The Economy Is About To Take A Big Pandemic Plunge With No Safety Net
November 18, 2020
Vaccine news from Moderna and from the combination of Pfizer PFE -0.5% and BioNTech on the surface have been terrific, with about 95% effectiveness in tests so far.
But the potential for getting them is far; the country is about to see a flood of spreader events; infections; hospitalizations and deaths are on a sharp rise; and Congress hasn’t bothered to find a path to more aid as all the existing programs will run out by the end of the year.
Happy Holidays. We are about to drive head on into a brick wall—high, thick, and sturdy.
Vaccines are key to some degree of normalcy and the current reports suggest the leading candidates have excellent effectiveness. Great news.
Except, vaccines don’t matter if people can’t get them. Moderna, which doesn’t produce its own drugs, faces production challenges. Its production partner, Switzerland-based Lonza, has barely started commercial production. With additional production facilities, the company could eventually reach 500 million doses a year. Billions of people will need it, though.
Pfizer knows how to make drugs. But its entry needs to be kept at -94 degrees Fahrenheit (-70 Celsius for the metric fans), versus ordinary refrigeration temperatures for Moderna. Maintaining such low temperatures is a challenge, the vaccine is reportedly only good for 48 hours under regular refrigeration, and some bank analysts suggest that inoculation would require intensive mass vaccination events that would “cover a fraction of the healthy population,” according to Fierce Pharma.
To assume that people will head to a local clinic, pharmacy, or doctor and readily get a jab in the arm sounds unrealistic. That’s the good news.
Explosion of Cases
The bad news is rapid increase in cases and hospitalizations. Look at the growth of new cases in the U.S. as this graph shared by the COVID Tracking Project shows:
Case rates are about 2.2 times higher than the height they reached in the summer.
As for daily deaths (which shows more about current conditions than cumulative ones), the rate is down from the 7-day-average April high of 2,113, in large part because medical professionals have found better ways to treat the disease.
The average as of November 17 was 1,565. That’s three-quarters of the high point and there is a lag between new cases and death. Even with that delay, we’re seeing 1% of cases resulting in death. The actual amount is likely higher. Go back to November 3, or two weeks before the 17th death figure, and the 7-day-average number of cases was 85,167. That would be a 1.8% mortality rate.
These numbers should scare people. In Massachusetts, where I live, some testing sites have been closing because they’re overwhelmed. Waiting times in lines run hours just to take the test, forget receiving results. Hospitals in various parts of the country have noted their intensive care units are quickly getting filled. This was the original danger mentioned back in the early part of this year. Care givers are getting sick. Reportedly, 900 Mayo Clinic staff came down with the illness in the last two weeks, according to the St. Paul News.
All this is before the upcoming mini-spreader events called the holidays.
Celebrations and Exposures
Infection rates are all over the place. But even a relatively small one can turn into a big exposure potential in gatherings. I’ll explain the math as simply as I can for those who have flashbacks to bad school experiences.
First, we’re going to assume that the virus is evenly spread through the population and that a chance of exposure means that at least one person in a group has the virus.
If 2% of the overall population has the disease and can transmit it, there’s a 98% chance that someone you meet doesn’t have it. But if you have a group of people, that doesn’t mean there’s only a 98% chance that someone will have it.
The probability of multiple independent events happening is the product of all their individual probabilities. If individuals have a 98% chance of not having the virus, the probability of a group of, say, 20 people all not having it is 98% multiplied by itself 20 times. That’s only 67%, leaving a 33% of at least one person having it and exposing all the others.
Numbers will vary by area because the infection rates vary wildly. Georgia Tech and Stanford have an interactive map of risk assessment by county. If you accept that there are likely five times more cases than reported and you limit a group to 15, the chance of exposure (remember, presence of one infected person in the group) in Penobscot County, Maine is currently 6%. In Sanborn County, South Dakota, it’s 89%. If the likely number of cases is ten times those reported (remembering that it’s still difficult to get tested), the chance of exposure in Penobscot doubles to 12%; in Sanborn, it becomes 99%.
Thanksgiving dinners, holiday parties and celebrations—many people will skip them. Others won’t. Even in the best of circumstances, with no vaccine widely available until sometime next year, this would be dangerous. This will be worse. Realism suggests that we’ll see much larger spikes coming.
Some states are again restricting activities as they try to build firebreaks to reduce the spread. More aren’t. People who get ill won’t be able to work at all, let alone safely. Consumption will drop, struggling areas of low-income employment, like hospitality and travel, will get hit fastest and hardest, even as they try to revive their fortunes.
Job losses are likely to begin increasing again (unless the country opts to let people die right and left, paralyze the healthcare system, and damn the consequences). Companies will be reeling. And all the federal financial help is about to end. Here’s a list of items that soon stop, according to Politico Playbook:
Emergency unemployment insurance (UI) compensation that added 13 weeks of coverage to those who needed it
Pandemic Unemployment Assistance that gig workers and independent contractors used
State and local funding
2020 rebate checks not yet received
Small business debt relief
Exclusion of employer payments toward student loans
Tax credits for self-employed family and sick leave
Payment delay for payroll taxes
Dozens of special tax provisions
This is going to be a nightmare. There will simultaneously be a sharp hit to the economy; likely increase in unemployment; greater healthcare cost pressures on states, localities, companies, and individuals; and zero federal aid.
No safety net to stop the vehicle from plowing into that brick wall while the major parties in Congress dig in and insist that they want everything their way.
And you thought 2020 started badly.