An Uncertain Outlook for the Pandemic Economy

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Covid-19 cases are surging again. After about a month of gentle decline, caseloads have spiked in the last couple weeks, hitting a new record of 47,341 on Friday (June 26th). The increase is not explained by increased testing – though testing capacity has improved, the positive test rate has risen significantly as well, indicating that confirmed cases are growing faster than tests.

Unlike most every other developed country, it looks infeasible that the US will have the virus somewhat contained in the foreseeable future. On Tuesday, June 30th Dr. Anthony Fauci said it’s possible that daily cases could reach 100,000 per day without further containment measures. The good news is that the number of daily Covid-related deaths has steadily declined for several weeks. This is likely due to some combination of improved treatments and the median age of newly infected people skewing younger. But deaths are likely to begin rising again due to the sheer increase in cases.

The economic outlook, to put it mildly, is uncertain. The May jobs report proved much better than expected, showing that the country actually added 2.5 million jobs (the largest single-month increase in history) But the economy is still in a deep hole, having shed a whopping 20.7 million jobs the month before. A second round of restaurant and bar closures have already started in some of the recently hardest-hit states like Florida, California and Texas, and more states are likely to follow suit. Many of these establishments were kept afloat by the federal Paycheck Protection Program, but it is uncertain if more aid will be forthcoming.

How has Montana coped economically? Despite one of the lowest caseloads in the country, the economic toll on the state has been close to average. A small business survey conducted by the Census Bureau asked business owners what effect the pandemic has had on them. The percentage of Montana businesses responding with “large negative effect” was 30.9%, 7.3 percentage points below the national average. However, a CNBC analysis shows that Montana suffered 155 job losses per 1,000 workers, a little above the national average.

Montana relies on summer tourism more than most states, and that industry has been savaged by the pandemic as much any other. But Montana’s low caseload and abundance of outdoor activities, which are now known to be much safer than indoor gatherings, may be helping the state’s tourism sector cope reasonably well. However, Covid cases are now on the rise in Montana too, with Monday’s (June 29th) report of 56 new cases shattering the previous record of 35 back in March. On a per capita basis the Montana’s case load remains low, but the trajectory is ominous.

Source: New York Times

The long hoped-for “V-shaped” recovery appears dead in the water. The economy remains in an extremely precarious position, and any recovery that may have been underway is likely to stall out in the face of the new wave of cases. Businesses can reopen, but people can’t be forced to live and travel as they would in normal times, and simply won’t do so if they don’t feel safe. Containing the virus was always the first and most important step to economic recovery.

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About Author

Brock Smith is an Assistant Professor in the Department of Agricultural Economics and Economics at Montana State University. He received a PhD from UC-Davis in 2013 and spent three years as a Research Fellow at the Oxford Centre for Analysis of Resource Rich Economies. He mainly studies effects of oil and natural gas shocks in both an international and domestic US setting.

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