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The geography of COVID-19

admin | April 24, 2020

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.

As a few states begin to cautiously reopen their economy, an examination of how states are faring with the COVID-19 virus should provide a helpful guide to which ones are likely to lead the way out of the downturn and which ones will have to stay locked down for a while longer. In general, the situation is worst in states along the East Coast from the D.C. area to Boston, while the South and West have generally fared better.

State-by-state data

There are various metrics that offer insight into the incidence of COVID-19, but two stand out: active cases and current hospitalizations, with both scaled by population. These measures should provide a solid picture of which states have been hard hit and are under substantial stress and which have had a lighter burden.

Active cases. With the exceptions of Louisiana and Michigan, which reflect the hot spots in New Orleans and Detroit, the 10 states with the highest incidence of COVID-19 lay entirely along the Acela Corridor from D.C. to Boston (Exhibit 1). Only Maryland along that path escaped the Top 10, and just barely, ranked 12 and rising fast.

Exhibit 1: Top 10 States for active cases relative to population

Source: Worldometers.

At the bottom of the list, most of the states have low population density and are located in the West or South (Exhibit 2).

Exhibit 2: Bottom 10 states for active cases relative to population

Source: Worldometers.

Hospitalizations. One of the primary difficulties with relying on data related to cases is that they depend on the aggressiveness of testing, which varies widely by state. It is possible that some of the states with low case figures are just not testing very much and are missing a lot of the people who have COVID but are not seriously ill. One way around that is to focus instead on hospitalizations. Anyone showing up at a hospital is clearly seriously ill, so comparing hospitalization rates by state can offer a cleaner read on how severely the state has been hit. One could also look at deaths, but there is fairly wide dispersion on the definitions states are using to define what is and is not a COVID-related death.

Another advantage of looking at hospitalizations as opposed to total cases is that it offers a direct gauge of how severely stressed the state’s health care system may be. One of the indicators that the federal government’s guidelines for reopening offers to begin the process is sufficient spare hospital capacity to handle a surge in cases. The Johns Hopkins web site, from which I gathered the hospitalizations data, did not have figures for Indiana, Nevada, or Nebraska.

Among the top states for hospitalization rates, there is still a heavy Northeast flavor (Exhibit 3). Compared to active cases, Maryland jumps into the Top 10 and Delaware falls out. Note #8. Some have questioned Georgia’s aggressive reopening strategy, and the relatively high incidence of hospitalizations certainly suggests that Georgia is not necessarily the ideal candidate to try that approach. It is further worth noting that the Governor of Colorado is also allowing some reopening of stores next week, but his orders are superseded by stricter guidelines in the city of Denver, and the bulk of cases in Colorado are clustered in Denver and surrounding counties.

Exhibit 3: Top 10 states for hospitalizations relative to population

Source: Worldometers, Johns Hopkins University.

In the Bottom 10 for hospitalization rates, again there is a heavy representation for more rural states (Exhibit 4). Several states in the Midwest made the list. Texas is a noteworthy entrant, as a large state and one that is poised to ease its lockdown restrictions. Take note of #8. After being one of the first hot spots when the virus began to spread in the U.S., Washington was able to tamp down the virus effectively and is now in good shape.

Exhibit 4: Bottom 10 states for hospitalizations relative to population

Source: Worldometers, Johns Hopkins University.

Reopening begins

A number of states are beginning to announce schedules for loosening economic restrictions. Seven states never implemented stay-at-home orders, though all of them did restrict activity to some degree. They are Arkansas, Iowa, Nebraska, North Dakota, South Dakota, Utah, and Wyoming. Note that a few of these states appear in the Bottom 10 lists above but not to the degree that you might expect. Their rankings for hospitalizations per capita are: AR #34, IA #39, NE n/a, ND #40, SD #28, UT #37, and WY #38. So while they are not at the bottom, they are all comfortably in the bottom half. Another common thread for these seven states is that all of the governors are Republicans, and believe philosophically in a decentralized approach.

That theme also holds for many of the states that have begun to announce relaxation of previous restrictions. Some of the states that have begun to implement looser restrictions, along with rankings for per capita hospitalizations, are: Florida #18, Georgia #8, South Carolina #21, and Tennessee #32 in the Southeast, as well as Texas #42, Montana #44, Minnesota #31, and Colorado #9. All of those states except the last two have Republican governors. Minnesota’s changes were extremely modest, allowing some outdoor activities. Colorado Governor Polis is an interesting case because he is the only Democratic governor who is considering a broad reopening, though as noted above, not for the major city in the state, Denver, where the vast majority of the state’s cases have been concentrated.

A number of states have stay-at-home orders that expire April 30, so there may be numerous states that begin to alter their rules over the next week or so. For example, Ohio Governor DeWine, a Republican, is planning to make an announcement on Monday.

While the incidence of the virus certainly has played an important role in shaping which states are likely to remain locked down well into May, there also appears to be a clear difference in political philosophy as well, as many Republican governors appear willing to open up earlier, even if it is a little risky, while most Democratic governors so far have preferred to play it safe and remain closed well into May.

These geographic differences will be important, as states that open up more quickly could see an earlier improvement in key variables like employment, consumer spending, and mortgage delinquencies. Of course, that assumes that the reopenings can be managed effectively and do not result in a need to shut down again if the virus spreads too much once activity picks up.

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