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The Lost Year
Coronavirus
Special Report
March 16, 2020
Coro
Bloomberg Businessweek
his mean?
?
virus Special Report
The coronavirus t at causes Covid-1 is
a minute, studded wrecking ball that’s ot
eventrulyalive.Butinitsmachinelikeway,it’s
defeatingeveryefforttohaltitsspread.M re
than 100 nations had reported infecti ns
as of March 10, and almost 4,000 peo le
had died, according to a Bloomberg tally. 1
On March 11, the World Health Organization
declared the outbreak a pandemic.
business activity, profits, and stock pri es
have plunged. N95 masks have beco e
rare and precious, and things that were o ce
valued are in surplus—take crude oil, he
price of which plunged as spigots ope ed
in an impromptu geopolitical knife fight.
The most valuable commodity? Distan e.
There is security in the ability to stay m re
than a cough’s distance away from oth rs.
You don’t want to be a barista, a dentis ,
Cover: Photograph by Chona Kasinger
wh
hen Covid
vid-19
.
siion vid-19
iff m its de d r
RS o g
o wa o
t know
m D
wrote in his book onn that epidemic, A J of
the Plague Year. “Their
h hands uld infe e
things they touched.”
e
Flummoxed a o be b
revising battle pll look
lo
o at
p vid 19
vid-19
2
contained in the U.S s the number
umb berr of
cases was skyrocket ef p flopp
f ping
p
and promising to o s t “ p e er of thet
federal governm m ” sewhe Chin n a’s
measures may ha a quire p c ce state
for enforcement, b t stop ttaly frrom
r
locking down the e entire country.
How will we look k back on all of this? It will
depend on how bad d busine e
ess
changing plans? Wha at e ssonallly?
l
The Lost Year, as we’re c eccial isssue
s
of the magazine, is less a about GDP re evisioo
ons
than a major disturbance tto our daily life.
Therearestillmanyquestio ion Covid-19.
Covid d-19.
We have some answers.
CO ID-19 Bloomberg Businessweek March 16, 2020
of
m ma be
Economy
4
Government
14
Business
28 3
Us
42
Virus
54
il h
Bu ar
he econom
○ When Covid-19 strikes, the worst of the
damage is done by the body’s effort to fight off
the disease. The immune system can overreact
restrictions to limit the economic pain, there’s a
risk that the number of new cases in the country
will begin to rise again as people go back to work-
in what doctors call a cytokine storm. Immune ing, studying, and shopping. If the number of new
cells attack not just the viral invader but healthy cases in China does keep falling, it will show that
tissue as well. Victims gasp for breath as their an authoritarian state with a pliant population and What I’m
lungs fill with fluid. The novel coronavirus, high-tech surveillance capabilities can rein in Covid- telling clients
which scientists have christened SARS-CoV-2, 19. But few—if any—other nations could employ Brendan MacMillan,
CIO, QP Global Family
tricks us into fighting it so hard that, in the most China’s strategy with the same strictness. Offices in New York,
extreme cases, we kill ourselves. Forecasters have now turned their attention to which manages family
offices and their wealth
As with the body’s immune system, so with the U.S., the only nation with a bigger economy than
4 the defenses of the global economy. There’s a vir- China’s. The question is the same: How much will We believe the market
hasn’t discounted the
tual cytokine storm going on: The all-out effort to Covid-19 take off U.S. growth—and how much of the full potential for an
battle the disease is doing more harm to global harm will come from efforts to fight the disease vs. event as significant
and symbolic as the
growth than the disease itself. Quarantines, travel the disease itself? There were 1,107 reported cases temporary closure
restrictions, business closings, and citizens’ vol- and 36 deaths in the U.S. through 4 p.m. Eastern of the U.S. school
system, or at least their
untary self-protection measures have frozen busi- time on March 11, according to data collected by statewide closures in
ness while wreaking havoc on people’s routines. Bloomberg. That number is expected to leap. California or New York.
We don’t see a high
This will be the business story of 2020: Can the probability that the
world modulate its immune response so as to fight
● How vulnerable
effects of Covid-19 will
lead to a credit crisis
Covid-19 in a way that saves lives without damaging yet, but just in case
everything else we care about? Or is this a lost year?
is the U.S.?
we get that wrong,
we will look to hedge
There’s reason to worry that simultaneously our equity positions
defeating the virus and sustaining growth will be by shorting stuff like
HYG, the high-yield
hard, if not impossible. New cases in China have Economists who were initially blasé about the bond exchange-traded
declined sharply, which is wonderful news. But to potential hit to the U.S. have become increasingly fund. �As told to
Joel Weber
make that happen the country’s leaders imposed concerned. Goldman Sachs Group Inc. revised its
one of the most extensive quarantines in his- U.S. outlook downward in late February to reflect
tory, corralling close to 60 million people inside a drop in U.S. goods exports to China, fewer tour-
Hubei province, the epicenter of the outbreak. ist arrivals from China, and modest supply chain
Governments in surrounding provinces also took disruptions for U.S. retailers. But that turned out to
steps to protect their populations, enacting travel be not pessimistic enough. “Over the last week the
bans and forcing factories to shut down. The eco- situation has proven worse than we expected,” the
nomic toll has been high: Growth in the first quar- Goldman team wrote on March 1, citing increased
ter will be just 1.2%, according to projections by economic weakness in China and further spread
Bloomberg Economics—the slowest year-over-year of the virus outside the country as key factors in
rate since China started keeping records. the decision to downgrade full-year 2020 growth
Despite Beijing’s best efforts, there have been to 1.3%—a full percentage point below the previ-
large outbreaks of Covid-19 across China as well as ous forecast. A week later, Goldman lowered its
in South Korea, Iran, Italy, and elsewhere. And now forecast once more, to 1.2%, despite the Federal
that authorities outside of Hubei have begun easing Reserve’s half-percent rate cut.
hi
COV be March 16, 2020
my?
5
authorities locked down the city on Jan. 23 in an attempt to contain the spread of the coronavirus. Since then, the
33-year-old professional cameraman has been documenting life at the epicenter of the outbreak. “I witnessed a
city of 11 million turn into a ghost town,” says Xie, who snapped all the photos in the following pages of this section.
“Sometimes I really want to find a stranger to chat with, but people are just staying away from each other.”
