PANDEMIC | 2. What Affects the Spread of the Coronavirus?

This is the second of a series of posts on the subject of the coronavirus death rates by country. See also posts on March 19 (#1, Why is Germany's death rate so low?) Virus Deaths Tracker (FT).

March 20, 2020–The New York Times has an informative article today showing the growth of COVID-19 cases in each country. A sample of the charts is at right, for the United States. It is illuminating to see the same exponential pattern occurring in virtually every country that has a significant number of cases. (It would be easier to compare countries' data if all of the countries were on the same chart, preferably logarithmic, so that the rate of change is easier to gauge.)

The charts show a series of daily snapshots of the progress of the novel coronavirus in each country. The chart shows the number of confirmed cases of infection by the virus. What are the factors that determine the spread among countries like Italy on the high-mortality end and Germany on the low end? Here are some early theories:

1. How quickly a country created social distance. Hand-shaking (until this pandemic) has become a world-wide custom. But some countries are used to even closer social greetings, such as hugging and kissing. Amsterdam is proud of its three-kiss greeting (that is the meaning of the three Xes in its shield). Self-isolation may be harder to enforce in some countries. The closeness of families in Italy is viewed as a problem in getting more vulnerable age groups in the population to keep their distance from socializing younger generations.
2. A city's density, as an indicator of how much of a magnet it is. If, as most people believe, the virus started in Hubei, China, then the virus somehow made its way from there to each country, probably carried by human beings. Travelers on busses, trains and airlines are likely carriers, and one can be a carrier with no symptoms. Hubei is center of transportation and manufacturing system in China, which made it an easy place to spread to virus. New York became an epicenter because of its central role in communications, finance, fashion and technology.
3. How much testing is done, when it is done, and when it is reported. New York State has authorized a range of manual, semi-automated and automated testing approaches and the numbers of confirmed cases of the SARS-CoV2 has been rising rapidly. The State says it is now testing 10,000 people a day, has tested 32,000 people in total, many more than any other state, and has found 7,100 cases of positive readings, nearly 40 percent of the total for the nation (19,624). 

The Times story references the need to "flatten the curve," i.e., the need to take quick action to test people with symptoms of the virus and quarantine them and provide hospitalization for the very sick, who will suffer from exacerbation of respiratory, heart or other immunity problems they have.

Additional Data to Get. The charts show the "curves" themselves in each country, indicating confirmed infections, so that we can better understand the number of people who are hospitalized or quarantined, and the coming demand for medical facilities. Now we need to put these numbers together with other data:

• Hospitalization and death ("case-fatality") rates. It would be useful to know how many are hospitalized in each phase, since the greatest concern is about a likely shortage of intensive-care-unit (ICU) hospital beds, ventilators and respirators. New York State reportedly (as of the Governor's press conference on March 21) has only 3,000 ICUs, 80 percent of which are occupied. It will need at a minimum twelve times that number based on the experience in Italy and other countries. A survey of more than 200 U.S. cities by the U.S. Conference of Mayors shows great concern about running out of supplies of masks and ventilators. The cities need collectively 28 million surgical (N95) masks, 8 million test kits and 139,000 ventilators. Reminds me of a play by Shaw that I first saw at the Abbey Theater in Dublin, The Doctor's Dilemma; read it here free–https://www.gutenberg.org/files/5070/5070-h/5070-h.htm.
• Names of those who have developed immunity. This could be the base for treatments that could save lives and slow spread. Dr. David Posnett says: "If we only knew who had developed immunity to the virus.  Immunity may occur in someone who had the virus (either with symptoms or without), got better and developed IgM and IgG antibodies.  We know that happens.  If you are declared immune, you can safely go back to work which might help the economy.  You are safe as a healthcare worker.  You are safe to go buy groceries. You are safe to be around your loved ones.  You could donate plasma at the local Blood center and plasma with lots of antibodies could be administered to patients dying in the ICU (passive immunotherapy used previously against the Spanish flu and against Ebola for example)." 

PANDEMIC | 1. Germany's Low Virus Death Rate

The following is the first in a series of posts on this topic. See also posts of March 20 (#2, on infection rates), March 21 (#3, includes Italy). Virus Deaths Tracker.

March 19, 2020 – The data in the table below show a column for death rate ("case fatality rate") with a global ratio of 4.1 deaths per 100 cases of the COVID-19 disease as of this morning, using the Johns Hopkins database (jhu.edu). It's not hard to see that Germany stands out for its low death rate, 0.2 per cent. What's behind these numbers, and are there any lessons we can learn from them?

Why Is German Death Rate So Low?

