It is happy to know that the world’s largest economy in the U.S. is improving after the demolition caused by the COVID-19 pandemic. This report has been derived on the positive outlook, is based on reviews of the experts on key economic indicators (KEIs’), including the gross domestic product, joblessness, and inflation. Experts have taken the prices of oil and gas, employment, and climate change impacts into their consideration highly, while conducting the analysis.
Although the economy recovered in the third quarter of 2020 by the experienced 33.1% expansion, the record was not enough to offset the earlier losses, including the 5% annual rate loss in gross domestic product that took place in the first quarter of the year, signaling the onset of the 2020 recession. This recession was mainly caused by the shutdown that followed the orders from the government to slow the outbreak spread. The pandemic and the decision to shutdown, ended the longest economic expansion in United States history. According to the definition of the National Bureau of Economic Research (NBER) on the word, recession; it is a significant decline in economic activity, lasting more than a few months.
The recession that took place during the month of March 2020, ended 11-year economic expansion, which was the longest in the United States history. The economy slowed down by 31.4% in the second quarter. Since record keeping started in 1947, the quarterly gross domestic product of the United States had never experienced a drop greater than 10%, until during the pandemic. During the second quarter, in April the retail sales in the United States economy went down by 14.7% as the governors closed nonessential business operations, but by the following month, during May the sales increased by 18.3% as the shops and restaurants slowly began to open safely. During November, as the pandemic hit its second wave, sales started falling again declining by 1.1%.
Following furloughing workers by the employers due to pandemic, the unemployment rate in April increased to 14.7%. This unemployment rate remained double digit until August, and then steadily declined to 6.2%.
The most recent Federal Open Market Committee (FOMC) meeting forecast released on 16th December 2020 says that the United States gross domestic product growth is subject to decline by 2.4% in 2020. It is also estimated to improve a growth rate upto 4.2% in 2021 and slowdown to 3:2% in 2022, and stay at 2.4% in 2023.
Further to the Federal Open Market Committee report highlights, the unemployment rate for the year 2020 will be 6.7%. The report also says that the unemployment rate also will gradually decline in the coming years, down to 5% in 2021, 4.2% in 2022 and will stay at 3.7% in 2023. These figures on the unemployment rates have given a positive outlook comparatively to the peak number recorded at 14.7% in 2020, as employers let the employees go from their jobs in response to the initial state of the pandemic. The rate of unemployment includes the underemployed, the marginally attached, and discouraged workers, and this has caused the figure to be round double the widely-reported data you normally see in the news articles.
The reporting on the occupational outlook that goes into great detail about the industry and job position is published by the Bureau of Labor Statistics (BLS) each year. In the recent report published by BLS, they expect the total employment in the United States to increase by 6 million jobs during the 10 year period between 2019 to 2029. But the BLS has not taken the impacts of the COVID-19 pandemic and related response efforts into their consideration while finalizing the report data in spring 2020.
Healthcare and social assistance positions are expected to grow to 3.1 million jobs over the course of the decade, reaching 23.5 million in 2029. Rapid growths expected in computer and math occupations and the Bureau of Labor Statistics forecasts a 60.7% growth in wind turbine services related technician jobs from 2019 to 2029. The report also predicts that the manufacturing and retail industries will continue shedding jobs and the e-commerce industry will continue to grow further. Further to them, this switch will create jobs in transportation and warehouses. Postal services, agriculture and some information-related businesses will decline during the 2019 to 2029 time period.
The inflation rate is expected to contract by 1.4% in 2020, and it is estimated to then rise to 1.8% in 2021, and to 1.9% in 2022, and stay at 2% in 2023. The Fed’s target inflation rate is 2%. The emergency meeting held by the Federal Open Market Committee in March 2020 to address the economic impact of the COVID-19 pandemic lowered the federal funds rate to stay between 0% to 0.25%. Then in September the committee announced it would keep the current benchmark rate of 0.1% until the inflation reached its expected 2% over a long period of time. According to the December 16th forecast, that couldn’t occur until at least 2023. The Fed funds rate controls short-term interest rates, that includes the prime rates of the banks on most adjustable loans and credit cards rated.
As another task of the Fed, it is working on to keep the long-term interest rates low in order to make it cheaper for borrowing money to encourage businesses and consumers on spending. A quantitative easing program has been started and soon expanded quantitative easing program purchases to an unlimited amount. Federal Reserves announced in March that it would purchase $500 billion and $200 billion worth U.S. treasuries and long term mortgage-backed securities, accordingly. Six months later by June 2020, its balance sheet had grown up to $7.2 trillion andlater by mid December the record reached $7,3 trillion.
The Fed reduces supply in the treasuries market by buying bank securities. That lowers the yield by increasing the prices on those long-term notes. The yield earned via notes set the benchmarks for the fixed-rate long-term mortgage loans and corporate bonds.
Returns (or yield) on treasury notes totally depend on the demand for the dollar. Higher demand on dollar , puts downward pressure on the yields. Investors interests on this successful investment methods may go down once the global economy is recovered.
The outlook on oil and gas prices from 2020 to 2029 is provided by the United States Energy Information Administration (EIA). The EIA predicts the prices for crude oil will average at $43 per barrel basis in the last quarter of 2020, and the prices for the same will average at $49 per barrel basis in 2021 for Brent global. Oil prices in the United States will also rise in 2021.
The United States EIA outlook further predicts rising oil prices through the period between 2020 to 2050. The data says that the average price for a Brent oil barrel could rise upto $183 in 2050 and this price has been sought after adjusting the inflation to 2019 dollar. It has not taken the government efforts to improve production of renewable energy to stop global warming, while preparing the report. The impact of the pandemic on the oil prices is also not taken into account while preparing the forecast.
However, how climate change will affect has also been separately stressed by the Federal Reserve. A research conducted by the Richmond Fed assumes that climate change also affects the annual GDP growth to reduce by up to a third of the historical average, provided that the country continues to produce a high rate of emissions.
Damaged on the United States economy from natural disasters like hurricanes and wildfires has also been experienced in 2020. Damage on the global economy from natural disasters associated with climate changes was $186 billion in 2018 and came down to $150 billion in 2019. The claims paid by the insurance companies on damages of natural disasters in 2018 was $86 billion and in 2019 it was $52 billion. The year 2019 itself experienced 820 natural disasters, compared to less than 600 a year between 1980 and 2006.
