Today I listened to the President explain that all was good with the “reopening”, that, of course, he was right. His evidence? That the number of reported new cases of COVID-19 is trending down. Except….
Economists look at statistics in one of three ways, leading, coincident, or trailing. Leading statistics tell us what is going to happen. Coincident are what’s happening right now and trailing tells us what has happened. As an example, each week the Department of Labor (DOL) reports the new jobless claims for the prior week. This is a trailing indicator in that it tells us what happened last week. It’s also, to some extent, a leading indicator for the monthly unemployment report. The Dow Jones Industrial Average (DJIA) is a real time indicator in that it tells us what is happening at this moment in the stock market. So why does this matter?
Recent reports of people testing positive for COVID-19 have been trending down. That sounds good until one realizes that tests for the disease are a trailing indicator. They tell us who was infected as long as two weeks ago. They don’t tell us what is happening today. And those current statistics have trended down because of the lock downs and stay at home orders were in place two weeks ago. A big drop in the numbers has been from New York State alone. Those indicators don’t tell us the new infections that are happening today. Hence the problem in the President’s statement. The numbers are low because distancing and closing worked. What’s next?
We won’t know for days, perhaps weeks if the re-opening is going safely. It takes time for the disease to spread, if indeed that is what it’s doing. The President is claiming he’s right, it’s safe to go out. I don’t believe him. Do you?