Economists warn of risk of second COVID-19 wave as reopenings continue

Economists are warning of the rising risk of a second COVID-19 wave in the United States as reopening efforts continue across the nation.

“The re-opening of the economy without a vaccine always presented the obvious risk of a second wave, which is by far the largest risk to a steady economic recovery,” economists at Wells Fargo Securities Economics Group wrote Friday in a report.

“While the U.S. as a whole saw the slowest pace of new case growth since March on Tuesday, it was the very next day that Texas reported its highest one-day total of new cases since the pandemic began. This uptick in case growth has raised concern of a new wave of lockdowns,” the report said.

Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP, noted that COVID-19 cases per capita “are exploding across the South and Southwest.” with Texas now at major risk of a significant wave of infections and Arizona’s medical system at risk of being overwhelmed.

Based on extrapolation of the current rate of infection, the number of cases is likely to approach 2.2 million in the third week of June,” Brusuelas wrote Friday in an analysis.

“We are now concerned that a wave of infections will carry a second round of economic implications.”

Maria Cosma, an associate economist at Moody’s Analytics, warned that cases in the United States could rise to such a degree that national and local governments would re-institute lockdowns.

“This has already happened in several Asian countries, but aggressive quarantines, testing and contact tracing efforts have limited lockdowns to cities and regions, limiting the economic pain as well,” Cosma wrote Friday in a note.

“Even if governments avoid lockdowns, a resurgence of cases could rattle consumers and businesses, stifling demand,” she said.

U.S. Federal Reserve Chairman Jerome Powell also warned that a second wave of COVID-19 infections could hurt public confidence and economic recovery.

“Even if you don’t have a national level pandemic, just a series of local spikes could have the effect of undermining people’s confidence in traveling, in restaurants, and entertainment, anything that involves getting people together in small groups,” Powell said at a virtual press conference Wednesday afternoon. “It would not be a positive development.”