This time last year, COVID-19 (CV-19) wasn’t on the radar. The US economy was in a historic bull run. Globetrotting was in vogue. We were looking forward to college football and going to music venues. Good times, right?
Today, we have historically high fourteen percent unemployment, one of the worst quarters of corporate earnings in recent memory, global and domestic travel is virtually nonexistent, and Federal deficit spending for CV-19 is over two trillion dollars and growing. What a difference a year makes. For that matter, what a difference ninety days has made.
This article provides some short term and strategic impacts that CV-19 will likely have on Americans.
Short term trends for CV-19:
The partial or full reopening of the country: We will see more businesses and venues open this quarter. Despite the health risks, we can not keep 330 million Americans locked down long term. There is not enough government aid to support up to fifty percent of our people who would be unemployed by the fourth quarter under prolonged lockdown. We also have a constitution that provides the world’s greatest set of civil rights. This means the US Constitution and the practical aspects of preventing an economic meltdown will drive the trend toward reopening.
Economic recession or depression: Commonly, depression is defined as an extreme recession that lasts three or more years or a decline in the real gross domestic product (GDP) of at least 10 percent in a given year. Right now the US GDP has declined by 4.8% in Q1 2020. Depressions tend to be accompanied by high unemployment and low inflation. We already know that Q1 corporate revenues and earnings declined. We also know that companies are projecting further declines in Q2. Q3 projections show little hope for improvement. Short of a vaccine, cure, or herd immunity, depression is a real possibility. The hardship that ensues will come down to the length of time to and the extent of the economic recovery.
CV-19 cases will likely increase: Nearly all the epidemiological models indicate that CV-19 infections will increase as more people interact. This means we will see more people infected, more people hospitalized, and higher mortality. They tell me that medical conditions such as obesity, diabetes, heart disease, lung disease, advanced age, and high blood pressure all increase the severity and mortality associated with CV-19. Obesity is the mother of many of these conditions. Since the US has an obesity rate of approximately 42%, US mortality will be higher than countries that are in better health because of the many comorbidities that obesity fosters. CV-19 does not have a positive or negative racial bias. It comes down to the health of the infected individual. In populations where comorbidities exist, the incidence and severity of the disease will be greater. The estimates provided range from ten to seventy percent of Americans infected with CV-19 within twelve months of reopening. Mortality is projected at four percent of those infected in the US. However, we are very early in our experience with CV-19 and individual health and behavior will be key determinants of infection and mortality curves.
Business failures will increase: The fact that thirty percent of US businesses employ ninety-nine or fewer employees and have the lowest ability to survive revenue shortfalls means that most in this category will fail within two quarters. According to the Small Business Administration, most of these smaller firms will not be able to reopen. The next level of companies ranging from one hundred to four hundred and ninety-nine employees have a slightly better chance of solvency but will need to make significant cost cuts to recover lost revenue. Thirty-two percent of companies that employ over five hundred employees tend to have stronger reserves and better borrowing power. However, their fate also hinges on their ability to generate revenue and cut costs. For most, generating revenue comes down to consumer spending.
In a consumer-based economy, the loss of jobs will have far-reaching effects. A few of these effects will include defaults on rent, loan payments, and lease payments. It also means cuts in research and development. As businesses fail, their trading partners, bankers, and lessors will be negatively impacted. As people lose jobs, consumer spending will decline across the board. Top economists state that consumer spending is not likely to return to January 2020 levels for at least two years. This means that the economic recovery is not expected to be rapid.
Travel, tourism, and sports: This large sector of the economy is one of the most sensitive to business and consumer spending and has been decimated. Travel, sports venues, and vacations will recover when people feel safe again and discretionary income returns. Thus, this sector is likely to be in the red for at least two to three quarters due to downward pressure on individual incomes.
