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Shortest Track
 
July 31, 2020
 
A Weekly Update

If you're anything like us, you're probably starting to wonder if we're seeing the beginning of the End of Days. The recent protests over Black Lives Matter have been overshadowed by news that new COVID-19 cases country-wide have increased by 50,000 in the one single day.

We have the utmost sympathy for Texas, which has had to slam the brakes on its grand reopening as a result of recording over 8,000 new cases in one day.

This put a dampener on the new found optimism last month; recent jobs data painted a rosy picture, with initial unemployment claims dropping to 1.5 million.

However, the economic outlook was less optimistic, with the Dow Jones losing 1,500 points in the second week of June. This was driven by rising Covid-19 infection rates with cases spiking in 21 states.

The Dow has ended the month where it started, but the tech-weighted NASDAQ is showing strong growth. This is a clear indicator that investors are looking to place their money in tech as a solution to the crisis.

For us in the US, this has been a bitter pill to swallow while we continue to watch cases in Europe decline and the continent gradually reopen.  

We're not alone, however. Cases in South Africa have yet to peak, and Namibia and Botswana are in the foothills of a very long climb.

China, in an effort to restart its previously stalled economy, has shifted its focus to steel. Data analysis has highlighted that China is currently on course to dominate global steel production to an even greater extent than before, accelerating a trend that has gathered pace for more than half a century. We think this is one of many fundamental structural shifts that will occur.

In the US, with no overall consensus on how the virus is developing, reopening, planning and forecasting all present a challenge.

It’s hard to think about where business is headed when surveys show that 8 out of 10 Americans think the country is out of control.

Sound familiar?

An announcement by the World Bank earlier this month forecast a 5.2 percent drop in GDP in 2020, using market exchange rate weights — the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.

As we have been talking to businesses it certainly feels worse than that.

We certainly have struggled as a data science team trying to measure ‘out of control’. There are a number of ways to think about it. Financial services think of ‘out of control’ as market volatility. Electrical engineers think about ‘out of control’ as the dynamical systems seen when observing the behavior of electrons.

Many of the business people we are talking to feel like electrons operating randomly. We had a conversation with an alcohol brand that was amazed at their massive increase in sales. While some could be attributed to home deliveries from those sheltering in place, the sheer increase in sales volume was actually a matter for concern.

Who would have put that in an analytic model?  While the increased sales were obviously welcome, the brand owners were concerned by the lack of control and analytical oversight they had over these developments. After all, if you can't measure it, how can you control it?

This week, our COVID Disruption Index overall showed an upward trend. This is the third week running, and a continuation of an ongoing trend since the beginning of the crisis.

We saw some specific disruption in the Northeast. Looking at the signals in the index, the reasons were increases in unemployment.

One thing is for certain: reopening the country is a balancing act.

If you run a business, it's important to know when, and how, you can hit the ground running on reopening. Right now, it's easy for business owners to feel powerless, so we'd like to show you the light at the end of the tunnel.

Take the worst affected counties in Michigan: Wayne, Macomb and Oakland. Forming one of the economic powerhouses of the Midwest, the greater Detroit area has been hit hard by coronavirus. This is to be expected considering the population density, but what is surprising is the level to which businesses have been able to adapt. With 23,206 confirmed cases in Wayne county alone, far above the national average, our index shows that business disruption has remained only slightly above average.

This is owed to Detroit’s position as a center for life sciences, automobile production and advanced manufacturing. These employees were brought back to work in the beginning of May, and the technological expertise that drives Detroit's industry has been extended to preparing them for a safe return. For large industries with the technological resources and economies of scale, introducing distancing measures, employee health screening and testing has been relatively easy.

However, with unemployment claims rising to 21.3 per 100 in Wayne County alone, the greater Detroit area isn't yet back to work. The stay-at-home order still stands in Michigan, and smaller businesses face significant challenges to adapt upon reopening. Even factoring in stimulus payments, greater Michigan has suffered: hourly-paid employees across the state have decreased by a massive 47.7 percent. This shows that the economic recovery is skewed towards large-scale manufacturing in the Detroit area.

However, there are positive signs for a resurgence for smaller businesses: consumer spending access the state has responded to stimulus payments and has only dropped by 5.9 percent since the beginning of the crisis. (www.tracktherecovery.org)

 If you're a small business owner, take heart: we're all building the plane on the way down right now. What our data analysis shows is that there's a way out of this. Uncertainty is going to be with us for a while, but if we can keep going during increasing disruption, we can beat this.
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