice guy, aside from being a very capable economist who was the Richard Stockwell Professor of Economics and once helped me out with a paper that was in a Revise and Resubmit condition.

I bring this up because there is an unconfirmed rumor that he died of complications of Covid-19, with for the moment nobody that I know, including members of the department, knowing what he died of.  If the rumor is correct, he will be the first person I knew personally to die of this dreadful pandemic.  It does bring it rather home.

It also does so because it probably puts the final nail into any plan to visit Madison this summer, which I have done almost every summer if for no other reason than having family members there I wish to see, not to mention some friends still, and it being a very pleasant place to visit in the summer, cooler than Virginia where i live. Indeed, Plan A had been to be there last weekend, but that got put off due to the pandemic.  I had still thought of possibly going maybe at the beginning of August or thereabouts for a quick pop-in.  But now apparently there has been a new spike of cases there and in Wisconsin more broadly, something my daughter who lives there had informed us of just in the last couple of days accompanied by discouraging noises about trying to go there.  And now I have learned about this new development, although it may be that the rumor is false.  But it does seem to be a final hammer hit on any plans to visit that fair city I am so much attached to for now.

Barkley Rosser

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Worrying About November 3, 2020

Worrying About November 3, 2020

Sigh.  So the US election is now just four days less than being four months from now, and, really, anything can happen. After all, four days less than four months ago was March 11, just before the US fully recognized that we were in a pandemic, with everything closing, and “the economy falling off a cliff,” as it is now put, but was not obvious on 3/11 at all, even though it was only about two days away.  And the murder of George Floyd was still some time off.  So, the world can turn completely upside down before the election, and nobody should forget that what really matters is what happens in the two weeks before the election, the period of short-term memory, and that really cannot be foreseen.  I mean, those who hate Hillary a lot say it was not a big deal, but most of us realize that if James Comey had not made his big announcement about new nothing investigations of her emails 11 days prior to the election in 2016, she almost certainly would be running for reelection right now.

So, we are in this obviously ironic position: many Dems are hoping things go badly in the next four months while many GOPs are hoping just the opposite just so each gets the electoral outcome they want.  This is nothing new, but it does put forward ironies in an unprecedented situation with many bad things happening and general uncertainty simply super high.  Thus we have the oddity that in Congress it is Dems who are pushing for more and more expansive fiscal stimulus, which would presumably help the economy and thus Trump’s reelection chances, while it is GOPs, especially in the Senate where they are in control, who are being the most negative about such a package, especially because of its aid to states and localities, whom they view as Dem interests.  I see out of the White House that Trump himself understands this and would like to see more fiscal stimulus, if perhaps with some limits and conditions.  But, heck, things are indeed fully topsy-turvy.

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Wildly Off Forecasts?

Wildly Off Forecasts?

The macroeconomic forecasting business has become quite unhinged in the current situation, with existing models seeming to have their wheels coming off as old relationships simply do not hold and reported data seems unreliable and going in all sorts of directions.  We have already seen this happen regarding forecasts that were made for the May employment numbers, with most forecasters projecting employment declines that would have been more than 10%, some of them by a lot more than that, although none more than 20%. But in the end employment was estimated to have grown by over 2%, a situation of the forecasters simply being wildly wrong.

As it is, with the month of June now over and thus the second quarter over, it looks increasingly to me like most of the forecasters have not learned their lessons from that May employment fiasco.  I suspect that in many organizations they find it hard to revise their models, especially on short notice, even when it is clear their models are not working.  We see a lot of the forecasters making predictions of a large second quarter decline in GDP, but more numbers have come out for May, and most of them have been positive, some of them very positive, and if June continues to be positive, even if at a lesser rate than May given renewed shutdowns occurring due to the uptick in Covid-19 infections as June proceeded, this may further make some of these strongly negative forecasts even further off.

So what are some of these forecasts and what do the latest reported numbers look like?  First, we must note the first quarter outcome.  It seems that GDP declined by -4.8% or 5.0% for the first quarter at an annualized rate.  All of the decline occurred in March, more than offsetting modest growth in both January and February.

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Going Too Far

Going Too Far

Unfortunately, it was going to happen, and we who support the movement need to call out those instances where it goes too far.  I am talking about the justified Black Lives Matter (BLM) movement, mostly characterized by widespread peaceful protests even in small rural towns that never see such things, and with a solid majority of the American people currently supporting both the BLM and its main demands.  As it is, one should probably not tie the BLM to some of these recent unacceptable events, although those engaged in them will justify their actions as being part of the movement. This should not be accepted.

OK, the one that has really put me off happened last night at sometime after 10:30 PM in Madison, Wisconsin.  A statue I know well was not only pulled down, but it was decapitated with both parts thrown in a nearby lake, although apparently since recovered. This statue stood on the east corner of the Capitol Square downtown.  It is of Hans Christian Heg (1829-1863).  An immigrant from Norway, he was an active anti-slavery abolitionist and member of the Free Soil Party who led the 15th Scandinavian American regiment in the Union army.  He died fighting against the Confederacy in the Battle of Chickamauga, which it says on the base of his statue.  There is absolutely no justification for this event.

