Pandemic would 'shock' economy

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If a severe flu pandemic hits the United States, federal officials estimate that 90 million people will become ill – and 2 million will die.

In economic terms, the estimates are equally dire: the real gross domestic product could fall by 5 percent the following year, an effect that would be comparable to a “typical business cycle recession.”

“In general terms, certainly specific sectors of the economy will be affected for a long time after the pandemic,” said Tom Zwirlein, professor of finance at the University of Colorado at Colorado Springs. “Tourism is definitely one of those, and in Colorado, 20 percent of our economy comes from tourism. Much of those businesses that rely on flights, hotels and people could be devastated.”

The Congressional Budget Office issued a 44-page report in December outlining the economic effects of a flu pandemic, which many health officials believe to be inevitable. Focus has been on the avian flu, known as H5N1, possibly mutating to allow human-to-human transmission.

“An avian flu pandemic could be thought of as a ‘shock’ to the economy, with both demand- and supply-side effects in the short run. In addition, the pandemic would have longer-term supply side effects,” the report said. “The economic effects would be greater than recent recessions and roughly the same size as the average postwar recession.”

Businesses will have to deal with increased number of sick employees, said Rosemary Bakes-Martin, public health administrator for the El Paso County Department of Health and Environment.

Assumed declines in demand

Wholesale trade
Retail trade
10% Decline
67% Decline
Food service
80% Decline
Health care 15% Increase
(Note: this scenario describes a pandemic that is similar to the 1918-19 Spanish flu outbreak. It incorporates the assumption that a particularly virulent strain of influenza infects roughly 90 million people in the United States and kills more than 2 million of them.)
Source: Congressional Budget Office

“They may have to be part of a community effort to help people who are at home, dealing with sick family members,” she said. “For instance, grocery stores might consider increasing their delivery services, while businesses might have to curtail their business to keep from spreading disease.”

One sector would remain robust: medical services. Others, such as international travel would dramatically decline. Experts cite the Severe Acute Respiratory Syndrome outbreak in April 2003, when flights to Hong Kong declined by two-thirds in a single month.

The military, another large sector of Colorado economy, could be affected as well, Zwirlein said. Troop movements could be limited, as the flu spreads across the world, and defense contracts could stall or be cancelled completely.

Much of the report from the CBO is based on the effects of other pandemics. Officials caution that the avian flu has not yet shifted to humans, and medical experts say there is no way to tell if – or when – it will. The government’s best efforts should include supporting international organizations and building stockpiles of vaccines, the CBO said.

“A promising federal object of attention is support for the efforts of governments of other countries and international organizations to contain avian influenza strains and control their evolution to diseases that are easily transmitted from person to person,” the CBO report said. “Federal policies may also be effective in building stockpiles of vaccines and improving antiviral drugs, as well as putting in place new technologies that allow effective vaccines to be produced more rapidly, and in large quantities.”

H5N1 is the virus most experts are concerned about, because it has “fulfilled two of the three prerequisites for a pandemic,” said the CBO report. The strain is a new virus, for which there is little or no natural immunity; and it has the ability to replicate in humans and cause illness or death. The third prerequisite is the ability to be transmitted efficiently from human to human.

All influenza viruses evolve over time, said Secretary of Health and Human Services Mike Leavitt in a March 6 statement.

“Changes of common and seasonal influenza are monitored and each year, vaccine manufacturers develop and produce updated vaccines based on these changes,” he said. “Just like the seasonal strains of flu, H5N1 has evolved, and a second distinct version now exists. This strain is now circulating Europe, Africa and parts of Asia.”

The Department of Health and Human Services has created a vaccine for the first version, and has let a contract to develop nearly 8 million doses of the vaccination.

“It is probable that H5N1 will continue to evolve, producing even more viruses with pandemic potential and making it necessary to develop a series of vaccines,” Leavitt said. “There is simply no way to predict which strain, if any, might produce a virus capable of human-to-human transmission.”

Currently, the avian flu is not transmitted from one person to another – only people in direct contact with infected birds contract the disease.

“We are overdue for a pandemic,” Bakes-Martin said. “That’s why everyone is keeping an eye on the avian flu. But although it could turn into a pandemic, it isn’t one at this point. And although we will likely see birds with avian flu in this country, it doesn’t mean that people are going to get it. We just need to be prepared for all the possibilities.”

If the avian flu mutates to a form that infects humans, the results could look like something out of a science fiction movie, Zwirlein said.

