As someone who deals in data (usually sketchy, fuzzy data), I’m totally frustrated at how people are drawing conclusions and doing extrapolations on the COVID19 data. It’s causing panic and bad decision making, and as I have been saying for a couple of weeks the panic is potentially worse than the pandemic (and make no mistake, despite the reluctance to use the word, this is a pandemic, but as has been pointed out by myself and others, pandemic does not automatically mean widespread death and the collapse of society). When I look at the COVID19 data (just the data, not the reaction to it), I see reason for concern by the health care community and some sectors of the population, but not the population at large. Here’s the latest on what you should do, what the numbers are, and what they mean …
First, what you should do: Wash your hands, don’t touch your face, don’t freak out. The best sources of practical information are at the CDC web site, and the DHS/FEMA “ready.gov” pandemic preparation site. Essentially, these are common sense actions. If you or a member of your family is over 65 (and especially over 75), or has health problems (especially respiratory or immune system issues), you should take some extra precautions. Avoid crowds, limit travel where you will be exposed to people, be super-fastidious about hygiene, and so forth, until the true scope of the pandemic becomes apparent.
So how bad is this thing, and has anything changed in the last few days to make me think it’s worse than I originally thought? For what it’s worth, my view hasn’t really changed that much in terms of the disease itself. In terms of health impact, COVID-19 should be at the high end of a bad seasonal influenza episode, with some twists that make its impact on some populations and therefore the health care community disproportionate. On economics, I’m increasingly concerned that the panic and reaction to the outbreak is striking at the existing fault lines in the global economy, and a very bad recession or worse is on the horizon.
Here’s some details; I won’t try to wow you with lots of charts and statistics, but just go straight to what the underlying data means. For those who are curious, I’m using data from the nCoV-2019 Data Working Group, Epidemiological Data from the nCoV-2019 Outbreak: Early Descriptions from Publicly Available Data as well as the current (6 March 2020) World Health Organization database. Ignore “Case Fatality Rates” (CFR) unless you are a health care professional. Those are pretty much meaningless at this point for the general population because the definition of a case is “a patient shows up, we think they might have COVID, and if we can get a test we tested and it was positive.” On the other hand, they mean a lot for the health care system because that answers the questions “how many people will show up, and how much care will they need?” The bottom line answer here seems to be that in general population terms, the hospitalization rate is lower than for the 2017 Influenza season, which was rated as “severe”. Note that for that outbreak, at least part of the population was vaccinated, and the vaccine was partially effective. So … of the total vulnerable population, about 0.3932% of unvaccinated people required hospitalization for the 2017 flu. For COVID19, the rate is hovering around 0.138% of the total population in the areas with major outbreaks (Hubei province China, Daegu ROK). It is less in Lombardy Italy (0.045%) and Iran (although I’m thinking the Iranian numbers are bogus). The fatality rate in Italy is higher than Hubei – but the population is a lot older, so that makes sense. Short version: for the general population, this still seems similar to the 2017 influenza season in terms of both population hospitalization rates and mortality.
However, if you are in a vulnerable population, it’s worse than the flu. A significant fraction of those who do show up for treatment (“present” is the fancified medical term) tend to be sicker with severe respiratory problems, even though the end mortality rate is similar (after all, the full name of the virus is “severe acute respiratory syndrome coronavirus 2″ or SARS-COV2; the disease you get from it is Coronavirus Disease 2019 or COVID-19), This has implications for planning for hospitals, in that they can expect a higher percentage of patients needing ICU care and breathing support than you would expect from the flu.
On economics: is China returning to work? It seems there are signs of activity returning, but still well below normal. Satellite air pollution levels are increasing. My own research shows that high intensity heat signatures at various factories is at about 57% of what it was last year at this time (compared to the low of around 25% a couple weeks ago). Those kinds of signatures are harder to fake than just turning on the lights, as some have alleged Chinese officials have done. But it will take some time to spin back up – and it may be nobody wants their products any more, either because they don’t want to be dependent, or have their own internal problems. This is a huge risk: the “social contract” between the (so called, but no longer communist) Chinese Communist Party and the people is simple: give us increasing prosperity, you can stay in power and control society. That “deal” has been broken, and the enormous pent-up potential for unrest is about to meet the desperate and ruthless desire to stay in power. It won’t be pretty, and the risk is that the Government will try to create an external threat to unify the people.
Across the rest of the world economic indicators are tanking. There is increasing concern about liquidity – the amount of cash available to flow through the economy. If the payment and credit system locks up, that is Really Bad. There were a lot of existing fault lines in the global economy. Share prices in the US in particular have become disconnected from the underlying value of the assets. A correction was already inevitable, and traders were sort of looking for an excuse to some extent. A lot of the growth in the last decade or so was based on credit and central bank shenanigans, which at some point becomes due and it’s a game of musical chairs where nobody wants to be standing when the music stops. While global trade was already declining due to geopolitical factors, the rapid halt to trade especially in critical goods which were outsourced to China is causing significant shortages which will really hit home over the next few weeks. Internal trade is also becoming problematic as people are scared, and scared people don’t buy, and our whole economic system is based on people buying
lots of stuff they don’t need important stuff they can’t live without. The COVID19 fear (and potential for quarantines, cancelled events, etc) is hurting key aspects of the service sector, which is responsible for 37% or so of the US economy. There is very little governments can do to stop a slide once one starts. They have been so focused on extending the growth they haven’t properly prepared for a serious correction or, worse, major decline in GDP. The best case for GDP for 2020 is static. The bad case? 30% decline, which would be 1930’s depression level bad (it was a 15% GDP loss). Scary.
In my view, we are in a race between a resolution to the COVID19 fear and a serious economic crisis. As noted above, the health fear is in my view overblown (not discounting that it is a serious health care system event). But the economic impacts from it risk spiraling out of control and taking us some place we just aren’t prepared to go. The next few weeks will tell …