Falling cases of the coronavirus imply that the US economy could improve over the next month or two as lockdowns ease and Americans resume their normal lives. There is, however, an unexpected short-term risk: that a vaccine will be ready by November.
To be absolutely clear, over the medium and long term a vaccine will be a godsend for economic growth. Even if it weren’t, a lower death rate is well worth a few more quarters of higher unemployment. Nonetheless, there is a possibility that the introduction of a vaccine could actually lead to a sharp if temporary deceleration in job growth.
Here’s why: As it now stands, there is no end to the pandemic in sight. While the numbers are currently improving in many parts of the US, there could easily be a surge of infections in the winter. After that, it’s anyone’s guess. Even the more optimistic estimates suggest that US would have to endure several more waves before the entire country reached herd immunity.
As a result, businesses and families have tried to find ways to plow through, adjusting to what is for the time being the new normal. A minority have even refused to abide by vague shutdown orders.
A vaccine would change all of that — setting a target date for everything to be over. For those considering returning to the office or school, a vaccine would provide a definitive answer to the question, “If not now, when?”
A vaccine would also create an obvious standard for who should be allowed back to work: those who’ve been vaccinated. While there is a robust debate about who should get a vaccine first, logic dictates that first responders and medical personnel will be among them. Then it would go to essential workers, however defined, across the economy.
It’s likely that non-essential workers and schoolchildren would come close to last. So the mere discovery of a vaccine wouldn’t necessarily end the current shutdown of businesses and schools; those reopenings would depend on the widespread distribution of a vaccine. Experts are uncertain about how long that would take, but it could easily be months.
While America is waiting for the vaccine to get distributed, job growth is likely to grind to a halt. Those who are already employed will likely stay employed, but it will be hard for employers to justify bringing anyone who has not been vaccinated into the workplace. Likewise, many school districts will demand that children get vaccinated before returning to school.
These two conditions — the reluctance of businesses to hire and schools to reopen — will severely limit how rapidly employment can expand through the end of this year and into the beginning of the next.
As a result, the US economy might need another round of stimulus to get through the vaccination process. And here there is reason for optimism. While an imminent vaccine might temporarily freeze the economy, it should have the opposite effect on Congress: Free of the fear that it would be making the kind of open-ended commitments that it did during the first rounds of stimulus, Congress could quickly pass a relief bill.
In Washington and elsewhere, politicians and public officials should be prepared for the perverse possibility that a vaccine would bring not only hope but also hardship — at least temporarily — for many workers. Even after a vaccine is found, Americans struggling to get by will still need assistance.
Bloomberg
