The United States could look like a booming economy by the end of the year but with emergency monetary and fiscal policies.
The Federal Reserve said this week that it anticipates 6.5% gross domestic product growth for the year, which would be the strongest annual growth since the Reagan years. It also sees unemployment falling to 4.5% before the year ends.
Chief financial officers of some of the country’s biggest organizations are optimistic. While only 29% of CFOs said that North America’s economy is currently good, an overwhelming 73% expect it to improve throughout 2021, according to a survey released this week by Deloitte.
The jobs report for February was also better than anticipated and found that the economy added 379,000 jobs, well above economic forecasts that pegged the number at fewer than 200,000 new jobs.
Consumer confidence, which dropped profoundly during 2020 as a result of the economic slowdown, is also on the rise this year. Customer sentiment jumped to 83 in early March, up from 76.8 in February, an 8.1-point gain, but that figure is still down from a year ago when it sat at 89.1, according to an index by the University of Michigan. Consumer expectations on the same index rose by nearly 10 points from February to early March, and it’s likely those figures will continue to grow as the number of COVID-19 vaccines increases and business restrictions are eased.
At the same time the economy will be returning to health, the accompanying federal policy is projected to be extreme by historical standards.
Fed Chairman Jerome Powell has said that the Fed doesn’t expect a rate hike from near zero in the next three years. He has said officials intend to keep short-term rates near zero until there is 2% sustained inflation and maximum employment.
The Fed also announced Wednesday that it will be buying $120 billion in government bonds per month until its goals are met.