This Podcast Will Kill You - COVID-19 Chapter 9: Economics

Episode Date: April 20, 2020

Episode 9 of our Anatomy of a Pandemic is here, and this week we’re stepping outside our public health sphere to examine COVID-19 from an entirely different perspective, that of an economist. Pandemics don’t happen in a vacuum, and the ripples of their impact extend far beyond those of public health, as nearly every person can attest to today. We’ve seen headlines about a global recession and high rates of unemployment, but what do those things actually mean? Have we seen something like this before or is this uncharted territory? And most importantly, what can we expect? We were curious to know the answers to these questions but we lack the expertise to take them on ourselves, so we asked economist Martha Gimbel, Manager of Economic Research at Schmidt Futures to join us on this episode about the economic impacts of COVID-19 (interview recorded April 14, 2020). A caveat: this episode focuses mostly on the economic impact of the pandemic in the US. As per usual, we wrap up the episode by discussing the top five things we learned from our expert. To help you get a better idea of the topics covered in this episode, we’ve listed the questions below: What are some of the indicators that we use to know how the economy is performing, and what were the trends we were seeing in the months before this pandemic hit? Could you take us through a timeline of the economic impact, starting with the first signs that the pandemic was having an impact on the global economy? What industries felt the pandemic first, and where do we stand now? Could you break down the impact that we’re seeing on the global economy, the US economy, large corporations, small businesses, and the average consumer? Was there a global recession after the 1918 influenza pandemic? If not, what makes these current circumstances unique? Which countries or industries are the most vulnerable and why? Are certain countries or industries proving to be more resilient in the face of this global recession? Can you talk about the gig economy here and how our reliance on low-paid workers with no protection from their employers has impacted our own economic resilience? Can you talk about the implications of the numbers of unemployment insurance filings that we’re seeing and just how staggering they are? Are the current benefits offered through the unemployment system going to be enough to keep people at home and not seeking work in situations that put them at higher risks of exposure? Are there any general trends or predictions in terms of how long this recession will continue and what it will take to recover? How will we know when we have “recovered”? Are you seeing any innovative solutions that people are proposing or starting to implement in terms of a social safety net? What positive changes do you hope this pandemic will bring about? Where is the money for the stimulus checks coming from? Is that $1200 check going to be enough to keep people going for the next few months? See omnystudio.com/listener for privacy information.

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My name is Rachel Hageemeyer. I am lucky enough to work as the manager of education and community engagement at the Canton Symphony Orchestra in Canton, Ohio. I am a recent graduate of the Baldwin-Wallis Conservatory of Music, where I majored in bassoon performance and arts management and entrepreneurship. As someone who is in their first year of professional work, I did not think that a global pandemic was going to be my biggest worry while on the job. Since the majority of our patron base are elderly and more at risk to COVID-19, we were watching the outbreak very closely. Over the last week of February and the first week of March, when reports of cases in America were becoming far more frequent, we knew that we had to start thinking about what would happen if we closed down. We watched preparedness

videos and started creating plans for working from home, canceling concerts, etc. We hoped that we wouldn't have to use any of these plans, but unfortunately, that was not the case. This is my fifth week working from home, and the symphony has now canceled all of our concerts and events through the end of the season, which is June 12th. We canceled our fundraiser and have announced we'll be doing a shorter season next year. Working from home isn't all that bad. I've been able to connect with our community through online educational videos and more social media presence. but I've been worried. Worried about our musicians who make their living in a gig economy. With this pandemic and the shutdown of live music, so many people have lost their source of income.

Thankfully, the Canton Symphony has been able to pay musicians a portion of what they would have received for concerts canceled, but what about the income from smaller concerts we were going to put on? What about other orchestras? What about their gigs for weddings? Easter? Maybe even this coming summer? Nothing. I've been worried for our students, and the community's teachers. Seniors have had their last year taken away from them. Students' ability to learn their instruments in an ensemble setting has been taken away from them. I'm worried for the future of the symphony. How long will we be able to support this financially? A grant from the government will only last so long. America's orchestras and the arts in America are suffering because of this pandemic.

We are unsure how this will affect things in the long run, but there's a strong likelihood that this could break many organizations. Life is now planning for a future that is uncertain. Life is now trying our best to connect with our community through rebroadcasts of concerts, virtual orchestra, online education content, and home videos for musicians. I am trying to use this time to work on collaborations and projects I didn't have time for before. I'm trying to stay positive, but it's hard when the future is uncertain. I know this isn't forever. I'm grateful that I work in a field that I expresses the human experience and connects people despite political, racial, geographical, or economic differences. Music is something all humans have in common. It's something we can share while we are

separated during this pandemic. I only hope that the organizations that provide these experiences to the world will be supported through this pandemic and come out of the other side stronger than ever, ready to spread the joy and connection that music provides. My name is Alia Crabtree, and I live and work in Seattle, Washington with my girlfriend and our menagerie of pets. The industry we both work in is hospitality. I am a bartender and server at a sports bar in downtown in the financial district. I have been in this industry now for over 10 years, and while it can be difficult, I really enjoy the fast-paced nature and the social interaction. I first became aware of COVID-19 back in early January. We were discussing it at work and later discovered one of the first U.S. cases was in our state. It wasn't until

March that things became more apocalyptic. About a week into March, more and more restaurants, bars, and hotels were laying off staff or deciding to close up for the month. As our customers dwindled, so did our hope of getting through this winter. We had all just made it through the slowest months for sales in our industry and we're looking forward to spring when business would inevitably start ramping up. Monetarily, during the winter months, those who have savings from the summer are living off of that. So when spring hits, we are all. all out of hot water and can afford to live actual lives and not be ruled by work. By March 15th, when the orders came that we had to shut down, there were many restaurants that had already

permanently closed. Corporate restaurants will most likely make it through this pandemic unscathed, but many of the other restaurants that have made Seattle their home will struggle to make it through this. Rent is very high and has already been pricing not only business but people out of the city for years. Adding to that, the amount of food that has gone to waste or given away, the cost of restocking the walk-in fridges will be nearly unaffordable. Most of us live day to day while we work. Our paychecks don't particularly go a long way, as much of the money we earn is in cash. There is an executive order that landlords cannot evict during this time and utilities will not be shut off, but they continue to accrue, forcing those of us that cannot pay into debt.

