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John Hood: Go-slow reopening may be costly

By John Hood

RALEIGH — Over the first two months of the coronavirus crisis, our labor-market cratered. The number of employed North Carolinians dropped by 820,000, or 17%.

Only 56.3% of working-aged residents were either employed or actively looking for jobs. That’s the lowest rate of labor force participation in modern times.

The next round of job and output numbers will probably be even more dismal. But have North Carolina’s economic woes been caused more by COVID-19 itself or by government’s regulatory response to the pandemic? This is not a simple question to answer.

Generally speaking, the largest declines in employment across the United States occurred in the places with the highest rates of COVID deaths per capita, such as Michigan, New York, New Jersey and Massachusetts. And some of the lowest employment declines occurred in states with low COVID mortality such as Texas and Kansas.

But there are exceptions. And it is also true that the states with the strictest lockdown measures tended to suffer higher-than-average job losses. As for the states that never enacted statewide stay-at-home orders — Arkansas, Iowa, Nebraska, North Dakota, South Dakota, Oklahoma, Utah, and Wyoming — all had lower-than-average job losses.

It is reasonable to assume that in places where the coronavirus has been deadlier, people would be less willing to venture out to work or shop even if it were legal to do so. And it is reasonable to assume that in places where government shut more businesses down for longer, the economic hit would be bigger. Both effects can be present, and their causes interrelated.

Let’s look more closely at North Carolina and its neighbors. All have had COVID deaths per million below the national average of 302 (as of May 25), although the rates in Georgia (174) and Virginia (142) are higher than the national median (114). Interestingly, Georgia has been beaten up by the national media for lifting its statewide lockdown early, at the end of April, while Virginia’s rules have been among the strictest.

Deaths per million in South Carolina (85), North Carolina (75) and Tennessee (49) are relatively low. But their regulatory approaches have been rather different. Goy. Roy Cooper’s lockdown orders were more sweeping and are being lifted at a much slower pace.

Consider a basic fact on the ground: foot traffic into businesses. According to data from Safegraph.com, all the states in our neighborhood saw declines of about half from mid-March to mid-April. Then people started leaving their homes in greater numbers to work and shop. They voted with their feet, so to speak, either because their calculation of the personal risk from COVID-19 changed or they simply had to get on with their lives.

This happened in North Carolina, for example, even before Cooper began his glacially paced reopening. Foot traffic into North Carolina businesses rose from 50% below the pre-COVID baseline on April 13 to 36% below the baseline on May 7, the day before Cooper’s phase one went into effect. Since then, it has risen to 30%.

South Carolina and Tennessee have seen roughly the same business declines on the front end but much-faster rebounds since mid-April, to 15% and 19% respectively. Foot traffic at dine-in restaurants has returned to 87% of pre-COVID levels in South Carolina and 76% in Tennessee. In North Carolina, the level is only 59%. You can see the same pattern in shopping mall traffic.

It would be hard not to conclude that the major difference here is public policy, not disease severity. South Carolina and Tennessee have lifted their restrictions earlier and more broadly. People have responded by getting out more, and companies have likely been rehiring to handle the increased business.

Perhaps, as Cooper’s defenders will warn, our southern and western neighbors will come to regret their decisions in two-to-four weeks if their COVID hospitalizations and deaths spike. But if North Carolina has a particularly bad jobs reports next month, the governor’s go-slow approach to reopening will likely be responsible for a significant share of the negative economic consequences.

John Hood is chairman of the John Locke Foundation.

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