Reopening Economy, Controlling COVID-19 A Dilemma

COVID-19 is testing the nation's public health systems, our national response to economic recession, and our overall capacity to respond to a crisis.

On May 31, we surpassed 106,000 confirmed coronavirus deaths in the United States. More than 1.8 million Americans have contracted the disease. Moreover, the numbers may not render a full depiction of the toll since states disagree on reliable and valid methods to report cases and fatalities.

From pandemic to economic collapse

At the end of May, the Bureau of Economic Analysis reported that the country's first-quarter gross domestic product (GDP), the broadest measure of the US economy, tumbled at a 5% annualized rate. It was the first contraction in six years and the harshest drop since an 8.4% decline in the fourth quarter of 2008 during the height of the Great Recession.

Economists believe the shuttering wide sectors of the economy sparked layoffs of millions of workers that will force the GDP to sink at an annual rate of 40% this quarter. This would be the largest decline in economic activity since 1947. While we have yet to see the overall economic impact of COVID-19, job experts say we have entered a recession that will affect some U.S. workers more than others.

Job contraction

Moody's Analytics is a leading provider of financial intelligence and economic analysis. Mark Zandi, chief economist at Moody's, estimates that almost 80 million jobs in the economy are at high or moderate risk of contraction. This amounts to more than half of 153 million jobs in the U.S. Zandi also projects that 27 million jobs are at highest risk of reduced pay, layoffs, shutdowns or fewer hours. The highest-risk jobs are concentrated in leisure and hospitality, travel accommodations, temporary help services, restaurants and bars, and oil drilling.

Zandi considers another 52 million jobs in retail, manufacturing, construction and education to be at moderate risk. Some 5 million of these workers may face unemployment or underemployment, according to Zandi.

Triggered by Moody's projections, we launched an investigation of the economic impact of COVID-19 in Tom Green County households that depend upon jobs at risk. We used data from the Quarterly Census of Employment and Wages (QCEW) reported by U.S. Bureau of Labor Statistics as a starting point.

Before contraction

The most recent QCEW report for Tom Green County gives a picture of the local job situation before the onset of the pandemic. QCEW data covering the third quarter of 2019 indicates that 1,375 Tom Green County establishments were in Zandi's high or moderate risk industries. The "high-risk" local businesses employed 12,800 workers and disbursed an estimated $61.6 million in wages during the July-September third quarter of 2019. Most were jobs in leisure and hospitality (24.3%), as well as food and drink establishments (20.3%). Only 43 workers, a miniscule 0.2%, worked in the oil fields.

In addition, establishments classified as "moderate risk" by Zandi employed another 12,439 workers with earnings estimated at $132.3 million. Almost one-in-four moderate-risk employees worked in retail jobs.

Potential contraction of at-risk jobs and wages

To measure the potential pandemic effects, we applied Moody's Analytics projections reported by Zandi to the most recent local QCEW data on employment and wages. We calculated that Tom Green County employers may narrow employment by an estimated 3,804 jobs because of COVID-19.

If such a contraction occurs, an estimated $25.5 million could be lost to the economy. Two-thirds of lost jobs represent a potential $12.3 million drop in quarterly wages. Additionally, Tom Green County workers could lose an estimated $13.2 million in wages if employers tightened the workforce by another 1,244 jobs in possible moderate-risk establishments.

Opening the local economy

On April 10, Texas recorded 1,441 new cases of the coronavirus. This was the largest daily increase since the initial report of the disease in Texas on March 6. In mid-April, there was a slump in the number of new cases. On the dip, Governor Greg Abbott announced on April 17 that he would let the statewide stay-at-home order expire at the end of April. Guidelines allowed retail stores, restaurants, theaters and malls to voluntarily start up at a limited 25% occupancy level.

During his announcement, Abbott stressed that a premature opening of the economy "would risk further outbreaks and be more likely to set us back, rather than to propel us forward." On the other hand, if there was no spike in virus cases, retail stores and other businesses could increase occupancy to 50% as soon as May 18. Fittingly, the governor stressed his reliance on a group of medical and economic experts to guide him through a series of incremental steps aimed at slowly reopening the Texas economy.

Meanwhile, stores in Tom Green County stayed closed or opened for fewer hours. Entertainment venues remained closed, and teachers did their best to deliver online classwork. Restaurants cut staff because they could only offer carryout and delivery. Small-business owners had doubts about their future as the governor's decision garnered mixed reactions in the local area. Would kick starting the economy be as dismal as anything since the Great Depression? On the other hand, would Abbott's plan trigger new outbreaks and lead to further closures? All gloomy prospects.

Nonetheless, buoyed by the governor's action, several downtown San Angelo restaurants decided to reopen. Tim Condon, San Angelo Restaurant Association president, declared, "We are going to slowly open back up with 25% occupancy and all the standards being put into practice. As the regulations change, we will go back to normal. We are ready to rock and roll."

Post reopening

During the lockdown, Tom Green health officials reported 51 cases of coronavirus with one death attributed to the disease. As of May 31, health officials had reported 49 additional cases and no fatalities since some local businesses reopened. It appears that most residents were practicing lockdown protocols.

Sadly, Texas counties reported an additional 36,200 new cases after easing state lockdown measures. This increase of 129% raised the overall total to 64,287 cases. Counties also reported 889 more fatalities, raising the total to 1,671, an increase of 114%. It is unclear whether the surge is due to more testing for the disease, or more transmission due to increased social contact. What is clear is that it takes just one infected person to launch a new outbreak.

The dilemma

We continue to hear that the cure cannot be worse than the disease. As President Trump recently said, "A never-ending lockdown would invite a public health calamity. To protect the health of our people we must have a functioning economy."

There is little doubt that stay-at-home orders have adversely affected local economies and lifestyles of Texans. Indeed, our calculations imply that Tom green County might be losing thousands of jobs during a prolonged lockdown costing millions of dollars to the local economy.

While we have concerns about the economic the effects of the pandemic, we also believe that reopening is ill advised if it is based on politics and public pressure. After all, there is little doubt that social distance helps to mitigate spread of the disease.

We do not believe increased loss of life should be the cost for prematurely reopening our economy. Accordingly, we should heed the guidance of medical experts who base their advice on available scientific data, something Governor Abbott said he would do to reopen the state.

Still, the dilemma is clear. South Carolina Senator Lindsey Graham recently said, "There is no functioning economy unless we control the virus." Federal Reserve Chairman Jerome Powell warns at the same time, "We are going to see economic data for the second quarter that is worse than any data we have seen for the economy."

The local leadership of Mayor Brenda Gunter advises, "We must be vigilant in our commitment to following the CDC guidelines. This has not changed just because we have loosened the restrictions and allowed more business to operate."

Patience, common sense and observation of these insightful words will help us get through this outbreak and any surge that may follow.

Contact Casey Jones at [email protected] or Kenneth L. Stewart at [email protected]. Support locally driven journalism with a digital subscription to GoSanAngelo.com.