Three Facts from Today's Jobs Report

• The employment-population ratio fell by 1.1 percentage points. This is the largest one-month drop since these data began in 1948.
• The number of job losers on temporary layoff showed a large spike upward (by more than 1 million people).
• The number of permanent job losers showed only a small increase (by less than 200,000 people). 

None of this reflects the dramatic changes during the past two weeks. We will have to wait until next month's report to see that in the employment data. But these three facts offer a glimmer of hope that the inevitable deep recession resulting from the pandemic might be followed by a quick recovery.

Viral Exposure

This NY Times piece seems to make an important point that has not received much attention:

From a policy perspective, we need to consider that not all exposures to the coronavirus may be the same. Stepping into an office building that once had someone with the coronavirus in it is not as dangerous as sitting next to that infected person for an hourlong train commute.... 

Low-dose infections can even engender immunity, protecting against high-dose exposures in the future. Before the invention of vaccines, doctors often intentionally infected healthy individuals with fluid from smallpox pustules. The resulting low-dose infections were unpleasant but generally survivable, and they prevented worse incidents of disease when those individuals were later exposed to smallpox in uncontrolled amounts. 

Despite the evidence for the importance of viral dose, many of the epidemiological models being used to inform policy during this pandemic ignore it. This is a mistake.

Daily Data on Hours Worked

I received the following email yesterday:

Thank you for blogging on the papers concerning the economic impact of coronavirus. I've been a fan of yours for many years, since using your textbook as an undergraduate. I'm reaching out to share some data that might be of interest to you. I am a software engineer at Homebase, the leading scheduling and time tracking solution for small businesses across the US, so we see daily clock-in and clock-out data. We are able to see how many workers are working fewer hours or no hours versus before coronavirus and track the economic impact of this on workers and businesses across the country in real-time.

You can see their data at this link. It shows that hours worked by hourly employees is down by more than 50 percent. FYI, hourly workers make up about 60 percent of the labor force, most of the rest being salaried workers. It is not clear to me how representative the Homebase data are, but they may turn out to be a good resource for tracking the economy in real time.

Pandemic Readings from Economists

1. Jim Stock
2. Michael Greenstone and Vishan Nigam
3. Sergio Correia, Stephan Luck, and Emil Verner 
4. Robert Barro, Jose Ursua, and Joanna Weng
5. Andy Atkeson

A Proposal for Social Insurance During the Pandemic

There has been a lot of discussion about how to best help people through the difficult economic times being caused by the pandemic. Some economists have suggested keeping things simple and quick by sending lump-sum checks to all Americans. Other economists are concerned that such an approach is expensive if the checks are generous and is not sufficiently targeted on those who are hardest hit. But targeting takes time, is difficult because it requires identifying who most needs the money, and, if imperfectly done, may miss some people who are truly needy.

So here is an idea: Don’t target ex ante. Target ex post.

Let’s send every person a check for X dollars every month for the next N months. In addition, levy a surtax in 2020--due in April 2021 or perhaps spread over several years--equal to N*X*(Y2020/Y2019), where Y2020 is a person’s earnings in 2020 and Y2019 is a person’s earnings in 2019. The surtax would be capped at N*X.

Under this plan, a person whose earnings fall to zero this year keeps all of the social insurance payments and does not pay the surtax. A person whose earnings fall by half keeps half of the payments and returns half. A person whose earnings remain the same (or increase) returns everything: They will have just gotten a short-term loan.

Of course, there is an implicit marginal tax rate in this scheme. If Y2020 is less than Y2019, each dollar of earnings in 2020 faces an additional marginal tax rate of N*X/Y2019. A hardcore supply sider might object. But at this moment in history, social insurance is more pressing than avoiding the distortionary effects of taxes. One might even argue that, considering the externalities associated with leaving home to go to work in this time of contagious pandemic, a higher marginal tax rate might be efficient.

For concreteness, let me put some rough numbers to this idea. (I am not recommending these particular numbers but using them to illustrate feasibility.) Suppose we send $2000 a month to every adult for the next six months. The adult population is about 300 million. We would send out $12,000 per person for a total of $3.6 trillion.

