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May 2020 Economic Roundup

BAILOUT BENEFITS

While social distancing and the $2 trillion rescue/bailout package signed by President Trump seems costly, cost-benefit analysis suggests otherwise. If doing nothing to stop COVID-19 would result in one million US dead, and if the value of each statistical life is $10 million, doing nothing costs society $10 trillion, ignoring all other costs.  This makes the interventions a great deal; a net value of minimally $60,000 per household.

CONTINUED CONTRACTION

In 20Q1, GDP probably declined at an annual rate of 5%. In 20Q2, the decline will be an ugly 24%. In 20Q3 GDP grows by 2% and in 20Q4 by a strong 7%. In total, GDP will contract by 5% in 2020. While some see a V-shaped recovery, a U-shaped or a checkmark-shaped recovery is more likely given policy implementation problems, ongoing struggles battling COVID-19 and the inevitable delays reconstituting businesses.

BAD BEARS

Since 1929 there have been 14 bear markets, defined as a stock market decline of at least 20%. The shortest, a three-month bear market in late 1990. The steepest, a decline of 86.2% over 33 months ending 6/32 during the Great Depression. The longest bear market, 61 months which ended in 4/42 and saw equites fall 60%. On average, bear markets last 19 months and equities fall 39%.  

FLU FEATURES

55 million Americans get the flu annually and up to 63,000 have died in a year but it comes on gradually and evenly across the nation over a period of many months. Conversely, COVID-19 comes on fast but generally in hot-spots. Also, the median stay for a COVID-19 patient is 12 days in hospital, versus 3.6 for the flu as most persons have immunity and nearly all healthcare workers do.

CORONAVIRUS CHANGES

Epidemics and disease have impacted human development since mortals first roamed Earth. These impacts have been spectacularly broad-based including demographic, cultural, political, financial and of course biological. COVID-19 will be no different. At first glance this new coronavirus will vastly increase telecommuting, by demolishing the argument that it doesn’t work. It will cause firms to rethink supply chains and speed up the introduction of (epidemic and disease resistant) robots.

COOKIE COUNT

Girl Scouts sell about 200 million boxes of cookies/year. At $5/box, that’s $1 billion in sales, more than the annual US sales of Oreos, the best-selling US cookie. Thin Mints are the favorite of 24% of Americans. Samoas/Caramel DeLites are next at 16%, while Tagalongs/Peanut Butter Patties are third at 10%. The remaining eight flavors are collectively favored by 29% of the population; 21% have no opinion.

 

Source: Elliot Eisenberg, PhD is Chief Economist for consulting firm GraphsandLaughs, LLC, serving a variety of clients across the United States. All rights reserved.

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