According to economist Lars Christensen, unemployment will be below 6% by the election. With lockdowns causing unemployment rates around 15%, the 6% prediction seems bold. However, the unemployment rate has been dropping drastically throughout the summer, and the economy is showing good signs. Earlier this month, the OECD predicted that the U.S economy will shrink only by 3.8% this year compared to the June prediction of 7.3%.
Three factors seem to be contributing to the good news for the economy. The first factor is that the spread of coronavirus in the southern states has slowed. More importantly, another factor is that the United State's stimulus has been larger than any other country. From stimulus cheques to increases in unemployment insurance, the average American has had increases in disposable income since the start of the pandemic. The final factor that has helped the economy is the Unites State's flexible labour market. The fall in recent unemployment reflects people finding new jobs, and not discouraged workers. There has been a reallocation of workers from dying industries to up and coming ones. People seem to be transferring their skills to new jobs quickly.
A lot is still up in the air with the pandemic facing another possible surge in Europe, but the U.S economy is holding on.
https://www.economist.com/finance-and-economics/2020/09/26/why-is-americas-economy-beating-forecasts
The economy seems like it is getting back up on its feet quicker than people thought because the economy is pretty open compared to the beginning of the pandemic, so yes, our economy is going to grow as people consume and sell more. Our economy adjusts quickly and is able to easily recover from situations like these.
ReplyDeleteWill be very interesting to see how the economy as a whole and unemployment rates react as the stimulus checks diminish. I agree that the economy has responded very well, but there could be cause for concern if the stimulus checks are ended too quickly or extend for too long.
ReplyDeleteI do not doubt that unemployment can get to below 6% by election time, if our economy continues without another shut down. At the moment, we are seeing states slowly begin to lift restrictions. Florida has just announced the lifting of all COVID-19 restrictions. Additionally, you noted above that the spread of the virus has slowed in the southern states. However, in Europe the number of cases is rising again, what will happen if they begin to rise in the U.S.? Will we have another shut down that hurts the recovery progress we have already made?
ReplyDeleteThe rising cases in Europe has already impacted the U.S stock market. With growing uncertainty of a another wave of the virus I think that the economy might not do as well in the coming months.
DeleteNew cases reached a peak in late July and then dropped nearly 50% in mid-September, but they have since started to rise again. States are lifting COVID restrictions and some states even lifting the mask mandates. I think unemployment could get to below 6% but it is whether or not it can still improve following that number without too many discouraged workers. It will really be interesting to see if the loosening of restrictions will lead to another shut-down.
ReplyDeleteI agree with your and Lars Christensen's analysis, but I think it rests on two assumptions: that there will not be a general relaxing of policies designed to prevent the spread of COVID-19 and that there will be a second round of fiscal stimulus. The former remains largely in the hands of state governments and even individuals, the latter with congress. The great deal of uncertainty surrounding both of these groups makes me skeptical of any concrete numbers for unemployment by the election. But then again, I'm not a professional economist, and I'm sure their models incorporate such uncertainty.
ReplyDeletei believe that the economy will go down again due to the expected second wave of covid however I don't believe it will be as big of an hit as the first wave. The US economy will most likely go back down again before it will be able to regain it former momentum pre covid.
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