The outlook continues to be clouded by COVID-19 but a team of University of Michigan economists sees encouraging signs that could bring economic life close to normal by the end of 2021.
Much, though, will depend on how readily a vaccine becomes available by next summer.
The annual U.S. Economic Outlook released earlier this month indicated that the real gross domestic product is expected to rise by 4.2% in 2021.
Real GDP is expected to decline by 3.6% year-over-year in 2020, according to the U-M forecast.
“Regardless of what happens in the near term with the virus, I think the recovery will be pretty vigorous once we get a wide rollout of a vaccine,” said Daniil Manaenkov, U.S. forecasting specialist for the U-M Research Seminar in Quantitative Economics, in a statement.
The negative risks, he maintained, are mostly short term and may only influence the timing of the recovery.
“But then again,” he said, acknowledging the shocking disruption to the economy in 2020, “it could be our own fatigue of forecasting gloom talking.”
The U-M forecast assumes that a vaccine will be available to workers on the front lines by early 2021, with wider availability by next summer.
The U-M call is close to the view of economists elsewhere.
Moody’s economist Mark Zandi, for example, is forecasting that real GDP will decline 3.6% this year and increase by 4.1% in 2021. Zandi said his assumptions are based on the passage of a $1.5 trillion fiscal rescue package in February and a coronavirus vaccine that could be widely distributed by mid-2021.
The depth of the COVID-19 recession in early 2020 — and the unknowns relating to the pandemic — create far less certainty when it comes to any economic forecast.
It remains unknown, for example, if the U.S. economy would head into a double-dip recession if the uptick in new COVID-19 cases sharply reduces economic activity this winter.
The encouraging signs include strong sales in housing, remarkable growth in the third quarter and brisk demand for new cars and trucks.
The overall U.S. economic recovery so far has been bifurcated, as some groups are doing very well while others are not.
Lower-wage workers at restaurants, hotels, bowling alleys, movie theaters and elsewhere in the service side of the economy have felt severe financial pain. They bore the brunt of the early jobless hit.