The Economist - USA (2020-11-13)

TheEconomistNovember 14th 2020 61

1

O

n november 9ththe end of the coro-

navirus pandemic came into tantalis-

ing sight. Pfizer and BioNTech announced

that their vaccine was more effective than

expected. Investors’ hopes for a stronger

economy sent stockmarkets soaring. Ten-

year Treasury yields neared 1%, levels last

seen in March (see next page).

Even before the vaccine news broke, the

speed of America’s economic bounceback

was exceeding forecasts and surpassing

others in the rich world. In April the imf

reckoned that gdp would shrink by 6% in

2020. It now projects a decline of 4%. Un-
      employment peaked at 14.7% in April; in
      June the Federal Reserve had expected it to
      still be around 9% by the end of the year. It
      went on to fall below that rate only two
      months later. In October it stood at 6.9%.
      Can a vaccine accelerate the economy’s
      return to its pre-covid state? The coronavi-
      rus is still spreading unchecked, with the
      burden often falling on the poorest. But
      many economists had also worried that the
      pandemic would leave broader economic

scars that take time to heal. Here, a look at

firms’ and households’ finances offers

grounds for optimism.

The resurgence of the virus will put a

dampener on the recovery in the months

before a vaccine becomes widely available.

Infections are rising so rapidly that, in the

admittedly unlikely event that current

trends were to continue, 1m Americans a

day would be catching the disease by the

end of the year (see United States section).

Renewed local restrictions on activity

seem inevitable. That will lower some

types of economic activity and could in

turn increase the number of people who

have lost their jobs permanently.

Still, it seems unlikely that America will

enter a double-dip recession, as Europe is

expected to. For one thing, it probably will

not impose lockdowns as severe as those in

Britain, France or Germany. High-frequen-

cy indicators, including The Economist’s

analysis of Google mobility data, suggest

that America’s recovery has slowed com-

pared with the summer. But it has not gone

into reverse, as it has in Europe. And the

vaccine could boost the economy in some

ways even before it becomes available. Tor-

sten Slok of Apollo Global Management, an

asset manager, argues that “households

and firms are going to plan ahead, for ex-

ample by booking travel [and] vacations”.

On the current growth path, at the turn

of the year there will still be 10m fewer jobs

than there would have been without the

pandemic. Output will be some $700bn, or

4%, lower than otherwise. Most forecasters

reckon that income per person will not ex-

ceed its pre-covid level until 2022, if not

later. But growth will accelerate as jabs are

administered. Everything from theatres to

public transport will feel safer. That will

America’s economy

Giant jab

What a vaccine means for the world’s largest economy

Outperforming acts

GDP forecasts, 2020

%changeona yearearlier

Source:IMF

1

Britain

Euro area

World

United States

China

-9-12 -3-6 30

Forecast made in: April 20 20 October 2020

Finance & economics

62 A boostershotforinvestors

63 Buttonwood:Emergingmarkets

64 Turkey—aneweconomicregime?

64 AnamberwaveinAmerica

65 Klarna,a Swedishpaymentsunicorn

66 Free exchange: Epidemiologists v

economists

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