Daily GDP lost by state (click on the image to see the full thing)
In an epic economic experiment, the Federal Reserve will fund the United States’ soaring 2020 deficit (i.e. they are printing trillions and trillions of dollars and we get to see what the consequences are long-term). Rather than being a one-shot event, this is what our government is doing now, for months on end.
Economists predict that so many jobs will be lost during the next month of shutdowns that non-farm payrolls (total US employment) will be taken back to 1998-levels. That’s the year I graduated from high school, and I am about to turn 40. All that labor growth, wiped out in a single economic catastrophe thanks to bad policy.
Profoundly bad news for Trump politically: The state economies most vulnerable to the insane coronavirus policy response include key swing states in the upcoming presidential election. Personally, I think Trump’s support in Florida – without which he cannot win re-election – is deeply underwater. Does he still have a devoted base when many households in his base no longer have a breadwinner? We shall see.
I will add that there is not a single professional economist who shares Trump’s view now that our country will rapidly return to “normal” now, even with extreme fiscal and monetary stimulus. More likely, the bad news will come in waves, which is typical of financial crises. We have the round-after-round of crazy employment data. We will have pensions reporting bad performance. We will have large companies that finally crack and go under. And we will have state and local governments realizing that they have to slash programmatic spending radically. Trump’s Pollyanna scenario absolutely could have played out had the shutdowns not been applied to every state and been extended for as long as they have. But that’s clearly not where we are anymore as an economy. If he does not intervene to open the economy soon, he’s very likely going to be a one-term president. And he’ll deserve it.
What it looks like in the financial markets when nothing seems safe.