Outlook for 2021 – Early Perspective

Here is an update on the PowerPoint Deck from the St. Louis Federal Reserve databanks, focusing on the condition of the US economy.

In general, things have recovered substantially from the rapid and deep dip in business activity in 2020, due to the lockdown and other aspects of the pandemic. Levels of production and consumption have not reached previous peaks in 2019 and 2020, however.

Optimism is in the air as the vaccines roll out. At the same time, there is talk many jobs have been lost for the longer term – especially in food, lodging and travel. Patterns of work may permanently change. More remote work lowering demand for offices. More retail moving online, impacting commercial real estate via the decline of shopping centers and retail outlets generally. Logistics and warehousing are growth areas of the economy.

Growing inequality is a troublesome feature. Many workers in food services, hotels, travel and retail have experienced joblessness, making paying the mortgage or even rent challenging. Food banks look to be doing a booming business. The closure of normal public school operation in many areas has impacted families depending, in some measure, on the school lunch programs.

On the other hand, the stock market sees new highs. Of course, only a small percentage of people own any significant number of stocks, so the efforts of the US Federal Reserve to bolster markets have very different impacts on groups of people in the US.

About 70 percent of US gross domestic product (GDP) is accounted for by consumer spending. It’s possible that the overhand from the pandemic could wing consumer spending later in 2021, if there is not substantial rebound in employment or significant government stimulus.