Deaths attributed to the Covid-19 pandemic continue to mount, and data confirms that social distancing and a rigorous system of testing and tracing are necessary to slow the spread of the disease, and are working to mitigate the health crisis. Recent modeling work suggests that the slow adoption of social distancing practices as public policy and the concurrent slow adoption by individuals have increased the mortality rate in the United States, and will continue to do so until a vaccine or treatment regimen is developed.
However, the efficacy of social distancing and the closing of all nonessential business has begun to gain traction; there appears now to be a modicum of success in flattening the U.S. fitted virus curve. The trend in the number of daily cases is displaying signs of decelerating, having peaked around April 10. The only plausible explanation for the slowing spread is that people in afflicted areas finally became aware of the consequences of contact with others and changed their living patterns to limit it. Thus, a national conversation will break out over the next six weeks on the efficacy of reopening the economy.
On Thursday, April 16, the Trump administration published its plan to reopen the economy in a gradual and orderly fashion. That goal was created around what is referred to as “gating criteria,” or what essentially are minimum requirements that must be satisfied before proceeding to phased reopening of U.S. nonessential businesses.
The plan relies on a decentralized framework that grants significant autonomy to individual states. It provides a minimum of information on testing and no information on who pays for the type of testing that will enable states and localities to meet the plan’s gating criteria. This lack of specificity strikes us as odd, given the roughly $500-billion-dollar hole already blown in state budgets due to the Covid-19 crisis, and the overwhelming reliance of the plan on the efficacy of testing. No information was provided about whether the insurance industry or the private sector will ultimately bear the costs of testing that will mark the reopening of the economy and the return to work by millions of Americans.
The administration throughout the day on April 16 released information to the media on what appears to be a schedule to stimulate public comments and discussion on a staggered reopening of the economy. The incremental opening will likely proceed as follows:
- May 1, 2020: Nationwide campaign to communicate plan
- May 1, 2020: Staged reopening for low-risk areas
- May 15, 2020: Leverage testing capabilities
- June: Controlled relaxing for moderate-risk areas
According to a recent poll by Gallup, only 20% of the public is ready to immediately return to normal activities, while 71% prefer to wait to see what happens and 10% are willing to continue to limit contact and social activities indefinitely.
This data implies that the federal government has a significant policy challenge ahead to convince the public and private sectors to quickly return to normal social interaction.
The difficult and ethically fraught decision about when to reopen business centers on the intersection of epidemiology and economics. A recent National Bureau of Economic Research paper, titled the Macroeconomics of Epidemics, and written by the economists Martin S. Eichenbaum, Sergio Rebelo and Mathias Trabandt, illustrates the tradeoff of the limiting the severity of the recession caused by the epidemic and the concurrent health consequences. This represents the dilemma for both policymakers and CEOs.
Essentially the data implies that roughly 12 weeks after the exit from quarantine of workers, the economy will boom. However, the resurgence will likely be truncated via a second wave of the virus and a recession unleased by a higher death rate and reduced labor productivity. This is analogous to what occurred during the Spanish flu pandemic of 1918-1919. In the United States, when politicians and the public grew impatient with the quarantine policies of the time, politicians lifted the social constraints, setting the stage for a much more deadly epidemic and more costly depression.
The fitted curve
The failure to quickly adopt social distancing practices has imposed a significant cost on society and the economy. As the figure below illustrates, the number of U.S. deaths rose with a lag as the Covid-19 virus spread and as the cause of death was determined to be the virus.
Data from an infected cruise ship (all passengers were tested) and other sources suggest that 25% to 40% of infected persons can be asymptomatic. This implies that no matter what the circumstances, the risk of infection is so great that social distancing – even among family members and friends in different households – is the essential and only tool available for defeating the spread of this horrible disease.
Given the latest parameters available, our model of the spread of the novel coronavirus projects a death toll of 38,000 by the end of the weekend beginning April 17. That forecast, of course, is subject to further intervention and the reporting capabilities of overworked first responders and hospital staff. Unfortunately, these data on deaths and the projections are probably conservative estimates of what has actually occurred, in part due to underreporting.
Despite the drop in daily reported cases over the past week, there is no guarantee that the deceleration trend will continue. We have little knowledge of the possible recurrence of the disease, or what the infection rates will be as it moves from population centers on the coasts to less dense areas in the middle of the country.
We are continually adjusting our model to incorporate the trends in the latest data. The model’s main parameter is the number of persons infected by a person with the coronavirus. At the peak of infection at the beginning of the month, each infected person would infect 3.0 others. The data from this past week suggests that parameter has been reduced to 2.7 people – which is lower, but is not a small number in terms of a pandemic.
Is this evidence of cautious optimism? Is it time to end social distancing? Our data implies it may be premature. Nevertheless, a national discussion and timetable for return has been presented. We think that the public and private sector leaders will likely determine when and how the economy is reopened.