Can the COVID-19 Vaccine Heal the Post-Pandemic Economy?
When the COVID-19 pandemic began to plague the United States around a year ago, shutdowns occurred, causing one of the largest economic crises in the history of the nation. As businesses closed, economic activity, as measured by the gross domestic product (GDP), decreased a shocking 31.4%, the largest drop seen since the Great Depression (Amadeo 2021). Unemployment peaked at 14.7%. The government deficit rose to an unprecedented amount of $3.3 trillion, due to stimulus spending of over $2 trillion (Amadeo 2021), from $988 billion for the first four months of 2020 (Congressional Budget Office 2020). As eligibility for the vaccine widens, with one-fourth of adults in the United States having received at least one dose of a COVID-19 vaccine and an average of 2 million people being vaccinated each day (Casselman 2021), the question is whether the vaccine is the key to reopening the economy and stimulating the necessary economic growth that the country needs to fully recover. Just as there were winners and losers during the pandemic, in a vaccinated world, certain industries hard-hit during COVID stand to make remarkable recoveries, while industries that saw mass growth from stay-at-home conditions face stagnation or decline in profits. The COVID-19 vaccine has the potential to decrease unemployment, generate large profits for pharmaceutical companies which will allow for their expansion, stimulate growth in the restaurant industry to unprecedented levels, and allow the airline industry to recuperate losses and slowly recover. On the flip side, the vaccine is also resulting in the slow-down of technology companies’ growth, which shot up when people were forced to stay at home, which is evident in the recent volatility of the tech-heavy S&P 500. The vaccine also has the potential to reverse gains seen in the real estate market while simultaneously decreasing the potential for the foreclosure crisis to harm the economy.
The COVID-19 vaccine will decrease the unemployment crisis created by the pandemic. While many businesses that have shut down have been able to open their doors and operate at reduced capacities, the number of jobs lost still stands at 10 million as of March 2021 (Tappe 2021). In addition to this, 18 million Americans were still receiving some sort of unemployment benefit as of February 2021. However, the vaccine provides hope for many to return to work or to seek new employment opportunities. The rollout of the vaccine -- including the production, transportation, and administration -- created over 50,000 new job opportunities alone (Miranda 2021). Further, over 916,000 new jobs were created in March 2021, which is the largest amount since August 2020 (Casselman 2021). A half million women also returned to the workforce as of March 2021, which many economists attribute to the reopening of schools (Casselman 2021). Both public and private schools also added 190,000 jobs in March (Casselman 2021).
The production of it will also stimulate economic growth and investment. An analysis conducted shows that in the process of reaching herd immunity, approximately $32.2 billion will be generated in nationwide economic impact (Implan Group 2020). This includes the addition of 88,179 jobs, $6.9B in labor income, and $11.5B in addition to the Gross Domestic Product (GDP) (Implan Group 2020). This economic stimulation will have a large ripple effect, which would funnel money back into the economy to allow for more spending.
The Pharmaceutical industry will also be transformed. The manufacturers, currently Moderna, Pfizer, and Johnson & Johnson are experiencing one of their most profitable periods yet which will allow them to grow. Both stands to make a massive profit with Pfizer estimated to profit $15 billion from the vaccine sales and $35 billion to their revenue (Cohan 2020). The estimates for Johnson & Johnson have not been released to date, however, administration in many states has been halted due to concerns over blood clots related to the vaccine. Funding for these companies in regards to R&D has been increased and the public has gained an increased sense of confidence and trust with these companies which have previously have held a negative reputation. Prior to the COVID-19 pandemic, the sector had already been growing annually and investing more money into research and development (Ikeda 2021). While it seems unlikely that these companies will stand to make a profit as large as these on a single product, these companies now have more capital and resources to invest in further research and development. They also developed collaboration networks, which will allow them to have more efficient and less costly production in the future (Ikeda 2021). The success of the COVID-19 vaccine means that the general public would probably be more receptive and trusting of further developments from these manufactures and allow future innovation to have more success.
With the economy already beginning to rebound, with new job opportunities emerging, and stimulus payments, Americans had $1 trillion more in savings than before the pandemic in March 2021 (Casselman 2021). In addition to this, comfort levels with returning to life pre-COVID have increased 26% since January 2020, with 40% of Americans saying that they will be comfortable with returning back to life pre-COVID in less than 6 months (Jackson, Newall and Yi 2021). This provides he opportunity for money to be spent on ndustries such as the food service sector. Among activities that consumers are looking forward to once COVID-19 is resolved, 43% of consumers are looking forward to eating out at a restaurant and 15% are looking forward to going to a bar (Stanley 2021). In a recent study, 67% of respondents say that they are not eating out as much as they would like to, and 76% indicate that they are on the lookout for services that make their lives easier over seeking services that would fit within their budget (Ruggless 2021). This provides an optimistic outlook for one of the hardest hit industries of the pandemic. With consumers having more disposable income, with comfort levels increasing, and many indicating a desire to dine out, restaurants have the potential to become profitable once again. Many consumers have not been to restaurants since the pandemic and have relied on cooking at home. Outdoor dining was not possible or desirable in all areas, however, the vaccine will allow indoor dining to occur more safely and with a lower amount of restrictions. With more people returning back to work, there could be less time for many to cook and more incentive to eat out. I believe that the demand within this industry could rise to levels beyond those pre-pandemic, given the vaccine rollout continues and immunity increases among a greater number of Americans. It is also likely that restaurants will become more innovative in their operation, perhaps incorporating more technology and less human interaction, or more options to dine-out.
