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Dealing with Bad Data, Bias and Hyperbole
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It is said that there are two kinds of people: the glass-half-full optimists and the glass-half-empty pessimists. I would argue there are other varieties such as the glass has been thrown against the wall dumping all the contents down the drain. During times of chaos and uncertainty, there will be those in the punditry community who feel compelled to describe the end of everything. It certainly gets a lot of attention from the media, but I find that these dire predictions are rarely accurate or at least not the extreme described. These are some of the doomsday assertions from a self-described futurist with a background in media management. His assertions are in italics and my response follows.
What could have been a recession will be a depression. This means years of lingering economic damage. Technically a recession is two consecutive quarters of negative growth and a depression is four consecutive quarters. We know we have a recession on our hands because Q1 and Q2 were both negative. The data on Q3 shows a gain of more than 20% as the bounce back from Q2 gets underway. This is not a depression, but it is a severe recession that will have lingering impact into 2021. Will there be years of lingering impact? Certainly, just as there was from the 2008 recession, but there was substantial growth in many sectors as well.
Unemployment will continue to go up and stay at unprecedentedly high levels. The rate of unemployment has already fallen considerably from the months of April and May. The rate at the peak of the crisis was nearly 16% at the U-3 level and over 22% at the U-6 level. Today it is at 7.9% (U-3) and 12.9% (U-6). Given that "normal" rates of unemployment are thought to be around 6.0%, the current situation is serious but far from unprecedented. Obviously, these numbers could worsen again if there are renewed lockdowns.
U.S. and global GDP will each be down double digits in 2020 versus 2019. That translates into a $2 trillion contraction for the U.S. and $8 to $10 trillion globally. The growth rate for the advanced economies was down by 5.8% in April, but is now back to 2.9% growth. World growth is expected to be around 3.6%. This is certainly down from the peak of 5.4% in 2010, but there is no current prediction of losses as steep as described above. Had there not been any recovery from the April numbers, these losses might have occurred, but there has been growth since that month and expectations have improved.
Communities in the U.S. will be torn apart as quality teachers and front-line health care workers quit in disgust with widespread refusals to wear masks and social distance. This is pure hyperbole and is not supported by any data whatsoever. There is no evidence of widespread resignations by teachers, health care workers, medical personnel or first responders. In fact, there has been widespread additional hiring in all of these categories. If there is a level of frustration among these workers, it has been provoked by long hours and the stress of having people to care for who are in distress. There is also no evidence to support the assertion of widespread refusal to comply with pandemic protocols. A survey from National Geographic found that 92% of people regularly wear their mask in public and 98% observe social distancing protocols.
Police and fire departments will lose funding, along with other necessary services, because cities, counties and states will face major cutbacks in services due to a lack of sales and income tax revenues. That will increase the number of unemployed. This is another example of pure hype and inaccurate, unfounded assumptions. It is true that states and cities and other government jurisdictions will face revenue shortages as a result of the lockdown. The governments are indeed planning to reduce staff and services but reductions to "critical infrastructure" are not part of this plan. Police, fire, water, power, etc. will be maintained while support staff and discretionary programs will be cut. Pools will close, community center staffs and the like will feel the reductions but necessary services are called necessary for a reason.
Equity markets may undergo collapse around the world by the end of 2020. It is now the end of October in 2020, and the markets are as high as they have been all year, even with the usual nervousness over election results. The U.S. market has been growing at a rapid pace for more than 10 years, and there has been expansion in many others as well (CAC 40, Nikkei, Han Sen and so on). This recession hit the low-income service sector especially hard and has had minimal impact on the investment community.
Americans, as citizens of the plague nation of the world, are not welcome in 90% of countries. In 2019m Americans made more than 93 million international trips. That will decrease at least by half in 2020 and by 25% in 2021. Conversely, 80 million foreigners traveled to the U.S. in 2019. That will be down by the same percentages in 2020 and 2021. The global, and particularly the U.S., tourism industry will experience the greatest contraction in history. Just think of all the businesses that will be forced to close their doors. Another egregious and unfounded assertion. This pandemic has affected every nation on the planet. The U.S. no longer has the dubious distinction of having the highest level of infections per million. Among the countries that have higher numbers are Brazil, Russia, Spain, Peru, UK, Mexico, Chile, Belgium, Ecuador, Bolivia, Panama etc. You get the idea. Predictions as far as international travel are skewed as the challenge at the moment is availability of flights. The desire to travel to and from the U.S. remains as it has been according to travel industry research. There is absolutely not a shred of evidence to support the assertion that Americans are not welcome. That is 100% fabricated "data".
That can't help but affect the global economy. When the largest national economy is ostracized, the rest of the world will experience a massive reset. Yet another in a long series of groundless and unsupported assertions. In what sense has the U.S. economy been "ostracized"? The U.S. remains the single largest trading partner for 87 nations. The U.S. imports $3.1 trillion worth of products every year and exports $2.5 trillion. These are not numbers suggesting the U.S. has been ostracized. The U.S. GDP is 25% of the total global GDP.
-- Chris Kuehl, Ph.D.