The US economy is recovering faster than expected

The US economy will return to its pre-pandemic magnitude by mid-yearEven if Congress no longer approves federal recovery aid, But it will be years before all those fired by the pandemic can return to work, the Congressional Budget Office expected on Monday.

The agency’s new projections, which are impartial and regularly issue budgetary and economic forecasts, are an improvement on last summer’s projections. Officials told reporters on Monday that the improved outlook is a result of large sectors of the economy are adapting better and faster to the pandemic than initially expected. They also reflect higher growth thanks to a $ 900 billion financial aid package that Congress approved in December.

The budget office now expects the unemployment rate to fall to 5.3% by the end of the year, compared to 8.4% expected in July. The economy is expected to grow 3.7 percent this year, after a much smaller contraction in 2020 than initially expected.

The report is likely to spark even more discussion in discussions about the approval of President Biden’s $ 1.9 trillion economic bailout package. It could encourage Republicans who lobbied Biden to cut the plan significantly, saying the economy doesn’t need as much additional federal support.

Still, the report reveals little risk of “overheating” the economy, which is expected to remain below potential levels on the current trajectory until 2025. And there are still major economic risks. The number of employed Americans will not return to pre-pandemic levels until 2024, officials predicted, due to ongoing difficulties in shedding the virus and returning to full levels of economic activity. Officials said the recovery in growth and employment could be accelerated significantly if public health authorities were able to bring coronavirus vaccines to the population more quickly.

At the moment, the budget office sees little evidence that growth will be strong enough in the coming years to stimulate a rapid rise in inflation. He predicts inflation will be below the Federal Reserve’s 2% target for the next few years, even if the Fed keeps interest rates close to zero.

Other independent forecasts, including one from the Brookings Institution last week, have predicted that a new dose of economic aid – like the $ 1.9 trillion package proposed by Mr Biden – would help the economy grow faster. end of the year.

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