Money / Opinion / Politics

US Economy Poised for Strong Rebound Despite Setbacks, Economists Say

Trump economyWASHINGTON—As states across the country progress through their reopening phases, some economic indicators that surpass expectations have boosted hopes of a speedy U.S. recovery.

A spike in retail sales and in personal consumption in May indicated that consumers were back and eager to open their wallets.

While the U.S. economy shows clear signs of recovery, some economists are taking a more cautious stance, raising concerns about the possibility of a second wave of COVID-19 that could stall reopening plans and hurt consumer spending.

Despite some setbacks in several states, White House economic adviser Larry Kudlow still predicts a sharp economic recovery in the second half of the year.

“Virtually every number is showing a V-shaped recovery now—private surveys, government statistics, restaurants, home builders, truckers, durable-goods makers, Apple mobility and travel, gasoline demand,” he said on June 26 during a workforce policy roundtable at the White House.

The consumer spending number is “tremendous” and will continue to be a key driver of the recovery, he said.

Consumers increased their spending by a record 8.2 percent in May after sharp drops in March and April caused by strict lockdown measures across the country. American consumers account for more than two-thirds of economic activity and are expected to spend more in the coming months as stores and restaurants reopen their doors.

The U.S. consumer confidence in June also posted the biggest increase since late 2011, beating the estimates.

According to Kudlow, if consumer spending grows by 20 percent in the second half of the year and 5 percent in the first quarter of next year, “we will be right back to the peak in 2019.”

Retail sales, which account for about a quarter of all consumer spending, rose 17.7 percent in May, marking the biggest monthly increase ever.

“Recent economic indicators, including the strong May retail sales report, suggest that the coronavirus hit is abating more quickly than expected,” Jan Hatzius, chief economist at Goldman Sachs, said in a report.

The Wall Street firm on June 17 revised up its forecasts for the gross domestic product (GDP) and unemployment for 2020 and estimated a “front-loaded” recovery.

According to the revised forecasts, there will be a stronger rebound in the third quarter, with 33 percent economic growth, up from 29 percent previously. Hatzius also raised the outlook for the full-year GDP contraction to -4.2 percent from -5.2 percent earlier.

The pandemic devastated the U.S. labor market, leaving millions out of work. But the U.S. economy added 2.5 million jobs in May, making a stunning comeback. A sharp drop in the unemployment rate suggested that Americans were returning to work.

Goldman Sachs lowered its projections for the jobless rate as well. It now forecasts a 9.5 percent rate by the end of 2020, down from a previous estimate of 10 percent.

Forecasters warn of significant risks to the recovery, with many predicting the economy won’t return to pre-pandemic levels until mid-2021.

“The virus outlook is perhaps the single most important factor determining growth risks over a longer horizon,” Hatzius wrote.

However, he predicts a significant upside surprise, should a vaccine arrive earlier than expected.

Source: Credit Suisse, US equity strategy report, 22 June 2020. Note: All measured on an annualized per capita basis.

The increase in government transfer payments and a drop in spending contributed to a large jump in personal savings in recent months.

On an annualized per capita basis, the savings from February to April have expanded by $14,426, according to Jonathan Golub, chief U.S. equity strategist at Credit Suisse.

“We anticipate that these savings will be spent as the economy reopens,” he said in a report on June 22.

Reopening Setbacks

Gauges of mobility have risen over the past few weeks as states have lifted their lockdown measures. However, the recent spike in CCP virus cases has led more than a dozen states to consider changing or pausing phased reopening plans.

There’s a reversal of mobility trends and a cutback in economic activity in these hardest-hit states, according to Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

“States with faster case growth are now underperforming economically based on measures of small business activity, restaurant bookings, and consumer spending,” he wrote in a report dated June 24.

According to his analysis, the continued spread of the virus remains a significant threat to the recovery as about 30 to 50 percent of GDP comes from counties that have seen worsening virus trends.

“This new inverse relationship between economic activity and COVID cases is particularly acute for several of the states exhibiting the most troubling trends, including Arizona, Florida, South Carolina, and Texas. The lesson is that behavioral changes in response to COVID trends can hinder the economic recovery even if states do not reimpose containment measures,” he wrote.

Conversely, earlier hotspots such as New York, New Jersey, and Massachusetts are seeing declines in new cases.

Besides the risk of a second wave of infections, economists believe there are other significant challenges to the recovery, including a reluctance to spend from consumers and a lack of an additional fiscal stimulus from Congress.

According to a survey of 34 economists by FiveThirtyEight and the University of Chicago in June, the majority of economists have started to believe that the shape of the economic recovery will be “a reverse radical” one.

Source: The Initiative on Global Markets at the University of Chicago Booth School of Business and FiveThirtyEight

The shape, which 73 percent of economists predicted for the U.S. economic outlook, implies a sharp drop followed by a quick partial recovery and a long period of slower, mixed growth.

A previous survey conducted in May found that the majority of economists predicted a “swoosh shape” recovery (as in Nike logo), which meant a sharp downturn followed by a long, slow recovery.

Many economists believe that another stimulus package is needed to support the recovery. Congress in March passed the $2.2 trillion CARES Act, which provided $1,200 checks to most Americans, and an extra $600 in weekly unemployment benefits through the end of July. Congress may consider another stimulus package this month.

According to Kudlow, any federal spending plan should include a reemployment bonus to encourage more hiring.

