What we risk by reopening

To open or not to open? Governor Lamont has answered this question with a qualified yes for malls, retail stores, hair salons, barbershops, zoos and outdoor museums, and outdoor restaurants. The unanswered questioned is: Will consumers come back to the stores and offices during a pandemic that still has no vaccine, no cure, inadequate testing, and no federal plan to track and trace?

As an entrepreneur who has owned multiple businesses, some successful and some not, I completely understand the desire of business owners to save their enterprises and get back to work. As an employee, I understand the anxiety of not knowing how long this crisis is going to last, yet knowing the bills will continue to come in. As an economist, I know this economic crisis is the result of a health pandemic not the other way around. As they say on the street, “Don’t get it twisted.”

We will soon find out whether the governor’s “First Phase Reopening” of the Connecticut economy will be successful for the businesses that reopen, the employees who return and the economy in general. We will also see in relatively short order what will happen to the pattern of COVID-19 cases, hospitalizations and deaths.

There is reason to be optimistic on the pandemic front in Connecticut. The Centers for Disease Control and Prevention’s website tracks cases and deaths in each state. In Connecticut, while both the number of cases and deaths is increasing, these metrics are increasing at a decreasing rate, leading to the all-important flattening of both these metrics. Most health care professionals attribute the flattening of the curve to the social distancing and the increased use of masks when people are in public. On Wednesday, we are reducing the amount of one of these important tools as businesses, employees and consumers come back out.

President Trump has talked about how “pent-up” demand will cause a V-shaped recovery. He, and interestingly not his former chief economist Kevin Hassett, made this projection. Hassett has recently said the U.S. economy could contract up to 30 percent this quarter. Goldman Sachs is predicting a peak unemployment rate of 35 percent this year, with double-digit unemployment rates lasting for the next three years. This decline is not likely to be reversed quickly in the face of continued uncertainty about the disease and the lack of a vaccine or treatment.

While we must open at some time, a premature opening could extend the economic depression if there is a significant spike in cases, hospitalizations and deaths attributed to the reopening of the economy at this time. If after this reopening, we have to shut things down again because our health care system is overwhelmed with unacceptably large increases in cases and deaths, will consumers, business owners and employees believe political leaders the next time they say it is safe to go back? This is the risk we face by reopening on May 20.

We are still learning about how this disease is contracted and how it affects different segments of the population. The recent finding that children appear to be suffering from unique complications and deaths from the disease compounds the anxiety we already have. Despite all that we don’t know and are still learning, we do know that people congregating in enclosed spaces increases the chance of transmission. We do know that increasing the size of crowds increases the chance of transmission. We do know that increasing amount of time we are in a space with large numbers of people increases the chances of transmission. We do know that it only takes one person to cause an infection of hundreds in a relatively short period of time. These are the risks of reopening on May 20. The question is: Are these risks worth it?

Some Connecticut residents will choose to come out and shop, and get their hair cut, and go to the zoo. But in retail, success now depends not on location, location, location, but on traffic, traffic, traffic. If only 50 percent of consumers come out over the next month, even if there is no immediate spike in cases, most retailers will still not be able to survive. A recent poll reported that 58 percent of Americans would continue to shelter in place despite the reopening, and two-thirds of respondents reporting that they do not think it will be safe to come back to the market until July! Reopening the economy now amounts to a race between a return to normal retail traffic against the progression of the virus. Right now, the virus is winning.

Fred McKinney is the Carlton Highsmith Chair for Innovation and Entrepreneurship and director of the Peoples United Center for Innovation and Entrepreneurship at the Quinnipiac University School of Business.