Better but different.
That’s the short version of Zions Bank’s 2021 outlook for the economy. During a webinar last week, Robert Spendlove, the bank’s senior economist, said the U.S. and the Intermountain region’s economies are fundamentally sound and ultimately will recover from the COVID-19 pandemic.
“It is important to keep in mind that the economy will be different a year from now than it was a year ago,” Spendlove said. “We’re kind of in a new normal. We don’t know exactly what it’s going to look like, but it will be different. But to me, this is kind of the nature of a dynamic economy, and I remain optimistic about the future.”
The year 2020 was “something that we’ve never seen before,” he said. “The contraction was dramatic and swift, and coming out of it, in the short term, the economy will continue to struggle.”
That, he said, will be especially true in the economic sectors hardest-hit by the pandemic’s impacts: leisure and hospitality, travel and tourism, and personal services.
“The economy is being driven by the virus and as long as we have the virus continuing to surge, the economy will continue to struggle,” Spendlove said. “As the vaccine rollout starts to accelerate, as more people get immunity, we’ll be able to re-open the parts of the economy that are being constrained and we should actually see strong economic growth in the latter half of 2021 and we should see markets, individuals and economies returning to normal.”
Spendlove described the past year as a “black swan” event: extremely rare, unexpected, severely impactful and also something that could not have been prevented or predicted.
“The recession that we felt last year, and the economic conditions that we continue to see, are not the result of an underlying weakness in the economy. It wasn’t the result of policy mistakes. It wasn’t the result of inefficient markets. It was the result of this black swan event,” he said.
The impacts were deep and broad. More than 22 million Americans lost their jobs in the spring and only 10 million have been brought back. The leisure and hospitality sector lost more than one-fifth of its jobs. The national unemployment rate in April hit 14.7 percent, compared to February’s 3.5 percent, and in November it had recovered to 6.7 percent. The labor force participation rate even now is at a level last seen in the mid-1970s.
And those who have lost their jobs struggle to find another one. One recent week, the number of Americans filing initial unemployment claims was about 787,000 — far below the 7 million mark as the pandemic hit but still way above the 282,000 before COVID-19’s impacts.
The nation’s GDP slipped 31.4 percent in the 2020 second quarter and rebounded in the third quarter with a 33.1 percent increase. But the GDP’s value has continued to suffer.
Consumer confidence is near 12-month lows, personal savings rates are down and the national debt as a share of GDP is approaching levels last seen in World War II.
A graph showing the recovery in 2021 could take on the look of a Nike swoosh, “where we have initial quick response but then slow ultimate recovery,” Spendlove said.
Meanwhile, the region benefits from strong population growth trends and relatively good unemployment rates and labor force participation rates.
“The good news is, the economy and markets are improving again,” said Scott Anderson, Zions Bank’s president and CEO. “In fact, the S&P 500 ended 2020 up more than 16 percent. The historic task of development and deployment of a vaccine is also boosting confidence that society will be able to return to normal soon.”
Nonetheless, the national unemployment rate remains high and short-term economic conditions “remain tenuous,” he said.
Anderson said he expects more short-term economic restrictions. “But we are confident,” he said, “the U.S. economy is resilient and will emerge from this episode stronger.”