Information on testing rates might be a clue. But data on testing rates, posted by Oxford University's Martin School's OWID, exclude Germany. The reason may be that Germany's automated testing system is so widespread within the country and distributed to such a wide number of labs, that they can't keep accurate track of all the tests that are being done.

Country (Rank by Cases)	Rank by Death Rate	Cases	Deaths	Death Rate	Recovered	Tests	Tests /Million Pop.	Comment
World	Total	222,642	9,115	4.1	84,506			See updates at JHU.edu
Germany (5)	1	13,093	31	0.2	113	-	-	Automated community testing.
Korea, S. (8)	2	8,565	91	1.1	1,540	286,716	5,566	High community testing.
Switzerland (9)	3	3,067	33	1.1	15	4,000	461	Testing number as of March 7
USA (6)	4	9,415	150	1.6	106	41,552	124	Inadequate, late testing; testing only those with symptoms.
France (7)	5	9,058	243	2.7	12	11,071	168	Number of tests as of March 10
Netherlands (11)	6	2,056	59	2.9	2	6,000	349	Testing number as of March 7
UK (10)	7	2,644	103	3.9	67	50,442	749	Updated at least daily. Data show number of people tested.
China (1)	8	81,154	3,249	4.0	70,535	320,000	2,824	Tests as of Feb. 24, Guangdong
Spain (4)	9	15,014	640	4.3	1,081	-		No data on testing
Iran (3)	10	18,407	1,284	7.0	5,710	-		Questions about transparency
Italy (2)	11	27,980	2,158	7.7	4,025	148,657	2,514	Unclear if people or tests. World’s 2nd highest elderly pop.
All Other		32,189	1,074	3.3	1,300
Comment						Some test numbers are for people, some for specific tests (x2). Community testing includes non-symptomatic cases.
Source	This blog	Johns Hopkins University JHU jhu.edu		This blog	JHU	Oxford University Martin School, OWID, ourworldindata.org/coronavirus

What is the story? 

Germany was the first to design a test differently from other countries; it has a rapid testing system. Germany has therefore probably diagnosed a much larger proportion of those who have been infected, and also a higher proportion of their population.

One factor is the number of independent labs throughout the country. Christian Drosten, the director of the Institute for Virology at Berlin's Charite hospital says that this network received both technical information to conduct tests and the approval to bill for them in January, when case numbers in Germany were still in the single digits.

Germany's distributed system helped doctors to determine quick whether suspected cases actually involved the new virus or a common cold, which can have similar symptoms. Drosten said: “Other countries lost a month or even more time because of this,”  Lothar H. Wieler, head of the Robert Koch Institute, Germany's equivalent the the U.S. CDC, said something similar: “We identified people early on with our testing who are infected, but not seriously ill.”

Why Doesn't the United States Adopt the German Test? 

The Germans developed a test for the new coronavirus one week after the genetic sequence for the novel coronavirus first became available in January 2020. That test became the basis for the World Health Organization’s (WHO) test used in countries around the world, including South Korea. However, the Centers for Disease Control and Prevention (CDC) declined to use it. The German test adopted and disseminated by the WHO scanned for three specific viral genes. 

Countries around the world adopted the test. South Korea, for example, quickly started testing around 10,000 people each day and now has tested 250,000 people.

The CDC instead created its own test using the three different genes from the German test. But when state labs tried the test, some found false positive results. The CDC redesigned and remanufactured test kits, but this took time.

Multiple Problems Being Addressed Now

The United States reported its first confirmed case of COVID-19 on January 21. Eight weeks later, there are aren’t enough tests for the virus available. Here are the contributing problems:

• Systemic failure. “The system is not really geared to what we need right now,” said Anthony Fauci, director of the National Institutes of Allergy and Infectious Diseases, at a briefing last week before the Committee on House Oversight and Reform, chaired by Rep. Carolyn B. Maloney (D-NY12). 
• Cuts in CDC, planning for pandemics. Contributing factors reportedly were cuts in the CDC and the termination of the unit planning for pandemics in the White House.
• The PCR is time-consuming. Until last week, the number of tests that could be run per day in the United States was limited to approximately 7,000, because it just takes so long.  The polymerase chain reaction (PCR) test has been around for decades. A doctor swabs a patient’s nose or throat and sends the sample to a lab, which looks for snippets of the virus’s genetic material. The test, however, is too slow. A bitter commentator has described the technology to me as "ancient." 
• Point-of-care testing is required in a pandemic. No one wants to wait for a lab while they decide where to put patients in an overcrowded hospital. "We’re just not quite there yet,” said Catherine Klapperich, director of the Laboratory for Diagnostics and Global Healthcare Technologies at Boston University.
• Shortage of supplies. The PCR swabs are imported and are in short supply.
• Too few labs. For weeks in the US, tests for the virus were being done by hand. A lab technician mixes a patient sample with tiny portions of chemicals in tiny tubes. Contamination can ruin the test. The samples must be repeatedly brought up to high heat and back down in a process called thermocycling, done on a specific machine. It takes a few hours to get results back. Labs that can do the testing have needed special approval to run PCR tests, and permission could take months. (Some of the problems listed here are being fixed.)
• State of emergency slowed FDA approval. Normally, state public health labs and commercial labs would have been able to create their own PCR tests.  But the public health state of emergency meant that any new test had to be approved by the Food and Drug Administration (FDA). That slow process also contributed to delays. On February 29, the agency relaxed the rule.
• FDA approval for machines took time. Machines are available that can run PCR tests automatically. However, it took companies weeks to develop tests for those automated systems and for the FDA to approve them.

