William D. Johnston

Chairman

Economic Commentary

Happy New Year to each of you; we hope 2021 is a fantastic year for you and your family. The year has gotten off to somewhat of a mixed bag. While the much-anticipated vaccine is being manufactured and shipped, the number of those who have actually been vaccinated is far below the initial target and currently rests at 4.5 million. Infectious disease experts have calculated that to repress the COVID-19 virus, we as a country have to get to an inoculated total of about 225,000,000 people, 65% of our population. To reach this total and meet the benchmark of who needs to be vaccinated, nearly 1.0 million people need to receive the vaccine each day, seven days per week.

Thus far, the “Operation Warp Speed” has been successful in the development, production and logistical distribution of the vaccine, yet the actual process of vaccination has run into roadblocks at state and local levels. To be perfectly fair, no one entity is trying to botch the process, yet the rollout has been disappointing at best. I have stated many times before that as Americans we want instant results. We do not have to be hungry to eat or thirsty to drink, and if there is a problem we want an immediate solution or someone to blame. The reality is that the last time we tried to do a mass inoculation in our country was in the 1950s when the enemy was polio. The perfect distribution site was pediatricians’ offices and schools. Those of us old enough to remember lining up for the sugar cube to suck on were actually participating in the largest distribution of a vaccine in our country’s history. This time around, we have taken the same course of action that we have taken with personal protection equipment and mask mandates. We are counting on individual state public health departments to coordinate with the CDC and “Operation Warp Speed” to order and distribute doses sufficient to meet the individual states’ needs. Each state has been given recommended distribution protocols but is also free to create their own protocol for delivery, which can result in very different outcomes in various states. What seems most consistent among the individual states is the reliance upon our healthcare system to administer the injections and keep the records on inoculations. In essence, our healthcare system is being asked to deliver the vaccine to our citizens at the very moment they are overwhelmed by the spike in patients to care for. The delay is not a lack of will, but a lack of capacity and resources to ramp the volume up to the need required.

Success in repressing the disease through inoculation will require each county in this country to vaccinate one person every minute for every hour of each day for 270 days. To achieve the goal without 24 hour seven day per week inoculation programs counties will need multiple locations and many trained healthcare workers. We got it right on the development, production and logistical ability to ship, but we are ill prepared at the “boots on the ground” level to administer the vaccine. By necessity, a successful national program will require the resources to include all available points of delivery including local pharmacies, clinics, fast care centers, hospitals, big box stores, schools, faith-based communities and even arenas. All of the previous takes resources of human capital, volunteers and money. We have burdened the healthcare system to deliver the vaccine at a time when they are under great stress, and now we have burdened the states to allocate resources available to vaccinate when their budgets are bare. Most economists view the repression of the virus as the most meaningful tool to rebuild the economy, and the quicker we get the serum in 225,000,000 US citizens the quicker we can claw our way back to a more normal economy.

The New York Fed Weekly Economic Indicator Index currently registers -1.89, which is a slight deterioration from the December 26 reading of -1.32. The regression is not unexpected, as the stimulus vote delay in Congress and the post-Thanksgiving spike in COVID-19 cases reduced consumption and employment. The focus of the final stimulus bill is mostly where it should be, which is on small business, unemployment extension and expansion of benefits; however, the bill did not include any earmarks for state and local governments. Consumers are saving more of the stimulus than spending it. The reality is that 10.7 million people are currently unemployed. Of that number, nearly four million or 37% are long-term unemployed. That number is important, because our history lessons tell us that the opportunities for employment diminish rapidly for those jobless for more than 27 weeks. Repressing the pandemic is critical for economic recovery, as nearly 15 million people reported that they had either not been able to work or worked reduced hours due to the pandemic, with the largest majority of those workers classified in hospitality, food and beverage (retail) and travel. Included in the last round of stimulus were targeted SBA opportunities for these industries. Manufacturing was strong again, as witnessed by the ISM index survey registering at 60.1, well above recessionary levels. Housing also continued its strong demand pace.

As I have mentioned previously I like data and statistics, and by nature I am somewhat cautious (I always wait for the walk sign at an intersection and never cross against it even if there is no traffic). Ronda claims I am a rule follower, and I guess upon the evidence she is right. I value traditions and respect institutions, though I understand most are imperfect and are made that way by the imperfect mortals that serve in them. Our “more perfect union” has not currently been achieved, and I respect greatly those that call to our attention where and when those institutions fail either all or some of us. It is how we broaden the tent under which more of us can get better, and how our institutions learn to serve the people they work for better.

In recent previous commentaries, I have used the term unsettling to describe the current state of political affairs because to me it is how it feels. For the first time in my lifetime, which includes 14 presidential elections, we have a President who refuses to acknowledge his defeat. As importantly, he has done so by trying to destroy the credibility of our electoral process, the states and state officials that administer those processes, the courts both state and federal that hear election law issues and, most importantly, the will of the people who spoke through their ballot. Like most of you, candidates that I have favored in many elections at all levels of contests and offices have lost their elections. Like it or not, the results were the will of the people — and because elections have consequences, sometimes I endured public policy that was not my preference. The more important lesson was that as a citizen in a democracy, I knew there would always be another election and perhaps the next time my preferences would prevail.

2020 is behind us. COVID-19, while still with us, has the vaccine to do battle with and the political theater of the absurd has turned to an unsettling frontal attack on institutions critical to the survival of our democracy. I am optimistic about repressing the virus, and when we do the economy will begin a more structural recovery, but I am left less sanguine about the recovery of our democracy.

COVID-19 Updates

As of January 24

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