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COVID-19’sEconomic ImpactMay 6, 2020
MARSH
COVID-19’s Economic ImpactSituation Update
2
Through May 5:
• 3,517,345 confirmed
cases and 243,401
deaths globally.
• 1,171,510 confirmed
cases and 68,279
deaths in the US.
Source: World Health Organization, USCenters for Disease Control and Prevention
MARSH
COVID-19’s Economic ImpactStates Beginning to Reopen
3
■Partially reopened as of May 6
■Partial reopening to begin soon
■ Lockdown/stay at home
orders remain in effect
Source: National Governors Association, news reports
MARSH
COVID-19’s Economic ImpactWhat We Can Learn From South Korea
4
0.18%
0.01%
0.13% 0.13%0.17%
0.10%0.13% 0.14%
1.00%
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 COVID-19 inSouth Korea
South Korea Mortality Rates From COVID-19 and Past Flu Seasons
Average US mortality from the common flu: 0.12%
Source: South Korea Ministry of Health and Welfare
Mortality rate = virus-related deaths
number of infected
MARSH
COVID-19’s Economic ImpactWhat We Can Learn From South Korea
5
Source: South Korea Ministry of Health and Welfare
0.12% 0.12% 0.09%0.38%
1.37%
5.27%
9.26%
20-29 30-39 40-49 50-59 60-69 70-79 80+
COVID-19 Mortality Rate in South Korea by Age
MARSH
COVID-19’s Economic ImpactHow South Korea Compares to Other Countries
6
Source: Organisation for Economic Co-operation and Development, United Nations
Population Age Distribution in South Korea and Italy
71%
29%
Italy
78%
22%
South Korea
■ 59 and younger
■ 60 and older
13.1
12.3
8.1 8.07.4
6.6 6.66.0
5.6
4.5 4.3 4.23.8 3.6 3.4 3.3 3.3 3.2 3.0 3.0 3.0 2.9 2.8 2.8 2.6 2.5 2.5 2.5 2.2 2.1
1.71.4
1.00.5
Jap
an
So
uth
Ko
rea
Russia
Ge
rma
ny
Au
str
ia
Czech
Rep
ublic
Po
lan
d
Fra
nce
Be
lgiu
m
Sw
itze
rlan
d
Chin
a
Gre
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Au
str
alia
Norw
ay
Po
rtug
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Neth
erl
an
ds
Fin
land
Italy
Isra
el
Sp
ain
Ire
lan
d
Ice
lan
d
Tu
rke
y
US
New
Zea
land
UK
Can
ad
a
Den
ma
rk
Sw
ed
en
Chile
Colo
mbia
Me
xic
o
Indo
nesia
India
Hospital Beds Per 1,000 People (2018 or latest available)
MARSH
COVID-19’s Economic ImpactHow Do Pandemics and Epidemics End?
7
The virus mutates and becomes less lethal.1
Effective vaccines ortreatments are discovered.2
The population acquires“herd immunity.”3
MARSH
COVID-19’s Economic ImpactVirus Mutations
8
Source: nextstrain.org/GISAID
MARSH
Through May 5, COVID-19 has
resulted in 13,724 confirmed
deaths in New York City.
Assuming a mortality rate of
0.8%, 1.7 million New
Yorkers have been infected — or
roughly 20% of the population.
COVID-19’s Economic ImpactHow Close Is Herd Immunity?