◼ COVID-19 / ECONOMY Bloomberg Businessweek March 16, 2020
financial giant State Street Corp., puts the chance
● What about the of a U.S. recession in the next six months at 75%
based on early March stock prices. Actually, a
wealth effect? Covid-19-induced recession may already have
begun. Economic historians measure reces-
The stock market’s swoon is not just a symptom sions from the peak of economic activity to the
of the harm the virus is inflicting on the U.S. econ- trough, and it’s possible the U.S. economy peaked
omy, but also one of its causes. Even U.S. house- in February, when unemployment tied a 50-year
holds that don’t directly own equities aren’t low of 3.5%.
immune to the so-called wealth effect of falling If extinguishing the virus is impossible, the
stock prices. Retail sales tend to decelerate sharply next best thing is learning to live with it. Save
in the wake of market shocks because, rightly or extreme precautions for the most vulnerable,
wrongly, many Americans view stock indexes such as nursing-home residents, while dialing
such as the S&P 500 as the most important indi- back economy-deadening measures in other
cator of the health of the economy. Business confi- spheres. For example, factories, offices, and
dence experiences a similar impact, which usually schools should generally stay open, albeit with
translates into a decline in investment. And so it’s better procedures to limit contagion (hand-
self-fulfilling prophecy: If both U.S. consumers and washing, social distancing, working from home
companies dial down their spending because they where possible, paid sick leave). Governments
think the outlook has worsened, then it almost can offset the economic damage with stimulative
certainly will. fiscal and monetary policies.
A virus as contagious as SARS-CoV-2 is hard Walling off stricken cities, regions, or nations
to tamp down as long as people continue to con- doesn’t make sense if the disease is already spread-
gregate and cough on one another. If the virus ing outside the containment area. “In a globalized
does spread widely in the U.S., a recession is world, there’s a question about whether the horse
6 likely to follow, says Moody’s Analytics Inc. may already have bolted,” says Neil Shearing,
Chief Economist Mark Zandi. “We could be mov- Capital Economics’ chief economist. That sounds ▼ Volunteers
ing from a self-reinforcing positive cycle to a self- defeatist. But given how damaging an overreac- waiting to pick
up people who’ve
reinforcing negative cycle,” he said on March 3. tive immune system can be, it’s simply realistic. fallen ill in Wuhan’s
State Street Associates, the research arm of —Peter Coy Jiang’an District
COVID-19 / ECONOMY Bloomberg Businessweek March 16, 2020
The coronavirus threatens to bring the world economy to a standstill. The fallout could include recessions in
the U.S., euro area, and Japan; the slowest growth on record in China; and a total $2.7 trillion in lost output—
equivalent to the gross domestic product of the U.K. That’s the most extreme of four scenarios developed by
Bloomberg Economics. The outcome many had in mind a month ago—with a major outbreak confined to China
and other countries suffering limited effects—is rapidly becoming too optimistic. The chances of the worst-case
scenario—with all major economies suffering a significant shock—are rising by the day. The graphic below shows
how they would fare under each scenario. —Maeva Cousin, Jamie Rush, and Tom Orlik
Scenario 1 Scenario 2 Scenario 3 Scenario 4
China shock More outbreaks Widespread contagion Global pandemic
Global 2020 GDP
growth forecast 2.9% 2.3% 1.2% 0.1%
Baseline 2020 GDP growth forecast Percentage-point change from baseline
-6 -4 -2 0 2 4 6%
Hong Kong
Russia For Hong Kong, the
impact of the virus will
compound the blow
Indonesia from 2019’s trade war
and protests, pushing
the economy into a
South Korea record contraction.
7
India
Turkey
France
In Scenario 2, the
Germany euro area and
Japan are sent into
recession.
Italy
Spain
Brazil
U.K.
Mexico
Australia faces its
first recession in
Australia 29 years as the virus
outbreak hits demand
from China, its
Canada biggest trade partner.
In Scenario 4, China’s
Japan growth falls to the
lowest level since
the beginning of the
Saudi Arabia reform era.
China In Scenario 3, U.S. growth
drops to 0.5%, enough to
drive unemployment higher in
U.S.
what is an election year.
SCENARIOS ARE BASED ON BLOOMBERG ECONOMICS’ ESTIMATE OF THE SLOWDOWN EXPERIENCED IN CHINA, THE CASE COUNT IN OTHER COUNTRIES,
CALCULATIONS OF SUPPLY CHAIN LINKAGES, AND A LARGE-SCALE MODEL OF THE GLOBAL ECONOMY. DATA: BLOOMBERG ECONOMICS, NIGEM, OECD ICIO
at ha ene to Y B 202
the bull market?
○ The 11-year bull market in U.S. equities is over, priced into the market as 2020 got under way, ▶ Shoppers at a
Walmart in Wuhan on
at least by one measure. At the close of trading on with the U.S.-China trade war widely believed Jan. 24, the day after
March 11, the Dow Jones Industrial Average had to be in the rearview mirror. At its last record in authorities imposed
travel restrictions
recorded a 20% drop from its highest point. The February, the S&P 500 was trading at more than
S&P 500 closed 19% below its high, just outside 2.4 times the sales of its companies, the highest
of bear territory. But the events of recent days such ratio on record in 30 years of Bloomberg
had already provided the sense of an ending— data. The price-earnings ratio was 22.3, in the top
the world was anxious about much more than 25% most expensive valuations since 1990.
stock prices. This all left the market especially vulnerable to
“The most unloved bull market” is the nick- a “black swan” event such as the novel coronavi-
name this rally earned, and for good reason. While rus that is wreaking havoc on economies and cor-
it was the longest in history, for much of its life it porations around the world—an event that central ● Market value added
to stocks during the
never quite felt like a boom for most people. It was banks and the government can’t mitigate easily long rally
born in the wake of the 2008 financial crisis and with their traditional toolkits.
a massive, controversial effort by the U.S. govern-
ment to rescue the nation’s banks. The rally was
The repricing has been sudden and violent.
The S&P 500’s last record was three weeks ago.
