29 June 2020





THE SURGE IN COVID-19 CASES MAY NOT TURN INTO THE CATASTROPHE YOU FEAR




By Raul Elizalde

This article also appeared on forbes.com



A significant number of states that decided to reopen their economies quickly are seeing a huge spike of new Covid-19 cases and a sharp increase in hospitalizations. However, related deaths are not going up. Moreover, an equally large portion of the U.S. achieved a massive reduction in cases, hospitalizations and deaths. While the pandemic is far from over, the outlook for the economy may be less dire than the headlines suggest.


We took a deep look at comprehensive data sets of Covid-19 data and divided the U.S. between “relapsing” states and “abating” states. The first group is the one experiencing a worsening of pandemic conditions and includes California, Texas, Florida, Arizona and the Carolinas, among other states. The second group includes New York, New Jersey, Illinois, Pennsylvania, Ohio and other states, which were hit very hard early on, but now show significant overall improvement. Each of these two groups accounts for almost 45% of U.S. GDP. The rest of the states are either too small or don’t provide detailed data.

source: Path Financial LLC, covidtracking.com


The contrast between the two groups is stark. The abating states group had an early onset of cases centered in the northeastern U.S. and imposed a number of strict guidelines to contain them. It paid off: Cases, hospitalizations and deaths plummeted.

source: Path Financial LLC


Meanwhile, some of the relapsing states, not having had much of an early outbreak, did not think they needed to do much to contain a pandemic that barely affected them and then rushed to ease quickly whatever initial restrictions they had. This proved to be a costly mistake, as Covid-19 cases in those states are now soaring and hospitalization rates are beginning to climb.

source: Path Financial LLC


While the country’s economy is divided about evenly between these two distinct areas, deaths are not growing in either one. This suggests that treatments have improved significantly. Also, new cases are disproportionately affecting younger people, who are better able to cope with the disease and have fewer medical conditions making infections worse. It could also be that fatalities will show up with a lag, but the first two factors argue against it.


The strain on the health-care system, one of the gravest concerns in the early days of the pandemic in the U.S., also seems manageable – at least for now – as hospitalizations overall have not grown uncontrollably in states seeing the most new cases. One missing data point is Florida, home to a large number of older people, which does not release current hospitalization rates. Nevertheless, the aggregate data for the remainder shows that hospitals are not near a breaking point or losing their ability to care for the sick.


There is much to criticize about the government response to the pandemic. The most egregious offense was the shortsightedness of states spared early who dismissed, in some cases arrogantly, most experts’ warnings about opening up too quickly. One encouraging fact is that those same states are now quickly rolling back their reopening plans and reinstating restrictions to limit the recent surge, such as closing bars, reducing restaurant capacity and closing some beaches.


While politics has turned the use of effective spread-containing protocols such as wearing masks and limiting social engagement into a culture war of sorts, it is not too late for top state and federal authorities to try to convince the public to adopt those measures more broadly. If so, and providing that states where the spread of Covid-19 is in clear remission remain vigilant, the outlook may be far less dire than what the headlines suggest. It won’t take long to find out whether the U.S. can do what it takes to get back on track to reopen its economy safely.


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