Coronavirus panic wreaks havoc on the global economy
When I first thought of writing this article regarding the economic impact of the coronavirus (officially known as COVID-19), I knew things were going to get worse before they got better — and they have. There has been a delayed impact on the United States, but as of March 7, there has been a total of 17 deaths and 308 cases. A state of emergency has been declared in California, New York and Washington and more. A cruise ship with 21 confirmed cases so far is quarantined near San Francisco, and in limbo as to when test kits for all the passengers will be available. They have finally been allowed to dock in Oakland, CA, which is odd, since Oakland is just a short drive from San Francisco, so I’m not quite sure what they’re trying to prevent.
What started as a problem halfway across the world in Wuhan, China, has spread to Italy, Iran and the rest of the world. So far, 102,000 have been infected with the virus and nearly 3,500 have died worldwide. The first death from the virus, which was first reported on Dec. 31, was in Wuhan. It’s likely that the virus had been spreading undetected for weeks prior.
On Jan. 23, the initial response to the virus was met with a strict quarantine imposed by the Chinese government, with all air and rail travel temporarily stopped. Then Beijing canceled celebrations around the Lunar New Year, and the Shanghai Disneyland closed. Travel restrictions started cropping up for locations like China and Hong Kong. By Jan. 27, there were cases of the coronavirus reported in the U.S., Taiwan, Thailand, Japan and South Korea. Suddenly, people were afraid to travel with or near anyone who looked like they might be from one of those countries which reeks of racism, and a policy like the ones deployed by China isn’t feasible in many other countries on a large scale that has been done in some of the countries where the first cases appeared.
A few firms were brave enough to send cautionary notes to their investors about the impact on their supply chains. Apple was among the first to do so; they closed some stores in China and have been consistently lowering their earnings estimates for the year. In our endless cycle of shopping and with China having become the world’s factory, there will be fewer goods shipped out from China. It boggles my mind that companies put all their manufacturing in one country and never diversified their supply chains to other leading manufacturing countries because the cost at the time would have hurt their bottom line. To me, this is typical Wall Street thinking of profits before people and procedure.
Sure, maybe we all don’t need the latest and greatest Apple Watch now, and we could live without it. What about every other thing we purchase? Most of it is manufactured outside the U.S., and a good portion of that is made in China. This includes the face masks that have seen stock outages and price gouging, as well as pharmaceuticals and medical devices. A friend of mine mentioned that some companies have had work standstills because the raw material they use for research are made in China as well, and they don’t have the reagents to make their products stateside. Wait times for products are increasing and without products to sell, there is no revenue to realize.
There have been travel and tourism repercussions as well, which seem blown out of proportion given the low fatality rates of COVID-19. True, the rate of infection is high, but since the virus impacts those with compromised immune systems and the elderly, it seems ridiculous to close school to save the children. A far better solution would be to tell the affected populations to self-quarantine or avoid public spaces. Schools have canceled their trips abroad for students, faculty and staff. The Louvre was closed for a period but has since reopened. The streets of Venice have been emptied out. Airlines have canceled flights to more and more countries, especially locations most seriously affected by the coronavirus. Companies have been canceling trips and conferences. South by Southwest was canceled in Austin, Texas. Both Amazon and Microsoft have been having their employees work from home, at least those who can. Additionally, as with any economic crisis, the most affected people are the ones who can least afford it: service workers continue to show up for their shifts because if they don’t, they don’t get paid. Gig economy workers who might be delivering for GrubHub or driving for Uber are still on the road. Schools have closed for weeks at a time, including elementary schools (as close as in Wellesley, MA) and universities (Stanford, the University of Southern California, and the University of Washington), out of an abundance of caution.
What’s worse than the bite of the virus so far is its bark. Fear begets fear, and I have noticed the streets around the Boston area seem to be quieter than usual. Scaremongering spreads awfully fast, and fewer people have been going to movies, eating out, riding the train or going to sporting events. Some teams have posted warnings and made requests that any fans concerned about their safety simply stay home, and suggestions have been made that games be played in empty arenas. I’ve seen recipes for hand sanitizer popping up on my social media feeds, and I’ve heard tales of people buying Everclear, which is 190-proof alcohol, if they can't buy hand sanitizer.
So far, 93 countries have been affected. Meanwhile, we still don't know how COVID-19 is transmitted, and there is no vaccine. Nor do we know the incubation period of the virus, with estimates ranging from two days to a few weeks. Many of those infected seem to recover, with those most susceptible being the elderly and those with compromised systems. The Centers for Disease Control and the World Health Organization have not labeled the coronavirus outbreak as a pandemic …yet. It’s more widespread than either SARS or MERS were, but it seems to have a lower death rate. A lot of people seem to think that buying a mask and giving a nasty look to someone who is coughing will be sufficient to prevent them from catching the virus. The reality is that people just really need to wash their hands better and moisturize afterwards. It’s one reason why I wear gloves when I’m out and about. It would help if public places were actually kept clean. Why does it take the threat of a virus to clean the subway lines or “deep clean” a school’s surfaces? I wonder what the cleaning staff is doing other than emptying trash and superficial dusting. Perhaps if they were given a budget for decent custodial supplies and the time in which to perform their duties, surfaces would remain cleaner.
The financial markets have certainly not been immune to the effects of COVID-19. Granted, the markets had been slowing, but jobs were growing at a healthy clip, incomes were rising and inflation was low. Then, on March 3, the Federal Reserve took the extraordinary measure of cutting the federal funds rate by one-half percentage point in an effort to calm the markets, but that measure fell flat. Last week, stocks experienced their biggest weekly loss since the global financial meltdown of 2008. The biggest stock losers were airlines, travel-related stocks, oil companies and technology stocks. Sure, the market has needed a correction, and I’ve felt that we’ve been in a bubble for a while, but what I don't understand is the senseless herd mentality of investors wanting to sell in a down market. If investors don’t like uncertainty, I’m at a loss to explain why they’re in the stock market to begin with. I constantly see my friends and family engaged in wild sell-offs and then complaining about their losses. Maybe if they would stop looking at their investments on a daily basis and use that time doing something more productive, like reading a book, it might give them more peace of mind.
Until the means of transmission are identified, and effective mitigating plans are put in place, the wild ride caused by the coronavirus is far from over. But we can all do our part by using common sense and taking measures not to spread illness when we are sick.