struggle to think about how long this pandemic will continue, when we slowly get back to normal, how long will some of us be out of work, how long will we be able to survive through this? I lost my health insurance, so I cannot afford to go to my therapist until I get either health care from the state or go back to work full time. I'm struggling with the decision of potentially getting into another line of work, but if I get a job, I no longer qualify for benefits and would then have to wait longer to receive anything through my employer. I am stuck between a rock and a hard place, and the only thing I can do now is wait and try to enjoy this daycation,

make the best out of this time I get to spend with my partner and our pets. My name is Jessica. I'm 27 years old and live in a semi-rural town in New South Wales, Australia. Up until a few years ago, I worked in child care before I started caring full-time for my elderly grandparents, both of whom have many medical conditions such as diabetes, chronic obstructive pulmonary disease, emphysema, and heart failure. Prior to the pandemic, our days were simple, busy, but simple. Morning medication, breakfast, then our days would consist of doctors' appointments or errands. On average, there were four to five

medical or care-related appointments per week. Afternoons would usually consist of social activities, more errands or rest. Then nights were more medications and showering. I first started really feeling the impacts of the pandemic in March. My grandparents were told to limit when they leave the house and to self-isolate. Due to their health conditions, they were, and still are, vulnerable and at risk. This also meant I had to do the same, so I didn't spread the germs to them. Unfortunately, we live a day-to-day life when it comes to finances. Due to caring for them, I cannot commit to a job. I Their appointments and medical needs take up a lot, if not all, of my time. I'm fortunate to get welfare from the government, but this only goes so far, especially right now during the pandemic.

We cannot afford to bulk buy things, and during the initial panic buying, it was hard to get our hands on anything. I was full of guilt. Here I am, supposed to care for them, but I couldn't even provide the simple things like toilet paper and bread. Due to our finances and medical needs, it was also hard to start. self-isolate or quarantine ourselves. It's a constant battle between protecting them from the virus and protecting them from their medical issues. There's always judgment from people. Why do I need to go out so much? Why can't I just stay at home? Why am I putting myself and loved ones at risk? I ask myself these questions too, but the answer is simple. My grandparents' lives

depend on it. They depend on me. Being stuck at home is hard on my grandparents. I can see the negative effect it has had on their physical and emotional well-being. They're no longer able to attend their rehabilitation and physical therapy, leading to more pain and a decrease in their ability to move around. Emotionally, they're missing their social outings. They feel alone. They're older, and technology isn't easy to understand for them. They, like me, are also scared. I'm terrified of the potential of my grandparents getting COVID-19 because I know their chances of survival, if the infection was severe, would be slim to none. I couldn't live with the guilt if I was the reason they caught the virus,

even if I know that my leaving the house is in their best interest right now. It's a constant struggle, and I feel like whether I leave the house or not, I lose. There is no winning until there is a vaccine or some end to this pandemic. Thank you so much to everyone who took the time to send us those amazing firsthand accounts. We really appreciate it. Thank you so much. We've read every single one and really, really enjoy reading them, wish that we could have every single one on the podcast. But thank you all so much.

Yes. Hi, I'm Erin Welsh. And I'm Erin Elman Updike. And this is, this podcast will kill you. Yes. We are on episode nine. Episode nine. That's a lot of episodes, Aaron.

I know. In a very short amount of time. A very short amount of time. This is our anatomy of a pandemic. series where each episode we're discussing a different aspect of the COVID-19 pandemic. So this week is quite a bit of a deviation from our normal because we're going to try to wrap our heads around the economic impacts that we've seen so far and what we might expect to see moving forward. Yeah. So, Aaron, we are disease ecologists and epidemiologists. Why are we talking about

the economy? Okay. It's a good question. I mean, and it's, we are talking about it for many different reasons. Yeah. So one of the things that we've always tried to do with this podcast is explore the many different ways that disease has impacted humanity, right? Our normal episodes take the form of one disease that we explore through space and time, right? Like we talk about the biology. of how it makes you sick, but we also spend a lot of time on the history of how this disease has moved through populations and the impacts that it has had across many different facets of humanity. Right. And if you've listened to an episode before, you know that you can't look at these diseases or these epidemics in a vacuum. You have to consider other aspects because

they involve people and people are very complex creatures with culture and politics and history and thought and all of these different aspects that you lose a lot by just looking at it in a very directed way. Right. And so we're kind of using this pandemic as an opportunity to say, hey, look at the myriad ways that COVID-19 is impacting life and humans and humanity. And so that's why we kind of decided to dive into the economic discussion of this pandemic. Right. It's something that I think had this pandemic happened in the past, we would have, touched upon the economic impact of it in our history section of a normal podcast. But it's just

like we're living through this now rather than looking back on this historically. And so we do want to make sure that we're looking at all the aspects of it. Absolutely. Yeah. So. Okay. So, but before we dive into this aspect of COVID-19, we have a few pieces of business to cover. So once again, first-hand accounts, we are still looking for them if you are still willing to provide them. And we also want to, again, thank everyone, every single person who has sent in their first-hand account. We really appreciate it. Another piece of business is alcohol-free episodes. So again, you can find episodes with the Quarantine Talk edited out under the episodes tab on our website.

And one last thing. we have bookshop.org affiliate page. You can find a link on our website underneath the books tab to bookshop.org, and that'll take you to our affiliate page on bookshop.org. And so Bookshop is, once again, an online bookseller that works with independent bookstores to help them sell books. And I think we have one more thing. The most important piece of business. It's quarantini time.

It is quarantini time. Okay. What are we drinking this week? Quarantini number nine. That stands to reason. Uh-huh. What's in this one, Erin? This one is basically the last word.

So what's in the last word? It is gin, luxardo, lime juice, and chartreuse. Yum. Yeah. It's delicious, actually. It is. Fantastic. There we go.

