The COVID-19 pandemic continues. Following significant surges in many states, signals in late July (at least as I am writing) have been modestly encouraging, with case numbers beginning to level off and COVID-related emergency room visits trending downward. Nonetheless, it will be a while before daily life or the economy can approach normal.
The U.S. job market has improved as businesses have reopened, though total employment remains well below pre-COVID-19 levels. The most recent reports indicate gains of 2.7 million jobs in May and 4.8 million in June, with a decrease in the unemployment rate from 14.7% in April to 11.1% in June. However, the total increase over the past two months is far below the loss of 22.2 million during March and April. Moreover, the situation remains challenging and fluid, and momentum appears to be slowing a bit as some reopening moves were reversed.
Our latest forecasts indicate that 2021 will see the U.S. economy regain a significant portion of activity lost through 2020. We are projecting a decrease in real gross product of -4.96% this year, with a gain of 3.67% in 2021.
Employment is expected to decline by -6.25% for 2020 and rise 4.78% next year. This decline represents about 9.4 million jobs. It is worse than that now (as are the GDP numbers), but some improvement is anticipated as the year progresses.
A new stimulus package is being negotiated and should provide relief for a few extra months to many people who have lost jobs or otherwise suffered. Another round of stimulus checks may also be forthcoming, helping household budgets across the country.
Funds to be used by schools to reopen more safely are also under consideration, as are aid for health care institutions, state and local governments, small businesses, and other areas. The measure is being negotiated in a contentious election-year environment, and will likely be far from ideal. Given the current distress, however, anything will help (although there are long-term consequences from rising debt).
It will likely take a little more than two years to return to prior peak job levels assuming no major additional disruptions. That is about half the time that was required in 2008, when the economy was facing major structural issues.
Health and safety remain of paramount concern, and progress will depend on the ability to continue to resume activity without infections reaching a level that will necessitate a new wave of restrictions.
The current economic crisis was caused by a health crisis, and to ultimately resolve the economic crisis requires effectively dealing with the pandemic situation. Once a lasting solution to the COVID-19 issue can be developed, long-term prospects for the U.S. economy remain positive. Be safe.