Economic impacts of the virus

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Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, and Brent H. Meyer write,

as of December 2020, firm-level forecasts of sales revenue growth over the next year imply a continuation of recent changes, not a reversal. Firms hit most negatively during the pandemic expect (on average) to continue shrinking in 2021, and firms hit positively expect to continue growing. Third, our survey data say that COVID-19 shifted relative employment growth trends in favor of industries with a high capacity of employees to work from home, as measured by Dingel and Neiman (2020), and against industries with a low capacity.

They emphasize the reallocation effects of the virus. Of course, in the PSST framework, every macroeconomic event is a reallocation shock.

18 thoughts on “Economic impacts of the virus”

  1. And therwithal they skriked and they howped.
    It semed as that hevene sholde falle.
    Now, goode man, I prey yow herkenth alle:
    Lo, how fortune turneth sodeynly
    The hope and pryde eek of hir enemy!
    – Chaucer

    • Henceforth we goeth to the dollar tree
      Facemask ensconced, my breathe fealeth hollow
      Sucketh at the teat of the cheapeth trinkets so sweet
      The virus doth bother me no moreth.

      • Unemployment in South Dakota is already lower than it was before the pandemic. Housing starts a surging. PSST will vary widely by jurisdiction with better governance assisting the rebound. The barriers to prosperity being inflicted by the Biden Administration are significant to be sure, yet they too can be overcome through localized adaptations. A lot of the adaptations will reduce tax revenues so the states and localities that slash their overhead operating expenses will provide more favorable conditions for rebound.

  2. Arnold, please help us change conversation to where virus came from to keep it from happening again.

    This Peter Daszak of EcoHeath Alliance with $40M from DoD and NIH funneled money & mice etc into WIV. He’s mentioned 23x in NY Mag lab leak article (btw read Nicholson Baker Human Smoke). Univ of North Carolina Baric with Anarchist Cookbook is mentioned 40x. The WHO picked Daszak to head ‘investigation’ team. It’s an active coverup.

    https://nymag.com/intelligencer/amp/article/coronavirus-lab-escape-theory.html

    https://www.wsj.com/amp/articles/the-world-needs-a-real-investigation-into-the-origins-of-covid-19-11610728316

    https://www.taiwannews.com.tw/en/news/4104828

  3. Arnold, rather than arguing the irrelevance of the research you report, I prefer to share with you and your readers Jeffrey Tucker’s latest column titled ALL HAIL THE REOPENING!

    This is the column:

    What a glorious thing the reopening is! After nearly a year of darkening times, the light has begun to dawn, at least in the US.

    Given how incredibly political this pandemic has been from the beginning, many people smell a rat. Is it really the case that the reopening of the American economy, particularly in blue states, is so perfectly timed? Do the science and politics really line up so well?

    These are questions for another day. And for the record, my own opinion is that the loosening of restrictions is timed well with the relaxing of public disease fear, from whatever source, political or through exhaustion or through a shift in the media narrative. In any case, it doesn’t matter for now. What matters right now is that the astonishing destructiveness of lockdowns might be coming to an end.

    For those of us inveighing against lockdowns for a full year, it’s truly been a remarkable week. Restrictions are being loosened or are going away. We are finally getting some truth about the carnage. And we are even starting to see some elected officials being honest with us.

    Let’s start in the most locked down state on the mainland: Massachusetts. Governor Charles Baker, whose pandemic management has wrecked so many businesses in his state, has decided it’s time to open up restaurants and businesses.

    More remarkably, Massachusetts’s chief epidemiologist admits that the lockdowns didn’t achieve their goal. Shira Dorn of Tufts said: “Businesses and restaurants have not been shown to be a significant source of spread of infection, and it’s not clear that the additional measures that were instituted in November and December actually helped.”

    So sorry we ruined your holidays and lives.

    The egregious limits on gatherings will persist for a few more weeks, but the tone of the argument here has shifted. It is the most significant change in state policy in a very long time. Perhaps people can begin soon to get their human rights back?

    The same is happening in other states.

    Washington, D.C. will resume indoor dining.

    Maryland’s governor has decided that the state needs to reopen schools now and no later than March 1.

    Gov. Gretchen Whitmer of Michigan says Michigan restaurants can reopen for indoor dining on February 1. Her health adviser decided to resign. Let us hope it is the beginning of many.

    Chicago’s mayor is now demanding an immediate opening of restaurants and bars. Chicago is also threatening teachers’ unions that they must return to work.

    New York Governor Cuomo has dramatically reversed his rhetorical course and demanded a reopening of the city.

    Governor Gavin Newsom, incredibly, has lifted all stay-at-home orders across the state and is permitting dining to open up. Many restaurants have defied orders for months now, and good for them. This new announcement shows that their defiance had an influence.

    National Public Radio has decided to announce that the virus has peaked.

    The WHO is insisting that the PCR cycle threshold must change. If nations adjust, it should make a big difference in the case trend.

