With economies opening and restrictions loosening around the country, things are definitely looking up for the population. The promise of a vaccine to protect the public from the coronavirus is allowing us to hope for better days ahead. But can we really look forward to improved conditions at this point in time? According to the experts at UCLA Anderson, we certainly can.
The earlier days of this year may have been bleak but economic experts are now saying that there’s a good chance for a rebound for the American economy. The Q3 report of UCLA Anderson is an optimistic report on what they believe is the trajectory of the local economy in the next couple of months. Unlike the bleak details of the first quarter’s revisions and the second quarter, the positive things indicated in the third-quarter report is a breath of fresh air.
The Road to Possible Economic Recovery for 2021
In April, the experts at UCLA Anderson had to release two revisions of their first-quarter report as the economy was thrown for a loop by the pandemic. With lockdowns and stay-at-home orders put in place in many places around the country, a steep decline in the economy was a natural result.
This revision which was the first in the institution’s 68-year history had to change their prediction from their initial release to state that the GDP will continue to fall in the following months and unemployment will spike significantly. It basically stated that the US entered a new recession, the first from 2008.
The June report confirmed their initial forecast, characterizing the situation as a ‘Depression-like crisis’. It also noted that there are no signs for improvement just yet and that the economy will not revert back to its 2019 conditions. The numbers were bad as the quarter experienced a 42% decline in real GDP and they did not believe that things will get better until 2022 or early 2023. This is particularly true for many workers as they only see the unemployment rate going up as 2020 signs of progress.
In their Q3 report in September, however, things a major shift can be noted. It’s not as bleak as the first three reports have been, providing an optimistic outlook for the next couple of months. It noted a 31.7% annual decline for real GDP during the second quarter but it was somewhat offset by the 28.3% growth for the following quarter.
The decline was less severe than what experts expected so that’s a good thing. The growth did not make up for the losses but it hints at an upward trajectory which is what everyone is hoping for after the lows earlier in the year. Full recovery is still not expected until late 2022 but experts are optimistic that significant improvements can be seen.
The bounce-back numbers have always been expected to be big but what came as a surprise is the timing. Initial assessments noted that improvements will only start in 2021 but came in the third quarter of 2020 instead. This is why they are also looking at a “stronger 2020 growth and weaker 2021 growth”.
For the fourth quarter, they are predicting a 0.3% growth and a real GDP decline of 4.2% for 2020. Compared to the 2.8% decline during the Great Recession of 2008, these numbers are way greater. It’s still way better than the predicted numbers from June which expected an 8.6% decline.
The optimistic upward trajectory is further reinforced by the fourth quarter report which pretty much reiterates Q3’s numbers. Experts are predicting another version of the ‘roaring 20s’ as the economy will hopefully pick up by the second half of 2021 and continuously improve from there on out.
These do not mean that we’re out of the woods yet, though, as the first few months of 2021 is still going to be tough. With these assessments hinged on the progress of the pandemic and the public health measures taken to further deal with it, the improvements are only really expected to hit once the government starts doling out vaccines against the coronavirus.
In their words, the months before the vaccine can be dire as winter will definitely cause a surge in cases and social assistance programs will also expire.
Pandemic Measures Helped and will Continue to Help the Economy
UCLA Anderson experts attribute the improvements to several things. At the top of this list is the fact that economies opened up sooner than expected. This had a huge part in stopping the freefall of the economy. No new shutdowns took place in Q3 as well, even with the surge in cases in many areas, so the flow was quite steady.
It’s also believed that the ability of businesses and consumers to quickly adapt to the new technologies allowed them to conduct business online and work remotely. The Federal Reserve also contributed largely by providing monetary support and committed nearly 0% interest rates until the labor market recovers. The numbers are lower than what they offered during the Great Depression, so that’s also quite impressive.
If the timeline that the UCLA Anderson experts assumed will take place, vaccines might start rolling out by the summer of 2021. That’s also the same time when the economy will accelerate. It’s believed that it can also stimulate the return of the economy to its previous growth trends.
California’s Economy: How are things going?
California’s economy is believed to mirror the national economy so taking a look at the broader picture is essential. The progress, however, will still depend on the pandemic progress and measures taken to alleviate the crisis. While the state’s unemployment numbers are way higher than the national rate, it’s also believed to grow faster than the US as soon as restrictions are lifted and the pandemic is dealt with.
Unfortunately, the hospitality and leisure segments of the market that are dependent on tourism might still not see any improvements in the next year or two. It’s likely that people will still be very cautious about traveling and that many will still be penny-pinching for a few years after this year’s crisis.
Optimistic Numbers but Nothing is Certain
As we are still living in unprecedented times, nothing is still fully certain despite expert forecasts. Some even say that these assessments are too optimistic so there’s no guarantee that all of the predictions will materialize.
Nonetheless, it’s one positive thing that many of us would like to hope for.