PERRY GERSHON—For the Suffolk Economy (NY-1)

The following statement is an endorsement by two economists of Perry Gershon as the best candidate to represent Suffolk County (NY-1) residents in the U.S. Congress. Dr. Frank P. Braconi served as Executive Director of the Citizens Housing and Planning Council of New York before serving as the chief economist for three New York City Comptrollers in 2006-2015. Dr. John Tepper Marlin was the chief economist for three New York City Comptrollers in 1992-2006. Before that he worked as an economist for three federal agencies and was subsequently senior economist for nearly four years at the Joint Economic Committee of the Congress.

We are have lived for decades in Suffolk County and got to know Perry Gershon during the past few years as he has been running for the Democratic nomination to represent NY-1 in the Congress.

Why do we economists support Perry to win back NY-1? Because Perry understands why Trump’s promises to make the economy work better have failed. Perry understands that Trump rammed through a tax cut that helped big corporations and their shareholders more than small businesses, and the cuts were paid for in part by capping the deductibility of state and local taxes. This hurt middle-class taxpayers in suburban areas like Suffolk County, which was suffering economically even before the pandemic hit.

Perry understands the disaster of Trump’s closing down the White House pandemic preparedness unit, a mistake for which Suffolk County paid a steep price. An unready Trump first postponed actions recommended by his advisers and then came up with some wildly improbable ideas about possible treatments for the disease. Perry understands that a major reason for unemployment levels not seen since the Great Depression is terrible leadership from the White House.

The foundations of economic prosperity are health, education and personal security. Trump has undermined all three, and Lee Zeldin has helped do this for Suffolk County: 

• On the health front, he used economic arguments for many of his anti-environmental votes.  His voting record in his last full term was rated by environmental organizations as one of the three worst of Members of Congress from New York State. Zeldin and Trump have sought to undermine Obamacare. The number of uninsured Americans is rising during the Trump administration. Covid-19 has shown just how important it is that healthcare coverage extends to everyone. 
• On education,Trump’s cap on the state and local tax deduction hurts the ability of local governments and school boards all across Suffolk County to seek improvements in educational funding. Twice in 2019 Zeldin has voted against repeal of this law.
• On personal safety, Zeldin has also supported the right of those who would deny the right of women to make decisions about their own bodies. Perry is also staunchly in favor of gun safety, while Zeldin is not. Perry has acted on his outrage at the murder of George Floyd by joining several local protests. Zeldin is missing from them.

In return for his slavish following of the President’s bidding, what has Zeldin gotten for Suffolk County? In December 2019, Suffolk County lost jobs from a year earlier. Its job growth was in the lowest one-eighth of large U.S. counties.

Other counties that lost jobs, like Westchester, at least saw higher incomes than most other counties. Suffolk's income growth was just as bad as its poor job growth. 

As we come out of our lockdowns, we will need to rebuild our economy while maintaining our public health standards. Perry knows how that should be done. He has built four small businesses, one of which was a sports bar at age 23. The other three businesses were in commercial real estate lending. Perry combines the independence he gets from having succeeded in the private sector with a cooperative approach that means he can work with the many disparate groups that make up NY-1.

We support Perry because we think Suffolk County has tremendous economic potential that is not being tapped. The nation is hurting, but Suffolk County taxpayers are hurting more than most. Perry can make the best case to expose the failures of our Tea Party Congressman and go on to make a difference in Washington, D.C. by representing small businesses and middle-class taxpayers in Suffolk County.

STATE UNEMPLOYMENT | April 2020, ranked

June 5, 2020—We are in uncharted territory, so it's worth looking at every piece of data that can help us understand what is happening. The markets were happily shocked by the drop to a 13.3 percent unemployment rate this morning, although if the status of some misclassified workers were corrected the percentage unemployed would rise to 16.3 percent. But at 13.3 percent the U-6 rate was above 20 percent, and some of the people who would have been among the May U-3 unemployed were located for the time being among the U-6 unemployed.

What are the major shocks that the United States is suffering through? Here are three:

• The coronavirus, which is poorly understood,
• The economy, which was been largely shut down by the Covid-19 virus, and 
• The relationship of governments at the federal, state, city and town level to the public that they serve, when nerves on both sides are frayed.

