The 2021 recovery is going out with a bang. Could someone please alert the media?
Economists were flooded with new data on Wednesday, most of it good news for the US. Weekly filings for unemployment benefits slid to the lowest level since 1969. Inflation surged higher, but not as high as economists expected. Americans’ spending throughout October was stronger than forecasted.
Taken together, the reports signal the recovery is charging forward faster than expected. It was enough for Wall Street to lift their forecasts for fourth-quarter growth. Morgan Stanley economists boosted their estimate for current-quarter growth to 8.7% from 3% on Wednesday, citing “the wealth of data” that showed fresh strength throughout the economy.
Economists at JPMorgan also lifted their hopes for recovery through the end of the year. The bank raised its estimate to 7% from 5% on Wednesday, similarly basing the bullish shift on the Wednesday data dump. The narrowing of the US trade deficit — how much more the country imports than it exports — was a “notable” surprise and suggests trade won’t be a huge drag on GDP, the team led by Michael Feroli said.
Other reports suggest the supply crisis that’s weighed on the recovery and fueled higher inflation is finally starting to fade, the bank added.
“The overall improvement in the data may be the first fruit of the modest easing in supply chain issues evident in some of the survey data,” JPMorgan said.
It’s not just Wall Street calling for a stellar fourth quarter. The Federal Reserve Bank of Atlanta’s GDPNow tool, which uses data releases to adjust its estimate for current-quarter growth, rose to 8.6% on Wednesday from 8.2%.
Everyone, it seems, thinks the recovery is bouncing back.
From third-quarter slump to fourth-quarter surge
The forecasts all sit significantly higher than the 2.1% growth seen through the third quarter. The previous three-month period saw the Delta wave slow hiring and drag on economic activity. The growth rate was the slowest of the pandemic recovery, and the lingering supply-chain crisis raised fears that the economic boom officially ended in the summer.
Wednesday data and bank reactions suggest a new boom started in October. Last month saw the Delta wave fade and retail sales rip to record highs. If the rosiest forecasts come to fruition, fourth-quarter growth will be the strongest since the third quarter of 2020, which itself marked the fastest growth since at least 1947.
The economic boom would also give Democrats a much-needed win in the economics department. President Joe Biden’s approval rating has taken a beating through the fall as Americans blame his administration for soaring prices and weakened economic growth. Consumer sentiment fell to decade lows in November due to “a combination of rapidly escalating inflation combined with the absence of federal policies that would effectively redress the inflationary damage,” Richard Curtin, chief economist at the University of Michigan’s Surveys of Consumers said. Extraordinary fourth-quarter growth would give the party something to celebrate, particularly as midterm elections approach.
The kiljoys who wrote this point out that it probably won’t help Democrats but note that even if the Democrats lose everything it’s good for the country. That’s not exactly true. The Republicans are batshit crazy and they are the ones who inevitably preside over economic hell until the Dems pick up the pieces.
But there’s no reason to despair today. Things are picking up. If only people knew it. So spread the word to your friends and relatives today!
Happy Thanksgiving everyone.