Notions of an easing pandemic ought to be gently dismissed as the pace of newly reported coronavirus cases appears ready to breach the April peak amid the accelerating spread of the virus in the South, Southwest and the vast interior of the country.
Until there is a national testing, tracing and treatment regime in place, any notion of returning to January economic levels are pure fantasy.
The sustained issues in California and the emerging hot spots of Arizona, Florida and Texas imply a slower pace of economic recovery this year. It is important to note that those four hot spots account for roughly 30% of total U.S. gross domestic product.
Until there is a national testing, tracing and treatment regime in place, any notion of returning to January 2020 economic levels are pure fantasy.
The reopening of local economies in early May came at a time when the crisis had moved past its early April peak in the Pacific Northwest and Northeast, and had yet to attack states in the South and Southwest. Newly reported infections were decreasing as social distancing practices became the norm in the densely populated urban areas and as non-essential businesses were shuttered.
Then, despite warnings from public health experts that the U.S. was still in the early stages of an enduring pandemic and that there was no pre-existing immunity, states began opening up their economies.
The result has been an increase in daily cases on a national basis that looks to surpass the initial outbreaks in Washington state and metropolitan New York and the exponential growth that followed as shown in the first two figures below.
In particular, there are major risks around the pace of infections in Houston, Austin, Dallas and Phoenix. Houston is the fourth-largest metro area in the country and is the energy hub of the economy.
Should the governors of those states and mayors of those cities decide to engage in another round of shutdowns — on Friday, Texas ordered bars closed and limited restaurant capacity — that will show up in the economic data over the next two months.
Just as critical to the economy will be the behavior of residents of those states and metropolitan areas, who may pull back on normal social and economic activity regardless of whether the political authorities pull back further on the economic reopening.
Were the infection to grow exponentially because of relaxed social distancing practices among the states and communities, we would expect to see the number of cumulative coronavirus cases to approach 2.8 million in the week leading up to July 4, the next test of our willingness to stop the spread of infection.
Although coronavirus infections are increasing again, deaths attributed to the virus have been in steady decline since their peak in the third week of April. We show this in the first figure below as the seven-day average of COVID-19 deaths dropped from 2,200 per day to 620 as of the latest data.
As Dr. Anthony Fauci said, deaths always lag an increase in infections.
But it is important to note that Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said that deaths always lag an increase in infections — a grim reminder that with respect to the pandemic, the worst is not behind us.
The second figure might give a better picture of what might be happening, though the reasoning is anecdotal for now. First, the amount of available care is improving. Hospitals outside of the metropolitan areas have not yet been overwhelmed, though reports are that they are nearing capacity.
And we would have to assume that the experience of the hard-hit metropolitan hospitals has increased the knowledge base among all health care practitioners. But we do want to note that the health system in Houston appears to have reached 100% utilization of intensive care units, and we are quite concerned about Phoenix and Austin as well.
Second, at least some states have had the good sense to keep nursing homes under lock and key. The fewer people who are exposed in a vulnerable elderly population, the less chance of infection.
Third, because of the earlier success of social distancing, restrictions on gatherings have been relaxed and younger cohorts — who were anxious after months of confinement — are out and about. We assume that younger people will both have a higher probability of surviving infection than their grandparents and will at the same time allow their sense of invincibility to override any safety concerns.
The second figure below hints at this thesis, showing that the ratio of daily deaths relative to the number of daily COVID-19 infections has dropped from a peak of 7.6% in April to just less than 2% in the latest data.
We should note, however, that because deaths can lag infections by weeks, it is uncertain if this downward trend will continue after this latest surge of infections.
And to use this trend as the rationale for allowing large gatherings is self-destructive. While the young people who get infected at a bar or at the beach or in a sports arena will hopefully survive, they are also likely to infect someone else whose immune system is compromised or is not so lucky as to be young.
These next three figures hammer home the argument that we would be foolish to remain complacent about controlling the virus. The spread is now rampant in the non-metropolitan states that were spared the initial onslaught of infection and death in New York, New Jersey, Massachusetts, Pennsylvania, Illinois and California.
The disease is spreading at a rate of 7,000 per day in the states with major metropolitan areas and 24,000 persons per day in all other states. At least some of the governors and mayors have stopped hiding behind hubris and denial and are taking reasonable steps to avoid a further catastrophe.
We know how to slow the spread. The economic cost is already staggering, but still less than the avoidable loss of life.
State analysis
Thirty of the 50 states (and Washington D.C.) are reporting higher rates of infection in the four weeks since the Memorial Day weekend compared to the eight weeks since the reopening of local economies at the beginning of May.
For instance, COVID-19 cases reported in Arizona that have been growing at an average rate of 34% per week since April 30 have been growing by 63% per week in the four weeks since May 25. South Carolina’s rate of growth has shifted from 26% to 51% per week. COVID-19 cases in Florida that were growing by 26% per week accelerated to 45% per week. Cases in Texas are now growing at nearly 40% per week, up from 22%.
There is also growing evidence of increases in the major states. For instance, New York, which was decelerating at a rate of 24% per week after the April 30, is now decelerating at a rate of 19% per week as residents move outside their apartments and into the streets and parks. Meanwhile, cases in California are growing at a rate of 20% per week since Memorial Day.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center