    And perhaps in the most honest statement uttered by any elected official in twelve months, Joseph Biden said the following: “There’s nothing we can do to change the trajectory of the pandemic in the next several months.” He didn’t need to qualify that statement. He could have stopped after the pandemic.

    CNN has removed the death tracker from its main page, while the New York Times has reported a 33% decline in new cases in the past two weeks. Plus, the Times, which arguably made the most profound contribution to the public panic over the virus, is finally reporting on the terrible carnage.

    In an incredibly heartbreaking article, the Times chronicles the unspeakable deaths of despair from young children denied schooling over the past year. It’s an absolutely shocking article, one that should echo unto the ages, given what happened this last year. It’s worth a read.

    As for the astonishingly anti-scientific blather dished out by the media over the last year, even that is starting to change. The Washington Post has published a helpful introduction to immunological basics, as written by JHU Professor Marty Makary:

    Having the infection activates both antibodies as well as memory B- and T-cells, which teach your immune system to recognize the same virus in the future to swiftly eradicate it.

    Natural immunity after the covid-19 infection appears to last for at least the one year in which the virus has been circulating at large. Extrapolating from research on the SARS and MERS coronaviruses, it could be much longer. In one study of 176 people infected with SARS, the immunity lasted for an average of two years. Another long-term analysis of health-care workers previously infected with SARS found antibodies up to 12 years later. Protective antibodies for the MERS coronavirus have similarly been documented to last for at least three years. And while the 1918 pandemic was caused by an influenza virus, the immune systems of those infected were able to make antibodies to the virus nearly nine decades later, a 2008 Nature study found.

    Even mild infections appear to elicit a persistent and functional immune response. One recent European study found that people who had mild or asymptomatic covid-19 mounted a “robust T-cell immunity” afterward. A separate French study affirmed this, noting that some people who lived with a confirmed covid-infected person developed T-cell immunity even when they did not test positive for covid.

    The article goes even further to openly admit what many of us have noticed since March: “Many medical experts have been dismissive of natural immunity due to prior infection, but there is overwhelming data showing that covid-19 reinfections are rare, and when they do occur, the infection is often mild.”

    These basic facts fundamentally change the rationale for locking down. We’ve evolved with viruses without locking down. Starting in the late 19th century, once we got smarter about viruses, we realized that protection of the vulnerable and exposure among the non-vulnerable, in the framework of a functioning society, was the best approach to dealing with pandemics. We pursued that policy for a full century until last year. The unprecedented experiment with lockdowns will end up causing more death than if we had maintained a functioning society while treating the disease as a medical and not a political problem.

    We are also getting some truth-telling on track-and-trace, courtesy of Holman Jenkins in the Wall Street Journal:

    —“Top of the list is magic solution X, a national test and trace program. I won’t mince words. A 9-year-old could see the math didn’t work. Covid spreads more easily than the flu. An overwhelming share of cases are asymptomatic or indistinguishable from ailments that millions of Americans suffer every day. In a country as big, mobile and open as the U.S., there was zero chance of catching and isolating enough spreaders to matter.

    Many experts said so at the time, but quietly. Anthony Fauci eventually said so, but quietly. All implicitly knew not to get between the media and its imperative that every big misfortune be played as a failure of inadequate government.

    Even when the testing data shouted the truth, the press couldn’t hear it. Our testing misses 70% to 90% of Covid cases and yet 91% of the people being tested for Covid tested negative and were suffering from something else. We were never going to make a dent in the epidemic this way. It was a distraction.”—end of quote

    Finally, we have actual experiments in openness right here in the US. Florida, Georgia, South Carolina, and South Dakota have all been open since the spring of last year, with life continuing on more or less as normal. The results have been no worse and most often better than what we see in lockdown states. It’s almost as if the virus doesn’t care about your political solutions.

    One final data point. I watched the AFC Championship football game last night. Gone were the dreary ads of 2020 that all began “In these challenging times.” Instead, we were treated to pictures of happy parties, friends socializing, people living life normally and happily. Even the masks are going away. True the stadium was only half full due to preposterous regulations but it felt much more normal.

    Are our governments getting wise? Doubtful but many are feeling pressure to start recognizing the rights of human beings again. The new variant (viruses naturally mutate and the NYT is trying to bring calm) might frighten them again. Biden has already imposed new international travel restrictions. We aren’t out of the woods yet.

    Will they admit error and apologize? That will take longer if it happens at all. At this point, right now, other things matter more. The priority must be to emancipate us from bad science and destructive policy so we can put our lives back together again.

    • Lo siento, EB-Ch. The red states already hailed the re-opening several months ago. The blue states are just now figuring it out and following our “scientific” advise.

      • Yes, but we need to emphasize that the rotten and corrupt democrats have been imposing “their science” and continued governing their states and large cities as if they were in charge of prisons.

