I have been saying in my past five years of presentations that there is plenty of good news to go around and that if anything, the news just keeps getting better — especially for our city and state.
I would then joke that when we have a downturn, I am going on sabbatical.
I never imagined that I would be in a situation — perhaps for the first time in my life — where I seriously think about just burying my head in the sand. Having both a public health and economics background is making my head spin. I can’t absorb all the relevant but shifting information and come to any kind of conclusion. There are just too many unknowns, and I studied economics precisely because things are quantifiable.
Yet we’ve all had the earth move from underneath our feet, and information — even if it’s evolving and inconclusive — can provide some sense of understanding, control and therefore comfort. Hence, in lieu of the monthly economic dashboard that my office typically produces for sponsors, I am sharing with you my humble observations and conjectures on the COVID-19 outbreak. The economic metrics I usually report are not in real time, nor will they draw correlation between the public health policies and the broader economic impact. I will attempt to bridge the two disciplines while conveying my perspective at this point in time.
Currently, a person infected with COVID-19 infects, on average, two more people. This is the replication rate (Ro), and any rate above 1.0 means the disease will continue to spread because you have more than one person becoming infected with each singular COVID-19 case. Currently, the United States’ rate is one of the highest in the world with an Ro that is about 2.5, translating to a doubling of cases every 4-5 days. We must get Ro to less than 1.0 in order to stamp out the disease. This isn’t just for the sake of our overall public health; it directly translates into our economic well-being. We don’t have to choose between the two: One translates into the other.
Any public health student will tell you that identification of an infectious disease is where everything starts. There are two types of testing that would greatly expedite our progress. The first is the swab test for COVID-19, but at a much wider scale than what we have been doing. Large-scale random testing in South Korea showed the highest proportion of cases (30 percent) in the 20-29 age cohort. A Harvard study cites a higher rate of 50 percent. This is a truly evil disease that hides in already resilient-minded young people who may believe that COVID-19 will not make them very sick or will just pass through them asymptomatically. The evil extends to how incredibly easy it is to pass the disease on to others; even compliant Millennials can still transmit the disease three days after touching a shared surface. If we had extensive testing available, we could identify symptomatic and asymptomatic people, we could trace their contacts, and knowingly isolate people with active virus.
Many say countries like South Korea are much smaller and it is easier for them to broadly test. I don’t buy it. As the world’s leader in pharmaceutical and university research, there is no excuse for us not to have a handle on this. Instead we have had such shortages in tests that most regions have had to prioritize health care workers, first responders, elderly care residents and those who “feel sick.”
What about the 30-50 percent of the infected who are young patients without symptoms? Even with shelter-in-place orders, these individuals are going out for essential activities, sometimes working in essential jobs and often living in our own homes. We are compromising our ability to mitigate the disease and the concomitant economic fallout because we can’t perform tests that were created in January by the World Health Organization.
We have all heard by now that a rapid increase in caseload overwhelms the health care system and that’s the main reason why case mortality rates (number of deaths/number of known cases) are higher in regions with a high Ro. The greater the level of contagion, the faster and harder the disease hits, and the less likely it is that someone will get an ICU bed (and ventilator) when they need it.
As of March 20, Spain had tested 646 people per million with a case fatality rate of 8.3 percent. South Korea had tested 6,148 people per million with a case fatality rate of 1.6 percent. At that time, the U.S. had conducted 314 tests per million (Graph A). Our current case fatality rate is still relatively low at 1.9 percent, but with exponential increase and continued low identification of the disease through pervasive testing, we are in danger of overwhelming the system — as evidenced by the New York City and Seattle areas — which will increase our case fatality rate. The COVID-19 cases per million shown on the graph are known cases (which will be lower with lower testing rates) but will be loosely indicative of where we may end up in mortality rates and length of high disease prevalence rates. Ubiquitous testing will allow us to identify and isolate both symptomatic and asymptomatic cases — and that’s the only way to bring down Ro and begin to resume economic activity. The longer cases continue to increase, the longer we must follow shelter-in-place orders and the longer the economic destruction goes on.
The other type of testing that would help is serologic testing, which tests for antibodies in people who have already been infected and recovered. We can phase recovered health care workers back to work to safely care for our most critically ill. We can likewise phase in immune workers to begin to add back to the broader labor pool. This is all assuming that the few observed cases of reinfection remain rare.