Technology for the new tests is still experimental. The PCR test is hard to bring to a patient’s bedside, because thermocycling needed to run the test needs a lot of electricity. Another approach, isothermal amplification, is simpler and can work at a fixed temperature. Dozens of companies are now developing point-of-care tests for the novel coronavirus. The Verge cites three promising approaches: 

• The University of California, San Diego is evaluating a system that they say could return results in one hour. 
• Mammoth Biosciences is developing a bedside test that would work similarly to a pregnancy test. 
• Cepheid is leveraging a flu detection technology to build a rapid novel coronavirus test.

The question is whether, after a late start, any of these tests can be ready to help stem this pandemic. We should ask the Germans to help us get this done.

FED | Back to the Zero Bound

Michael Laurence, Alan Greenspan, President
Bill Clinton.

March 18, 2020 – On August 31, 2011 I wrote about Krugman and the Liquidity Trap. 

Back on December 18, 2008, I had reported on a speech by Laurence Meyer to the New York Association for Business Economics. 

Meyer said that after the December 16, 2008 Federal Open Market Committee statement, the FOMC could go on vacation "for two years". Nearly three years later, we were still at the zero bound. 

It's now more than nine and a half years since that report, more than eleven years since the 2008 meltdown, and we are back in the zero bound, a fed funds rate range of 0.25 percent to zero percent.

I noted in the 2011 post that Paul Krugman was one of the few people who predicted the danger of the Japanese-style liquidity trap infecting the United States. For example, there was no mention of the liquidity trap in the 12th Edition of Baumol and Blinder's economics textbook, which I was teaching from at the time.  More. 

Of course, the reason for the bond market craziness and stock market crash in March was not financial. It was the coronavirus pandemic... Right? Or are we going to find out now about  underlying problems in the financial markets that are revealed as the tide went out... The repo market? Derivatives?

PANDEMIC | The Economic Impact of the Virus

Kristi Hood loads up groceries for a self-quarantining
family. This is a new service of  the Springs
General Store. Photo by John Tepper Marlin.

PS. Here are some followup stories in the East Hampton Star. As a public service, the newspaper has a free alert on the coronavirus as it affects the Town of East Hampton and Suffolk County generally:

Suffolk Hospitals Face "Herculean" Task as Virus Numbers Grow (March 24, 2020).

https://www.easthamptonstar.com/villages-health/2020324/suffolk-hospitals-face-herculean-task-virus-numbers-grow

PANDEMIC | Avoiding Layoffs–Wage- or Work-Sharing

Automaker Shutdowns Raise Specter of
Mass Layoffs. How to Head Them Off?

March 19, 2020–The economic disaster threatened by the social distancing required by the COVID-19 pandemic could be exacerbated by widespread corporate layoffs. 

Yesterday, Ford Motor, General Motors and Fiat Chrysler Automobiles agreed to UAW demands to shut down North American plants to prevent the spread of the virus. They  suspended factory operations through the end of March. The closing of auto factories by U.S. automakers could be a sign of what is to come.

To reduce this threat of mass layoffs in the face of the pandemic, the United States might consider a program that has had some success in Europe. 

That is, to enact a Federal and State Wage Sharing program, by which the Federal Government pays for, say, 30 percent of worker salaries during the active period of the coronavirus. State governments could opt to pay for another 30 percent.

President Obama looked at this idea in 2014 but did not implement it. The U.S. Unemployment Insurance system is based on a person being totally laid off. The state unemployment insurance systems provides partial replacement income to such workers. The Austrian and German "short-time working" (Kurzarbeit) programs provide government assistance to workers to allow private employers in a recession to offer their employees a reduction in working hours and pay, in lieu of layoffs.

"Ich war dabei" means
"I was there."

