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How the unvaccinated threaten the economy

·Senior Columnist
·4-min read

Sure, it’s a personal decision. But choosing to forgo the coronavirus vaccine could delay school reopenings, send some consumers back to lockdown and harm the overall economy.

The delta variant of the coronavirus now accounts for most infections in the United States, and it’s causing worrisome new outbreaks in areas with low vaccination rates. In Florida, which has a lower vaccination rate than the national average, caseloads nearly tripled from June to July. The sunshine state now has the largest caseload in the country. Other areas with worsening infection rates include southern states such as Georgia and Louisiana and mountain states such as Idaho and Wyoming.

Coronavirus death rates fell sharply for most of 2021, as vaccines made their way into arms. But the University of Washington now forecasts an increase in deaths through the end of summer and into the fall. This fatal backsliding, of course, is largely self-inflicted, since vaccines are widely available and free. The federal government will now once again recommend indoor masking in areas suffering outbreaks. Schools, government agencies and many employers are beginning to require vaccinations.

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New masking rules and vaccine mandates will intensify the debate over Americans’ right to behave foolishly. But they also highlight the economic cost of refusing vaccinations, as the recovery that looked robust earlier this year slows. “The delta variant of the COVID-19 virus is an emerging threat to our optimistic economic outlook,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a July 27 analysis. “The variant will do meaningful economic damage if it causes people to resume sheltering in place and forces schools to remain online when the school year starts in a few weeks.”

Low-vax states with delta outbreaks don’t account for the majority of the nation’s population or economic activity. But they tend to be places that were recovering faster than big urban centers, because southern and mountain states have less population density, and in the south, more outdoor activity. That provided some innate protection compared with people packed tightly in cities. So some of the bright spots in the recovery are now dimming.

JPMorgan Chase recently lowered its forecast for second-quarter GDP growth from 9% to 8% (annualized), saying in a research note, “The delta variant may impart a little more caution in consumer behavior, and we are adjusting our Q3 real consumption forecast lower.”

In Florida, a “back-to-normal index” maintained by Moody’s Analytics and CNN Business has dipped as the number of delta infections has surged. Some public-health experts say Americans shouldn’t travel to Florida right now, given that 20% of all new coronavirus infections in the country are surfacing there.

Photo by: STRF/STAR MAX/IPx 2021 7/7/21 Delta Variant now dominant COVID-19 strain in in the United States according to CDC. STAR MAX File Photo: 7/4/21 COVID-19 vaccination sites are set up in Coney Island, New York.
COVID-19 vaccination sites are set up in Coney Island, New York. (STAR MAX File Photo: 7/4/21)

Diane Swonk, chief economist at Grant Thornton, says Federal Reserve Chair Jerome Powell is likely to cite the delta variant as an economic risk. “Powell will have to acknowledge the downside risks that are beginning to emerge from the spread of the delta variant,” Swonk writes. “The course of contagion in high contact areas including restaurants, bars and theaters could dampen consumers’ willingness to congregate unless they can be assured that attendees are vaccinated.” She predicts Powell will cite this sort of risk after the Fed’s two-day meeting concludes on July 28.

There seems little chance of government-imposed lockdowns similar to those at the start of the pandemic last year. Vaccinations are working, for those who get them, with infection rates plummeting in areas with high vaccination rates. Even President Biden, who drew criticism for publicly wearing a mask after it seemed unnecessary, isn’t suggesting any kind of new government mandate.

But some workers and consumers remain concerned about unsafe conditions and could lock themselves down as conditions worsen in some areas. Census Bureau data suggests about 4 million Americans are choosing not to work because they’re concerned about contracting the virus—one underappreciated cause of the so-called labor shortage. Recent Axios/Ipsos polling finds that the portion of Americans social distancing for health reasons rose from 34% in June to 43% in July. And the portion saying life is risky because of the virus rose by 11 points. If that sort of reaction to the unvaccinated problem persists, it will cut into activity, spending and hiring.

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Virtually all of the states enduring infection spikes have Republican governors who cut off federal jobless benefits for their residents this summer, before the program expires in September. That was supposed to boost the incentive to look for a job, but instead it seems to have added to people’s financial hardship with no offsetting benefit. Those states are now losing billions of dollars in federal money that would have gone into their regional economies as the unvaccinated problem threatens to suppress growth. Refusing an economic inoculation might end up as regrettable as refusing a medical one.

Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.

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