- The pace of daily U.S. vaccinations has steadily declined from a peak of 4.3 million to below 1 million. We believe that will likely stay depressed, as most eligible Americans who want a vaccine have already received one.
- We project the U.S. has more than enough doses to vaccinate the entire population by the end of July, with additional vaccine approvals likely. However, this does not account for the potential need for a third dose/booster shot.
- The timeline for U.S. herd immunity (70% of the population) is slipping later into 2021. Vaccination rates may increase on further approvals for children and for the back-to-school season, but it looks like the U.S. will reach herd immunity closer to late September/October instead of our original projection of late August/September.
- Despite the significant slowdown in vaccination rates, S&P Global's economic projections are unchanged and no longer depend on achieving herd immunity. With about 52% of Americans 12 and older vaccinated, and rates of infection steadily falling, businesses are reopening more quickly. We expect the economy to strengthen further this year.
No Herd Immunity, No Problem
The supply of COVID-19 vaccines from Pfizer Inc., Moderna Inc., and Johnson & Johnson is expected to be more than sufficient to cover all 330 million Americans (including children) by the end of July. Now the focus shifts from production and logistics to promoting vaccinations to the hesitant. Daily vaccinations in the U.S. declined from their peak of over 4.3 million on April 1 to a seven-day average of below 900,000 on June 3 (chart 1). Current vaccination trends indicate the U.S. is unlikely to achieve the targeted 70% vaccination rate for herd immunity by late summer. Multiple media outlets doubt the country will reach President Joe Biden's goal of 70% of adults receiving one shot by July 4, despite 65% of those 18 and older already having done so, given that vaccines are now readily available.
We believe that economic reopening at this point has largely decoupled from vaccination efforts because those most concerned with COVID-19 have been vaccinated and those unvaccinated are largely less concerned about the virus. We no longer believe recovery of the U.S. economy hinges on achieving herd immunity.
While another spike in cases is possible (chart 2), particularly from the Delta variant, we do not view that as a significant risk to economic recovery. Assuming vaccines remain highly effective at reducing severe illness and death from new variants, we expect availability--and a corresponding change in sentiment toward vaccines--will significantly reduce the severity and duration of potential spikes.
With the U.S. Centers for Disease Control and Prevention no longer recommending masks for children outdoors, we expect the upcoming school year to spark a surge in vaccination among children. This is on the condition of regulatory approvals for the vaccination of children younger than 12. While some private schools and colleges have announced vaccine mandates, we believe it is unlikely public schools will widely adopt such measures, since changes to vaccine requirements require legislature approval in most states. We expect that by the fall--but not before September--vaccines will be available for all school-age children (5-12). By the start of 2022, vaccines may be available for children 6 months and older.
In a slightly older demographic, hundreds of colleges and universities across 35 states and the District of Columbia have mandated vaccines for in-person learning in the fall. Many others will add the requirement once a vaccine receives full U.S. Food and Drug Administration approval, expected by the end of the year. These schools are still a significant minority, however.
The significance of children being eligible for vaccines is profound on the economy and returning to work. Parents, teachers, and administrators reluctant to attend school in person can return with the peace of mind from being vaccinated. We expect this could contribute to a substantial return to the labor force, which may ease some challenges in the economy including wage pressures and labor shortages. But note that increased labor force participation may drag on the unemployment rate.
That said, restrictions are easing and activities constrained because of the pandemic are resuming, supporting a strong economic recovery. Additionally, vaccine approvals for children seem only a few months away, providing hope for the largest involuntarily unvaccinated group of the population. Therefore, we don't view herd immunity as a necessary condition for full economic recovery. This is a credit-positive broadly across the health care sector. We expect specialty pharmaceutical companies will benefit from new patient referrals. We expect medical services to benefit from normalizing patient volumes and pent-up demand from elective procedures. This in turn should contribute to a resumption of domestic medical device purchasing. We also believe the industry is positioned to benefit from additional labor supply--or at least be insulated somewhat from labor pressures--as nurses and caregivers who left during the pandemic may return to work.
