Economists See Benefits of Waiting to Reopen Economy

March 30, 2020 - Coronavirus cases continue to grow in the United States and around the world, as do the measures to try to slow the spread of the virus.

Unfortunately, measures to slow the spread of the virus, by limiting contact between people, end up slowing the economy as well.

We saw unemployment claims at a record level last week, and many expect this week's number to be even higher. The situation is certainly bad for those losing their jobs, but a recent survey of economists conducted by The University of Chicago's Booth School of Business suggests that there really isn't much difference between saving lives or saving the economy.

Measures to quickly slow the spread of the virus, while harsh in economic terms, will actually be less bad for the economy in the longer term when compared to potentially lifting lockdowns too early. This makes sense if you imagine a scenario where lockdowns are lifted, leading many more people to get sick, and causing many other people to stay home as much as possible until they are sure the coast is clear.

Perhaps more striking than the conclusions of the survey is the unanimity of the responses.  The survey respondents were all pretty well aligned in terms of what the appropriate course of action is in terms of both quarantines, and how the government should be responding to the crisis. You can read more about the survey here.

There are a few earnings reports this week, and some economic data, but all of it is at least a bit outdated given how quickly the coronavirus situation has progressed.

Tuesday's consumer confidence will almost certainly show a pretty severe reversal from February. Similarly, the monthly employment numbers due Friday morning will likely show an increase in unemployment, but it should be noted that those numbers were collected during the week containing March 12, which was a week before the week that ended on March 20 that generated the massive jump in unemployment claims we learned about last Thursday.

What comes next for the market is hard to know, but it seems safe to bet that volatility is likely to continue for some time as the damage to the economy remains largely unmeasurable, and so we're likely to get conflicting reports for a while while we wait for the data to catch up with our current situation.

Economic Events this Week

The monthly unemployment report is going to get a lot of headlines, but it should be noted that it will likely understate the harshness of the change in employment since the stats were gathered during the week containing March 12, which was before some of the more restrictive measures were enacted.

• Tuesday
  • 10:00 a.m. Consumer Confidence
• Wednesday
  •                     - Auto and Truck Sales
  • 8:15 a.m. - ADP Employment Change
  • 9:45 a.m. - Chicago PMI
  • 10:00 a.m. - ISM Manufacturing Index
• Thursday
  • 8:30 a.m. - Initial Claims
  • 8:30 a.m. - Continuing Claims
  • 8:30 a.m. - Trade Balance
• Friday
  • 8:30 a.m. - Nonfarm Payrolls
  • 8:30 a.m. - Unemployment Rate
  • 10:00 a.m. - ISM Non-Manufacturing Index

Earnings Reports this Week

Pretty light this week, but things should start to ramp up next week.

Tuesday:

• Before the bell: CAG, CONN, MCK
• After the bell: BB, PAYS, PUMP, VRNT

Wednesday:

• Before the bell: LW, UNF
• After the bell: PVH

Thursday:

• Before the bell: AYI, APOG, KMX, SCHN, WBA
• After the bell: CHWY, RECN

Friday:

• Before the bell: STZ