Restaurants, concerts, religious gatherings, and theaters: These venues will reopen. Attendance at these venues will be determined by a mixture of public policy, individual confidence, the disease curves, and overall economic outlook. When Americans are comfortable enough to attend a concert or sporting event is a question mark. Religious gatherings will likely see a more rapid resurgence due to the nature of worship and the need for it during this pandemic. Packing thousands of people into a crowded space, especially an enclosed stadium during a pandemic is not likely to pass the sensibility test. Until we have solid precautions and/or a cure, the outlook for mass stadium events is bleak. The bright spot is that there are televised options and mass precautions that could work. As a healthcare worker, I’ve been trained in infection control and my clinical colleagues work with highly infectious people every day. Thus, it can be done. The issue is with the people who refuse to follow protocol. People exhibiting risky behaviors will keep us all from having live sporting events and the exercise of many of our civil rights.
Increased government spending: Federal, State, and Municipal Governments will be forced to spend at record levels to meet human needs and attempt to assist businesses. The long term impact of providing a safety net for America will have lasting effects on governmental ability to borrow and spend for decades. The fact that most of the current CV-19 funding has been invested in short term benefits will do little to address strategic issues such as crumbling infrastructure or the modernization of operations. While critical to avoid an economic meltdown, deficit spending on short term items does not foster long term strategic gains.
Rights vs. social responsibility: With civil rights come individual responsibilities. This debate is being played out all over social media and even in armed protests in State Capitals. This means that as we open up, what you and I do to follow precautions (handwashing, social distancing, masking, quarantining when ill, covering coughs, and staying away for medically high-risk individuals) will have the major impact on the disease curves and our economic recovery. Suffice it to say, we will have a greater problem if the American people are not responsible for exercising their rights. Individual responsibility can not be overemphasized. CV-19 will show American character in many ways. Patriotism will likely increase. Political polarization will continue. Government leadership and the legislative process will be scrutinized. While a “TBO” (throw the bums out) election does not appear to be in the making, the character and judgment of America’s political and corporate leaders are being questioned.
CV-19 learning curve: CV-19 is a new virus. While our learning curve has been rapid, much remains unknown. Our scientific and medical communities are struggling to find treatments, cures, and vaccines. Countries such as Sweden have banked on the herd immunity, the concept of letting the disease infect people in the hope that they will gain immunity. Others bet on quarantining all or a subset of their people. So far, we know quarantine and universal precautions work. We do not yet know if herd immunity will work. Nevertheless, we will be banking on universal precautions, herd immunity, and quarantining ill and high-risk people in the US until a cure or vaccine is developed. The best guess I received from one virologist is that it will take twelve to twenty-four months for a well tested and effective vaccine to emerge. Treatments to support life while the body heals itself are currently in place. A highly effective antiviral that has proven efficacy does not exist. The timeline to a cure is speculative and is in part impacted by virus behavior and mutation. The recent issues with this year’s flu vaccine, show the inherent problems with vaccines. CV-19 is likely to become a part of our society like many other infections for the foreseeable future. Everyone is confident that we will “find a cure”. No one can say when.
Strategic trends resulting from CV-19
CV-19 will drive some new trends and accelerate existing ones.
Telemedicine: CV-19 has exposed many more Americans to telemedicine, either via video or phone technology. CV-19 infection risks and protocols have also forced many more physicians to use this method of care in place of in-office visits. The combination of greater work at home, infectious disease trends, and an increased comfort level with telemedicine will likely improve legislation and reimbursement for these services. Improved reimbursement and the ability to reduce office costs will further reinforce this trend among physicians.
Working at home: The trend toward working at home permanently or specific days each week started in earnest in the 1990s when consulting firms and other companies decided that their self motivated and productivity monitored people really did not need a costly office. Studies have generally supported a higher quality of life, greater productivity, and significant employee cost savings from telecommuting. CV-19 has reinforced this practice and exposed millions of workers, students, teachers, and companies to the widespread application of this work arrangement.
Home redesign: As more people leave the traditional office setting, home renovations in support of a dual-use, work and home, spaces will increase. As people spend more time at home, they will also invest more in their home environment.
Reduction in fossil fuel use and air pollution: The recent significant drop in miles driven to work shows what can happen as more people are allowed to work and study at home. This has huge ramifications for energy companies. This trend will likely drive lower car insurance rates, less traffic-related injuries, and less pollution. While fuel usage will increase as the country reopens, it will likely never return to pre-CV19 levels.
