The economy in 2021

The unique impact of the coronavirus recession makes a fast recovery possible, but even after the pandemic recedes, the global economy will be facing a myriad of problems.

Other recent recessions have left behind financial systems crippled by toxic assets, or permanently broken industries that forced economy-wide restructuring. 

In contrast, while the suffering and dislocation of the pandemic have been staggering, societies have the tools to provide relief and a speedy recovery. However, even when the Covid recession recedes, the global economy will still be facing several of the problems it did before 2020, from trade wars to inequality to weak investment.

What will it take to get the global economy back on track in 2021?

Two things will affect global production above all else: The first is how quickly and where the pandemic is contained, and the second is how well policymakers around the world are able to repair the economic damage left in its wake. The latter is especially dependent on how American policymakers steer the world’s largest economy—its attempts at recovery will cascade across the rest of the globe, with consequences for every market.

60-70%:  While it is too difficult to say with any precision right now, epidemiologists estimate 60% to 70% of the population must be vaccinated before herd immunity takes effect; in the US that threshold may not be reached until the fall. The speed of economic recovery around the world will depend on the number of available doses of a vaccine, the ability to procure and distribute it, and the public’s willingness to be vaccinated.

“Ensuring that household balance sheets are solid, and we’re not going to walk into the recovery with bad student debt or bad housing debt or bad rent is really important.”

Mike Konczal, researcher at the Roosevelt Institute.

The economic scar tissue left by the coronavirus has not been equally distributed throughout the economy. Many working-class Americans left unemployed will face eviction, debt, and the need to pay back-rent. Unlike the housing crisis, where the complexity of mortgage debt made relief more difficult to provide, this is a case where cash relief can solve the problem, much as the CARES Act in April allowed the US economy to coast through summer and early fall. Public support for people still suffering should make for a faster recovery, but lawmakers missed an opportunity to provide sufficient and more targeted aid to address the sectors most affected by Covid-19.

After a historic, deeply unusual year, a lot remains uncertain about 2021 and what it will bring for major economies around the world. Here are seven indicators to keep an eye on to understand the global recovery as the year progresses.

🏆 Commodity prices

💸 US Treasury yields

🥡 Soybean exports

🍽️ Restaurant activity

🛍️ Online shopping

👩‍💼 Women in the workforce

🌆 The price of a big-city home

Lunar New Year is usually a popular time for dining out as families spread out all over China get together to celebrate. But on the eve of the holiday last year, panic was setting in about a new coronavirus. China instituted strict lockdowns, sending restaurant sales cratering 41% in January and February.

The hotpot, especially, conflicted with so many of the pandemic’s new social rules—it’s a form of dining where large groups dip a variety of veggies and meats into a communal broth. And yet China’s leading hotpot chain, the Hong Kong-listed Haidilao, has seen its stock rise 70% for the year. That’s one of several signs China is coming out on the other side as businesses adapt to the pandemic—though it’s still too early to comfortably rejoice.

Charting hotpot sales is one way to understand how the Chinese economy will do in 2021. Here’s what we suggest focusing on in when looking at other regions: 

🇮🇳 In India, focus on non-food credit growth

🌍  In Africa, look to debt levels and a new trade agreement

🇪🇺 Manufacturing will be at the heart of Europe’s economy recovery

Investors have gone from fearing a once-in-a-generation recession to feasting on risk. But now policy makers have another problem—the potential that investors will get so carried away that they rip a new hole in the economy.

Reason for concern can be found just about everywhere. Armchair investors have flocked to trading apps, snapping up everything from Tesla stock to bitcoin. And though tech stocks drove the equity markets through multiple record highs in 2020, Wall Street analysts say it’s not the time to pull back on them.
With interest rates on government bonds hovering around record lows—and not expected to go anywhere anytime soon—investors of all kinds are scrambling for riskier assets that offer growth. It all adds up to a world in which investors are, seemingly permanently, taking ever more risk.

These recent books will introduce you to the discussion of economic forecasts and trends to watch in the year ahead, and broader debates in the world of finance and economics. 

• The Price of Peace by Zachary Carter
• Open: The Progressive Case for Free Trade, Immigration, and Global Capital by Kimberly Clausing
• Freedom from the Market by Mike Konczal
• The Deficit Myth by Stephanie Kelton
• Trade Wars are Class Wars by Michael Pettis and Matthew Klein
• One Billion Americans by Matthew Yglesias
• Monopolized by David Dayen