$28t
fueled for years by companies buying back their Perhaps, then, the recovery will be just as swift?
own shares, historically low interest rates, and the Making such a prediction would be ill-advised
8 Federal Reserve purchasing massive amounts of in normal times and downright foolish when it
bonds in what investors interpreted as an effort to comes to a situation as unpredictable as this one.
keep the party going as long as possible. While stock market history offers no past event
The rally added $28 trillion in value to U.S. exactly like this one, recovering from other bear
equities from March 9, 2009, to Feb. 19, 2020. markets has never been swift. The minimum time
Chalking all that up to financial engineering and a it’s taken for the market to return to its highs in
cooperative central bank is too easy, and it misses previous episodes is 320 trading days, or roughly
the point. The leading companies of this bull mar- 15 months, according to Bloomberg strategist
ket were genuine innovators. Apple Inc. went from Cameron Crise. The median is two and a half
being a $74 billion company in 2009 to a $1.4 tril- years. Both the swiftness of the decline and the
lion company in 2020 not through financial engi- heady valuation of the market at the beginning
neering, but by old-fashioned engineering. (In could lengthen the recovery time.
fairness, there was some tax code engineer- What’s easy to predict is another bull market
ing, too.) Amazon.com Inc. went from being a will come eventually. It could have a different char-
$26 billion company to a $1.1 trillion company by acter. The long 2000s bull was built on the legacy
reinventing the retail industry. Google, Facebook, of the financial crisis. We may see the next rally as
Nvidia … the list of companies that changed not the one in which businesses and investors adjusted
▼ “The panic arrived
only our investment portfolios but also our daily to the new rules of a world that’s lived through a faster than I expected,”
lives goes on. public-health crisis. —Michael P. Regan Xie says
● How did it hold
up for so long?
The bull market seemed to withstand any
challenge thrown its way: the European debt cri-
sis, the loss of the U.S. government’s AAA rat-
ing at S&P in 2011, and the trade war. Maybe that
explains the indestructible sense of optimismo ◼ COVID-19 / ECONOMY Bloomberg Businessweek March 16, 2020
How quickly will China
bounce back? What I’m
○ Across China, factories that produce everything activity, such as energy consumption. The use telling
from smartphones to sneakers have been dormant of coal burned to generate electricity has been investors
since the Lunar New Year holiday in late January as steadily ticking up and is now approaching nor- Karen Van Voorhis,
director of financial
the nation battled to contain the spread of the new mal levels for this time of year. planning, Daniel J. Galli
coronavirus. Now plants are slowly coming back But, as ever, some are trying to game the system. & Associates, Norwell, 9
Mass.
online, prodded by President Xi Jinping and other In Zhejiang, a province on the east coast that’s a
top Chinese leaders who worry that an extended manufacturing powerhouse, at least three cities gave It’s human nature to live
and react in the here
shutdown will jeopardize the government’s lofty factories targets for power consumption because and now. The challenge
development targets for 2020. they’re using the data to show a resurgence in pro- is complicated by
the fact that the
Economists are tracking energy consumption, duction, according to people familiar with the mat- solution to most of
poring over pollution charts, and studying data ter. To comply, some plant managers turned on all people’s fears is to do
nothing. It feels like
on traffic movements to discern how quickly the the lights and ran machinery as if they were operat- an unsatisfying thing
world’s second-largest economy can get back to ing at full capacity. to tell people. People
rarely remember that
business. Bloomberg Economics has estimated that Just as China’s factories are beginning to get not everything they
the economy was operating at as much as 80% of back on their feet, they face a second blow: the have is in the stock
market. I’ll say, “You’re
normal capacity as of March 6. spread of the disease and the associated risk of a looking at what the
Millions of migrant workers who were left collapse in economic activity in the major devel- Dow is doing, but you’re
not only invested in
stranded by restrictions on travel imposed after oped economies that are their main customers. the Dow. You have
the start of the January holiday are being allowed holdings in bonds and
back into the megacities along China’s east coast. ● Can you trust the data? international equities.
And you have cash—
They have to endure quarantines when they get remember how we put
that aside in a money
there, but back they are going. About 78 million Manufacturing companies across China told market fund?” This
have returned to work, which is about 60% of those Bloomberg News that the emerging challenge is is a double whammy,
because it’s not only a
who went home for the holiday, and almost all will now demand, not supply. “We are actually more market downturn but
have returned by early April, the government said worried about the development of the epidemic in it’s also a health scare.
It’s different than having
in early March. Europe and the U.S., which will affect their domes- a trade war. The stress
Given the extent of the virus controls, it will take tic consumption,” says Mark Ma, owner of Seabay level is higher because
there are legitimate
time to get that many people back on the job. At one International Freight Forwarding Ltd., a company health concerns. �As
stage the cheap-and-cheerful long-distance buses in Shenzhen. About a third of the goods it handles told to Annie Massa
that ply China’s highways were allowed to travel only are sold on Amazon, he says.
half full as part of an effort to prevent contagion. David Ni runs a company in Nanjing that buys
Economists have long suspected that China aluminum alloy car wheels from Chinese produc-
fudges its statistics, and so they have become ers and exports them to retailers in the U.S. He
accustomed to tracking proxies for economic was planning to showcase his products at the◼ COVID-19 / ECONOMY Bloomberg Businessweek
Inspired Home Show in Chicago in mid-March. a resurgence in cases as factory staff return.
But the trade show, like so many others, has been No matter how quickly life returns to normal,
canceled. “I’d booked hotel, flight ticket, and a China is facing its first quarterly economic con-
booth—everything was ready,” says Ni, who’s based traction in decades and the weakest year since the
in Los Angeles. “But seeing the situation in the U.S., early 1990s. But though unemployment is likely
I began to feel afraid of going on business trips.” to rise, it’s starting from a relatively low level of
There’s also a risk that the outbreak in China isn’t 5.2%, and there’s no evidence of widespread job
really under control. Although government statis- losses yet. Consequently, there’s been little talk
tics show a marked decline in the number of new yet of a stimulus package on the scale of the one
infections registered daily both in Hubei province Beijing cobbled together in response to the 2008
and in the rest of the country, there are suspicions global financial crisis, which equaled about 12%
that authorities are manipulating the data, as case of the size of the economy. That may change as
numbers have been repeatedly revised through the machinery of government, also disrupted
the course of the outbreak. Also, health special- by the virus, resumes working. �Jeff Black,
ists have warned that the country could experience Jinshan Hong, and James Mayger
Could there be
10
a financial
contagion?
