Power & Market

As predicted by many, April's employment numbers were the worst ever recorded since the US government began making these estimates in 1939.

The US Bureau of Labor Statistics (BLS) released new estimates this morning, and unemployment surged to 14.4 percent. That's below the Great Depression high of 24.9 in 1933, but it's above the early 1980s depression peak of 11.3 percent.

According to the BLS report:

In April, the unemployment rate increased by 10.3 percentage points to 14.7 percent. This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the coronavirus pandemic and efforts to contain it.

In April, unemployment rates rose sharply among all major worker groups. The rate was 13.0 percent for adult men, 15.5 percent for adult women, 31.9 percent for teenagers,14.2 percent for Whites, 16.7 percent for Blacks, 14.5 percent for Asians, and 18.9 percent for Hispanics. The rates for all of these groups, with the exception of Blacks, represent record highs for their respective series.

Total employment crashed to a near twenty-year low as more than 20 million jobs were lost in the wake of the COVID-19 panic and numerous government-imposed "lockdowns" on the economy, which forced many businesses to close and many workers to lose their jobs as part of statewide "stay-at-home" orders.

Total nonfarm employment has sunk back to 131 million, where it was in early 2000. All the job gains of the past decade have been lost, and for all intents and purposes, the job gains of the post–dot-com bust were lost as well.

The year-over-year change in nonfarm employment cratered at negative 12.8 percent, falling well below the YOY job losses experienced during the trough of the Great Recession.

Meanwhile, the number of Americans who prefer to work full time but can only find part-time work surged to levels above those of the 2009 recession.

The employment to population ratio collapsed to multi-decade lows, falling to 51.3 percent and below the rates seen during the early 1960s, when single-earner households were far more common. 

Needless to say, it doesn't require a lot of slicing and dicing of the data to see that this report shows enormous job losses and suggests similarly large losses in total output, income, and demand. We have yet to see the trends that come next: missed rent payments, foreclosures, and auto repossessions. It is possible that some job gains will ensue once fears over COVID-19 somewhat subside and businesses are allowed to open. But we do not yet even know the full extent of the job losses, as they will continue through May, at least.

In the bigger picture, it remains very difficult to guess how much of the collapse in employment is due to government-forced shutdowns and how much is due to consumers abandoning businesses over fears of the COVID-19 disease. We know that the job losses are not 100-percent due to the shutdowns, but we know that the forced shutdowns certainly played a role. After all, we know of many cases where businesses with customers have been forced to shut down, or in which "nonessential" independent contractors were arrested or forced out of business for serving customers.

The relative effects of these two factors will likely never be known, but we do know that the fallout of both has not yet been measured. May's employment report will show sizable job losses as well, and the promised "v-shaped recovery" is by no means a given. Many economists predicted something similar in the wake of the the 2009 job losses and financial crises. That never happened, and following the last recession, the previous peak in employment was not reached again for over six years:

Is the BLS Underestimating Unemployment? Two Fed Economists Say Yes

In a report for the Chicago Fed released Tuesday, Jason Faberman and Aastha Rajan suggest that the current realities of "unpaid leave" and other categories don't quite fit into the standard BLS measures. They suggest the unemployment rate really could be as high as 34 percent,

In summary, more than 26 million new unemployment claims are already reported between mid-March and mid-April, and job losses could exceed 20 million through April. The official unemployment rate may only capture a fraction of these losses. This is because the unique nature of the Covid-19 crisis has led to the furlough of many workers and has also made it difficult for people to look for new work, even if jobs are available. In this blog, we have proposed an alternative measure of underutilization, the U-Cov rate, which captures a broad range of workers affected by the crisis. This rate reached 12.9% in March, up 2.5 percentage points from its February level. We predict that it could reach between 25.1% and 34.6% in April, an increase of 16 to 21 percentage points, reflecting the breadth of the sharp contraction currently affecting the labor market.

