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

ece

Au

str

alia

Norw

ay

Po

rtug

al

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)

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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

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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

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20

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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0

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6

201

7

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

1

200

2

200

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202

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

100

120

140

195

1

195

4

195

7

196

0

196

3

196

6

196

9

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2

197

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197

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198

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0

199

3

199

6

199

9

200

2

200

5

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

Fe

b 1

9

Fe

b 2

0

Fe

b 2

1

Fe

b 2

2

Fe

b 2

3

Fe

b 2

4

Fe

b 2

5

Fe

b 2

6

Fe

b 2

7

Fe

b 2

8

Fe

b 2

9

Ma

r 0

1

Ma

r 0

2

Ma

r 0

3

Ma

r 0

4

Ma

r 0

5

Ma

r 0

6

Ma

r 0

7

Ma

r 0

8

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r 0

9

Ma

r 1

0

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r 1

1

Ma

r 1

2

Ma

r 1

3

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r 1

4

Ma

r 1

5

Ma

r 1

6

Ma

r 1

7

Ma

r 1

8

Ma

r 1

9

Ma

r 2

0

Ma

r 2

1

Ma

r 2

2

Ma

r 2

3

Ma

r 2

4

Ma

r 2

5

Ma

r 2

6

Ma

r 2

7

Ma

r 2

8

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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