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What Coronavirus Means for the Global Economy(TED, 53 min listen)Ray Dalio discuss in Ted Connects that the current crisis is worse than 2008 and is similar to that of the 1930s. He thinks the economy will take longer than a typical recession to recover due to the current levels of debt (not the virus ) and will require years of financial restructuring, economic reconfiguration and human innovation for the economy to get back on trend growth.
Back-of-the-envelope Estimates of Next Quarter’s US Unemployment Rate (VoxEU, 6 min read) By combining different types of statistics on industry and occupation composition. The study finds that over 52 million people could be unemployed in the US, with a 32.1% unemployment rate 2Q of 2020.
The Coronavirus Pandemic and US Consumption (VoxEU, 20 min read) In the US, consumption is less volatile than income. But this column argues, it is now likely to fall even more than household income. Reasons include: negative shock originates from consumption itself, jump in income insecurity as the unemployment rate rises, fall in asset prices and a contraction in credit availability. It estimates consumer spending in 2Q could fall by 20%, for every 16% fall in household income.
The Human-Capital Costs of the Crisis (Project Syndicate, 6 min read) Unlike natural disasters, the pandemic causes no damage to physical capital stock (economy’s productive capacity). But firm-specific skills of labor loses value when the firm that uses them goes bankrupt. This loss of human capital is why productivity, wages, and economic growth are likely to be affected for years to come.
What is a Recession? What is Depression? (CalculatedRisk, 2 min read) Depression is a prolonged slump with a 10% or more decline in real GDP. The market can only expect a depression if the economic slump in Q2 is prolonged years ahead without recovery. If we try to open the economy too soon without the proper preparedness (testing, masks, guidance) – then the economic damage will be more prolonged.