Some Economists Predict Pent-Up Demand Will Drive California's Economy If Covid-19 Vaccine Can Be Distributed

A new forecast predicts the U.S. economy will get worse before it gets better. That’s the bad news.

The good news? UCLA economists making the forecast see much better days ahead once the COVID-19 vaccine is distributed. So good, in fact, that they’re comparing it to the rapid economic growth in a similar period from last century.

The Roaring Twenties, which also marked a period of significant social change, followed another devastating pandemic: The 1918 Flu.

Here’s what the latest UCLA Anderson Forecast quarterly report is forecasting:

A difficult next few months:

• slow growth for the U.S. economy
• high unemployment
• difficulty paying the bills for many people

But the report predicts a light at the end of the tunnel:

• an increase in the country’s gross domestic product (GDP) from 1.8% this quarter to a strong 6% towards the middle of 2021 and continued growth into 2022.
• Additionally, the report estimates that California’s unemployment rate will gradually improve, dropping from 8.9% in this quarter to 6.9% in 2021, 5.2% in 2022 and 4.4% in 2023.

The forecast comes with a big asterisk: it assumes mass distribution of the COVID-19 vaccine will succeed by the middle of next year. If that assumption holds, the economists anticipate a burst of pent-up consumer demand that will help the economy recover.

Leila Bengali, an economist with the UCLA Anderson Forecast and co-author of the California section of its latest report, joined our newsroom’s local news and culture show, Take Two, to describe why mass vaccination could spark economic growth. Bengali told host A Martinez:

“So, think about haircuts, travel, leisure and hospitality — more so than the goods we’ve all been able to consume now during this period of time where we can order goods online and for delivery," she said. "So once the vaccine becomes widely available and consumers feel more willing and able to resume life closer to normal, we’re expecting some pretty substantial growth.”

According to Bengali, California’s economy is expected to follow the country’s recovery as a whole, although there will be some differences when it comes to the unemployment rate. While travel-dependent industries such as leisure and hospitality could see a slower rebound, the forecast predicts the technology sectors, residential construction and logistics will make strong gains and lead the state’s recovery.

Listen to the interview:

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