Restaurant traffic has been falling as the number of new cases and hospitalizations for COVID-19 has been rising. Why is this important? Because it will impact employment.
This graph overlays employment numbers from the Census Bureau’s Pulse Survey (black line) against the year-over-year change in OpenTable restaurant traffic data.
You can see they correlate pretty well.
According to the Census data, we’ve lost about 1.5mm jobs since the last employment report. Opentable data is updated more frequently. It continues to fall, suggesting that the number of jobs lost since the last employment report is closer to 2 million jobs now.
Over the last 2 months, we’ve see the stock market rally. Yet we have seen unemployment spike to levels not seen since the Great Depression. Why are the financial markets so rosy? It comes down to benefits and Moral Hazard.
In this table, I provide data on education level, average weekly earnings, lost wages, and then the extra stimulus benefits.
Employment, Lost Jobs, Wages, and Extra Benefits
First, this shows the power of education. You make way more money AND you have a lower chance of losing your job.
In the first month, you can see that most of the job losses were for those people without a collect degree. Those individuals, on average, make about $700 per week. Combining the job losses and average weekly earnings, the lost to the economy was $16.1 Billion per week by mid-April.
Now some of that is made up for at the state level. Typically unemployment insurance caps out at about $450 (depends on the state). That means $8.6 Billion would be paid to these workers each week, so the loss to the economy would be $7.5 billion.
However, Congress is giving $600 extra per week to those unemployed because of the crisis. That is an extra benefit of $11.5 billion, which means, in aggregate, laid off employees are making about $4 billion MORE per week that when they were employed.
Therefore:
These workers have more to spend
Many of these workers have no incentive to go back to work
So why is the stock market doing well? Because if we can get the economy going before the end of July, aggregate demand will Increase!
The moral hazard is the fact that people are better off NOT working. That is just bad incentives.
