U.S. Outlook

Updated: October 27, 2020

Fragile recovery hinges on election result and COVID-19 response.

U.S. labour markets continue to recover from the pandemic-induced sharp drop in employment, which began toward the end of March. However, there is still a long way to go, as there is still a deficit of jobs that will take months to fill. The upcoming U.S. election this November will have a major impact on recent trends in nationalization and trade protectionism, which have had a negative effect on the global economy.

Contents of the Autumn 2020 edition:

  • Aggregate demand
  • Financial markets
  • Fiscal policy
  • Labour markets
Woman wearing mask; hands pinning election button to jean jacket lapel

Key findings

The U.S. economy will decline by 4.4 per cent this year before recovering and expanding by 3.9 per cent in 2021.

The recovery depends crucially on a vaccine being available sometime in the third quarter of 2021.

Spending in the services sector has borne the brunt of the steep downturn in household spending.

While labour markets are recovering, the unemployment rate will remain above pre-COVID-19 levels through the medium term.

Interest rates will not increase until the early part of 2023 as the Fed believes the recovery remains fragile due to the elevated level of uncertainty.

The fiscal deficit soared to over $5 trillion in the second quarter of this year due to the massive spending required to support the economy in the face of massive job losses.

A Joe Biden victory in November would eliminate some but not all of the trade irritants linked to the Trump administration.

You may also be intersted in