In this week’s commentary, we’ll discuss North Carolina’s health statistics and current developments in the economic landscape, and offer some thoughts on the reopening of schools and universities.

First, North Carolina continues to show an overall improving trend in relevant healthcare statistics.  The state’s healthcare utilization remains in a relatively good position, and national utilization is starting to improve for first time since April. Despite some major hotspots, hospitalization rates both in North Carolina and across the country are falling, as are positive test rates, overall new cases and the basic reproduction rate (R-naught).  Perhaps most significantly, COVID-related fatalities have leveled off; accordingly, going forward, we expect the number of fatalities – which lag behind other health-related statistics – to fall in a manner consistent with current developments in the rest of our metrics. 

Second, while North Carolina health statistics show some signs of promise, the overall economic situation (both in our state and around the country) has undeniably plateaued. The fears we expressed in our earlier commentary on the general fragility of the economic recovery appear to be frustratingly warranted. We’re witnessing a dip in both aggregate spending and small business activity. As a result, our consumer consternation measure, designed to capture the extent to which households are unwilling and/or unable to engage in nonessential consumption, has also ticked up slightly. Although we witnessed significant improvement in both statewide and national consumer consternation from a peak in April to mid-June, nonessential economic activity has stagnated through most of July and August. A reversal in this statistic — though slight — only highlights the impediments to a more robust recovery. Consumers must both be safe and feel safe before they are likely to engage in nonessential activity. Collectively, these developments, at best, reinforce the likely slow, grinding nature of this economic recovery and, at worst, serve as a possible harbinger of a W-shaped (double-dip) recession.

One modest bright spot we do observe relates to insured unemployment, which has now dipped to 5 percent in North Carolina. Unfortunately, the overall U.S. number remains considerably higher. Despite the fact that significant improvement is still needed on the labor market front, as millions of Americans remain out of work, there are no concrete signs of another stimulus package forthcoming. At best, it may be several weeks before a presidential executive order delivers a $300 unemployment top-up extension (as of this writing, there does not appear to be any roadmap for congressional action, despite both sides of the aisle agreeing in principle on the need for additional support). Given this delay, he relevant questions are: Will businesses continue to recover in the absence of a fresh round of stimulus if their customers’ financial situations become increasingly constrained? And at an aggregated level, will we see a further dip in economic activity as these household savings run out?

As we discuss high-level aggregates, it’s important to remember that economic statistics are not abstract. This dispute in Washington coincides with a frustrating human reality on the ground. The conditions that describe socioeconomic adversity, both in North Carolina and around the country, remain dire. Our measure is designed to capture how likely individuals are to be experiencing moderate or high levels of mental adversity (anxiety, worry and/or depression), healthcare adversity (delayed or unavailable medical attention), and food insecurity (sometimes or often not having enough to eat). Measured in this way, socioeconomic adversity continues to sit well above pre-crisis levels. As a heart-wrenching testament to the personal challenges facing many Americans, nearly 41 percent of respondents to a CDC survey reported “at least one adverse mental or behavioral health condition” (three to four times higher than what the CDC reported at the same time last year). The study also shows that the number of Americans contemplating suicide is soaring.¹ Mental health support systems are “needed urgently,” according to the CDC.

An additional aspect of adversity is the hard-to-gauge, but sizable, cost associated with keeping children and older students out of school. Much has been written about the significant challenges many (particularly women) face with children at home competing with the demands of work. As a result, there is now a far greater appreciation for the extent to which economic activity cannot fully recover until the children of those in the workforce are back in school. However, we also know that the developmental and educational costs of keeping so many children out of schools are immense, and that some of these costs could become dangerously semi-permanent.

In the face of all this, school districts, colleges and universities around the country are struggling with the near impossibility of successfully reaching two competing goals: safety and learning. Despite what appears to be an intractable knife-edge challenge, failing to deliver along either dimension carries serious costs. However, we can learn from continental Europe,² where many schools and universities are already open or cautiously opening. Following their lead, we need to marry an elevated government-level testing and tracing regime with a renewed sense of individual responsibility, in which we diligently practice social distancing, wear masks, wash our hands and stay home if feeling unwell. Ironically, the avenue to economic freedom flows through an effective government bureaucracy, coupled with a personal responsibility to the community.Our children’s future cannot be collateral damage.

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