The Pre-Pandemic Economy Is Roaring, But Will Delta Slow It Down?
The AP points out the U.S. economy grew at a 6.5% annual rate last quarter. The pre-pandemic economy is back as the total size of the economy has now surpassed its pre-pandemic level. Thursday’s report from the Commerce Department estimated that the nation’s gross domestic product — its total output of goods and services — accelerated in the April-June quarter from an already robust 6.3% annual growth rate in the first quarter of the year.
The Pre-Pandemic Economy Is Roaring
The quarterly figure was less than analysts had expected mainly because supply chain bottlenecks exerted a stronger-than-predicted drag on companies’ efforts to restock their shelves. The slowdown in inventory rebuilding, in fact, subtracted 1.1 percentage points from last quarter’s annual growth.
By contrast, consumer spending — the main fuel of the U.S. economy — advanced at an 11.8% annual rate. Spending on goods grew at an 11.6% rate, down from a 27.4% surge in the first quarter. Spending on services, from restaurant meals to airline tickets, expanded at a 12% rate, up from a 3.9% gain in the January-March period.
For all of 2021, the economy is expected to expand perhaps as much as 7%. If so, that would be the strongest calendar-year growth since 1984. And it would mark a sharp reversal from last year’s 3.4% economic contraction — the worst in 74 years — as a result of the pandemic.
The economy is showing sustained strength. Last month, America’s employers added 850,000 jobs, well above the average of the previous three months. And average hourly pay rose a solid 3.6% compared with a year earlier, faster than the pre-pandemic annual pace. Consumer prices jumped 5.4% in June from a year ago, the sharpest spike in 13 years and the fourth straight month of sizable price jumps.
Is The Pre-Pandemic Economy Back?
Still, despite the job market’s steady gains, the 5.9% unemployment rate is still well above the 3.5% rate that prevailed before the pandemic struck. Also, the economy remains 6.8 million jobs short of its pre-pandemic total.
The Delta Variant
Overhanging the rosy economic forecasts is the possibility of a resurgent coronavirus in the form of the highly contagious delta variant. The U.S. is now averaging more than 60,000 confirmed new cases a day, up from only about 12,000 a month ago. Should a surge in viral infections cause many consumers to hunker down again and pull back on spending, it would weaken the recovery.