Virus Fears Hurt U.S. Economy Whether Locked-Down or Reopened

As a second wave of coronavirus cases spreads across the U.S., economists say fear of the disease likely plays a bigger role in stalling business activity than any rules that governments put in place.

That’s the key finding in a series of studies that cast doubt on the effectiveness of attempts to reopen the economy while the pandemic is still raging. The research also suggests that reluctance to re-impose lockdowns on economic grounds may be misplaced.

The U.S. has the world’s largest number of coronavirus cases and deaths, and it’s reporting rising levels at a time when many other countries appear to have gotten a grip on their outbreaks. That divergence may soon have consequences for the economy if it takes longer for American shoppers or diners to get comfortable returning to prior habits.

In a study of customer visits to more than 2.25 million businesses, University of Chicago economists Austan Goolsbee and Chad Syverson found that traffic fell by 60 percentage points -- and that legal restrictions explained only slightly more than one-tenth of that drop.

The decline began before stay-at-home orders were in place, was closely tied to the number of virus deaths locally, and showed that consumers were actively avoiding the busier stores, according to the paper distributed by the National Bureau of Economic Research.