Hurray. The U.S. economy has revived so quickly that it’s now larger than it was before the pandemic. But it’s still no time to celebrate.

After a sizzling 6.5% rate of annualized growth in the spring, the size of the economy surpassed its pre-coronavirus peak. And it happened a lot faster than virtually anyone would have predicted one year ago.

“Last year at this time, the U.S. economy was facing a near Great Depression scenario,” said chief economist Scott Anderson of Bank of the West. “Much of the leisure and hospitality and service economy was flat on its back and the U.S. unemployment rate hovered at 10.2%.  What a difference a year makes.”

Yet the economy is still not nearly as big as it would have been had the pandemic never happened at all. Economists estimate it’s about 2.7% smaller than it would have been without COVID.

Now 2.7% might not sound like much, but in a $22 trillion economy that’s a lot of missing jobs, worker pay and business profits.

Missing jobs is still a big problem for the economy.

Although most of the 22 million people who were laid off early in the pandemic have gone back to their jobs, the labor force is still missing 6.7 million workers.

The shortage of labor has become one of the biggest headwinds on the economic recovery.

Many businesses can’t find enough workers to serve diners, clean hotel rooms, build homes or manufacture industrial goods. Even higher pay or hiring bonuses haven’t been enough to draw more people back into the labor force.

People are returning to the labor force, to be sure, but not as quickly as businesses would like.

Economists estimate the U.S. added about 900,000 new jobs in July, nudging the official unemployment down a few ticks to 5.7% when the data is reported next Friday. That would still leave the economy almost 6 million jobs short.

See: MarketWatch Economic Calendar

Surveys of unemployment workers indicate that up to a few million earn enough from extra jobless benefits put in place during the pandemic to stay at home. Half of the U.S. states recently ended extra federal benefit payments to try to prod people to go back to work.

Million of others say they are staying home because they have to care for young children or aging relatives. Others are still worried about catching the coronavirus.

The conventional wisdom has been that these people would return to work in the fall as schools and nursing homes fully reopen and extra jobless benefits run out.

Yet that view is being challenged by the latest spike in coronavirus cases due to the more contagious delta strain.

The Biden administration is urging people to wear masks again in many parts of the country where the virus is spreading and prominent businesses such as Google
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have already delayed plans to bring workers back to the office.

Read: Jobless claims retreat from two-month high in sign delta hasn’t hurt much

However, the delta variant alone should not be enough to stunt the recovery.

Federal Reserve Chairman Jerome Powell pointed out last week that each new wave of coronavirus cases has done diminishing harm to the U.S. economy. Businesses and consumers have largely learned to adjust, he noted.

Perhaps the biggest danger is that the delta variant will hurt other countries even worse and keep the global economy on the ropes. Trade between countries has been severely disrupted and one of the offshoots has been surging inflation.

Read: Inflation surges again in June as shortages plague U.S. economy

Take manufacturing. U.S. businesses cannot get enough supplies, many of which are produced overseas, to provide all the goods that Americans are clamoring for. Auto production in particular has been stunted by a lack of computer chips.

These problems are also likely to persist into the fall — and push off the day when the U.S. economy makes a full recovery.

“After a blazing start to the global recovery, it is becoming increasingly apparent that the last mile will be the toughest due to supply challenges and the spread of the delta variant,” said chief economist Douglas Porter of BMO Capital Markets.

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