At some point if this disease continues, we may start to face shortages in necessities other than those related to the provision of health care. Workers are needed for food production, transport and other essentials. Knowing the level of infection and immunity allows us to begin to ease social distancing measures, to keep hospital caseloads and mortality rates low, to increase (consumer) confidence that the disease is “under control,” and to slowly but safety get the economic cogs in motion. I’d rather start turning on the lights with a dimmer than be completely in the dark.
It is true that we have a more decentralized political and health care system, but we also have provisions in place like the Defense Production Act and the Emergency Use Authorization. The EUA is an existing provision of the Food and Drug Administration’s statute cutting through the usual protocols to develop new drugs or tests in times of emergency. There are various layers of complexity to this, such as the shortage of certain components of the tests as well as the needed swabs. These special, federal government provisions enable the drastic (albeit imperfect) ramp up of the requisite production lines. Had this been invoked sooner, we just might be on the other side of the curve. Lamenting the past will not change it but, given that many U.S. regions are still experiencing replication rates greater than 1.0, identification of COVID-19 is still one of our best weapons. It’s not too late.
Widespread testing also buys time to develop and widely distribute a vaccine and/or treatment. It’s a gamble that this will occur within six months or even a year, but we do have the advantage in the last 80-100 years of rapid and nearly miraculous medical breakthroughs. A protocol with widespread testing, contact tracing and quarantine also writes the playbook for a fall resurgence if we don’t have a vaccine or treatment by then (or if it’s not available to everyone).
Now, about the economy
Let’s shift attention to the employment and economic situation. Graph B shows that the pinnacle of weekly unemployment claims during the Great Recession was 659,250 while the peak unemployment rate was 10%. The weekly unemployment claims last week broke through all previous records at 3.3 million, a 1,064% increase over the previous week (Colorado’s claims increased 737%). The correlation between claims and the unemployment rate from 1968 to February of this year is high at 0.81. A 1.0 correlation means they perfectly correlate. With a simple algebraic calculation, the 3.3 million unemployment claims extrapolate to an unemployment rate 5½ times higher (a staggering 56.5%) than the Great Recession. Thankfully, there have been swift and extensive monetary and fiscal policies that should help moderate this astronomical, hypothetical calculation.
Thankfully, extensive monetary and fiscal policies have been swiftly enacted that should help moderate this astronomical, hypothetical calculation. My hope is that they are enough to keep small and large businesses from massive layoffs (local businesses can go to pikespeaksbdc.org/prepare). We also have many more people than even 10 years ago able to work from home (including distraught economists). The Bureau of Labor Statistics in 2016 calculated that about 30 percent of the U.S. workforce could work from home, although I am guessing many companies have made herculean efforts in the past couple of weeks to continue as much work as they possibly can through remote means. We won’t know exactly how effective the federal, state and local policies have been or how many workers have and can continue to be successfully transitioned to remote work until the official unemployment rates are released in coming months.
With these major job losses, imminent personal and business bankruptcies, and a historic fiscal stimulus that further balloons the national debt ($2.2 trillion, or 10 percent of annual GDP), the question has arisen: Should we just stare COVID-19 in the face and allow the disease to “run its course?” Wouldn’t this create “herd immunity” where most people become immune and the pestilence gets stamped out the way most pandemics have throughout human history? The incongruency in the U.S. is that we are instilling social distancing and other (helpful) measures, admittedly self-inflicting unprecedented economic hardship, but not alongside the widespread testing that much more efficiently halts the (physical and economic) disease in its tracks.
An aggressive public health strategy and severe economic pain are not mutually exclusive. A rampant disease still has ramifications for the economy in the short and medium run. High death rates from highly infectious diseases still disrupt supply chains and spook consumers. The latest analyses from consumer sentiment economists say that at a minimum, the impact on consumer spending will last two to three times longer than the virus itself.
All the pieces fit together so we must decisively undercut the disease by severing its replication rate. And given the stealthy, diabolical transmission and wildfire spread across the globe, we should also be working in concert with other nations and international health organizations to aggressively instill this strategy. We may not have set the stage for reducing the deficit (while in good times), for promoting international cooperation, or preparing for a pandemic, but that is the past and we cannot change it. Now is the time to look forward, listen to medical and epidemiological experts, and aggressively plan, produce and execute.
If we don’t instill a rigorous, broad-based and sustained protocol for testing and containment of the disease, not only can it more easily resurge, we won’t have the framework in place to quickly stamp it out again in the absence of vaccines and/or treatments. This makes it more likely that we will have a W-shaped “recovery” or even an L-shaped, protracted economic calamity.
We have to be at least one step ahead of this disease.
Dr. Tatiana Bailey is the director of UCCS Economic Forum. She can be reached at email@example.com.