Henry Blodget here. I’m the CEO and Editorial Director at Insider. I’m also an occasional columnist and host.
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TLDR: Lessons from the “Spanish flu.” Yes, lockdowns are smart. We should be able to begin to relax restrictions in May or June, but life won’t be normal. Drugs, testing capacity, and medical capacity offer hope. Our devastated economy will recover, but not in a “V.” What to watch this weekend.
Thoughts on the questions everyone’s asking…
Any historical precedent for this? Any lessons?
Unfortunately, yes. Pandemics have been a fixture of human history. If you want to feel relatively better about our situation, read about the smallpox and the plague.
One of the worst pandemics in the past century or so was the “Spanish flu.” It spread in three “waves” from 1918 through 1920. The authors of one recent study view it as a “worst-case scenario” for the coronavirus pandemic.
The authors estimate that this “Great Influenza” killed an estimated 39 million people, 2% of the world’s population at the time. The deaths included an estimated 550,000 Americans, or about 0.5% of the US population. Other countries, in particular India, had it much worse. Unlike the coronavirus, the Spanish flu was particularly fatal for younger people.
The researchers found that the 1918 flu not only had a brutal impact on public health. It also clobbered the economy. It temporarily reduced GDP by 6% to 8% in most countries and by more than 10% in some.
Is “social distancing” the right approach?
For now, yes. If the US and Europe had responded and prepared better, we might have been able to take a more targeted approach. But the US response has been hampered from the beginning by a lack of leadership and testing capacity. Until we build up enough testing and medical capacity to “test, trace, and isolate” cases the way South Korea has, the only way to slow the spread of the virus is through social distancing.
Importantly, the question of whether we should prioritise the economy or public health seems misguided.
Another study of the 1918 influenza pandemic concluded that it was the pandemic itself that hurt the economy, not the “panic” or “response” that accompanied it. People don’t shop, travel, or eat out as much when worried about getting a fatal disease. This study also found that, on average, cities that shut down earlier and longer did better than those that played down the risks or dragged their feet. Specifically, the cities that acted more decisively (green dots) had fewer deaths and recovered faster economically than the cities that didn’t (red dots).
So by prioritising public health and locking down the country, we are actually doing the right thing for the economy in the long-run.
When will life be normal again?
Our best guess, based in part on this paper from the American Enterprise Institute that Insider’s Jeremy Berke wrote about this week, is that, in some places, we will be able to begin to safely relax some restrictions in May or June. But life may not return to “normal normal” until 2021.
Importantly, we think the “reopening” process this spring and summer will have to be gradual and different by state and region. The US and Europe have not shut down all at once, and we don’t think they will reopen all at once.
There may also be additional shutdowns in some areas if the virus reappears, as we are seeing in China. Even Singapore, which has thought to have had one of the most successful responses to the virus, just reinstituted a lockdown, as Bloomberg’s Philip Heijmans and Faris Mokhtar report.
To meet this May/June timetable, the US will have to significantly reduce the spread of the virus (as measured by “daily new cases,”), finally build up adequate testing capacity, and build enough medical infrastructure to be able to test, isolate, and trace new cases. Given the US’s current lack of preparedness, this will be challenging.
This excellent article by the leading epidemiologist Marc Lipsitch outlines the challenges we will face in safely “reopening.”
What about our jobs and the economy?
Until earlier this week, the consensus was that the economy would have a disastrous second quarter and then rebound sharply in a “V-shaped” recovery in the third quarter of the year.
Well, we’re certainly headed for that catastrophic second quarter.
As Insider’s Carmen Reinicke notes, the job losses in the past two weeks have been horrific. Almost 10 million people have filed for unemployment insurance in two weeks. This is by far the fastest and largest jump in the number of jobless on record.
The next few weeks won’t bring much of a respite.
Insider’s Ben Winck reports that Nobel laureate economist Paul Krugman thinks the US unemployment rate could hit 20% in two weeks. That would be twice the peak level of unemployment as in the Great Financial Crisis. It would be almost as high as the staggering 25% peak in the Great Depression.
After the data about these job losses were released and delays implementing the federal emergency rescue package became apparent, the consensus is now that the recovery will take longer.
Specifically, economists expect that the economy will begin to recover in Q3 but that the impacts of this shock will continue into 2021 and possibly beyond.
Is there still hope for a “V-shaped” recovery?
There’s always hope.
In fact, on Wednesday, economists at JPMorgan cited the massive federal emergency package and early economic recovery trends in China as signs that the global economy might bounce back fast.
But even the optimists note that a speedy recovery would depend on most of the world getting the pandemic under control.
The keys to a rapid recovery, in our view, are 1) the discovery of effective treatments, or, ironically, 2) the discovery that many more people have been infected with the virus than we currently think.
On the former, the mobilisation of the international medical research community has been remarkable, and there are some promising possibilities. But it seems unlikely that we will discover and produce huge quantities of “therapeutics” in the next few months. Development and distribution of a vaccine, meanwhile, is still expected to take 12 to 18 months.
On the latter, there is evidence that some people who are infected with the coronavirus develop few or no symptoms. Because of our lack of testing capacity, moreover, it is likely that many more people have had the coronavirus than we have currently identified.
One hope, therefore – and at this point it seems little more than a hope – is that when we have developed widespread “antibody” testing, we will discover that the virus is already so widespread that we will have already achieved “herd immunity.” And we can then get back to life and business as usual.
Well, what should we watch?
In the meantime, it will be another big screen weekend.
Insider’s Kim Renfro has a few recommendations for you, starting with “Feel Good,” “The Great British Baking Show,” and “Westworld.”
And although I noticed some Trekkies grumbling about the new Star Trek series “Picard,” I will tell you that I know from personal experience that they’re wrong. Our family happily watched and enjoyed it. So if you binge your way through all of Kim recommendations, check it out.
Thanks again for reading. Please feel free to share your thoughts ([email protected]). All best for the weekend. We’ll send another edition soon.