The COVID-19 pandemic halted economic expansion in March, forcing businesses and economic researchers to adapt accordingly. Though recovery has been slow, experts say there is reason to be optimistic for recovery over the next few years.
The Kelley School of Business forecasted in November the U.S. economy restart will continue into 2021, but with some deceleration compared to previous years, according to an IU press release.
Though output might regain its previous peak by mid-2021, the employment rate is unlikely to recover until 2022. Manufacturing and consumer spending for goods might see more recovery than unemployment due to a decline in the labor force, since employment is down by about 10.1 million jobs, according to the release.
Kyle Anderson, an economist with the Kelley School of Business, said although Indiana is doing well compared to other states because of its large number of manufacturing, automobile, transportation and logistics jobs that have recovered, many service industry and lower-wage jobs are not recovering, exacerbating income inequality.
“It’s going to be a long winter,” he said. “We all can probably think of small businesses that are either closing or struggling to survive.”
Anderson said to make it through the winter, community members should avoid spreading the coronavirus while still uplifting the economy when possible.
“We need everyone doing everything they can to slow the spread of the virus,” he said. “The biggest thing you can do to support the economy is keep yourself healthy and try to minimize the risk of spreading the virus, and when we do that then other parts of the economy continue to function well for longer. In the meantime, I think efforts to support small and local business are definitely worthwhile.”
The forecast also highlights the severity of this recession compared to those like the Great Recession of 2007-2009. Ryan Brewer, associate professor of finance at IU-Purdue University Columbus and co-author of the forecast, said this is because of how quickly the economy was shut down.
“The pattern of the pandemic shock to the economy was more severe,” he said. “When it’s a situation where the decline is more gradual, we have a lot more time within the economic response to make a measured, more careful response and pull levers we need to pull to get the economy going again."
Brewer said the severity of the situation came from having to shut fown the economy in an effort to keep case numbers low and not overwhelm hospitals.
Other key findings in the forecast suggest short-term and longer-term interest rates will remain low in 2021, corporate earnings among companies in the S&P 500 index are expected to rebound and the world economy is expected to shrink by 4.4% in 2020 and expand by 5.2% next year. The forecast also outlines how a resurgence of COVID-19 infections and tightened government restrictions may drag the world into a global recession.
China will be the only major economy with positive growth in 2020 as it hasn’t been impacted by a strong resurgence of the virus, according to the forecast.
Before vaccines can be distributed to the general public, much of the 2021 economic forecast hinges on Indiana’s ability to stay open. But because Gov. Holcomb rolled back Stage 5 of reopening, it’s unclear how that will affect the forecast going forward. If Indiana can reopen safely, the forecast predicts stronger, positive economic growth in the second half of 2021 and subsequent positive economic output for 2022.
Senior Jacob Griffith is a finance and accounting major and recently landed a job with BDO USA in Chicago after graduation. He said he feels the economy isn’t bouncing back as much as he had hoped, but he is glad to have found work.
“It was more difficult than usual to find a job this semester,” he said. “I got really lucky and found a couple firms that liked me, but I know a bunch of people who are really smart who would, in normal times, definitely get a job or have a job offer already but are still trying to find one.”
Brewer said regardless of the current economic climate, students should remain optimistic and continue to work hard to pursue prospective careers.
“Find your passion,” he said. “Just because there’s a recession or a slow down, it doesn’t mean that there are no jobs, it doesn’t mean that there are no opportunities. It just means that instead of knocking on seven doors and having two of them open, you might have to knock on 77 doors and only have one of them open.”
A detailed report on the outlook for 2021 will be published in the winter issue of the Indiana Business Review this month.