The US Recovery’s Promising Moment

Recent macroeconomic figures and the accelerating pace of COVID-19 vaccination suggest that optimism about the US economy's prospects is justified. But to avoid snatching defeat from the jaws of victory, policymakers must press ahead with measures to lock in robust, sustainable, and inclusive long-term growth.

LAGUNA BEACH – President Joe Biden’s announcement that the US will have enough COVID-19 vaccines for every American by the end of May has contributed to a rising tide of optimism about the country’s economic prospects this year. This, and other good reasons to be hopeful about the economy, opens a valuable window for the administration to address the complex policy challenges it is facing in 2021 and beyond.

On the positive side, Biden’s vaccine announcement came on the heels of economic data that beat the consensus expectations of economists and market analysts. The latest figures show that personal income grew by 10% between December and January, that manufacturing expanded by nearly ten percentage points year on year, and that 379,000 jobs were created in February (well above the consensus expectation of some 200,000). In keeping with with these trends, the Federal Reserve Bank of Atlanta’s much-watched (and notably volatile) GDPNow model now estimates annualized first-quarter GDP growth to have reached around 10%.

This notable economic pickup is being driven by the release of pent-up demand – both in the US and internationally – and by the fiscal stimulus package that Congress approved at the end of last year. Moreover, these public- and private-sector effects are both likely to intensify as vaccines continue to be administered more quickly, and as the Biden administration progresses with its two-stage rescue and recovery effort.

But three main challenges will need to be addressed quickly. First, progress toward increased vaccine availability is necessary but insufficient. To end the public-health crisis, stepped-up vaccine production will need to be accompanied by a high rate of vaccine acceptance, vigilant efforts to prevent a resurgence of infections, and ongoing resilience in the face of new variants of the virus.

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