This was accompanied by other pretty unacceptable nonsense. The “Forward” statue at the opposite end of the square was also pulled down and dragged down State Street.  This is of a generic woman representing the state motto of “Forward,” not quite as completely insane as pulling down Heg, but also without any obvious justification. The Forward motto and idea has long been associated with the Progressive tradition in the state, although I suppose one could drag in bad stuff about some of those folks, such as that some supported eugenics. But I do not think this crowd was thinking about that.

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Is The Possible V-Shaped Recovery Flattening As The Second Quarter Comes To An End?

Is The Possible V-Shaped Recovery Flattening As The Second Quarter Comes To An End?

Probably,  although it is unclear whether or not we are having a V-shaped recovery (see most recent post here). However, whatever it is, it looks like the revived spread of the coronavirus is probably slowing it somewhat.  New cases are up by 15% nationally from a low point several weeks ago, and there are reports of businesses of various sorts of closing, if not whole communities.

The pattern of the increase has various aspects:

1) It seems to be now more in red states than blue states, with the trend having been toward this since the early days of the pandemic when it first started in major Dem cities in major Dem states, such as Seattle, WA, the Bay Area of CA, and the New York metro area.  Of the states with the most rapid recent increase, we have only three that are predominantly Dem: CA, OR, and NV, with one purplish, NC, and the rest GOP: SC, GA, FL, AL, MS, AR, OK, TX, AZ, UT.

2) While now it is predominantly rising in GOP states where governors have not strongly encouraged social distancing or mask-wearing while rushing to fully reopen, and in some cases even banning local communities from requiring mask-wearing in public places, although some of those are now backing off that, such as Abbott in Texas, if one looks at this at the county level it remains that Dem counties are still outnumbering GOP ones, although the trend is strong toward GOP ones, and the line on this one will probably be crossed soon (these designations are based on how they voted in the presidential election in 2016). The obvious explanation for this apparent discrepancy is that in the red states cases tend to be increasing more in densely populated areas, which are more likely to be urban areas in Dem counties in those states, such as the Houston metro area in Texas.

3)  There is not a clear pattern of these either being spread across states or concentrated in particular areas.  Some states with increases scattered widely include the Carolinas, Florida, and Alabama.  Somewhere they are more isolated/concentrated in particular locales include the two largest on this list: California and Texas.

4) Certain sectors seem to be especially hit be reclosings, notably restaurants and bars as well as some sports facilities.

5) A possible offset to all this is that certain communities are still reopening, despite this new round of new cases.  An example is Washington, D.C., which just got going today with its second stage of reopening, following its suburbs in MD and VA that have already done so.

Barkley Rosser

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Do BLM Protests Prove No More Pandemic?

Do BLM Protests Prove No More Pandemic?

It has become a widespread meme that the many protests over the murder of George Floyd and other racially based police brutality will show that it is fine to end all shutdowns related to the pandemic and end all rules about social distancing and wearing face masks.  Here we are reaching two weeks since these protests with thousands of people involved, supposedly all violating those rules, and we are not seeing a surge of Covid-19 cases coming out of the locations where these big protests have happened.

Well, it turns out, that while the reports are scattered, apparently at many of the protests many people wear face masks, not only that, there is apparently a lot of trying to keep some distance from each other as well, although based on the performance of nations in East Asia, it is pretty clear that the wearing of face masks is the most useful.  Among other cities with large protests where this has been observed is Philadelphia. But in many places there has been much urging of this.

It is a mere anecdote, but I can report that I attended one such protest, admittedly in peaceful Harrisonburg, VA where I live where we have a black mayor and a black police chief.  But I attended a peaceful protest with over 1000 people.  Almost everybody was wearing a mask, and most people were keeping distance from each other.  There has been a lot of this.

So, this meme widely spouted with great arrogance by many observers is just misleading.  It is quite likely we shall see no spike of cases following most of these protests, although possibly in some locations.  But that does not mean this will hold for places where reopenings coincide with lots of people imitating our president and not wearing face masks or maintaining social distancing.  And indeed, we are seeing surges of cases in many such states, with the vast majority of those being where we have seen such attitudes and policies.

Barkley Rosser

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Might There Be A V-Shaped Economic Recovery After All?

Might There Be A V-Shaped Economic Recovery After All?

Maybe.

This is a matter where if it happens, I shall be proven wrong.  I have mostly emphasized how much uncertainty and lack of knowledge we face about the pandemic as well as the economy in this situation, and have as a result largely stayed away from making specific or definite forecasts on those matters.  However, here and in other places on the internet, I have made a lot of forecasts that the time path of GDP is likely to look like a “lazy J” or “whoosh,” a pattern of slow recovery after the very rapid decline, with a possible W if a second wave of the pandemic hits hard.  What I often dismissed, sometimes rather pompously to people who seemed to push it for blind political or ideological reasons was that there might be a rapid bounceback, a V-shaped recovery.  Now that it looks like it might happen, or at least a modest version of it, so I may be wrong on my past forecasts.

