There is an interesting divide in our society that is eerily reminiscent of the monetary and trade policies among nations during the Great Depression. In the 1930s, nations that maintained the gold standard and adopted protectionist tariffs were slower to recover from the Depression than those that allowed their currencies to depreciate.
As the spread of coronavirus cases has declined in major cities, it has increased in the less densely populated areas of the country.
The abandonment of doctrinaire policies allowed currencies to properly value the price of goods, while lower interest rates were able to stimulate the recovery from the economic shock. At the same time, government intervention in the U.S. domestic economy through public assistance and public works programs facilitated the recovery at home.
We are seeing the similar differences among the states in their responses to the coronavirus outbreak that will undoubtedly affect the duration of the pandemic and the speed of the economic recovery in various regions of the country.
As the figure below illustrates, the initial spread of the virus during March and early April was virtually identical among the smaller states and the six states with major metropolitan areas — New York, New Jersey, Pennsylvania, Massachusetts, Illinois and California — that were the hardest hit in terms of the initial number of infections.
But as social distancing practices were adopted and enforced in the major metropolitan areas and the spread of infection diminished among those major states, the virus continued its spread from the coasts and into the less densely populated areas.
The divergence in the rate of spread has become more pronounced since the last week of May. As of June 4, there were 7,500 newly reported cases of COVID-19 infections in the six major states, but 14,000 new cases among all other states, as shown in the first figure.
Furthermore, while the number of new cases in the major states has decelerated on trend since the end of April, the spread among all other states appears to be gaining traction as their economies reopen and social distancing is lessened. And we do not have any idea of the potential for re-infection or a second wave of the virus.
As we pointed out last week, that’s not to say that social distancing is the province of the coastal states. After all, as we show in the second figure, cases in California have continued to increase since the economy was re-opened gradually and as social distancing practices were relaxed among the population.
A disturbing trend
In the table below, we show the weekly growth rates of each of the states since local economies began to reopen in May. The six major states with the largest outbreak of COVID-19 infections are highlighted in light blue, with 22% to 27% rates of decline of newly reported cases in the New York and New Jersey metropolitan area, 15% declines in Pennsylvania and Massachusetts, and a 11% decline in Illinois since the end of April.
At the opposite end of the spectrum, new cases in Virginia have increased by nearly 6% per week; cases in Texas, California and Florida have increased by 11% per week; while cases in North Carolina have grown at a rate of 16% per week.
So there are good public health reasons to maintain social distancing and for the governor of North Carolina to continue to prohibit large gatherings.
A suspended downtrend nationally
The increase in new infections in the smaller states has suspended the downturn in the national infection curve over the past two weeks. The coronavirus is infecting Americans at a rate of 22,000 per day — or more than 150,000 per week — as shown in the first figure below.
Our mathematical model of the coronavirus spread (shown in the second figure) indicates a spread that is still exponential, though at a diminishing rate were existing social distancing practices to remain in place. Based on extrapolation of the current rate of infection, the number of cases is likely to approach 2 million in the second week of June, a milestone bound to gain attention even among the social unrest.
Finally, extrapolating the current 5.7% latest U.S. mortality rate – which is declining slowly from a local peak of 6% in the first week of May – we would expect the number of deaths attributed to the coronavirus to approach 115,000 deaths within the next week.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