Easy-peasy. That's going to be a fun one to make the siobrita for. I don't know what I'm going to do. do you substitute chartruse? What flavor is chartruse? It's like a million herbs. It's like basically the KFC, a million unknown herbs and spices. Um, herbal tea. Irbal iced tea. That could be a good we'll see. We'll make it work. Don't worry. Don't worry. Don't worry. We'll find a way. We will. Okay. We will post the recipe for our quarantini and our non-alcoholic placebo Burita on our website. This podcast will kill you.com and follow along at all of our social media to

see the quarantini posts in real time. All right. So this episode, we are absolutely without a doubt going further outside of our wheelhouse than we've ever gone before. But like we already said, we feel it's a really important topic to address in the context of this pandemic. So we're talking today about economics. We've all seen the headlines about unimpleased. We've all seen the headlines about unemployment rates skyrocketing, probably every single one listening knows at least one person who's out of work right now. I know I do. Or are themselves out of work? Exactly. Right. It's a really scary situation for a lot of people financially right now. But like we said, we're disease ecologists, an epidemiologist. We don't know anything about economics or the economy. I don't think I could

give a definition of the word economy before this interview. And frankly, I'm not sure I could right now after we've already had it. But I did learn a lot. Yeah, we learned a ton. So, as usual, we sought out the expertise of someone who does know what they're talking about. And we were thrilled to get to speak with Martha Gimble, who has extensive experience in economics and economic research. And we will let her introduce herself and explain how in the heck we even measure the status of the economy, whatever that means, right after this break. Dinner shows up every night, whether you're prepared for it or not. And with Blue Apron, you won't need to panic order takeout again.

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the fabrics. Every piece is thoughtfully designed to be your new wardrobe essential, and each piece is made with premium materials in ethical trusted factories and priced far below what other luxury brands charge. I recently got a pair of Quince's Bella stretch wide-leg jeans, and they are now in constant rotation. They are so comfortable, the fit is amazing, and they come in a bunch of different washes, so I'm about to go order some more. Refresh your wardrobe with Quince. Go to quince.com slash this podcast to get free shipping on your order and 365-day returns, now available in Canada, too. That's Q-U-I-N-C-E.com slash this podcast to get free shipping and 365-day returns. Quince.com slash this podcast. My name is Martha Gimbel. I'm the manager

of Economic Research at Schmidt Futures, which is a philanthropic initiative, started by Eric and Wendy Schmidt. My background, is in economic policy and labor market data. So in a previous life, I was the research director at Indeed.com, which I think I'm still contractually obligated to say is the world's number one job search website. And before that, I worked on the Hill at the Joint Economic Committee, which is Congress's sort of internal economic think tank.

And then worked at the Council of Economic Advisors at the White House and also at the Department of Labor, where I specialized in unemployment and insurance, among other things. Excellent. Well, thank you for coming on to talk to us today. We are, as we told you, not experts in the economy. So we're wondering if you could help first sort of set the stage for us a bit in terms of what the economy in the U.S. Or if you could talk a little bit about what it looked like broadly, what did it look like in the months leading up to this pandemic?

and what are some of the indicators that we use to know how the economy is doing? Yeah. So if you look at the economy in the United States leading up to the pandemic, it was in incredibly good shape. We had record low unemployment rates, perhaps more importantly, and I can get into why we care about this, we had the employment population ratio among what economists like to refer to as prime age, which by which we mean age 25 to 54, never let economists name anything. Workers was, you know, continually improving.

We had really fast wage growth for low wage workers in particular, which is exciting because those are the workers who most need a wage. And so what you had was an economy where workers could find work, workers who had even given up on finding work, were coming back into the labor market.

And the workers who most needed a raise were getting a raise. Wow. That's good news. Yeah, it was a great time to be alive. Oh, boy. So can you talk a little bit more about these indicators? Are there some that are more important than others? Yeah.

So I think the thing that often confuses non-economists the most is the unemployment rate. So economists mean a very specific thing when we say unemployment rate. We mean that, one, you don't have a job. I think that part is obvious. But we also mean that you are actively looking for work. And so that can end up being really confusing to a lot of people. And it can also end up skewing the numbers a little bit, particularly if people feel really discouraged by the labor market. you saw this during the Great Recession.

And so people often say that the unemployment rate is, you know, fake or it's not counting the right thing. And, you know, that's not right. It's just counting a very specific definition of unemployment. That means that sometimes people are more likely to look at the employment to population ratio. And that is exactly what it sounds like. It is the share of the population, age 16 or over, because we don't really care of four-year-olds are working, with a job. then we get into the prime age restriction. And the reason we do that is that we have an aging population.

And in the same way that we're okay with four-year-olds not working, we're also okay with 80-year-olds not working. That's not really an indication of economic health. And so if you restrict to the percent of the population ages 25 to 54 with a job, that's been a pretty good barometer in recent years of, of people coming back into the labor market and finding work. I'm going to insert a brief caveat here, which is that it doesn't work particularly well

if you're trying to compare today to say 1952, because if it were 1952, the three of us probably would not be working. So you had so many women who've come into the labor market, which means that the percentage of the population with a job, you would just expect to have gone up. So you can't do historical comparisons in the same way, going way back with that number. But if you're looking at, say, now versus 2000, it's less of a concern.

That's very interesting. Yeah. And so when you look at the population overall with a job, does this mean sort of any type of employment, even if it's part-time employment or anything like that? Yes. And this is another incredibly important indicator that we look at. So there is something that the Bureau of Labor Statistics calls part-time for economic reasons. which is a very fancy way of saying,

you're part-time, but you don't want to be. So there's the rate of part-time work overall, but there are plenty of people who work part-time, and that works for them. And we're good with that. Like, if you want to work 20 hours a week and you have 20 hours, great. We are on board.

