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US economy will rapidly recover, unemployment will return to pre-pandemic level by 2022, CBO report finds

Thomas Catenacci, DCNF

The U.S. economy will recover and Americans will return to work quicker than expected because of government stimulus and the vaccination effort, a government report said.

The U.S. gross domestic product will return to its previous peak halfway through 2021 and the unemployment rate will return to normal by 2022, the nonpartisan Congressional Budget Office (CBO) report released Monday found, CNBC reported. The CBO forecast doesn’t factor in any future coronavirus stimulus legislation, which could potentially speed up an economic recovery even more.

“GDP is projected to return to its prepandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025,” the report said. 

GDP is expected to surge 3.7% in 2021, the CBO report found. In 2020, the economy shrank 3.5%, the nation’s worst economic performance since the 1940s, due to the ongoing coronavirus pandemic and despite massive third and fourth-quarter economic growth.

The International Monetary Fund, meanwhile, raised its U.S. GDP forecast for 2021 to 5.1% on Jan. 26, according to MarketWatch. In addition to the positive 2021 projection, GDP will grow 2.4% and 2.3% in 2022 and 2023 respectively, Monday’s CBO report found.

The U.S. unemployment rate is expected to decline to 5.3 % in 2021 and to 4.9% by 2022, according to the CBO. The current unemployment rate is 6.7%, according to the Bureau of Labor Statistics.

“Over the course of the coming year, vaccination is expected to greatly reduce the number of new cases of COVID-19, the disease caused by the coronavirus,” the report said. “As a result, the extent of social distancing is expected to decline.”

Roughly 31.1 million coronavirus vaccine doses have been administered in the U.S. as of Monday morning, according to the Centers for Disease Control and Prevention. The figure is the highest of any country worldwide, data compiled by The New York Times showed.

President Joe Biden has promised to pass a massive $1.9 trillion stimulus package, which includes $2,000 direct payments to Americans and an additional $400 in unemployment pay per week. Biden’s Treasury Secretary Janet Yellen said during her confirmation hearing that the smartest thing to do for the economy is “act big.”

The president inherited an economy that has been sluggish in recent weeks and months. The U.S. lost 140,000 jobs in December, marking the first jobs loss since April, according to Department of Labor (DOL) data released Jan. 8.

The January jobs report will be released Friday.

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