David Flattum by email points out that in the movie The Big Short, it is said that each 1 percent rise in the unemployment rate is associated with forty thousand deaths. Another anonymous emailer suggests that the government authors of shutdowns be held accountable by international tribunals for the deaths they cause.

These comments motivate a brief look at unemployment and death. To that end, a search was conducted using DuckDuckGo on “unemployment relation to death.” The first article, dated February 13, 2015, reports on a study of the 2008 recession:

The analysis, carried out by Carlos Nordt and colleagues at the University of Zurich, explored the link between increases in rates of unemployment and suicide. They attribute 45,000—or one in five—suicides a year worldwide to unemployment, with a further 5,000 deaths caused by the economic crisis.

The suicide numbers across sixty-three countries rival those from this new virus:

The researchers found that there had been an increase in the relative risk of suicide associated with unemployment across all regions of 20% to 30%. There were an estimated 233,000 suicides a year between 2000–11, of which around 45,000 could be attributed to unemployment. In 2007, the year before the crash, there were 41,148 identified cases of suicide. In 2009, this number had risen to 46,131—an increase of 4,983 or 12%.

The next article, “Rising Unemployment Causes Higher Death Rates, Yale Researcher Shows,” is dated May 23, 2002. An epidemiologist conducted this study, and it encompassed advanced economies like America’s:

“Employment is the essential element of social status and it establishes a person as a contributing member of society and also has very important implications for self-esteem,” said Brenner. “When that is taken away, people become susceptible to depression, cardiovascular disease, AIDS and many other illnesses that increase mortality.”

The third article is a National Center for Biotechnology (NCBI) article. The NCBI is a branch of the National Institute of Health (NIH). This article dates from August 26, 2014. It’s titled “What Is the Effect of Unemployment on All-Cause Mortality? A Cohort Study Using Propensity Score Matching.”

Unemployment was associated with a significant all-cause mortality risk relative to employment for men….This effect was robust to controlling for prior health and socio-demographic characteristics. Effects for women were smaller and statistically insignificant…

For men, the findings support the notion that the often observed association between unemployment and mortality may contain a significant causal component though for women there is less support for this conclusion. However, female employment status, as recorded in the census, is more complex than for men and may have served to under-estimate any mortality effect of unemployment.

Conclusion of this blog: it would be highly irresponsible for American governments at all levels to ignore the established knowledge of a positive link between unemployment and mortality. Those who keep insisting on policies like lockdowns and other arbitrary rules that have caused immense unemployment need to change their policies now and change quickly. Otherwise, they will have a great deal to answer for, namely, excess deaths caused by the policies causing unemployment.

Originally published at Lewrockwell.com.

For more, see: "Unemployment Kills: The Longer Lockdowns Last, the Worse It Will Get," by Ryan McMaken.

In a world where the Left has declared everything from abortion to social media to be a human right, it is disheartening, to say the least, that so many who think of themselves as "progressive" have embraced wholesale violations of real human rights: namely, the rights to seek employment, to freely assemble, and to exercise one's religion.

The ban on searching for employment is the most damaging in its immediate effects, and the war against this right looks something like this: in the name of preventing the spread of disease, civil governments have taken to issuing decrees—in many cases without any sort of legal process that allows for appeal or public debate—shutting down businesses and prohibiting the free exercise of one's right to seek employment.

Why Looking for Work Is a Basic Human Right

In other words, individuals have been prohibited from entering into peaceful voluntary agreements with others to sell their labor in exchange for wages. For those who earn a living through independent contracting or selling goods and services, the effect is the same: commerce with others is forbidden, with the result being impoverishment and a loss of one's income.

In the American context, this is violation of several rights outlined in the Bill of Rights, most especially the property rights outlined in the Fifth Amendment. To be cut off from one's own labor and one's own right to enter into contracts is fundamentally a destruction of the basic right to control one's own property. But, of course, these rights are not specifically American. All human beings have these rights, whether recognized by government officials or not. A farm worker in Tanzania has these rights just as much as an insurance agent in Baltimore. To ignore these rights is no less backward than ignoring rights to free speech or the right to not be enslaved. Any governmental attempt to seize property in this way requires—morally speaking—due process.

