November 7, 2020 / VOLUME NO. 130
The Masked Economy

The U.S. economy’s encouraging recovery in the third quarter is threatened by the resurgence of the coronavirus and pandemic fatigue.  

Masks may help.

Face mask mandates remain controversial even as positivity and infection rates, hospitalization activity and deaths broke new records at the end of October. Tenacious and persistent resistance to wearing masks despite these trends bodes ill for the economy’s full recovery. 

“It is crucial for Americans to maintain vigilant mitigation measures; the virus's spread is heading in an extremely concerning direction that could prove catastrophic for our country's healthcare system and economy,” wrote Raymond James healthcare policy research analyst Chris Meekins in an Oct. 26 report. Federal Reserve Chairman Jerome Powell made similar remarks in September.

The economy moved past the initial supply shock in the spring — when we risked running out of essential goods like medical equipment and hospital capacity, and faced the rapid and uncontrolled spread of the virus without dramatic intervention. It’s moved into the next, potentially longer and more tedious driver of economic malaise: demand shock. Normally, these shocks are temporary increases or decreases for goods or services; this decrease in commerce has yet to fully fade.

Many consumers do not feel safe going to stores or the movies, flying, or eating in restaurants. That lack of activity erodes the confidence of small businesses that they can survive the recession with their existing workforce, according to a survey of small businesses conducted by Goldman Sachs between April and September. 
“The majority of economic activity actually takes place in a physical structure somewhere. Things are bought, things are manufactured, people stay overnight, services are provided,” Ryan Severino, chief economist at global real estate firm JLL told me for my fourth-quarter magazine story on the dynamics behind the looming commercial real estate crisis. “If the economy is going to be impaired, it’s going to end up impairing the performance of those physical structures.”

One of the few things that everyone can do to keep this recovery from slipping into a second recession — or a second lockdown — is participating in the continuous, widespread use of face masks.

A recent study suggests that 130,000 fewer people would die from the virus through February 2021 if 95% of the population wears face coverings and follows social distancing guidance. Keeping rates of infection, hospitalizations and deaths low is paramount to keeping the economy on track.

Masks are imperfect and annoying. They might also be the surest way of protecting the economy’s health for the time being.

• Kiah Lau Haslett, managing editor of Bank Director
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