July 13, 2020

It really does not take a genius to analyse and understand what’s going on. Just stare at the table below the time it takes to write a tweet and you should get the lay of the land.

Last week, the U.S. registered 164 new daily Covid-19 cases per million population, up from 71.1 in May and 119 in June per John Hopkins/NBF data. Only 3 other countries are currently above 100 new cases per million: Israel (128.4), South Africa (169.3) and Brazil (174.0). The other 22 countries tallied recorded an average of 11.4 new cases per million last week.

In China, where it all started some 7 months ago, there have been essentially no new cases to speak of for about 4 months. And if you don’t believe China’s numbers, look at Japan and South Korea.

In the Eurozone, the average number of daily cases peaked in April at 50.7 per million and is now 11.2. Italy and Spain are now at 3.3 and 9.0 daily cases per million.

One might say that North America being hit last needs a bit more time. How did Canada reach 7.6 daily cases per million last week from 40.4 in April while mighty USA just topped 164, up 38% from June’s average?

South Africa, and to some extent Brazil and Mexico, are fighting an unfair war in their highly populated and poor regions.

Is it a coincidence that three countries in the Americas, the USA, Mexico and Brazil, are led by presidents blatantly ignoring, even openly negating science.

Their high and rising number of cases is not because of more testing. According to John Hopkins data, testing in the U.S. has increased about 40% in recent weeks but the number of positive tests per day has doubled to reach 63,000 on July 11.

The number of hospitalizations, up 87% in less than one month, has nothing to do with testing. So does the number of deaths which is now turning up following the recent rise in hospitalizations:

The truth is that leadership matters, even more so when social media can easily amplify disinformation and influence a large swath of the population. How can we explain the huge divide between Republicans and Democrats on virus matters? The Pew Research Center, on June 25:

Republicans and Democrats increasingly view the disease in starkly different ways, from the personal health risks arising from the coronavirus outbreak to their comfort in engaging in everyday activities. (…)

A growing share of Republicans believe that the nation has turned a corner in its struggle with the coronavirus. A majority of Republicans and Republican-leaning independents (61%) now say that when thinking about the problems facing the country from the coronavirus, “the worst is behind us,” while 38% say the “worst is still to come.”

By contrast, just 23% of Democrats and Democratic leaners say that the worst is behind us when it comes to problems from the coronavirus; more than three times as many Democrats (76%) say the worst is still to come.

The partisan divide is glaring across the Pew survey:

                                                                                                   Republicans  Democrats

• % concerned about unknowingly spreading the virus:        45%              77%
• % worried they will need hospitalization:                             35%              64%
• % thinking individuals’ actions matter a great deal              44%              73%
• % comfortable to eat out in restaurants                                65%              28%
• % comfortable attending a crowded party                            31%                8%
• % comfortable attending indoor concert/sporting event       40%              11%
• % saying the economy is doing well                                     46%               9%

In every case, the differences between Republicans’ and Democrats’ levels of comfort far exceeds other demographic and even geographic differences. Across all six items, the average partisan gap in levels of comfort is nearly twice as big as the gap between whites and nonwhites and is far larger than the gap between men and women, those living in urban and rural communities, and the gap between younger and older Americans. (…)

Democrats and Democratic-leaning independents are about twice as likely as Republicans and Republican leaners to say that masks should be worn always (63% vs. 29%). Republicans are much more likely than Democrats to say that masks should rarely or never be worn (23% vs. 4%).

Can we reasonably expect that such a divided country can successfully fight an invisible enemy blindly attacking anybody and everybody within its reach? Careless people necessarily doom careful people and preclude a positive ending.

Brazil’s Bolsonaro and Mexico’s AMLO have both quickly adopted Trump’s virus playbook with similar results. And in Israel, CNN explains how elections and political motives can get in the way of sound, basic country management:

On April 18, almost exactly two months after Israel discovered its first case of coronavirus, Netanyahu declared that the country had succeeded in its fight against coronavirus, setting an example for the world “in safeguarding life and blocking the outbreak of the pandemic.” He predicted Israel would set an example in restarting the economy as well. (…)

Just weeks after reopening restaurants, malls and beaches, Israel is now seeing a 50-fold surge in new coronavirus cases. (…)

From a high of 73% in mid-May when the country appeared to have Covid-19 well under control, Netanyahu’s approval has plummeted to 46%, according to surveys conducted by Channel 12 News.

The top public health official in the Ministry of Health, Prof. Siegal Sadetzki, resigned Tuesday, issuing a scathing criticism of the government’s handling of the pandemic. In a Facebook post explaining the reasons for her decision, she wrote, “To my regret, for a number of weeks the handling of the outbreak has lost direction. Despite systemic and regular warnings in the various systems and in the discussions in different forums, we watch with frustration as the hour glass of opportunities runs low.”

The national unity government, established in May specifically to deal with coronavirus, appears more interested in political squabbling between Netanyahu and erstwhile rival Benny Gantz.

In the U.S., where the virus was supposed to be “just a flu”, “go away”, “go away during summer” or even “magically disappear”, and where the president set examples of crowded political rallies, flatly refused wearing a mask and pretends to be managing a deadly pandemic without meeting his top expert on infection diseases in over 2 months, it looks like this great country has lost control.

All states but 4 are currently experiencing daily cases per million well above 11.4 reported by the 22 “winning countries” tallied above; only 10 states are below 50 while 25 are above 150 including 18 above 350.

