You’re standing in the back yard, filling up a wading pool for the kids with a garden hose. If you turn the hose off, the pool stops filling. Allow enough time, and the sun evaporates the water. Over the course of the summer, the water slowly dries up, leaving you with an empty pool and unhappy children – unless you turn the hose back on.
Starting in late February, governors across the U.S. turned off (or severely restricted) their economies to try and mitigate the spread of COVID-19.
They first felt the consequences in March, and the negative ripple effects are likely to continue well into 2021. The virus is still circulating at high levels despite 10 months of lockdowns and travel restrictions (some of which are still in place).
As we enter 2021, the deeper economic impacts are starting to become increasingly apparent. Even the more optimistic economic forecasts don’t look that great.
2021: Misplaced Optimism?
When the bar for economic improvement is just “do better than 2020,” it isn’t hard to beat expectations. “We see really strong growth potentially starting in the second quarter,” says Barclays economist Jonathan Millar. “It’s a pretty strong year.”
That optimism seems misplaced once you factor in the rest of this outlook:
That doesn’t mean the economy will be back to normal. The pandemic is leaving a legacy of millions of jobless Americans and thousands of shuttered businesses that will take years to reverse.
According to Federal Reserve Chairman Jerome Powell, we’re lucky because 2021’s predicted unemployment rate fell from 5.5% to a mere 5%. That’s not much better than the current unemployment rate of 6.7%, and considerably worse than the pre-pandemic 3.8% unemployed in January 2020.
While that’s good news, it won’t offer much comfort to the millions of people who have already been out of work for much of 2020.
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