○ The coronavirus is threatening to expose the Federal Reserve Chair Jerome Powell has
Achilles heel of the U.S. economy: heavily leveraged dismissed comparisons of the business borrowing
companies. As the expansion stretched into a record binge to the precrisis housing debt bubble, argu-
11th year and interest rates stayed at ultralow levels, ing that the financial system is now better able to
business debt ballooned and now exceeds that of handle credit losses. But he has acknowledged
households for the first time since 1991. that some debt-laden businesses could face severe
What’s more, borrowing increasingly has been strains if the economy deteriorates and that they “It will add to
concentrated in riskier companies with fewer finan- could amplify any downturn by laying off workers recessionary
cial resources to ride out virus-driven difficulties. and cutting back on investment. pressures in
A wave of defaults would intensify the economic The Fed is trying to cushion the economy—and the U.S.”
impact of the contagion. “It will add to recession- the corporate sector—from the blow of the corona-
ary pressures in the U.S.,” says Nariman Behravesh, virus by cutting interest rates and pumping money
chief economist at consultant IHS Markit Ltd. into the financial system. Behravesh says Congress
Energy companies are especially vulnerable and the White House will also have to act. “We’re
because of a collapse in oil prices. But they’re going to need them to set up a bailout fund, then
not alone. Debt tied to travel companies such as decide where to distribute it,” he says.
American Airlines Group Inc. and Hertz Global On March 9, stock markets posted their worst
Holdings Inc. has been hit hard in the fixed-income losses in more than a decade. President Trump told
markets, as have the obligations of movie theaters reporters later in the day that he’d seek a payroll
and casinos. tax cut and “very substantial relief” for industriesthat have been hit by the virus, reversing course on recover only 55¢ to 60¢ on the dollar, compared ▲ Wuchang train
station on Feb. 5
the need for economic stimulus. with 67¢ historically, because of companies’ dubi-
There are about $1.3 trillion in high-yield bonds ous earnings math and rising debt loads.
outstanding, up from $786 billion a decade ago. With broad financing markets shut for now, des-
The investment-grade credit market has more perate companies are turning their attention to the
than doubled, to $6 trillion, in the same period. $812 billion private-credit market. In times of stress,
Almost half the investment-grade bond mar- these lenders—private equity firms and others—
ket is now rated BBB, which means it could be often step in to provide financing to borrowers
downgraded to junk levels if the economy falters. that would otherwise have to go without, at a cost.
Should that happen, many investors would need But that might not be a cure-all. A slowdown in
to sell the debt to comply with restrictions on the consumer and business spending could be partic-
quality of their holdings. ularly damaging for broadly syndicated loans and
private credit, much of which is debt rated B and
below, according to UBS Group AG credit strategist
● Who’s at risk Matthew Mish. That debt is among the riskiest in
the high-yield market because downgrades can put
this time? it in CCC, the lowest tier.
“Companies with vulnerable balance sheets—
In the $1.15 trillion leveraged loan market—where meaning little cash, high maturing debt—are
companies already carrying a lot of debt accu- going to have difficulty refunding themselves,”
mulate more—borrowers have used adjustments Mohamed El-Erian, chief economic adviser at
to their earnings to reduce their apparent level Allianz SE, told Bloomberg Radio on March 9.
of indebtedness. A downturn could expose their “There is going to be an increase in credit
weakness. Analysts at Barclays Plc estimate that defaults.” �Rich Miller and Claire Boston, with
buyers of U.S. leveraged loans will be able to Kelsey Butler and Davide Scigliuzzo◼ COVID-19 / ECONOMY Bloomberg Businessweek March 16, 2020
12
▲ Walking the desolate streets of Wuhan’s Jianghan District on March 7◼C March 16, 2020
◀ Opening hours at
a mall in Qingshan
District on March 5
What I’m
telling clients
Mark Haefele, CIO
at UBS Wealth
Management, Zurich
Taking a look at the
overall coronavirus
Who wins the oil
picture, we think it’s
going to accelerate a
lot of larger trends. One
is genetic therapies.
We’ve seen the rapid
sequencing of the
virus to see how it’s
mutating. Another one
price war?
is the digital consumer.
The trend toward use
of facial-recognition
software—that trend
is accelerating. And
the future of food, not
just moving to plant-
based foods but also
microfarming and the
provenance of food. 13
● Saudi Arabia and Russia have long been at odds of the other combatants. If the price war persists While markets
are good at pricing
over how to cope with falling oil prices. It took the for months, Saudi Arabia appears in be in a weaker slowdowns in growth,
coronavirus to bring the conflict out into the open position. Riyadh needs oil prices of more than $80 they’re bad at pricing
just how fast a recovery
and set off a price war that sent crude down as low a barrel to balance its budget, higher than at almost can take. People adapt.
as $31 a barrel in early March. any other time in the past 20 years. If it’s forced to There are some pent-
up sales. What makes
For Russian President Vladimir Putin and Saudi tap the piggy bank, the kingdom’s cash reserves are this such an interesting
Crown Prince Mohammed bin Salman, oil is the life- $500 billion—down a third from their peak in 2014. period is if our baseline
view holds that this
blood of their economies—and their political power. Russia has spent the past five years resetting its gets settled in the first
Saudi Arabia depends on oil for almost 70% of gov- economy to a lower oil price and rebuilding cash half of the year, we’re
in a situation with low
ernment income, according to the International reserves to $570 billion. Following a price slump interest rates and high
Monetary Fund. For Russia it’s 40%, including gas. and U.S. sanctions in 2014, Moscow has lowered global stimulus applied.
