GDP at (Covid) Risk? – and State and Behavioral Response

As of last week, GDP originating in counties with rising death rates accounts for 60% of total; still below the 80% recorded in the Winter.

Source: Deutsche Bank, Covid Tracker, 5 August 2021.

Source: Deutsche Bank, Covid Tracker, 5 August 2021.

These are results based on reported data as of 4 August.

It is unclear what the economic implications of high Covid death rates would be. If state authorities impose public health measures such as restricting indoor business activity, then one might see a decline in high contact service related activity and hence output. However, reaction functions vary widely across states. For instance, we can see hospitalization rates rising above peak in Florida, and yet there is no evidence of a state government response. Hence, there may be no short run impact on activity (although risk averse behavior might come into play, reducing economic activity nonetheless).

Source: Newnodes, accessed 8/9/2021.

(The above regards short-run implications. Obviously, with a sufficiently high death/incapacitation rate, hours worked might decline measurably in the longer term, as suggested in some models.).

More on Florida from several days ago (the situation is changing fast) here.

25 thoughts on “GDP at (Covid) Risk? – and State and Behavioral Response

  1. macroduck

    One big question is whether government-induced behavioral change is all that matters to economic activity, or whether voluntary change does, as well. I recall seeing evidence-based claims for both last year.

    Some behaviors, like remote schooling, can only be voluntary if the state allows them. It’s a fine little experiment we’re running.

    1. Macroduck

      Off topic — Money Center banks are cutting Chinese growth forecasts. The Delta variant is the big issue, but changes in credit extension, financial market regulation and bankruptcy practices are also factors.

      Slower Chinese growth will widen the U.S. trade gap and slow global growth. Commodity producers are likely to suffer most from second-round effects.

  2. SecondLook

    A historical perspective:
    (From a working paper published by NBER)

    “Mortality and economic contraction during the 1918-1920 Great Influenza Pandemic provide plausible upper bounds for outcomes under the coronavirus (COVID-19). Data for 48 countries imply flu-related deaths in 1918-1920 of 40 million, 2.1 percent of world population, implying 150 million deaths when applied to the current population. Regressions with annual information on flu deaths 1918-1920 and war deaths during WWI imply flu-generated economic declines for GDP and consumption in the typical country of 6 and 8 percent, respectively. There is also some evidence that higher flu death rates decreased realized real returns on stocks and, especially, on short-term government bills.”

    “In the United States, for example, the flu death rate was about 0.5%, or one death for every 200 residents.
    That means that, in the United States, the flu pandemic probably cut U.S. GDP by about 1.5% and consumption by about 2.1%, the economists estimate.”

    [We should note that the Spanish Flu was roughly three times as fatal as Covid-19. But also far less damaging to the health of those who recovered.]

    “In the United States, for example, with a 0.5% flu death rate, the flu might have increased the inflation rate by about 5 percentage points”

    As Santayana famously put it: Those who cannot remember the past are condemned to repeat it

  3. Moses Herzog

    Some links relating to Menzie’s post, but as they pertain specifically to the state of Oklahoma

    It is now illegal for individual schools in Oklahoma to require immunizations and/or masks from students for admittance:

    The reason why this is “fascinating” is, republicans are always giving lip service to the idea that important decisions should be made at the local level, while now he and the OKlahoma Republican legislature has put out a government edict taking away any authority from schools, public or private to require school children wear masks or have received full vaccination. EITHER.

    According to this NYT graphic I link below, based on a 7-day moving average, Oklahoma is 7th in the entire nation (including Virgin Islands), in death rate per 100,000. Oklahoma’s is 48 per 100,000 vs Florida’s 90. It’s worth noting Oklahoma’s population density is much lower than Florida, which, in essence means we have to “work much harder” or “be much dumber” to even near matching Florida’s numbers, because population density is an important factor in contagious viruses.
    Similar to Menzie’s thoughts on the Governor of Florida, I do not expect Governor Stitt to change his stance on this, no matter what the level of deaths, which I might add, at least for the state of Oklahoma, I do not see as hitting their peak number of deaths no sooner than October, possibly later.

  4. macroduck

    Putting off distancing and mask mandates looks even dumber now that there is enough Delta variant data to begin evaluating vaccine effectiveness. While western vaccines are doing a pretty good job preventing systemic infection, they don’t prevent spread and there is growing evidence they don’t do much to reduce hospitalization or mortality rates among breakthrough cases:

    Boosters are going to be needed, but we have communities which are mostly not yet vaccinated the first time.

