The coronavirus shutdown may finally have the Covid-19 pandemic in retreat, or at least at a stalemate. But when the U.S. economy comes back to life, it won’t look the same: It will be wearing a mask.
Government directives and consumer caution likely will keep many Americans’ faces covered for weeks, perhaps months to come. Though not a direct damper on the coronavirus economy, the masks symbolize the social distancing that will continue as the nation stays on guard against a devastating virus that experts don’t fully understand and for which no established treatments exist. And that distancing comes at a massive cost.
Economists are loath to guess when Americans will pack into airline seats, stadiums, shopping malls, bars and restaurants again. Much depends on widespread coronavirus testing and the race for a Covid-19 cure and vaccine. But clearly, the coronavirus shutdown will not end quickly or all at once.
No ‘All Clear’ Signal For Coronavirus Economy
“I doubt that it’s going to be, ‘Hey, it’s all clear,’ ” Joel Prakken, chief U.S. economist at IHS Markit, told IBD. “When the worst is behind, you’re going to see a halting resumption in activity. People will initially be frightened and very reticent.”
Starting in May, he expects “spot openings around the country,” in places the virus left relatively unscathed. Harder-hit spots could gradually begin to unfreeze nonessential business activity by late May, if new cases and deaths peter out, as some models suggest, Prakken said.
The fear they might have to renew coronavirus shutdowns if new cases spike will lead state and local officials to move deliberately, restarting activity in phases — “First small gatherings, and then larger and still larger,” Prakken said.
The national pastime could prove a yardstick for the coronavirus economic recovery. How long will it take until Americans can hear an umpire shout “Play Ball” before a packed stadium, without fear of a national nightmare of disease? Until then, the U.S. may endure a masked economic recovery, where large events are taboo, subway cars and restaurants unusually empty and recovery of international and domestic travel proceeds at a snail’s pace.
Coronavirus Economy Still Crashing
In just three weeks, the coronavirus shutdown wiped out 15.1 million jobs unadjusted for seasonal factors — more than six years’ worth of job growth — as much of the economy went into a deep freeze. The thaw will be a massive undertaking and will require huge strides on several medical fronts.
Dramatic increases in coronavirus testing are needed, both for new infections and to identify people who have developed Covid-19 antibodies, even if they never showed symptoms. Surveillance systems, mostly of the low-tech variety, need to be ready to go. That will likely involve hiring tens of thousands of people to track down the contacts of those who fall ill.
Infrared thermometers, already widely used in medical settings, are being adopted by Walmart (WMT), Amazon.com (AMZN), Burger King and others to check all employees before they start work.
Customers may have to get used to temperature checks too. When Starbucks (SBUX) reopened in China, customers were greeted with a thermometer. Disney (DIS) is mulling using temperature checks for attendees before letting them enter its theme parks, once they reopen. Students may get similar treatment when they show up to school.
Extreme vigilance can make workplaces safer and allow more of the economy to function. But it probably won’t begin to lift the mask from the American economy. That will take a drug breakthrough that sharply reduces the Covid-19 threat and prevents an overload of health care systems. A coronavirus vaccine that vanquishes “the invisible enemy,” as President Donald Trump calls it, likely won’t become available before the summer of 2021.
Coronavirus Testing, Treatments May Restore Confidence, Economy
But effective treatments could be ready much sooner. The many candidates include antibody drugs, which might prevent illness for those exposed to the virus. Others are antiviral drugs, which aim to block replication, alleviating the worst effects of Covid-19 after people fall ill.
“We can have that kind of drug by the summer and certainly by the fall,” former FDA commissioner Scott Gottlieb said in a CBS News interview. He sees four to six drugs that could be ready and potentially make a trillion-dollar difference for the economy. “The four antibody drugs (Lilly, Vir, Regeneron, Amgen) hold some of best near term promise,” Gottlieb tweeted.
Effective treatments, along with on-demand testing and quick results, could gradually give Americans the confidence to resume their everyday activities — like in a really bad flu season. Still, they may keep wearing masks on the subway and in grocery stores.
Policymakers will likely still need to know who has contracted the virus, and who they’ve come in contact with, to allow for early interventions. Those people will still have to isolate themselves for a couple weeks. Resuming mass gatherings, such as baseball stadium crowds, may have to wait for a vaccine.
Time To ‘Double Down’ On Coronavirus Shutdown
For now, the U.S. is intensifying social distancing efforts. New York City Mayor Bill de Blasio said Thursday it was time to “double down” on restrictions, which might last until June.
A few more states in the past week embraced “stay-at-home” measures already covering the vast majority of Americans. The number of airline passengers has crashed by 95%. Boeing (BA) this past week extended the shutdown of its Seattle-area factories and closed the South Carolina plant where it assembles the 787 Dreamliner.
The Centers for Disease Control, in a reversal, now encourages people to wear masks when out in public. New Jersey just began requiring employees and customers to wear masks in grocery stores. Los Angeles is expanding that mandate to all essential businesses. Some LA-area cities and counties are mandating face coverings in public.