(NBF)

Meanwhile, in the last 28 days, China is at zero (since April!), Japan 1.0, South Korea 0.9 and Finland 0.8. Even Italy at 3.7 and Spain at 7.9 seem to have won their deadly fight along with France (5.1) and Germany (5.2), all down considerably since April-May. This beast can be controlled if people accept the necessity to fight it.

The U.S. and some of its southern imitators increasingly look like stubborn donkeys while the rest of the world is successfully containing the epidemic and cautiously re-opening their economy. Some countries have re-opened their borders and welcome travelers but only coming from low-risk countries.

Given the current trends, the nearby election and coming school re-openings, there is a very plausible scenario in which countries such as the U.S., Brazil and Mexico are obliged to keep fighting the virus with lockdowns and other stringent measures impacting their economy while most of the world is recovering, living, trading and traveling quasi-normally but keeping safe distances from countries still in combat mode.

In such a scenario, America becomes one of a few sick bubbles, shunned by most other countries, until Americans realize that they need to get serious about this enemy and impose the radical necessary fighting upon their “leaders”.

America has not won a war in a long time. It needs to realize it cannot lose this one. But first, Americans must understand there is a war that needs to be fought.

When celebrating America’s Independence Day on July 4, Trump failed to get inspired by the great American leaders carved on Mount Rushmore. He could have taken a hint from George Washington who had the genius to understand there was a war that had to be fought and that he needed military experts like Lafayette and Von Steuben to have a chance to defeat the powerful English forces.

The United Kingdom’s P.M. Boris Johnson was also following parts of Trump’s playbook while seeking the elusive herd immunity until things got very bad for his country and himself in late March. The Brits got serious and have now brought the count of new daily cases from 71.7 per million in April to 8.0 in the last 7 days.

Of course, the battle will not be totally won before a cure or a vaccine is found and the risk of a second wave on school re-openings and during winter requires continued monitoring and caution. But unless things suddenly improve, the U.S. will be among the few countries entering the risky period with poor overall health and negative momentum.

Ironically, Trump’s isolationist policy, really only tariffing the enemy out, could get imposed upon the U.S. by the rest of the world.

While the White House and Congress await their 21st century Pearl Harbor, it looks like the American people might be about to do the job themselves. The recent stats on Covid-19 seem to have convinced more people that re-opening is actually not winning.

Commanders in the trenches, governors and mayors, are taking it upon themselves to find ways to win this. Joseph Briggs, a Goldman Sachs economist, noted on Friday that re-opening reversals/pauses have now been declared in states containing 70% of the U.S. population leading to “a meaningful slowdown in activity”. Importantly, he also observed that “retail/recreation activity moved sideways and work activity declined in states that eased reopening restrictions too.” This means that what’s happening in hot states is having an impact countrywide.

In fact, data from Homebase confirm that activity has plateaued at a low level and threatens to roll over:

• You can see a recent plateauing that will likely continue, or worsen, given new coronavirus case rates and associated impacts on lockdowns and customer demand.

• An increase in COVID-19 cases in states like Arizona, Florida, and Texas—which collectively make up a group we’re calling “Wave 2” states—have seen a decline in hours worked, as you can see in the graph below. 
• Even before concerns arose over the increase in cases, the “Wave 2” states were experiencing plateauing levels of activity. In fact, the declines preceded the re-implementation of lockdowns and restrictions. 
• These plateaus suggest around 20% of Main Street businesses are closing permanently. 
• The trend in job postings — a real-time measure of labor market activity — is 24.7% lower than in 2019, as of July 3. The trend has improved over the past nine weeks relative to May 1, when the trend was down 39.3% from a year earlier. However, most of the decline in the gap in the past week from 2019’s trend comes from slower growth in last year’s baseline. (Indeed.com)

• Job postings for higher-wage occupations have fallen the most. Initially, postings in higher-wage occupations fell less than those in middle- and lower-wage occupations, but have subsequently lagged. Postings in higher-wage occupations are now 34% below trend, versus the 15% below trend for lower-wage occupations.

• Opportunity Insights, a partnership between economists from Harvard University and Brown University, finds that the positive trend in consumer spending seen since stimulus payments started on April 15 has rolled over since June 22.

• OI notes that the rebound in spending over the last 2 months was centered on low-income households while spending among high-income households remained considerably lower than pre-COVID-19 levels. Low income people used most of the stimulus checks to provide for their basic needs while higher income Americans stopped eating out, going to concerts and travel among other non-essentials spending categories. But employment among low-income workers remains very depressed and their earnings are still 36% below pre-pandemic levels. Their recent spending surge is unsustainable.

Meanwhile, as seen above, employment opportunities for higher-wage occupations are 34% below trend.

Goldman Sachs concludes:

Our finding that virus spread significantly affects consumer activity and spending—including in states that are not experiencing a rise in cases and have not rolled back reopening plans, and for several weeks after a surge in cases—provides support for our expectation that consumer service spending growth will pause in July and August.

In Goldman’s worst case scenario, which assumes that U.S. cases spike to 100k/day by the end of July, spending drops back to early May levels “and could fall even further if such a large spike in cases triggered a stronger health policy response”.

Dr. Fauci said last Friday in a FT interview:

I have never seen a virus or any pathogen that has such a broad range of manifestations. Even if it doesn’t kill you, even if it doesn’t put you in the hospital, it can make you seriously ill. What worries me is the slope of the curve, it still looks like it’s exponential.

Only in America!