Growing Optimism and a Rising GDP

Market Pulse

In this episode of Market Pulse, we discuss the U.S. economic outlook, the American Jobs Plan and consumer credit trends with Cris deRitis, deputy chief economist at Moody's Analytics.

This transcription is edited for brevity. Listen to the full podcast for more great insights.

Theresa: So let's start with an update on the U.S. economy. What do you see on the horizon or what is important for our listeners to know about today, Cris?

Cris deRitis: The U.S. economic outlook is particularly strong. It keeps getting stronger or we keep updating our forecast with a more optimistic and positive view. And, really a couple of things have gone right over the last three months. First of all, we have the vaccination campaign that has really surpassed our expectations. We're vaccinating around 3 million people a day now throughout the country and opening up vaccination schedules to people who are younger. That certainly is helping to keep the spread of the virus under control and rebuild some of the consumer confidence. There's a lot of pent up demand that's out there. People are itching to get out. They're looking to shop. I hear that hotels are booked up throughout the summer in many of the key vacation spots. That's going to continue to push the economy forward.

The second factor in the outlook is the stimulus packages that were passed in December and February. Those checks are going out now or have gone out, and that is certainly putting more money in folks' pockets. That is also contributing to some of the upgraded growth that we would expect in 2021. The Moody's Analytics’ outlook calls for about 6.4% growth in GDP in 2021 and then still very strong growth around 5.25% in 2022.

Theresa: A number of times over the past year, we've talked about the K-shaped recovery. The upper leg of the K keeps going higher and the lower leg keeps going lower. Will we start seeing less divergence of the two economies?

Cris deRitis: We are starting to see perhaps the bottom leg of the K coming back up. The leisure and hospitality jobs are being added back. Those do tend to be lower income individuals. So, a strengthened labor market down at that part of the K is certainly beneficial. But at the same time, we are continuing to see growth in the upper part of the K as well. The stock market continues to go up. Housing prices continue to rise as well. So we might still see quite a bit of divergence there between those two legs, but at least the bottom seems to be moving upward.

Theresa: Let's talk a little bit more about that fifth round of stimulus. What are you seeing, Cris?

Cris deRitis: So this is the proposed American Jobs Plan. It's been pitched in some sense as an infrastructure bill, but it's much more than just traditional infrastructure. It's about funding initiatives that hopefully would increase productivity overall and really continue economic growth or long-term economic growth. So I view it as designed, in part, to fill some holes that we've had in our budget for a long time. So infrastructure spending, I think everyone agrees on both sides of the aisle. I don't think it is controversial that we need to replace some of our roads and bridges. And, there are some gaps in terms of our infrastructure spending on airports and ports. So we just need to modernize. So there's about $600 billion or so allocated within this $2.3 - 2.6 trillion package.

On top of that, you have other types of infrastructure, which I think are also equally valid. Rural broadband, for example. So, I don't think there's any real controversy around that. We want to, again, modernize our infrastructure in a way that can help more people access the labor market. And so it's not just about the roads, the physical roads. It's about the internet and being able to access the internet for school or work.

There's a lot of things in there that makes a lot of sense, but then you have some other parts where there is certainly much more debate. And, there's funding in there for elderly and disabled care. Not that I don't think, again, anyone really disputes that we need to fund those things. But does that funding belong in this type of infrastructure package? And is this necessarily a spending that would be for investment and improving the productive capacity of the economy? Or is that more of an entitlement taking care of folks who we have promised through our Medicare, Medicaid programs to provide an adequate level of care in their old age, or as needed?

For more on this interview, listen to our full podcast. To access the latest consumer credit and small business insights, contact your Equifax account executive today, or visit us online at equifax.com/business. You might also enjoy checking out Economy.com by Moody’s Analytics for the latest economic updates.

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