Although economic forecasters have always anticipated a period of strong growth to emerge post-pandemic, in recent weeks and months they have shifted to even more optimistic expectations: “a supercharged rebound that brings down unemployment, drives up wages and may foster years of stronger growth.” This according to a recent article in The New York Times.
The article outlines some signs that we’re turning a corner, including a bump in retail sales as the “latest round of government aid began showing up in consumers’ bank accounts,” adding that an increase in business investment signals confidence from corporate leaders. It also notes that economists surveyed in February by the Federal Reserve Bank of Philadelphia forecasted U.S. output to grow to 4.5 percent this year, making it the best year since 1999. Goldman Sachs economists reportedly predict that the economy will see 6.8 percent growth this year along with a drop in unemployment to 4.1 percent by December, “a level that took eight years to achieve after the last recession.”
Last but certainly not least, the article states that consumers are sitting on a “trillion-dollar mountain of cash, a result of months of lockdown-induced savings and successive rounds of stimulus payments,” with more to come vis-à-vis President Biden’s latest program.
Morgan Stanley chief U.S. economist Ellen Zentner puts it this way, “There will be this big boom as pent-up demand comes through and the economy is opening. There is an awful lot of buying power that we’ve transferred to households to fuel that pent-up demand.”
The article also notes that the boom carries risks, noting that some prominent economist have expressed concern that Biden’s relief bill is too large and “could lead the economy to overheat, pushing up prices and forcing the Federal Reserve to bring the party to a premature end,” but adds that Fed officials have largely dismissed the concerns by noting that recent decades have seen too little inflation.
“But for many businesses and households that have struggled to stay afloat during the pandemic, those concerns pale in comparison with the opportunities that a boom could provide,” the article states, arguing that this recovery is different from others in that the U.S. economy was “fundamentally healthy when the recession began. There was no housing bubble; household debt was low; banks weren’t sitting on a tower of dubious loans that could collapse at any moment. That means there is not reason, at least in theory, that the economy can’t pick up more or less where it left off.”