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Stevenson and Wolfers explain COVID-19 economic and financial turmoil

June 12, 2020

Last week’s surprising employment report, stock market recovery and loss, a statement from the Fed chair and a search for context marked the week ending June 12. Ford School economists Betsey Stevenson and Justin Wolfers were called upon by the press throughout the week to try to explain the fluctuations.

Here is a sampling of their commentary:

Betsey Stevenson:

Second Stimulus Check And Extra $600 Unemployment Benefit On Life Support After May Jobs Report, Forbes, June 7, 2020

Extrapolating a “rocket-ship” recovery from one month of job numbers is myopic and irresponsible. As Betsey Stevenson, former member of the President's Council of Economic Advisers and Chief Economist at the Department of Labor, noted, “15% temp layoffs recovered and increasing permanent job loss is not even a V.”

Punching In: Scalia’s Senate Testimony, Bloomberg Law, June 8, 2020

Betsey Stevenson, a former member of the White House Council of Economic Advisers in the Obama administration, said BLS doesn’t change a respondent’s answers even when they look wrong. “This is a good thing. We can analyze people’s responses but ‘correcting’ their answers raises the threat of manipulation.”

How did everyone get the unemployment rate wrong?, Marketplace, June 8, 2020

What to make of the discrepancy? Primarily, that it has been difficult to figure out how to count people who are not working because of COVID-19, according to Betsey Stevenson, a professor of public policy and economics at the University of Michigan. “Should we call them employed but absent from work, or should we count them among the unemployed?” Stevenson said. “The BLS decided it would count them among the unemployed.”

Shock U.S. Jobs Report Raised Questions, and Here Are Answers, Bloomberg, June 8, 2020

Another potential culprit is that many of the self-employed and gig workers who are out of work and on the new federal Pandemic Unemployment Assistance benefits -- 10.7 million people as of the week ended May 16 -- are being classified as something other than unemployed, according to Betsey Stevenson, a University of Michigan economist and former U.S. Labor Department chief economist. “It’s difficult to say how they would be coded in the BLS survey, but I would count them as on temporary layoff,” Stevenson said. “But given the drop in unemployment and the numbers that the BLS survey is capturing, my guess is that many of the 10.7 million were not counted as unemployed.”

Could Detroit Lose its Flavor?, Hour Detroit, June 9, 2020

“The banks selectively picked the bigger loans, so they ended up disproportionately going to bigger businesses instead of small,” says University of Michigan economist Betsey Stevenson. (Many of those companies have given the money back amid public backlash.) “Part of what will help the restaurant industry is when the state and local governments come out with guidelines for how they can operate and keep people safe,” Stevenson says. “For big corporate chains, the good thing is there’s a centralized place to try to think through the right protocols to implement them.”

How’s the Economy Doing? Watch the Dentists, The New York Times, June 10, 2020

“If you look at your typical dentist office, nothing went wrong with their business model,” said Betsey Stevenson, an economics professor at the University of Michigan. “It’s just coronavirus that happened.”

How to Prevent Another Great Depression, Freakonomics Radio, June 10, 2020

“We still have time for good public-policy choices that will reduce the amount of permanent job loss, that will help workers stay attached to their jobs, that will help businesses stay afloat.”

Justin Wolfers:

What Does the Shocking Unemployment Report Really Mean?, The Atlantic, June 6, 2020

“There are two things going on at the same time. There is a suppression, and there is a recession.” The suppression-depression frame brings the bewildering jobs report into sharper focus. “In April we lost 20 million jobs, and in May, 2.5 million of those jobs were suddenly recalled,” Wolfers said. “That tells you that at least one-eighth of the economic crisis is the mechanical unwinding of the suppression.”

Is The US Economy Recovering From The Coronavirus? Experts Say It's Too Early To Declare Victory Despite Jobs Report, International Business Times, June 7, 2020

Justin Wolfers described Friday's stock market reaction to the report as overblown. "If today's jobs numbers caused you to dramatically shift your assessment of the economy, you're doing it wrong. Markets are reacting to today's jobs report as if it were pretty good news, but it's far short of great news and that seems about right."

These 3 things need to be true for stocks to make sense, CNN Business, June 9, 2020

Plenty of market watchers are still concerned that the recent euphoria has been overblown, pushing valuations too high. After all, the outlook is very different now than it was in January. "Either the market was too low then, or it's too high now, because there's no way our prospects are as bright right now as they were pre-[COVID]," tweeted Justin Wolfers, an economist at the University of Michigan.

Betsey Stevenson is a professor of public policy and economics at the University of Michigan. She is also a faculty research associate at the National Bureau of Economic Research, a visiting associate professor of economics at the University of Sydney, a research fellow of the Centre for Economic Policy Research, a fellow of the Ifo Institute for Economic Research in Munich, and serves on the executive committee of the American Economic Association. She served as a member of the Council of Economic Advisers from 2013 to 2015 where she advised President Obama on social policy, labor market, and trade issues. She served as the chief economist of the U.S. Department of Labor from 2010 to 2011, advising the Secretary of Labor on labor policy and participating as the secretary's deputy to the White House economic team.

Justin Wolfers is a professor of public policy and economics. He also serves as a member of the Congressional Budget Office Panel of Economic Advisers. Wolfers' research interests include labor economics, macroeconomics, political economy, social policy, law and economics, and behavioral economics. Previously, Wolfers was an associate professor of business and public policy at the University of Pennsylvania and a visiting professor at Princeton University. He is a research associate with the National Bureau for Economic Research, a senior fellow of the Brookings Institution, a senior fellow of the Peterson Institute for International Economics, a research affiliate with the Centre for Economic Policy Research in London, and an international research fellow at the Kiel Institute for the World Economy in Germany.