Technically, the economy is still in a recession. The National Bureau of Economic Research-NBER), the arbiter of recessions and economic recoveries, has yet to declare that the recession is over. Many times in the past they will post-date the recovery, demonstrating we may already be out of recession. Key economic reports would suggest the low point for the economy occurred in April, including employment, consumer spending, and manufacturing production. The top of the cycle clearly occurred in February of last year.
Whenever the NBER makes its declaration, this economic recovery has been far from what might be considered a normal recovery. The pandemic that led to the steepest slide in quarterly GDP on record (U.S. BEA, data back to 1947) has also shaped one of the most lopsided recoveries we’ve ever experienced.
Look no further than service-based industries that require the personal interactions to thrive, which is something we took for granted pre-Covid.
Social distancing restrictions and fear of contracting the virus have severely impacted airlines, hotels, travel, restaurants, concerts, and movie theaters. These industries and more have struggled to adapt to the new normal. Surprisingly, even health care has suffered.
But other industries have adapted. For example, housing has benefited from record low interest rates have spurred strong demand. Essential retailers, technology, home improvement, auto sales, and grocery stores have experienced robust numbers.
Reopening various sectors of the economy has helped, and generous jobless benefits and two rounds of stimulus checks have left many with ample cash to spend. While the final touches aren’t yet on the latest relief package, more cash is likely on the way. A new and costlier relief package that’s currently pegged at around $1.9 trillion seems likely to pass soon.
What might help the beleaguered industries that have suffered under today’s restrictions? For starters, a successful rollout of the vaccines that greatly reduces the odds one can contact Covid. In our opinion, the best stimulus is to continue reopening the economy.
Economic Prospects Look Bright
For all of 2021, economists are forecasting the GDP could grow by 6% (CNBC). That would be the fastest annual GDP growth since the economy expanded 7.2% in 1984 when Ronald Reagan was president. Economic forecasting, which is never easy, is even more difficult in today’s environment. Still, forecasters are sounding an optimistic tone.
The Atlanta Federal Reserve, which tracks real time data to estimate GDP is now indicating a 10% gain for the first 3 months of 2021. Economists are counting on pent-up demand that vaccinations and falling coronavirus numbers will drive job growth this year.
Bottom line, once we get past the pandemic, the economy is on a pretty strong foundation.
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