COVID-19 vs The Economy
When anyone starts a conversation about ‘restarting the economy’ they are often quickly accused of being an insensitive rich person that doesn’t care about human life. As protests erupt in the United States with workers that want to go back to work, I think it is time that we look more closely at the decision of our governments to shut down non-essential businesses which has resulted in millions of workers worldwide unemployed and seeking financial assistance from government or any other willing donor. The impact of this shutdown on people’s health is not something that we can ignore for much longer.
The coronavirus hit my radar as a significant concern for Canada the first few days of March. Back then we were seeing daily reports of new cases in the double digits and the math suggested that the virus was highly contagious and much more lethal than the seasonal flu. I went into action on two fronts – first to make sure that ASI had a plan if the virus became a pandemic, and second, to work on a home gym in case I got locked down.
I didn’t even think about the implications for the stock market or I would have sold everything if I understood what was coming. That really isn’t true, I am not much of a market timer and I don’t know how anyone would have predicted that governments would react globally to shut down the world economy for non-essential services or the scramble that has ensued.
By mid-March my son said that he had grown weary of everyone saying that what we were experiencing was ‘unprecedented’. I told him that my friend Kelly had just said that this situation was ‘wild’. He appreciated her use of colour and only wished the media could do the same.
Flattening the Curve
Unprecedented times call for unprecedented measures. Frankly, in my mind great leaders earn their money in times like this – reacting to the unknown – making it up as they go along and getting it more right than wrong.
In early March, Canada had a few hundred cases – but the projection was that cases would double every 3 days and by the end of the month we would have tens of thousands of cases and to compound the problem the mortality rate would be 2% to 4% compared to the mortality rate of the common flu of approximately 0.1%. Add up the math and we were ultimately expecting 30% to 70% of North America to get the virus adding up to millions of deaths. Canada alone might see 200,000 to 400,000 deaths. With these types of projections, I don’t know anyone that didn’t think immediate and drastic action was required to save some lives. The economic cost of the actions was considered but was not the priority.
We are now more than a month down the road. Serious social distancing has been put in place and non-essential businesses have been shuttered. The result? By April 19, we have limited confirmed cases in Canada to 35,000 and deaths to around 1,500. I don’t want to suggest that the pain of this disease for 35,000 isn’t real or that the loss of 1,500 lives isn’t sad. But considering the projections, we are winning this war – for now at least.
The importance to flattening the curve was to buy time to ramp up our medical resources to deal with the cases to come. I heard last week that Detroit is cutting their emergency beds from 1,000 to 250 as they get though the hump. I hope they aren’t making that move too quickly.
It is too soon to add up the numbers on how the economy has performed over the last month or so. However, by any measure the numbers will be worrisome. The government stimulus intended to help unemployed workers and businesses that have closed are staggering in their amount. The sheer number of unemployed gives us a clue that the economy is not in the best shape.
To be clear, the stock market is not the economy and we shouldn’t spend too much time worrying about the prices of stocks which are just guesses by everyone on how this will work out in the long run. What does matter is the worker that was making $4,000+ a month and now needs to get by on the $2,000 the Canadian government is sending them. Some are choosing to make the numbers work by not paying rent – so where does that leave the landlord that has a mortgage to pay? Well, some landlords are accruing interest on missed mortgage payment – so who pays for that extra interest when we restart the merry-go-round and how do you jam 12 months of mortgage or rent payments into 8, 9, or even 10 months?
If it wasn’t clear before this crisis, what is clear to everyone now is that the economy is so fully integrated locally – and globally – that you can’t just turn it off without massive trickle-down effects. Some think the longer we stay shut the more bankruptcies we will have from businesses that can just never make up ground on the missed rent that has to be paid back. Large scale bankruptcies would be a detriment to all of us as thousands or possibly millions of workers get displaced. Taxpayers are going to have to pay back all the government spending and the more employed workers we have when this is behind us the better for everyone.
But setting aside the economic wellbeing of the lowly worker and the small business owner there is something else going on here. People are stressed. Stressed about paying bills, stressed about finding groceries, stressed about getting sick. Stressed about having to be stuck inside with each other all day long.
As a society, we have come a long way to recognize the importance of mental health and we have shifted the balance away from the ‘we are here to make money’ standard of work to the ‘we care about you and your life and we want you to be healthy while you work’. We shouldn’t take this shift for granted as greater and greater number of workers find a happy work-life stress load. Unfortunately, we are doing some serious damage to the health side of the equation for many workers with the shutdown.
There are surely workers that are still being paid to not work – there are those being paid to keep working (our firm) – but the third group that is not working and not being paid is vulnerable right now. While the government could try to keep paying them a fraction of their regular income indefinitely to make some of the worry go away, there just isn’t enough money to do that and some workers and business owners are falling through the cracks. I talked to a landlord yesterday who has a brand-new tenant that just called crying because after investing her life savings to start a doggy daycare, she is watching everything fall apart. The landlord is working with her.
Drivers, Start Your Engines
If you read my commentary on telecommuting, you will know that I am not loving this new world working exclusively from home. But I will suck it up for the greater good. With that said, to me we need to hope that in the coming weeks our medical system has ramped up and that we can start to loosen the reigns and let some people get back to work. Not get back to the way things were – but better than today.
As I write this commentary, there has been talk this past week about how to start the economy. Both the UK and the US are talking about a three-phase approach – although what opens and when, is different between them. In the US gyms are targeted in the first phase – I assume because of the mental health benefit (or perhaps effective lobbying). In the UK, gym openings are deferred to the third phase – I assume due to the challenge of keeping surfaces virus free.
As we restart the economy, I am not sure that the right dividing line is essential/non-essential. To me, it is largely about the size of a gathering. A small crew of construction workers building a family home would be a smaller step forward than filling up the local Costco with thousands of customers and hundreds of workers each day. A two-man or four-man landscaping crew again better than full office towers in the downtowns. A small yoga studio better than a 5,000-member 50-treadmill gym.
I am pretty sure filling a hockey arena isn’t practical until long after the hockey season should have ended. I am ok with that, but I am bracing myself for the sadness of the cancelled NFL season that seems to be heading our way if we can’t find the vaccine or the herd immunity for which the experts are desperately searching.