With a global economy
On March 6, Putin refused to go along with MBS’s the price at which its budget breaks even, to about that went into this in
plan to cut production among the oil-rich countries $50 a barrel from $115 in 2013. And Russian com- decent shape, that is
a highly stimulative
to put a floor under prices. Riyadh then declared panies can turn a profit at a much lower oil price. environment. We
a massive production increase for April, which President Trump cheered on the fall in prices, could see a very sharp
recovery in the back of
Moscow matched. Prices went into free fall. tweeting it was “good for the consumer.” He may the year. �As told to
Russia and Saudi Arabia have a common enemy: feel the domestic impact politically, however. The Joanna Ossinger
the U.S. and its shale oil drillers, which have oil industry’s pain could hurt his popularity in
grabbed an increasing share of the world’s oil mar- Texas. And the price plunge is ricocheting across
ket. At first glance, the U.S. should be the loser in U.S. financial markets—his personal gauge of suc-
the price war. Drilling in the Permian Basin of West cess. To avoid disrupting his own presidency,
Texas and New Mexico is far more expensive than Trump may have to intervene to keep Moscow
in Siberia or the Saudi desert. Permian shale pro- and Riyadh from escalating further. The U.S. presi-
ducers need an average of $40 to $50 a barrel to dent called the Saudi prince on March 9, according
break even, according to Rystad Energy. Producers to two people familiar with the situation. “It’s no
have already been weakened by lenders reluctant longer about economics,” says Chris Weafer, chief
to finance their drilling and by falling demand executive officer of Macro Advisory, a Moscow-
because of the coronavirus. based consulting firm. “All three of them are hurt-
But much depends on the economic resilience ing at this price.” �Javier Blas and Jack Farchyom
esp
○ As the new coronavirus spread around the worl ,
sickening tens of thousands of people, Preside
Xi Jinping,
China
Donald Trump suggested that warm weather w would After his government
initially suppressed
kill the virus and said the number of U.S. ca ases of warnings about the
Covid-19 was “going very substantially down n, not outbreak’s severity, Xi
claimed credit for lock-
up.” He predicted the imminent availabilit y of a ing down Hubei prov-
vaccine and blamed the Obama administration for When the going gets ince and replaced local
tough, go golfing leaders. His success
the slow rollout of test kits. will depend largely on
With the number of cases in the U.S. now in four whether there’s a sec-
ond wave of infections.
figures, public-health experts have harsh critticism
for how the White House has responded. “T This is
14 an unmitigated disaster that the administratio on has Hassan
Rouhani, Iran
brought upon the population, and I don’t sa ay this
lightly,” says Ashish Jha, director of the Harvard Global At the outbreak’s start,
Iranian authorities
Health Institute. “We have had a much worse ressponse made a show of solidar-
than Iran, than Italy, than China and South Korea.”
K ity with China and were
slow to restrict inter-
Financial executives are just as concerned: “W Where national and domestic
is the U.S. leadership, which was one of the de efining travel. Religious author-
ities in Qom, a pilgrim-
features of the crisis in 2008?” BlackRock Incc. Vice age site that was the
Chairman Philipp Hildebrand said on Bloombe erg TV epicenter of the Iranian
outbreak, declined
on March 10. to restrict access to
shrines. Iran’s missteps
are reflected in the
○ Why didn’t the high number of govern-
ment officials who have
been infected, including
U.S. move faster?
? about one-tenth of the
nation’s 290-member
parliament.
The federal government’s role in the crisis began in
earnest on Jan. 31, when Trump forbade most fo oreign Moon Jae-in,
South Korea
nationals from entering the U.S. if they had recently
traveled to China. “I give Trump credit for the travel The government’s
refusal to completely
restrictions—and he has taken that credit,” saays Ian bar Chinese visitors
Bremmer, president of Eurasia Group, a po olitical sparked anger. Moon
recovered by declaring
risk consulting firm. “war” on the virus and
But the few weeks of time the U.S. bought with instituting an aggres-
sive and effective test-
the travel restriction were frittered away, experrts say. ing campaign. Some
What other countries have done, and what th he U.S. 210,000 tests (as of
March 11) have left
didn’t do, is immediate and widespread testing for the country with
the virus, which Jha says is the single most important one of the largest
case totals—but
step in containing the spread of disease. The a admin- also one of the low-
istration decided against a test already in use by
b the est fatality rates.v
March 16, 2020
Lee Hsien
Loong,
Singapore
Cases in the city-state
surged to among the
World Health Organization good job.” As criticism of the U.S.’s slow response highest outside China
in the early weeks of
and instead developed its grew, Trump on Feb. 26 named Vice President Mike the outbreak. Prime
own version, even though Pence as his coronavirus coordinator. Even then, the Minister Lee’s com-
munications struck a
“you could see the tsunami president pronounced, “The risk to the American reassuring tone. The
coming,” Jha says. people remains very low.” government laid out
steps people could
The U.S.’s resulting The next day, Trump named Deborah Birx as the take to help prevent
coronavirus test contained official in charge of scientific and medical efforts the spread of the
virus and detailed the
a faulty component that against the virus. Birx, a medical doctor and retired risks associated with
led to many inconclusive Army colonel, had been the U.S. State Department’s infection. Singapore
has taken stringent
results. It took several highly respected global ambassador for AIDS pre- measures, including
weeks to fix that. Initial U.S. guidelines for testing
w vention and treatment. Experts were pleased by her setting up quarantine
facilities and contact-
were also narrow, instructing hospitals and doctors
w appointment but put off by what the White House tracing cases.
to o screen only people who had respiratory symp- did next—ordering all public communications to go
to oms and had either traveled in China recently or through Pence. Jim Thomas, an epidemiology pro-
Shinzo Abe,
ccome into close contact with someone who had fessor at the University of North Carolina, says pre- Japan
been infected. In California, Oregon, and Washington
b vious health scares have typically had a scientist as
Not only could the
state, the epicenter of the U.S. outbreak, those limits the public face of the response and complained that virus tank Japan’s econ-
may have left undetected the virus’s spread to peo-
m this time scientific voices “have had to contend with omy, it’s raising ques-
tions about whether the
ple who had done neither.
p the confusion introduced by the political voices.” Summer Olympics will
TRUMP: ANDY BUCHANAN/GETTY IMAGES. XI: XIE HUANCHI/ALAMY. ROUHANI: JASON ALDEN/BLOOMBERG. MOON: SOUTH KOREAN PRESIDENTIAL BLUE HOUSE/GETTY IMAGES. LEE: NICKY
The White House’s messaging in January and into On March 6, Trump signed an $8.3 billion spending be canceled. As cases
of Covid-19 mounted,
la ate February continued to be that the virus had been measure to speed federal funds for vaccine devel- Abe lurched from a rela-
ccontained. “You would literally not know what to do opment and help state and local governments buy tively relaxed approach
15
to restricting travel from
too protect yourself if you were only listening to” the masks and other equipment, hire staff, supply lab- China and South Korea
Trump administration, says Bremmer.