White House coronavirus response coordinator Deborah Birx stressed that face coverings provide limited protection, leave the eyes exposed and shouldn’t substitute for distance. “There’s no magic bullet,” Birx said at a March 31 briefing.
The New Normal Isn’t Normal
In a best-case scenario, conditions will begin to normalize in May and June. But the new normal will be relative. Numerous schools and colleges already have called off in-person classes until the end of summer. Some summer camps are canceling sessions in June. Democrats just delayed their nominating convention from July 13 to Aug. 17, and presumptive nominee Joe Biden says it could end up being virtual.
The coronavirus shutdown may not be over for Disneyland and Disney World any time soon. Disney theme parks probably will be closed through Sept. 30, with only 50% attendance in fiscal 2021, Wells Fargo analysts said.
“We don’t think Parks can get back to anything close to full capacity until testing and/or vaccines are far more ubiquitous,” they wrote April 7.
While U.S. plans for reopening the economy remain vague, some countries in Europe are beginning to offer clues. Germany’s draft plan includes mandatory mask-wearing, Reuters reported. Ongoing limits on gatherings will aim to ensure that the government can track more than 80% of people with whom an infected person had contact within 24 hours of diagnosis.
Italy, which has seen a sharp drop-off in new cases, signaled its coming phase of “coexistence with the virus” may begin in mid-May with the lifting of a ban on all movement, even driving between cities. Reopening bars, restaurants, nightclubs and gyms is expected to take longer. “The return to normalcy is very far away,” warned Agostino Miozzo, deputy head of civil protection.
Can Economy ‘Play Ball’ After Coronavirus Shutdown?
Reopening stadiums to soccer fans isn’t on the horizon in Italy, and for good reason. A Feb. 19 championship soccer match in Milan that crammed in 40,000 fans is now known as “game zero.” The match is viewed as a key catalyst behind Italy’s explosion in coronavirus cases and fatalities. Valencia, Spain, home to the opposing team, later saw one-third of its players test positive. That city also became a hot spot.
In the U.S., Major League Baseball reportedly plans to seclude all 30 teams in Arizona, with Opening Day in May or perhaps June. There, players would get regular coronavirus tests, play before empty seats in the Phoenix area and be sequestered for much if not all of the season.
A day after the NBA’s indefinite timeout on March 11, the U.S. Centers for Disease Control advised against gatherings of 250 or more people. Three days later, CDC cautioned against groups of 50 or more. The next day, it advised people to avoid groups of more than 10 people.
Reversing and eventually removing that guidance will likely happen much more slowly. After the current crisis abates, public health officials have to assume that Covid-19 will return in a second wave later this year. And there’s a risk that, like the 1918 influenza pandemic, the second wave could be even deadlier.
In gauging the outlook for the U.S. economy’s recovery from the coronavirus shutdown, the timing for lifting restrictions on nonessential business may be a secondary concern. The key question is whether Americans will feel confident they can go about living their lives without risking their health and that of friends and family members.
Working Safer In The Coronavirus Economy
The supply side of the economy is already learning to work around the coronavirus. Lowe’s (LOW), like many other retailers that are still open, recently announced a $2-per-hour wage increase for all hourly workers. Beyond making masks and gloves available, Lowe’s installed plexiglass shields to protect cashiers and trimmed hours to provide more cleaning time.
It’s developed an app to let store managers monitor customer traffic and, if needed, limit entrants based on CDC guidelines. It’s even adding “social distancing ambassadors.” Productivity may suffer, but employees and customers will be safer while allowing commerce.
Along with similar steps, such as “sneeze guards” and making aisles one-way streets, Walmart said it will begin using infrared thermometers to take workers’ temperature before they start their day. Those with fever above 100 degrees must go home for a minimum of three days. Amazon facilities and Restaurant Brands (QSR) chains Burger King, Popeyes and Tim Hortons also will use infrared thermometers.
Temperature checks for customers seem likely, at least at crowded venues such as concerts and conventions. Disney is mulling temperature checks at its theme parks, Chairman Bob Iger told Barron’s in an article posted April 7.
Employers in China widely deployed infrared thermometers when the country began to reboot its economy. While another useful step in containing spread of the coronavirus, evidence indicates that people who have yet to show symptoms can transmit the virus.
Coronavirus Testing For Immunity
The good news is that some Americans — those who have been infected by the virus and built up antibodies — likely can get on with their lives without risk. That’s why widespread serological testing to determine who has immunity to Covid-19 will be an important step. Such testing will be especially useful for health care workers, bus drivers and others who interact closely with the public, especially the elderly.
Since many who contract the coronavirus never develop symptoms, plenty of people who don’t realize they were exposed may have immunity. But while this “safe” group can help run the economy, they can’t act as a stand-in for the American consumer.
Many businesses will continue to face recession-type conditions, if not much worse. As long as Americans feel the need to wear a mask or keep everyone at a distance — or both — they won’t be up for dining out, taking in a ballgame or booking airline tickets to a popular tourist destination. Live entertainment, movie theaters, hotels, sports clubs, shopping malls and even barber shops could be in for rough times.
