The U.S. economy is rebounding rapidly from the severe and unprecedented slowdown caused by the pandemic that began earlier this year, according to new economic forecasts released today in 11th Annual Inland Empire Economic Forecasting Conference.
Despite the alarming and record-breaking decline in economic output in Q2 and the lingering painful effects of the COVID-19 outbreak itself, the economy remains fundamentally strong and, in many ways, is already rebounding .
“The United States bottomed out in the current downturn in April, and since then the country’s economy has returned to more normal economic output levels,” said Christophe Thornberg, director of UC Riverside School of Business Center for Economic Forecasting and one of the authors of the report. “Strange as it sounds, technically this recession is over, making it the deepest, but shortest, in US history.”
Thornberg points out that this does not mean that the effects of the recession are not yet being felt, especially in certain industries and individuals, but that everything from the unemployment rate to the rate of employment recovery to spending on consumption, indicates that the economy is growing. Plus, as spending has been cut back over the past seven months, the ‘fuel’ that has built up in the form of increased wealth and savings is expected to trigger a vigorous expansion once the virus is hit. mastered.
Despite the apparent contradiction of a deep and short recession, the new forecast argues that as dramatically bad as the Q2 numbers were, the shocks caused by the pandemic to the economy were largely transient and not based on any imbalance. fundamental financial or economic. Today, the share of the US workforce that is truly unemployed (that is, workers who have lost their jobs permanently or are actively looking for a new job) stands at around less than 5%, which is significantly lower than the rate of over 8% seen at the height of the Great Recession. Workers who consider themselves temporarily laid off represent about 3% of the current unemployed workforce in the United States.
The new forecast includes outlook for the economies of the United States, California and the Inland Empire. In all geographies, forecasts are relatively optimistic but come with a key caveat: the full recovery and resumption of economic activity / production is strongly dependent on containing the spread of the COVID virus- 19.
Select the main conclusions:
- The underlying strength of the US economy at the onset of the pandemic was excessively enhanced by the federal government’s $ 3 trillion stimulus package. The economic activity lost in the first half of 2020 amounts to around $ 600 billion, or 20% of the size of the stimulus package.
- Total personal income in the United States has actually increased during the pandemic as spending has declined. That pushed consumer savings to nearly $ 1.2 trillion, four times what they were in Q4 2019.
- The California labor market continues to recover from the effects of the pandemic, although the rate of employment growth has slowed in the months following the strong rebound in June when 558,200 positions were reintegrated into the economy. . The slowdown is due in large part to the reapplication of business closures and restrictions due to the resurgence of the virus.
- As state-imposed health restrictions continue, cities in California that rely heavily on tourism / visitors and transitional occupancy tax will experience real hardship due to lost income.
- At the time of this writing, the cities in California with the largest job losses are Santa Cruz
- (-14.7%), San Luis Obispo (-13.3%), Salinas (-12.4%) and Oakland-Hayward-Berkeley (12.2%). Three of those four locations are home to major universities, and as education has moved online, they have felt a distinct impact of the lack of student spending at local and surrounding businesses.
- The Inland Empire labor market continues to recover steadily from the pandemic, creating 74,700 jobs since the April lows. Yet on an annual basis, year-over-year employment has declined by 132,900 jobs. The region overtakes the state in terms of employment recovery, but lags behind the nation.
- Unsurprisingly, the sectors with the greatest job losses in the Inland Empire are leisure and hospitality, retail, other services (including hair and nail salons), manufacturing and retail. government. Once the virus is under control, however, these industries are expected to increase production to meet growing consumer demand.