Hello. I’m Eric Lascelles, the Chief Economist at RBC Global Asset Management.

And in this week’s #MacroMemo we cover off quite a number of subjects, including the latest COVID numbers, how the virus is being transmitted, new social distancing rules, an update on the quest for herd immunity, the latest from schools, and, of course, a run through economic data, including some slicing and dicing from a gender and age perspective. And we also take a look at some long-feared economic headwinds and the extent to which they are or aren’t manifesting.

And so let’s jump in then, and we’ll begin with the COVID numbers. And unfortunately, still seeing quite high numbers of cases globally, and in the developed world, a very clear second wave has formed. It’s more than formed; it’s maybe even peaking in a European context, with even some slight tentative decline in Spain, which has been among the worst affected of European countries.

However, in the likes of the UK and Canada, still very much building. And so the UK having gone from no more than 1,000 cases per day up to 6,000 or 7,000 now. Canada having had a low of around 300 or 400 cases per day across much of the summer, now up to nearly 1,500 cases per day. And so on a very palpably rising trend at this point in time.

And the U.S., unfortunately, which already grappled with its second wave and in fact had started to pull that down ever since late July, its numbers are now beginning to deteriorate again also. And so on a number of fronts, that second or maybe third wave in the U.S. context is very real.

I will say, for those looking for good news in the COVID space, we can say some of the emerging market countries are getting better. India, which has the mostly daily infections, is materially off its highs from roughly a month ago. We can say Brazil, which is in the top three in terms of total cases is also seemingly improving, along with much of Latin America. And so very much some good news embedded as well. But on the aggregate, COVID-19 is becoming, I would say, more challenging, not less, at least in terms of the infection numbers.

Now one subject we’ve been frankly obsessed with is trying to sort out how COVID is actually being transmitted. And is it bad luck, and just walking down the street and someone’s on the sidewalk not too far from you? Or is it more socially interactive sorts of behaviour?

And the answers are still fairly hard to find. And so there isn’t good, perfect answers to this. And the reality is, when you don’t have symptoms for a week, it’s hard to remember what you were doing roughly a week before. And the person who gave it to you might also not have had symptoms at the time. And so, in many cases, it’s actually impossible to sort out where the virus came from. And so the data is incomplete at best.

Nevertheless, there is an interesting but incomplete series in Canada that does make some interesting claims. And so for instance, it finds that the most outbreaks were initially unsurprisingly in long-term care homes and seniors residences, and that remains a significant source of transition, though much less aggressively so than back in March and April.

It seems as though social gatherings, and so I’m supposing barbecues and those sorts of casual, noneconomic activities, have mounted over time as a source of outbreaks, and indeed, was the single greatest source of outbreaks in August. And so this is why we hear a lot about politicians asking people to scale back the personal interactions that are going on. And so that has become quite significant. And then now we do see schools and daycares picking up to some extent. Not taking the lead by any means, though, of course, it’s still the early going, but that’s become something of a vector of transmission as well.

The frustrating thing in that data, though, is it doesn’t tell us anything at all about restaurants and bars and retail stores and grocery stores and the kind of commercial enterprises that might also be a source of transmission, and so it’s only a partial answer.

I can say that as COVID numbers have gotten worse across much of the developed world, we are now seeing new social distancing measures put in place by governments, so this is a necessary step to control the virus, particularly given that colder, drier weather arguably makes it transmit more easily. And as schools are reopened, and that’s a potential new vector for transmission. It means perhaps less social interaction is possible in other venues.

And so far, the emphasis has been on minimizing social private gatherings, and so house parties and barbecues and these kinds of things. And I can understand that focus to the extent that limiting that doesn’t hurt the economy, and so perhaps it’s attractive to policymakers in that sense.

You can also imagine, though, that politicians are reluctant to impose a serious second round of shutdowns in the sense that it’s very costly from a fiscal perspective. It makes them unpopular from a political perspective. And whereas really the March shutdown was just a thunderbolt from out of the blue and no one really knew what was going to happen or saw it coming with much anticipation, we can say this time round, businesses have had a chance to activate and to lobby and this sort of thing, and employees aren’t all that keen on losing their jobs twice perhaps in the span of a year. And so there is greater political pressures as well on them not to shut down as much as they did.