“Even if they lifted all the bans, the fear factor is too great here,” said Dan Alpert, adjunct finance professor at Cornell University Law School. He’s holding out hope that immunity from exposure to Covid-19 is far more prevalent than experts believe. We’ll begin to find out if that’s true by May.
Coronavirus Economy Still Crashing
Wall Street economists are unanimous in expecting a jaw-dropping GDP plunge in the second quarter. Forecasts for the coronavirus economy in the second half are split between a dramatic, if still far from complete, rebound and an anemic recovery.
Rather than a V-shaped recovery, Prakken anticipates “something that looks like a swoosh” — the Nike logo. The level of GDP will get “a little bit higher” quarter after quarter over the next couple of years. After diving 26% at an annual rate in the second quarter, he expects 0% growth in Q3 and 6% in Q4. That would add up to a 5.4% drop in GDP for the year, far worse than any contraction since 1946.
“We don’t expect economic output to return to precrisis levels unless there is sufficient progress on diagnosis and therapeutics such that individuals feel safe,” wrote Wilmington Trust economists Luke Tilley and Rhea Thomas in an April 8 report.
Social distancing mandates could put at risk 37 million American jobs in food service, retail, lodging, gaming and personal services, says Alpert, who helped develop the U.S. Job Quality Index tracked by Cornell.
Business activity regarded as nonessential services, based on New York and California guidelines, amounts to about $1.6 trillion in annual output, excluding takeout and delivery, says Deutsche Bank. Along with much-reduced spending on transportation, nonessential retail and business investment, Deutsche Bank sees an economic hit of nearly $5 trillion at an annual rate, or about 23% of GDP, in the second quarter. (That would translate into a 68% plunge in quarterly GDP at an annual rate.)
While typically cyclical industries like autos, housing and oil could operate with various safeguards, demand for cars, homes and petroleum products may be at depression levels for months. Without a quick coronavirus economic recovery, Alpert worries that the pain will spread to goods-producing sectors, transportation, warehousing and wholesaling.
Coronavirus Will Return
Gottlieb says you can take one forecast to the bank: Covid-19 cases may fade this spring, but “the virus will return in the fall, and so will fresh risk of large outbreaks and even a new epidemic,” he wrote in a recent op-ed.
“Getting back to normal” won’t happen before there’s a cure or coronavirus vaccine, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said April 6 at a White House briefing. Still, “a real degree of normalcy” is attainable, he said.
Coronavirus Test And Trace
Federal and state governments will have to put in place a high level of coronavirus testing and surveillance. That will let communities recognize any problem early enough “so it never gets out of hand,” Fauci said.
How much coronavirus testing? After a furious effort to ramp up capacity, the U.S. is now testing up to 140,000 people a day. Abbott Labs (ABT) introduced a 5-minute Covid-19 test in recent days that can scale up to 50,000 tests per week. Other tests can take a day or more to process. Some share of coronavirus tests yields false negatives, though how high isn’t clear.
Coronavirus testing capacity may need to ramp up to 3.8 million per week, Gottlieb told Politico. That would allow for testing everyone who goes to the doctor.
Widespread coronavirus testing will be combined with dogged efforts to track down, test and isolate people who have recently come in contact with someone known to be infected.
Massachusetts Gov. Charlie Baker last week announced plans for a virtual call center staffed with 1,000 contact tracers, calling it the first of its kind in the U.S. If the rest of the country has a similar number of trackers, there could be 50,000.
Yet even under a massive coronavirus testing and tracking regime, some big events might be too risky. If someone tests positive for the coronavirus the day after going to a sold-out ballgame, just think about the difficulty of tracking down everyone he came close to.
And what about domestic and international travelers who pass through U.S. airports? Would they get tested too? Would temperature checks suffice? Or would we follow what China, Hong Kong, Singapore and South Korea regularly do now — quarantine visitors for a couple weeks?
Coronavirus Shutdown, The Sequel
Because the coronavirus can move so fast, the government has a small margin of error. Any plan to reopen the economy should include thresholds for closing things back down.
In an American Enterprise Institute report, Gottlieb and a group of other public health experts suggest that individual states reimpose a coronavirus shutdown if they see a sustained rise in new cases for five days or “a substantial number of cases cannot be traced back to known cases.”
International experience suggests renewed coronavirus shutdowns in parts of the U.S. should be expected. Singapore, which already had an extensive tracking system in place when Covid-19 hit, just shut down nonessential businesses as new cases mounted. Hong Kong reimposed distancing mandates after loosening things up prematurely.
That’s why ending the coronavirus shutdown may be more like dipping a toe in icy water, followed by slow, deliberate progress.
The ice won’t break until there’s an effective treatment in hand, Gottlieb told CBS. “Absent that, this is going to be an 80% economy. There are things that are not coming back. People are not going to crowd into conferences.”