By:  Michele Wood

May 5, 2020

If you have read the word “unprecedented” an unprecedented number of times in the last few weeks, you are not alone. These are uncharted waters for everyone and across the globe we are all attempting to grasp the magnitude and the implications of what is happening. One way to make sense of new situations is to look at prior events to find patterns. One event that seems especially relevant right now is the Spanish Flu pandemic of 1918.

While that pandemic fell into historical obscurity for mysterious reasons, the last few decades saw a renewed interest in the subject, resulting in a wealth of research. Two published studies in particular help us gauge and–dare I say it?–predict what may lie ahead for us coming out of COVID-19. The two studies each focus on economic impacts of the disease, but in different ways. The first one, “The Economic Effects of the 1918 Influenza Epidemic,” looks at economic growth correlated to mortality. The second study focuses on how non-pharmaceutical interventions adopted by cities affected economic activity following the subsidence of the epidemic. Both give us some clues about the future.

In Study #1, the authors look at the United States from 1919 to 1930 and ask how mortality correlates to economic growth, if at all. It can be read here:

Brainerd, Elizabeth & Siegler, Mark V, 2003. “The Economic Effects of the 1918 Influenza Epidemic,” CEPR Discussion Papers 3791, C.E.P.R. Discussion Papers. (

The Spanish Flu killed between 25 million and 50 million people worldwide and it is estimated that 1 in 3 people on the planet were infected. In the US, approximately 675,000 people died from the flu. That is a large number in any context, but especially large within a total national population of 100 million (compared to the current population of 330 million). What made this epidemic was unusually high mortality for people in prime working age (ages 15-44). This created a “W” mortality pattern, whereas regular seasonal flu strains follow a “U” pattern, primarily affecting the very young and the elderly. The deaths left many families without breadwinners and orphaned countless children, putting a strain not only on businesses lacking labor, but on families and whole communities.

The 2003 study found that the severity of the epidemic was positively correlated with subsequent economic growth in the United States, even after controlling for differences in population density, income per capita, climate geography, and other factors. The authors grimly conclude that “one more death per thousand resulted in an average annual increase in the rate of economic growth over the next ten years of at least 0.2 percent per year” (p. 3). This economic growth, it should be noted, followed a recession caused by the epidemic in 1918 and 1919. The authors also found that flu deaths “among prime-age adults were significant predictors of business failures in 1919 and 1920” (p. 3).

One important distinction that the study makes is that “while prime-age death rate is a significant predictor of business failures…total flu mortality is not” (p.28). This is important as a potential indictor of how to look at the COVID-19 impact. If the disease is not primarily affecting prime-age citizens, it is unlikely to correlate with a rise in business failure. This bodes well for the chances of economic recovery, as so far the mortality trend of COVID-19 has been largely sparing those under 50.

The best news for a speedy economic recovery is this: “states with higher business failures from 1919 to 1921 grew more rapidly thereafter, thus strongly suggesting that at least some of the observed growth from 1919-1921 to 1930 was simply a return to trend following the temporary disruption caused by the flu epidemic” (p. 28). This means that the recovery following the subsidence of the virus, it was a essentially return to the pre-pandemic baseline trend. And this happened in spite of huge population loss due to both WWI and flu deaths.

The second study was just released this March and is currently under peer review. It was conducted by an economist on the Board of Governors of the Federal Reserve System and an economist at the Research and Statistics Group of the Federal Reserve Bank of New York and can be found in its entirety here:

Correia, Sergio and Luck, Stephan and Verner, Emil, Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu (March 30, 2020). Available at SSRN: or

Unlike the 2003 study, this one focuses on correlations between how cities responded to the epidemic and their economic performance following the epidemic. It focuses specifically on “non-pharmaceutical interventions,” or NPIs for short. NPIs back then looked remarkably similar to what we are doing now to combat COVID-19: closing of schools, theaters and churches; bans on public gatherings; quarantining suspected and infected individuals, and restricting business hours.

The impact of such measures was as dramatic to business then at it has been today. They cite a Wall Street Journal excerpt from October 24, 1918:

In some parts of the country [the pandemic] has caused a decrease in production of approximately 50 percent and almost everywhere it has occasioned more or less falling off. The loss of trade which the retail merchants throughout the country have met with has been very large. The impairment of efficiency has also been noticeable. There never has been in the country, so the experts say, so complete domination by an epidemic as has been the case with this one.

Headlines pitting the health of the economy against the health of the people have abounded in recent weeks. Some people are feeling in such economic dire straits that they are defying “stay at home” orders and organizing protests demanding businesses be opened up. Meanwhile, city, state and federal guidelines have been myriad and sometimes contradictory. This mismatch between our desire to understand the virus and the limited knowledge available in these early days has resulted in a flood of misinformation being passed around on various platforms, especially social media sites.

The March study found a positive correlation between a strong and swift application of NPIs in a community and better economic growth in the recovery. Specifically, “those cities that implemented early and extensive NPIs suffered no adverse economic effects over the medium term.” And, “cities that intervened earlier and more aggressively actually experienced a relative increase in real economic activity after the pandemic subsided.”

These two conclusions should give us some comfort. First, the deep economic loss so clearly being seen and felt in each community is likely short term; and second, if your city implemented strong and swift interventions to mitigate spread, you are likely to experience a better increase in activity once we feel that the pandemic is under control. Of course, the pain felt now is likely to continue in the short term, and governments should continue to offer help to individuals, businesses and organizations, especially those serving vulnerable populations. This continuation will be critical in how acute the short term pain is, and how quickly relief is felt from it. Careful, orderly and conservative opening up of industry over the next few months will be important in preventing new outbreaks which may send us back to square one. In the meantime, we can feel good about the investment made in slowing and stopping the spread. History tells us we will see a good return on that.