    I’m afraid politics is getting in the way of admitting the need for boosters. Fauci is eager to have full approval for vaccines, apparently to encourage doubters to get vaccinated. Happy to hear it, but that’s not a reason to dawdle in arranging a program of booster vaccines. If drug firms don’t have strong signals that demand will be fed by a booster program, they are less likely to be tooled up to accommodate demand for boosters.

    1. Moses Herzog

      @ macroduck
      I’ll be honest, at this point, aside from children getting bad parental advice and special cases, I don’t feel sympathy for any of the people dying from Delta/Covid right now. Maybe that means I’m a horrible human being. I don’t know. I can’t help how I feel about it, and I’m not going to lie about it. I just don’t feel sympathy or empathy for them at all. At this point they’ve had time to get vaccinated and get themselves a personal backlog of masks.

      But you know, the thing that is getting me right now, my “worry”. Where are we going on the mutations at this point?? I’d like to hear a straight answer from a epidemiologist on the probabilities of another mutation, by say, the very end of 2022. Don’t we have to assume the next one will be more communicable than Delta, and that there are enough unvaccinated/unmasked to have a stewpot/cauldron to have a 60% probability of another mutation?? I don’t know, maybe my 60% wild guess is more like 2%?? I kinda doubt it though.

      1. Moses Herzog

        Hopefully it was kind of implied, but I want to clarify, I don’t feel sympathy for Covid-19 victims residing inside the USA who got very ill or died post high vaccine availability (maybe like April 2021??) those living in the USA. or whatever nations you want to label as “highly developed”. We could include Canada, some others. Those that don’t have a valid excuse for not getting vaccinated.

      2. baffling

        this is why i had the issue with the chinese vaccines. they offer less protection against the formation of a vaccine resistant variant.

      3. rjs

        106 of those who died in Massachusetts were fully vaccinated…other states have similar stats…for instance…

        Lessons from Oregon’s July COVID-19 breakthrough report – OPB – One out of every five COVID-19 infections reported in Oregon in July were breakthrough cases; those which were were diagnosed in people who are fully vaccinated, according to the Oregon Health Authority. It’s a discouraging number, but there’s a silver lining: vaccinated people made up just one out of ten COVID-19 deaths.

        15 states aren’t keeping track, nor is the CDC…

        1. rjs

          i see that Oregon article has been updated since i saved it…it now reads:

          “About one out of every five COVID-19 infections reported in Oregon in July were breakthrough cases; those which were were diagnosed in people who are fully vaccinated, according to the Oregon Health Authority (OHA).

          And 18% of Oregon’s July COVID-19 fatalities were also in fully vaccinated people. That’s a big increase from the June breakthrough report, which showed that vaccinated individuals made up just 8% of COVID-19 cases and 6% of deaths.”

        2. baffling

          “106 of those who died in Massachusetts were fully vaccinated”
          out of over 4 million vaccinated people in the state. since the vaccine is not 100%, there will be a small number of breakthrough infections. some of those will result in death. most likely those folks will have underlying conditions. at least with the current variant. future unknown variants may produce a different outcome.

          i think the lesson to be taken from these breakthrough infections is that the virus is still a problem, so the nation should continue to promote behaviors (masking, social distancing, vaccines) which help to eliminate the spread. breakthrough infections will continue to be a problem until we reach a higher level of vaccinations. while the virus can spread among the vaccinated, the real problem is the unvaccinated. the sooner the population gets vaccinated fully, the sooner we can return to some sort of normal.

    2. Ivan

      It’s a delicate balance. Do you “push” the booster shots before its clearly supported but data, creating more suspicion about the process, or allow the agency to take its time. The data so far on needs for boosters do not support an irregular or rushed process. We will likely have boosters for immunosuppresed people next week and get it recommended for everybody else in a few months. Full approval will not change the minds of those who used the lack of it as an excuse (they will find another excuse supported by the medical genius Tucker Carlson) – however it may make it more doable to deny jobs and services to those not vaccinated.

      1. baffling

        “however it may make it more doable to deny jobs and services to those not vaccinated.”
        except for the republican run states, where you are not allowed to ban the unmasked virus carrying population, but you are allowed to ban the lbg community.

  5. Moses Herzog

    PBS NewsHour had this on last week, and Robert Reich sort of gave memories and tribute to Richard Trumka. I thought it was worth sharing. You can either read the text, or click the white colored play button in the middle of the video embedded in the upper left hand corner.

    BTW, it’s worth sitting through the entire video conversation to hear Robert Reich’s final sentence. Sometimes “less is more”.

