The health and economic data from this past week brought both good and bad news about the state of affairs in North Carolina. Health data suggest the growth in new cases is slowing, that hospital capacity remains available and that we might be getting a better handle on identification. While this is certainly encouraging in the battle against the pandemic, a similar levelling off in business activity does not bode as well for the economy. In this week’s commentary we seek to unpack some of the details in the data to understand what may be a new plateau.
The most recent data for the state of North Carolina provide some signs of stabilization of new infections. The number of new daily positive tests for COVID-19 has levelled off near 2,000 (or 19 per 100,000). Statewide hospitalized COVID-19 cases stayed close to 1,200 (11 per 100,000). Likewise, the average number of new daily reported deaths has remained around 20 (0.19 per 100,000). We even observed a slight tick down in the positive test rate. Of course, these numbers are just snapshots and not reliable indicators of what will come, but nonetheless provide some hope that new infections may be reaching a plateau.
There was also good news this week on healthcare utilization rates in North Carolina. First, we continued to see stability in our statewide measure in the 75%-80% range. Second, we were able to examine regional data for North Carolina for the first time based on new daily statistics reported by NC-DHHS. We are very excited about these new data because we believe that increasingly decisions on openness will need to be made more regionally. These data will help both policymakers and business owners understand conditions in specific areas within North Carolina. We are currently working on economic statistics to track economic activity using these regional definitions and hope to have those on the dashboard within the next two weeks. Perhaps most importantly, these data show what appear to be good conditions in healthcare utilization rates across the state. All regions appear to have capacity in either available or unstaffed inpatient hospital beds as well as intensive care unit (ICU) beds. Availability of ventilators is very good in all regions. While a rapid flare-up in a region could quickly utilize capacity, the current conditions are reassuring.
Now, the bad news. We continue to see signs of a stall in economic activity in North Carolina. Spending data for the week of July 11 (the most recent available) show activity at a level that is roughly equivalent to the week of June 20 and still about 8% below January levels. While this is a huge rebound from the April trough of -33%, conditions do not appear to be improving further in recent weeks. We had some hope that the Independence Day holiday was contaminating growth estimates, but this does not seem to be the case. Of further concern is that we see the levelling-off of activity across all of the sectors that we believe are the best indicators of COVID-19 impacted businesses (such as apparel, entertainment, restaurants and transportation). Small business activity has also plateaued and may even be showing signs of decline. Labor market conditions have also stopped improving in North Carolina—despite continued declines in June in the insured unemployment rate, the July values are stuck just above 8%.
We believe that economic conditions in North Carolina continue to track national trends both because the economies are intertwined as well as because N.C. consumer attitudes are shaped by national trends. For example, in spite what appears to be signs of stabilization on the new infection front in North Carolina, the (preliminary) week of July 18 reading for our Consumer Consternation Index ticked up for the first time in a month. We see continued signs of socioeconomic adversity both nationally and in North Carolina as further weighing on consumers’ ability and desire to spend. This comes as we approach a possible fiscal cliff for unemployment insurance and the end of forbearance of loans and eviction moratoriums. Consumers, of course, anticipate these potential disruptions, so the sooner Washington can provide clarity on new policy, the better it will be for the economy (ceteris paribus). Finally, the school-year starting virtually in most jurisdictions will put continued pressure on parents, especially mothers, and will likely reduce hours worked (not to mention induce further mental and emotional stress).
We are also watching how traditional seasonal patterns in spending (e.g., back to school buying) will be affected by the pandemic. We expect much lower spending on children’s apparel and traditional school supplies in July and August. In contrast, the largely virtual/hybrid school model will drive higher than usual technology spending as parents try to prepare home spaces for a better educational experience. The mix-shift of consumption titling away from traditional goods toward electronics will likely be a further hit to brick-and-mortar retailers in North Carolina since technology goods are more often purchased online. However, we also wonder if the summer tourism season may extend into September; with many schools opening in virtual-only mode, some families may sneak in an additional week in the mountains or beach. Expect more on this in future commentaries.
We have been wondering for some time how effective testing has been in identifying infections in North Carolina. While we are working on a statistical model for undetected cases, a new study released last week has provided additional insights on how deaths from COVID-19 can shed light on testing in North Carolina. The study was a meta-analysis by Meyerowitz and Meroneof 26 case-fatality rates from other studies and was able to provide a more precise estimate than previous research. Case-fatality rates, also known as infection-fatality rates, measure the likelihood of dying from the disease after becoming infected. The values from previous studies examined by the analysis ranged widely from as low as 0.09% to as high as 1.60%. By combining the results of prior studies, the authors were able to generate a point estimate of the infection-fatality rate of 0.68% with a 95% confidence interval of 0.53-0.82%.
Why is this important for understanding testing in North Carolina? We had been using the number of deaths and the infection-fatality rate to infer the total number of cases in North Carolina. Given the uncertainty, we decided to use a conservative estimate of 1.4% estimated from New York data. However, we had little confidence in the results because they suggested the number of daily new infections in North Carolina were averaging about 1,400 (i.e., about 20 deaths per day divided by 0.014) and the actual number of reported new cases is now consistently higher than that. The updated point estimate of 0.68% suggests new infections in North Carolina are closer to 2,900 (with a confidence interval of about 2,400 to 3,700) which is not too much higher than the current average of reported new cases of about 2,000. Taken at face value this suggests that North Carolina is now identifying somewhere between roughly 55% and 85% of new cases which is likely a much higher percentage than even a month ago. We have added to the dashboard the updated calculations for death-implied new cases and confidence intervals based on a two-week lag of seven-day average daily deaths.
All in, we see much to worry about on the economic front even as the healthcare front appears to be stabilizing some. As always, we encourage individuals to do their part to reduce the risks of new infections through social distancing, use of masks and diligent hand-washing and personal hygiene. Economic conditions are likely to only improve subsequently as perceived risks of infection go down, and we must take our shared responsibility seriously.
Next week, we hope to have more insight into how the new federal stimulus package is evolving with a close eye on support for small businesses and the unemployed; the potential for NC to transition to Phase Three reopening; and nonstandard seasonal trends in consumer spending.
A New Plateau?