Most Restrictions Are Likely Lifting Permanently
At all levels of the economy, we expect restrictions--both public and private--will continue to ease and much harder to reimplement. In March and April 2020, concerns about capacity within hospital systems and attempting to protect the most vulnerable segments of society from the virus were primary drivers of shutdowns and travel restrictions. With daily infections, hospitalizations, and deaths all lower than in the last 12 months (charts 3 and 4) and the summer heat helping to slow the virus' spread, it is reasonable to expect reopening will proceed uninterrupted into the fall. Even with vaccination rates seemingly stalled, most at risk to the virus are those who have elected not to be vaccinated. Although many immunocompromised individuals may be unable to receive a vaccine or solicit a sufficient immune response from vaccines, this subset of the population appears too small to continue affecting public policy. Other than this high-risk group, the virus will disproportionately affect the unvaccinated. (Not all unvaccinated groups are of equal risk. Children and young adults, for example, generally face limited risks.)
Many states, particularly those in the South, have vaccination rates well below the national average. This is cause for concern about a potential community or regional resurgence of the virus, particularly resulting from a mutated strand. These are mitigated by the availability of COVID-19 tests, vaccines, and the ability to isolate incidents. While the summer heat will abate and new variants will continue to spread, particularly as global travel normalizes, the risk to reversing reopening trends seems low. Vaccinated individuals would be less likely to be seriously ill, which will ensure hospital systems have capacity. We assume that even if a vaccine booster is needed, adoption rates will be similar and supply will continue to exceed demand. We also expect these vaccines and/or boosters will protect against new variants.
Although we expect mask mandates and testing to continue or reintroduced in some settings, including schools, hospitals, and the transportation industry, we see little risk that government mandates will be more severe.
Natural Immunity Provides Some Help
While about 70% of the country may be vaccinated, it is important to note that rate has always been toward the low range of estimates for herd immunity. Tim Spector of Kings College London says over 95% of the population needs antibodies against the super-transmissible Delta variant. Partial vaccination and natural immunity provide some measure of immunity that meaningfully contributes to herd immunity. In fact, Canada's public health response hinges largely--albeit temporarily--on the effectiveness of a single shot.
With over 10% of the population having tested positive for COVID-19 and estimates that well over 20% has contracted it, a larger percentage has some level of immunity. The limits of natural immunity, however, are highlighted by the devastation in India. Despite positivity rates well above 50% in Mumbai's slums in summer 2020, new variants have led to infection and death rates that greatly exceed 2020 peaks. Immunity induced from vaccines has been touted as more durable and resistant to multiple strains, according to Dr. Ashish Jha, dean of the Brown University School of Public Health. Still, at both the individual and community levels, there are some benefits to herd immunity from individuals who have contracted the virus.
Given the clear trends in terms of vaccinations, infections, hospitalizations, and deaths, as well as the uniform directional movements toward reopening the economy, we no longer believe the U.S. economic recovery depends on achieving herd immunity to COVID-19. Instead, we believe current vaccine supplies in combination with additional approvals for children, easing of restrictions, and natural immunity will allow full economic recovery in the fall, barring significant evolution of vaccine-resistant strands.
- The Health Care Credit Beat: COVID-19 Vaccine--Patent Waivers, Falling U.S. Shot Rates, And Thoughts On Potential Pharma Ratings Upside, May 26, 2021
- EU's Vaccine Supply Boost Will Aid The Race Against COVID Mutations, April 28, 2021
- The Health Care Credit Beat: U.S. Herd Immunity By Midyear Is Possible With Additional Vaccine Approvals, Feb. 11, 2021
- EU Could Meet 70% Vaccination Target By Late July If Production Steps Up, Feb. 11, 2021
- COVID-19 May Accelerate Disruption In The Global Vaccine Market, Aug. 3, 2020
- What Does Pharma’s Quest For A COVID-19 Vaccine Mean For Its Credit Quality And ESG Profile?, July 8, 2020
This report does not constitute a rating action.
|Primary Credit Analyst:||Patrick Bell, New York (1) 212-438-2082;|
|Secondary Contacts:||Arthur C Wong, Toronto + 1 (416) 507 2561;|
|David A Kaplan, CFA, New York + 1 (212) 438 5649;|
|Tulip Lim, New York + 1 (212) 438 4061;|
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: email@example.com.