By: Christopher Sirota, CPCU
What will happen to the U.S. economy in 2021 while the pandemic continues?
The COVID-19 pandemic has obviously affected the economy in many ways. A Brookings Institute report in September 2020 highlighted that the pandemic had caused demand, supply and financial shock—and nearly all at the same time. The report lists ten effects, including a 20% reduction in small business revenue from January to September 2020, low income families facing income disruption, and in 26 states, one in five households was behind in rent payment as of July 2020.
Now, a January 2021 podcast (includes transcript) from NPR's The Indicator, has discussed three economic indicators that may reveal how the U.S. economy might be fairing in 2021.
The podcast asked the following three economic questions and considered an indicator to monitor which might help answer the question.
How might we evaluate if the government's recent economic stimulus is helping people?
Per the podcast, one way to evaluate might be to examine the survey the U.S. Census Bureau has been reportedly conducting which asks U.S. households if they have had enough food in the previous week (see the U.S. Household Pulse Survey data tool here). The podcast notes that the number of U.S. households reporting food insecurity jumped by 5 million from August to December 2020, to a total of about 27 million. So, for example, the podcast suggests that since a likely reason for the increase would be the previous stimulus money ending during that period, one could continue to monitor the survey data to see if the latest stimulus money can reduce the number households reporting food insecurity by possibly that same amount, 5 million, thus revealing significant effectiveness.
How might we evaluate if the economic damage caused by the pandemic has ended?
The podcast suggests monitoring the data for spending on services, which includes "doctor's appointments to eating in restaurants to staying in hotels to getting a haircut to attending a concert." The podcast explains that such services have been typically the hardest hit by the pandemic, so increases in spending might indicate the economy was on the mend. Per the podcast, the latest figures available are for November 2020, and the amount of spending was down by 7% compared to February 2020 (see the Bureau of Economic Analysis home page here).
How might we evaluate if the pandemic has caused potentially permanent or very long lasting damage to the economy?
The podcast suggests monitoring the Architecture Billings Index (see The American Institute of Architects web page for the index here). Why? Per the podcast, the index helps to understand the demand for architects and their firms. If the demand is low, then, according to the podcast, that typically means that the number of new office buildings and stores being constructed will be low as well. The podcast explains that currently the index has been dropping for nine straight months during the pandemic likely due to so many people working remotely and shopping online. Therefore, per the podcast, if in the upcoming months, the index does not increase, that might mean those certain pandemic habits—working from home and ordering online instead of shopping at physical stores — might remain for a long time..