January’s surprisingly strong retail sales—which showed that consumer spending increased 5.3% from the previous month—have some economists wondering if the post-COVID-19 economic rebound they’ve been anticipating might turn out to be even stronger than they expected.
Despite the fact that new claims for unemployment haven’t abated much (initial unemployment claims fell by a mere 0.4 percentage point to 6.3% in January), many economy watchers see growth and prosperity at the end of the COVID-19 tunnel, as infections continue to drop nationwide, and more Americans get vaccinated.
On Feb. 9, economists at Goldman Sachs forecast that the economy will grow 6.8% this year and that the unemployment rate will drop to 4.1% by the end of 2021, while Morgan Stanley economists predicted in December that global economic growth could hit 6.4% for 2021, and acknowledged at the time that its forecast bucked consensus.
Goldman Sach’s projections arrived on the heels of the U.S. Senate passing a budget resolution Feb. 5 that clears a path for the Biden administration to propose a $1.9 trillion relief plan. The package currently includes sending stimulus checks to people who earn under $75,000; raising the minimum wage to $15; and sending $400 weekly checks to unemployed Americans.
Economists also predict that the end of the pandemic—which now feels in sight but in reality is probably still months away—will trigger a mass spending spree, with employed and wealthy consumers who’ve been stockpiling funds during the pandemic dropping major coin on travel, restaurants, and other experiences.
To be sure, many Americans have been saving. The personal savings rate in the U.S. has jumped in pandemic months—it soared to 32.2% in April 2021, and though that rate has slowed, it’s grown most months since.
Still, there are millions still living paycheck to paycheck in the U.S. And as affluent households reined in their spending in 2020, companies laid off or furloughed employees, leading to significant employment losses among low-income individuals working in the most affluent zip codes in the country, according to Opportunity Insights, an economic tracker from Harvard University.
(Photo by Andy Thrasher)
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