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Major Flu Outbreak Threatens to Slow Economy Further

Thursday, 10 Jan 2013 | 12:00 AM ET
Jupiterimages | Workbook Stock | Getty Images

One of the worst flu seasons in a decade is putting further strains on an already sluggish U.S. economy as companies get slammed with increased health care costs and lower productivity from widespread worker absences.

On average, seasonal flu outbreaks cost U.S. employers $10.4 billion in direct costs of hospitalization and outpatient visits, according to the Centers for Disease Control. That doesn't include the indirect costs related to lost productivity and worker absenteeism.

But this year, that figure is expected to go much higher, as the flu virus has shown up in some 41 states with 29 of them reporting high or severe levels of sickness as thousands are flooding into hospital emergency rooms and doctor's offices.

"If this is a major influenza outbreak, like the Spanish flu of 1918, it could have a very significant effect on economic growth," said Timothy G. Nash professor in Free Market Economics at Northwood University. "If GDP is projected to be be 2 percent this year, the flu could cut that back to one half percent growth rate." (Read more: Vaccine Shortages Reported)

"A non-epidemic flu costs the U.S.economy with roughly 36,000 lives and causes more than 200,000 people to be hospitalized and costs our economy," Nash said. "We don't know if this is a like 1918 but we can't ignore the serious nature of what's going on."

"The last thing we need in a slow economy is a major flu epidemic," said Paul Mangiamele, CEO of the Bennigan's restaurant chain located throughout the U.S. "It's bad enough as it is without the flu taking even more customers away."

Mangiamele said his company is on "orange alert' to try and keep the flu impact to a minimum.

"We have basic high-end standards on hygiene any way but we're doing more work in making sure our utensils are extra clean and making sure the salt and pepper shakers have been rubbed down and every worker washes their hands. We're just ramping up our normal effort," said Mangiamele.

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This particularly devastating flu season started five weeks earlier than usual and caught many people off guard. Flu season usually peaks in late January or early February but by November the flu was already severe and widespread in some parts of the South and Southeast, and now in the Northeast and Midwest.

There have been more than 2,257 hospitalizations associated with the flu, according to the CDC. Some 18 children in the U.S have died from it.

The city of Boston has declared a public health emergency as a result of the flu outbreak. Massachusetts said some 18 people have died in the state from flu related illness. South Carolina reports 22 dead so far. Two people died in Sacramento, California. In Minnesota, 900 people were hospitalized because of the flu and four people died.

For the fourth week in a row, the proportion of people seeing health care providers for flu like illness is above the national average and jumped from 2.8 percent to 5.6 percent in that time, according to the Centers for Disease Control and Prevention. Last season's proportion peaked at 2.2 percent, the CDC reports.

According to the Bureau of Labor Statistics, employee absences are traditionally up during the winter flu season -- some 32 percent higher than the rest of the year. The highest number of absentees was 3.3 million in 2008 -- a severe flu season.

Employees who are sick and go into work aren't really doing their colleagues any favors, said John Challenger, CEO of Challenger, Gray & Christmas Inc, an outplacement firm.

"Sick employees may think they're doing the right thing by going in but the fact is they are only making matters worse by exposing themsevles to others," Challenger said.

"The business culture is changing and I think most firms are more accepting of people calling in sick, especially during the flu season," said Challenger. (Read more: More Than Flu Hitting)

"What a business should be doing is offering flu shots, and giving comp days to workers who are sick and feel like coming in. Coming in sick and doing sub par work won't really help," argued Challenger.

The predominant type of flu that is circulating is H3N2 Influenza A virus, which is making up 76 percent of the viruses reported, according to the CDC.

Doctors urges everyone six months and older to be given a flu shot or vaccine. The CDC said that that flu viruses are likely to be spread for the next two to three months. Its not too late to get the flu shot, but it takes about two weeks for it to offer full protection, said the CDC.

For businesses, suggestions to help cut down the affects of the flu include limiting meetings, allow for flexible work hours, provide hand sanitizers, encourage workers to wash their hand often, and allow workers to stay home with out losing their jobs. ( Read more: Flu Impact on Stocks)

"Firms really need to get a flu program in place before this gets worse," Challenger said. "Otherwise they won't be productive."

If there's one consolation, the U.S has a higher quality of health care to handle a flu outbreak than the rest of the world, said Timothy Nash.

"Our health care system is much better than other countries when it comes to handling an epidemic and the economy of other countries would suffer much more than ours," said Nash.

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