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Ready or not, here comes the boom

April 23, 2021
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Monthly Review (Page 3)

The expected post-pandemic boom in activity has begun as many key growth drivers surged in March. Spurred by improved weather and further relaxing of government-imposed COVID restrictions, payroll employment jumped for March helping to boost first quarter job growth to more than 1.6 million. Hiring is expected to be even stronger in coming months as businesses keep pace with a spike in demand for goods and services as consumers increasingly venture into in-person activity. Retail sales already climbed sharply for March in response to the third round of stimulus check for households, more seasonable weather, and additional opening of local economies. Business surveys also showed a demand-driven jump in production, although lingering workplace COVID limits and persistent supply chain problems may constrain growth in the near term. After posting strong returns over the past year, equity markets continued the positive momentum into April as forward earnings expectations remain strong and Fed provided liquidity remains ample.

Outlook (Page 4)

The near-term outlook for growth is very positive, driven by the eventual full reopening of the economy as the pandemic ebbs and with record support from monetary and fiscal policy. Even with that optimistic view, the risks continue to lean towards further upside if consumers and businesses rebound more strongly than anticipated. The expected boom in consumer activity has already shifted forward into the second quarter, fueled by relaxed COVID restrictions in response to faster vaccine uptake and the significant income boost from the American Rescue Plan. And more fiscal stimulus may be on the way. Even after the initial reopening/stimulus-induced surge, spending should remain strong into next year as consumers spend down elevated savings while interest rates (albeit rising) should remain low — supporting sales of autos and housing. Downside risks for the economy, including COVID variants and a sustained acceleration in inflation, remain, but are a reduced concern to disrupt the near-term outlook — especially as the positive feedback loops for the economy strengthen this year. This suggests that actual economic growth this year could overshoot even the rapid current estimate.

Go deeper with the full April dashboard linked below.