The Future of Our Economy: An Overview
By Glenn Newberger ‘23
There is good news and bad news. The bad news is that the global economy is recovering more slowly from the recent COVID-19 induced recession than economists initially expected. The good news is that the U.S. economy is recovering from the same recession faster than economists predicted, despite a recent resurgence in the number of coronavirus cases. This disparity is the result of the U.S. and the rest of the developed world being in different stages of recovery, and it will be interesting to see if this trend continues.
The U.K.’s economy is projected to grow by 15% in the third quarter following a 20.4% drop in the second quarter. However, one telling figure worries economists. Service sector outputs are down 12.6% and industrial outputs are down 7% for an average decline of 11.7% from pre-recession levels in February. Other European countries, Australia, Japan and India all show similar numbers. This figure indicates that a full recovery of the economy will take many months, and the world might not return to pre-pandemic levels until 2022.
The U.S. economy is now projected to grow in the third quarter at an annualized rate of 29.3%, up from earlier predictions of 18.9%. This increase accounts for about half of the loss from the rest of the year. Improvements in the labor market also exceeded expectations. Last month, the country added 1.7 million jobs, bringing the unemployment rate below 10%.
How is the U.S. recovering faster despite having millions more cases than any European country and a resurgence of new cases over the past few weeks? It may be because the U.S. is following the same recovery path as the rest of the world, and is just a little behind the curve. Europe also experienced rapid recovery in the third quarter as businesses started to reopen. Only now is it slowing down that most businesses have reopened. Now that this period of rapid reopening is over, economic growth must occur naturally until it returns to pre pandemic levels. Since the United States was hit harder by the virus, it could still be experiencing the rapid economic growth of reopening and may start to slow its growth over the next few months to the rate of the rest of the developed world.
Of course, as with all economic activity over the past year, the future is still uncertain. If the new cases in the U.S. cause the country to return to a position of total lockdown, all growth will stop and the rest of the world will continue to recover. However, if a working vaccine is developed and distributed within the next few months, global economic growth could surpass expectations significantly.