T oratories, and assist community health centers. and shutting down
schools for a month.
While states and public-health departments are Just after arriving in West Palm Beach, Fla., where
laargely responsible for their own preparedness and he spent the weekend playing golf and hosting a
delivery of health care, the administration didn’t
d lavish birthday party for his son Donald Jr.’s girl- Giuseppe
Conte,
make sure hospitals and health departments had the
m friend, Trump tweeted, “We have a perfectly coor- Italy
fuunds, equipment, and training needed to respond dinated and fine tuned plan at the White House for
Conte has drawn fire for
too local outbreaks, say epidemiologists and other our attack on CoronaVirus.” his handling of the big-
experts. That left facilities underprepared.
e But all over the country, front-line medical work- gest coronavirus out-
break in Europe. In early
On Feb. 25, the president told reporters travel- ers were telling a different story by warning of sup- March he bungled the
LOH/GETTY IMAGES. ABE: TOMOHIRO OHSUMI/GETTY IMAGES. CONTE: FILIPPO MONTEFORTE/GETTY IMAGES
inng with him in India that the virus was “very well ply shortages, and hospitals were uncertain when announcement of a
series of increasingly
under control in our country” and that the U.S. was
u they’d be able to test suspected cases without rely- drastic measures to halt
“in very good shape.” Hours later, federal health offi- ing on government labs. Lawmakers said the federal the virus. Ultimately,
the government placed
ccials warned that the spread of the virus was inevita- government would fall far short of being able to test all of Italy under lock-
ble and advised businesses to arrange for employees
b 1 million people within days, as promised. Hospitals down. The efficacy of
these measures is still
to
o work from home and consider scrapping meet- were getting fewer than half the high-quality respi- unclear, but they will tip
in
ngs and conferences. rator masks they were ordering, said Chaun Powell, an already weak econ-
omy into recession.
“It’s not so much of a question of if this will hap- a vice president at Premier Inc., which helps hospi-
pen anymore, but rather more of a question of exactly
p tals purchase supplies. —Benjamin Harvey,
Kanga Kong, Philip
when this will happen,” Nancy Messonnier, direc-
w If Trump’s goal had been to minimize the threat Heijmans, Peter Martin,
to
or of the National Center for Immunization and to keep markets calm, his misstatements and delays Alessandro Speciale,
and John Follain
Respiratory Diseases, part of the Centers for Disease
R may have had the opposite effect: On March 9 the
Control and Prevention, told reporters. “We are ask-
C stock market saw its biggest rout since the 2008 finan-
in
ng the American public to work with us to prepare, cial crisis, sending shares down about 19% from their
n the expectation that this could be bad.”
in Feb. 19 all-time high. The U.S. dollar, normally strong
Trump’s response, upon returning to the U.S., in times of crisis as investors seek a haven, has lost
was to contradict that advice, saying he didn’t believe
w value, which may reflect a lack of confidence by mar-
th
he virus’s spread was inevitable. “We have it so well kets in the administration’s response.
under control,” he said. “We really have done a very
u “The federal government is the only game in◼ COVID-19 / GOVERNMENT
y did March 16, 2020
containment
town,” wrote Stephen Stanley, chief economist at
Amherst Pierpont, in a note to clients, in which he
also warned against thinking that additional Federal
Reserve easing or fiscal stimulus could do much
good. “I would argue that the most important front
fail?
right now is the public health response,” he wrote,
which has “been underwhelming.”
For a president who often measures his success
by how well stocks are faring, the market plunge was
enough to reverse course on the need for economic
stimulus. Trump announced he would meet with
congressional officials soon to work on a measure ○ Patient zero for the new coronavirus outbreak in
to provide “substantial relief,” including to indus- the U.S. appeared to do everything right. He arrived
tries that have been hit by the virus. on Jan. 19 at an urgent-care clinic in a suburb north
of Seattle with a slightly elevated temperature and
a cough he’d developed soon after returning four
● What can we do days earlier from a visit with family in Wuhan, China.
The 35-year-old had seen a U.S. Centers for Disease
to catch up? Control and Prevention alert about the virus and
decided to get checked. He put on a mask in the wait-
Comparisons with other countries’ responses high- ing room. After learning about his travel, the clinic
light the U.S.’s lack of central coordination. Singapore drew blood and swabbed his nose and throat, then
is the standout, says Eurasia’s Bremmer. The coun- called state and county health officials, who hus-
try responded quickly and transparently, giving the tled the sample onto an overnight flight to the CDC
public a wealth of information about how to protect lab in Atlanta. The patient was told to stay in isola-
16 itself. For example, the government created an app tion at home, and health officials checked on him
to inform users where people with the virus had vis- the next morning.
ited so others could avoid those places. South Korea The test came back positive that afternoon, Jan. 20,
is a close second, Bremmer says: It created drive-thru the first confirmed case in the U.S. By 11 p.m., the
testing centers, among other measures. patient was in a plastic-enclosed isolation gurney
The U.S. effort is moving toward what those on his way to a biocontainment ward at Providence
countries have done, belatedly. The CDC is advis- Regional Medical Center in Everett, Wash., a two-
ing high-risk people to stock up on medicine, food, bed unit developed for the Ebola virus. As his condi-
and household necessities and to avoid crowds and tion worsened, then improved over the next several
contact with people who are sick. Conferences, fes- days, staff wore protective garb that included helmets
tivals, sporting events, college classes, and busi- and face masks. Few entered the room; a robot
ness travel are being sharply curtailed. Under equipped with a stethoscope took vitals and had
pressure from governors, several large health a video screen for doctors to talk to him from afar.
insurance companies said they’d waive patients’ County health officials located more than 60 people
costs for coronavirus tests. Labs in every state are who’d come into contact with him, and none devel-
now capable of testing for the virus. But Illinois oped the virus in the following weeks. By Feb. 21 he
Governor J.B. Pritzker said on March 10 he was was deemed fully recovered.
