Economic growth in 2021 could be the strongest in decades, NY Fed president says

John williams
John Williams. REUTERS/Stelios Varias
  • US GDP could grow in 2021 by the most in decades, New York Fed President John Williams said.
  • Strong stimulus and continued vaccination stand to supercharge the nation’s economic rebound, he added.
  • Still, he warned that minorities and low-earners face a tougher return to pre-pandemic employment.
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The US economy’s rebound from the coronavirus slump could fuel some of the strongest growth in recent memory, John Williams, president of the Federal Reserve Bank of New York, said.

With the pandemic’s winter resurgence fading, economists are looking ahead and gauging how fresh stimulus, falling case counts, and continued vaccination will aid the recovery. The market has been one step ahead, with investors rapidly dumping defensive assets for cyclicals and value stocks.

Fed officials have been somewhat tight-lipped with their outlooks. Chair Jerome Powell said Tuesday that vaccine rollouts “offer hope for a return to more normal conditions later this year.” Williams went a step further in a Thursday videoconference, suggesting gross domestic product could meet extremely bullish expectations this year.

“With strong federal fiscal support and continued progress on vaccination, GDP growth this year could be the strongest we’ve seen in decades,” the Fed president said. “Such a robust rebound would be very welcome after the toughest period for the economy in living memory and a winter where the pandemic has been particularly severe.”

The US is far from the finish line, though. The official unemployment rate sits at 6.3%, but Powell and Treasury Secretary Janet Yellen estimate the true rate is closer to 10%. Sectors hit hardest by the pandemic including leisure and hospitality remain far from operating at pre-pandemic strength.

The pandemic’s fallout has also been far from even, Williams said. Communities of color, young workers, and low-income Americans faced disproportionate job loss through the recession. Their recoveries have also been slower than those seen by high-earners and white workers.

The New York Fed is aiming to “understand how racial disparities play out in the labor market” and what can be done to remedy such inequities, Williams said.

The president also joined his colleagues in seeking to quell concerns of runaway inflation. Treasury yields sharply swung higher throughout the week as investors bet on Democrat-backed stimulus and vaccinations to accelerate price growth. While the recovery could see a pickup, inflation should stay “consistent” with target levels as the economy heals, Williams said.

“With our economy and the global economy still far below full strength, I expect underlying inflationary pressures to remain subdued for some time,” he added.