Friday, June 26, 2020

Calculated Risk author downgrades all economics forecasts for H2 2020/2021

Bill McBride is an economist, and the author of Calculated Risk, an economics blog that longtime readers know I have been following for many years. His claim to fame (with his co-blogger Tanta) was calling the mortgage crisis and subsequent downturn correctly. He has a new outlook, and it is quite grim (emphasis mine): 
...It doesn't take an official lockdown to push local economies back into recession - many people will pull back as the number of cases and hospitalizations rise.  Based on recent hospitalization data, I expect further layoffs in some states like Arizona, Texas, and Florida.  
I do expect another round of disaster relief in July - extending the extra unemployment benefits (perhaps at a lower level), extending the PPP, and providing relief to the States.   Without this disaster relief, the entire US economy might slide back into recession in August. But even with another round of disaster relief, it seems likely the recovery will stall unless progress is made in slowing the spread of the virus.  The longer the widespread pandemic continues, the more structural damage to the economy.   And the more severe the economic damage, the longer it will take to recover from the pandemic.
Everyone is hoping for a vaccine in late 2020 or early 2021, but even if there is a vaccine, the damage to the economy will be extensive if we don't lower the infection rate significantly in the near term. Perhaps there will be a sudden change in behavior while we wait for a vaccine - or some other breakthrough that will slow the spread of the virus - but I'm not sanguine. 
After a decade of making fun of bearish analysts and writing "the future is bright", it pains me to be pessimistic.   I hope I'm wrong on the virus, but if I'm correct, then I expect every major economic forecast will be revised down for the 2nd half of 2020 and for early 2021.
This bodes poorly for all of us, and it's not clear to me how chemistry will be affected. I imagine that the real problem will stem from two places. First, it's quite clear the pandemic is hurting academia most, and there will be a tremendous slowdown in the hiring of tenure-track professors, and even more of a burden shifted towards non-tenured teaching faculty. Second, I think that it's the non-pharma sectors within the industrial chemical enterprise that will be affected the most - while there is undoubtedly plenty of excess plastics being purchased for PPE, etc, it's the people who are not buying new cars, new planes and new houses that will be problematic for the Dows and DuPonts of the world. It's hard for me to know how best to think about this, but that's what I have been thinking, and I haven't seen a lot to change my perspective yet.

Best wishes to us all. 


  1. PPE just doesn't consume that much material, on the order of 1% of supply for things like PP and PE even with the surge in production. It can't come anywhere near offsetting the loss in big-ticket, heavy items like cars, appliances, and housing.

  2. Yeah, we academics are looking at belt tightening for the next year or so. I wish the University and College level administration would take more of the brunt of it. They skim enough off the top for their pet projects and administrative "support;" you'd think those would be the first to go, but whatever percentage contraction (3-10%) is getting passed down to the departmental level instead.

    I note that your burden distribution is backward. Non-tenured faculty are going to get laid off if this goes on long enough and their load spread among T/T. It's the last option as lecturers are liked, valued, and frankly indispensable, but the idiotic shift toward Universities as banks has driven a wedge into the teaching/research dichotomy with the power still vested in the research, but official paycheck (and majority of the work) in the teaching.

    I wish at the University level they would tap more of us to help with the COVID effort. I have furloughed, non-critical personnel who could put our idle PCR machines to use doing testing, and all of our school's med students could sample the community instead of learning remotely. And that's at a minimum. We're not viral researchers, but we're all trained scientists ffs. Good luck to us all.

    1. I guess what I noted is in my instiution (R1 with med school) is that the more poorly paid and unprotected people (adjunct lecturers, general medical workers) are losing their jobs, while the more well paid people (tenured faculty and administrators) are not. And some of these well-paid people (faculty who are in their 80's and refuse to retire) I'm sure the school would love to get rid of, but can't. There is a lost of waste in academia, without a doubt, and the corona virus seems to make it stand out.


looks like Blogger doesn't work with anonymous comments from Chrome browsers at the moment - works in Microsoft Edge, or from Chrome with a Blogger account - sorry! CJ 3/21/20