Forensic Economics You Can Trust
Although COVID-19 is disrupting many businesses, GHME has had no interruptions in providing expert witness services. Our use of Zoom Meetings, Conferencing, and Webinars enables compliance with physical distancing directives. GHME has a long history of employing technology in communications. As an early example, in 2008 live video connection allowed Dr. Mellish to testify from Idaho with real-time cross examination as well as conversation with a Florida Judge. To set up a Zoom Meeting to discuss your latest case, give us a call so we can send you a meeting invitation by email.
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."
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 4.2% over last year which is the highest annual jump since 2008 according to the Economic News Release by the U.S. Bureau of Labor Statistics. According to a business economist and research officer at the Federal Reserve Bank of St. Louis, "most forecasters view this inflation surge as transitory" with the inflation forecasting model projecting "personal CPI to increase to 2.8% in 2021, but then drift back down toward 2% in mid-2022." However, they acknowledge that "there is some risk that inflation could exceed 3% in 2021." 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 (4.2% inflation versus near 0% interest rates).
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. After approximately 18 months, the unemployment rate has dropped to 5.8% but remains well above the pre-pandemic rate of 3.5% according to the latest release by the BLS. According to the Second Quarter 2021 Survey of Professional Forecasters unemployment is predicted to "decrease to 4.5% by second quarter 2022." However, an economist at the Federal Reserve Bank of St. Louis believes that "employment over the latter part of 2021 and into 2022 could be stronger than anticipated."
What is the economic forecast considering the COVID-19 outbreak? According to the Second Quarter 2021 Survey of Professional Forecasters "the US economy is on a faster pace of economic rebound with stronger labor markets" than previously predicted. The real GDP is now expected to "grow at an annual rate of 6.3% in 2021 and 4.3% in 2022" based on the annual-average over annual-average computation method. These projections are up from 4.5% for 2021 and 3.7% for 2022 in the last survey. This growth in GDP is expected to slow substantially in 2022 to 2.6% in second quarter 2022. The projected growth in real GDP stems from an expected decrease in the unemployment rate and monthly jobs gain rate of "331,600 in 2021 and 405,100 in 2022" (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 expect higher inflation, both in the short run and in the long run" with a current-quarter headline CPI inflation average of 3.2% dropping to 2.2% in second quarter 2022. The 10-year average for 2021-30 is projected to be 2.3% at an annual rate for headline CPI inflation. is expected to exceed previous projections with 2.5% in second quarter 2021 dropping to 2.0 by the fourth quarter and remaining there throughout second quarter 2022. The risk of a contraction in the real GDP ranges from a low of 4% in the second quarter 2021 to a high of 13.3% by second quarter 2022 according to the survey.