Forensic Economics You Can Trust
Who is Dr. Mellish?
Dr. Mellish is an expert witness specializing in the valuation of loss due to business damages, wrongful termination, personal injury and death. He has been qualified as an expert witness in the majority of the Circuit Courts in Florida and many Federal Courts in various states including FL, GA, AL, NY, TX, CA, US Virgin Islands, and others.
This office has a reputation for providing expert witness consultation at the highest standards. We assist attorneys in identifying areas of damages as well as calculating the present value of future losses including lost wages, benefits, the value of household services, the amount necessary to provide medical care in the future, hedonic damages (value of the loss of enjoyment of lifestyle issues) as well as punitive damages in cases that warrant it. In worker's compensation cases, our reports are often made a part of the fee petition package. We have designed a computer-assisted format for presenting the results of our analysis in the worker's compensation cases. We have also developed a computer-assisted format for calculating the present value of future medical care items required in a life care plan for catastrophic injury cases. These computer assisted formats allows us to keep billing to a minimum by reducing the amount of professional time needed. Please refer to our Services page for a detailed list of services provided.
What does it take to evaluate economic damages?
Quite often attorneys call us to quickly estimate the level of economic damages in an injury or death case. When the attorney can give us a short description of the nature of the injury, we can typically identify the probable damage elements:
- Loss of income or support
- Loss of value of services
- Probable future medical expenses
We can usually provide an estimate in a 5 to 15 minute phone call. We do not charge for such brief consultations. By contrast, a written report requires documentation for underlying data. That is what takes the most time and is billable. Business damages cases are different from personal injury cases when it comes to quick estimates. That said, we can usually describe the type of underlying data that will be needed to estimate business damages in a 5 to 15 minute consultation.
How is COVID-19 effecting interest rates?
Covid-19 restrictions severely crippled consumer spending in 2020 and devastated the economy. Typically, the Federal Reserve eases these types of economic crises by lowering the interest rate; however, the interest rate was already low when Covid-19 started. Lowering the interest rate to 0% from .25% didn't provide the stimulus needed to counter the effect of Covid-19 on the US economy. Therefore, the Federal Reserve chose to address the crisis by using the "quantitative easing" method. This meant that they entered into repurchase agreements (repos) which are similar to short-term collateralized loans by making large-scale purchases of Treasury securities and mortgage-backed securities. Through these collateralized loans, the Fed was able to inject over $2.5 trillion into the US economy by May 2020 and increased their securities holdings to over $7 trillion. In the February 8, 2021 Congressional Research Services Report to Congress the Fed emphasized its commitment to the US economic recovery by pledging "that it will not raise interest rates until the economy has reached full employment and consistently maintained a 2% inflation and that it will continue large-scale asset purchases until 'substantial further progress' has been made towards those goals." However, the persistently high inflation has prompted aggressive rate hikes by the Feds.
How does this effect future economic losses?
When the interest rate or discount rate is low, the present value of future economic losses will be higher. However, the other element in the present value calculation is the growth rate in wages, or in future medical expenses or inflation rate. Typically, when interest rates are low, these other two elements of the present value calculations will also be low. Therefore, the present value will not be substantially different than in a period of high interest rates. However, with Covid-19 there is substantial government and Federal Reserve policies that influence interest rates, inflation, and wage growth. Currently, inflation is exceeding interest rates substantially with the current inflation rate at 8.2% over last year according to the Economic News Release by the U.S. Bureau of Labor Statistics. According to USA Today, "the annual increase in "Core" prices is at a new 40-year high at 6.6%. Even with the aggressive rate hikes by the Feds, inflation rates are outpacing interest rates by a significant margin. If inflation is not reigned back in and interest rates are not increased, the present value of future economic losses will be higher with growth rates exceeding interest rates significantly (as of Oct 2022, 8.2% inflation rate versus 4% interest rate - U.S. Dept. of the Treasury).
Recovering from Soaring Unemployment amid COVID-19:
As a result of COVID-19, 3.28 million workers filed for unemployment in March 2020. Consequently, the unemployment rate soared approaching 20% after hitting a 50-year low of 3.5% for March 2020. The recovery has been slow. Although unemployment has finally dropped to the pre-pandemic rate of 3.5% according to the latest release by the BLS, the labor participation rate and the employment-population ratio are still 1.1% below their values prior to the Covid-19 pandemic resulting in slow GDP growth.
Economic Forecasts:
What is the economic forecast considering the COVID-19 outbreak? According to the Second Quarter 2022 Survey of Professional Forecasters by the Philadelphia Federal Reserve Bank, the US economy looks weaker now than previously predicted with annual growth in real GDP prediction reduced to 2.5% in 2022, 2.3% in 2023, and 2.0% in 2024. This represents an overall drop of 2.2 percentage points from the prior prediction of 3.7% in 2022, 2.7% in 2023, and 2.3 for 2024 and 2025. The predicted annual unemployment rate is relatively unchanged with an overall net increase of only .4 percentage points at 3.6% in 2022 and 2023 then increase slightly to 3.8% over the next two years. The projected monthly jobs gain rate of 479,700 in 2022 is up by "50,000 more jobs than the previous estimate" (based on "the year-to-year change in the annual-average level of non-farm payroll employment, converted to a monthly rate"). On the flip side, forecasters have increased their prediction for inflation, both in the short run and in the long run, with a current-quarter headline CPI inflation annual average of 7.1% up from 3.8% in the last survey and dropping to 3.0% by second quarter 2023. The 10-year average for 2022-31 is projected to be 2.8% at an annual rate for headline CPI inflation. The risk of a contraction in the real GDP is 19.6% according to the survey.