Third Challenge
The third challenge may be harder to address. Even if the novel coronavirus doesn’t flare up again in the autumn or next year, the fear of its re-emergence may cause dramatic and long-lasting changes to social behavior, and by extension to economic activity.
The Great Depression cast a shadow on the saving and spending habits of millions of Americans for decades. Even the Great Recession of 2008-09 had a documented impact. The current crisis could go deeper.
“This is not just a threat to your economic livelihood, it’s a threat to your health,” said Peterson’s Wilcox. “It’s going to affect behavior in more dimensions than I can begin to imagine.”
Rebuild Confidence
That in mind, steps that rebuild public confidence in normal activities will be central to restoring economic normalcy. The best solution will come with a vaccine, estimated to take another 18 months. In the meantime, other new medical therapies may reduce anxiety.
Athreya at the Richmond Fed said government officials might also help by establishing new safety regimes aimed specifically at business sectors that have been hit the hardest.
He suggested, as one example, the Centers for Disease Control might publish a set of best practices for restaurants that could reduce the risk of new transmissions. Restaurants could then post a notice saying they have complied with the CDC guidelines.
“We need to have a regime in place, something credible, to give people confidence in communal consumption,” he said.
--With assistance from Catarina Saraiva.
This article was provided by Bloomberg News.