And so, unfortunately, the risk then is that we’re not seeing enough being done. And so we’ve seen some limitations on social interactions. That should help, but that may not be enough. Only now are we starting and grudgingly beginning to see some economic sectors restricted again. And so for instance, in Canada, Quebec now limiting its restaurants and bars more significantly. British Columbia has done something similar.

So we’re starting to see those actions taken. I would argue we probably still haven’t had enough, and so we’re likely going to have to see some more restrictions imposed before these numbers start to come down. And keep in mind, compliance may be worse the second round as well. The first time round, people really didn’t know how deadly this was. It seemed awfully scary. It still is, by the way, but it doesn’t seem quite as frightening, perhaps, as we see lower cases fatality rates. People just unlikely to resort—or to return fully to the kind of behaviour they engaged in March and April of last year.

Now in terms of what that means from an economic standpoint, we think it will take a couple of months probably to pull these numbers back down to more tolerable levels. And as a result, and if the U.S. second wave is any example, it probably means a more limited rate of economic growth over the next few months. And so we’re now budgeting for really the mid-September perhaps to mid-November period being a time of quite muted economic growth, as opposed to the more enthusiastic growth that had previously prevailed. And so it really slows thing down. Doesn’t have to be a recession, though, we don’t think.

We’ve been spending some time on herd immunity data as well. And so we can all look and see the number of infections officially reported in different countries, but there’s a sneaking suspicion that the true number of people who are immune to COVID-19 probably significantly greater. You had asymptomatic people who never knew they were infected, this kind of thing. And we were digging through the U.S. numbers recently, and so officially 2% of the U.S. population has been infected and is theoretically immune going forward. However, serological testing, which is blood testing, looking for antibodies, argues roughly speaking the true number is about three times higher. And so whereas the official number is 2%, might be more like 6%. There’s also another group of people who don’t show antibodies, but some very limited testing argues that their T cells may nevertheless have been exposed and have given them some immunity without developing antibodies. And so, in an optimistic scenario, you might double that number again, maybe as much as 12% of the U.S. population; call it 6 to 12% if you want to be properly safe.

I should say that’s, of course, a challenge in the sense that it tells us how easily the virus spreads. It’s good in the sense that it means we’re getting closer to herd immunity and making it harder for the virus to spread, since many people have already gotten it. However, we’re nowhere near herd immunity. And so if the number is 6 to 12%, that means we’re still 5 to 10 times lower than the 60% of the population that needs to be immune to get the virus to stop completely. So maybe more progress than conventionally imagined, but hardly done at this point in time.

I want to talk for a moment about schools. And so I’m recording this at least at the very tail end of September, and so we’re in a position in which schools in the northern hemisphere have now been open for several weeks. And unsurprisingly, though unfortunately, there are several, in fact significant numbers of cases in schools.

And indeed, we can say that even if schools are not a main source of transmission, we knew in a Canadian context that there would be almost 100 Canadian children per day being infected, unrelated to being infected in schools. And so you would expect dozens if not 100 schools a day to find that there had been a case within their walls and to have to take the necessary remedial actions.

And keep in mind, of course, that there was and there is still transmission between children happening outside of school, related to camps and daycare and sports teams and socializing more generally. And so as it stands right now, I would say it’s bad timing that schools have opened at a moment when COVID-19 was surging across much of the developed world.

The Centre for Disease Control in the U.S. has laid out criteria for when schools might reasonably expect to be open physically versus virtually. And in a Canadian context, most of the criteria are met to open it physically, but that could change. If the number of infections per day roughly doubles from here in Canada, which certainly could happen in the span of just the next few weeks. That would then change the conclusion. And so very much on a knife’s edge right now. Perhaps reasonable to keep them open for the moment, but there is a risk, if this gets much better, that the logical conclusion could change to some extent.

