Saturday, June 20, 2020
On Twitter, I do updates on the local situation, on the theory that Montreal is a hot spot that did not get as much coverage as New York, and so might be of interest.
From the perspective of the disease in Canada, the situation appears to be under control. In many provinces, infections have nearly disappeared, and so there is limited danger of loosening restrictions. The situation in Quebec is a bit rougher, but the problems appear to be concentrated to a few districts on the island of Montreal, as well as the health/senior care system.
Various activity restrictions are being loosened, and so far, community transmission does seem to be declining. At least in our area, the school year is effectively over (non-mandatory remote classes are happening). Whether the more lax behaviour remains consistent with falling infections will be tested, but my gut reaction is that any re-tightening will not be that significant from an economic standpoint.
Turning to the Canadian economy, data should stabilise at a new "steady state," with a race between delayed business failures versus the expansion of re-opened businesses, as well as the growth of businesses that are benefiting from the new pattern of consumption.
However, the big story is the ongoing rise in infections across many states in the United States. The absolute levels of infections remains relatively low when compared to the improving situation in New York -- hence U.S. aggregate numbers look stable -- but I am hearing contradictory stories about emergency room capacity. The experience in Montreal is that emergency room capacity is the constraint being hit, and not so much ICU/ventilators (which was the initial worry).
The obvious risk is that states will be forced back into a de facto hard lockdown as those that are able return to safety, blowing another hole in the economic recovery. The politicisation of the pandemic means that I do not believe that I can handicap the odds of such an outcome, given the fog of uncertainty over reports. Meanwhile, if deaths are not reported, they might not affect behaviour, and so there can be decoupling of the medical reality from economic outcomes.
(c) Brian Romanchuk 2020