In the past few months, it has looked like we were through the worst of the pandemic. Mask requirements have been lifted in most parts of the country, the vaccination rate has steadily increased, and new cases and deaths have decreased.
A sudden outbreak of new cases caused by the highly contagious COVID-19 delta variant has led the CDC to reverse its guidelines and use masks in affected areas for. to promote Everyone People, vaccinated or not.
We’re also seeing new government regulations, like the latest rulebook in New York City: Mayor Bill de Blasio announced this week that you’ll need to show proof of vaccination before entering restaurants or gyms.
As COVID-19 appears to flare up again – and although President Biden calls this a pandemic “among the unvaccinated” – the environment is turning back for everyone. How much will the delta option have on the economy?
What the Fed Says
Public confidence in the government is currently low. Three months ago, polls found that 43% of Americans believed the country was on the right track. Today that number is even lower at 38%. Pew Research has been tracking government trust since the late 1950s. Their moving average finds that public confidence was 24% in a poll last April.
While most Americans don’t trust what they’re saying, it’s important to note what Federal Reserve Chairman Jerome Powell said at a recent news conference about the Delta variant and the economy: “What we’ve seen is with Successive Waves of COVID Over the past year and several months, the economic impact of each wave has tended to be smaller. We’ll see if this is the case with the Delta variety, but it’s certainly not an unreasonable expectation, ”Powell said at a news conference.
Powell also noted that bond purchases will ease in the coming months, which has helped keep interest rates low and stimulate consumer spending.
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The real impact of Delta
The delta variant affects certain parts of the country disproportionately. Regions with low vaccination rates are hardest hit as both hospital admissions and deaths increase. Most of these cases affect unvaccinated people.
On the other hand, places with high vaccination rates see very moderate or slight increases in hospitalization rates and little to no increase in death rates.
These New York Times maps show a clear conclusion: vaccines are effective.
But as long as some regions of the country remain at risk, consumer spending and economic measures could decline – especially if new regulations, like New York City’s latest vaccination ruling, make it harder for businesses to do business. The National Restaurant Association issued a statement addressing the ability of restaurants to train their staff on how to properly use vaccine identification.
“Checking vaccination status is not like identifying a customer before serving them a drink – employees are trained on it,” said Larry Lynch, senior vice president of science and industry for the association. “Now our staff are expected to check the vaccination status of every customer who wants to eat at the facility without any training.”
Other concerns concern schools and the labor market. Will all schools open again? Or will some be subject to guidance that affects the classroom environment? The job market is already tight and the delta option is likely to prolong the problem.
All of these factors contribute to an economy that is recovering more slowly than expected. Yes, real US GDP growth was 6.5% in the second quarter, a very high rate of growth, but projections predicted growth of 9.0%. Estimates were off by almost 30%.
With the Delta variant moving through the country and forcing the government to tighten again, the real impact on the second half of the year is difficult to predict.
What we do know is that previous spikes in the virus have left the economy relatively unscathed – aside from the initial surge that crippled the country last March. Jerome Powell says the hardened economic environment is due in part to the fact that by that time the industry has learned to deal with the virus.
Do real estate investors need to be concerned?
Yes, we should be concerned about the Delta variant. First and foremost, it has been proven to be more damaging to our health than any of the previous variations of the virus. Despite the vaccine, people still get sick. That alone should justify caution.
But when it comes to the economy or the real estate market, that doesn’t seem like a real burden. As long as death rates stay low – and they are – it’s hard to believe that massive action will be taken to prevent further spread. What I would define as a massive measure is some form of business closure, travel restrictions and any suppression of economic activity.
But we have to wait and see what happens. As always, be prepared for the worst.
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