Increased demand for internet capacity: More people working or studying from home will mean greater demand for internet services and higher capacity.
New leadership techniques: The old days of a boss having employees sitting outside their office in a cubical is closing for many companies. Many pastors, supervisors, and public servants who are accustomed to managing their people live are struggling to make the transition during the quarantine. Not having employees and colleagues in the same building has been intimidating for many. The more egocentric managers find it hard to do without the daily ego strokes in the workplace. There are also some real issues that emerge with productivity and quality monitoring, operating video conferencing applications, and changing the communication style. Either these managers will learn to evolve or become extinct as the teleworking trend continues. This means that successful managers must learn new skills.
Infection control as a way of life: CV-19 and many other emerging pathogens will likely cause us to rethink the precautions we take. The late Howard Hughes was impacted his entire life by his mother’s preoccupation with infection control after surviving the 1918 Influenza Pandemic. While I hope no one develops a phobia, the mental impact of living through a pandemic will remain. If we continue to observe precautions, we will be healthier for it. Better infection control practices across the population will help reduce the spread of disease in the future. This trend has and will continue to fuel new product development and sales of hygiene products and gadgets. These will include air filtration and anti-pathogen technologies in the home and medical facilities.
Greater focus on personal health responsibility: The high hospitalization and mortality rates for people who are obese or have obesity driven, preventable conditions will become a greater focus in the future. The US obesity rate as predicted by the CDC will reach fifty percent in the US over the next ten years. CV-19 can be a catalyst for strengthening American’s focus on personal health. As with CV-19, a person’s poor healthcare choices cost society in many areas such as higher incidence of disease, higher insurance premiums, higher use of medical resources, and mortality. If people learn these lessons and take appropriate steps to reach and maintain a healthy weight, stabilize blood glucose, sleep better, manage stress more effectively, and achieve better mental health, as much as one-third of all healthcare costs can be eliminated. This focus on better health will drive the wellness industry and help reshape public policy.
Self-care will increase: The internet, telemedicine, and CV-19 will change the national consciousness around individual responsibility for health and self-care. Self-care will include the expanded use of wellness services such as health coaches, self-care applications, a renewed focus on fitness rather than working out, and the desire of people for a scientifically based system of self-care that includes nutrition, exercise, stress management, sleep, and mental health. CV-19 will cause many people to understand their own responsibility for their health. Self-assessment applications, self-ordering of lab tests, remote physician-based prescribing, and businesses supporting self-care will increase. The self-care trend combined with the decline in available physicians will also shift legislation to allow Americans greater access to resources and treatments at home.
Robots and drones will increase: CV-19 will continue to accelerate the trend toward the use of robots and drones for deliveries, surveillance, and medical care. Because machines can not contract the disease, can be cleaned, and do not miss work, more companies and agencies will look to implement this technology. In law enforcement, the trend toward robotic vehicles, traffic control devices, and lab testing for DUI and illness at the patrol car level will increase dramatically. Drone deliveries, robotic cars, and carts for delivery will also increase in usage.
Reduced air travel: Cabin air quality has long been reviewed by the FAA. While some improvements have been made, putting hundreds of people in a cramped aircraft greatly increases the risk of infection. Airlines will be asked to improve air quality through a variety of techniques including high-efficiency filtration. The effectiveness of these measures will have much to do with the recovery of the airline industry. In addition to air quality, social distancing will be engineered into planes or passengers will be required to wear masks. Passenger screening scenarios are also likely. Regardless of the approach, many airlines will go bankrupt due to lost revenues. It will be years before air travel peaks again. Due to the high cost of flying, the economic impact of CV-19, and the rapid adoption of video conferencing, air travel is not likely to return to pre-CV-19 levels for business travelers for many years. Business air travel may well become an “antiquated method” for many businesses who are learning that the use of video conferencing improves productivity (travel wastes significant amounts of time) and significantly lowers costs.
