We must solve the public health crisis in order to solve the economic crisis

A common refrain amongst many Americans who oppose stay-at-home orders, mandatory lockdowns and mask-wearing mandates is that while the coronavirus is a serious threat, the risk of contracting the disease is minor compared to the economic damage of such orders, not to mention threats to individual freedom. However, studies of national and state-specific economic data as well as trends in coronavirus infections support a different analysis.

A quick look at the fortunes of Georgia, the first state to begin aggressive economic reopening, reveals that relaxing restrictions is far from a cure-all for unemployment and consumer confidence. In the first few weeks after Governor Brian Kemp began to ease restrictions on April 24, weekly unemployment claims remained notably higher than pre-pandemic levels. Some Georgians were called back to work while others still filed unemployment claims for the first time. Layoffs continued, particularly in the retail, social assistance and health care industries. Additionally, some businesses including restaurants replenished their staff well below capacity, citing lower customer demand.

Consumer confidence is key to the functioning of a healthy economy, and its present absence drives lower demand and with it, higher unemployment. If potential customers are worried about catching the virus, they’re less likely to visit stores and restaurants. Indeed, the Conference Board, which releases the most recent Consumer Confidence Index (CCI) rating every month, claims that the reopening of the economy in some states and decrease of the national unemployment rate in June have caused only a marginal improvement in consumers’ outlook. Lynn Franco, Senior Director of Economic Indicators at The Conference Board, specifically cited national fears of a COVID-19 resurgence as one of the main reasons consumer spending remains well below pre-pandemic levels.

In the past few weeks, the US has seen COVID-19 infection rates reach unprecedented levels, especially in the South and West in states like California, Arizona, Texas and Florida. Florida represents a particularly interesting case study as Governor Ron DeSantis, like Georgia’s Brian Kemp, was one of the last governors to shut his state down and one of the first to begin the reopening process. Florida started loosening restrictions on May 4, and DeSantis allowed local leaders to open their beaches as far back as mid-April. Just a couple weeks later, the Florida governor declared his state’s reopening a success in an interview with the National Review. However, a quick glance at Florida’s economic data reveals that the state unemployment rate actually increased to 14.5% in May from 13.8% the previous month in spite of the state’s reopening.

Despite these meager results, DeSantis continued his reopening plan in June with Phase 2, which allowed for even looser restrictions including letting bars and movie theaters reopen at 50% capacity. It didn’t take long for the coronavirus to surge again, and many record-breaking counts of daily new infections followed. Phase 2 began on June 5, and barely a week later the state surpassed 2,000 new COVID-19 cases a day for the first time. Five days later, Florida surpassed 3,000 new daily cases. Now, with a seven-day average of new cases approaching 10,000, it’s clear that what little economic recovery Florida gained from reopening has come at a steep price. Even Dr. Anthony Fauci, the nation’s top infectious disease expert, said in a podcast discussion Thursday that Florida “jumped over a couple of checkpoints” in its eagerness to reopen.

American businesses are noticing the nation’s troubles with controlling the virus as well. Hollywood film and television productions have been forced to stop filming almost entirely across the board, leaving producers scrambling to find solutions to resume production in the midst of a pandemic. A production executive who spoke anonymously to Variety claimed that producers are “suspicious” of political leadership in states which have reopened quickly and seen subsequent coronavirus surges. Joe Guest, who worked as a production manager on Avengers: Endgame, singled out Florida as “dangerous” and said states that have quelled their outbreaks like New York seem like better places to film. Some productions are looking to leave the US entirely and relocate to sound stages in Europe where many COVID-19 outbreaks are more contained. Upcoming summer blockbusters are preparing to restart production in the UK, not the US. Some European production companies such as Mid Atlantic Films and Studio Babelsberg have received many calls from American producers who want to move their productions overseas. The message is clear: only countries and states which have successfully responded to their COVID-19 outbreaks are under consideration for hosting productions and receiving their accompanying economic benefits.

