President and CEO, U.S. Chamber of Commerce
May 06, 2021
The United States’ first quarter economic data showed 6.4% growth for the first three months of the year. That’s the second highest quarterly growth in nearly two decades—behind only the astronomical 33.4% rate in the third quarter last year as our economy emerged from its large-scale summer lockdown.
Based on the U.S. Chamber’s current economic predictions, our GDP will return to pre-COVID levels this quarter, and by the fourth quarter of the year the economy will exceed its pre-pandemic trajectory.
This summer should mark the end of the K-Shaped Recovery and the beginning of the Great Resurgence. The disappointing April jobs report, however, shows the recovery can still be undermined by policy choices. It's crucial that we continue to gain control over the pandemic, get people back into the workforce, and that policymakers reject tax increases that would punish job creators at this critical moment. "President Biden recently gave a national address where he rightfully celebrated our progress in supporting families, strengthening communities, and shepherding our nation through the pandemic. It’s important to remember that this was possible because of the strength and resilience of the private sector aided by the federal government.
Government alone did not move our nation out of this crisis, but government alone could increase the time it takes to recover from it.
The Chamber will fight tirelessly against job-killing policies like the PRO Act, a national $15 minimum wage, and disastrous policies under consideration in the tax space. This includes increasing the U.S. corporate tax rate to the highest in the industrialized world, returning the U.S. to a system of global rather than territorial taxation, increasing the capital gains tax by 82%, and raising taxes on small businesses.
Each of these proposals would throw a wet blanket on the recovery, and together they could endanger the entire recovery itself.
There is a lot to be optimistic about right now in our economy—but it could all be undone by misguided policies that would stifle our gains and potential.
Economic Outlook By the Numbers:
The Chamber predicts that the first quarter’s 6.4% growth will be followed by 10.4% growth in Q2 and 7.4% growth in Q3, with an annual growth rate of 7.4%.
If these predictions hold true, our GDP will return to pre-pandemic levels in the second quarter of this year, much faster than past economic recoveries.
Following the Great Recession, for example, our economy took more than three years to recover. Alternatively, we are currently on track to return to our pre-pandemic levels in less than half that time.
What’s even more incredible, by the fourth quarter of this year our GDP is on pace to surpass the levels it was tracking before COVID-19.
K-Shaped Recovery Gives Way to Great Resurgence:
Looking back to last fall, approximately six months into COVID-19, the Chamber noticed a trend that would come to define our pandemic economy. Our nation was experiencing a K-Shaped Recovery, where some businesses and industries experienced a sharp rebound from the initial economic shocks of the pandemic, while others remained in freefall.
Tech companies and some segments of the retail industry, for example, thrived as their products or services directly supported work, education, health, or simply daily life in a pandemic. Their successes kept the stock market hovering around all-time highs and helped drive the strongest growth rate on record in the third quarter of 2020.
For those on the bottom half of the K-shape, however—companies in the travel, entertainment, leisure, hospitality, and food service industries to name a few—there has been no end to the economic downturn.
For as long as necessary social distancing and public health restrictions have been in place, industries that rely on in-person gatherings have continued to suffer
But now, we are poised to end the K-Shaped Recovery.
Private-sector innovation, led by the pharmaceutical industry and a whole-of-business effort to manufacture, mobilize, and administer vaccines at a historic pace, has brought into sight the light at the end of the tunnel of the pandemic.
And as more people get vaccinated and can safely return to in-person gatherings, the industries in the bottom half of the K-shape will continue to takeoff and lift our entire economy along with them.
Americans are eager to get back to the things they enjoyed before last March, and like bulls at the gate, job creators across the country are ready to help them do it.
Consumer sentiment is at the highest level it has been since before the pandemic, and income and personal savings have risen sharply over that time. These trends and increasing vaccinations help explain why small business optimism and manufacturing sentiment is also on the rise.
From sporting events to the travel and tourism industry, food and beverage to small business storefronts across the country, a return to health will mean a return to strength across our economy.
Beating COVID and Avoiding Policy Blunders is Key:
All of this optimism is contingent upon our nation’s commitment to fully defeating the pandemic.
As the tragic COVID-19 wave in India continues to devastate the nation, it should give us all a sense of caution about the challenges yet ahead in fully emerging from this crisis. And it should serve a reminder that this is a global pandemic—one that will not be over until it is defeated in every corner of the world.
The potential threats looming are more than just a resurgence of the pandemic, though. All of our economic gains could be equally upended by policies that would saddle job creators and slow growth at a time when they are needed most.
Behind every challenge is an opportunity. As we begin to fully emerge from the greatest public health crisis in a century, we have the chance to initiate a period of broad-based economic growth that lifts all Americans—and the world. Let’s not squander it by punishing the job creators who have made it possible.
With a commitment to taking the right steps in our health—namely getting all Americans vaccinated—and the courage to reject misguided policies that would slow our economic growth, our nation can emerge from the end of the K-Shaped Recovery and begin our Great Resurgence.
About the authors
Suzanne P. Clark
As President and CEO of the U.S. Chamber of Commerce, Suzanne Clark heads strategy, government relations and market innovation to support member companies and businesses.