The following rank of unemployment rates by state may help separate out the different strands of distress. Minnesota's April unemployment rate, for example, ranks second-lowest among all the states (DC is included here as a state). Its economic stress should be relatively low. It is therefore surprising that this is where George Floyd was murdered.

One sorting factor among the states is relative density. Connecticut and Minnesota have a relatively low density. Another factor is the importance of tourism and travel. Nevada and Hawaii are greatly affected by the loss of tourism and air travel. Michigan is affected by the stay-at-home guidelines.

New York is an interesting case. Because New York City is a tourist and immigration destination, it was the first to be affected in a major way by the coronavirus. It is densely populated downstate and relatively sparsely populated upstate. 

State	April 2020(P) rate	Rank		State	April 2020(P) rate	Rank
Connecticut	7.9	1		Florida	12.9	25
Minnesota	8.1	2		Oklahoma	13.7	28
Nebraska	8.3	3		Wisconsin	14.1	29
North Dakota	8.5	4		Oregon	14.2	30
Wyoming	9.2	5		Delaware	14.3	31
Missouri	9.7	6		Louisiana	14.5	32
Utah	9.7	6		New York	14.5	32
Maryland	9.9	8		Tennessee	14.7	34
Arkansas	10.2	9		Massachusetts	15.1	35
Iowa	10.2	9		Pennsylvania	15.1	35
South Dakota	10.2	9		West Virginia	15.2	37
Maine	10.6	12		New Jersey	15.3	38
Virginia	10.6	12		Kentucky	15.4	39
District of Columbia	11.1	14		Mississippi	15.4	39
Kansas	11.2	15		Washington	15.4	39
Colorado	11.3	16		California	15.5	42
Montana	11.3	16		Vermont	15.6	43
New Mexico	11.3	16		New Hampshire	16.3	44
Idaho	11.5	19		Illinois	16.4	45
Georgia	11.9	20		Ohio	16.8	46
South Carolina	12.1	21		Indiana	16.9	47
North Carolina	12.2	22		Rhode Island	17.0	48
Arizona	12.6	23		Hawaii	22.3	49
Texas	12.8	24		Michigan	22.7	50
Alabama	12.9	25		Nevada	28.2	51
Alaska	12.9	25
(p) Preliminary
Note: Rates shown are a percentage of the labor force. Data refer to place of residence. Estimates for the current month are subject to revision the following month. Source: https://www.bls.gov/web/laus/laumstrk.htm

UNEMPLOYMENT | Local Rates Higher

June 5, 2020—New Yorkers have a feel for these things and they are surprised at a reported U.S. unemployment rate of 13.3 percent. Economic analysts surveyed by Dow Jones expected nonfarm payrolls to decrease by 8.3 million while their average estimate of the May unemployment rate was 20.5 percent.

The BLS actually reported this morning a 2.5 million increase in payrolls, the largest increase on record.

One explanation is that in New York City the unemployment rate might be much higher. Using a simple forecasting model based on April and prior months, the New York City unemployment rate for May would be above 20 percent, i.e., 21.6 percent.

Here are the May numbers for New York City and neighboring counties, as projected from prior months. All of these actual BLS numbers for May will not appear until close to the date when the national unemployment rate for June is released.

Unemployment Rates - U.S. and Local, May 2020
	U.S. Rate, %	Projected Local Rate, %
New York City	13.7	21.6
Nassau Co.	13.7	15.1
Suffolk Co.	13.7	15.7
Westchester Co.	13.7	14.1

Source: May unemployment rate from BLS. Projected

May local rates by CityEconomist.

For the future, New York City may outperform the rest of the country because it has been through the coronavirus mill earlier. It has just had its first day since March 12 without a confirmed coronavirus death.

(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for assistance with the interpretation of the data.)

JOB NUMBERS | May Unemployment 13.3% (16.3%?)

June 5, 2020—Total nonfarm payroll employment rose 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported this morning.

However, the BLS includes a note by BLS Commissioner Beach noting that some misclassification occurred, making the unemployment number as reported 3 percentage points lower than it would otherwise have been:

If the workers who were recorded as employed but absent from work due to "other reasons" (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). Additional information is available online at www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf.

