From a medical perspective, is the pandemic over? The answer is simple: I don’t know. The same is true if we look at it on a global basis: I don’t know. But when we look at the U.S. and when we consider the economic—rather than the medical—effects, then I think the answer is pretty clearly yes. We are now in the post-pandemic era.
Why do I say this? It’s not, actually, because of the medical progress. That progress is real, and we will get into it in some detail on Friday. New case growth is down to levels of last summer, and deaths are down as well. Positive test rates have reached pandemic lows. The progress is real and likely to continue.
Normalizing the Pandemic
But while it helps, that progress is not what’s driving the economic improvement. Instead, we as a country have normalized the pandemic. Case growth now is at about the same levels as the first wave, when we were panicked and shutting down. Same for deaths. Yet we have now largely reopened. It is not about the number of cases; it is about their acceptability.
All right, you might argue, but what if cases were to rise again? Based on the pandemic thus far, cases can rise quite a bit and still be economically acceptable. If you look at the second wave (when we were reopening the first time), cases were well above where they are now, and large parts of the country still reopened. Growth could, in fact, more than double and still be below the second-wave levels. We have quite a bit of cushion here before we need to worry about more shutdowns.
More Economic Shutdowns Unlikely
In fact, case growth is likely to stay low. With vaccinations spreading and with almost 40 percent of the population fully vaccinated (while almost half have had at least one dose), case growth is unlikely to go back to levels higher than the second wave and probably not higher than the first wave. Since we have already decided that is an acceptable risk, even if we do see those increases, we will not see the economic shutdowns and damages we did in earlier waves.
Looking at it from a national level, we can also see that if case growth does pick up again, it will likely be localized. Several states have very high levels of immunity, which will constrain case growth there. In states where vaccinations and immunity remain relatively low, which are most vulnerable to case growth rising, the political environment supports remaining open even if that happens. In other words, the states that are most vulnerable to another round of shutdowns are the most vaccinated. Any outbreaks we do see are unlikely to result in widespread shutdowns. And if we don’t have shutdowns, we have a growing economy.
But What About Herd Immunity?
This provides some useful context when we look at slowing vaccination rates around the country and whether or not we will get to herd immunity. From a medical standpoint, herd immunity is very important. But from an economic standpoint, it is much less so—and likely to drop even further.
This matters, because there is still the chance of a breakout variant that could push case growth up. It matters because when the weather changes in the fall, we are likely to see case growth tick up again. And it matters because continued reopening and subsiding economic risk are the foundation of where the financial markets are right now. Fortunately, while the medical risks remain real, although declining, the economic risks continue to subside.
A Post-Pandemic Economy
As I look at the news, what is remarkable is how it has changed back to what used to be normal: what will the Fed do, what is going on in Washington, and so forth. We’re not hearing much about the pandemic. This is what a post-pandemic economy looks like—and chances are it will continue this way.