9
Source: New York City Health Department
MARSH
COVID-19’s Economic ImpactHow Eliminating Containment Will Affect COVID-19 Deaths in New York City
10
Source: Jesus Fernandez-Villaverde and Charles I. Jones, “Estimating and Simulating a SIRD Model of COVID-19 for Many Countries, States, and Cities,” Stanford University, 2020
MARSH
0
10
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20
CBOE S&P 100 Volatility Index (VIX)
COVID-19’s Economic ImpactUS Stock Market Volatility
11
Source: Cboe Global Markets
MARSH
COVID-19’s Economic ImpactHow Americans Manage Their Savings
12
Source: Federal Reserve Bank of St. Louis/US Bureau of Economic Analysis
0%
2%
4%
6%
8%
10%
12%
14%
198
0
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201
8
201
9
202
0
US Personal Savings Rate, 1980 to Present
US Recessions Personal Savings Rate
MARSH
COVID-19’s Economic ImpactOil Prices and Consumer Spending at Gas Stations Falling
13
Source: US Bureau of Economic Analysis, US Energy Information Administration
Daily Card Transactions at US Gas Stations
0
20
40
60
80
100
120
140
160
199
9
200
0
200
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0
West Texas Intermediate Crude Oil Spot Prices (dollars per barrel)
MARSH
19%
12%
11%
5%5%5%
4%
4%
3%
3%
29%
Global Oil Production by Country, 2019
United States
Saudi Arabia
Russia
Canada
China
Iraq
United Arab Emirates
Brazil
Iran
Kuwait
Other
COVID-19’s Economic ImpactThe US Is the World’s Leading Oil Producer
14
Source: US Energy Information Administration
MARSH
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Weekly Unemployment Insurance Claims, Seasonally Adjusted (thousands)
Who’s at Risk?
• Households in countries with high debt
and weak safety nets.
• Businesses with:
– High fixed costs (operational leverage).
– High debt.
Financial systems are better capitalized
than in 2008, but are not capable of
withstanding the shock caused by the
pandemic.
COVID-19’s Economic ImpactSignificant Risk for People, Businesses, and Economies
15
Source: US Department of Labor
MARSH
0
20
40
60
80
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120
140
195
1
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4
195
7
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0
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3
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3
199
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2
200
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200
8
201
1
201
4
201
7
Nonfinancial Corporate Debt as Percentage of GDP
COVID-19’s Economic ImpactUS Economic Indicators
16
Source: Federal Reserve Board of Governors, Federal Reserve Bank of St. Louis, Google
1995 2000 2005 2010 2015 2020
St. Louis Fed Financial Stress Index
May2019
Jun2019
Jul2019
Aug2019
Sep2019
Oct2019
Nov2019
Dec2019
Jan2020
Feb2020
Mar2020
Apr2020
"Can't pay rent" Search Interest
20
40
60
80
100
120
140
Household Debt as Percentage of Disposable Income
MARSH
COVID-19’s Economic ImpactFederal Reserve System Assets
17
Source: Federal Reserve Bank of Cleveland
MARSH
-100
-80
-60
-40
-20
0
20
Fe
b 1
8
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b 1
9
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b 2
5
Fe
b 2
6
Fe
b 2
7
Fe
b 2
8
Fe
b 2
9
Ma
r 0
1
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2
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3
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r 2
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r 2
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Ma
r 2
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Ma
r 2
9
Ma
r 3
0
Ma
r 3
1
Seated Restaurant Diners, Year-Over-Year Percentage Change
COVID-19’s Economic ImpactThe Pandemic’s Effect on the Restaurant Industry
18
Source: OpenTable
MARSH
Demand by Industry
▼Airlines.
▼ Restaurants.
▼ Hotels.
▼ Car rental services.
▼Movie theaters.
▼ Durable goods.
▲ Health care.
▲E-commerce.
▲ Groceries.
▲ General merchandise.
COVID-19’s Economic ImpactEffects on Individual Industries
19
Source: SafeGraph
MARSH
COVID-19’s Economic ImpactPower Consumption Has Fallen Dramatically
20
Electricity Usage Changes
(first two weeks in February
vs. week ending April 4):
▼ Down 23% in Italy.
▼ Down 15% in Spain.
▼ Down 8% in France.
▼ Down 8% in the US.
▼ Down 7% in Portugal.
▼ Down 7% in the UK.
▼ Down 5% in Germany.
▲ Up 3% in Sweden.
Source: Steve Cicala, Early Economic Impactsof COVID-19 in Europe: A View from the Grid,University of Chicago, April 2020
MARSH
COVID-19’s Economic ImpactFalling REIT Returns
21
Source: Green Street Advisors
Change in US Unlevered and Levered Values, February 21 to April 15
MARSH
COVID-19’s Economic ImpactWhy Government Intervention?
