The Federal Reserve raised economic expectations for the rest of the year and into 2021, projecting better growth and lower unemployment than previously expected as many industries continue to recover from pandemic restrictions.
The central bank now expects real gross domestic product to fall just 2.4% in 2020, compared to a decline of 3.7% predicted in September. The Fed also upped its 2021 real GDP forecast to 4.2% from 4.0% expected previously.
The Jerome Powell-led Fed estimates the unemployment rate to fall to 6.7% this year, further below the 7.6% previously predicted. The unemployment rate should fall to 5.0% in 2021, compared to the central bank’s previous estimate of 5.5%.
The news comes as President Trump’s economy has proven remarkably resilient to COVID-19 related lockdowns and the slowdown of economic activity that came with them. Prior to the onset of the coronavirus pandemic, unemployment was close to a half-century low and inflation remained low as well. Meanwhile, the Trump stock market rally from the day he was elected until December, 2019 more than doubled the average gains of presidents three years into their term.
A lot of the Trump economic boom came crashing down when states started imposing strict lockdown policies, leading to a March surge of over 45 million jobless claims.
But it didn’t take Trump’s economy long to come roaring back, with over 11.4 million jobs added since April, while other jobs have returned from their temporary hiatus. Perhaps more promising, GDP surged to an annualized rate of 33.1% in the third quarter of 2020, besting expectations and smashing through a 70-year-old record.
From the Council of Economic Advisers:
While the pandemic hit every major economy around the world, the United States experienced the least severe economic contraction of any major Western economy in the first half of 2020, with the Euro Area economy’s contraction being 1.5 times as severe as the contraction of the U.S. economy.
While Trump’s economy has benefited from his 2017 tax cuts and the furious pace at which the president slashed regulations, a potential Biden Administration would likely see a slower recovery. As a member of former President Barack Obama’s administration, Biden helped oversee the slowest economic recovery in 50 years.
That’s eight years of virtually zero income gain. And Obama and his Washington pals wonder why voters are in such a cranky mood.
Last week, the Joint Economic Committee of Congress issued a new report on the Obama recovery that’s loaded with even more bleak news.
On almost every measure examined, the 2009-15 recovery since the recession ended in June of 2009 has been the meekest in more than 50 years.
Not deterred by his previous results, Biden has promised to undo much of Trump’s economic agenda, which would reshape expectations for the recovery again – in the opposite again.