US Economy May Have A Tricky Rebound

By on
While the US economy is on a strong recovery path, many employers are having trouble filling posts, leading to a rise in wages and in turn inflation
While the US economy is on a strong recovery path, many employers are having trouble filling posts, leading to a rise in wages and in turn inflation

The U.S. economy has grown as many businesses and industries have reopened, but will the economy ever go back to what was "normal?"

Data on Sunday from CNN’s Business' "Back-to-Normal Index" pointed out that "normal" may not be too far away but it may be a different outcome than most might expect.

CNN Business teamed with Moody Analytics to come up with the “The Back-to-Normal Index” which goes over the numbers of different scenarios that would make the U.S. economy normal again. These include unemployment claims, state unemployment rates, how many are getting hired, how many are being laid off and have quit, small business work hours, and job postings. Along with a 30-year mortgage rate, the Dow Jones Industrial Average, personal savings, consumer credit, small business closures, and e-commence spending.

The data they have collected shows that the economy is slowly on its way back to normalcy, but day-to-day life is much different than it used to be.

In short: things are improving, but they have yet to return to normal.

CNN noted that the pandemic may have changed some fundamentals of the economy in ways that mean it's never going back to "normal."

Working from home is a change that may be staying for the long haul. People and businesses have adapted to this change and are preferring this rather than going into the office. This is a change that has allowed the workforce to become more diverse. 

Dr. Daniel Bachman, a senior manager with Deloitte Services LP, put it this way in his assessment of an economic recovery: "'Normal' recessions permanently damage the economy. Investment suffers, leaving the economy with less capital than it might have had with no downturn. While unemployed, workers lose skills and hence productivity. Spending on R&D, a key driver of innovation, falls off as businesses focus on their current balance sheets."

However, Bachman struck a very optimistic tone for four reasons: business finances are healthy, households are sitting on a large pile of savings, the acceleration of productivity trends, and government spending to continue to support growth.

Earlier this month, the Conference Board Economic Forecast provided a forecast that real GDP growth will rise to 9% in the second quarter and 6.6% year-over-year in 2021 and it expects the recovery to continue through the rest of 2021, citing a rise in consumer spending. The forecast comes after the consumer confidence index fell in May for the first time in 2021 due to inflation fears and an uncertain job outlook.

Join the Discussion