“frustrated” by the federal government’s lack of Somehow, someone was missed. All the care-
assistance with testing. ful medical detective work, it’s now clear, wasn’t
For now, the Pollyanna-ish tone at the top has died enough. In February firefighters in Kirkland,
down. On Feb. 27, CDC Director Robert Redfield down- Wash., began making frequent visits to a nursing
played Messonnier’s warning that the virus would home where residents complained of respiratory
spread beyond those who had traveled to China problems—evidence of continuing transmission
or come into contact with an infected person. By that burst into public view on Feb. 29 when officials
March 10, he conceded to House lawmakers that the announced the first sicknesses, and later multiple
U.S. is past a containment-only approach and must deaths, of people at the facility from Covid-19, the
now try to limit the virus’s impact: “In some areas, disease caused by the virus.
we’re in high mitigation.” �Margaret Newkirk and The Seattle area, which had 260 infections and 23
Paula Dwyer, with Justin Sink, Mario Parker, Jennifer deaths as of March 10, is, for now, the center of the
Jacobs, John Tozzi, and Steve Matthews most severe U.S. outbreak. That may change soon.◼ COVID-19 / GOVERNMENT Bloomberg Businessweek March 16, 2020
t
“We are past the point of containment and broad we see, you know, anything is possible,” he said.
mitigation strategies—the next few weeks will change On Jan. 15, when the traveler to Wuhan who became
the complexion in this country,” Scott Gottlieb, a for- the first known U.S. case returned to Seattle-Tacoma
mer Food and Drug Administration commissioner, International Airport, he took group transportation
said on March 8 on CBS’s Face the Nation. from the airport with other passengers, county offi-
This reconstruction of how the virus spread around cials said. At the time, 41 people in Wuhan had been
Seattle, based on interviews with health-care provid- diagnosed with the new coronavirus, and Chinese
ers, first responders, relatives of patients, and aca- officials said the threat of human-to-human trans-
demic researchers, offers lessons to places such as mission was low. A CDC notice advised Americans
Florida and California that are reporting their first who’d been in Wuhan and felt sick to seek care. On
deaths. There were excruciating missed opportuni- Jan. 17 the U.S. began checks of passengers from
ties, especially at the nursing home. One shortcom- Wuhan at airports in Los Angeles, New York, and
ing was a lack of testing in a critical six-week window San Francisco. Two days later the recent arrival from
when the virus spread undetected. Even recently, Wuhan visited the urgent-care clinic in Snohomish
some patients say, hospitals weren’t taking enough County, and the intensive response began.
precautions to protect staff and others from infection. In retrospect, it was already too late. Some
PHOTOGRAPH BY EIRIK JOHNSON FOR BLOOMBERG BUSINESSWEEK
Governments are bowing to the reality of unprec- researchers who’ve traced the viral genomes of
edented, economy-killing measures seen as dras- patients around the world now say someone else
tic just weeks ago. Italian Prime Minister Giuseppe in the area might have picked it up between Jan. 15
Conte on March 9 ordered nationwide closures of and Jan. 19, before the traveler went to the hospi-
public places including schools, gyms, and theaters tal. He might have sneezed in the airport shuttle or
and asked everyone to stay home after hospitaliza- on some surface. “This virus is more contagious
tions strained its health-care system. than the flu, so any sort of exposures before he got
Although a lockdown of a U.S. city such as Seattle to the hospital would be certainly of high concern,”
is hard to imagine, something similar might happen, says George Diaz, who leads the infectious disease
Anthony Fauci, director of the National Institute of department at Providence, where the patient was 17
Allergy and Infectious Diseases, told Fox News. “You treated. By Jan. 30 the patient’s symptoms had ▼ A deserted Pike
don’t want to alarm people, but given the spread resolved, according to a New England Journal Place Market in Seattle◼ COVID-19 / GOVERNMENT Bloomberg Businessweek March 16, 2020
of Medicine paper. Snohomish County officials example, that Seattle got unlucky and had an early
allowed him to leave home isolation three weeks later. introduction that did take off into a chain of trans-
mission, and other places that did nothing differ-
● What slowed testing down? ent might have had better luck,” he says. “It’s quite
possible that we’ll see some places with lots of cases
Early in February the CDC began shipping test kits once we start testing.”
to laboratories around the country as news out of Testing around the U.S. was hampered when
Wuhan grew alarming—tens of thousands more sick- local officials reported flaws in the kits the CDC sent.
ened and a virtual lockdown imposed to keep people Replacements didn’t come until weeks later, which
in their homes. Outbreaks hit Iran, Italy, and South left most hospitals and clinics short of tests. Shifting
Korea. More cases around the U.S. were reported, guidelines for who should get the few tests available
suggesting other travelers may have brought the virus also confused hospitals, Diaz says. At the time, there
home with them. For every dozen cases the U.S. still had been only the single case reported in Seattle.
caught, it probably missed 20 or 25, estimates Marc Trevor Bedford, a Harvard-trained researcher and
Lipsitch, an epidemiology professor at the Harvard viral genome expert at Seattle’s Fred Hutchinson
T.H. Chan School of Public Health. “It may be, for Cancer Research Center, wondered why. He had
Are American
workers ready?
18
Many working Americans lack health benefits, while more workers than ever are in industries where they have to
show up to get paid, including heath care and restaurants. Older workers, who are particularly vulnerable to Covid-19,
make up an increasing portion of the U.S. labor force. Here’s a look at how various risk factors vary by income level and
industry. �Dorothy Gambrell
What benefits do workers enjoy in different industries?
Percentage of workers with Access to paid leave Health benefits Ability to work from home
Utilities*
Financial Wholesale Transportation
Information activities Professional and business services trade* Construction Manufacturing and warehousing*
◀ Highest weekly wages◼ COVID-19 / GOVERNMENT Bloomberg Businessweek March 16, 2020
spent weeks analyzing genomes of patients from genetically identical to the original except for three
around the world, tracing minor mutations to deduce minor mutations in the virus. And it contained a key
how Covid-19 emerged and spread. The early work genetic variant that was present in only two of 59
found that infections were doubling roughly every viral samples from China. This type of circumstan-
six days, and that for every three to four rounds tial evidence stops just short of proving a chain of
of transmission—or once every 20 to 30 days—one transmission. It’s possible the Washington cluster
minor mutation was occurring, Bedford said in an didn’t derive from the known patient zero, but from
interview on Feb. 13. “We are watching very care- another case that came into Washington at the same
fully for more local transmission,” he said. They time and went undetected. Still, Bedford calculated
soon found it: a teenager with mild symptoms who a 97% probability the new case was a direct descen-
attended a high school about 15 miles from where dant—one that hadn’t been spotted because of the
the first case was identified—someone who wouldn’t narrow testing at that time, he wrote in a blog post
have been tested because he didn’t meet the cri- on March 2. “This lack of testing was a critical error
teria. But the results showed up in the Seattle Flu and allowed an outbreak in Snohomish County and
Study, a project on which Bedford is a lead scientist. surroundings to grow to a sizable problem before
The new case, announced on Feb. 28, was it was even detected,” he wrote.
