The U.S. economy will slowly recover from the devastating effects of the COVID-19 pandemic. By 2023, the gap between potential and actual growth should close. However, the pandemic will have long-term effects.
Growth, Jobs, and Inflation Interrupted: U.S. Outlook to 2040
Growth, Jobs, and Inflation Interrupted: U.S. Outlook to 2040
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- Economic growth will slow down over the long term due to population aging and its impact on the size of the working-age population.
- Potential economic growth declined sharply in 2020 due to a collapse in investment spending. It will slowly recover over the medium term but then start to drop once again through the long term, pulled down by population aging and weaker productivity growth.
- Fiscal deficits surged in 2020 due to the spending required to support the economy during the pandemic. Deficits will slowly decline over the medium term but will remain high until the later years of the forecast period because of the upward pressure on health care spending that comes with an aging population.
- Consumers will spend less on durable goods and more on services, notably health care, over the long term. Spending on services such as travel could continue to suffer over the long term due to the lingering impacts of the pandemic.
- The pandemic will lead to permanent job losses in the accommodation and food sector, as some businesses will not survive the loss in revenues caused by the COVID-19 control measures. Consequently, the unemployment rate will likely remain above its pre-pandemic levels throughout the long term.
- The U.S. dollar will slowly depreciate over the long term. This will be due to the closing of the spread between U.S. interest rates and those in other countries, as well as to the loss of confidence among some foreign investors in the federal government’s ability to deal with trillion-dollar fiscal deficits.
- In general, the U.S. economy will be more digitized and less equal through 2040, a trend closely linked to the lasting effects from the pandemic.
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