But there are good reasons to be upbeat about the answer. For starters, households saved record amounts of money while they were stuck at home in 2020, which suggests they still have pent-up spending power. Second, Americans have mostly recovered their collective earning power. Total wages and salaries quietly reached a new peak in May, and are trailing less than 1 percent behind their pre-plague trend. Pay has bounced back faster than employment, because the country’s missing jobs are largely concentrated in lower-wage service industries like hospitality.
It’s getting harder for the Biden Administration to claim we’re in an economic crisis that demands more spending. It’s closer to the truth to say the economy is growing in a way that calls for spending and monetary restraint.
The latest evidence arrived Monday with the Institute for Supply Management’s news that its March survey for service businesses hit 63.7. That’s an all-time high, and it signifies rapid growth and optimism. The only problem is that many businesses say they can’t find enough workers or supplies to meet their order books.
That follows Friday’s blowout employment report for March, with a net total of 1.07 million new jobs including revisions from the previous two months. Wage gains were bigger than they looked at first glance, given that many returning workers were those in lower-wage services jobs hurt by the pandemic.
There remains a striking contrast between the quick recovery of financial markets and the slower recovery of the economy, which experienced the highest unemployment rate since World War II (see Figures 5 and 6). The possibility remains for heavy ongoing credit losses and failures. Consumer spending and business investment face pervasive uncertainty about the course of the pandemic and its consequences.
But research suggests the dormant economies won’t immediately blossom—unless consumers also lose their fear of the coronavirus.
So far, about 40 million Americans, or 12% of the population, have been fully vaccinated against Covid-19, according to the Centers for Disease Control and Prevention. More than 73 million, or about 22% have received at least one shot.
ON MARCH 5TH at its annual parliament, the National People’s Congress (NPC), China’s government revealed an economic-growth target of “more than 6%” for this year, a bar it is expected to clear with ease. Take the latest data. China’s key economic indicators for January and February, published on Monday, were buoyant. Industrial production and retail sales, for example, are soaring—35.1% and 33.8% higher than a year ago, respectively, beating consensus forecasts. Fixed-asset investment surged by 35% year on year, but still fell below expectations.
This year’s rocket-fuelled figures are even harder to decipher than usual because they are compared with record lows last year, during the first wave of covid-19 outbreaks. Macquarie, a bank, says that if you remove the effect of the pandemic, underlying retail sales were up by 3.1% for the first two months of 2021. This implies consumption accelerated after a few small outbreaks were brought under control in Beijing in January. Oxford Economics, a research group, says it expects household consumption to become the main engine of economic growth from the second quarter of 2021, as travel restrictions are eased. But in the first quarter, growth will remain sluggish.
At the current pace of around 1.5 million doses per day, PWBM said it expects economic recovery “to continue but proceed gradually through the middle of year,” with employment rising to nearly 152 million in July and four-quarter real GDP growth of around 5% in the third quarter. Averaging over the full year of 2021, PWBM projected that raising the rate of daily vaccinations to 3 million or more would increase employment by nearly 1 million and real GDP growth by about a third of a percentage point.
The effects on the labor market that PWBM projected are largest in the summer, “which is when how quickly you’re able to vaccinate people makes the biggest difference,” said Arnon. At 2 million vaccinations a day, say, by the end of the year, most of the people who want it would have been vaccinated, he noted.
When the coronavirus pandemic hit last year, big parts of the U.S. economy just turned off. Voluntary social distancing and lockdowns, like those during the first wave in March, were necessary to help “flatten the curve” of COVID-19’s spread throughout the country, but these lockdowns had ripple effects on the economy.
Millions suddenly lost their jobs, pushing unemployment to historic highs. When travel ground to a halt, hotel occupancy plummeted — and so did profits, which dropped 84.6% in 2020 from a year earlier. In New Jersey, that meant hotel owner Bhavesh Patel had to furlough employees to make ends meet.
That factory is one of the parts of the economy that are slowly coming back. Some sectors are thriving, while others continue to struggle, putting different people in vastly different situations. NPR will spend the year following four people who will help illustrate the arc of the expected economic recovery.
While the ongoing rollout of the COVID-19 vaccine is promising, federal and state policymakers, as well as business leaders, will have to act to reverse an economic decline that has exacerbated longstanding inequalities, the president of the Federal Reserve Bank of Boston warned Friday.
Speaking at Yale University’s Economic Development Synmposium, Eric S. Rosengren predicted the national and regional economies could see significant gains in the second half of 2021, provided the vaccine distribution is successful.
“The disparate economic outcomes for some individuals and groups during the pandemic have further exacerbated longstanding issues in our economy,” Rosengren said. “The uneven nature of this downturn has highlighted the need to rebuild the economy in a more inclusive way.”