How old are they? Do they have health Do they work from Can they handle a
◼ A more than 20% benefits? home? financial emergency?
increase in workers
from 2008-18 Income bracket: Lowest Second Third Fourth Highest How Americans would cover an
unexpected $1,000 expense
16 to 24
21m workers
95% 5%
25 to 34
38m
37% 19
35 to 44 Borrowing
34m 41%
Savings
45 to 54 85 3
33m
55 to 64
28m
65+ 7% 13%
11m Something Reduce
75 1
else/don’t spending
2008 2018 2008 2018 know
Box width = number of workers
1m 10m
Education and health services Other services Retail trade* Leisure and hospitality
75%
50
25
0
Lowest weekly wages ▶
*TRANSPORTATION IS CATEGORIZED WITH UTILITIES AND WHOLESALE TRADE IS CATEGORIZED WITH RETAIL TRADE FOR WORK-AT-HOME AND PAID LEAVE DATA RELEASED
BY THE BUREAU OF LABOR STATISTICS. DATA: BUREAU OF LABOR STATISTICS, AMERICAN COMMUNITY SURVEY, BANKRATE JANUARY 2020 FINANCIAL SECURITY INDEX◼ COVID-19 / GOVERNMENT Bloomberg Businessweek March 16, 2020
At Providence in Everett, where patient zero was
● How did the area handle the rapidly treated, bed space could become an issue. The hospi-
growing number of cases? tal has started a program to discharge stable patients,
Diaz says. They’re sent home with a thermometer
The consequences were deadly for residents of Life and an oximeter, a measurer of respiratory health.
Care Center, a nursing home in the Seattle suburb Readings are transmitted to Providence, and if the
of Kirkland that houses elderly and often very sick patient’s condition worsens, he or she can quickly
patients. February was an unusually busy period for be returned to the hospital. Ten patients were in the
911 calls to the home, says Evan Hurley, a Kirkland program on March 8, Diaz says.
firefighter and union representative. The number Still, some people complain that area hospitals
went from seven in January to 33 for February and aren’t consistently following protocols to isolate pos- ● Number of cases
in King County as of
the first few days of March, he says, citing call logs sible cases. On a doctor’s orders, Alicia Hansen on March 8
later used to track which staffers needed to be quar- March 3 took her mother, who’s had cancer multiple
antined. Firefighters weren’t always wearing masks;
sometimes the calls were for a nosebleed or some
times, to the Swedish Hospital First Hill emergency
room after she developed fever and breathing dif-
83
other problem, Hurley says. But by late February, ficulties. She and her mother lived together not far
he recalls, a lieutenant remarked about the num- from the nursing home in Kirkland. According to
ber of recent visits to Life Care for breathing issues Hansen, some hospital staff were in and out of her
and fever. A captain shared the concern with the mother’s room without masks in their first 45 min-
county. Then, on Feb. 28, came word that a patient utes at the facility. Hansen herself, who could have
transferred from the home had Covid-19. The fire been exposed to the virus, was mixed with the gen-
department declared the facility a “hot zone” requir- eral population in a waiting room while her mother
ing full protective gear. An initial group of 17 firefight- was treated and tested for Covid-19. The test came
ers was quarantined. The next day, state officials back negative, but her mother died on March 7. A
announced the first death in the U.S. attributed to the spokesman says the hospital is following WHO’s guide-
20 new coronavirus and said that more than 50 people lines for dealing with potential Covid-19 patients.
associated with Life Care were sick and being tested. At Life Care on March 6, 15 more people were
The facility’s low-slung building in a nondescript hospitalized within 24 hours. Within days, infec-
H
part of town dotted with condos became the center of tions began turning up in other homes. The facility
an unfolding crisis. Authorities dramatically increased also serves as a short-term rehabilitation center, and
public warnings—while, families contended, doing firefighter Hurley says some of those patients were
little to save people in the home. “They are being left discharged to other places in the weeks before the
S
to be picked off one by one by this disease,” Kevin spread of the virus was known. (Life Care says the
Connolly, a relative, told television reporters outside. first patient later diagnosed was picked up from the
King County officials quickly moved to purchase a home on Feb. 19. Hurley says it may have been as
motel and set up modular housing to isolate patients, early as Jan. 22, based on call logs.) “We don’t think
g
a jarring escalation. Within days of the first deaths, we’re anywhere near the end of this,” Hurley says.
they advised people older than 60 to stay away “This spread is not limited to Life Care.”
from public places, while avoiding a total ban on big On March 6, a nursing home in Issaquah, a sub-
events. A comic-book convention planned for down- urb east of Seattle, said a resident tested positive for
town Seattle held out until March 6 before canceling. Covid-19. Four days later, county health officials said
“We are determined to protect those who are most 10 long-term care facilities had positive cases. All
vulnerable—our older residents, those with compro- told, 31 Kirkland firefighters have been quarantined—
mised immune systems—and, in doing those things, almost a third of the department—in addition to 10
we also want to protect our economy,” King County from other communities, as well as some relatives.
Executive Dow Constantine told reporters. Bedford, the genome expert, is working with
Amazon.com Inc., Microsoft Corp., and other researchers from the University of Washington to
companies told Seattle-area staff to work from home understand the extent of the spread. In early March
if possible, and the University of Washington shifted the university started using its own virus test, a mod-
to online classes for the rest of the quarter ending ified version of one the World Health Organization
March 20. As of March 8, King County reported 83 cases created. When a positive result is found in a sample,
and 17 deaths, all but one tied to the nursing home. the researchers perform a second round of tests to
The challenge for the health system is that in the sequence the viral genome. Pavitra Roychoudhury,
vast majority of cases, symptoms remain mild—but a university researcher in charge of sequencing, says
some percentage of people require hospitalization. technicians have been working late into the nightYou can also read
