Researchers: Shutdowns may help recovery

Coronavirus containment measures that force economies to slow down or halt may ultimately be better for economic growth than laxer efforts, according to Federal Reserve researchers who analyzed the 1918 influenza pandemic in the U.S.

The research was presented in a paper released in preliminary form Thursday, as the U.S. economy grinds to a halt to stop the aggressive spread of the novel coronavirus. Authors include the Federal Reserve Board’s Sergio Correia, the New York Fed’s Stephan Luck and Emil Verner of the Massachusetts Institute of Technology.

President Donald Trump has called for the economy to ramp back up “by Easter.” Some economists have cautioned that if such a move caused the virus to surge, it would ultimately take a heavier toll.

The paper said the influenza, which killed 550,000 to 675,000 Americans, or 0.66% of the population, caused a “sharp and persistent fall in real economic activity.”

A U.S. state at the average level of exposure suffered an 18% reduction in manufacturing output in 1918. Those effects lingered for years and depressed economies, especially in regions with higher levels of infection.

But steps taken to halt the spread of the virus like social distancing — identified by the researchers as “non-pharmaceutical interventions” — didn’t have the same negative effects.

“Cities that implemented more rapid and forceful non-pharmaceutical health interventions do not experience worse downturns,” the researchers wrote. “In contrast, evidence on manufacturing activity and bank assets suggests that the economy performed better in areas with more aggressive NPIs after the pandemic.”

The paper drew clear distinctions between COVID-19, the disease caused by the novel coronavirus, and influenza.