2021 Economic Outlook: Part 1

The Year of Unicorns and Rainbows?

Part 1 of a 2-part economic outlook from guest blogger Dr. Chris Kuehl. (Read Part 2) 

If 2020 was the year of the dumpster fire, what can we anticipate for 2021? The good news is that it really can’t be any worse than last year, right? It would seem that many of the emerging trends are positive and there is a legitimate reason for optimism regarding the resumption of growth and a return to some of the patterns that were in place prior to the arrival of the pandemic but there are many assumptions that are underlying these optimistic forecasts.        

The three most important of these assumptions are 1) the virus will be largely contained by the second quarter of 2021, 2) restrictions will be universally lifted and business conditions will return to the way they were prior to the lockdowns, and 3) consumers will be ready, willing, and able to resume their old patterns and habits.        

The news on the vaccine front has been unusually good. In past years, the vaccine for the seasonal flu outbreaks has been less than 70% effective and thus far all three of the COVID-19 vaccines are showing over 90% effectiveness. Production is in full swing and distribution has already started. Nearly every person who desires the vaccine will likely have access to it by April or May of 2021. The same pattern of distribution is showing up worldwide.       

The next step would be the end to the lockdown — once and for all. This decision will be based on the same factors that have determined the restrictions up to now. There will be a determination based on the number of cases, the number of hospitalizations, and the number of fatalities. At this juncture, there has been no attempt to indicate what an acceptable level of infection and fatality should be but there will have to be a tacit agreement at some point. Not everyone will accept the vaccine and there will be those for whom the vaccine will not work. That means that even with full distribution of the vaccine there will still be people contracting the virus and perishing. Do the restrictions remain until there are no more cases? That would be an impossible goal, but will authorities be able to state that restrictions can all be lifted, even as there are some who will sicken and die? There will have to be agreement on what an acceptable level of infection is.