This staggering number, however, is not as scary as it seems. Because these payments would be short-term loans for most people, the net budgetary cost would be much smaller. The only people who would not repay the loans in full via the surtax would be those with reduced earnings in 2020. Let's say 25 percent of the labor force is unemployed for half the year (a very bad scenario). Then 40 million people would experience earnings declines of 50 percent. Their surtax would repay half the social insurance payments, resulting in their receiving net payments of $6,000 per person. For an unemployed person with usual annual earnings of $40,000, this $6,000 would replace 30 percent of lost earnings; the replacement rate would be higher for workers with lower usual earnings. In addition, the $6,000 short-term loan would help cushion the blow. The net budgetary cost would be only $240 billion, about 1.2 percent of GDP. This is surely feasible.

The above description of the  proposal has been expanded and slightly revised  from the original post.

How to Help

If you would like to use your charitable dollars to help people through the pandemic, one charity to consider is GiveDirectly.

Possible Policy Responses to the Pandemic

Bill Dupor of the St. Louis Fed has some thoughts.

As do Markus Brunnermeier, Jean-Pierre Landau, Marco Pagano and Ricardo Reis.

Donald Marron too.

And Eric Budish, Anil Kashyap, Ralph Koijen, and Brent Neiman.

A Kind Offer from Cengage

Blog readers who teach introductory economics and use my favorite textbook may like to know that for U.S. colleges impacted by COVID-19, Cengage is offering students free access to all their digital platforms and 14,000 ebooks through Cengage Unlimited for the remainder of spring semester. They are also offering webinars for those interested in learning how their digital platforms can be used to deliver online courses. You can obtain more information by clicking here.

Flattening the Curve: A Simulation

Very cool article from The Washington Post.

Thoughts on the Pandemic

Several reporters have emailed me, asking my thoughts about the current economic situation in light of the ongoing pandemic. Here they are, in abbreviated form:

• A recession is likely and perhaps optimal (not in the sense of desirable but in the sense of the best we can do under the circumstances).
• Mitigating the health crisis is the first priority. Give Dr. Fauci anything he asks for.
• Fiscal policymakers should focus not on aggregate demand but on social insurance. Financial planners tell people to have six months of living expenses in an emergency fund. Sadly, many people do not. Considering the difficulty of identifying the truly needy and the problems inherent in trying to do so, sending every American a $1000 check asap would be a good start. A payroll tax cut makes little sense in this circumstance, because it does nothing for those who can't work.
• There are times to worry about the growing government debt. This is not one of them.
• Externalities abound. Helping people over their current economic difficulties may keep more people at home, reducing the spread of the virus. In other words, there are efficiency as well as equity arguments for social insurance.
• Monetary policy should focus on maintaining liquidity. The Fed's role in setting interest rates is less important than its role as the lender of last resort. If the Fed thinks that its hands are excessively tied in this regard by Dodd-Frank rules, Congress should untie them quickly.
• President Trump should shut-the-hell-up. He should defer to those who know what they are talking about. Sadly, this is unlikely to occur.

The Biden Tax Plan

The Tax Policy Center has released its report on Joe Biden's tax plan.

Most noteworthy is the huge increase in taxes on high-income households. The top one percent would see a 40 percent increase in federal taxes (all federal taxes combined). Their average federal tax rate would rise from 29.7 to 41.7 percent.

If enacted, this plan would give us the most redistributionist tax code in many years. For comparison, in 1979, as the Reagan tax revolution was starting to pick up steam as a political movement, the tax rate for the top one percent was 35.1 percent--a rate that has never been reached since.

By contrast, the middle quintile under the Biden plan would pay a federal tax rate of 13.5 percent, which is about the same as it has paid in recent years and much lower than the 19.1 percent rate it paid in 1979.

Summer Job Opening

I am looking to hire a student (presumably a Harvard student, but not necessarily) to work with me during the summer to help with the revision of my intermediate macro textbook. The job involves updating the data in the figures and tables and helping me prepare the manuscript. The work can be done anywhere if you have a computer and internet connection. If you are interested in being considered, please send a cover letter, resume, transcript, and writing sample to my assistant, Lauren LaRosa, by March 30. I will make a hiring decision soon after that.

A New Podcast

My friend Steve Davis alerts me that he and Kevin Murphy have started a new podcast called Economics, Applied. You can find it here.

Will the Economy Re-elect Trump?

Click here to read my column in Sunday's NY Times.

A Novel for the Times

For obvious reasons, I have have been thinking about a novel I read a couple years ago, called Station Eleven, about the world in the aftermath of a devastating pandemic. Highly recommended.