This is a special edition of BBA Economic Digest, because I believe it is warranted due to the COVID-19 pandemic.
The coronavirus outbreak already has affected our daily lives and the U.S. economy and will for some time to come. How long, we are not certain.
Scientists believe we are looking at a virus with a mortality rate of about 1 percent. That sounds low -- meaning that the average person infected will likely do OK with it -- but it could result in an onslaught of sick people requiring acute care at the same time, so much so that hospitals will not being able to cope with the surge. That's what worries health care professionals the most.
Right now the epidemiologists in this country say they are working in the dark, because there has been so little testing to date. The numbers we are seeing are not true numbers. Where and how deeply the virus has taken root remains unclear.
We need to do as much socials distancing as we can, especially for vulnerable populations such as the elderly and those with medical conditions. And we need to stay calm.
To those who have said this an overblown, manufactured crisis by the liberal media, or just the flu, perhaps President Trump's declaration of a national emergency on Friday will impress you that the threat is all too real.
But all storms pass. Life will return to some sense of normalcy. This is now happening in China, where Apple reopened all its 42 stories on Friday. And it will happen here, too, with time. Just hang in there and take reasonable precautions.
My Social Distancing
It was something that I did not want to do. It cost me money, but more importantly, I feared that it might cost me good will.
The fact is that I asked two economic development organizations in the Midwest if they might give me a rain check in speaking to their stakeholders.
These two trips/events were both scheduled in April, and I was really looking forward to spending time in the communities and learning more about them. My usual modus operandi is to do a community tour the day before I speak so as to get a better understanding of the lay of the land.
But these are not normal times. Far from it. We are now live in a time of an officially declared national emergency because of the coronavirus pandemic. Between 160 million and 214 million people in the U.S. could be infected over the course of the epidemic, The New York Times reported on Friday.
Admittedly, those numbers are derived from worst case scenarios as developed by the U.S. Centers for Disease Control and Prevention. And so, too, are the number of deaths -- between 200,000 and 1.7 million.
In my plea to the economic development organizations, I mentioned that I'm in a more at-risk group. As a 65-year-old male, if I were to be infected, this virus could downright hammer my senior derriere.
Thankfully, the response I got from both economic development groups was very positive. The one ED professional said her group was now considering cancelling the event until things calm down a bit. And they will.
The truth is I really enjoy visiting communities and passing on what little knowledge I have. If you would like me to come to your place, please let me know and we'll make arrangements. But let's just wait until things cool down a bit.
I should mention that I got an emailed request to meet from an economic developer who is coming to Dallas in later this month. I responded by saying that I was working from home and no longer frequenting restaurants, coffee houses, or even my favorite craft brewery (which is truly a tragedy in itself).
But I did offer a possible solution -- let's meet at a nearby park, where there is a covered pavilion with plenty of tables and chairs. We can talk there.
"If that is acceptable, I look forward to meeting you and your colleagues. If it's not, well, then I guess we will have to meet another day," I wrote. Haven't heard back yet.
A Game-Changer for Work?
Remote work and remote learning are not new, but the sudden switch to telecommuting en masse because of the coronavirus outbreak has the potential to change how we work and how we learn.
I should note that just last night (Saturday), my wife received a text message from her employer stating that she should work from home until further notice.
With businesses and schools requiring more people to work and study at home, are we looking at something that could become more permanent for some workers, even after the virus crisis has passed?
“The virus could act as a game-changer for remote work,” Prithwiraj Choudhury, a professor at Harvard Business School told Axios.
Most companies and universities are not yet built for the virtual world. At least not yet. But we may look back at this virus and identify it as a turning point.
Less than 4 percent of Americans work from home full time. Remote learning is more prevalent, with just under 16 percent of U.S. students taking all of their courses online, per a recent study from the Department of Education.
Many jobs, of course, simply can't be done remotely. And the fact remains that managers and teachers value face-to-face interaction. They know, correctly, that sharing physical space fosters teamwork and sparks creativity.
What remote workers gain in productivity, they often miss in harder-to-measure benefits like innovative thinking. Studies have found that people working together in the same room tend to solve problems more quickly than remote collaborators, and that team cohesion suffers in remote work arrangements.
Steve Jobs was a famous opponent of remote work, believing that Apple employees’ best work came from accidentally bumping into other people, not sitting at home in front of an email inbox.
Being near other people also allows us to express empathy and collaboration. Those are the skills that can’t be automated. In short, it's what makes us human.
Flattening the Curve
Many health experts, not all, expect that a majority of people will eventually be exposed to, if not infected with, the coronavirus. The total number of infected people isn’t what scares many epidemiologists. It’s how many are infected at the same time.
Slowing the spread of the virus reduces the burden on the health care system, increasing the chances that those who fall ill can get the help that they need. Slower outbreaks tend to infect fewer people over a longer time period, reducing the impact on the wider health care system from a roster of potentially devastating trickle-down effects. Epidemiologists call this "flattening the curve."
We can flatten the curve by engaging in social distancing, proper quarantining and proper hygiene. If we can slow the rate of spread, we will have enough resources to properly care for everyone. This buys us time and will ultimately save lives.
South Korea has flattened its curve by engaging by extreme testing. If you roll up to a drive-through COVID-19 testing center in South Korea, you are advised to hit the re-circulation button so that if you're sick, you keep the pathogens in your car, and avoid infecting the medical personnel doing the testing.
