Post-pandemic economic boom? A mountain of money is waiting to be spent as soon as the virus gives up

WASHINGTON.- The economy of United States it remains mired in a pandemic winter of closed premises, high unemployment and little job creation. But on Wall Street and Washington, the spotlight is on an interesting and hazy possibility: a post-Covid boom.

Forecasters have always predicted that the pandemic would be followed by a period of strong growth, with businesses reopening and a return to normalcy. But for the past few weeks, economists have already been talking about something much stronger: a dizzying rebound that will lower unemploymentIt will raise wages and may even usher in a multi-year period of strong economic growth.

There are already signs that the economy has turned upside down: Last month, when the U.S. government deposited the latest round of aid on consumer bank accounts, retail sales exploded. In addition, new unemployment insurance claims have been steadily declining since the first days of January, although they remain high. And business investment indices reacted, a sign of business leaders’ confidence.

Economists surveyed this month by the Philadelphia Federal Reserve predicted that this year production in the United States will increase by 4.5%, which would represent the best score since 1999. And some expect an even more pronounced rebound: economists at Goldman Sachs predict that this year the economy will grow by 6.8%, and that in December, unemployment will have fallen to 4.1%, a level that 8 years to reach after the last great recession.

“The growth rate this year will most likely be very high,” says Jan Hatzius, chief economist at Goldman Sachs. “I don’t know if it will be a boom, but it will definitely be a V-shaped recovery,” Hatzius added, referring to the curve of a steep decline followed by a strong rebound.

The growing optimism of economists responds to a confluence of factors. For starters, coronavirus cases in the United States are on the decline and the vaccination campaign, although slower than expected, is gathering momentum. In addition, and largely thanks to billions of dollars in state aid, the economy appears to have survived the past year with less structural damage than previously feared, especially in terms of bankruptcies. business, foreclosures and personal bankruptcies.

Finally, and following months of forced savings from quarantine and successive rounds of direct state aid, American consumers are sitting on top of a mountain worth hundreds of billions of dollars. And this mountain can keep on growing if the Congress approves direct home help program proposed by brand new president Joe Biden.

When the pandemic ends, money will begin to flow like spring snowmelt: freed from containment, consumers will fight over hotel rooms and restaurant tables, businesses will fight over best employees and employees. supplies to meet demand., And workers relegated due to parental obligations or fear of the virus, they will join the workforce, drawn by higher wages and the sudden abundance of opportunity.

“There will be a big boom in contained demand as the economy opens up”says Ellen Zentner, Morgan Stanley’s chief economist for the United States. “There is immense purchasing power accumulated in households”.

But this vision is far from being a certainty. Any delay in vaccination could freeze recovery, as could the emergence of new strains of the virus that are not vulnerable to the vaccine. A political paralysis in Washington could also hamper aid to the unemployed and struggling businesses. Even if the economy manages to sidestep all of these pitfalls, it’s unlikely that there will ever be a specific time when health officials will give out a “free pass,” and it could take years for people to sneak in. bars and sports stadiums like they used to. .the pandemic.

In addition, a boom also carries risks. In recent weeks, leading economists, such as Lawrence H. SummersThe Secretary of the Treasury under the Clinton administration warned that Biden’s financial relief proposal was too big and could overheat the economy, pushing up inflation and forcing the Federal Reserve to turn off lights in the middle of the party . The monetary authorities largely dismiss this risk, stressing that the constant problem of the last decades has been too low, not too high inflation.

Other economists fear the rebound will primarily benefit the rich and the growing inequalities typical of the pandemic.

“There may be a boom, but maybe it’s just serving to give an extra edge, or maybe it’s a trickle, when what’s needed in a downpour,” says Tara Sinclair, economist at the ‘George Washington University.

But for many businesses and households that have struggled to stay afloat during the pandemic, those concerns pale in the face of the opportunities that an economic boom could offer.

So despite all the downsides it can have, an economic boom would be the best and perhaps the only possibility for workers to regain lost ground. Before the pandemic, the labor market was so strong that it was already starting to distribute profits among the lowest paid workers and could provide opportunities for people with disabilities, criminal records and other barriers to employment. A sudden drop in unemployment will not heal all the wounds caused by the pandemic, but at least stop the bleeding.

“We have to drive an economic boom,” says economist Sinclair. “But we must not believe that this will cure all of our ailments.”

Ben Casselman

Translation of Jaime Arrambide

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