States Reopened, but Covid-19 Fears Threaten to Keep Consumers Away

So far, about 40 million Americans, or 12% of the population, have been fully vaccinated against Covid-19, according to the Centers for Disease Control and Prevention. More than 73 million, or about 22% have received at least one shot.

“The state of the pandemic, not any orders the government imposes about the pandemic, is what drives people,” said Chad Syverson, an economist at the University of Chicago who has studied the phenomenon. “If the pandemic improves, people will go out at a higher rate. The orders themselves are icing on cake.”

To measure the economic impact of government-imposed lockdowns versus the effect of voluntary distancing, Dr. Syverson and his colleague Austan Goolsbee used cellphone data to track customer visits to 2.25 million businesses in commuter zones across the U.S. last year from January through May.

Examining commuter zones allowed the researchers to compare consumer behavior in neighboring jurisdictions with the same exposure to Covid-19, but different shelter-in-place policies. If shutdowns were responsible for last year’s economic collapse, jurisdictions that remained open should have fared better than neighboring areas that shut down.

Instead, the researchers found a 60% decrease in consumer traffic, on average, with only 10% attributable to shelter-in-place orders—meaning that all businesses within the same commuting zone lost traffic, but the decline was 10% greater in areas that locked down.

In addition, places that ended shutdown orders saw an equally modest recovery afterward—what Dr. Syverson described as a mirror image of the decline attributed to the closures.

“We repeated that kind of analysis thousands of times across all sorts of counties, businesses and metro areas,” Dr. Syverson said. “What all these results have shown is the primary driver of business activity is how comfortable or uncomfortable people feel going out to businesses given what’s going on with the pandemic.”

The findings were published in the peer-reviewed Journal of Public Economics in January. When the researchers followed up later, using 2020 data from May 18 through Aug. 16 and from Oct. 5 through Jan. 3, the results were nearly identical.

It’s important to note the researchers assumed the number of consumer visits corresponded to the amount of economic activity, which wouldn’t detect whether people shopped half as often but spent twice as much. However, a separate study by economists at the Federal Reserve Bank of Chicago explicitly tracked revenue and spending as well as mobility and found something similar.

That study linked county-level stay-at-home orders to cellphone records and consumer spending in the U.S. from March 1 to April 17 of last year.

“Our results are broadly consistent with and complementary to the Goolsbee and Syverson paper,” said Diane Alexander, a co-author of the Chicago Fed study. “We find similar results to what they find when we look at a different, but related, data set of cellphone activity.”

They also found that mobility measures didn’t fully capture the drop in spending caused by lockdown restrictions.

Shutdowns were responsible for 16% of the drop in visits to nonessential businesses, the study found, but 24% of the drop in restaurant revenue and 45% of the drop in nonrestaurant small-business revenue.

The researchers also tested whether responses to stay-at-home orders varied by political affiliation and found that the effect was nearly identical across different kinds of counties.

“An early narrative was that stay-at-home orders would be ineffective in areas that supported former President Trump,” Dr. Alexander said. “However, we find very similar effects in areas which voted Democratic and Republican in the 2016 election.”

That result might seem surprising, but according to an election postmortem prepared by the Republican strategist Anthony Fabrizio after last year’s presidential race, a majority of voters in 10 battleground states “prioritized stopping the spread of coronavirus over reopening the economy.”

The analysis—which was obtained by Politico—found that 57% of voters in five states Mr. Trump won in 2016 and 2020 and 60% of voters in five states that supported him only in 2016 favored limiting Covid-19 over reopening the economy.

Still, researchers at the Chicago Fed and the University of Chicago didn’t discount the value of stay-at-home orders as a public-health response. Lifting them prematurely might increase transmissions of the coronavirus without causing the economy to spring to life.

Write to Jo Craven McGinty at [email protected]