Months after proclaiming the U.S. economy was in a recession and a “depression-like” crisis, UCLA economists Wednesday painted a slightly rosier picture, thanks to sooner-than-expected business reopenings and the ability of consumers and merchants to adapt to health restrictions.
But all is still not well, according to the UCLA Anderson Forecast report, which notes that absent an effective coronavirus vaccine by early next year and another round of economic stimulus payments, things could be significantly worse than anticipated.
“The economic recovery still has a long way to go before we get back to pre-pandemic levels of output and employment, and there are significant headwinds to getting back to these levels,” UCLA economists Leo Feler and Jerry Nickelsburg wrote in their report. “First is the course of the pandemic during the rest of 2020 and early 2021. Will there be a resurgence of cases necessitating renewed shutdowns? When will there be a viable vaccine that can be widely distributed and that the public will accept?”
They also questioned whether Congress will get around to acting on another stimulus package, given the current focus on the U.S. Supreme Court, and whether global conflicts — such as trade issues with China and potential economic repercussions from Brexit — will contribute to continued domestic turmoil.
And more notably: What of the November election.
“If the election is not decided on November 3rd, will consumer sentiment and business investment suffer?” they pondered.
“And, with our fourth quarter 2020 forecast for GDP at only 1.2% annualized growth, it is important for business and government decisions to keep the downside risks in mind,” they wrote.
They predicted that the nation would end the year with 7.8% unemployment, declining to 6.3% by the end of 2021 and 4.7% by the end of 2022, “but will not reach pre-pandemic rates until at least late 2024.”
“The employment recovery has initially been fast, as workers have been recalled back to their jobs from temporary layoffs with the reopening, but continued recovery will be much more arduous as more bankruptcies unfold and slack demand for sectors with high human contact continues,” they wrote.
On the statewide front, UCLA economist Leila Bengali wrote that California’s economy will largely track the national picture, although some industries will struggle more to recover from the pandemic than others.
“For example, we expect to see more strength in industries such as professional and business services and less strength in industries such as other services and leisure and hospitality,” she wrote.
Bengali said California’s unemployment rate will remain above the U.S. rate, ending 2022 at about 6%.
“The housing market is an area where we project particular strength and a quick recovery to pre-recession levels, with residential building permits almost back to their 2020 first quarter level by year’s end and reaching just about 130,000 units by the end of 2022,” Bengali wrote in her report. “Generally, a full recovery to pre-recession levels of economic activity is not expected until after 2022 in the state.”
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