Three Economic Trends to Watch in 2021

As 2021 kicks off, the economy is continuing to grapple with the ongoing effects of the pandemic. Three economic trends to watch out for in 2021 are:

December Jobs Report to Show a Winter Slowdown

This Friday, the Bureau of Labor Statistics will release its December jobs report, giving us our last backwards look at the labor market of 2020. The report is likely to show a job market buckling under the weight of the ongoing COVID-19 surge. Some other trends to watch this Friday include:

Long Winter or Early Spring?

The worsening pandemic is likely to impede the recovery in the coming months, but vaccines offer a light at the end of the tunnel. The question, however, is how quickly vaccines can be distributed and delivered. By the end of 2020, just 2 million Americans had received the vaccine, well short of the Trump administration's goal of 20 million. If the vaccine is slow to reach the public or be widely adopted, the return to normal will likely be pushed back even further into 2021.

Complicating matters, the new variant of SARS-CoV-2 first detected in the United Kingdom and now detected in several U.S. states poses additional risks. Even if the new variant is not more lethal, a more transmissible variant could add fuel to the fire—accelerating the pandemic and overwhelming health care systems while also delaying the return to normalcy. The vaccine is still expected to work on the new variant, reinforcing the importance of rapid and widespread distribution of the vaccine.

The Long Road to Recovery

There may not be political appetite for further relief and stimulus, particularly if Republicans retain control of the Senate under President-elect Biden. The recent relief package extended certain key provisions but many, like the expanded unemployment programs, expire in the spring before the vaccine is expected to be widely administered. A gap in benefits combined with a return to political gridlock could hiccup the economic recovery and leave many American households economically exposed and vulnerable.

It's also critical to remember that a return to normal is not the same as a complete recovery. While the vaccine may ensure that the pandemic is largely under control in the U.S. in 2021, the economy is still digging itself out of an enormous hole. There are 9.8 million fewer Americans on payrolls today than in February 2020, and it'll take some time for businesses to fully recover, expand hiring and bring Americans back into the workforce.

Additionally, a return to normal cannot ignore the impacts of the ongoing “K-shaped” recovery. The pandemic hit women disproportionately hard, as they often had to drop out of the workforce to care for children. Similarly,  minority workers who are disproportionately represented in hard-hit service industries, were adversely impacted by the pandemic more than others . We should be careful not to declare victory over the pandemic or hail an economic recovery until a full and equitable recovery is complete.