So part-time for economic reasons is the share of the labor force. And by the way, when I say labor force, I mean people who are either employed or unemployed, who are working part-time, but would prefer full-time work. Okay, gotcha, gotcha. Okay, so moving on from this, like, beautiful image of strong economy and growth, growth,

that kind of has changed, right? And in the past month or several months, so could you kind of take us through a timeline of the economic impact that COVID-19 has had so far, starting with like when, what were the first signs that we saw something is wrong or that this pandemic, is going to have a major effect. And were there certain industries that felt the impacts of the pandemic first and then maybe kind of bring us up to where we stand right now as of April 14th at 3 p.m. Eastern time. So I'm going to start off with one caveat before I dive into your question, which is that we were in this amazing place of growth, growth, growth. And also,

we had just been coming back from the Great Recession. We had. had been dealing with the recovery in the mid-2000s. And the reason that all of that is important is that there are, you know, plenty of economic indicators going into this that weren't even back to where they were in the late 1990s, early 2000s, which is the last time that we think of the economy as being, you know, quote-unquote really strong. So it's important to emphasize that the economy was doing good, but not as well as it could have been. And so we lost out on all this potential when this happened, which is really sad. So let's start with the timeline of what happened. In late February, early March, we were starting to hear some, you know, rumblings about

what these numbers were going to look like and the number of people who were losing their jobs, who were losing hours, where people weren't making reservations at restaurants anymore, Open Table released some data that was very scary about that in particular. And, you know, the issue with labor market data is that it often lags and it's incomplete. So the first data that we got was in mid-March about unemployment insurance claims. And that spiked from where it had been, which was in the low 200s. And it had been there for a while, and that was very low. which is both good and bad, and we can get into that later, but it spiked into the high 200s.

So still not historically at the levels say that you saw in the Great Recession, but it was particularly scary about that was the speed at which it was happening. So we saw a jump of about a third in a week, and the highest it ever got during the Great Recession of like a one-week jump was 14%. So that was very scary. Of course, the week after that was even scarier where it jumped up to multi-millions. And then the week after that into more than six million. And the week after that stayed at more than six million.

And so what you've seen is this, I mean, I don't know how else to put it, except insane number of people losing their jobs in an incredibly short timeframe. And so it's this real whiplash. We also got what is referred to as the employment situation, which the Bureau of Labor Statistics releases every month. So if listeners know, like, they look up their phone and they get a news alert that says the unemployment rate was X percent, and we added X number of jobs.

That's the employment situation. A lot of predictors hadn't expected the employment situation report to show that much. because of when the data was gathered. And so this is this kind of technical thing, but it says that this is the report for the month of March, but of course the data is not gathered March 1st to March 31st. It's gathered at a specific point,

and it's gathered around the week of the 12th, which was a little bit before it seemed like things were really hitting the fan. And so people like me thought, oh, well, like maybe it won't be that bad. And it was bad. we lost 700,000 jobs, which, of course, compared to the multi-millions that we then lost in the next few weeks now looks like a cakewalk. But I think it gets to this point of things were bad even before we thought they were bad. The unemployment rate jumped up quite a bit.

The part-time for economic reasons rate that we were talking about earlier also jumped. And there's a couple of things that I think were really scary about that report, not just that it happened harder and faster. than we were expecting. One is where the job losses were. So they were almost entirely in leisure and hospitality, particularly food and service drinking places, which I think makes sense. The other place that we saw a lot of job losses

was what's in ambulatory healthcare services. I told you guys that an economist should never be allowed to name anything. But think of that as like doctors offices, dentists offices, home health care aids. You know, people talked about health care as being a safe place. going into this pandemic. But of course, that's not true for all types of healthcare jobs. And if you're, for instance, a physical therapist, it's really hard to do your job right now. And so what's scary about that is that we lost 700,000 jobs. And that was truly just the beginning, right? Like, that was just

these, you know, we're not seeing these follow-on effects in, you know, let's say, accountants who could do their work from home, but their services are no longer needed. So we're, you know, that's still starting to show up in the data. The most depressing statistic in the report to me was what BLS, the Bureau of Labor Statistics, BLS identified as what they considered to be a survey error. And so they had specifically said to people, if your employer has sent you home because you can't work, you are designated. as unemployed but on temporary layoff.

And people didn't answer the question that way. There was a big spike in people identifying themselves as employed but absent from work. And it could be that there's some percent of them who really were employed but say we're in quarantine or something like that. But the spike was big enough that BLS thinks that people answered the question wrong. And I think that this gets at this, I mean, just hugely different. pressing psychology of this, right? Of you have people who've been told by employers, like, we're furlowing you, we're sending you home for a couple of weeks, but our intention is to hire you

back. And workers are relying on that, but we don't actually know that employers will be able to hire people back. We don't even know that some of those employers will still exist. And so you have this big group of people who are telling government survey people that their job is still there for them. And in fact, that job may not be there for them at the end of this. So we'll see how that number evolves. But that was the number that sort of I found most depressing and upsetting. Yeah. And that's where we are. That is depressing and upsetting. And that kind of actually gets into the next question that we had. And that is looking at sort of the difference and impact that this is having on employers versus employees and sort of the difference and impact that these changes and

this sort of, I mean, this global pandemic is having on small businesses versus large corporations versus the individual consumer and employee. So could you talk a little bit about those differences that we're seeing in terms of impact? Yeah. I mean, I think the answer is, unless you're like Clorox or Zoom, no one's doing that well, right? I mean, it's just, it's really hard. A huge amount of consumer spending has just been sucked out of the economy. I mean, you can look at me. I'm very lucky.

I still have a job. I am not spending money like I used to because I can't. I would love to go get my haircut. I would love to go out to dinner, but I literally cannot spend that money. There's a group of us on Twitter that it's affectionately referred to as econ Twitter, which is basically a bunch of economists getting very nerdy about economics on Twitter. And someone asked this question of what are policies that you support now, that you wouldn't have supported a couple of months ago?

