View from the Peak

This July, we find ourselves looking back on a half a year of upside surprises. As the year started, we expected a better run than we had in 2020, which was a low standard to surpass. Rapid progress distributing vaccines followed, which has allowed for a potent and prolonged boost to economic activity.

The strength of demand has certainly caught the supply side of the economy off guard. Supply chain stress is elevated, as are inflation readings; we expect both to recede in the months ahead. The labor market recovery has not yet been as rapid as we had hoped, but each month, more people are going back to work.

The current combination of loosened restrictions, returning to work, and catching up on vacations and social gatherings during the peak season of summer likely mean we are at the apex of economic activity for the year. In the second half of the year, supply will catch up with demand, hiring will carry on, and the economy will continue its return to normalcy.

USEO - Chart 1 - 07/08/21

Influences on the Forecast