Today’s economic news is uncommonly upbeat.
The Associated Press reports that economists are increasingly optimistic about a mid-year recovery.
“I am not often optimistic,” said Heidi Shierholz, an economist at the liberal Economic Policy Institute. “But I am optimistic now.”
The brighter outlook rests on three premises. The first is that household finances, as a whole, are much healthier now, with less debt and more savings, than after the Great Recession a decade ago. Once the virus is contained, that cushion of cash could drive pent-up consumer spending. That spending, in turn, would support faster hiring.
The second premise is that the pandemic recession has yet to inflict the type of structural damage to higher-paying sectors of the job market that the Great Recession did. In 2008-2009, 4 million construction and manufacturing jobs — many of them highly skilled, well-paying positions — were lost and never fully recovered. Both those sectors still have fewer jobs than they did in late 2007.
And the third dynamic is that the Federal Reserve and the Treasury Department appear more intent on spurring job growth and less concerned about igniting inflation or increasing budget deficits than they were a decade ago.
A couple of positive indicators:
Activity in the services sector is stronger than it was before the pandemic.
The services sector, where most Americans work, operated in January at the highest level in almost two years.
Activity climbed to a reading of 58.7% last month on a seasonally adjusted basis, according to a report Wednesday from the Institute for Supply Management, up a full percentage point from 57.7% in February.
Last month’s gain came as a surprise to economists who had been looking for a slight decline given that the country was battling a severe resurgence of virus cases in January. Any reading above 50 signals expansion in the services sector.
And it was the highest reading since February 2019, when the index hit 58.8%. January was the eighth straight month of growth after sharp spring declines as the global pandemic broadsided the U.S. economy.
And ADP reports private sector employment grew by 174,000 between December and January, As Calculated Risk writes,
This was well above the consensus forecast of 45,000 for this report.
A note of caution:
The BLS report will be released Friday, and the consensus is for 50 thousand non-farm payroll jobs added in January. Of course the ADP report has not been very useful in predicting the BLS report.
Keep those vaccinations coming.