The U.S. economic recovery is unlike any in recent history, powered by consumers with trillions in extra savings, businesses eager to hire and enormous policy support. Businesses and workers are poised to emerge from the downturn with far less permanent damage than occurred after recent recessions, particularly the 2007-09 downturn.
New businesses are popping up at the fastest pace on record. The rate at which workers quit their jobs—a proxy for confidence in the labor market—matches the highest going back at least to 2000. American household debt-service burdens, as a share of after-tax income, are near their lowest levels since 1980, when records began. The Dow Jones Industrial Average is up nearly 18% from its pre-pandemic peak in February 2020. Home prices nationwide are nearly 14% higher since that time.
The speed of the rebound is also triggering turmoil. The shortages of goods, raw materials and labor that typically emerge toward the end of an expansion are cropping up much sooner. Many economists, along with the Federal Reserve, expect the jump in inflation to be temporary, but others worry it could persist even once reopening is complete.
“We’ve never had anything like it—a collapse and then a boom-like pickup,” said Allen Sinai, chief global economist and strategist at Decision Economics, Inc. “It is without historical parallel.”
When Covid-19 pandemic restrictions sent the U.S. economy into free fall last spring, economists and policymakers worried it would take years for workers and businesses to heal. They now expect the economy’s size to surpass pre-pandemic levels this quarter. Analysts project that by the end of this year gross domestic product will reach the path it was projected to follow had the pandemic never happened, and then exceed it, at least temporarily.
The recoveries from the 1990-1991, 2001, and 2007-2009 recessions were “jobless”: Weak demand reduced employers’ need for labor, keeping unemployment stubbornly high for years. This time, however, the labor market appears increasingly tight. The employment cost index in the first quarter rose 0.9% from the previous quarter, the sharpest increase since 2007. That’s even though the unemployment rate, at 6.1%, remains far higher than before the pandemic.