While airlines were regarded as a low risk for COVID-19 transmission, they still saw a profit loss of over $35 Billion in 2020 (Josephs 2021). However, with disposable income among Americans increasing and COVID-19 infections declining, many airlines are preparing for a surge in travel. 35 percent of Americans say that they plan to spend more on travel over the next 12 months than they do in a typical year (Josephs 2021). While it does seem likely that airlines will see an increase in usage, it does not seem that they will be able to reach optimal profitability until many years after the pandemic. Delta still expects travel restrictions to be in place for longer-haul trips until a greater number of people are vaccinated (Josephs 2021). Restrictions on global travel are still in flux, and it is unclear how they will change contingent on the success of the vaccine rollout. An estimate shows that it will
take until 2023 or 2024 to reach passenger volumes (Josephs 2021). While airlines can expect to recuperate some of the lost profits and see an increase in operations, it seems that this sector is going to be hit hard for many years to come and for now they just have to focus on breaking even, even with the vaccine.
The COVID-19 pandemic not only triggered an economic shutdown, but it also caused the stock market crash of 2020. The market transitioned from bullish to bearish (Amedeo 2021). Between February 19th and March 23rd of 2020, the S&P 500 lost 33.7% of its value (Cox, Greenwald, and Ludvigson 2021). Upon the announcement that the experimental COVID-19 vaccine yielded high efficiency rates, the S&P 500 rose to a record high since its drop (Riley Tappe 2021). With the announcement of the Pfizer vaccine’s success in the UK trials, the S&P 500 rose 0.3% to another record level of 3,702.25 (Winck 2020). However, the gains in the market due to the vaccine are being offset by Big Tech companies. These companies have been volatile and have caused large losses because the S&P 500, a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies, is extremely tech-heavy. This is due to the companies becoming increasingly worried if they will be able to sustain the gains made during the pandemic. During closures, the dependence on technology increased majorly. Differing internet services saw usage surges of 40% to 100% (De’, Pandley, Pal 2020). With a slow return to normalcy, it would not be surprising to see profit losses in technological sectors that profited during the pandemic. The boost of the stock market caused by the vaccine seems to be neutralized by other sectors within the market such as technology and disparages the positive trends seen before.
The real-estate and foreclosure market will also be impacted by the vaccine. While many other sectors saw declines, the real-estate sector saw many gains during the pandemic. There was a large drop in mortgage rates (Babbs 2021) which increased the demand for housing. As a result, homeownership rates increased, people relocated due to the new flexibility offered by their jobs, many left cities for suburbs, and the increased time at home led many to seek a larger space. The introduction of the vaccine has the potential to reverse the gains in this industry. This was a temporary gain due to the circumstances and it will likely flatten out, especially as mortgage rates rise again. The pandemic has caused many, around 500,000 to 700,000, foreclosures predicted to occur from quarter 4 of 2020 until quarter 4 of 2021 (Babbs 2021), which have the potential to negatively impact the economy for many years to come. For example, the 2008 foreclosure crisis lasted over 10 years, resulted in over 10 million mortgage-borrowers losing their homes, and drove home value prices down in the areas affected (Emmos 2016). With the development of the vaccine and government efforts supporting those who were financially impacted during the crisis, allowing many to remain in their homes or to accumulate lower amounts of debt which could potentially be paid off to avoid foreclosure, it is likely that this will be a diminishing threat. Overall, the real estate market will see a decline in the gains experienced during the pandemic and will be impacted by the foreclosure crisis, whose scope of impact depends on the timeliness of the vaccine rollout.
The COVID-19 vaccine is the most important tool in stopping the spread of the virus and allowing life to return to how it was pre-pandemic. With continued economic losses, decreases in GDP, and increased government spending on stimulus packages increasing the deficit, the extent of recovery in the United States economy was dependent upon the successful development and distribution of a vaccine. While government efforts, such as PPP loans and stimulus payments have been effective in keeping individuals and businesses afloat, they are not a permanent solution and the government deficit level will continue to increase and negatively impact the economy without a reduction of cases. It will lead us to a state where economic reopening can slowly occur, and the economy can take steps towards going back to normal. This can be seen the demand for industries which suffered during the pandemic such as the restaurant industry and travel industry increasing. While profitable futures are predicted for these industries, it is important to consider that many of these businesses encountered substantial profit losses which will be recovered and have the potential to impact operation size. Additionally, many of the regulations, which the success of the industries depend on, are uncertain and subject to change. It is also going to take time for Americans to build savings and come out of hardships faced from the pandemic. In addition to this, the development of the vaccine itself is contributing to economic growth, and is also leading to the rise of power
of pharmaceutical companies in the future, both fiscally and socially. However, while these firms have more R&D, the demand such as the one seen with the COVID-19 vaccine will most likely be unparalleled. Further, many of the gains seen in industries such as the technological industry, real estate industry seem to have been as a result of the pandemic conditions and are likely to be reversed or diminished. At the same time, technology has become embedded in our lives and is always innovating, so there is the possibility that the predicted decrease in usage may not occur to the extent predicted, and the industry still may be able to sustain gains which would allow the S&P 500 to rebound. A recent study also showed that the number of Americans who would be comfortable moving after receiving the COVID-19 vaccine is 70%, a large increase from the current 52% (Stackpath 2021). This means that there is a potential for another boom, regardless of interest rates and increased foreclosures. While we do not know the definitive impact of the vaccine, there does seem to be some light at the end of the tunnel.
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