Daily GDP lost by state

State GDP (or gross domestic product, the measure of total economic output for a population) paints an ugly picture of the impact of state and local government-imposed shutdowns across the country. Florida, which is dependent on tourism, is one of the worst hit. So are states with a heavy manufacturing presence, like Michigan, who depend on workers being physically present at their jobs. (Source: Moody’s Analytics. Moody’s issues credit ratings on state and local government bonds.)

Looking at this collapse in economic activity, I think it is safe to say a lot of these jobs lost are not coming back. Even for companies that have furloughed most or all of their workforce, there is likely not going to be demand for that scale of labor after the economy opens up.

My advice, once the economy does open up, is not to be fooled by people who are quoting percentage changes in various measures. Any change from zero is going to look big, but it does not mean you are getting back to where you were before (returning to previous trends in economic activity). That’s going to take a while.

I was trying to explain this to a relative yesterday who saw the massive rally in the stock market and told me the economy is already returning to normal. (1) The stock market is not the real economy. It’s where investors make bets on the direction of the real economy. And when financial markets are being propped up by the Federal Reserve outright purchasing financial assets, it’s open for debate what reflation in the stock market actually means. Just like how Obama likes to brag about the performance of the stock market during his term, when the Federal Reserve had multi-trillion dollar quantitative easing programs going for many years. Financial assets were increasing in value at the same time Obama was trying to explain that sub-2% economic growth was “the new normal.” Obama thought that was swell, and that’s what gave us Bernie Sanders as a serious presidential contender. I predict that Trump will be similar to Obama in this sense. The Federal Reserve will have bought up most financial assets in the country, but damn look at that rally. (2) The market can rally considerably and we still will not be at the near-record levels we were before this all started – 20% of a smaller number cannot get you to a large number. There a lot of people out there with a political interest in trying to get you to conflate all of these things.

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