CBO Report Says US Economy to Return to Pre-Pandemic Levels by Mid-2021

February 1, 2021 by Victoria Turner
CBO Report Says US Economy to Return to Pre-Pandemic Levels by Mid-2021
The U.S. Capitol. (Photo by Dan McCue)

WASHINGTON – The Congressional Budget Office estimates that the U.S. economy will return to its pre-pandemic level by mid-2021, but employment levels will not fully return to normalcy until 2024.

The nonpartisan federal agency that provides budget and economic analyses and estimates to Congress issued its report on the economic outlook for 2021 to 2031. The report projects that the gross domestic product levels will surpass the nominal 1.9% expected to a 2.6% annual growth, enabled by the economic expansion seen in mid-2020 that was “boosted” by a number of 2020 legislations and a quicker turnaround of companies adapting to the novel coronavirus pandemic.

Last July, the CBO had estimated the unemployment rate would be 8.4% by the end of 2021, which it now projects at 5.3%. This 3.1% point decrease is attributed to a quicker economic recovery than expected, but also the anticipated benefits stemming from the Consolidated Appropriations Act through its fund appropriation for the rest of this year for federal agencies’ pandemic response as well as relief for households and businesses. The report estimates that this pandemic-related funding response will bring an estimated $774 billion to FY21 and $98 billion to 2022, bolstering GDP by an annual average of 1.5% for the next two years.

Despite gradual improvement in the labor market, and an optimistic outlook the size of the civilian labor force will return to its former size by 2022 while foreseeing a gradual improvement of the unemployment rate, the number of individuals employed will still lag behind until 2024. The report also notes a gradual rise in inflation and federal funds as result of the ongoing pandemic, with the former rising to 2% at the end of 2023 and a gradual increase of the near-zero Federal Reserve’s fund rate gradual after 2024.

The economy is recovering faster, federal relief and further initiatives have kicked it into gear along with a quicker response by companies mitigating the remote work and social-distanced situations the global health crisis created. Nevertheless, the budget office is cautious that its projections can be “subject to an unusually high degree of uncertainty” not just from the unknown longevity of the pandemic and its long-term impact, but to how well these fiscal policies play out and the response to any volatility in global financial markets.

A more detailed report will be released in the upcoming months.

The full text of the report can be found here.

A+
a-
  • business
  • Congressional Budget Office
  • Employment
  • nonpartisan
  • U.S. Economy
  • In The News

    Health

    Voting

    Economy

    June 14, 2024
    by Dan McCue
    Nation’s Top Business Leaders Host Trump, Rate Economy ‘Stable’

    WASHINGTON — The Business Roundtable, the exclusive group of businesses that is also one of the most powerful lobbying organizations... Read More

    WASHINGTON — The Business Roundtable, the exclusive group of businesses that is also one of the most powerful lobbying organizations in the nation, played host to former President Donald Trump on Thursday, and also released its quarterly assessment of the U.S. economy. At least 80 of... Read More

    May 21, 2024
    by Dan McCue
    With Memorial Day Approaching, White House Moves to Keep Gas Prices Low

    WASHINGTON — With Memorial Day weekend fast approaching and the summer driving season just around the corner, the Biden administration... Read More

    WASHINGTON — With Memorial Day weekend fast approaching and the summer driving season just around the corner, the Biden administration announced it will sell 1 million barrels of gasoline from federal reserves to lower prices at the pump for all Americans. Energy Secretary Jennifer Granholm said... Read More

    April 12, 2024
    by Kate Michael
    IMF Director Sets the Stage for IMF-World Bank Spring Meetings 

    WASHINGTON — As the world's finance ministers and central bank governors prepare to convene in Washington, D.C., for the IMF-World... Read More

    WASHINGTON — As the world's finance ministers and central bank governors prepare to convene in Washington, D.C., for the IMF-World Bank spring meetings next week, Kristalina Georgieva, managing director of the International Monetary Fund, spoke about how this event comes at a delicate moment for the... Read More

    April 8, 2024
    by Dan McCue
    Biden Administration Invests $6.6B to Bolster US Chip Manufacturing

    WASHINGTON — The Biden administration is awarding up to $6.6 billion in grants to the Taiwan Semiconductor Manufacturing Company, the... Read More

    WASHINGTON — The Biden administration is awarding up to $6.6 billion in grants to the Taiwan Semiconductor Manufacturing Company, the largest maker of the most advanced microchips in the world, to help support construction of the company’s first major hub in the United States. The announcement... Read More

    Inflation Slowed Further in December as Economic 'Soft Landing' Moves Into Sharper Focus

    WASHINGTON (AP) — The Federal Reserve’s preferred inflation gauge cooled further last month even as the economy kept growing briskly, a... Read More

    WASHINGTON (AP) — The Federal Reserve’s preferred inflation gauge cooled further last month even as the economy kept growing briskly, a trend sure to be welcomed at the White House as President Joe Biden seeks re-election in a race that could pivot on his economic stewardship. Friday’s... Read More

    Americans' Economic Outlook Brightens as Inflation Slows and Wages Outpace Prices

    WASHINGTON (AP) — After an extended period of gloom, Americans are starting to feel better about inflation and the economy —... Read More

    WASHINGTON (AP) — After an extended period of gloom, Americans are starting to feel better about inflation and the economy — a trend that could sustain consumer spending, fuel economic growth and potentially affect President Joe Biden's political fortunes. A measure of consumer sentiment by the University of Michigan has... Read More

    News From The Well
    scroll top