How experts measure economic recovery

in Early June, The National Bureau of Economic Research officially announced: the United States In full recession.Unemployment rises to Historical level, Total output DownAnd industrial activities slow down.Just like that, the COVID-19 pandemic has been extinguished Longest expansion period In American history.

Since then, signs of recovery have been confusingly mixed-unemployment has improved Faster than expected The stock market has Shows amazing resilience, But other indicators look worse. So how can we know when the economy will really recover?As part of us Ongoing Economist Survey,versus Global Market Initiative At the University of Chicago Booth School of Business, we asked experts which indicators they will now use to judge the strength of economic recovery and what they are looking for to predict the direction of economic development Next.

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When it comes to measuring the recovery, economists are paying close attention to gross domestic product. Three options were given to describe their degree of concern about GDP. 81% of the respondents said they paid “very close” to GDP, and another 16% said they paid “very close” to GDP, only 3 % Of respondents said they don’t care about GDP. It didn’t follow closely at all.

How economists assess economic recovery

Some economists surveyed stated that they are paying close attention to certain indicators to assess the speed and intensity of economic recovery

Share who said they were watching…
Metric Not at all some very close
gross domestic product 3% 16% 81%
unemployment rate 3 26 71
Retail and food sales 10 29 61
Consumer confidence twenty three 48 29
savings rate twenty three 55 twenty three

A survey of 31 economists was conducted from July 2 to 6.

Source: 55/IGM COVID-19 Economic Survey

The next statistics that are of interest are unemployment rate, It’s not surprising; GDP and unemployment are both key Lagging indicatorsOr show an important indicator of economic conditions.According to the survey Retail and food sales Also fall into this category-especially in this pandemic because Hotel and retail Belonging to the industry The most damage When virus-related shutdowns force companies to shut down.

According to economists, the three main indicators they are using to judge economic recovery, the United States still has a long way to go before it can return to its pre-pandemic baseline.

After most Cruise along From the fourth quarter of 2019 to the first quarter of 2020, the average annual quarterly growth rate of real gross domestic product (GDP) is between 2% and 3.5%, with an average annual decline of 5%, including only about one month’s Coronavirus-related impact (although the National Bureau of Economic Research has stated that the recession will begin in February 2020).Federal Reserve Bank of Atlanta GDPNow model It is estimated that the real GDP in the second quarter will eventually decline at an annual rate of 35.5%, which is seven times that of the first quarter. Bureau of Economic Analysis Publish its official number Later this month.

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Similarly, the unemployment rate is right now 11.1%, an increase of 7.6 percentage points from February, but still higher than the level from 1948 to March 2020. Released an update Based on its long-term forecast for the decade earlier this month, it predicts that the unemployment rate will remain above pre-pandemic levels for the remainder of the past decade.

Retail and food sales From just over 200 billion U.S. dollars ( Consumer Price IndexAdjusted 1982-84 U.S. dollars) to 161 billion U.S. dollars in April-a sharp drop.but Thanks to reopening the shop, It rebounded in May to just under $190 billion if Consumer spending data Is any sign.These gains are trivial, but they are threatened by the following Increase in the number of cases Certain types of businesses have been forced across the country Close again. There is a close inverse relationship between the spread of the virus and the openness of retail/food companies, which is an important reason for observing the development of this indicator.

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This is not to say that these are the only indicators that may prove to be insightful. “Interestingly, Consumer confidence with savings rate The level of attention has declined. “University of California, San Diego, Professor of Finance and Economics Allan Timmermann said after reviewing the survey results. “I find the latter a bit surprising, because we have seen from earlier crises that consumers May be hit by major macroeconomic shocks, especially in the early stages of people’s growth and when precautionary savings have increased significantly. As we can see Already in April and May-consumer spending will decrease and the recovery will be slower. “

The headline numbers are the numbers that economists seem to pay the most attention to, which means they are indicators that should tell us where we are recovering from the recession.However, as we mentioned above, they are fundamentally lagging indicators, and the fast-moving nature of this virus exacerbates this situation, and our traditional economic indicators are aimed at this kind of crisis. Almost unsuitable.Real GDP is released only once a quarter; retail and food sales Come out every month, But provide a snapshot one month before the release date. Even the unemployment rate can only glimpse the situation in the middle of the previous month.These days, things May have changed a lot When the numbers come out.

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This is why we also asked our survey team which fast-moving data sources can tell us the direction of development of the above-mentioned main indicators.Of the choices we made, only economists clearly observed expenditures, Was considered “very useful” by 65% ??of respondents, while the remaining 35% of respondents at least considered “somewhat useful”.

What do economists use to predict economic recovery?

Some economists surveyed said that certain high-frequency indicators are useful for predicting economic recovery

Share who says the metric is…
Metric Not at all some Very useful
expenditures 0% 35% 65%
Initial unemployment claims 0 52 48
Job posting 0 55 45
traffic 6 77 16
Mobility (from mobile phone) 3 84 13

A survey of 31 economists was conducted from July 2 to 6.

Source: 55/IGM COVID-19 Economic Survey

A clear second layer of usefulness is formed around Initial unemployment claims with Job posting From various Recruitment website. In the case where each group is “very” or “somewhat” useful, the group is divided into about 50-50, but none of the interviewees believes that they provide zero value.

(Economists are impressed with mobility data such as transportation, for example, driven distance -Or trend Cell phone tracking data, Although most people admit that they are at least some useful data points. )

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It’s still early days, but consumer spending seems to be rising.Extremely useful Opportunity Insights COVID Data Dashboard, Overall consumer spending-based on credit and debit card usage data Collected by Affinity Solutions -At the beginning of April, it was down by about 33% (compared to January), but significant progress was made from then to mid-to-late June. As of June 22, expenditures were only down about 6% from January. However, the surge of coronavirus cases across the country in June has clearly slowed spending: since July 1, it has fallen by 9% compared to January.

High-frequency employment data also illustrates a similar situation.according to indeed, Job posting Steady improvement Since the low on May 1 (a decrease of 39% relative to 2019), it is still 23% lower than the same period last year.Initial claim Drop once a week Since March 28, this has been 14 consecutive weeks, but the average weekly decline in the past four weeks was only 4.3%, while in the 10 weeks before that, the average weekly decline was 13.6%.

Such Real-time data It is a welcome addition when the monthly or quarterly speed of most official releases that constitute an important lagging indicator standard is slow.In fact, there is a lack of reliable, fast-updated data Has always been a sign of this crisis, Whether it is public health or economic data. So, how do we know when things will get better? According to our survey, we will get there when real GDP returns to growth and the unemployment rate drops. Early clues may be hidden in people’s willingness to consume. However, no matter how you look at it, most economists agree: It may take a long time to fully recover.

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