22
“Infection externality.”1
Short-term solution: crude containment measures, such as lockdowns.2
Medium-term solution: smart containment/large-scale testing and quarantining of infected individuals.
3
MARSH
COVID-19’s Economic ImpactModeling Economic Effects
23
Source: Eichenbaum, Martin, Sergio Rebelo and Mathias Trabandt, “The Macroeconomics of Testing and Quarantining,” Northwestern University, April 2020
MARSH
COVID-19’s Economic ImpactThe Pandemic’s Permanent Changes
24
• Remote work.
– Decline in value of office buildings.
• E-commerce.
– Further declines in value of retail space.
• Telemedicine.
• Video conferencing.
• Online teaching.
• Fintech replacing conventional banking.
• Automation and reshoring.
MARSH
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03
Hotel Occupancy in Hong Kong, December 2002 to August 2003
COVID-19’s Economic ImpactHong Kong Hotel Occupancy During the SARS Epidemic
25
Source: Hong Kong Tourism Board
MARSH
COVID-19’s Economic ImpactAn Uncertain Future
26
MARSH
COVID-19’s Economic ImpactFuture Decision-Making for States
• Governments need to balance economic
priorities with public safety needs.
• Decisions will be made based on local levels of
preparedness and potential vulnerabilities:
– Equipment stockpiles.
– Planning.
– Testing kits.
– Aging populations or those with underlying
health conditions.
• Different approaches to reopening will highlight
best practices and lessons learned.
– This will inform responses in the event of a
second COVID-19 wave.
27
MARSH 28
COVID-19’s Economic ImpactA Whole of America Response
Preparedness at all levels of government is crucial.
Mitigation is in the hands of individuals, families, and communities.
Nonprofits are providing valuable resources to vulnerable populations.
The private sector’s lifesaving capabilities have never been more needed.
MARSH
COVID-19’s Economic ImpactLooking Ahead
29
Governments will look for opportunities to learn lessons as they reopen.1
Emergency managers will assume there will be a second COVID-19 wave.2
Businesses should similarly learn lessons and prepare for additional restrictions in the future.
3
MARSH
Understand screening.
Evaluate screening options
and choose the right one for
your organization.
Take steps to maintain privacy
and confidentiality.
COVID-19’s Economic ImpactPriorities for Employers
30
Define who needs to return.
Be clear about which employees
must return to work — and which
ones do not.
Engage with empathy.
Focus on communication.
Start with the most appropriate
return-to-work process and
adjust/refine as needed.
MARSH
Providing face masks
to employees.
77%74%
COVID-19’s Economic ImpactHow Employers Are Supporting Employees and Protecting Their Health
31
94%
Implementing
enhanced cleaning
and disinfection.
Source: Mercer Global COVID-19 Survey #4
Administering on-site
temperature screening.
85%
Communicating
reminders about
mental heath
programs.
MARSH
20%
15%
2.8
77,643
People under 65 with preexisting conditions
Population 65+
ICU beds per 10,000 people
Total ICU beds
26%
20%
1.7
7,605
Metro vs. Non-Metro Health Resources and Challenges
Metro Non-Metro
COVID-19’s Economic ImpactPreparedness and Access to Care Differs by Geography
32
Source: Kaiser Family Foundation
MARSH
Telemedicine can help address:
• Wariness of hospitals and
doctors’ offices.
• Strains on health care systems.
• Employee anxiety.
COVID-19’s Economic ImpactTelemedicine Is Here to Stay
33
Source: Mercer Health on Demand Workers Survey
69%
72%
77%
Virtual mental healthcounseling for anxiety, stress,
mild depression
Telemedicine for significanthealth issues, such as
diabetes
Telemedicine for simple healthissues
Employees’ Willingness to Try Telemedicine
MARSH
Liquidity Strategies for COVID-19
For the latest information and insights from Marsh about
how to manage COVID-19's effects on your business,
including our new briefing on how insurance and risk
management strategies can help your organization
maintain liquidity during challenging times, visit
marsh.com/us/insights/research/pandemic-risk-hub.html.
Join us again on Wednesday, May 20, for more information and
insights on how you can manage critical risks as the pandemic
continues. Visit marsh.com to register.
Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman.
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