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Surge In Coronavirus Cases Could Short-Circuit Economic Recovery


Analysts at Goldman Sachs are warning that the economic gains from reopening could now be in real jeopardy for June and July. They're pointing to a surge in new coronavirus infections, and NPR's chief economics correspondent Scott Horsley has been looking into this. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, David.

GREENE: So I guess we do have some good news to cover this morning. The Nasdaq hit another high yesterday. And there's news that service-oriented businesses are seeing a pickup. That all sounds good. What are we making of that?

HORSLEY: Right. It's another sign the coronavirus recession may have hit bottom and turned a corner. Last week, we learned that manufacturing activity picked up in June after shrinking in March, April and May. And now we know the much larger services side of the economy - that's everything from coffee shops and chiropractors to construction crews - are also starting to back - bounce back. The June rebound was faster and stronger than a lot of forecasters were expecting.

GREENE: Well, then talk me through why we're getting these caution flags about the road ahead here.

HORSLEY: The fear is that this comeback could be short-circuited by what's turned out to be a sharp jump in coronavirus cases in many parts of the country. Tim Quinlan is an economist at Wells Fargo Securities. He says if that happens, this kind of euphoric jump in service sector activity last month won't look so good in the rearview mirror.

TIM QUINLAN: Well, a skeptic might reasonably argue that what's being captured here is the sugar high of a rushed reopening.

HORSLEY: Already, some states have been forced to pause or even backtrack in their pushes to reopen businesses in hopes of getting a handle on the resurgent virus. And, you know, people who work in the services industry have been warning about that. One of the people who answered the survey on services last month said the economy seems to be on the road to recovery, but let's not get too complacent. The person noted that COVID-19 is still a pandemic - there's no vaccine - and said, you've got to be really careful and follow all the recommendations religiously if you want to run your business safely.

GREENE: Well, Scott, I mean, we're seeing a spike in new infections in a good number of places around the country. Are we getting a sense so far of how consumers and how businesses are responding to these new increases?

HORSLEY: In the hardest-hit states, you can already see some decline in people's willingness to go out and spend money. And you can also see a decline in demand for workers. Economists are tracking this with measures like mobility data from cellphone companies and workplace schedules from companies like Homebase. What looked to be a pretty robust recovery for consumer spending in the early part of June starts to stall out as the virus picks up speed. And as a result, the economists at Goldman Sachs have now lowered their forecast for economic growth in both July and August.

GREENE: So are we going to see another round of lockdowns, I mean, just like the ones we had in March and April?

HORSLEY: That would be one way to slow the spread of the virus, but it's obviously painful, and most policymakers want very much to avoid that. Goldman Sachs' chief economist Jan Hatzius argues you could skip the shutdown and still achieve a similar reduction in new infections if the government simply ordered people across the country to wear masks when they're out in public. He says that would cut the infection rate more than 60% without the price tag of another lockdown.

JAN HATZIUS: Face masks are very effective in reducing virus spread. That would bring down the growth rate of confirmed virus cases significantly and reduce the need for what otherwise would be a significant hit to the economy.

HORSLEY: It's obviously late, but Hatzius says it's not too late for a nationwide mask mandate. And he points to Texas Governor Greg Abbott, who finally did an about-face on masks last week and issued his own broad mandate as a sign that policymakers in this country are willing to adapt when circumstances require it.

GREENE: So interesting - both a public health argument and an economic argument for face masks. NPR chief economics correspondent Scott Horsley with us this morning. Scott, thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
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