The Inequality of Shutdowns

Those in favor of lockdowns and impoverishing millions insist that there is no other way. Unless we outlaw employment for millions, we are told, the death toll will be unacceptable. Of course, when pressed for what death toll is "acceptable," no answer is given. Is it six hundred thousand (the number who die from cancer in the US each year)? Sixty thousand (the number who typically die in the US from flu and pneumonia each year)? Some lesser number? One? This figure remains a great mystery. We are only told that human rights are null and void until the "experts" decide otherwise.

Politicians still, begrudgingly, allow some people to exercise their right to work for a living. These people are the ones in so-called essential lines of work. Which types of work are essential? Well, that's up to the arbitrary whims of the state governors who now rule by decree (and collect six-figure paychecks while cosigning others to unemployment). In some places, hardware stores are "essential." In other places, they are not. In some places, diagnostic procedures to find brain tumors are deemed "elective" and therefore verboten. In other places they're allowed.

Should private citizens violate these many prohibitions and limitations, the result is anything but voluntary: the state uses force (or the threat of force) to impose fines, jail time, and to revoke business licenses.

The result, of course, is mass unemployment and the loss of access to a wide variety of goods and services, including housing, transportation, education, insurance, and even basic necessities like food. The newly and forcibly unemployed are expected to be content to sit at home, go on welfare, prepare for bankruptcy, and watch their children go hungry. 

Meanwhile, those who complain about the regime's callous and immoral disregard of human rights are denounced by the ruling (and very well-paid) technocrats.

Some especially out-of-touch pro-shutdown "COVID Warriors" rationalize it all by insisting that these prohibitions on earning a living are, as Dr. Anthony Fauci claims, mere inconveniences. It's easy to see why someone like Fauci might think this way. His government salary is $400,000 dollars (not including whatever lucrative contract work he has on the side), and there is little risk he'll be missing any mortgage payments any time soon. 

Similarly, lots of white-collar "creative class" types who can work from home delight in lecturing other people about "staying home" and "flattening the curve" while working-class people who work in fields that require human interaction are just out of luck. Some simply can't afford to give up their incomes and wait around for small, inadequate government checks that may take weeks to arrive. At some point in the near future those checks will stop coming, an even in places where the state plans to ramp up welfare spending, the fact is a community must produce wealth before wealth can be distributed. An economy that is in decline will simply be redistributing a smaller and smaller pool of resources. 

Not surprisingly, some business owners and contractors will try to open their businesses anyway. And some workers will still try to provide services in the marketplace—which is now a black market thanks to government decree.  In these cases, the police—i.e., more government employees with safe jobs and hefty paychecks—intervene and arrest business owners, just to make sure the destitute aren't allowed to bring in a few bucks.

Those who support this systematic use of violence and harassment of peaceful citizens insist they have the moral high ground, and the crusaders for public health contend that they are are the only ones who care about human life while those execrable working-class barbers, hygienists, and front desk receptionists care only about filthy lucre.

The Costs of Unemployment and Isolation

In the real world, however, cutting people off from earning a living comes with many costs indeed. There is a growing mountain of data showing that unemployment leads to more deaths via drug abuse, suicide, and stroke. Other side effects are even more grim, such as the increase in domestic violence and child abuse recorded during these "stay at home" orders.  Forcing people into isolation comes with real physchological effects that shorten lives.

But ignoring this reality is to be expected of those who have adopted the tunnel vision of the busybody and the public moralist. In the minds of the COVID Warriors, all that matters is the lives of the people the COVID Warriors have deemed important. Everyone else's life and well-being is of lesser importance. If there's more suicide and more child abuse, that's too bad, but it was all "worth it." 

