WASHINGTON (MaceNews) – The National Association for Business Economics, in its March outlook survey of members released Monday, found more optimism about growth but no full jobs recovery until 2023. Their views are bullet pointed here:
Summary:
While NABE panelists have become increasingly optimistic about future GDP growth, their views on the job market are less so,” added Survey Chair Holly Wade, executive director, NFIB Research Center. “Despite unemployment projected to decrease every quarter through 2022, 59% of panelists do not anticipate a full recovery in the job market to pre-pandemic employment levels until 2023 or later. “About half of the respondents considers the balance of risks to economic growth in 2021 to be to the upside, whereas fewer than one-quarter expects the balance to be to the downside,” continued Wade. “Panelists point to a large fiscal stimulus program and a faster vaccine rollout as the main upside risks.”
Highlights:
•NABE panelists have grown more optimistic about the prospects for economic growth in 2021. The median forecast for the first quarter (Q1) of 2021 calls for an increase of 3.4% in inflation-adjusted gross domestic product (real GDP), quarter-over-quarter (q/q) annualized. This growth rate would be less than the Q4 2020 growth rate of 4.1%, but higher than the December survey panel’s median forecast for Q1 2021 of 2.9%. The median forecasts for the remainder of 2021 have also risen from those in the December survey, to 5.2% in Q2 (from 3.5%), 5.6% in Q3 (from 3.2%), and 4.8% in Q4 (from 3.1%)
•The median forecast for the change in real GDP from Q4 2020 to Q4 2021 is 4.8%, compared to 3.4% in the December survey. The median real GDP growth estimate for 2022 is 3.0%.
•On an annual-average basis, the panel expects real GDP to increase 4.8% in 2021, but then to taper off to 4.0% growth in 2022
•Panelists’ views regarding risks to growth in 2021 vary widely. Fifty-one percent view risks as skewed to the upside—an increase from 37% in the December survey. Less than a quarter of respondents (22%) sees more downside risks, while 25% view risks to the outlook as weighted neither to the upside or downside.
•A vast majority (82%) of panelists expects real GDP to return to pre-COVID-19 recession levels sometime in 2021, with most (52%) anticipating that to occur in the second half of the year (H2 2021). Fourteen percent of respondents indicate this will happen in 2022, and 4 percent think it will take until 2023 or later.
•The panel is less optimistic regarding a job market recovery, as 59 percent of survey respondents anticipate nonfarm payrolls will return to pre-COVID-19 levels in 2023 or later. Twenty-seven percent expect this to occur in H2 2022, and 10 percent expect it in H1 2022
•A plurality of panelists – 39% – regards a large fiscal stimulus program as the biggest upside risk to the economy. A faster vaccine rollout ranks second as the biggest upside risk (cited by 31% of panelists), but that is a decline from the 78% who held this view in the December survey.
•Health-related topics continue to dominate the downside risk assessment. Two-thirds of panelists view vaccine-resistant variants of the coronavirus as the biggest downside risk. A slower vaccine rollout is cited by 10% of respondents, while another 10% list fiscal policy inaction as the biggest downside risk.
•In the eyes of the panelists, the odds of a double-dip recession have fallen even further since the December survey. A large majority (87%) of panelists puts the odds of a “double-dip” recession at less than 30%, with almost one-third (30%) of respondents pinning the odds at less than 10%. Only 2% place the odds of a double-dip recession at 50% or higher.
•Expectations for 10-year Treasury yields have risen since the December survey. The median response calls for the yield to close 2021 at 1.45%, up from 1.15% forecasted in the December survey. Yields are expected to rise to 1.8% by year-end 2022.
•A vast majority of panelists (84%) expects the federal funds rate to remain where it currently stands through 2021, with an upper limit of 0.25%. The share of panelists that expects the rate to increase has risen from 9% in the December survey to 16%, with 10% expecting an increase of one percentage point or less, and 6% anticipating a year-end rate of 1.75%. Continued on next page
The outlook for real residential investment is substantially more optimistic than in the December 2020 survey. The median forecast calls for 12.4% growth in 2021, compared to a 6.8% increase projected in the December survey. Real residential investment growth is expected to cool to 4.7% in 2022.
•The panel expects real business inventories to rise this year, with the median forecast calling for an increase of $71 billion in 2021, after an $81 billion decline in 2020. Inventories are anticipated to rise $70 billion in 2022.
•Real federal, state, and local government consumption expenditures and gross investment are expected to increase by a combined 0.7% in 2020, down from 1.1% growth in 2019, but up from 0.2% forecasted in the December survey. Respondents anticipate real government spending growth to accelerate to 1.3% in 2022.
