What Does 2021 Hold? A Post-Election Economic Forecast
For many sectors of the economy, better days are ahead.
That’s the message Dr. Sean Snaith, Director of the UCF Institute for Economic Forecasting, reported to entrepreneurs during a recent webinar by the Entrepreneurs Alliance of Orlando. Dr. Snaith was a guest speaker as part of the EAO fireside chat series.
The 2020 economic collapse was historic in several ways, Dr. Snaith said. First, it was more rapid and deeper than the great recession a decade ago. The 2009 recession was supposed to be a once-in-a-lifetime event, but the pandemic showed economic calamities can happen at any time.
The recession caused by Covid-19 and the worldwide pandemic is second only to the Great Depression in its depth.
However, this is not the only reason this recession will be remembered – it’ll also be historic for its short-lived nature. Dr. Snaith noted the recession, which started in February, likely ended three months later in May.
Another reason the Covid-19 recession will be etched in history books is what Dr. Snaith referred to as a “self-inflicted wound.” The U.S. economy was surging, and unemployment was at an all-time low when the decision was made to shut the economy down for public health reasons. From an economic standpoint, the results were catastrophic.
Many small businesses were shuttered, and millions lost their jobs. Instead of an economy continuing to race forward, it slammed into reverse faster than at any other time in our nation’s history.
Fortunately, as fast as the economy collapsed, it started to rebound. Dr. Snaith projected the recovery won’t be a classic “V” but will be more like a lopsided V or perhaps a Nike swoosh. Some sectors of the economy never suffered from the pandemic, while other sectors, such as travel and tourism, saw losses that made the aftermath of the 9/11 terrorist attacks look like a drop in the bucket.
What does 2021 bring for the economy?
Dr. Snaith projects there will be pent-up demand because so many individuals have been unable to travel for leisure or business.
U.S. consumers will fuel the recovery according to the UCF Institute for Economic Forecasting. Consumption that shrunk in 2020 by 3.3 percent, will grow by 6.5 percent in 2021. The country’s real gross domestic product will bounce back from a loss of 2.9 percent in 2020 to a forecasted gain of 5 percent in 2021.
The job market will also continue to rebound in the coming year, but a full job market recovery is not expected before 2023.
Dr. Snaith cautioned against legislation as a quick fix to perceived problems with the economy. For example, take the national movement to increase minimum wages.
“It is the law of demand,” Dr Snaith said. “The law of demand cannot be changed by legislators, governors… or wishful thinking. If you raise the price of something, the quantity demanded of that item will go down.”
Across the country, the price for less-skilled labor is going up. This means demand for that labor will go down. Business owners will cut hours, cut jobs or replace tasks with advance technology when possible.
Snaith also cautioned that America will one day have to deal with the ballooning national debt.
Still, the post-Covid-19 bounce is expected to be good for many businesses in the coming months.
Dr. Snaith encouraged business owners to track the recovery through complimentary reports provided by the UCF Institute for Economic Forecasting.
Click here to view original invitation.
Click here to view the UCF Institute for Economic Forecasting’s Q3 2020 forecast.
Click here to view quarterly forecast publications for US, Florida, and Metro Orlando.
Click here to view Opportunity Insights’ Economic Tracker.
Click here (members-only) to view a recording of Dr. Snaith’s fireside chat.
CEO Nexus is committed to serving business owners and executive teams leading growth-oriented, second-stage businesses. Our professionally facilitated Peer Roundtable Programs utilize the CEO Nexus Content Model, which focuses on leadership, sales, operations, and finance.