There is a race, however, between the vaccine rollout and the spread of new and more contagious mutations of the virus. These present the very real possibility of yet another spike before vaccine impacts can take hold. Even more concerning, there is already at least some evidence that the new mutations may be less affected by the vaccines currently in use. If public health restrictions to slow the spread of the pandemic are lifted too quickly or simply ignored by a tired and restless populace once they have received their vaccines, new spikes could occur even amongst vaccinated populations before drug makers have the opportunity to revise their vaccine formulations or develop necessary boosters to combat mutated forms. Aside from the vaccine race, there remain real potential threats that could easily reverse the tentative early indicators of recovery. Eventual termination of eviction restrictions, likely continued need for additional airline and other travel industry support, serious governmental and educational budgetary shortfalls at state and local levels, reductions and eventual termination of unemployment benefits, and continued depression of foodservice and event businesses all still represent real threats to any nascent recovery. Based upon the assumptions about the course of the pandemic described previously and our analysis of economic factors, prior business cycle patterns in periods of crisis, and the likely impacts of changes in operations and customer behavior, we now forecast an increase in U.S. GDP for 2021 of approximately 5.4 percent as there will be less ground to makeup from the smaller 2020 decline than we originally expected. Even with that growth, the economy as a whole will already have moved beyond its 2019 level by the end of 2021, an amazing recovery, not just better than we once thought, but better than we could have hoped. GDP is forecast to grow by 2.5 percent in 2022 over 2021 as it settles into its new post-pandemic patterns but still deals with long-term adjustments to new working and living environments and with residual soft spots. This information is presented in the graph on the following page. As we have noted all along, unemployment tends to lag GDP and other economic indicators as an economy recovers. As a result, we still do not expect employment to recover as quickly after the pandemic. We now forecast an annual average unemployment rate for the U.S. as a whole of 6.7 percent for 2021 and 5.9 percent for 2022. We continue to expect an uptick in inflation in the next two years due to the Federal Reserve’s stated comfort level with rates above 2.0 percent on at least a temporary basis and the continued ripple effects of fiscal stimulus efforts and increased employment costs. We now forecast an annual inflation rate for the U.S. economy of 2.5 percent in 2021 and 3.2 percent in 2022. The forecasted unemployment and inflation rates described are shown in the graph on page 23.
∴ GENERAL ECONOMIC CONDITIONS
21
Made with FlippingBook - Online catalogs