What will Covid-19 Second Wave do to the American Economy?
As Covid-19 transitions from young people (the 20-29 cohort) to the general population, it will boost herd immunity eventually but that will take some time. In that interim period near the end of 2020 we’ll see NY like stress on the healthcare system, in many many more places.
This will mean small businesses, retailers and restaurants that survived the first great shutdown as well as individuals will face even more uncertainty. When the Fed is warning us, we should listen. America’s most vulnerable families could face financial crisis if government relief fades away, with young people (GenZ) at special risk to churn from the middle class just as they are supposed to be graduating.
The Second Wave of the pandemic is a more pro-longed economic crisis that has been weirdly under-reported from the retail sector to the political situation across Europe, the U.S., South America and India.
The K-shaped recovery means those most vulnerable, start to really hurt and social unrest results. The scale of that unrest will depend on the severity of the pandemic. New simulations are showing that as Covid-19 enters older Millennials, GenX and Boomers, it will press our healthcare systems like never before, where in the U.S. 3,000 deaths a day could even be seen, roughly 3x worse than what we are seeing today. The U.S. have topped 7 million cases but soon India will overtake that total figure.
It’s widely expected that half of restaurants will close permanently and half of those who were unemployed in the first wave are still unemployed many months later. A vaccine won’t be embraced by many Americans and Europeans, until it’s been seen to be 100% safe due to being rushed. Positivity rates will increase in North America and Europe as we head into October and November. The situation in South America and India is even more critical.
By the simple act of China letting the virus to go global, it’s put itself in an economically favorable position. Meanwhile the ‘retail apocalypse’ will take new heights in 2020, essentially never seen before where digital transformation and E-commerce are seeing a golden age acceleration where roughly 5 years of progress has occurred in the last 5 months.
However given the hit to travel, hospitality and the service sector, women and young people have been hit much harder. This will have lasting and profound economic consequences likely to scar a new generation of graduates and Moms.
The Second Wave destroys entire retail neighborhoods permanently. Brick and Mortar retail and tourism, travel and the performing arts and the event industry, may not return to pre Covid-19 levels until mid 2022. A pandemic is usually a 3-year event even with the innovation that is occurring. The scale and spread of Covid-19’s upper limit is still not known. Therefore the economic impact is likely worse than feared, not better.
In the U.K, which has not been hit as badly as the U.S., according to the Centre for Retail Research, 13,867 shops have permanently closed so far this year, a 24.8% rise on the same period last year. Dozens of retailers in the U.S. have gone bankrupt before the peak of the Second wave. How many more are vulnerable to doing so as well? Likely over a dozen major retail chains. The pain to the small business sector and local retail is not even yet known.
As the positivity rate increases in Europe, new parts of the U.S. and Canada, the impact on consumer behavior will be as radical as the new targeted imposed lockdowns. The scale of the Second Wave will be many times more severe in its impact on the general population, the vitamin D deficient older male demographic who have pre-existing conditions. The economic impact of the Second wave, we know if it’s a W-shaped recovery, the second downturn could be more severe.
The volatile political situation in the U.S. is even worse for the vulnerable. Stimulus checks and enhanced unemployment benefits that helped the poorest Americans weather the coronavirus pandemic are in danger of ending, throwing the finances of the most economically vulnerable. Evictions, more homeless, more protests, more breakdowns of the healthcare system are coming, we just don’t know exactly when. A system in denial is not a society in a state of preparedness.
The Federal Reserve is a lot more worried about the economy than the stock market or the president are. The Fed took unprecedented measures to minimize the economic pain of the first wave. However during the 2nd wave, Covid-19 fatigue combined with a breakdown in support systems means economically things could become dire for a while. Instead of avoiding reality, we need to collectively brace for the 2nd wave.
Mass layoffs, corporate debt rising, the exodus from urban areas, it’s likely a trend that will continue globally. Global GDP won’t be okay in 2021. Bouncing back from Covid-19 will take time and for many, that will mean new careers and entire pivots of their life plans. The world remains in an economic crisis and hopes for a full and fast economic recovery are misplaced. We need to look at the data and not believe the politicians.
Depressed wages and profits, and in many cases increased debt loads, will be a drag on consumer and business spending. Lingering uncertainty over potential new waves of COVID-19 and over the economy will also dampen demand.
We need to re-think our values and priorities in the process of how we experience the pandemic and its impact on people. We need to do this as workers, as families, as companies and as people adapting to a changing world and environment.
In the face of uncertainty, many firms are unlikely to rehire non-essential workers in the short term. As demand shrivels up, people need to consider new careers options, taking a gap year from studies or postponing wedding or travel plans. Covid-19 is just getting started in how it will impact the general population. Herd immunity or a vaccine won’t change the world over night.
Firms will either downsize or fail altogether, and over time the labor and capital that they release will be reallocated to more productive or better-adapted firms. Natural selection will take place in a new cycle, and the rebirth is going to be incredible if you can seize the opportunity.
However in terms of total deaths, lingering heart conditions, weary souls in terms of our mental health, it will be significant. So too will be the impact on our savings, on our humanity and our sense of identity. You might not be working in 6 months time in the field you have been in for the last few years.
We don’t even know if herd immunity is possible with Covid-19, we don’t know how effective vaccines will be or how much of the population will voluntarily take them. We don’t know how unsafe our cities will become at the height of the Second Wave. We don’t even talk about these things openly any more as a society.
We have let our kids go back to school without masks, we have tried to say business is more important than life, and for the economy in the long-term, these are poor choices. Our preparedness has not been like Taiwan, we didn’t fear Covid-19 like we should of and China knew all of this when they continued to let international flights continue.
China fully expected the hedonism of consumerism to trump preparedness and strong national leadership and response to the Pandemic. By down playing the severity of the virus, we deserve the Second Wave’s virality. We brought it upon ourselves, together. It is a kind of economic deterministic and sociological karma of our behavior.
Welcome to the Second Wave. We could witness a total breakdown of our our health agencies and health sector, retail sector, governments capabilities and banking industry to cope with the pressure. When we tried to have a good summer and continue our lives, we didn’t anticipate what the consequences might be as a society.
More than 100,000 restaurants and bars have permanently closed due to the coronavirus pandemic, according to estimates from the National Restaurant Association. But today we stand not at the half way mark of the pandemic, but rather, just at the onset of the Second Wave.
The pandemic has altered consumer behavior, from how people order restaurant food to their perception of third-party delivery companies. And, the pandemic will condition us further as it gains traction in the mainstream population.
For the 2nd Wave the Fed’s ability to save us will be reduced. When they talk about economic uncertainty, we must be realistic of what they actually mean. Economists who work up the most detailed (but classified) forecast of the economy understand what’s actually going to happen.
The Fed has been grappling with slow-burn changes to the United States and global economy. The severity of the 2nd Wave will surprise a lot of people and CEOs who have not been paying attention. Healthcare services could be entirely derailed like nothing we’ve seen before since many health concerns were already delayed by the first wave. Combined with the flu season, the impacts will be horrific for those most vulnerable. Politicians don’t tell the truth for a reason.