The Global Economy Will Likely Find Firmer Footing After the First Quarter of 2021


  • Hoping for Better

The renewed wave of virus infections and associated restrictions in several advanced markets have dampened fourth-quarter growth prospects. However, promising developments surrounding vaccination and fiscal support in Europe give us hope that 2021 will be a better than year than the one that is about to end. We expect the global economic recovery to find firmer footing after the first quarter of 2021.

While there is light at the end of COVID tunnel, frictions between the world’s two largest economies over trade and technology and potential disruptions at borders between the U.K. and the European Union are two major downside risks.

The following are our views on how major world markets will fare during the balance of this year and next.

United States

  • The U.S. labor market illustrates an economy losing momentum. The unemployment rate only improved from 6.9% to 6.7% in November, while the labor force participation rate fell. Job creation is far below the pace needed for a fulsome economic growth cycle. Workers in highly impacted sectors, like hospitality and tourism, appear to be sitting out the recovery until a vaccine brings their former industries back to life. We do not expect a second recession, but the year is ending in a patch of slow growth.
  • As we go to press, discussions of another round of fiscal stimulus are continuing. Areas of compromise include a renewal of the Paycheck Protection Program for small businesses and a supplement of $300 per week for workers who remain unemployed. Deliberations over liability protections and support for state and local governments remain contentious. Any additional stimulus will support the recovery, and the sooner it passes, the better.