“It could have a real damaging effect on the work force,” he said. “But it would have a more damaging effect on consumption. Consumer spending is about two-thirds of our economy. If people start staying away from retail activities, food and beverage spots, movies, malls, sporting events – it could really stall the economy.”

Even worse, if thousands of people die from the disease, government officials could insist that people stay at home to keep the flu from spreading farther and faster, he said. Work in every economic sector would come to a standstill, and it could take years for individual incomes to recover.

Bakes-Martin said that companies should consider ways for employees to work from their homes and should develop liberal sick leave policies for implementation during a pandemic.

“During the 1970s Hong Kong flu pandemic, people were encouraged to stay home if they were sick,” she said. “And that’s what we need to say today, to keep it from spreading. Other companies should band together, such as trash pick-up services, to make sure certain necessary services are still completed.”

The CBO concurs, noting that “social contact would be sharply cut, which would lead to significant declines in retail trade. People would avoid public places … attendance at theaters, sporting events, museums and restaurants would decline. It seems likely that many schools would close, and even if they did not, attendance would fall dramatically as parents kept their children at home.”

Nationally, the economy has shown a remarkable ability to recover from disasters, both natural and manmade, Zwirlein said. Despite high unemployment rates after the 2005 hurricanes struck the Gulf Coast, and the crash of the stock market after Sept. 11, 2001, the U.S. economy rebounded.

“We are very resilient as a nation,” he said. “And if the flu hits only one specific part of the country, the economy could recover quickly in the rest of the country.”

Bird flu has not yet infected birds in the United States, but has resulted in thousands of poultry flocks being culled in Asian countries. The disease has spread to European domestic poultry flocks, and can be transmitted to cats.

According to the Centers for Disease Control, 178 people have been infected with the virus since 2003, and 98 have died. Each person came into direct contact with infected birds. In the United States, health officials expect the virus to infect birds as early as this year, when spring migration routes bring birds that winter in Asia to the United States.

Pandemic Checklist for Business

  • Identify a pandemic coordinator for preparedness and response planning
  • Identify essential employees required to maintain business operations
    by location and function.
  • Develop and plan for scenarios likely to result in an increase or decrease
    in demand for products and/or services
  • Determine potential impact of pandemic on company business financials
  • Determine potential impact of a pandemic on business-related domestic
    and international travel
  • Find up-to-date, reliable information from community public health, emergency
    management and other sources.
  • Establish an emergency communications plan.
  • Implement an exercise/drill to test the plan.
  • Forecast and allow for employee absences during a pandemic, due to personal
    illness, family member illness, community containment measures and quarantines,
    school and business closures, public transportation closures.
  • Implement guides to modify frequency and type of face-to-face contact
    among employees and between employees and customers.
  • Encourage and track annual influenza vaccination for employees.
  • Evaluate employee access to and availability of health care services
    during a pandemic, and improve services as needed.
  • Evaluate employee access to and availability of mental health and social
    services during a pandemic, including corporate, community and faith-based
  • Identify employees and key customers with special needs, and incorporate
    the requirements of such persons into your preparedness plan.
  • Establish employee compensation and sick-leave absences unique to a pandemic,
    including policies about when a previously ill person is no longer infectious
    and can return to work.
  • Establish policies for flexible worksite (telecommuting) and flexible
    work hours
  • Establish policies to prevent influenza spread at work.
  • Establish policies for employees who have been exposed to pandemic influenza,
    are suspected to be ill or become ill at work.
  • Establish policies for restricting travel to affected areas.
  • Set up authorities, triggers and procedures for activating and terminating
    the company’s response plan.
  • Provide sufficient and accessible infection control supplies
  • Enhance communications and information technology infrastructures as
    needed to support employee telecommuting and remote customer access.
  • Ensure availability of medical consultation and advice for emergency
  • Develop programs and materials covering pandemic fundamentals
  • Anticipate employee fear and anxiety, plan communications appropriately.
  • Disseminate information about pandemic preparedness and response.
  • Provide information for the at-home care of ill employees and family
  • Develop platforms for communicating pandemic status and actions to employees,
    vendors, suppliers and customers inside and outside the worksite in a
    consistent and timely way.
  • Identify community sources for timely and accurate pandemic information
    and resources for obtaining counter-measures.

Courtesy of – a government Web site set up to explain and track possibility of pandemic flu