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Vermont Is a Vaccination Star. Why Cases Are Rising There, and What It Means for Investors.

Call it the Vermont Problem: Why are daily Covid-19 case counts doubling in New England states with vaccination rates that top 70%, and what does it say about the winter to come?

Of all the states, Vermont has weathered the pandemic most successfully so far, with the lowest death count and the highest rates both of fully vaccinated people and of those who have received a booster.

And yet new cases of Covid-19 have climbed sharply in Vermont in recent weeks. The state was averaging about 200 new cases a day through October. By late November, that number was closer to 350.

The situation is similar to nearby Connecticut, Rhode Island, and Massachusetts, all of which have vaccination rates of 71% or 72%, and all of which have seen their average number of new daily cases roughly double recently.

The surges in these well protected states are sparking fears of another dark pandemic winter in the U.S., as the coming cold weather pushes people inside and drives up transmission of the virus. Already across the Atlantic, new shutdowns are in place in Austria and the Netherlands, rendering Europe’s economic recovery even more shaky.

Investors have been anxious in recent weeks, and the

S&P 500

index has stalled since early November, after climbing 7% in October.

The good news for the U.S. economy is that high vaccination rates mean that a winter surge here won’t bring lockdowns. Still, a rise in cases will probably cut into travel, spending, and hiring, and cause economic disruptions after the holiday season.

“It is very possible that we see some slowdown in services spending over the next month or two if cases keep rising,” says Brett Ryan, senior U.S. economist at Deutsche Bank. “If it gets severe enough, it just slows the recovery down, and really slows the recovery down in services, and just causes disruptions to everything because of child care.”

The winter wave, if it comes, won’t look like earlier pandemic waves. While the pandemic is not over, and deaths among the unvaccinated and some vulnerable groups of vaccinated people will continue to accumulate, rising case counts don’t mean what they did months ago. That is contingent on no major changes disrupting the course of the pandemic.

One such potential change emerged on Thanksgiving Day in the U.S., when global health authorities became concerned about a new variant of the virus identified in southern Africa. It’s too early to tell what the implications of the variant might be, but stocks fell Friday amid concerns that the variant could pose a renewed threat, and some nations instituted new travel bans.

“I do not anticipate that there is either the political will or even the need for anything close to a shutdown again,” says Dr. Howard Forman, a professor at the Yale School of Public Health and the Yale School of Medicine, speaking before Thanksgiving. “It would be hard for me to imagine that the pandemic will affect economic activity to anywhere near the same degree as we’ve seen before, but could we get 200,000, even 300,000 deaths before summer? Very possible. And that should concern people.”

A look at the data from states like Vermont and Connecticut suggests that what’s happening in the Northeast is a surge that’s heavily concentrated among the unvaccinated.

“We have a highly vaccinated population here,” acknowledges Dr. Jan Carney, associate dean for public health and health policy at the Larner College of Medicine at the University of Vermont. But that doesn’t mean, Carney says, that everyone in the state is vaccinated. “It varies by county, and it varies by age,” she says.

As of Nov. 23, more than 95% of Vermonters ages 65 and above were fully vaccinated, and the average number of new cases reported a day in the state for that age group is actually down 14% over the past week. Meanwhile, cases are up 13% for people ages 25 to 49; for adults in Vermont ages 22 to 29, the vaccination rate is just 62.8%.

Even more striking, Covid-19 hospitalizations in Vermont are up 25% over the past week for those not fully vaccinated, and down 23% over the past week for the fully vaccinated.

The story is similar in Maine, where new cases aren’t up as sharply as in some states in the Northeast, but where hospitalizations have jumped 29% over the past two weeks, according to New York Times data.

“Hospitals continue to tell us that 60% to 70% of their patients are not fully vaccinated,” says Robert Long, communications director for the Maine Center for Disease Control and Prevention.

Overall hospitalization rates have begun to tick up in the Northeast, with the average number of people hospitalized in Vermont for Covid-19 climbing 17% from Nov. 16 to Nov. 23, but it’s nothing like in the Upper Midwest. Michigan, which has a vaccination rate of 54%, now has the highest Covid-19 hospitalization rate in the U.S., and the state’s governor has asked the federal government for emergency help from the U.S. military to keep its hospitals running.

Most states have higher vaccination rates than Michigan, and vaccination rates continue to rise as vaccine authorizations expand to include younger children. For much of the country, large economic disruptions are unlikely. “What I do think is you’re going to get back to situations where mandatory masking indoors becomes much more the rule of the day,” Forman says.

Deutsche Bank’s Ryan compares what’s coming to the dip late last summer as the Delta wave struck. “You saw hiring slow, and that, I think, is the risk,” he says.

Hard-to-predict follow-on effects of the pandemic, meanwhile, will continue to accumulate. Take

(ticker: MDT) recent sales miss in the second quarter of its fiscal year, for which the company blamed in part a shortage of nurses. Medtronic’s CEO, Geoff Martha, attributed the shortage to burnouts and early retirements. “During the height of Covid, the ICU beds were full with Covid patients,” Martha told Barron’s. “That’s not the case now, but they don’t have enough ICU nurses.”

The Covid-19 pandemic isn’t going to end; rather, it will peter out as it shifts to an endemic phase. The likely winter surge is a step toward that future, when the virus continues to have an impact on economic activity by hitting certain sectors, and certain geographies, harder than others, but isn’t as catastrophic as it was in earlier periods.

Write to Josh Nathan-Kazis at [email protected]