U-M economists: 5 things to watch (and watch out for) in President Biden’s first year

ANN ARBOR – Many are looking to 2021 as a year of hope -- that the COVID-19 vaccine will be widely distributed, that normal life and the economy will begin to recover and that the new Biden administration will commit more dollars to support businesses, employees and communities.

Researchers at University of Michigan’s Research Seminar in Quantitative Economics are seeing some signs for optimism as they make forecasts looking ahead.

However, they acknowledge that recovery tends to come with unintended consequences and obstacles, and that any new presidential administration undergoes an adjustment period as it introduces policy changes and new politics.

“The pandemic quickly made most predictions made early in 2020 irrelevant,” economic forecaster Daniil Manaenkov said in a statement. “With the ongoing vaccine roll-out, the end of the pandemic is in sight, letting us focus on how the post-pandemic economy might look like.”

Below are the U-M experts’ “five things to watch” and “five things to watch out for” in the country’s economy this year.

Five things to watch for:

1. Getting the vaccines out quickly is the most important economic/social task. Under the incoming administration, expect a federally coordinated push and vaccination sites to pop up everywhere over the next few months, including in schools, public libraries and chain stores.
2. Longer and more generous support for families and businesses. The $300-per-week boost to unemployment compensation is likely to be extended or, possibly, increased. Look for another stimulus check in the spring. On the small-business side, some form of job-creation incentive or tax credit is likely.
3. Reopening schools is President Joe Biden’s top priority. So if all goes well on the vaccination front, most schools could return to in-person learning by spring, which should help many parents return to their pre-pandemic work schedules.
4. Those who were working remotely will see their work colleagues in person, but maybe not everyone at once, and only a few days per week. We think offices are likely to broadly reopen by summer, but many workplaces are likely to keep the work-from-home option open for quite some time.
5. Look for a pivot in national policy discussions to healthcare and climate policy.

Five things to watch out for:

1. As a result of the ongoing pandemic hitting small businesses much harder, several sectors may enter the post-pandemic period with more concentrated market power, leading to higher prices. One place this trend could show up is in pricier food at the grocery store and restaurants this summer.
2. Look around for some new favorite restaurants, burger joints, gyms and other shops. Many of your old favorites may have already folded and are not coming back.
3. Popular vacation destinations may get crowded this summer, especially the outdoor ones.
4. As the economy rotates toward the old normal, some people who have found new employment in the sectors that benefited from the pandemic may have to look for new jobs again.
5. Since May 2020, the foreign exchange value of the dollar measured against a basket of currencies is down about 10%. This could make foreign travel and some of our favorite imported tech toys more expensive.