The U.S. economy may still be in the grips of the coronavirus pandemic, but it’s poised to see historic gains later this year as more Americans are vaccinated and pandemic-related restrictions start to ease.
Some economists have actually projected that the nation’s GDP, the broadest measure of goods and services produced in the country, will be even bigger in late 2021 and 2022 than if the pandemic hadn’t occurred.
“That’s a particularly remarkable outcome, especially when you consider that [in the aftermath of the 2008 financial crisis], the U.S. economy never really returned to its prerecession path,” Morgan Stanley Chief Economist Chetan Ahya wrote in a note to clients last week.
Morgan Stanley sees the U.S. economy growing 6.5% this year — the best on record since 1984 — and 5% in 2022. Goldman Sachs is expecting about 7% growth.
One reason for the “remarkable” growth expectations is the massive spending operation undertaken by the federal government: Congress passed nearly $4 trillion in relief measures last year under former President Donald Trump, and Democrats are currently pushing forward with another $1.9 trillion stimulus plan that includes a third $1,400 stimulus check.
The cash payments that lawmakers sent out last year — Congress approved checks worth $1,200 in March and $600 in December — have put a collective $1.5 trillion in Americans’ pockets, according to Morgan Stanley. That figure is expected to rise to $2 trillion by March.
Consumers are already spending the money. Commerce Department figures released last week show that retail sales soared 5.3% in January as consumers, buoyed by the stimulus checks, spent at bars and restaurants, electronics and appliance stores and department stores.
Still, experts say the economic recovery hinges on vaccinations: While testifying before Congress on Tuesday, Federal Reserve Chairman Jerome Powell said the outlook remains “highly uncertain,” and said the economy is still a “far way” from full health. There are still 10 million out-of-work Americans than February, before the crisis began.
“The path of the economy continues to depend significantly on the course of the virus and the measures undertaken to control its spread,” Powell said. “The resurgence in COVID-19 cases, hospitalizations, and deaths in recent months is causing great hardship for millions of Americans and is weighing on economic activity and job creation.”