Economic Changes to Watch For in 2021 | Since the start of the pandemic, many changes have had to be made in people’s daily lives and routines. As the world continues to fight Covid, even more changes are expected to be seen, particularly in the economy. While a sense of normalcy starts to return, the economy is also starting to improve and recover from the damage done by the pandemic, and experts are making some positive predictions. Here are some things to watch for as the economy changes this year.
Unemployment and the Job Market
The job market and unemployment rates will likely change a lot in 2021 as recovery from the pandemic continues. After so many people were furloughed or let go in 2020, the estimated unemployment rate for the year is 5% and is predicted to continue to drop in the years after. The shutdowns caused by coronavirus greatly affected the hospitality industries, and employment in these areas will likely continue to see a return during the year. Suzanne Clark, CEO of the U.S. Chamber of Commerce, has emphasized the need for people to get back to work and fill those empty jobs in order for the economy to continue to recover. As far as the job market goes, job creation in health care, computer industries and production of alternative energy will be expanding.
Climate Policy and Green Infrastructure
It is already being seen that climate change will be more of a top priority this year with more support of green infrastructure and of researching clean energy. However, without changes to climate policy, some experts worry that if the U.S. continues to generate a high rate of emissions, it could reduce GDP growth. With more considerations being made to climate, that also means more considerations surrounding the damage done by natural disasters that climate change affects. Damage done by hurricanes, wildfires and floods has caused insurance companies to pay out billions of dollars in damage claims. Moving forward, banks will be required to make plans for more extreme weather and the economic impact it has.
Despite the fact that there are some explicable worries about inflation, predictions are that the pressure on pricing will be temporary and that there are reasons to believe inflation won’t be a huge concern over the course of the year. The pressure is likely to subside once unemployment benefits end and people go back to finding jobs, especially in service industries, and businesses start to raise their revenues again. Consumer demand will also start moving from goods over to services, which will provide more help with the pricing strain.
As more and more people get the Covid-19 vaccine and activity in the economy increases, there will be a rise in demand for oil. Therefore, oil prices in the U.S. are predicted to rise this year. Also, during Covid, oil production had been limited because of a lesser demand, so now that production has begun to increase again, the prices will also increase.
Federal Budget Deficit
The federal budget deficit is projected to grow to $3.4 trillion this year, which is the highest in history. This is partly due to the American Rescue Plan that was passed in March of 2021, and also due largely to the pandemic, tax cuts, military spending and mandatory programs. As long as the budget deficit stays in moderation, it could help increase the growth of the economy.
Mortgage Interest Rates
Interest rates for mortgages are predicted to be between 3 and 3.5% during the course of the year. Shortages and inflation could affect this, as well as how other countries’ economies are recovering, but because the U.S. economy is expected to grow, interest rates will also probably rise. At the end of the year, mortgage rates will likely average around 3.5%.
The GDP is expected to grow in 2021 as the country and the world recovers from the economic damage done by the pandemic. As the economy changes this year, these predictions along with others made by economic experts, are the ones to watch.