Global Economy on the Path to Recovery; U.S. a Top Performer Among Advanced Economies
|At the start of a new year, a long path to global recovery is in sight as COVID-19 vaccines roll out, albeit slower than initially expected in many parts of the globe. The optimistic medium-term view is that the pandemic will be reined in through mid-2021 and allow for a resumption of regular economic activity. Bloomberg Intelligence currently forecasts worldwide GDP to expand 4.9% in 2021, which would return total economic output to pre-pandemic levels.
Until vaccines become widely available, the global recovery will likely continue to encounter turbulence as swelling virus numbers in many countries are resulting in new restrictions (see the story below for more detail on the U.S.). New stay-at-home guidelines and business restrictions intended to curb surging case counts represent perhaps the most significant downside risk for economic growth this year. The growing virus counts could also undermine consumer confidence and spending, which would result in decelerating activity until confidence is restored.
On the global economic treadmill, U.S. performance during 2020 stands out among advanced economies, placing the U.S. on a faster road to recovery. Bloomberg Intelligence currently estimates U.S. GDP decreased 2.8% in 2020, the second-best figure among developed economies. The smaller decline means the U.S. has less ground to recover and consequently may grow more slowly than other advanced economies this year. But it also means that the U.S. could achieve pre-pandemic economic output levels by year-end.
Projected Change in 2021 Economic Output Relative to Pre-Pandemic Totals
Coronavirus Case Counts Rebounding After Holiday Dip
|COVID-19 case levels in the U.S. have rebounded to a seven-day rolling average of 213,000 new cases after experiencing a lull at the end of the year. The number of reported virus cases dropped substantially on both Christmas and New Year’s probably because fewer tests were administered on the holidays. In addition, many states have started reporting a backlog of virus case data after government health offices closed or operated at reduced capacity during the last week of the year.
Moving into the new year, coronavirus cases may accelerate in the short-term because of a spike in travel levels over the past two to three weeks, which could have exposed more people to the virus. Daily Transportation Security Agency (TSA) checkpoint screenings (which do not differentiate between business and leisure travelers) averaged more than 1.0 million people per day during the latter half of December compared to 700,000 per day during the first half of the month. Some local agencies have reported case spikes related to Christmas gatherings.
December Daily TSA Security Screenings & Seven-Day Rolling Average of New Virus Cases
Labor Market Propped Up for the Time Being
|The U.S. labor market was showing signs of stalling as 2020 came to an end. Employment growth slowed in recent months but was still holding in positive territory as of November with 245,000 net new jobs. Continued deceleration, however, could mean net job losses in the December employment report, which will be released this Friday.
The $900 billion stimulus package signed into law last week represents a welcome shot in the arm, but any continued slowdown in the labor market risks leaving more workers on the sidelines for extended periods of time. Rising permanent job losses are increasingly concerning with approximately 3.9 million people out of work for 27 weeks or more. As the number of permanent job losses recently increased to a high of 3.7 million (compared to 1.2 million in February), this figure exceeds the number of temporary layoffs. Ultimately, the ranks of the long-term unemployed could grow should the recent stimulus measure prove ineffective.
Meanwhile, many workers continue to encounter employment disruptions for the first time. Initial unemployment claims dropped modestly last week but remain well above pre-pandemic levels at 787,000. While continuing claims dropped over the past couple of weeks by 171,000, more and more unemployed workers are exhausting their 26 weeks of state benefits. With pandemic related unemployment programs such as PUA and PEUC set to expire in mid-March, meaningful labor market distortions may emerge in the absence of coherent economic and fiscal policies providing stability through the U.S. economic recovery.
Equally challenging is measuring labor market success with the U-3 unemployment rate, which does not include people who have dropped out of the labor force. While the Federal Reserve expects the unemployment rate to fall to 5.1% by year-end, shadow unemployment will likely remain a challenge for many parts of the country past year-end. The labor force participation rate is down 1.9 percentage points compared to February with 7.1 million people who want a job but are not actively searching for one.
Number of Long-Term Unemployed Workers & Labor Force Participation Rate
The Weekly Briefing - January 4th, 2021
The Weekly Briefing – January 4th, 2021
In This Week’s Brief:
- Global Economy on the Path to Recovery; U.S. a Top Performer Among Advanced Economies
- Coronavirus Case Counts Rebounding After Holiday Dip
- Labor Market Propped Up for the Time Being