It should not surprise us that this war on human rights—led largely by smug intellectuals, billionaires, and politicians—has come wrapped in the mantle of moral supremacy. But such is the usual m.o. of those who view human rights as an inconvenient impediment to one's agenda. The Soviets insisted that they represented "the workers" and a revolution in favor of a more just world. The slave drivers of the Old South equated slavery with civilization itself. The absolutist monarchs of Renaissance Europe told themselves they were defenders of culture and God and national "honor." Then, as now, moral crusaders justified the destruction of dissidents, traitors, and anyone else who refused to repeat some variation of the slogan: "we're all in this together." 

Most states and municipalities have shut down major sectors of their economies in the hope of minimizing the very real medical damage from the spread of the coronavirus. The benefit is assumed to be in saved lives, or at least a “flattened curve” that allows time for hospitals to ramp up capacity and for medical research to find treatments and a vaccine. To that extent, the economic shutdown will create a lot of good.

But it is reasonable to ask, “At what cost?” The economy is not some machine that can be turned off and on at the whim of politicians and medical experts. The economy is us, we the people, as we go about our daily lives trying to improve conditions for ourselves and our loved ones. As I write this, the shutdown has created more than 20 million additional unemployed workers and destroyed countless numbers of businesses. That is not a small cost. Is it worth it?

A rational person must ask if the benefits exceed the costs, or if the costs exceed the benefits. This is not easy to measure since benefits and costs do not always carry monetary values. Nevertheless, policymakers need to be aware of the tradeoffs and opportunity costs of their dictates. The argument is often put in terms of people vs. money. But that is an incorrect framework. It is about people vs. people, i.e. lives saved due to the shutdown (benefit) vs. lives lost due to the shutdown (cost).

Numerous economic studies show a high correlation between poverty and mortality, and between unemployment and mortality. Estimates range from a low of 10,000 additional deaths per percentage point increase in unemployment, to a high of 40,000. Suicides increase dramatically, the incidence of drug and alcohol abuse rises dramatically, crimes against persons and property increase, and critical medical care is postponed or canceled. The list goes on and on.

We must create income in order to create health. If we destroy income we will destroy health. But in order to create income, we must produce goods and services. Income is the payment for that production. We cannot shut down the economy, i.e., shut down production, and then print money to pretend it is not shut down. Money is merely a medium of exchange; it is not production-based income. At some point, the costs of the shutdown will exceed the benefits. But where is that point? For some wealthy individuals, that point will never be reached. For some poor individuals that point has already been exceeded. I believe that for the majority of people, we are fast approaching that tipping point.

If unemployment rises 20 percent above its preshutdown level, low-end estimates predict an additional 200,000 deaths. At 30 percent unemployment, it would be 300,000 deaths. Those numbers rise fourfold at the high end of the mortality estimates, so we could have over 1 million additional deaths from this economic shutdown.

Is it worth it? Isn’t there another way to minimize the medical damage from the coronavirus without creating such enormous medical damage from the economy? If the economy does not reopen within two to four weeks of this writing, we will see economic data not seen since the Great Depression in terms of unemployment (+25 percent) and lost GDP (–30 percent).

Some medical experts and politicians say that the economy should remain partially shut down until there are zero new coronavirus victims. Others say that it should remain shut for another 18–24 months, until an effective and safe vaccine has been developed and deployed. What madness!

To make matters worse, we are making this disastrous economic policy based on flawed (at best) medical data that is known to overstate coronavirus mortality. Why not err on the side of saving lives, rather than on the side of destroying them? We do know that the vast majority of people who contract coronavirus are either asymptomatic or have only minor symptoms. The highest levels of mortality are among the elderly who also have other preexisting health conditions. Why not focus on saving them instead of destroying the economy and the hundreds of thousands, perhaps millions, of lives that will go along with that?

It is an inconvenient question, I know, but one that must be asked.

This article was published in The Gazette, Colorado Springs, April 19, 2020.