Reprinted with Permission from - Epoch Times by - Emel Akan

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Bill Brown
1 month ago

Be an American. Stop being Brainwashed: 1) Stop watching the mainstream news;  2) Stop watching mainstream Entertainment;  3) Stop watching any and all Sports that either does not have the National Anthem and/or insults our Country via protests as kneeling. We are being brainwashed.
 
Decide to be free!  Take our Country BACK: RED – Remove All Democrats!!!!!

Ed J
1 month ago

That our economy will recover is not in question – only how long it will take. Only two elements will affect our economic recovery.  First, and uncontrollable, is the extent of COVID-19 resurgence in the coming months. However, COVID-19 will eventually wane in time to become little more than a footnote in history. Second, is the interference of the Demsheviks trying to make things seem much worse than they are in the lead-up to the November election. This second element is obviously a desperate attempt by the Demsheviks who will use any gambit to “win” back the presidency this November.  It will be… Read more »

Burton Pauly
1 month ago

Folks our economic recovery is right up there as businesses reopen. In my opinion some time in 2021 the US should have a complete come back. And the democRats will not be of much help. They have only been a drag since the potus took office. So kudos to president Trump.

Jack
1 month ago

Oh you can bet they’ll be begging for Federal Funding to recover from their natural disaster.

Rik
1 month ago

Of course being that I live in sunny CaliMexico and since we have a Communist Governor, numbers have spiked not because he was forced to reopen businesses but because of the BLM protests and riots where at least half weren’t wearing masks and only the rioters wore masks to help conceal their identities. What aggravates me is how they will blame President Trump for their actions in destroying the economy in hopes of defeating his re-election. I don’t believe the phony polls that show Biden with a double digit lead, I believe he’s behind by double digits myself. After all,… Read more »

Peter K
1 month ago

We have collectively fallen into the entitled trap that comes with a life that is without hardship. IF we truly had the good of our country and its citizens in mind we would immediately stop buying from Amazon, would cancel Prime, would not use Google as our search engine, would stop supporting every sport that puts black lives about all others. And, you know what folks? None of that is going to happen. WE are too spoiled and too weak. On top of that we have large numbers of Americans preparing to vote for a man that simply will never… Read more »

Phyllis Poole
1 month ago

Be sure to keep that mask under your nose! You are otherwise. Breathing in carbon dioxide that we exhale! We need oxygen to breathe in and plants need our carbon dioxide. Otherwise we and our plants ( nut trees, vegs etc will stop producing. That we need to exist and so do our animals – pets and food animals !! I really wonder about the ability of our leaders to think many times. How did they get where they are!!!?

Patriot Will
1 month ago

If our economy does start making a serious recovery before the election, President Trump will have an excellent chance of being elected in 2020. If he gets reelected, I am very excited for our country’s future. If he does not get reelected. sadly, I am very worried that the Bolshevik Dems will totally destroy the greatest country in the history of mankind.

John A. Fallon
1 month ago

The fact is that the TRUMP HATERS are a very small group, but they are a very vocal group that consists of people that get excessive access to TABLOID MEDIA, they are(1) hoolywierd elites, grossly overpaid pro athletes and techno geeks that know how computers work and NOTHING ELSE AND(2) journalists and politicians that are incapable of intelligent thought, or economist that know “numbers” and nothing else, they keep trying to feed us thier lies and fake polls hoping we give up and not VOTE, it is imperative that we ignore the LIES and VOTE, Then the LIARS WILL BE… Read more »

carol
1 month ago

This idea that the spikes in the virus is a bad thing to me is ridiculous. The whole lockdown was to allow the medical community the ability to prepare for virus cases. We met that goal and now with more testing and folks getting the virus that are fairly healthy, it’s time we started getting the herd immunity that other countries have experienced. Then those who are in the susceptible groups won’t have as much to worry about when they interact in society and we can all get back to normal again! A vaccine isn’t coming any time soon. There… Read more »

James
1 month ago

It speaks volumes! The economy-vs-the democrat party! The democrat party is trying to hold the Trump economy down! The Trump economy is like a rumbling volcano beneath them! It’s time to get out of the way!

Mludwig
1 month ago

The news media tells us about the new positive tests but no word on how many are really sick or need to be hospitalized. Rioters don’t have to social distance but tax paying businesses have to close down.

JohnH
1 month ago

A few weeks ago Trump said “consider a badge of honor” that US is leading world in Covid=19 cases cuz it means we are doing the most testing in world. But , listening to his comments he does not see the interaction of testing & bringing jobs and economy back.

JohnH
1 month ago

I hope economy recovers 3Q, but do not see how with the USA leading world in Covid-19 cases & deaths. My opinion, Trump needs to throw his support & Federal dollars to the states so they can expand testing quickly. Sounds like Trump wants to cut funding for state testing sites & that is opposite of what should be done………….Test,Test,Test

Gregory Russell
1 month ago

Despite the best efforts of liberals to initiate a scorched earth policy in an attempt to kill the chances of President Trump to be re-elected, the economy is robust and healthy. You MUST know, liberals would burn this country to the ground to achieve their evil agenda. If you vote for even just a single demon-crat, YOU are a domestic terrorist, just like them.

Brenda Blunt
1 month ago

Time to open up America so that Americans can get back to work. Keep the borders closed for now. America WILL get through this!!

Denise
1 month ago

Open the nation back up and stop the extra $600.00 a week for unemployment. No one wants to woke if they can make more money staying at home.

Stephen Russell
1 month ago

More jobs due to Dem city riots alone for $$$ unless Dem cities remain as IS due to riots

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