By Jonathan Wolf
No aspect of life in America escaped unscathed from the COVID-19 pandemic. Millions got sick, hundreds of thousands died, and even day-to-day tasks like picking up groceries and going to work changed dramatically.
According to the U.S. Pandemic Misery index developed by the USC Dornsife Center for Economic and Social Research, 80 percent of Americans experience a coronavirus-related hardship over the course of the pandemic.
We are not quite out of the woods yet. But nearly two-thirds of Americans have received at least one COVID shot. More than a million vaccine doses are still being administered every day, on average. Given the new guidance from the CDC on fully vaccinated individuals being largely able to resume pre-pandemic life (without having to wear a mask), businesses, government offices, and all sorts of places of public accommodation are beginning to enthusiastically reopen.
There will be no recovery for the hundreds of thousands of Americans who lost their lives to the COVID-19 pandemic. But for those who suffered only economic hardships, it seems there is hope on the horizon. The economic recovery is steaming ahead.
Unlike during some previous periods of economic instability, the government met this downturn with enormous policy support, which seems to be serving its intended purposes well. Consumers amassed trillions in extra savings during the pandemic and they are now interested in spending. Businesses are looking to hire; new businesses are being started at the fastest pace on record. Worker confidence in the labor market is the highest it’s been since at least 2000.
As a percentage of after-tax income, household debt-service burdens are approaching the lowest levels recorded since 1980, when records of this metric were first kept. Home prices are rising, and the stock market is hovering near record-highs. The evidence is piling up that the economic recovery is not only on track, it is progressing faster than expected.
A speedy and powerful economic recovery is surely better than the alternative. That being said, too-fast economic growth is not wholly without risk. Some economists fear market shortages spurred by an overheating economy.
Shortages of goods and raw materials have sprung up in some sectors already, as consumers and businesses compete to snatch up available stock. Certain segments of the economy have seen labor shortages as well. These conditions caused a spike in inflation, although many experts expect the jump in inflation to be nothing more than a temporary aberration.
The Fed has expressed confidence that price increases will remain a temporary phenomenon. Yet, some investors are skeptical. The Fed, and the central banks of other nations as the global recovery gains momentum, could tighten monetary policy sooner than anticipated.
The Summary of Commentary on Current Economic Conditions by Federal Reserve District (commonly known as the “Beige Book”) is a report published eight times per year in which each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District. The information collected by each of the Fed’s 12 regional banks is then compiled and summarized.
The latest Beige Book was released on June 2. In it, the Fed said, “Several Districts cited the positive effects on the economy of increased vaccination rates and relaxed social distancing measures, while they also noted the adverse impacts of supply chain disruptions.” However, the U.S. central bank generally used a relaxed tone in the latest Beige Book, ending its national summary of overall economic activity by saying, “Overall, expectations changed little, with contacts optimistic that economic growth will remain solid.”
A handful of Fed officials have discussed the possibility of scaling back the central bank’s bond-buying program in the near future. This has some analysts concerned. But markets seem to have embraced the official narrative from the Fed that inflation is only going to be transitory.
For now, the economic recovery appears to be ahead of schedule. That state of affairs still carries some risk, of course. Investors are going to keep a close eye on inflation data moving forward. If the uptick we have recently seen in inflation turns out to be more than just a temporary blip, the Fed will be more likely to make a move on monetary policy.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD. He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached [email protected].