Earlier this year, many economists and market analysts predicted an apocalyptic downturn. Six months later, while the economy continues to stabilize amid the pandemic, the damage is proving far less severe than some feared. Forecasts are now being revised upward.
The Wall Street Journal reported:
“The U.S. economy and labor market are recovering from the coronavirus-related downturn more quickly than previously expected… Economists polled by The Wall Street Journal expect gross domestic product to increase at an annualized rate of 23.9% in the third quarter.”
What Shape Will the Recovery Take?
Economists often describe recoveries with letters — V, U, W, or L — to reflect speed and durability. A quick summary:
- V-shaped: Fast, sharp recovery (best-case).
- U-shaped: Longer trough before recovery.
- W-shaped: Recovery followed by a renewed dip then recovery again.
- L-shaped: Slow recovery that stays below pre-recession levels for a long time.
Economists are also using the term “Nike swoosh” to describe a V-like recovery that takes several months to fully climb back.
Unemployment — Improving but Still a Long Road
While millions remain out of work, unemployment has improved markedly from the worst early-pandemic levels. The initial post-shutdown spike hit 14.7%; the rate has since fallen and was reported at 8.4% in recent data — far better than many earlier projections.
As economist Jason Furman noted on Twitter:
“An unemployment rate of 8.4% is much lower than most anyone would have thought it a few months ago. It is still a bad recession but not a historically unprecedented event…”
WSJ-surveyed economists projected unemployment will continue to decline in coming years:
- 2021: 6.3%
- 2022: 5.2%
- 2023: 4.9%
Bottom Line
The economic recovery still has a long way to go, but current data show it’s progressing better than many projected earlier in the year. Continued progress will depend heavily on public health outcomes and policy choices ahead.
