Saturday, May 21, 2022

Covid-19, endemic or not, will still make us poorer

The possibility that the Covid-19 transition from pandemic to endemic has brought the bulls out on Wall Street. “A meaningful upside to our medium-term economic outlook,” writes Bank of America Corp. “A positive for risk assets,” says JPMorgan Chase & Co. “Highly contagious” The “silver lining” of the Omicron version, BlackRock says Huh Inc.

By “endemic” they mean that Omicron will leave almost everyone highly immune, either through vaccination, prior infection, or both. Then, he argues, Covid-19 will have a more predictable, less deadly appearance, much like the flu, and the world will return to normal.

Such optimism needs a reality check. This new normal will not be the same as the old normal: endemic COVID-19 will still take a toll on health, work and mobility; The only question is how big.

Predictions for the end of the pandemic have been a record disappointing. The hopes that vaccines would bring about herd immunity, that the more permeable versions would always be less lethal, or that the delta wave would last, were wrong. So be wary of forecasts that Covid-19 is going to be endemic.

And if it does, “endemic doesn’t really mean little,” says Carolyn Collijn, a mathematician specializing in infectious disease at Simon Fraser University in British Columbia. “It simply means that the system has reached some kind of steady state. Endemic can mean a higher level of infection.”

Pro. A team led by Collision modeled endemic COVID-19, assuming that a highly permeable variant is able to evade vaccines, as Omicron turned out, and confers immunity. They concluded that British Columbia’s infections may still be relatively high, compared with 2021 levels. Even though this new variant was 80% less severe than Delta’s, they estimated that its endemic condition, may have caused enough hospitalizations to routinely overwhelm the province’s health system.

The comparison with the flu is also incomplete. Let’s say the US death rate from COVID-19 fell compared to Vermont last year, thanks in large part to the state’s high vaccination rate in the largest part of the country. This would still be three times the death rate from flu and pneumonia in 2019. And Covid-19 will circulate along with the flu, reducing the toll.

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The past few weeks have shown that even without the lockdown, COVID-19 can still wreak economic havoc through the widespread absence of those infected. A key question, therefore, is whether once COVID-19 becomes endemic, disruptive interventions such as isolation will continue.

It will depend on the trade-off between the economic burden of illness and isolation, said Peter Chin-hong, a professor of medicine at the University of California, San Francisco. “We may be different for the flu, but no, because the consequences are high,” he said. “It doesn’t just depend on what the science says but what your values ​​are.” He said that with established treatments for COVID-19, early infection and transmission need not pose as much risk in the future.

But depending on the long-lasting effects of Omicron or the severity of future forms, failure to isolate infected workers could still lead to severe or chronic disease in some cohorts, Prof. Collison said. “These are really tough questions and are going to depend on things we don’t know yet.”

Endemic COVID-19 could thus create a permanent “supply shock” that could produce economies similar to the rise in oil prices in the 1970s. In October, the International Monetary Fund estimated global output this year to be 3% lower than it projected in 2019, with Western Europe and Latin America seeing a much bigger hit than China and Japan, where the toll of Covid-19 is much lower. Used to be.

The US is an exception: production was almost back to its pre-pandemic trend in the last quarter of 2021. But the economy, distorted and disrupted by Covid-19, is struggling to maintain this level of output, as inflation shows a 7% increase.

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COVID-19 may have increased efficiency in some industries by accelerating the adoption of digitization and remote working. Economists at Goldman Sachs estimate that this increased US productivity by 3% to 4%.

But some change in remote operation is involuntary, and some of the increase in productivity may reflect an overworked workforce. In fact, the pandemic has left the labor force smaller, sicker and less happy. Employed workers have an average of 50% higher absenteeism due to illness in the last two years. According to a routine Census Bureau survey, as of early January, about 12 million people were not working because they were sick with COVID-19, suffering from a coronavirus, or worried about getting or spreading the disease. The figure is not less than 4 million since June 2020.

According to the Federal Reserve Bank of New York, over the past year, workers have reported a decline in satisfaction with their wages and rising “reservation wages,” that is, how much they would have to pay to accept a new job. This could reflect inflation, changed expectations, or stress due to COVID-19 testing, mask and vaccine mandates, or their absence.

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For employers, this makes it very difficult to attract the required workforce. Nursing homes have raised hourly wages 14% since the start of the pandemic, yet staffing has declined 12%, reducing their ability to accept new patients. Such a reduction incurs a cost that is not reflected in GDP.

To be sure, almost all of these things will get worse as the omicron wave gets shorter. America has retreated from wars, disaster and disease in the past. It is bouncing back from Covid-19, and once the virus becomes endemic, its burden will no longer be on the mind.

That doesn’t mean they will leave.

Amid a surge in cases, some countries are offering other booster shots. In Israel, early data suggests that a fourth vaccine dose may increase antibodies against COVID-19, but is not sufficient to prevent infection with Omicron. WSJ explains. Photo Composite: Eve Hartley / WSJ

Write Greg IP greg.ip@wsj.com . Feather

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