The spread of the delta variant could slow down the national and state-level economic recovery. Total COVID-19 daily cases have risen to some of their highest levels since the spring, as have the positivity rate among tests and the transmission rate, or how fast the virus spreads between people. All these new surges, according to government leaders and public health officials, are happening almost exclusively among those who have not gotten a vaccine.
The rise in cases has prompted talk of renewed restrictions after they were lifted for months. The federal Centers for Disease Control and Prevention on July 27 urged anyone in parts of the country with significant outbreaks to wear a mask indoors regardless of vaccination status.
Gov. Phil Murphy, who is facing reelection this November, followed suit the next day, “strongly recommending” people in the state to wear masks indoors at crowded places, and wherever they’re not sure whether everyone they’ll encounter has been vaccinated.
But an economic downturn of the magnitude of what occurred in March and April last year is unlikely, according to many economic experts. “The general view is it wouldn’t be anything like last year,” said Charles Steindel, the state’s former chief economist.
Steindel
“Obviously if people are scared or fearful and don’t feel like going out, they won’t go out. Businesses would fall off in places like restaurants, entertainment venues, hotels and motels,” he said, though he added that this scenario remains unlikely.
And S&P Global, in a July 23 analysis, reported that “despite the pickup in COVID-19 cases, tied to the delta variant, the pace of U.S. economic activity remains high.”
“Despite the risk from the delta variant, the U.S. economy continues its strong reopening in June,” S&P continued. “On average, the increase in COVID-19 cases hasn’t discouraged folks from having dinners at restaurants or arranging trips.”
According to Track the Recovery, a joint non-profit venture between Harvard and Brown universities and the Bill & Melinda Gates Foundation, consumer spending in New Jersey on restaurants, hotels, entertainment and recreation has steadily increased since dropping to record lows in April 2020. And nationwide credit card spending finally rose to pre-pandemic levels for the first time starting in May for hotels, restaurants and bars, according to the federal Bureau of Economic Analysis. Nationwide gasoline consumption rose past pre-pandemic levels on a consistent basis beginning in March, according to the BEA.
Nevertheless, the state’s economic recovery could very well slow down as a result of the variant. James Hughes, an economist at Rutgers University, said the continued spread of the delta variant represents “a speed bump” that could rein in the state’s rebound.
Hughes
Lagging vaccination rates, which now tie in with the surge of the delta variant, are another factor, Hughes said. “We have the issue of labor shortages that are slowing the economy. If you can’t hire wait staff, you have to cut restaurant hours,” he continued. “We have supply chain bottlenecks, the chip-shortages that have slowed automobile production.”
Doug Offerman, an analyst with Fitch Ratings, another Wall Street rating agency, suggested that if the variant’s spread upends many school districts’ plans to fully reopen, working parents could be stuck at home while their children attend remote classes. “Part of the question would be, does it delay the resumption of office reopenings, and therefore a pick-up in commuter activity and a pick-up in business activities in areas where there are high populations of daytime workers,” he said. “To the extent that any changes in public health conditions affect the schedule of reopening, it could delay some of the bounce-back in economic activity.”
Hughes suggested that even with a new mask mandate, many New Jerseyans can adapt, as they’ve had to these past 16 months. “After April we had growth, despite everybody learning how to wear a mask. We had special hours at supermarkets, one-way aisles,” he said. “If we have to go back to that, it’s not going to be a shock as it was last year.”
Siekerka
Michele Siekerka, the president and CEO of the New Jersey Business & Industry Association, largely agreed with that assessment. “People were coming out in droves when we had mask mandates,” she told NJBIZ. “You’re always going to have some aspect of the population that is going to be nervous for their health.”
But, she continued, “vaccinated people feel like they have a safety passport of some sort,” making them more willing to bite the bullet, put on the mask and take risks like packing into a concert hall, sports arena or crowded bar.
Other statistics also suggest that New Jerseyans have adapted to the pandemic reality. Last March when the pandemic took hold across the nation, panicked buyers descended on grocery stores, stocking up on cleaning products, toilet paper, canned goods and meats. This year as the delta variant becomes more prominent, the same phenomenon has yet to play out.
“Fortunately our members are not seeing stockpiling and panic buying at this time,” said Mary Ellen Peppard, vice president of the New Jersey Food Council, a trade group for grocery stores and retailers up and down the state.
Data on consumer spending paints a similar picture. Track the Recovery found that grocery spending the week ending July 18 was 15.4% above the January 2020 benchmark. By comparison, grocery consumer spending for the week ending March 16, 2020 surged to more than 66% above it was just weeks before in January.
“It’s hard for me to imagine we’d see a return to conditions that were experienced at the start of the pandemic given vaccinations, given masking, given factors like that,” Offerman said.