Believe it or not, I am an economist. Let’s talk economic data here. And so Global Purchasing Manager Indices roughly flat in the month of September. And so that is to say consistent with growth but no longer the cheery acceleration that we had before.

We’re looking at U.S. jobless claims quite closely, particularly as real-time data becomes less reliable as seasonal distortions mount and no longer so actively improving. And so let’s acknowledge that the rate of growth is probably slower than it was a few months ago.

And we’ve also been looking at Canadian monthly GDP data, and using it as a proxy for the whole world. Because Canada is one of only a few nations with monthly GDP, industry-based data. We can say a lot about how different sectors have been performing, and it probably looks quite similar across countries. And so we can say, for instance, at its worst, to no one’s surprise, accommodation and foodservices, art, entertainment, and recreation, those were the sectors that were hammered the worst. They were down more than 60 percent at their worst.

Quite a divergence, though, between those two sectors since. We’ve seen a nice recovery in accommodation and foodservices, though far from complete. We’ve seen virtually no recovery in art, entertainment, and recreation.

Then you can turn to things like manufacturing and retail, down more than 30 percent. Manufacturing’s recovered a little more than half of what it lost. Retail, though, has recovered everything; more than what it lost. Though if you break it down into subsectors, you could say department stores haven’t and grocery stores have more than recovered, and all sorts of other slices are possible as well.

And then looking at the sectors that have been most resilient. And for the most part, to no one’s surprise, we can say there really wasn’t much of a drop in public administration, in utilities, in agricultural output, in the finance sector, and in real estate. I’m a bit surprised by the real estate, but that’s a subject we’ve covered in the past.

Let’s talk for a moment about how the recession and the pandemic has hit different demographic groups differently. And so one of the terms that’s been coined recently is she-session in that sense that, historically, most recessions have disproportionately made men lose their jobs to the extent that often the manufacturing and construction sectors are hit quite hard. This time round, actually it was women who lost more jobs. And so it hit disproportionately restaurants and retail and these sorts of things, which are disproportionate employers of women. And so it’s been quite different in that regard.

However, we can actually go beyond that and make other comments. And so you could argue, from an age perspective, it’s very much been a young session, in the sense that young people lost their jobs to a much greater extent than older people, and so it’s skewed very much that way.

And we can also say, of course, we should also care, in a pandemic, about who’s being hurt most by the pandemic itself, as opposed to the economic consequences. And so globally, we can say that, unfortunately, men have been dying more than women. That’s not the case in Canada, by the way, which is interesting and probably merits some more investigation. But in most countries, men have been dying more than women and so it’s been a he-pandemic you might say, to continue the lingo there. And of course, the most powerful demographic trend from an age perspective has been that older people have fared much worse in terms of surviving the pandemic. And so in terms of what you take away from that, it’s sort of hard to say. I guess you can conclude every group is taking its lumps. And so whether it’s men or women, or young or old, from an economic and/or a pandemic perspective, it has been quite a rough go as it stands right now.

And let me finish just with one last little thought here or section. And so we’ve been concerned and nervous about various economic headwinds we expected to start building as time passed, and so beyond the recession itself but not that much beyond. And so far, those haven’t been that bad. It’s not the final word, but so far that U.S. fiscal cliff hasn’t stopped U.S. growth in its tracks.

There are still challenges to come, of course. So far, credit problems haven’t proven to be quite as large as initially feared, though again, the final word is not out on that. And the housing market, which, reasonably, you would’ve thought would’ve been weaker given high unemployment and low immigration, has for the most part held together. And so we’re still watching those headwinds. However, as it stands right now, it’s not proving as problematic as we thought.

And so I guess if I’d give you a conclusion, it would be, the main story right now is quite challenging virus numbers. There is a second wave. The response so far is building but it’s been insufficient, to my eye, to date.

But let’s not say it’s all bad. I’m reasonably confident we will have governments doing what’s necessary, albeit reluctantly. And from an economic standpoint, the economy probably does get to continue growing, and some of the big risks out there haven’t manifested as much as the next few months might be more sluggish.

All right. I thank you so much for your time. I wish you very well with your investing. And please consider tuning in again for our next #MacroMemo.