Market Weekly: June 28 – July 5 2020

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Goldman Sachs says a national US mask mandate could potentially substitute for lockdowns

Jan Hatzius, Goldman’s chief economist, said his team investigated the link between face masks and Covid-19 health and economic outcomes.

GS says lockdowns would subtract nearly 5% from GDP. But, wearing masks could substitute.

GS say:

a national mask mandate could cut the daily growth rate of confirmed cases by 1.0pp to 0.6%
face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP

“We start by showing that a national mandate would likely increase face mask usage meaningfully, especially in states such as Florida and Texas where masks remain largely voluntary to date,” the Goldman researchers write in their 11-page report.

Goldman said a national mask mandate could raise the percentage of people who wear masks by 15 percentage points and cut the daily growth rate of cases by 1.0 percentage point to 0.6%.

“We find that face masks are associated with significantly better coronavirus outcomes,” Hatzius wrote in a note to clients. “Our baseline estimate is that a national mandate could raise the percentage of people who wear masks by 15 [percentage points] and cut the daily growth rate of confirmed cases by 1.0 [percentage point] to 0.6%.”

“These calculations imply that a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP,” the economist added.

By Goldman’s estimates, lockdown efforts — both official government restrictions and actual social distancing — earlier this year subtracted 17% from U.S. GDP between January and April. Other countries with even more aggressive restrictions saw even larger economic effects.

Using those results and a target to reduce daily growth rate by 1 percentage point, Goldman Sachs found that a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP.

“If a face mask mandate meaningfully lowers coronavirus infections, it could be valuable not only from a public health perspective but also from an economic perspective because it could substitute for renewed lockdowns that would otherwise hit GDP,” Hatzius wrote.