And someone somewhat sarcastically responded to everything. But it is really true, right? So you've seen conservative economists saying, get money to individuals and workers do it yesterday, write them direct checks. Like, this is a nightmare. You've seen more liberal economists saying save businesses or these workers won't have jobs to get back to, like get them money, get them yesterday. And, you know, there's actually been pretty fair amount of agreement among economists. You know, there's disagreement on the edges. We always love to argue. But we all agree that workers need direct supports and businesses,

need direct supports. This isn't something that frankly we necessarily would have expected a lot of people to plan for. You know, saying to a restaurant, well, why didn't you plan for a situation in which you couldn't open your doors for six to 12 to 18 months? Like that's just, we wouldn't ever have expected them to plan for that. And so we really are in the situation where we both need to be supporting workers so that they can survive and stay home and buy groceries. And also supporting businesses so that workers have a place to go back to. If you're not dealing with both sides of this, it's kind of scary to think about what the economy could look like on the other end of this.

Yeah. So one of the questions that like, and I see headlines and discussions of, oh, the stock market is this or the stock market is that. And this is like a complete, like obviously I know nothing about this at the stock market and the economy. What does it mean to the average human being, I guess, like to the average person in the U.S. when the stock market increases or when it decreases, does it mean anything? No. I knew it. That makes me feel better. I knew it all along. No, the stock market is not the economy. About 50% of American households, I always forget the exact number, but it's something like that, don't hold stock. And, you know, I think one thing that can be particularly frustrating to people is you'll often see headlines that say things like, you know, 6.6 million Americans filed for unemployment. The stock market rose by X percent. And everyone's like, what is going on? In that particular case, the stock market had already priced in that millions of Americans were going to file for unemployment. They already knew that

was going to happen. At the same time, or around the same time, the Fed announced a huge injection of money into the markets. And so what the stock market was responding to was not the unemployment insurance claims, which it had already priced in. It already knew it was going to be millions of people who had lost their jobs. But this new good information that the Federal Reserve was riding in on its white horse to help. That being said, you know, the stock market is made of people. That sounds like I'm talking about, you know, Soylent Green, but it is made of people. And the question is, do a bunch of people know what's going to happen over the next six months? And if you think that no one really knows what's going to happen over the next six months,

you know, the stock market doesn't really know either, which is part of the reason why you've seen so much volatility there. In recent weeks, I've often compared the stock market to just like, the stock market, like many of us right now, is just like a cranky toddler who needs a nap and a snack. And it does. And it got a snack from the Fed. And it was very happy about that. But it's just not going to settle down for a while until it's a lot clearer what's going to happen. Yeah. That makes sense. So this right now is being what, what we're going through right now is being termed as a global recession, right? Like, is that, is that accurate? Yeah, I mean, it's interesting, right? So economists have like very technical

definitions of a recession. And technically, we haven't hit those definitions of a recession yet. And I think that it tells you a lot that economists are not waiting for those indicators. We're just like, no, no, this is a recession. We're in it. We're not questioning. This is not a drill. I'm going to anticipate a question from some of the listeners, which is, is it a recession or a depression? So depressions are interesting because there isn't a specific definition of a depression. A depression is a period of high unemployment that goes on for a long period of time. We are at a high period of unemployment. So we have already lost more jobs than the total number of people who are unemployed at the height of the Great Recession.

Like we are at a high level of unemployment. We are into double-digit unemployment. The only question is how far we go. That then raises the question of how long we stay in this. And that's a really hard question to answer. And I know people really want answers on that, and so do I. The problem is that it depends on the actions that policymakers take. And it also depends on the public health prognosis, right?

So if by some miracle, someone pops up tomorrow and says, I have a vaccine, we've, you know, been secretly testing it on humans for all this time and we're totally good to go, and I've manufactured billions of doses and we're going to roll it out. problem, then we'd come back, right? Like, then it would be okay. The problem is, the longer that this goes on for, the more you have what economists refer to as scarring. People run out of savings. They haven't worked in a while, and so their connections to help them find jobs go away. The businesses that they had connections to may have gone out of business. And so the longer this goes on for the harder it is to come back from. And it's not comforting, but it's really an open

question at this point. And no one really has the answer. It's really hard. Yeah. One of the things that I've been so curious about is comparing this to the 1918 influenza pandemic, which is the closest thing that I can think of in terms of like, well, a pandemic, that global pandemic, that has led to essentially like the shuddering of a lot of things. But like to my very basic knowledge, what we were always taught was like, oh, the roaring 20s, everything was great. And then there was a great depression. So like, was there a huge economic impact of the 1918 influenza? Was it short term and then like recovery or like what are some of the differences or do you think are the key differences between what we're going through now and what happened there?

Yeah, so there's a couple of key differences. So the first answer to your question is, with the usual caveats about historic economic data and that we're guessing, et cetera, et cetera, et cetera, our best guess is that GDP dropped by about 6% because of the fluke pandemic. Now, the thing we have to keep in mind is that, and stick with me here, 1918 is not 2020. And there are some minor differences. For one thing, there was a war in 1920. 1918. And that, you know, makes a big difference on mobilization of resources and ability to come back

from things. The other thing is just that our economy is really different. So if you think about 1918, and again, the usual caveats about historical economic data apply. But, you know, we were much more heavily into manufacturing and we were much more heavily into agriculture, right? So, like if you're working on the family farm and there's a pandemic, you can still keep working on the family farm, right? And you may have debt, you may have issues, but there's a place for you to go and work. And people may not be buying as much of your produce,

but you have a place to live and you're making your food. And please don't ask me any other questions about farming if I don't know. But, you know, think about it now. We're a services economy. We are really reliant on consumer spending. That's what drives the U.S. economy. And consumers aren't spending, right? Like we're not going and getting haircuts.

We're not going out to dinner. We're not going to the gym. We're not spending money on all of these things. And no matter how much money you give us at a certain point, we're just not going to have, you know, once we've got rent and food and Netflix right now, there's just not that much else for us to spend money. on. And so any attempted economic forecasting is a fool's game. That being said,

there was a study that came out, I believe, yesterday that was suggesting that we could get a 10% drop in year over year GDP at the end of this year, which is bigger than we saw with the 1918 flu pandemic. And I think that just reflects that we're in a different world. than we were. And in some ways, we're a lot better off, right? Like in 1918, they didn't know how to treat that. We have a much better public health and healthcare system, in my understanding. But, you know, from an economic perspective, we're so much more interconnected and we're so reliant on spending that other people are doing. And so that could really have impacts. Yeah, that makes a lot of sense. So I know you kind of touched on this a little bit already,

but does it seem, and I know also that you're a U.S. economics expert, but are there any places, whether it's industries or countries that seem to be at all resilient to this, or is this sort of just everyone is equally in the toilet at this point, you know? As regards to, to countries, one of the countries that is in a really good situation right now, and stick with me on this, is the United States. So we just talked about how horrible things are in the U.S. But it is so much better to be us than it is to be so many other countries. And one reason for that is because people really want dollars right now. Like dollars are a really safe place to be. That's caused various fluctuations in the financial markets, but it also means that borrowing is really, really cheap for us right now.

