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Countries that lifted business restrictions early during the COVID-19 pandemic benefited from boosting economic activity, but those gains were limited or short-lived because other states often caught up within a month, according to a Moody’s Analytics study.
Aggressive states recorded a longer-term advantage in employment, but even in that critical category other states narrowed the gap, Moody’s analysis shows.
“I don’t see states buying themselves so much extra growth by aggressively opening up,” says Moody’s economist Adam Kamins.
At the same time, states that opened early did not pay a significant price by falling behind the rest of the country after they had to renew restrictions – such as banning indoor dining or reducing company capacity limits – due to COVID overvoltages.
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As vaccination increases and infections fall, both the health and economic crisis caused by the virus are on track to be significantly reduced by summer. The US economy is expected to be fully open by July 4, leading to a rapid return to near normalcy in all 50 states. Almost one third of the population is fully vaccinated and that share is continuously growing, according to the Centers for Disease Control and Prevention.
This year, the nation is projected to record the strongest economic growth since 1984 as a result of rising vaccinations and billions of dollars in state aid to households and businesses.
However, some states have sparked controversy along the way, risking higher infection rates in the name of limiting economic damage.
“The states (which are the most energetic in opening up, are doing huge jobs and that’s exactly what these numbers are about,” then-President Donald Trump said last June.
Moody’s looked at 15 states that lifted all restrictions by the end of March 2021 – Arkansas, Florida, Georgia, Iowa, Idaho, Missouri, Mississippi, Montana, North Dakota, Nebraska, Oklahoma, South Dakota, Tennessee, Texas and Wyoming. That group also imposed minor restrictions when the pandemic began a year ago and had previously eased restraint during the crisis, Kamins says.
Moody’s compared its economic performance to that of more cautious states based on a “return to normal” index that includes measures such as working hours in small businesses, employment, house sales ads, sedentary restaurants and the share of employees who have returned to offices.
On the index, which reached 100 at the end of February 2020, before the crisis began, the aggressive states kept the advantage that kept them on average about 5% ahead of the rest of the country. Their edge widened during the reopening of the business in the spring of 2020, and narrowed during the COVID raids last summer and late fall that hit them harder. Both at the beginning of the crisis and recently, more cautious countries have caught up with the aggressive ones within 30 days, although at other times the bolder states have retained the advantage for longer.
Since last June, the index has ranged from 80 to 89 in countries that lift restrictions early and from 74 to 84 in the rest of the country.
A simpler way to compare the two groups of countries is to review the business. As aggressive countries imposed less restrictions at all, their total employment at the peak of the crisis in April 2020 was 12.1% below the peak in February 2020, compared to a decline in other countries of 15.5%.
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However, since then, the overall payroll has climbed by 10.6% for more cautious states and only 9.2% for aggressive states, despite their earlier opening, according to Moody’s and the Department of Labor. This has allowed more cautious states to partially reduce the gap. They are now 6.5% below employment before the pandemic, compared to 4% for aggressive states.
One of the reasons the advantage of aggressive states is limited is that, among both groups of states, most white-collar workers have not yet returned to offices, Kamins says. This continued to push sales in restaurants, shops and other downtown outlets.
“Many companies are taking on more caution than elected leaders,” Cummins wrote in the report.
Similarly, he says, the lifting of restrictions by the state does not necessarily mean that all residents can return comfortably to their usual shopping, dining and travel activities.
Tom Jackson, a regional economist at IHS Market, says he broadly agrees with Moody’s study, but adds that other factors have affected economic growth and job growth, such as the fall in oil prices that wiped out jobs in Texas early in the pandemic. . This, he says, can make it difficult to isolate the impact of reopening.
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He also noted that states like New York and New Jersey that suffered higher infection rates and that were slower to ease restrictions “had trouble rebuilding lost jobs.”
Now that vaccination is expanding and states are reopening across the country, the discord between aggressive and more cautious states is likely to diminish further, Cummins says. And aggressive states are more likely to hit difficulties because they have more residents who are reluctant to get vaccinated.
For those states, “The road to normalcy could hit speeds in the coming months,” Cummins wrote in the report.
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