Economists are forecasting a recovery this year and next that should reduce unemployment and help industries that were devastated by COVID-19. That should be good news for the service-heavy sectors in Champaign-Urbana.
Hang on for a wild economic ride. That’s what economists are saying as businesses and individuals shake off the effects of a nearly year-old COVID-19-related slowdown, with numerous signs of a boom ahead.
It was about a year ago that
the first signs of economic stress related to the global pandemic began to appear. By March 20, according to the Federal Reserve Bank of St. Louis’ financial stress index, it had peaked.
But the U.S. economy stayed in negative territory through the first half of the year. A nice recovery followed in the second half.
But now, economists say, there are signs of robust growth ahead.
“As 2021 unfolds, the consensus of private-sector forecasters and Federal Reserve policymakers is
that the U.S. economy will register strong gross domestic product growth this year and next, with further declines in the unemployment rate,” said St. Louis Fed research officer Kevin Kliesen.
A number of signs point to a robust recovery, including a sharp increase in industrial production in December, strong increases in housing starts and home sales, the hearty expansion of vaccine distribution and unusually high levels of household savings in the last year.
That last item indicates that households could be ready to spend on vacations, dining and leisure. That should lead to a rebound in spending at restaurants, bars and hotels, all of which have been the foremost victims of pandemic restrictions, especially in service-reliant Champaign-Urbana.
Professional forecasters contacted by the Fed’s Philadelphia branch are predicting real GOP growth at
4.5 percent this year — the greatest level in more than 20 years — and 3.7 percent in 2022. (By comparison, GDP fell 2.5 percent last year).
But before breaking into a chorus of “Happy Days Are Here Again,” know that the recovery is dependent on increased consumer spending and the broad success of COVID-19 vaccines.
It also could be threatened by higher debt levels and inflation, although economists believe it will be no more than 2 percent.
Remember, of course, that economists didn’t know a worldwide pandemic was on the horizon when they were making their sunny forecasts for 2020.
Still, the U.S. economic outlook is much more favorable than it was
11 months ago, and that is good news for a populace that has seen a lot of personal and financial hard times.