One year ago, the world sat in nervous anticipation of the yet-unknown ways that the novel coronavirus would change the shape and momentum of life as it was known. Despite the dire predictions of deep recessions and long-term plunging GDP, Beacon Economics, one of the nation’s leading Independent economic research and consulting firms, has taken an in-depth look at how the U.S. economy fared and where it is heading, according to the newest Western Alliance Bank Regional Intelligence Report.
Getting Back to Work
With a holistic look at the economy, the most significant pandemic-activated declines took place in the labor market, which sustained a significant downturn in March and April 2020, resulting in the loss of 22 million jobs, sending unemployment rates skyrocketing from 3.5% to 14.8%. A year later, more than half of the jobs have been recovered and the unemployment rate rests at 6.7%.
With the most substantial job loss (40%) occurring in the Leisure and Hospitality sector alone, Financial Activities and Professional, Scientific, Technical and Management Services remained largely unaffected. As the numbers suggest, lower-income and less-skilled workers were hardest hit. As laid out in the Regional Intelligence Report, Beacon Economics anticipates strong recovery and growth in Leisure and Hospitality in 2021, yet not quite to pre-pandemic levels.
Examining Household Economic Health
Yet despite the job losses and unemployment dip, household savings have shot up to levels not seen in the history of the U.S., including 25% in the second quarter of 2020 and 13.4% by the end of the year due largely to fiscal stimulus. As well, household debt service payments were at their lowest share of disposable personal income in decades.
The report zeroes in on bigger pocketbooks, as well as recovering unemployment rates as the key drivers that will contribute to growth in 2021.
Key Sectors Under the Microscope
The report also took a keen look at the health of key industries, which mirrored the unemployment rates. With Leisure and Hospitality seeing the largest decline, most industries were largely unaffected by the downturn. Wholesale Trade, Information Services, Financial Activities, Professional, Scientific and Tech Services and Management all experienced declines off less than 3% from December 2019 to December 2020.
Another major indicator of future economic health is within the residential real estate sector, which Beacon Economics predicts will continue its strong surge. Virtually uninterrupted by the pandemic, the sale of single-family homes across the nation increased by 23% from December 2019 to December 2020 in large part to low mortgage rates.
A Look Ahead
Against the backdrop of plunging employment figures and rapidly declining GDP as the pandemic took grip, the U.S. experienced one of the shortest-lived recessions of recent times. Although the bulk of the downturn was seen in April and May 2020, the economy saw a slight loss of momentum at the end of 2020 as the spread of coronavirus peaked and new variants emerged.
But as vaccine distribution becomes much wider and treatment options continue to improve, Beacon Economics predicts that 2021 will be a year of unprecedented growth in terms of recent history. Unlike prior recessions, the pandemic-induced recession occurred against a strong economy that included high savings rates, low household debt and a healthy consumer. It is anticipated that employment gains and anticipated consumer spending bolstered by the second fiscal stimulus package, will drive strong economic expansion in 2021.