• Marco Annunziata

Charting A Path To Independence



This will hardly feel like Independence Day: no fireworks, and very little independence. In fact, as several states halt or roll back the reopening of businesses, more people face prolonged dependence on the government’s largesse.

I would have loved to kick off the weekend with an upbeat blog on the second month of robust jobs growth—nearly 5 million jobs ‘resuscitated’ in June—but the media has quickly buried the positive news arguing that the rise in new Covid-19 cases leaves us no choice but to switch the economy off again.

Whether it’s justified or another over-reaction, imposing a second round of complete lockdowns and putting reopening plans on hold is likely to have a brutal impact on the economy. It would hit business owners and workers with open-ended uncertainty, no longer knowing if and when they might be allowed to reopen and work again, and lead to a second, larger wave of bankruptcies and layoffs. It’s a choice that needs to be taken with eyes wide open to the consequences. The upbeat economic data of recent weeks, with rising jobs, retail sales and consumer confidence, may have given an illusory sense of certainty that the economic damage can be repaired quickly; the truth is that a protracted economic depression is still a very real risk. The longer policymakers toy with shutting and reopening the economy at will, the greater the risk.

Meanwhile though, to get to Independence Day on a more upbeat note, I wanted to show a few charts that in my view suggest the Covid-19 resurgence is less threatening than we think.

Yes, new cases have increased sharply: they had stabilized around 20,000 per day between mid-May and mid-June, and then jumped to about 50,000 per day. Tests have also risen sharply, from about 400,000 per day in mid-May to over 600,000; but the it’s not just that we find new cases because we test more—the share of tests that come out positive has picked up.



Hospitalizations have also increased: the number of Covid-19 patients in US hospitals has risen from about 28,000 in mid-June to about 37,000 (the chart shows the number of patients currently in hospital, not new admissions).


So far so bad, but here comes the reassuring part:

  • Fewer of those contracting Covid end up in hospital, and those who do stay in hospital for a shorter time. The ratio of currently hospitalized Covid patients to new cases keeps falling:


And so does the ratio of the total number of people who have been hospitalized for Covid to the total number of cases:


  • Fewer of those hospitalized end up in ICU:


The ratio has fallen sharply from about 25% in mid-May to about 15%. If you are wondering about the U shape in the middle of the graph: the number of ICU patients mysteriously dropped by 5,000 on 27 April and magically surged by 3,000 on 7 May…don’t get me started again on the quality of the data…let’s just pretend the data follow the hand-drawn dotted line.

We now have about 5,600 patients in ICU compared to a low of about 5,200 on 21 June. The number of ICU patients correlates closely with the number of deaths, which continues to decline: The 7-day average of daily Covid deaths has declined to 525 (there was a massive spike on June 25 as about 2,000 ‘forgotten’ casualties were added in at once).


To summarize: yes, more people are contracting Covid-19, but a lot fewer of them need to be hospitalized, and a lot fewer of those hospitalized need to be brought in ICU.

Which means that the pressure on hospital resources is rising at a much slower pace than the rise in new cases. So let’s take a look at the existing capacity in hospitals (the original CDC charts are here):

Across the US hospital system, about 35% of inpatient beds and 38% of ICU beds are currently free; only 6% of inpatient beds are occupied by Covid-19 patients.

For inpatient beds, spare capacity varies from about 20% in Maryland, to 26% in Arizona, about 35% in California, Texas and Florida, to about 50% in many Midwest states.



Among the states recently flagged for the rise in hospitalizations, Arizona has 20% of beds occupied by Covid-19 patients, Texas 12%, Florida 11% and California just under 10%.



Arizona has about 20% ICU spare capacity, California, Texas and Florida about 35%.



That’s why I am optimistic: I think in the coming weeks we will realize that the rise in new cases does not threaten to overwhelm the health care system, that its impact on hospitalizations, ICUs and fatalities is much less severe than we now seem to fear; that some judicious use of masks and social distancing can keep the situation under control even in the new hotspots. That therefore, we do not need to shut down our entire economy again. And then we’ll be able to chart our path back to (healthy) Independence.

@ 2018 Annunziata + Desai Advisors, LLC