It's been a long time coming and the only way we’re going to make our way to a post-pandemic world was by developing and distributing a COVID-19 vaccine. Immunizing the majority of the population is key to stopping the spread and protecting our community's most vulnerable members.
With safety as a top concern for many, the economy is a close, close second. COVID-19 sent people around the world spiraling into financial uncertainty. Millions lost their jobs, thousands of small businesses have closed permanently, many families face eviction and governments have scrambled for months to offer assistance.
Now that a viable vaccine is underway, what should be expected in regards to the economy? Will we skyrocket to pre-pandemic levels shortly? Or will things continue to rise and fall rather unpredictably as they have most of 2020? While no one can know the answer for sure, there are some factors we can consider as of now.
Where Do We Stand With COVID-19 Vaccines?
On December 8, 2020, a 90-year-old British woman became the first person in the western world to receive a vaccine for the coronavirus.1 The vaccine, developed by Pfizer and BioNTech, was approved for use in the United Kingdom first.
Within days, Canada gave the vaccine a green light, and the United State’s Federal Drug Administration (FDA) vaccine advisory panel gave it a thumbs up as well. Healthcare workers and government leaders in America began receiving a COVID-19 vaccine the week before Christmas.
With a second vaccine, developed by Moderna (and others as well), things are starting to be implemented. More Americans will have access to the vaccine in the coming months. Starting with higher risk groups and health care workers first and then moving down the line. The bottom line is, all five vaccines on the market have eliminated Covid-19 deaths.
How Vaccines Currently Impact the Economy
In determining how the COVID-19 vaccine may impact the future economy, it’s important to acknowledge how current, commonly used vaccines help keep the global economy going.
Vaccines play a major role in:2
- Preventing loss of productivity in the workplace (due to illness).
- Making travel safe & protecting travelers against disease when visiting foreign places. (I for one, am looking forward to some travel)
- Helping individuals remain active, contributing members of society for a longer period of time.
- Empowering children to increase their cognitive skills, improve their physical abilities and perform better in school.
- Lastly, helping our mental health as we work toward a more normal life.
Simply put, vaccines help members of our society contribute to the greater economy by working regularly, spending money on things like vacations as well as goods and services, and raising children who will do the same when they grow up.
As we saw in 2020, a virus running rampant has a vast and sharp rippling effect - governments call for widespread shutdowns, people can’t make money and therefore can’t spend money, travel halts and the economy, ultimately, suffer.
Prevention Vs. Treatment
As Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” (I think this phrase is spot on in most circumstances). When it comes to the economic impact of pandemics, the costs associated with prevention (a vaccine) could be less than the costs associated with treatment.
Meaning, aside from the obvious impact of keeping people healthy, a COVID-19 vaccine could end up costing individuals and the U.S. government less in the long run. This would be determined by comparing the costs associated with mass vaccine distribution (production of vaccine plus the infrastructure to widely distribute) against the costs associated with caring for infected individuals (unemployment benefits and healthcare costs). On an individual level, again the comparison comes between the cost to receive a vaccine (which may be covered entirely by your insurance) against the costs of becoming infected and symptomatic (loss of work, hospitalization, etc.).
Of course in the context of the economy at large, less money spent on the treatment of people affected both directly and indirectly by the virus means the more money individuals and governments are able to spend elsewhere - thus an indication that a preventative measure for the virus could be a contributing factor in the growth of the country’s economy.
Will There Be a Global Post-Pandemic Spending Spree?
For millions around the world, the past 10 months or so have been fatiguing and isolating. We’ve canceled large celebrations, skipped small gatherings with loved ones, and spent holidays apart. Many of us have opted to postpone vacation plans as we stay close to home. With this potential light at the end of the tunnel, who could really blame citizens around the world for wanting to celebrate?
Does this mean that when life resumes to some sort of post-pandemic “normal” - should we expect to see an economic jump? More spending, more traveling, more vacations - all means more money going back into the economy. While it’s impossible to predict if people will be big spenders once the pandemic has ended, it’s definitely something worth considering and looking out for in the coming months.
In decades past, we’ve developed vaccines to help eradicate diseases such as Mumps, Polio, Influenza, Measles, Whooping Cough, etc. With the development and distribution of a new COVID-19 vaccine on the horizon, citizens around the world could be seeing an end to the pandemic in sight. What does this mean for the economy in the coming months, and even years? A vaccine will allow us to eventually resume work, travel freely, and patronize businesses - all factors that can potentially contribute to a growing and progressing economy. Not to mention the numerous mental positives.
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In good health.
All the best.
Rick Fingerman, CFP®
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.