COVID cases are plummeting across the country, and many believe we’re nearing the end of the pandemic stage and entering an era of endemic COVID. But what does that mean for the economy?
What endemic COVID will do to the economy will depend on how the disease moves through the country and how we respond to it. The GDP will likely fall slightly, but most people probably won’t notice. That said, the possibilities are endless, and no one is really sure what’s going to happen.
A virus is endemic when it is a constant presence and continues to circulate through the community infecting people, as opposed to one that has been eradicated, like smallpox, or one that circulates until it has no one left to infect.
Infectious disease doctors are cautious about their predictions for the future of COVID-19, though it seems likely that it will be endemic. People have diminishing immunity over time, whether that immunity came from a vaccine or a previous infection, and it’s highly likely to continue to mutate. COVID has seasonality, spreading more readily in the winter months, and might transmit from animals to humans, leaving the door open to more variants.
Endemic COVID doesn’t mean that it will be milder. We are likely to experience sharp spikes in cases, including hospitalizations and deaths, especially in the winter months and if new variants arise.
But what does this mean for the economy?
Whether COVID becomes endemic or not, the economic impacts will come in three different ways: voluntary damage, direct damage, and regulatory damage.
Voluntary damage will likely continue when and if COVID becomes endemic. Some people will always be more concerned about getting sick than others and will continue to avoid crowds, restaurants, travel, concerts, and cruise ships. But they are likely to engage with the economy in other ways, as most people did at the beginning of the pandemic lockdowns. That is, they will continue to buy goods like home furnishings and exercise equipment instead of going out and seeking travel or entertainment. Some people will retire early, others will take less stressful jobs and out of the public eye at the cost of doing work that is not suited to their skills.
As for direct damage, COVID has already led to the loss of 5.9 million lives worldwide and counting, not to mention the suffering and emotional toll it took on their loved ones. Direct economic damage resulted from the loss of work hours both for those who were sick and those who were caring for them. Work hours were also lost to people having to isolate themselves after possible contact with the virus, and medical needs soared, leaving few resources for other types of investments.
Regulatory damage was significant and could have been less if policymakers approached COVID as a disease we had to learn to live with. Some countries, like China and Australia, had zero-COVID goals, restricting productivity, exercise, travel, and hospitality to meet them. But some people still have to leave their homes, which means there is still a chance that COVID could spread. Eradication of COVID is possible, in theory. But this virus is extremely transmissible, making it an even more difficult goal to achieve.
Most countries are slowly opening up and abandoning extreme lockdowns and lifting voluntary limitations. Eventually, all countries will lift restrictions, and we will get to a point where the economy is no longer affected.
There’s no way to tell what endemic COVID will mean for the economy, but we will probably see a small negative impact. In the end, life, business, and the economy will go on, as will COVID.
Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.