How Johnson & Johnson’s vaccine pause could slow the economic recovery

Economic turnaround hopes are strongly tied to the vaccine rollout around the globe — so a new concern over the Johnson & Johnson Covid-19 vaccine was just about the last thing the recovery needed.

US regulators recommended pausing the use of J&J’s one-dose shot in the United States, and the company temporarily stopped usage of hte vaccine in the European Union. They cited six reported US cases of a “rare and severe” type of blood clot among more than 6.8 million doses administered.

That’s less than a one-in-a-million. But the fear and uncertainty it could induce have a damaging effect on the public’s willingness to get vaccinated, potentially prolonging the pandemic.

If not enough people are vaccinated, it could lead to a new surge in cases and affect consumers’ willingness to resume “normal” activities needed to get the economy fully functioning at pre-pandemic levels. J&J’s vaccine was considered important to certain aspects of America’s overall distribution strategy.

“There is a clear connection — in fact we’ve said this from the beginning, and so has [Federal Reserve Chairman Jerome] Powell — between controlling the virus, distributing the vaccine, and a robust and lasting economic recovery,” said Jared Bernstein, one of three members of the White House Council of Economic Advisers, in an interview Tuesday on CNBC.

“The recovery is very much a function of people feeling and being willing to reengage with commerce,” he added.

If the problems with the J&J vaccine drag on, it could feed uncertainty for US businesses, who are in the process of making decisions about when to ramp up operations that were partly or totally shut by the pandemic, and whether to invest in equipment and inventory and hire the staff they’ll need.

But, so far, Wall Street investors aren’t expecting that kind of pullback. The S&P 500 set a record Tuesday and was poised for a new record Wednesday.

Feeding the problem of vaccine hesitancy

Beyond the economic impact of a potential slowdown in the vaccination rate, the administration’s public health officials acknowledged they were already concerned about “vaccine hesitancy” even before Tuesday’s action.

Dr. Anthony Fauci said the question of whether this action will make people suspicious of vaccines in general is “one that we’re are all, obviously, aware of.” But he stressed there have been no reports of blood clots caused by the other two vaccines approved for US use, from Pfizer and Moderna.

“If anyone’s got a doubt that they may not be taking safety very seriously, I think this is an affirmation that safety is a primary consideration when it comes to the FDA and the CDC,” Fauci told CNN Wednesday. “That’s why it was done and that’s why it’s a pause. It isn’t a cancellation, it’s a pause.”

Still, the White House acknowledged that it could struggle with doubters.

“Look, hesitancy amongst a group of people is a challenge, and we need to be addressing it,” said Jeff Zients, the administration’s Covid-19 response coordinator.

No one is yet suggesting that the J&J vaccine will have to be halted indefinitely.

A similar vaccine from Oxford University and AstraZeneca, which has yet to be approved for US use, was briefly pulled from use in most of Europe in March due to reports of similar blood clot issues. It’s been widely resumed, albeit with restrictions on use in some countries.

But the temporary pause has fed vaccine hesitancy there.

An online poll conducted March 15 to 16 for BFM TV, a CNN affiliate, suggests that only 20% of the French people surveyed trust the Oxford-AstraZeneca vaccine. Even if the J&J vaccine returns to use within days, which Fauci suggested Tuesday was a possibility, some people may be hesitant to take it.

Large, but not unlimited supply, of other vaccines

The good news is that the overwhelming majority of doses now available in the United States come from Pfizer and Moderna. More than 110 million people in the United States have received at least one dose of one of those vaccines, compared to less than 7 million who received the J&J vaccine.

Zients said Tuesday there is enough supply of the Pfizer and Moderna vaccines to meet the administration’s goal of 200 million people getting their first shot in Biden’s first 100 days in office.

“The vaccine supply has become more abundant over time,” said Dr. Peter Marks, Director FDA Center for Biologics Evaluation and Research, at a press conference Tuesday. “This temporary pause hopefully will not have an adverse effect on making those goals in a timely manner, if any at all.”

Still, the J&J vaccine is hardly a minor or niche product, and the pause could affect the vaccine rollout. The company committed to delivering 100 million of its one-shot doses to the US government by May, which would be enough to fully vaccinate more than a third of US adults.

With production of the vaccine continuing, for now at least, that figure is still on track to rise to 188 million US doses by the end of the year, according to science analytics firm Airfinity.

Getting enough Americans vaccinated to create “herd immunity” and end the pandemic is possible even without the J&J doses, although it would be more difficult, said Matt Linley, senior analyst at the firm.

“It’s good to have a broader supply. And having a single-dose vaccine takes away all the logistical issues with a two-dose vaccine of getting people back for a second shot,” he said.

It will also take longer to have enough vaccine for all US adults — the population for which vaccine use is currently approved — if the J&J vaccine can’t return.

Airfinity estimates that with all three vaccines, there could be enough US supply to vaccinate 285 million people by end of August. With only Pfizer and Moderna, it would likely be sometime in December to reach that target.

The global view

While there are plenty of concerns stateside, economists are particularly worried about the impact that a J&J pause could have outside the United States.

J&J said it intends to deliver 1 billion doses worldwide by the end of the year. It was expected to be a major part of the global vaccine solution.

Unlike Pfizer and Moderna, J&J’s shot doesn’t require ultra-cold storage — nor do patients have to return for a second appointment, making it the vaccine that public health experts expected would be crucial to fighting the pandemic in much of the developing world.

And if it takes longer than expected to turn back the pandemic in much of the developed world, that is only going be bad news for the US economy.

Not only will the United States now find weaker markets for its goods and services in many of those countries, but those countries could have trouble supplying US consumers with the products they want, and disrupt global supply chains upon which US businesses depend.

“The emerging world that is getting crushed by the pandemic is about half the world’s economy,” said Mark Zandi, chief economist at Moody’s Analytics. “The US can make its way back but it won’t flourish the way we hope if they can’t come back. If the emerging world’s economies are still sick, it’s hard to see our economy getting back to full health.”