The picture is cloudy: why economists are worried about 2021

Americans may be gearing up for the holidays, but economists are looking forward to January and trying to sift through a raft of new data to figure out what to expect beyond 2020. The picture is murky at best — and there is growing concern that an uncontrolled surge in COVID-19 caused by the Thanksgiving weekend could further weaken an already slow recovery. Writes about this NBC News.

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“Right now we're looking for signs of cracks in what has been fairly good economic growth,” explained Gary Schlossberg, global strategist at Wells Fargo Investment Institute.

Economic data is causing discontent even among experts: some figures suggest a continued, albeit more modest, recovery, while others warn of possible danger. One warning sign is weekly unemployment claims.

Economists say the number of workers receiving unemployment benefits indicates that job losses in the spring and summer have escalated into a trend, as rising virus cases across the country are forcing businesses and schools to close.

The resumption of quarantine could have devastating consequences for workers, whose pandemic protection system will disappear in a matter of weeks. The pandemic unemployment compensation program ends the day after Christmas, and the pandemic unemployment relief program, which provided unemployment benefits to workers and others not normally covered by state programs, expires on December 31.

On the subject: Largest GDP Growth Ever: US Economy Strongly Recovers

“A lot of this data is really concerning,” said David Wagner, a manager at Aptus Capital Advisors. “There has been a lot of evidence published that may show more signs of slowing economic growth in the fourth quarter of this year, perhaps even in the first quarter of next year.”

GDP in the third quarter grew by 33,1%. The Department of Commerce said it has revised its policy towards increasing investments and exports. This growth in profits was offset by a revision of tactics to reduce spending by state and local governments, private investment and personal consumption. Economic growth in the third quarter was supported by increased production of durable goods. The huge jump in GDP in the third quarter came after the quarter in which economic activity fell 31,4%.

Household spending is currently flat, rising only 0,5% in October, but the Commerce Department reported that personal income, disposable income and savings rates have declined.

The movement in income and spending in opposite directions indicates that Americans are spending money that many raised at the beginning of the pandemic. It also shows the extent to which the restoration was supported by the government.

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“The risk is that we will see further contraction,” said Mike Englund, chief economist at Action Economics. Falling revenues could be the first sign.

“This could mean an even greater slowdown in the future,” he stressed.

A potential silver lining is that worsening economic conditions could prompt Congress to pass a stimulus package more quickly, said economist Scott Mayfield. “If we start to see a trend that the pandemic is picking up again, if unemployment claims start to rise ... that could provoke some of the more skeptical members of Congress to pass the legislation,” he said.

In addition, consumer sentiment has deteriorated. Their confidence fell in November, mainly due to rising negative expectations for the future. Ian Shepherdson, chief economist at Pantheon Macroeconomics, even said in a research note that spending could slump for the first time since April.

“We hope that the increase in spending on goods will be enough to offset the weakness in discretionary services, especially leisure and hospitality,” he explained. “Consumer spending falls in face of third wave of COVID-19.”

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