https://www.yahoo.com/news/coronavirus-lockdowns-end-live-shrunken-122800321.html
- A projection from the Department of Homeland Security, published by the New York Times, shows coronavirus cases spiking again at the end of summer.
- It’s a stark reminder that American life after lockdown will still be one of limited human interaction. And that means we’ll have to live with a smaller economy too.
- The economy will be packed with uncertainty given the possibility of another shelter-in-place order.
- Until we can all hang out again with confidence, the US economy is going to be a shell of its former self.
When the US emerges from its various shades of shelter-in-place orders, it will emerge to a shrunken global economy. One that will not easily be inflated living within parameters the coronavirus demands.
Financial transactions are a form of human interaction, and even after strict orders to stay at home are lifted, Americans will need to limit human interaction to mitigate the spread of coronavirus. One projection from the Department of Homeland Security, first reported by the New York Times, imagines a world where schools remain closed, 25% of Americans work from home, and social distancing remains in place through the summer.
And people will still be scared. They will know that there is an deadly virus infecting people who interact with other people.
In this scenario, back to work doesn’t mean back to growth because people won’t be spending money the way they did before. Back to work simply means finding a more sane, stable way to maintain society until we get a vaccine. There will be no V-shaped recovery. This is a marathon, and if we’re lucky, we will limp across the finish line.
As incomplete as it is, China is the best picture we have for understanding what a life after lockdown looks like, and it doesn’t look like a booming economy. 460,000 businesses closed permanently in China during the first quarter.
One Chinese county has gone back into lockdown already. In Beijing — where state media says epidemic prevention and control will “probably” become “long-term normal” — restaurants have been ordered to maintain social distance by cutting seating in half and limiting tables to three people. Customers have been slow to come back anyway.
All of this is to say that even if we’re out of lockdown, this saga isn’t remotely over.
Deflation strikes back
What China’s economy is telling us is that once this weird supply funk brought on by everyone staying home is over, and some people are able to go back to work, we’ll still have a demand crisis. Even though the virus has been contained analysts at Oxford Economics told clients it expects to see “basically no growth” in China this year. With other global economies weakened it will sell fewer exports.
Zhu Jun, director of the international department of the People’s Bank of China, said that there’s a small chance the world risks another Great Depression. Cheery, I know, but until there’s a vaccine, optimism will be in short supply.
Here in the US, just as in China, people will be broke and businesses will be broken. Money will be scarce. Demand will be depressed not just because of a lack of funds, but because people will have changed their behavior to avoid getting sick.
Wall Street it seems, hasn’t processed this bad news yet. It’s taking this pandemic day-by-day, not looking at life after lockdown. This week the market rallied on news that all over the US, even New York City, the curve is flattening. It was a silly rally.
It’s silly for the market to declare victory before we’ve even seen how much damage has been done (that will take months at least). It’s silly to expect any kind of stability until we know what kind of demand a post-shelter-in-place, pre-vaccine American economy will have.
Finally, we don’t know how long Washington will be in a giving mood. So far the Federal Reserve has pulled out all the stops, and Congress has approved trillions in aid. But will Washington keep sending checks to unemployed Americans until we have a vaccine?
We thought we knew uncertainty
I think back to all the times I’ve heard CEOs and Wall Street types talk about uncertainty around regulations, or elections, or literally anything else that has happened in my life time, and I have to laugh. All of it seems silly compared to the uncertainty before us right now.
It is quite possible that sometime this summer scientists will develop a treatment for COVID-19 that makes the symptoms much more mild — something more like a standard, week-long flu. That discovery could make things a lot easier, and really bolster confidence enough to bring the economy back until we have a vaccine. But government officials obviously can’t plan with that in mind. Neither can businesses.
And so, those charged with imagining the worst case scenario must imagine a world where Americans are again forced to shelter-in-place to flatten the curve. Homeland Security’s projections put a resurgence of the virus somewhere around the end of summer to the beginning of fall. It’s not unreasonable to think certain populations may have to go back into shelter-in-place then.
Singapore has a robust system of testing for and tracking the coronavirus and its citizens went back into shelter-in-place this week. Here in the US we don’t have such a system. Last week the White House ended federal funding for its drive-thru testing site program.
On Friday New York Governor Andrew Cuomo urged the President to invoke the Defense Production Act to ramp up production of antibody tests that can show who has been infected with the coronavirus and built up immunity. That would allow people to go back to work, but the federal government will only be able to produce 2,000 a day in the next two weeks.
As a nation, we need to be doing everything we can to ensure that when this lockdown is over, those who can go out can do so with as much confidence as possible. We need to inject as much certainty into this situation as possible Without testing, that’s not happening.
In an interview with CNBC, Bill Gates — the Microsoft founder and billionaire philanthropist who has dedicated a significant chunk of his charitable efforts to studying pandemics — said the federal government simply doesn’t seem interested in a unified testing system. This is one of the few variables in this pandemic the government can control, and it’s blowing it.
Testing is one of the only things that will make our beleaguered, shrunken coronavirus economy a little bit bigger. It’s one of the only ways we can impact the ugly twist of this economic downturn, behavior.
Even then, though, the possibility of an outbreak in a workplace, city, or state will change the way our economy works in ways that will make money scarce. We need to be ready for that.
HENRY KOTULA 