The test takes 10 minutes. Results are texted to you, usually the next day. And it's free — paid for by the government. Drive-through centers have helped South Korea do some of the fastest, most-extensive testing of any country, and experts credit the emphasis on testing with reducing case numbers and fatalities. (See story below.)
Here in the U.S., there have been numerous reports of people having difficulty getting tested. Some have been rejected because they exhibit no symptoms, even though they had been in proximity to someone who tested positive.
Others were refused because they had not traveled to a hot spot abroad, even though they had fevers and hacking coughs and lived in cities with growing outbreaks. Still others were told a bitter truth: There simply were not enough tests to go around.
“The system is not really geared to what we need right now, what you are asking for. That is a failing,” said Dr. Anthony S. Fauci, who leads the National Institute of Allergy and Infectious Diseases, in testimony before the House Committee on Oversight and Reform on Thursday. “It is a failing. I mean, let’s admit it.”
The Economic Impact
President Trump announced a national emergency on Friday and the stock market responded favorably. Why?
Because finally we heard about a mass plan to increase testing for the virus, and saw evidence of a public-private partnership with CEOs from Quest Diagnostics, CVS, Target and Walmart in attendance. Can they deliver? We don't know that yet, but the market was reassured.
But the stock market never tells the whole story. Wall Street is not Main Street. When we are told to stay at home, when meetings and events are cancelled, that impacts the economy and hurts certain people -- restaurant workers and Uber and Lyft drivers in particular.
When we social distance and stay at home, we're not out spending. (I didn't go to my favorite craft brewery this week, and I'm experiencing withdrawal symptoms.) Indeed, consumer spending accounts for roughly 70 percent of U.S. economic growth.
Jobs at Risk
New research from Deutsche Bank indicates as many as 15 million Americans are at risk of losing their jobs due to the coronavirus outbreak’s impact on the U.S. economy.
“A significant part of the 15 million would be at risk of losing their jobs,” said Deutsche Bank’s chief economist Torsten Slok. “We’ve never seen non-farm payrolls fall by 15 million from one month to another, but this is like a gradual erosion.”
Those 15 million workers consist mostly of independent contractors, on-call workers, and temp help agency workers in industries ranging from health care to law. They represent roughly 10 percent of the U.S. labor force, says Slok.
“Every time you have a slowdown in the economy, temp workers are the first ones to get hit,” he said. As meetings are cancelled, travel declines and people forgo social activities, like going out to restaurants, movie theaters, gyms, and sporting events, these jobs are vulnerable to a sudden drop in demand.
Also, a survey released last week by data provider ISM shows the virus outbreak has caused supply chain disruptions for nearly three-quarters of U.S. companies, and many are already pricing in revenue losses this year as a result.
“This is a shock arising out of the real economy, out of the real world, out of biology, not out of financial shenanigans or complexities. We are much less well suited to deal with this.” -- Adam S. Posen, president of the Peterson Institute for International Economics.
“Long-brewing debates about how to revamp the U.S. health-care system might benefit from a renewed sense of urgency, enabling structural change.” -- Kathryn Judge, law professor at Columbia University.
"A pandemic carving through the world can't be ‘solved' by anything in the very short term, and any trade that involves catching a falling knife is liable to cause pain." -- Kit Juckes, Societe Generale Strategist.
"Unfortunately, though, people don’t always get everything right — and even the 'best' information changes over time. One byproduct of this 'natural' collective sensemaking is misinformation, unintentionally spread." -- Kate Starbird, University of Washington researcher.
“I am not to judge one measure or the other by any government. But I doubt very much that diseases have passports and are aware of borders.” -- Christine Lagarde, president of the European Central Bank.
“Only in a crisis are governments able to rally people to accept necessary but painful reforms. Every crisis is also an opportunity.” -- James Boughton, senior fellow at the Centre for International Governance Innovation
In Every Dark Hour
The first inauguration of Franklin D. Roosevelt took place in the wake of Roosevelt's landslide victory over Republican incumbent Herbert Hoover in the 1932 presidential election.
Roosevelt's inaugural speech on March 4, 1933 was awaited with great anticipation as the nation was at its peak of the Great Depression.
The nation was in crisis mode. Unemployment had reached 25 percent in early 1933. Drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans, and more than 5,000 banks had failed. Hundreds of thousands of Americans had congregated in shanty towns dubbed Hoovervilles.
Broadcast nationwide by radio, the speech was heard by tens of millions of Americans, and set the stage for Roosevelt's urgent efforts to respond to the crisis.
"So, first of all, let me assert my firm belief that the only thing we have to fear is...fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and of vigor has met with that understanding and support of the people themselves which is essential to victory. And I am convinced that you will again give that support to leadership in these critical days."
What We're Reading
This Coronavirus Is Unlike Anything in Our Lifetime, and We Have to Stop Comparing It to the Flu ProPublica
The Dos and Don’ts of ‘Social Distancing’ The Atlantic
Can't Stop Touching Your Face? Science Has Some Theories Why Wired
Here's what a massive coronavirus lockdown would look like in the U.S.
South Korea Wants to Show the World How to Tackle the Coronavirus Bloomberg
Why Soap Works The New York Times