The Top Line

• While the economy shrank at a 4.8% pace over the first quarter, and economists predict a deeper contraction in the second quarter, consumers, who fueled our economic expansion, expect business conditions to improve.

• As the peak of COVID-19 cases passes in most states, plans to reopen their economies vary both between the states and within states themselves.

• Restaurants, bars, and their workers were some of the most affected by the COVID-19 crisis. But as the economy begins to reopen, some good signs may be appearing on the horizon.

• Major technology companies are working together in an effort to limit virus spread as stay-at-home orders are lifted.

American Optimism Survives

U.S. Personal Savings Rate

Even with economists bracing for continued contraction in the second quarter, many Americans continue to embrace optimism in the future, which was at record highs immediately before the pandemic hit the country.

• The percentage of consumers expecting business conditions will improve over the next six months more than doubled from 18.7% to 40.0% in April. The number of consumers expecting a greater availability of jobs also rose.
• Similarly, worker confidence remains in positive territory, though disparities exist among worker classifications, with full-time workers providing the highest readings, followed by the self-employed and contractors. Freelancers were the least optimistic, but still edged into positive territory.
• At the same time, Americans boosted their savings in March to the highest level in 39 years, which will serve as firepower to boost consumption when lockdowns ease (see above).

The Various States of Reopening

As the initial wave of COVID-19 cases passes its peak in most states, several lockdowns in the U.S. (see above) will begin to ease this week.

• States will vary as to the dates they begin to reopen and the respective measures they will take to combat a reemergence of COVID-19.
• Even the status of reopening within states may vary, with New York set to implement a reopening based on 10 different intrastate regions and Illinois considering similar measures.

Myth vs. Fact

MYTH: Certain commentators have suggested that insurance companies should be required to pay claims on business interruption policies that either didn’t include pandemic coverage or specifically excluded pandemic coverage.

FACT: Aside from the bad precedent for the rule of law that retroactive alteration of contracts would entail, the scale of claims that would result from such forced coverage would likely drive large swaths of the insurance industry to bankruptcy. To cover the claims caused by forced coverage, insurance companies would likely sell assets, leading to severe drops in asset prices and cascading economic effects that could exacerbate economic conditions.

Returning to the Table

With restaurants and bars among the industries hardest hit by the COVID-19 pandemic, food consumption by Americans has shifted dramatically (see above).

• Despite this, major restaurant suppliers are seeing an uptick in orders for their food products and kitchen supplies, indicating a potential start in a return to more normal business in the food service industry.
• As consumers return to their local eateries, the restaurants and staff that serve them are implementing preventative measures to avoid a resurgence of COVID-19 as they reopen.
• Amidst the shift to home cooked meals, some old American mainstays in the food industry have seen a revival in demand for their products.

Disruption of the Week

As we enter the next stage in our fight against COVID-19, will temperature checks and crowdsourced contact tracing become the new norm?

• By now we have all become familiar with the practices that help flatten the curve and protect our health care system. However, as parts of the country slowly reopen and Americans reenter public life, the next phase of effective COVID-19 tracking will be critical in ensuring the curve remains flat.
• Included in the White House plan to reopen America are stringent testing and contact tracing guidelines, including the establishment of detection sites screening for asymptomatic cases and quick contact tracing for individuals who test positive.
• One of the largest efforts related to voluntary contact tracing involves the use of smartphone Bluetooth technology and an app that will alert individuals if they have potentially been exposed to the virus.
• Despite cybersecurity and privacy concerns, and potential scalability issues as many Americans say they can’t or won’t use this technology, tracing apps and similar tracking technology has proven to be useful in places like Italy, South Korea, and Germany.
• In the coming months, as governments work to protect citizens amid a reopening economy, the efficient use of data-driven testing and containment practices have the chance to help us safely return to normal.

Further Reading

• As the nation looks towards reopening, the pandemic’s effects on the federal budget and debt is coming into focus. Brian Riedl of the Manhattan Institute discusses how COVID-19 will push this year’s deficit and the national debt to levels not seen since World War II and keep adding to the debt long after the crisis abates.