•Panelists expect the euro will appreciate to around $1.22 in December 2021, up from $1.20 in December 2020. The euro is then anticipated to stabilize around $1.22 through December 2022
•The federal deficit is expected to widen from $3.13 trillion in fiscal year 2020 to $3.20 trillion in fiscal year 2021 – roughly $1.0 trillion wider than the $2.19 trillion median forecasted in the December 2020 survey. In fiscal year 2022, the deficit is expected to narrow to $1.76 trillion
•Industrial production is expected to grow 5.5% in 2021, compared to the December 2020 projection of 4.4%. The outlook for 2022 calls for industrial production growth to cool to 3.8%
•The median projection for monthly nonfarm payroll employment growth in 2021 is 351,000, which is about 9% lower than the 387,000 jobs anticipated in the previous survey. The panel expects some softening in net hiring in 2022, with the median forecast calling for 258,000 net new jobs.
•The median forecast calls for the unemployment rate to average 5.8% in 2021, 0.5 percentage points lower than the median forecast in the previous survey. The panel expects the unemployment rate to decline every quarter through 2022. Respondents anticipate the unemployment rate will average 4.7% in 2022.
•Panelists anticipate slower productivity growth this year compared to 2020. The median forecast calls for productivity growth—as measured by real nonfarm business output per hour – of 1.8% in 2021, down from 2.6% growth in 2020, but a tad faster than the estimate of 1.7% in the previous survey. Respondents anticipate labor productivity growth to remain steady at 1.8% in 2022
•Nonfarm business compensation growth is projected to decline from 7.0% in 2020 to 3.0% in 2021. The current 2021 forecast is up from the previous estimate of 2.2% in the December survey. Panelists anticipate nonfarm business compensation growth to slow to 2.7% in 2022
•Consumer spending, as measured by real personal consumption expenditures (PCE), is forecasted to increase 5.4% in 2021, better than the expectations reported in the December survey, which called for a 4.6% increase. Respondents anticipate consumption to rise 4.1% in 2022. Real PCE decreased 3.9% in 2020
•The median forecast for new light vehicle sales in 2021 is 16.5 million units, better than the projection in the previous survey, which called for sales to total 16.1 million units. Panelists anticipate vehicle sales will increase to 16.7 million units in 2022. There were 14.5 million units sold in 2020. Continued from previous pageContinued on next page
•Panelists look for real fixed business investment to rise by 6.6% in 2021, after declining by 4% in 2020. The forecast is better than the expectations reported in the December survey of 3.7%. Panelists anticipate real nonresidential fixed investment growth to moderate in 2022, increasing 5.0%
•Panelists forecast homebuilding will accelerate from 1.38 million starts in 2020 to a pace of 1.49 million starts in both 2021 and 2022.•Existing-home prices, as measured by the Federal Housing Finance Agency (FHFA) house price index, are forecasted to increase 5.3% between Q4 2020 and Q4 2021, and then slow to a 4.1% increase in 2022.
•Survey respondents expect inflation – as measured by the GDP price index – to be higher in 2021 and 2022 than in 2020. Inflation is forecasted to be 1.9% in 2021 and 2.0% in 2022. The index increased 1.2% in 2020. Panelists expect similar increases in inflation in 2021 and 2022 compared to 2020, as measured by the consumer price index (CPI) and the personal consumption expenditures (PCE) price index.
•The median forecast calls for the price of West Texas Intermediate (WTI) crude oil to average $55 per barrel in December 2021, and $59 per barrel in December 2022. The price averaged $47 in December 2020.•Panelists expect corporate profits to increase by 9.2% in 2021, down slightly from the previous estimate of 9.5% in the December survey. The median forecast calls for profits to rise by 4.5% in 2022
•Roughly two-thirds (68%) of panelists indicate that up to 5% of jobs will be permanently lost due to the health crisis, broadly in line with panelists’ views in the December survey. Twenty-three percent of respondents anticipate between 5% and 14.9% of job losses will be permanent, while the remaining 9% of respondents are unsure.
•The largest share of panelists (39%) indicates that between $500 billion and $1.0 trillion of additional stimulus might be needed to get U.S. real GDP back to its pre-COVID peak. Twenty-two percent of panelists anticipate that less than $500 billion could be necessary, and 24% of panelists indicate that between $1.1 and $1.5 trillion in additional stimulus could be required. Ten percent of respondents suggest that $1.6 trillion or more might be needed.
•Forty-three percent of panelists expect U.S. real consumer spending on services will rebound to pre-COVID-19 recession levels in 2021, with 12% expecting a return as early as the first half of this year, and 31% anticipating a return in the second half. Twenty-seven percent of respondents anticipate U.S. real consumer spending on services will return to pre-recession levels in the first half of 2022, while another 18% view the second half of 2022 as the most likely timing. The remaining 12% of panelists do not anticipate a return to pre-recession levels for U.S. consumer spending on services until 2023 or later.
•Relative to their pre-COVID forecasts, 44% of panelists expect that the shortfall in Q4 2021 real GDP will be 1% or less, while 28% of panelists expect the shortfall to be between 1% and 2%. Twenty-four percent of the panelists expect that the shortfall will be greater than 2%
•About half the panelists (52%) have revised their 2021 GDP growth outlook higher because of Democrats winning control of the Senate, while 8% have revised their outlook lower. Forty percent of panelists did not revise their 2021 GDP growth outlook after the change in control of the Senate.
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