Curiously, as noted in a fairly recent post, I was one who was not surprised by the net increase in employment in May, given the evidence noted in still earlier posts of a likely turnaround in GDP that probably dates back even into late April and probably not later than early May, looking at figures on gasoline demand and carbon emissions.  It seemed not surprising that this turnaround would lead to some new hiring, even as further layoffs were clearly happening.  But most of this data seemed consistent with the Whoosh scenario, with these renewed increases occurring at rates much lower than the rates of preceding decline.  So the net increase in hiring in May was only 2.5%, large for normal time, but only beginning to offset the double-digit plunge that had happened before it.

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Tear Gas Versus Pepper Spray

Tear Gas Versus Pepper Spray

Or pepper gas.

So, AG Barr and Pres. Trump (and also the commander of the US Park Police, I think) have been hotly denying that tear gas was used last Monday June 1  in the attack by the Praetorian Guard on peaceful protesters in Lafayette Square.  Various of them have also been claiming that as many as three warnings were issued to the crowd before they attacked and also have claimed that the protesters were throwing things at them and hus were violent rioters.  The latter claims have been denied by nearly all observers, including journalists, although it may have been that perfunctory warnings were issued very quietly so that almost nobody could hear them and that maybe one bottle got thrown.  Barr has also denied giving the order for this attack, laying it on the Park Police chief, and also denied that it had anything to do with Trump walking across the square a few minutes after the protesters were cleared to have his photo op at St. John’s Church with an upside-down backwards Bible, after church personnel were forced off their own church grounds by the attack.  All of this has turned into a massive embarrassment as polls on this have turned sharply against Trump, and the National Guard from 11 states are now being removed from Washington, if not the still non-IDed Praetorian Guard Barr oversees himself.

Then we have the matter of tear gas, with protesters clearly crying and coughing and exhibiting symptoms usually associated with being tear gassed as they fled the square, and with most of them claiming to have been “tear gassed.”  This has been roundly denied by the three parties identified above.  Instead it has been admitted that “pepper balls” were thrown into the crowd, along with rubber bullets being used and flash-bang grenades.  While both Barr and Trump have both since claimed that these “pepper balls” are not “eye irritants,” clearly they are, and a variety of expert sources have reported that they are.

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Has Trump Created A Praetorian Guard In Washington?

Has Trump Created A Praetorian Guard In Washington?

President Trump has already shown his Orwellian tendencies by giving a speech on Monday in the Rose Garden in which he declared his “respect” for peaceful protesters at the very moment that forces ultimately responding to an order by Trump violently attacked peaceful protesters in front of the White House to remove them from Lafayette Square, as well as priests and parishioners from the patio of their St. John’s Church across from the White House.  This attack and removal of the protesters as well as church people allowed Trump to walk across the square fot photo op at the church, holding up a Bible backwards and upside down.  While it has been admitted that ultimately this attack reflected Trump wanting to have this photo op, it remains unclear precisely which federal forces were part of the attack and exactly who was immediately commanding them.  It seems at a minimum that this involved federal Park Police, but may have included DC National Guard, and maybe  Secret service personnel, as well as maybe others, although no DC police or officials, with Mayor Bowswe opposing this action.

Most seem to think that AG Barr gave the immediate order, but he does not seem to official authority over  several of these groups, notably the Secret Service.  SecDef Esper and Chief of Staff Gen. Milley were present during Trump’s walk across the square, but are now apparently claiming not to have any responsibility for this.  Esper and Milley have since come under strong criticism by many people either in the GOP such as the Lincoln Project group as well as current and former high DOD officials, including James Miller who publicly resigned from the DOD Science Board in protest as well as a strong memo by former SecDef “Mad Dog” Mattis.

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Jobs Report Not Really All That Surprising

Jobs Report Not Really All That Surprising

I am a bit taken aback at how shocked so many are about the new jobs report showing that net hiring in May was positive.  For regular readers here I have made several posts here noting that the US economy was almost certainly growing, probably for at least a month. The most recent was my one a few days ago on Rising Oil Demand, and an earlier one, where I was vaguer about the US economy, was the one on Rising Carbon Emissions.  It has been clear to me that the US economy hit bottom in terms of output about a month ago, which put it about a month behind the world economy as a whole and two months behind China.  All of this correlates with how the relative patterns of the pandemic have gone, with China a month ahead of most of the world and about two months ahead of the US.  I think it has been pretty clear that US GDP has been growing, so nobody should be all that surprised that the labor market has turned around and net hiring is now positive.

How did all this confusion come about?  I think the issue is that we get weekly reports on fresh layoffs as measured by new applications for unemployment insurance while we only get monthly reports on net hiring, with our monthly BLS reports such as the one that came out today and surprised the heck out of so many observers who should have known better.  I note that I did not forecast an increase in net hiring, but I had avoided making any forecasts on employment beyond the comment that it is a lagging indicator behind output, which would allow for net hiring to have still been negative. But I was somewhat mystified by what seemed to be such an disjuncture, clear evidence GDP was rising while there were these ongoing weekly reports of many more getting laid off.

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