Premature restart leads to a resurgence of the U.S. economic recovery

When Texas reopened bars last month on Memorial Day weekend, previously banned millennials and Gen Z took advantage of the opportunity to squeeze bars in defiance of social distance rules and push credit card spending over the next two weeks to 2019 levels. Southern states such as Florida and South Carolina have also seen this brief indulgence from the premature economic restart. But this indulgence has led to a renewed surge in new crown cases, which is changing the nature of the outbreak and may test the strength of the overall economic recovery.

Premature restart leads to a resurgence of the U.S. economic recovery

Reports from states such as Florida and Texas, where large outbreaks have been large, indicate that young people are the main group infected with neo-coronavirus (COVID-19). Because young people are less likely to die from the disease, mortality may be lower, but it could also upend the U.S. economic recovery process.

The U.S. economic restart is already intermittent, and with some places suspending economic restarts and stores shutting down, Americans are divided into two categories willing to take more risks and still comply with health guidelines, and the recovery may become more blurred.

Analysts and epidemiologists warn that doing so will lead to a halt in the recovery and, instead, turn the recent good news into a false action. The recent decline in single-day deaths will also fade away. Hospital admissions are rising in Texas, and health experts warn that the spread of the virus among young people at lower risk of serious illness will eventually spread to those at higher risk.

“There’s an inevitable mix,” said Amesh Adalja, a senior and academic at The Johns Hopkins University Center for Health and Safety. “The death toll is likely to rise. “

And this change could eventually hurt the recovery.

“If you increase your risk tolerance for not wearing a mask for an indoor party, then the virus will spread widely… And risk aversion can make people afraid to shop again,” said James Stock, a professor of economics at Harvard University. “As a result, the recession will be longer and the recession may be deeper.” “

Stock and other researchers have proposed balancing economic restarts with outbreak prevention and control measures. But there is little national consensus on any such system, and there is no concept of what will happen if the new crown outbreak spreads further out of control.

Different tracks

Key analysts are trying to figure out what the recent surge in cases might mean.

Does this suggest, as Krishna Guha, Evercore ISI’s vice-chairman, recently pointed out, that the U.S. market is vulnerable if people are afraid to cross state lines? Or, as St. Louis Federal Reserve Bank President Brad suggests, there is a new balance around how the recovery has entered, with different people, businesses and regions having different judgments about risk and risk management.

Republican-controlled states, especially in the southern state, are hesitant to take action against the epidemic in the early stages of the outbreak, and the pace of easing restrictions is swift. These states are now experiencing record numbers of new crown cases, and some states, such as New York State, have specifically quarantined residents in those states. New York State was hardest hit in the early days of the crisis, but made the most progress in controlling the outbreak.

Jim Justice, the Republican governor of West Virginia, has warned against travel to Myrtle Beach after the state’s infection sourcing it from the popular resort of South Carolina and some fast-moving incumbents have turned their backs on.

Over the past week, Republican Texas Gov. Greg Abbott has gone from encouraging people to “stay at home” to issuing an order Friday to close bars, reduce the capacity of restaurants and curb other activities.

Florida authorities also announced Friday that the state’s bars must immediately stop serving alcoholic beverages in-stores.

Speaking at the Florida Chamber of Commerce on Thursday, Atlanta Federal Reserve Bank President Raphael Bostic said that if a large number of people return to public life without following health rules, it would put the economy “on a different track.”

“Even if not everyone does it right away, someone might raise their hand and say, ‘You know, it’s not worth it,'” Mr Bostik said. “‘I’ll only take it out. I’ll watch movies on Netflix, not in the theater. ‘”

Economic recovery slowdown phase

There have been some surprises on the economic side. U.S. employment unexpectedly rose in May, and retail sales rebounded sharply from the historic collapse.

But if the states that are rapidly restoring economic activity have shown a new foothold in the outbreak, the trend could be a false dawn.

J.P. Morgan analyst Jesse Edgerton has a chart showing a broad correlation between increased restaurant customer traffic in some states and an increase in infections in two weeks.

“Even if we enter a new normal where young people are willing to go out and spend, older people who stay at home, travel outside, and don’t eat in restaurants will be left behind,” Edgerton said. And “we’re not sure that people who are going back to travel and spending will sustain this trend.” “

Oxford Economics’s “recovery tracker” of 20 economic, health and social indicators began to rise steadily in early April, but levelled off in June. Gregory Daco, chief U.S. analyst at the institute, said the indicator could slow further if infections continue to grow.

“Following the strong first phase of the recovery, which has rebounded from a sluggish one that falsely suggests it will return immediately to a pre-epidemic state, the economy appears to be entering the second phase of a slowdown in the pace of recovery,” Daco wrote in a recent analysis. “This economic recovery is based on improved health prospects. If the indicator continues to deteriorate, confidence will fall accordingly. “