  6. Moses Herzog

    I wonder if these people fully realize they are contributing to, causing deaths?? In the case of DeSantis, Stitt, and Abbott, I think nearly without a single doubt, the answer is, YES, they cognitively fully understand they are causing people’s (often their own constituents’) deaths..

    These are the people who say “Islam is a death culture”. Let’s assume for the sake of argument that’s true. What exactly makes Republicans different in the current context?? What do you call it when you equate “freedom” with causing the deaths of tens of thousands of your fellow countrymen?? You don’t have to start a Jihad in the MidEast or build concentration camps in Western China to kill large masses of people. Republicans have been proving this fact since at least February of 2020.

  7. joseph

    “In the case of DeSantis, Stitt, and Abbott, I think nearly without a single doubt, the answer is, YES, they cognitively fully understand they are causing people’s (often their own constituents’) deaths..”

    That Donald Trump Kool-Aid is one helluva drug. It’s a suicide cult.

    1. pgl

      Some of Florida’s schools are wearing masks but DeSantis has decided that if they do – he is going to withhold the salaries for these responsible educators. Gee – do the right thing and one does not get paid. Participate in this death cult and you do get paid. This has become very sick.

      1. baffling

        it looks like the larger school districts in texas-houston and dallas- are gearing up to ignore the governor and impose a mask mandate. they have basically said i dare you to cut our funding because we are protecting the children. if the governor in texas, like florida, intentionally targets the administrators salary, this will be sad. the governors are now making this a personal assault. hey dick stryker, hope you are happy with the monsters you have created.

    2. pgl

      DeSantis is up for reelection in 2022 and the leading opposition candidate is former Republican turned Democrat Charlie Christ. I’m wondering what Christ is saying about how DeSantis is abusing his office to endanger the citizens of Florida. Anyone know?

    3. pgl

      I keep hearing that the Florida Constitution mandates safe schools. If this is true – the governor is violating his own Constitution. So why is he not being impeached?

  8. ltr

    August 9, 2021

    Climate Denial, Covid Denial and the Right’s Descent
    By Paul Krugman

    Before the right embraced Covid denial, there was climate denial. Many of the attitudes that have characterized the right-wing response to the coronavirus pandemic — refusal to acknowledge facts, accusations that scientists are part of a vast liberal conspiracy, refusal to address the crisis — were foreshadowed in the climate debate.

    Yet from the response to Covid-19 among Republican officials — especially the opposition to lifesaving vaccines — it’s hard to escape the conclusion that the paranoid, anti-rational streak in American politics isn’t as bad as we thought; it’s much, much worse.

    On Monday the U.N.’s Intergovernmental Panel on Climate Change released its latest report. The conclusions won’t surprise anyone who has been following the issue, but they were terrifying all the same.

    Major damage from climate change, the panel tells us, is already locked in. In fact, it’s already happening, as the world experiences extreme weather events, like heat waves in the Pacific Northwest and floods in Europe, that have been made far more likely by rising global temperatures. And unless we take drastic action very soon, catastrophe looms.

    We can, however, safely predict how influential conservatives will react to the report, if they react at all. They’ll say that it’s a hoax or that the science is still uncertain or that any attempt to mitigate climate change would devastate the economy.

    That is, they’ll react the same way they’ve reacted to past warnings — or the way they’ve reacted to Covid-19. Extreme weather events probably won’t change anything. After all, Republican governors like Ron DeSantis in Florida and Greg Abbott in Texas are still opposing virus-control measures — not just refusing to act themselves but also trying to block vaccine requirements by local governments and even private businesses — as hospitalizations soar.

    However, while there are important similarities between the right’s response to climate change and its response to Covid-19, there are also some important differences. The pandemic has opened frontiers in destructive irrationality.

    You see, while climate denial was intellectually irresponsible and morally indefensible, it also made a kind of narrow-minded sense.

    For one thing, warnings about climate change always involved the long run, making it easy for denialists to claim that short-run fluctuations refuted the whole concept: “See, it’s cold today, so global warming is a hoax!” This kind of evasion has gotten harder lately, now that we’re having what were supposed to be once-in-100-years fires and floods every couple of years. But it helped confuse the issue.

    Also, there was big money behind climate denial. Fossil fuel interests were prepared to spend large sums creating a fog of skepticism in the expectation that delaying climate action would be good for their bottom lines.

    Last and least, but not irrelevant, free-market ideologues didn’t want to hear about problems that the free market can’t solve.

    None of these explanations work for current Covid denial….

  9. baffling

    saw an oped by casey mulligan in the wsj today. won’t post the link because it is drivel. but demonstrates why mulligan is a dino turd wrapped in dog puke. disgusting human being.

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