The Coronavirus Outbreak

The heated debate over when to restart the economy has obscured an issue that could prove just as thorny: How to do it.

The Broadwalk Restaurant in Hollywood Beach, Fla. Restaurants generally have tight profit margins even in the best of times. 
The Broadwalk Restaurant in Hollywood Beach, Fla. Restaurants generally have tight profit margins even in the best of times. Credit...Scott McIntyre for The New York Times
Ben Casselman

The economy shut down almost overnight. It won’t start back up that way.

Politicians and public health experts have sparred for weeks over when, and under what circumstances, to allow businesses to reopen and Americans to emerge from their homes. But another question could prove just as thorny — how?

Because the restart will be gradual, with certain places and industries opening earlier than others, it will by definition be complicated. The U.S. economy is a complex web of supply chains whose dynamics don’t necessarily align neatly with epidemiologists’ recommendations.

Georgia and other states are beginning the reopening process. But even under the most optimistic estimates, it will be months, and possibly years, before Americans again crowd into bars and squeeze onto subway cars the way they did before the pandemic struck.

“It’s going to take much longer to thaw the economy than it took to freeze it,” said Diane Swonk, chief economist for the accounting firm Grant Thornton.

And it isn’t clear what, exactly, it means to gradually restart a system with as many interlocking pieces as the U.S. economy. How can one factory reopen when its suppliers remain shuttered? How can parents return to work when schools are still closed? How can older people return when there is still no effective treatment or vaccine? What is the government’s role in helping private businesses that may initially need to operate at a fraction of their normal capacity?

South Carolina, for example, looks likely to be among the first states to allow widespread reopening of businesses. But if a manufacturer there depends on a part made in Ohio, where the virus is still spreading, it may not be able to resume production, regardless of the rules.

“We live in an economy where there are lots of interconnections between different sectors,” said Joseph S. Vavra, an economist at the University of Chicago. “Saying you want to reopen gradually is more easily said than done.”

The White House released a plan this month for a phased reopening of the economy, with restrictions easing as states meet public health benchmarks. States have begun to develop their own road maps. Gov. Andrew M. Cuomo of New York said Tuesday that parts of the state that had fewer coronavirus cases might be allowed to reopen more quickly than New York City and other hard-hit areas.

But those proposals are mostly rough schematics, leaving unanswered crucial questions about how the process will play out at the ground level. Those details may help determine whether the economy will bounce back relatively quickly once the pandemic ebbs or the United States will face a slow, painful turnaround, as it did after the last recession.

Under the White House’s three-phase plan, many businesses will be allowed to open in the first phase. Schools and day care centers will need to wait for the next phase. That means that millions of working parents could be asked to return to their jobs before they have any way to take care of their children.

Mr. Vavra and two colleagues recently estimated that nearly one-third of U.S. households have a child under 14, and that more than one in 10 has no other adult in the household to help with child care. In addition, many reopening plans call for younger adults to return to work first, while people over 55, who are at greater risk of severe complications or death, stay home longer to avoid exposure. But younger adults are also more likely to have young children at home.

Then there is the public health threat: If states reopen their economies too quickly, or without the right precautions in place, that could lead to a renewed outbreak, with dire consequences for both safety and the economy.

“The biggest risk is that you open too fast, too broadly, and you have another round of infections, a second wave,” said Mark Zandi, chief economist for Moody’s Analytics. “That’s the fodder for an economic depression. That would just completely undermine confidence.”

In the early phases of reopening, businesses will almost certainly be required to operate at reduced capacity to allow for greater social distancing. That will require changes for virtually all companies, but in many cases it won’t present insurmountable hurdles.

Offices, for example, might operate in rotating shifts, with different departments coming in on different days and deep cleanings performed in between. In factories, production lines could be redesigned to allow more distance between workers and to reduce or eliminate contact between teams.

But other businesses could have a much harder time adapting. Most restaurants, for example, have tight profit margins even in the best of times. Operating at half capacity — or less — will mean losing money for many restaurants.

“It’s impossible in the restaurant business to be profitable at a 50 percent revenue clip,” said Alex Smith, president of the Atlas Restaurant Group, which operates upscale establishments in Baltimore, Houston and other cities.

For restaurants that were struggling before the shutdown, or that weren’t yet established enough to turn a profit, owners could decide that restocking kitchens and redesigning dining rooms to allow for social distancing is not worth the expense.

“If you were profitable before and your business was growing, then you need to hold tight and hope that there’s light at the end of the tunnel and things will come back,” Mr. Smith said. But if you were losing money before, “you really have to ask yourself, are you digging a deeper hole?”

The public debate has focused on government mandates: When should city and state shutdown orders be lifted? But just because businesses are allowed to reopen doesn’t mean that they will or, if they do, that customers will return.