So you see the federal government talking, having already allocated, you know, trillions of dollars talking about spending even more, you haven't heard anyone, or at least anyone reputable, talk about the national debt. And that's both because this is not the time, but also because our borrowing rates are so low, it will. really kind of doesn't matter. And I want to be clear, like, I am not an economist who thinks that government debt doesn't matter. Like, I am someone who thinks that, you know, long run, you have to think about how much you're borrowing and how much you're spending, et cetera. But right now, it doesn't matter. Like, spend it, give people money. And so we're actually in a pretty good situation relative to a lot of countries, which is also very scary. within the United States, you know, I think a lot of people have gotten a bit of a shock over the past few weeks. You know, when this first started happening, there were a lot of people who really thought that this, the carnage was going to be controlled in services that were provided face to face. So restaurant servers, trainers, employees at gyms, hair cutters. I keep coming back to hair cutters, which gives you the sense of how I feel about my hair right now.

things like that. The problem is those people then stop spending and other companies are scared to invest. And so then the question becomes not just can you do your job from home, but will people pay you to do your job from home? And that moves us away a little bit from is your job face to face, but this question of just, are people going to pay for your company's work right now? So the distinction now isn't so much, are you a computer programmer versus a hairstylist? Because as a computer programmer, you can usually work from home. But are you a computer programmer who works for a company whose services are still needed right now, as opposed to a computer programmer who works for a company whose services aren't needed as much right now? You know,

That, I think, is going to be really hard and more and more of a shock to people as time goes on. And it's really, really scary. And no one knows where it's going to go next or how long this is going to go on for. And it makes it really hard for companies and people to make decisions. Yeah. Like the primary effects and the secondary effects. And it just seems to just sort of like ripple out and out and out to all these. other industries. The longer that it lasts, just the bigger that ripple. Right, right. So one of the

areas, you know, specifically in the U.S., talking about the industries or groups of people that have been heavily impacted is, you know, there's been a lot of discussion about the gig economy and how much the U.S. relies on sort of, you know, low-paid workers with no protection from their employers. So, you know, is our reliance in the U.S. on these types of workers, on this type of gig economy, what are the implications that this pandemic is having for that aspect? So I do want to address this issue about the gig economy really quickly because I think it's something that sometimes people get a little confused about. So the conversation about the gig economy has in some ways outpaced the data about the gig economy. We have very bad data on the gig economy.

It's not collected particularly well. The best data that we have actually suggests that it's a relatively small percent of people who do what we think of as traditional gig work. And I think one issue that you have is that for a lot of people, these kinds of informal or less certain work were really hidden to us before, right? So for instance, David Weil, who's a professor, has talked a lot about, about how hotels outsourced their cleaning staffs. And so their cleaning staff wouldn't actually work directly

for the hotel, but they would be contracted out. We don't see that, right? Like we just see that the hotel room's been cleaned. We do see our Uber driver. We do see the postmate who's coming to bring us food. And so these places that work had been much more uncertain and that people hadn't been able to rely on the traditional protections of work, I think part of the conversation just comes from it becoming more visible

to a certain group of us. So with that caveat, and if people are interested in this, they can Google BLS contingent workers survey, and there's a lot of data about that. Yes, workers in the United States have a lot fewer protections than workers in other countries. And if you think about the workers who are most vulnerable in almost every sense of the word right now, they are the ones with fewer protections. So like grocery store workers, very unlikely to have paid sick leave, very low paid, very exposed to this virus. You know, I think one thing that you're seeing right now is people really realizing how much the day-to-day functioning of the economy is really reliant on people who are incredibly poorly paid and work under really tough conditions and who we don't

necessarily treat very well. But if they walk off the job, the rest of us are in a lot of trouble. You know, I think there is this question around how do we as a society think about compensating people who are doing this very poorly paid, but also right now, very dangerous work. Yeah. Is that something that you think will change in the future? Oh, it's just so hard to predict how these things go, which is like a theme of this entire conversation. You know, I think it's unclear. I think you've already seen a certain amount of labor activism and labor unrest among these workers. And also at the same time, these workers are incredibly vulnerable. They may not have savings. And more workers are becoming unemployed and need to feed their families.

And so it's really unclear, I think, where this is all headed. But I think this is actually transitioning into this broader point, which is that right now economic policy is public health policy and public health policy is economic policy. So people keep saying, like, what is the number one policy that we need to save the economy right now? And the response is, fix the public health crisis. Like, anything else we do is just band-aids on this until the public. public health crisis is done. At the same time, in order to fix the public health crisis,

you have to make sure that the economy is functioning reasonably and that people have enough money to feed themselves and feed their families and have a place to live. If people lose their homes and go into homeless shelters and can't feed their kids, well, one, they're not in a place where they can't keep the coronavirus from infecting them. Homeless shelters are bad for that. And also, like, they're going to leave and try to find shelter and try to find a job and be going out in the world and circulating around. And so there's been this question around some of the economic policy actions that have been taken of, like, why are we paying people so much in unemployment insurance right now? Then they won't look for work. And this is a huge problem.

