Forecasters are increasingly optimistic about economic
growth this year, though less so about the labor market’s prospects, as it
recovers from the effects of the coronavirus pandemic, a new Wall Street
Journal survey shows.
Economists on average expected gross domestic product to
expand nearly 4.9% this year, measured from the fourth quarter of the prior
year, according to the business and academic economists surveyed in February,
an improvement from their 4.3% forecast in January. They cited the distribution
of Covid-19 vaccinations and the prospect of additional fiscal relief from
Washington for the brightening outlook.
However, they were more cautious about the recovery in jobs.
Economists this month on average expected employers to add 4.8 million jobs
this year, down from the 5.0 million they projected in January and equal to
just half of the 9.6 million jobs lost since February 2020. The forecasters saw
a mean unemployment rate of 5.3% by year’s end, about the same level they
projected in last month’s survey. The Labor Department said Friday the national
jobless rate was 6.3% in January.
“The economy is already picking up some growth momentum in
the first quarter,” said Brian Bethune, professor of economics at Boston
College. “The large $1.9 trillion stimulus package will provide significant
insurance against a relapse into recession,” he said, referring to President Biden’s
proposal.
More than half of the respondents said the amount of fiscal
aid the economy needs to recover from the coronavirus shock was less than $1
trillion, while only one said that more than $2 trillion was required.
Economists on average expected inflation to pick up, projecting
2.8% growth in consumer prices in June of this year from a year earlier, up
from the 2.5% increase projected last month. The Labor Department said
Wednesday its consumer-price index rose 1.4% in January from a year earlier.
The survey also showed growing expectations of a long-term
rise in oil prices.
Survey respondents on average saw a 17.5% chance of another
downturn in the next 12 months, down from 21.2% in January. Economists cited
vaccines and the prospects for new federal spending as their main reasons for
optimism.
A solid majority of forecasters (62.5%) said growth was
likelier to overshoot their 2021 GDP estimate than it was to undershoot.
However, 30.4% saw a higher risk of lower-than-expected growth, up from 25% in
January’s survey.
A large plurality hailed vaccination as a key reason for
optimism. However, the virus is an increasing source of worry. Nearly
four-fifths of economists surveyed this month cited virus-specific concerns as
the biggest risk to growth—compared with two-thirds in January. Half of
forecasters this month specifically mentioned highly transmissible virus
strains as the greatest threat to the expansion, a fivefold increase from the
share in last month’s survey. However, that risk is still incipient: Around 60%
said they don’t expect variants of the virus to reduce 2021 GDP growth.
“Much remains unknown about the length of time vaccines
provide immunity, how we build the supply chain for vaccination, and the
willingness of the American public to be vaccinated,” said Daniel Bachman, an
economist at Deloitte. “The path to large-scale vaccination and herd immunity
remains uncertain.”
Economist Amy Crews Cutts of AC Cutts & Associates LLC
said that although she doesn’t currently predict that Covid-19 variants will
sandbag growth, that possibility is the biggest threat to the recovery.
“If vaccination rates can grow, perhaps with new vaccines
approved soon, before the virus mutates to a new level of bad, we could come
out ahead very soon,” she said. “I don’t want to think about what happens if we
don’t.”
The survey of 62 business and academic forecasters was
conducted Feb. 5-9. Not all participants responded to every question.
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