When do we open up the economy?

What’s happening

Around 90% of the American population is under a stay-at-home order as states try to slow the spread of the coronavirus and make sure hospitals don’t get overwhelmed by surges in patients. 

These measures to “flatten the curve” have been recommended by the CDC to buy the medical infrastructure time until a vaccine is created, a process that will take around 18 months.

The social distancing measures appear to be working, as seen in hot spots of New York and Washington state; in New York the number of coronavirus-related deaths appears to be stable, though counting people remains difficult as many who die at home are not tested.

“We are flattening the curve,” New York Gov. Andrew Cuomo has said. 

But the economic toll of social distancing has been deep. The lockdown has resulted in many layoffs and business closures. Already 22 million people have lost employment in the past four weeks, wiping out the last 11 years of job growth. 

Why there’s debate

The skyrocketing number of jobless and damage done to stock markets have led some (including President Trump) to push to “end the lockdown” and lift the social distancing guidance — something that public health officials have pushed back against.

Countless businesses have had to shutter to slow the spread of the coronavirus. But when do they reopen? (Alyssa Pointer/Atlanta Journal-Constitution via AP)

Many governors have taken the position that tackling this quickly and proactively will result in less overall economic damage and death. 

“An economic recovery only occurs on the back of a healthcare recovery,” New Jersey Gov. Phil Murphy said recently.

However, there’s been a lot of worry that the cost of the economic shutdown is too burdensome, particularly from regional conservative politicians who are upset over the ban

In Michigan’s capital city, Lansing, thousands protested the governor’s orders to keep people at home, citing economic damage. The governor responded, calling the rally “a public health risk.”

Another aspect of the debate is that Trump has said he has the authority to open the country up, but governors argue it rests with them, as they — and not the federal government — implemented the stay-at-home orders in the first place. (Trump backtracked this the day after.) 

Trump formed a council of advisers in concert with medical experts and industry professionals. The president on Thursday unveiled federal guidelines issued to states recommending that can ease stay-home orders if they document a decline in coronavirus cases and have strong testing capability. These places would begin a three-phased gradual reopening of businesses and schools, 

What’s next

Some regions are working together on plans for what a reopening of the economy and loosening of restrictions would look like. California, Washington, and Oregon have announced plans to work together to work on a plan to reopen the economy, though have not given a timeline. Seven states in the Northeast are working together on their own plan, as New York’s hospital admittances from COVID-19 fall. 

But many of the stay-at-home orders have been extended well into May, including New York.

Reopening will be complicated, gradual and risks a second wave of coronavirus infections. There are plenty of questions to be answered: Which industries will open first? Will some have restrictions — perhaps even mandatory testing and face masks? Will some people elect to avoid crowds until the vaccine emerges? Does getting over the disease guarantee immunity from getting it again? 

Graphic by David Foster/Yahoo Finance


Let’s manage expectations, this won’t be really over until the vaccine

“We believe the path to reopening the economy is going to be long. It will require turning on and off various forms of social distancing and will only come to an end when vaccines are available, in the spring of 2021 at the earliest.” — Morgan Stanley Research note, April 12.

Slow return to work in June as social distancing relaxes

“We see a slow return to work with US cases peaking in [~38 days]. We expect social distancing reductions in June as diagnostic/serology testing are widely available and hospital capacity is extended. Variable levels of social distancing will remain until a vaccine is widely available in Spring 2021.” — Morgan Stanley Research note, April 4

The public will need to be persuaded that everything is okay when a restart occurs

“We see a few prerequisites [for reopening]: further declines in confirmed new infections, sufficient hospital and testing capacity, and the ability to trace and quarantine those who might be infected. These look achievable in coming months, but there is much uncertainty about the feasibility of controlling virus spread during reopening.” — Goldman Sachs Economic Research, April 15

The all-clear will likely come as a roll-out, not an “all-clear”

“There may never be an ‘all clear’ or sudden and immediate rollback of stay-at-home orders. Still, forcing everyone to stay home necessitates a sharp decline in spending and by the third quarter, after months of suppressed activity, there will be a coiled spring effect which will likely translate into one of the strongest quarters on record for spending even if social distancing becomes a necessary part of life. Even with that surge in the third quarter however, it will not be until the end of 2021 or perhaps not until early 2022 before the level of personal consumption expenditures return to the pre-recession peak.” — Wells Fargo Securities Economic Group, April 8

Graphic by David Foster/Yahoo Finance

Jobs with close proximity to others will be come back later than others

“Construction and manufacturing ought to come back before hair salons, restaurants and fitness centers.” — Neil Dutta, Renaissance Macro Research, April 13

Childcare will be an issue 

“Even if many workers are allowed to return to their worksites in May or June, childcare will remain an issue for many since schools will be shuttered for the remainder of the year. This would suggest remote work arrangements would continue for much of the white collar professional workforce at least through July.” — Neil Dutta, Renaissance Macro Research, April 13

New rules for restaurants, fitness centers, and other high-contact establishments

“Even when places like restaurants, fitness centers and salons open up, there will likely be guidance on how these establishments can operate. For example, before fully shutting down, New York mandated that all restaurants and bars reduce capacity by 50% (March 12).” — Neil Dutta, Renaissance Macro Research, April 13

There is a demand shock now, but there will be a supply shock when things restart

“While the demand shock is getting a lot of attention now, the opening up of the economy will feel a bit like a supply shock in that the US economy will still not be operating a full capacity.” — Neil Dutta, Renaissance Macro Research, April 13

Social distancing and reopening may not be 100% mutually exclusive if we test and change business practices

“We agree that much of the improvement is probably a direct consequence of social distancing and the plunge in economic activity, and could reverse quickly if people just went back to work. But even if this means that a return to “business as usual” is off the table until we have a vaccine, it might be possible to bring back at least part of the lost output with a sharp increase in testing as well as more limited changes to business practices that lower the risk of infection.” — Goldman Sachs Economic Research, April 13.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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