This is the thing that economists refer to as moral hazard. And the thing is right now, like, we don't really want people looking for work. Like, we don't want people leaving their homes. We want people to stay home and sit there and stay safe. That is incredibly important right now. And so, like, some of these, you know, traditional calculations fall by the wayside. Yeah. And so that kind of was going to be one of our next questions is, are the current benefits that we have enough to

keep people at home and to sort of address this public health crisis at this point. Yeah. So the changes to the unemployment insurance system are encouraging. That being said, one of the big issues that you have right now is that people can't get access to those benefits, because we do not have a very good government infrastructure in this country. It's just not something we've ever really invested in. And so you look at other countries, they've invested in their social safety, that's a lot more. And with that comes a easy financial connection to their citizens that they can utilize at a time like this. We haven't done that. And so the unemployment insurance system right now is just breaking under the load. The systems weren't set up

for this. They weren't even really ready for a regular recession. And this is not a regular recession. And so, you know, one of the things that's incredibly important for us to be thinking about moving forward is investing in the infrastructure of government and making sure that we have that and it's functioning. You know, it's not just for workers. You've seen the same complaints with the small business program, paycheck protection program or PPP, but has also run into technical issues. And also with the $1,200 checks that are supposed to be being sent out. And so, you know, we haven't invested in the day-to-day functioning of government. And the moment when you find out that things are breaking is almost always the moment where you most need them not to break. Yeah. So I know that you said that guessing at the future is a fool's game.

And so let us ask you. Yeah, what's going to happen? No, I won't ask you what's going to happen. But I guess what I do want to ask is what do you think it will take to recover and how will we know when we have recovered, whatever recovered means? What does that look like? Oh, that's such a good question. So one thing I want to point out is that it's not just getting back to where we were before. Because, you know, and this was something we were talking about earlier, where we were going into this was a late.

market that still had room to grow and there were still people who were benefiting from the really tight labor market. And so, you know, a full recovery doesn't just mean getting back to 3.5% unemployment. It means continuing to get all those people who were coming back into the labor market who are getting wage increases, the full benefits of that. And it's just so frustrating, right? Like we've had, we've lost decades. I mean, it's so frustrating. You know, as far as how long is this going to take, I think this could take a really long time. And I think people have to really be emotionally prepared for that. Think of how long it took us to come back from the Great Recession. And that was a different situation and that was a financial crisis,

et cetera, et cetera. But this is worse in a lot of ways. And always really. I don't know why I said a lot of ways. And recovery is not going to be tomorrow. and it's not going to be next month, and it's probably not going to be this year. And frankly, it may not even be next year. It just takes a really long time. And we also have to keep in mind that there are people for whom the impacts of this are going to stretch for years. We know that graduating into a tough economic situation impacts your earnings for a really long time. We know that losing your job impacts your earnings for a really long time.

And so, you know, we have to keep in mind that for a lot of people, it's not like, oh, I'll just find another job in six months and it'll all be okay. It's just not the way it works. And so we as a society have to be prepared for that. Are there, are you seeing any innovative solutions that people are proposing or starting to implement in terms of like social safety net like you were saying to help alleviate this current crisis, but also to try. try and put things in place to prevent something like this from happening again? We need a silver lining. Yeah, we need to end not too depressing. Is that possible? Yeah, for an economist anywhere. You know, I mean, I think on the federal government side, you know, it feels like it's been so slow.

But they've actually moved incredibly quickly. Like, this is, I mean, it is unprecedented the speed in which this happened. and is unprecedented the speed with which Congress acted. You've also seen the Federal Reserve taking unprecedented actions to shore up the economy. And so, you know, so far, policymakers have actually been doing okay. Like, to be clear, you know, if I were in charge, are there things that I would have done differently? Like, yes, absolutely. I would have, you know, we need more money for all of these programs.

We need more money yesterday. We need our unemployment insurance, infrastructure to work better, all of these things. But the economic response has not been bad. We just need more of it. So that's my silver lining. It's what passes for a silver lining among the Congress. As silver as it gets. I don't know what color you'd call that.

Opalessant, maybe. Yeah, yeah. Shimmering in any capacity. Right. It's like an oil slick, though. So maybe I don't know. Oh, dear. Oh, yeah.

Well, well. So looking forward again, what are some positive changes you hope to see come out of this? Maybe whether that's policy or just in terms of how, you know, people think about the economy or how interconnected people are finally realizing all of these different aspects are? What are some of the positive changes you? you hope will come out of this. I think people really start investing in our unemployment insurance system. This is something that a group of us have been screaming about for years, and no one ever pays attention to UI when it's not a recession because it's not a recession.

But it's incredibly important. It's a thing that people assume will be there for them when they lose their job. It often isn't. And I'm hoping people really take a good look at it and try to figure out a way to make the system work better, you know, both from a design perspective and also from a tech infrastructure perspective for people moving forward. I also think it's helpful that you've seen policy makers move, at least by, you know, U.S. standards relatively quickly to get people the money that they need. Should we be moving faster? Like, yes, absolutely. And I don't want anyone to think that I don't think

that. But, you know, I'm hopeful that when the next recess, comes around, you know, we'll remember that one of the most efficient ways to help people who have lost their jobs or in financial stress is to give them money, which isn't that complicated, but sometimes we make things more complicated than they need to be. Yeah. Yeah. This is kind of a like, pardon this silly question, but where's the money coming from? This is such a good question, Aaron, for noobs.

I don't get it. Yeah, we're borrowing. We're borrowing a lot of money, but we're borrowing it at such cheap amounts of money. Like, we are borrowing money so cheap. It is practically free. Wow. So, you know, we have these $1,200 checks that are going out to some people. Is $1,200 going to be enough to get people through these next few months to keep the economy, you know, afloat or whatever a float means? No. And this is why one of the things that a lot of economists are most focused on right now is in whatever legislative package passes next, what you need is what we refer to as triggers for the help that we're giving to both individuals but also businesses. And so what we mean by that is, and if people are interested, you can look up the work of Claudia S-A-H-M. She's an

amazing economist. But, you know, she's done all of this work about how we think about using the unemployment rate to trigger on and off different programs. And this is already something we have a little bit in the unemployment insurance program. But, you know, this is going to be too stressful and it's not going to work well if every month or two Congress has to come back and go like, well, where are we? How do we feel about this? Where do we think we're going? Like, it's a lot easier if we say the checks will continue until the unemployment rate has hit X percent. Or the checks will continue until, you know, the number of new cases is X-per-s. Whatever we think the right set of triggers is in the situation.