Data from OpenTable, the restaurant reservation service, shows that people largely stopped eating out even before governors and mayors recommended doing so, and well before official shutdown orders took effect. Evidence from Sweden and other countries that have avoided formal lockdowns likewise shows that people have sharply reduced their activities even without government mandates.

“I don’t think it was really the government shutdown orders that shut down the economy — I think it was the virus that shut down the economy,” Mr. Vavra said. “Saying the economy is now opened is just lip service. The economy’s not going to be reopened until people want it to reopen.”

So far, there is little evidence that the public is ready. Despite scattered protests, surveys show widespread support for shutdown orders and little appetite for a rapid return. A recent Wall Street Journal/NBC News poll found that most Americans were more worried about lifting restrictions too early than keeping them in place too long.

“There’s no restaurateur in the country that believes that when the government says ‘Go,’ the restaurants will be packed again,” Mr. Smith said.

Mr. Smith’s greatest fear, he said, is that Americans will rush back to daily life too quickly, resulting in another flare-up and another lockdown. He can borrow money and reach into savings to reopen once, he said. A second time could be too much to manage, especially because a false start could leave customers even more wary.

“What scares most of us is Wave 2,” he said.

The federal government has already spent extraordinary amounts to keep individuals and businesses afloat during the economic shutdown. Congress approved another half-trillion-dollar aid package in recent days, with more help expected in coming weeks.

But economists say the government’s role is only beginning. Businesses will need help weathering a period of reduced sales. State and local governments will need help, too, or they will have to cut programs to offset a sharp drop in tax revenue. Individuals will need unemployment benefits, food assistance and other aid to make ends meet in a recession that will almost certainly outlast the pandemic.

The scope of those problems isn’t yet clear. No one knows how many businesses have failed permanently, rather than shut down temporarily, or how many laid-off workers will be able to return to their old jobs. But the longer the shutdown lasts, the more permanent the damage will be, and the slower the rebound.

“You can press pause for a period of time, but not too long before that becomes bad loans and defaults and so on,” said Shubham Singhal, a senior partner at McKinsey, the consulting firm. “Then you have the negative cycle that feeds on itself for a while.”

The good news is that the government mostly knows how to deal with that kind of problem. Unlike the current shutdown, which required policymakers to develop programs in record time, the post-pandemic period will probably resemble a more traditional recession and demand more conventional policy responses.

The bad news is that, historically, political will for these programs has ended long before the need for them. After the last recession, calls to rein in jobless benefits began while the unemployment rate was still close to 10 percent.

Elizabeth Ananat, a Barnard College economist who studies poverty and inequality, said she worried that government support would again dry up before the economy was ready to sustain itself, prolonging the downturn and hurting lower-income families, who are typically the last to benefit from a recovery.

“In some ways, I’m even more anxious about the reopening than I am about the shutdown,” she said.

  • Updated April 11, 2020

    • This is a difficult question, because a lot depends on how well the virus is contained. A better question might be: “How will we know when to reopen the country?” In an American Enterprise Institute report, Scott Gottlieb, Caitlin Rivers, Mark B. McClellan, Lauren Silvis and Crystal Watson staked out four goal posts for recovery: Hospitals in the state must be able to safely treat all patients requiring hospitalization, without resorting to crisis standards of care; the state needs to be able to at least test everyone who has symptoms; the state is able to conduct monitoring of confirmed cases and contacts; and there must be a sustained reduction in cases for at least 14 days.

    • If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can be carried on tiny respiratory droplets that fall as they are coughed or sneezed out. It may also be transmitted when we touch a contaminated surface and then touch our face.

    • No. Clinical trials are underway in the United States, China and Europe. But American officials and pharmaceutical executives have said that a vaccine remains at least 12 to 18 months away.

    • Unlike the flu, there is no known treatment or vaccine, and little is known about this particular virus so far. It seems to be more lethal than the flu, but the numbers are still uncertain. And it hits the elderly and those with underlying conditions — not just those with respiratory diseases — particularly hard.

    • If the family member doesn’t need hospitalization and can be cared for at home, you should help him or her with basic needs and monitor the symptoms, while also keeping as much distance as possible, according to guidelines issued by the C.D.C. If there’s space, the sick family member should stay in a separate room and use a separate bathroom. If masks are available, both the sick person and the caregiver should wear them when the caregiver enters the room. Make sure not to share any dishes or other household items and to regularly clean surfaces like counters, doorknobs, toilets and tables. Don’t forget to wash your hands frequently.

    • Plan two weeks of meals if possible. But people should not hoard food or supplies. Despite the empty shelves, the supply chain remains strong. And remember to wipe the handle of the grocery cart with a disinfecting wipe and wash your hands as soon as you get home.

    • That’s not a good idea. Even if you’re retired, having a balanced portfolio of stocks and bonds so that your money keeps up with inflation, or even grows, makes sense. But retirees may want to think about having enough cash set aside for a year’s worth of living expenses and big payments needed over the next five years.