September 13 will mark six months since U.S. President Donald Trump declared a national state of emergency in response to the COVID-19 a national pandemic.  And here in North Carolina, Governor Roy Cooper announced last week that the state will transition to “Phase 2.5,” with further easing of restrictions on certain places and types of activities including mass gatherings, playgrounds and gyms, but with other restrictions – such as those on bars and entertainment venues – remaining in place. It seems like a good time to take stock of where we’ve been, where we are now and what lies ahead.

What have we learned?

It’s fair to say that many of the dogmatic opinions from both ends of the political spectrum have been off the mark.  Yet some of what each side has espoused has proved out.  The truth of the situation is clearly somewhere in the middle, and an objective assessment of what we have learned in the last six months suggests the following:

• Mass gatherings are dangerous, community spread is easy and wearing masks is tremendously beneficial.  Pretending otherwise has damaging consequences for individuals and organizations.  There’s no better case in point than the disastrous start of the school year at the large UNC system campuses. While there were substantial direct health consequences to the failed return to campus, the wider impact has been on the students and families forced to manage the fallout, as well as on the institutions themselves. The UNC system is now much worse off than it would have been if a more thoughtful approach had been undertaken (e.g., limiting the number of students on campus as other universities did, implementing widespread surveillance testing programs, and so on).  There is a salient lesson for broader policy in this debacle.  When governments, organizations and businesses make decisions on how to resume more normal operations, they can’t operate based on what they want to be true.  They must take into account the realities of what we know to be true about both the disease and human behavior.
• Smart reopening of the economy without swamping the healthcare system is very feasible.  As we look at North Carolina as an example of “dimmer switch” reopening policy, we see that increased economic activity does not have to result in ping-pong public health policy.  The economy in North Carolina has been on a one-way road to reopening and never faced serious capacity constraints in hospitals (see our regional dashboard page).  Yet it is fair to say that, in hindsight, the state economy reopened too slowly.  A better policy would have been a shorter, but widely enforced, statewide “stay at home” order, broad implementation of mask requirements among businesses and a faster move to the current status.  This is admittedly Monday morning quarterbacking.  Real-time decision-making was difficult because of uncertainty about disease transmission and especially the lack of data on the true number of cases in the state.  Perhaps it was better to have erred on the side of caution than have risked a second full shutdown like some other states, but we should continue to aggressively press ahead with thoughtful reopenings.

Where are we now?

• The broad economy is in limbo.  The August employment report was quite encouraging and showed a labor market continuing to improve.  However, spending is now growing more slowly nationally and has been flat for two months in North Carolina.  Small businesses are still extremely stressed, with the most recent data showing a decline in activity since mid-July.  Industry segments that serve as key indicators, such as apparel, general merchandise and transportation, have all stopped improving both nationally and in North Carolina.  We attribute much of the stall to people’s continued reluctance to undertake nonessential activities away from home because they sense conditions are unsafe.  To this point, our consumer consternation indexticked up in August in North Carolina, and is at the second-highest level above the national index since the pandemic began.
• The healthcare situation is being handled with controlled community spread.  The North Carolina economy is effectively reopening without substantial increases in new cases, hospitalizations or deaths. An August blip in new cases in North Carolina is largely attributable to UNC system students and other young people becoming infected. With any luck, cases will continue to tail off now that many students have returned home (though risks remain for nearby communities from off-campus students who have not returned home). It is probably time to throw in the towel on contact tracing as an effective containment mechanism and admit that it can’t be done currently at the scale necessary for preventing community spread. Those resources are likely better spent on public health awareness programs and better testing.
• Speaking of testing.  We still find it remarkable that there is effectively no national policy on testing, that tests are relatively hard to obtain for some people and results are sometimes reported with significant delays.  This is perhaps the most serious indictment of federal health policy, given that testing is an entirely fixable problem.  The “see no evil, hear no evil, speak no evil” approach to testing has not served the U.S. well, and has likely prolonged and deepened the severity of both the pandemic and the economic downturn.  Again, we can gain wisdom from universities where rigorous testing appears to be limiting spread on campus.  As we’ve been saying for months, testing is not just about limiting the spread of the disease, but also about building confidence among the public as conditions continue, we hope, to improve.  

Where are we headed?

• Additional stimulus is likely needed, but not on the scale previously proposed by congressional Democrats. As noted already, the recent national employment report is very good news for the economy.  There were legitimate concerns that the sudden stop of federal stimulus in August (especially supplemental unemployment benefits) would tip the economy into another downturn.  The continued growth in nonfarm payrolls across almost all sectors of the economy was a huge relief and indicates that we do not appear to have started a double-dip recession in August. It also suggests that the Republicans were closer to the mark in terms of what an additional stimulus package should look like, at least in terms of size.  That said, a lot of people are still hurting. The unemployment rate remains elevated, especially among people of color, teens and those with lower educational attainment.  It remains important to provide additional support for a broad segment of the population struggling to stay afloat financially.  We can see this in our socioeconomic adversity index.  Even as the economy has improved, the index remains extremely elevated and has actually increased disproportionally for many segments of the population, including people under 40, households with children, middle-income households, single people and people of color.
• The broad economy will remain in limbo until a vaccine is available.  Increasingly, it feels as if public health policy is becoming ineffective in generating economic growth.  We’ve said it before, but will say it again: Just because you open a business, it doesn’t mean people will go there (bars being the exception, apparently).  Airlines are a case in point.  There are relatively few restrictions on domestic air travel, yet air traffic remains down 70 percent.  Likewise, most brick-and-mortar retail establishments are open for business, but foot traffic at these locations remains about 20 percent below pre-pandemic levels.  While some permanent decline is to be expected given accelerated shifts to online spending (and business closures), a substantial rebound will occur once vaccinations are widespread.
• We must focus resources on getting kids back to school.  First and foremost, the learning deficit students are experiencing will have significant long-run consequences and is highly inequitable.  However, it’s also important to consider that childcare is a key bottleneck in the economic recovery.  Schools provide about 30 hours per week of free childcare which is crucial for many parents, especially low-income and single parents.  While the unemployment rate has continued to decline, this does not capture the fact that the labor force has contracted by more than 3 million workers, many who have been forced out of jobs because of childcare considerations.  In addition, scores of workers are having to juggle the responsibilities of working from home and attending to children schooling at home.  This lowers hours worked and productivity, and, of course, is also a huge stress on parents.  As vaccine distribution decisions are being debated, we believe that near the front of the line should be primary and secondary school teachers, parents of school-aged children, and as soon as safely possible, children themselves.  We also suggest rapidly expanding programs that put recent college graduates (who are experiencing unprecedented unemployment) to work in virtual and in-person classrooms for the next year or two to help overwhelmed teachers. 

So, putting all these points together suggests that we are stuck in “Phase 2.X” of reopening.  Until a vaccine is widely available and effective, people will not be able (or willing) to resume fully normal activity, and the workarounds of remote work and school are not sufficient for the economy to return to pre-pandemic output levels.  In fact, it’s safe to say that the speed at which the economy can return to pre-pandemic conditions will depend almost entirely on both when a vaccine is available and how rapidly and intelligently it’s distributed.

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