But, you know, doing these kinds of one-offs is just, is really hard. And so putting these kinds of triggers on for, you know, this kind of relief is really important. Anyone who works long hours knows the routine. Wash, sanitize, repeat. By the end of the day, your hands feel like they've been through something. That's why O'Keeffe's Working Hands hand cream is such a relief. It's a concentrated hand cream that is specifically designed to relieve extremely dry, cracked hands caused by constant hand washing and harsh conditions.

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Learn more at PennyMac.com. Penny Mac Loan Services, LLC, Equal Housing Lender, NMLSID 35953, licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. Conditions and restrictions may apply. What a fantastic interview. Thank you so much, Martha, for talking to us and taking so much time out of your day. We really appreciate it.

We really appreciate it. Also, that was so thrilling. My brother, what my brother works in like, I don't know, something financial. I still don't understand what he does. But he was like very jealous that we got to interview Martha Kimball. She's a big deal. So thank you so much for taking the time to talk to us. That was great.

Yes. Okay. So what have we learned? Well, number one, I've learned a lot about how we actually measure the economy because really I didn't know any of these things. I didn't know the metrics and what they meant. And so what we have learned from this interview is that prior to this outbreak, the U.S. economy was really in an upswing.

We were seeing growth, not just low unemployment numbers, but actual increases in wages. and that one number that Martha mentioned, the unemployment population ratio, that was improving. So basically, even though we weren't fully back to, you know, pre-2008 Great Recession crash numbers, the economy was really looking strong and was in a period of growth before all this happened. Absolutely. Number two, the second thing we learned is that we have lost a ton of jobs. Oh, yeah. many, many tons of jobs.

It's like hard to wrap your brain around. It really is. And it's not just in sectors that you might have expected like the service industry and like face-to-face businesses, but even in things like health care that you might have thought were sort of safe industries in a pandemic. And because of all these job losses and of course because we're all staying at home and not going out and spending money, even people who have jobs that are. that they could in theory do at home are feeling the strain, because so many companies and businesses

are losing money, and in some cases letting people go because of it. I'll also add that even for those of us who are at home and in theory still working, and Martha didn't say this specifically, but I'm almost positive that all of us are seeing massive dips in our productivity, simply because of how difficult it is to focus, whether that's because you have kids at home with no child care, or you are ill yourself, or you have loved ones who have fallen ill that you're helping care for, or because, I don't know, the world is crashing down around us, and it's kind of hard to focus on your job. Absolutely.

Number three, and this is a really scary one, I think. We don't know how long this is going to last, and we don't know what businesses are going to survive. We don't necessarily know what it's going to look like on the other end of this thing, basically. And so while a lot of people may think, or at least hope that their jobs are waiting for them when this is all over, there is so much uncertainty about literally everything right now that it's very possible that many people will be out of work not just during this pandemic, but also after it ends. And so while we can't predict exactly what the overall impact of this pandemic is going to be on our economy, it's entirely possible. And some people are actually predicting that the effects are going to be much great. than what we think happened as a result of the 1918 influenza pandemic, which really is kind of the

closest thing that we can compare our current situation to. Either way, this is already worse than 2008, which is pretty scary to think about, and we don't really know how long it's going to take to recover. Oh, yeah. It doesn't get better. Number four, many of the people most affected financially by this outbreak are the same people who are vulnerable in many other ways, with no sick leave, very poor or no health insurance, or in some cases, still working but in incredibly unsafe conditions right now. So right now, economic policy is public health policy. We might always argue that's the case. I was going to say, that's like 100% always the case. But all economists even agree on this right now.

which apparently is not a thing that happens very often to get economists to agree on things. So the most important thing that we have to do in the U.S. and across the globe right now is address the public health crisis at hand and get the epidemic itself under control to try and minimize the economic damage. Yeah, totally. Yep. Number five. The U.S. especially needs to invest in our social safety nets, including our unemployment insurance program, if we hope to have any chance at addressing this current crisis and preventing issues like this in the future.

Snaps. Snaps. While the economic impacts of this pandemic are just as global as the health impacts, like we talked about in the disparities episode, not everywhere is going to feel this impact equally. We learned that the U.S. is in a pretty good position financially to be able to borrow lots of money at low rates, but our lack of government infrastructure with regards to social programs makes it difficult to actually get that money to where it needs to be, basically in the hands of people who need it. And in countries that have stronger social programs in place, it's easier to actually mobilize and get people the help that they need at a time like this. And so I think that this is like, this episode was hard because it was depressing. Yes.

And seemed very scary. Very. However, I think that one of the silver linings, even though in the interview, I don't think we had any strong silver linings. But, you know, one of the things that I think we can take away from this is that this is going to be used as a teachable moment, a massive global teachable moment. Public health is economic health. Yeah. I have a very small silver lining. What's that? I don't have to worry about the stock market or ever learn what the Dow really means.

I love that part. I was like, I knew it. Like I felt so validated in my life. Yeah. I don't understand. I still don't understand what the stock market does, but guess what? I don't have to. Doesn't matter to me. Someone's going to write it and be like, actually, you guys. It'll be my dad, actually, that he'll be my dad. text me as soon as this episode comes out and he'll be like let me i thought i've explained to you Aaron i'll be like sorry dad oh boy yeah anyways anyways so thanks again to martha for giving us that fantastic interview yeah it was really great to talk to you and we really enjoyed it we did

i was going to say we owe you a haircut when this is all over uh totally 100%. We'll Venmo you for a haircut. We'll Venmoe you. Yeah. Thank you also to Bloodmobile for providing the music for this episode in all of our episodes. And thank you to you, listeners, for sticking with us through these tough times. Tough times. Yeah. Hope you can find a silver lining of your own.

Let us know. Yeah. Actually, that would be great. That would be great. Can you tell us what your silver linings are? Yeah. We need them. We all need them.

We all need them. We should do a silver linings episode. Okay. I like that, actually. All right, in the works. Okay. Well, until next time, wash your hands. You filthy animals.

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