This article was published in the New Haven Register on December 18, 2020.
As we prepare to put a tough year behind us, many people wonder what 2021 has in store.Will promising new vaccines end the pandemic shutdown and throw the economy into fast forwardagain? Or will we endure more of the same chaos and uncertainty we’ve been dealingwith since March?
Let’s take a look at what the experts are saying about the second half of this year and theeconomic outlook for next year.
Real gross domestic product (GDP) grew at a turbocharged rate of 33.1 percent in the thirdquarter, after plummeting 31.4 percent in the second quarter, according to the U.S. Bureau ofEconomic Analysis. The stunning turnaround was fueled by business reopening's and theresumption of activities that were postponed or restricted during the second quarter, BEAanalysts said.
The third quarter saw increases in personal consumption expenditures, imports, exports andinvestments. Consumer spending was led by health care, food services, accommodations,clothing, footwear and motor vehicles.
Disposable personal income fell 13.2 percent in the third quarter, primarily because federalstimulus payments had increased incomes 44.3 percent in the second quarter.
Nonfarm employment increased by 638,000 jobs in October and the unemployment rate fellto 6.9 percent, according to the U.S. Bureau of Labor Statistics. It was the sixth straightmonth of declining jobless rates. Unemployment had fallen to a historic low of 3.5 percent inthe final quarter of 2019 and into February, then soared to a high of 14.7 percent in April.
U.S. stock markets experienced solid gains during the third quarter: The Dow JonesIndustrial Average rose 7.6 percent, the S&P 500 increased 8.5 percent, and the Nasdaqjumped 11 percent.
For the year to date through Sept. 30, the Dow was down 2.7 percent, the S&P was up 4.1percent, and the Nasdaq was up 24.5 percent.
Looking ahead, the Conference Board predicts U.S. GDP will fall 3.5 percent in 2020 as awhole, then gain the same 3.5 percent back in 2021. “Gains in consumer spending will belimited by high unemployment rates, but likely will accelerate again in 2021 as the labormarket heals,” said the board’s Oct. 28 Global Economic Outlook report. “Key variablesinclude the amount and timing of government stimulus, number of new COVID-19 cases, thelabor market recovery and the degree of volatility following U.S. presidential elections.”
Globally, the Conference Board predicts a 4.7 percent decrease in 2020 GDP worldwide willbe offset by the same 4.7 percent increase in 2021.
The International Monetary Fund painted a more optimistic picture in its October WorldEconomic Outlook report, predicting a 5.2 percent surge in global GDP during 2021 followinga 4.4 percent drop in 2020. The IMF’s outlook for the U.S. calls for a 3.1 percent increase in2021 GDP following a 4.3 percent drop in 2020.
“After the rebound in 2021, global growth is expected to gradually slow to about 3.5 percentinto the medium term,” IMF analysts wrote. Keep in mind that economic predictions aremerely predictions. For example, last year’s optimistic predictions for the first half of thisyear were upended by a virus that most of us could not have predicted. If you areapproaching retirement or already retired it’s a good time to reassess portfolios and financialplanning as part of your 2021 goal setting.