Even economists have begun extolling the virtues of preventive measures such as mask wearing in recent weeks. On Monday, Goldman-Sachs released a report making a medical and economic case for wearing masks, including a nationwide mandate to do so. The investment bank’s analysis indicates that a federal mandate would greatly slow the spread of the virus and potentially reduce the need for more economic lockdowns. Measures to slow the virus’s spread are often criticized as harmful to the economy or intrusive to one’s personal liberties. However, Goldman-Sachs claims that widespread mask usage will lead to a “sizable” economic boost, and Constance Hunter, chief economist at KPMG, agrees while adding that any economic recovery will come slowly due to the long-term damage the virus has dealt to the labor market.

The economic harm that the coronavirus has dealt to younger workers from the Millennial generation and Gen Z can scarcely be overstated. The oldest members of Generation Z have only recently finished college, and many have had internships and job offers revoked amidst the pandemic assuming they received job offers at all. Nearly a third of Gen Z workers have lost their jobs since the start of the crisis, and studies have shown that young workers who graduate during economic recessions tend to have lower starting salaries, which makes saving for retirement and purchases of homes and cars much harder. Lower starting pay rates often mean that young workers not only start their careers in a weak financial position, but also will need to take years if not decades to start building real wealth. It’s almost exactly a repeat of what happened to Millennials who graduated during the Great Recession in 2008-2009. In fact, Millennials were among the least prepared for the present economic slowdown since they were still recovering from the last one. Not only did Millennials suffer from high unemployment during the late 2000s, but they also had to contend with higher costs of living, tens of thousands of dollars in student debt and poor wages. Now, Millennials could be forgiven for feeling an uncomfortable sense of déjà vu.

If all of the aforementioned evidence isn’t enough, and the disastrous state reopenings, lack of consumer confidence, departing American businesses, pro-mask economist recommendations and substantial virus-induced youth unemployment can’t convince skeptics that the coronavirus must be contained nationwide before economic recovery can begin, then consider the nationwide unemployment rate. President Trump himself has frequently criticized state governors for going into lockdown on the grounds that the economic toll is simply too great. However, even the efforts of governors with aggressive reopening plans barely made a dent in national unemployment. From February to April, unemployment skyrocketed from 3.5% to a staggering 14.7%. After two months of reopenings, the rate lowered to 11.1% in June which, while an improvement, came with dire warnings from Dr. Fauci and other public health experts. Those grim predictions have sadly proven prescient.

The harsh truth is that economic recovery from the present recession will be long and arduous just as the recovery from the crisis of 2008 proved to be. In addition, reopening state economies too soon and too quickly leads to spikes in COVID-19 infections and eventually more deaths which could have been avoided. As long as the coronavirus rages unchecked across entire regions of the nation, consumer confidence will remain low, unemployment will remain high and American firms will look overseas for their business. The present public health crisis must be solved before we can begin to seriously discuss solving the economic one.

Sources:

https://www.investopedia.com/articles/fundamental/103002.asp

https://www.cnbc.com/2020/03/31/us-consumer-confidence-march-2020.html

https://www.cnbc.com/2020/05/26/consumer-confidence-may-2020.html

https://www.conference-board.org/data/consumerconfidence.cfm#:~:text=The%20Conference%20Board%20Consumer%20Confidence%20Index%C2%AE%20increased%20in%20June,improved%20from%2068.4%20to%2086.2.

https://www.businessinsider.com/georgia-reopening-states-arent-seeing-economic-boom-2020-5

https://apnews.com/26f196a8b756af280092c8ac714ba35b

https://www.politico.com/news/2020/05/21/georgia-reopening-coronavirus-jobs-273070

https://www.businessinsider.com/gen-z-careers-derailed-like-older-millennials-if-recession-hits-2020-3

https://www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/

https://www.cnbc.com/2020/06/01/how-the-coronavirus-pandemic-is-shaping-the-future-for-gen-z.html

http://lmsresources.labormarketinfo.com/charts/unemployment_rate.html