Tags: goldman | economy | 2021 | pandemic | unemployment | gdp

Goldman: Strong 2021 Economy, But It Will 'Get Worse Before It Gets Better'

Goldman: Strong 2021 Economy, But It Will 'Get Worse Before It Gets Better'

By    |   Friday, 13 November 2020 02:11 PM

Goldman Sachs reportedly projects GDP will grow at a 5.3% pace in 2021, ahead of the Federal Reserve consensus of around 4%.

However, the firm cautions that the pace of the economic recvoery will likley “get worse before it gets better” due to coronavirus spread, CNBC reported.

“Fiscal support has largely dried up for now, leaving disposable income lower in the final months of the year. But the largest risk is that the third wave of the coronavirus is likely to worsen with colder temperatures,” Goldman economist David Mericle wrote in a report cited by CNBC.

However earlier this week, investor risk appetite was boosted by Pfizer Inc.'s (PFE) announcement that the COVID-19 vaccine being developed with German partner BioNTech SE (BNTX) appeared to be 90% effective, Reuters explained.

Once the vaccine is approved, the most at-risk parts of the population would get inoculations first and then economic healing can accelerate, CNBC quoted Mericle as predicting.

“But the path is likely to be bumpy as virus resurgence puts the brakes on the recovery this winter before the vaccine effect triggers reacceleration next spring,” he said.

Meanwhile, Goldman also sees the unemployment rate falling to 5.3%.

More than $3 trillion in government coronavirus relief for businesses and workers fueled a historic 33.1% annualized rate of economic growth in the third quarter. That followed a record 31.4% pace of contraction in the April-June quarter.

Lack of fiscal stimulus and spiraling new coronavirus infections put the economy on a sharply slower growth path heading into the fourth quarter. Restaurants and gyms have moved outdoors, but cooler weather and the resurgence in COVID-19 infections could leave many in trouble.

Meanwhile, the U.S. economy created the fewest jobs in five months in October and more Americans are working part time, underscoring the challenges the next president faces to keep the recovery from the pandemic on track as fiscal stimulus dries up and new COVID-19 cases explode across the country.

Though small and medium-sized businesses have suffered most from the pandemic, large corporations have not been spared. Exxon Mobil last month announced 1,900 layoffs in the United States. Boeing said it expected to eliminate about 30,000 jobs, 11,000 more than previously planned, by end-2021, Reuters reported.

The unemployment rate fell to 6.9% from 7.9% in September. But it continued to be biased down by people misclassifying themselves as being “employed but absent from work.” Without this recurring mistake, the government estimated the jobless rate would have been about 7.2% in October.

The number of people out of work for more than six months surged by 1.2 million in October. There were 6.7 million people working part time for economic reasons, reflecting reduced hours because of slack work or business conditions. That was up 383,000 from September.

The share of permanently unemployed increased to 40.9% in October from 35.6% in the prior month.

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Goldman Sachs reportedly projects GDP will grow at a 5.3% pace in 2021, ahead of the consensus around 4%.
goldman, economy, 2021, pandemic, unemployment, gdp
Friday, 13 November 2020 02:11 PM
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