The idea is that instead of laying off 30 percent of workers because orders are not coming in, all workers are retained and their hours are reduced instead of the headcount. The government wishes to avoid the cascading effect of layoffs, as workers without incomes stop spending money in their communities and may lose their work habits and skills, making it harder for companies to start up again in good times.  

The governments support this program by making up some of the difference in salary for the workers, with the possibility of providing full pay for fewer hours if employees are enrolled in training programs during their extra time off. The program offers these advantages:

• The employer is better able to pursue a no-layoff policy by having to pay workers less.
• For example, if the company was planning to lay off 30 percent of the workforce, the same saving might be achieved by shaving 30 percent off the workweek of 100 percent of employees.
• Employees can use the time off to take training, take a vacation, or even pursue a long-postponed personal hobby or startup.
• The government program makes up most or all of the pay loss by the workers. They are paid to stay home.
• This benefits the country by sustaining the incomes of the workers, so that they don't have to cut back spending in their communities.
• As a temporary measure, it benefits the business because it eliminates the cost of recruiting new workers when business picks up again.
• It increases the morale and loyalty of workers to the company, and they are less likely to move away or apply to a competitor or change their occupation.
• By keeping employees on the payroll, the skills of workers are maintained.  

The Austrian short-time program is arranged between the national Chamber of Commerce and the labor unions. They negotiate the types of staff to be covered, the maximum period, conditions for layoffs and the nature of any training programs that will be part of the program.

The German government's program in 2009 budgeted €5.1 billion to replace some of the lost income of over 1.4 million workers, i.e., approximately €3,600 per worker. The program was cited that year in a report by the Organisation for Economic Co-operation and Development (OECD) report, which said that the short-work program had saved nearly 500,000 jobs during the recession.

To recap, the advantages of the program are that it maintains worker skills and buys time for management to determine eventually (if the hard times continue) how many workers they can keep on their payrolls. It encourages managers to decide in favor of retaining workers, and thereby reduces the threat of widespread layoffs. For the duration of the COVID-19 disease, companies could envision a no-layoff policy.  This maintains the stability of corporate paychecks, community incomes and tax payments. By keeping together skilled work groups, it makes recovery easier. 

The program does not solve all the problems presented by the COVID-19 virus, of course. It does not address the problem of maintaining the incomes of those without jobs. It costs money, even if it is limited to the period of the COVID-19 disease. It is only for a short-term recession or a pandemic or a similar catastrophe. It would probably best be administered through state unemployment insurance programs.

Governor Cuomo has said that the numbers of infected people will peak in six weeks, based on the progress of the virus in other countries. So in a best-case scenario, payments in a wage-sharing program would continue for about 10 weeks. If recovery from the disease did not start by May or early June, the program might have to be extended or renewed.

Paul Krugman recommended the Kurzarbeit concept in 2010, noting that Germany's growth rate in GDP was slower than that of the United States, but its employment rate did not fall as much. The employment rate, or employment-to-population ratio, is a more reliable number than unemployment because it doesn't depend on subjective phone surveys of each household member's intent to find a job.

I wrote about the Short-Time Working program (Kurzarbeit) in March 2014. This "Wage-Sharing" proposal is similar to the "Work-Sharing" program outlined in a June 2014 Brookings report, Encouraging Work Sharing to Reduce Unemployment, by Katharine G. Abraham (University of Maryland) and Susan N. Houseman (Upjohn Employment Institute). Wage-sharing looks at the spending side for corporations, providing government subsidies for the wages. Work-sharing looks at the arrangement from the perspective of the employees, i.e., sharing the cuts in factory work among all the workers. Two sides of the same coin. 

Abraham and Houseman proposed that the federal government subsidize state work-sharing payments during economic downturns. They suggested making work sharing a requirement for state unemployment insurance systems. They would modify federal requirements for state work-sharing plans that discourage employer participation. They also recommend providing states with adequate funding to administer work-sharing programs. Reportedly more than half of the states have work-sharing plans on the books but they lack adequate federal funding or interest among companies.

POSTS RESTARTING MARCH 17, 2020

March 17, 2020–I am reopening this CityEconomist blog today, having just retired as senior economist from the Joint Economic Committee of the Congress, my third retirement from the Federal Government (previous ones were in 1969 from the FDIC and in 2011 from the JEC). 

This blog is being reopened so that I can do my best to be useful while socially distant. My JEC email address is deactivated. Please use john@cityeconomist.com. With the coronavirus spreading in the United States, Alice and I are self-isolating in East Hampton, N.Y. It is an opportunity to restart this blog on that theme.

Recent Economic News

The coronavirus spells disaster for the New York City economy. https://bit.ly/2wgbLwu.