    • It surely is a biden miracle. First the vaccine was discovered mere days after the most sainted election, now the virus yields mere days after the most popular inauguration.

    • We’ve evolved with viruses without locking down. Starting in the late 19th century, once we got smarter about viruses, we realized that protection of the vulnerable and exposure among the non-vulnerable, in the framework of a functioning society, was the best approach to dealing with pandemics.

      The problem is that NO ONE IS NON-VULNERABLE. Prior to the demographic transition, we were used to people dying young and it was part of the culture that you can’t save everyone, that some bad stuff just is and can’t be changed. Now, that is unacceptable. If everyone is potentially vulnerable, then everyone must be protected. With a highly contagious disease, that means everyone must be separated. Masks and “social distancing” as half-measures, but “lockdowns” as the only true solution.

      P.S. Arrowhead Stadium, site of the AFC championship game, had attendance capped at 22%, not half.

      • 22% > 0%. Try a similar feat in say California.

        “The problem is that NO ONE IS NON-VULNERABLE.”

        Nope. The problem is that the politicians is certain states allow individuals to decide for themselves on their individual level of acceptable risk, after taking into account hospital capacity, while other states do not. Try attending school in-person in say California (again).

        And, the larger problem is that “let the science guides us” has been used primarily as a flogging device. The “science” has evolved quite a bit over time and what makes sense in one locale with high population density may not make sense in some other locale. Also, questions of morality are always outside the scope of science.

        • 22% is definitely greater than 0%. I am glad Missouri allowed things to open as much as they did. I just don’t like people hurting their argument by unnecessary exaggeration.

          My “problem” was a logical one. You cannot honestly talk about “vulnerable” and “invulnerable” populations. There are only more and less vulnerable. To a utilitarian, that makes a big difference. To lots of present day Americans, it doesn’t. For them, as long as things aren’t “safe” for everyone, we must continue to endure strong separation.

          (And here “science” can provide cover. Perfectly safe, like invulnerable, is impossible. However, if the CDC says it is safe to open up, most people will go along, even if what the people at the CDC actually mean is, “As far as we’re concerned, it’s safe enough.”)

  4. Maybe a complement to “restrict supply, subsidize demand” is something like “regulate process, protect producers.

    In a situation of realatively open and competitive international trade, the problem with trying to regular and local, domestic production or industry when it adds significant burdens and costs is that it opens up an international regulatory arbitrage opportunity, and production will just move abroad as those producers are able to offer the same output at lower prices, without any comparative advantage except for that created by the regulation.

    The consequence is for the domestic portion of that industry to face implosion and beg for regulatory relief from the state, or, much more likely, help and protection in the form of subsidies, tariffs, quotas, or other forms of protection from international competition. And the state is likely to take their bribes, er, campaign donations and job offers, and comply.

    • I’m thinking that gov’t tax break subsidies for compliance with regulations is better, and more politically feasible, than only expensive regulations. And it looks like expensive regulations of business are politically inevitable.

      Uncommon typo (Handle usually so correct!*) , needing another ‘regulate’ instead of ‘regular and’ in:
      the problem with trying to regular and local, domestic production or industry when it adds significant burdens

      *How many Germans does it take to screw in a lightbulb?
      One.
      Two hands are sufficient, and most efficient.

      There is a LOT of humor available with the CCP virus going around.
      Anti-PC censorship is growing thru many cracks.

  5. Arnold, yes all society’s shocks imply the reallocation of work and physical capital but old macroeconomics based on aggregating humans’ work, output, income, and consumption as if they were homogeneous deny that implication. You can see that grotesque characterization of the economy in all MR posts involving society’s shocks, including the big shocks the pandemics.

    The analysis of society’s shocks should start from the idea of the heterogeneity of humans (the relevant structural problem) and not from its consequences, that is, the heterogeneity of behavior and performance (as it happens in your PSST framework). We have yet to make serious progress in developing a framework based on that idea.

  6. As for the virus itself, I subscribe to Michael Osterholm of my local University of Minnesota — who says that we are in about the fourth inning of the virus game. We do not know what strategies (if any!) will turn out to have been best.

    I can contrast the experience of Minnesota and South Dakota. The Democratic governor of Minnesota listened to all the health experts (I am related to one of his counselors), and much of the economy was shut down.

    The Republican governor of South Dakota took the stance that business comes first, and if 1,500 very old people die as a result, well, that is not worth impoverishing the younger people.

    So far, South Dakota seems to have made the better deal. However, the rates of infection are much higher in Dakota. If 95% of these cases are benign, as at present, then they win.
    But if catching Covid has long-term consequences for everyone, look out.

    • Osterholm was anti-lockdown in March in a Washington Post op-ed and then reversed becoming an advocate to having a hard lockdown across America until June this year when enough people have been vaccinated. Osterholm also devoted an hour podcast in late June to explaining that masks don’t help before beginning to say in late July: “As I’ve said all along, wear a mask!”

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