Rethinking consumer finances: Many people will continue to be financially impacted by CV-19. This experience will encourage greater savings and a more spartan view of “what’s needed” in the future. Like those Americans who lived through the Great Depression, a modern version of “depression mentality” will emerge after CV-19. This will change savings rates, financial planning, and spending levels for the average citizen. The significant decline in average credit rating due to the inability to pay bills will greatly lower credit issuance in the near future. The decline in individual retirement savings will highlight the need for better planning and, perhaps, different asset allocations.
Remote education: CV-19 has shifted campus-based learning to video and computer-based learning universally over the past three months. Students are learning about the huge savings they receive by eliminating dorm rent, meal plans, added fees, and commuting costs. This experience will increase the use of off-campus learning for decades to come. When Universities and other institutions are forced to provide more off-campus arrangements, the cost of a college degree will be decreased by as much as seventy percent. The downside is that human interaction is a critical component of learning and video conferencing is not ideal for many types of education. For example, the hands-on portions of medical school or nursing school require human interactions and onsite labs.
Tighter credit: The inability of consumers and businesses to repay debt during CV-19 will likely result in tighter lending guidelines.
Buying opportunities: Foreclosures and historically low-interest rates will create an opportunity for individuals buying a first or second home or businesses looking to expand. The long term trend will be toward smaller, less expensive (price and ongoing costs) homes. CV-19’s duration as a crisis will also lower the price of many stocks and create significant buying opportunities for those with funds and willing to buy in ahead of recovery.
Reductions in just in time inventory systems: While hospitals and many businesses today have shifted from warehousing and oversupply, the just in time inventory strategies of the 1990s and 2000s have caused severe shortages in a crisis. This includes personal protective equipment. The savings attributable to shifting to just in time inventory is US hospitals saved between two and five percent of supply chain costs. These strategies will be modified in the future. The likely outcome will be either more regional warehousing of critical supplies by the hospital, health system, or vendor.
Shift toward domestic production: CV-19 has opened our eyes again to the serious issues caused by global outsourcing of production of nearly “everything” to countries such as China. CV-19 will bring about a greater sense of American nationalism (America First) and will feed the existing movement to bring production back to the US. This will be an afront to pure profiteers who place maximizing shareholder wealth above the societal marketing concept and seek to shift everything to the lowest-cost producer. US production will also increase costs due to higher labor costs but will strengthen our economy, create jobs, and improve our ability to deal with global disruptions such as pandemics, war, and trade disputes.
Cultural changes from selfishness vs. selflessness: The national debate over civil rights (not wearing masks, assembling without precautions, my right to go wherever I want) verse individual moral responsibility will come to a head soon. The consequences of selfish behavior will be seen in the CV-19 “curves”.
Increased funding for clinical and basic science research: CV-19 has highlighted what epidemiologists and physicians have told us for decades, i.e. that a major pandemic(s) is coming. The many examples of ill-preparedness with CV-19 and the significant suffering that ensues will bring about a major increase in research funding for basic science in virology, and R&D for treatments and cures.
Healthcare Reform: CV-19 has exposed many holes in the US healthcare delivery model. In the US, we do not have a true health system. We have a series of poorly coordinated episodes of care that are overpriced and result in a wide variance in quality and patient outcomes. The high level of mortality from CV-19 and many other diseases highlight the failure of the US to address most of the root causes of disease. These include obesity and overweight, poor diet and motion; misleading for-profit information, a food industry that is focused on profit rather than health, and the lack of national best practices that are universally applied. Trends toward Medicare for all or a Public Option with more government quality and pricing controls will come about over the next decade. The economic crisis and mass unemployment (which means loss of employer healthcare benefits or unaffordable COBRA) will bring more Americans into the reform camp.
Summary: CV-19 will reshape trends domestically and globally for decades to come. The strength and amplitude of these change waves will be influenced by three factors: the duration of the CV-19 pandemic (time to a vaccine, cure, herd immunity, and/or eradication of disease); the personal impact of each American (severity of illness, deaths of friends and family members, loss of income/assets); and economic impact (major recession, depression, and business closings.)
We are currently working with healthcare organizations, businesses, charities, and religious organizations to develop strategies to address the trends associated with CV-19. What is a threat to some, is an opportunity for others. CV-19 provides many personal and business challenges. Those with a strategy and plan will be in a better position to respond to change and thrive in the future.