(June 6 —See WaPo story, 11 am.)

The principal unemployment rate (U-3) is lower than many economists expected. The BLS warned in a May correction that because its survey is a sample of households during a specific period, unemployment claims data will not necessarily match up to the unemployment numbers. However, the BLS also reports different unemployment rates using a range of definitions.  U-6 is the broadest definition, taking into account those marginally attached to the labor force, including total employed part time for economic reasons. This rate was 20.7 percent, more in line with economists' expectations.

Forecasts had been for as high as 25 percent. The unemployment rate was 25 percent (or a smidgeon above) at its peak in the Great Depression. This rate occurred in the early months of 1933. Most economic observers dismiss the idea that we are in a Depression, because they expect the economy to recover quickly as soon as coronavirus cases level off or a vaccine is developed that would allow the public to resume a normal life.

But the following are examples of people who have gone on record as fearing that the May 2020 unemployment number announced this morning could be as high as 25 percent:

• Fed Chairman Jay Powell.
• Treasury Secretary Steve Mnuchin.
• Goldman Sachs.
• Forbes Magazine's Chuck Jones.

One of the backdrops to this was a 48 percent increase in bankruptcies in May.

Consensus: 20 percent. Most commentators, if they gave a projected unemployment number, were close to CNN's Anneken Tappe, who thought the rate will be most likely about 20 percent. Which is bad enough, and off the April chart.

To understand what is happening, behind the unemployment number itself, look at U-6 as well as U-3. U-6 is 20.7 percent. It includes people who are not in the unemployment numbers because they are marginally attached to the labor force or are employed part time for economic reasons.

Measure	Apr.   2019	Feb. 2020	Mar. 2020	Apr. 2020	May 2020
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.6	3.5	4.4	14.7	13.3
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	7.3	7.0	8.7	22.8	20.7

The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.

The level of U-6 unemployment is important to look at because of the number of Americans who are on the Payroll Protection Plan and other special programs that are keeping workers off the unemployment rolls.

(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post!)

MAY UNEMPLOYMENT ESTIMATES | 20-25%

U.S. Unemployment Rate, 2010-2020. The May figure was predicted to be
off the chart. [P.S. The BLS actually reports it defined to 13.3 percent.]

Thursday, June 4, 2020—Forecasters like to say: "If you give a number, don't give a date. If you give a date, don't give a number." Especially, don't forecast a definite number the day before.

However, these rules have been broken recently by people who have strong views about what the U.S. unemployment number will be at 8:30 a.m. tomorrow.

Scariest number: 25 percent. The unemployment rate of 25 percent is scary, because that (or a smidgeon above) was the peak unemployment of the Great Depression. This rate occurred in the early months of 1933. That would meet one test for deciding whether we are in the Second Great Recession or the Second Great Depression. The economy (GDP) has already suffered two quarters of decline. The big question is whether the decline will continue, which would be likely if the country saw a second wave of coronavirus infections. Paul Krugman has argued that to call what we are in a Depression would require four quarters of decline.

Most economic observers dismiss the idea that we are in a Depression, because they expect the economy to recover quickly as soon as coronavirus cases level off or a vaccine is developed that would allow the public to resume a normal life.

The following are examples of people who have gone on record as fearing that the May 2020 unemployment number to be announced in the morning will be as high as 25 percent:

• Fed Chairman Jay Powell (and it's his job to be well informed on the topic).
• Treasury Secretary Steve Mnuchin.
• Goldman Sachs.
• Forbes Magazine's Chuck Jones.

Consensus: 20 percent. Most commentators, if they give a projected unemployment number, are like CNN's Anneken Tappe, who thinks the rate will be most likely about 20 percent. Which is bad enough, and off the chart above. We will know soon enough.

To understand what is happening, behind the unemployment number itself, I recommend looking at U-6 as well as U-3.

Measure	Apr. 2019	Feb. 2020	Mar. 2020	Apr. 2020	May 2020
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.6	3.5	4.4	14.7	20%? 25%?
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	7.3	7.0	8.7	22.8	25%? 30%?

The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.

The level of U-6 unemployment will bear careful watching because of the number of Americans who are on the Payroll Protection Plan and other special programs that obscure the data.

(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post.)