United States economy would increase 6.9% in 2021

The OECD forecasts that the United States economy will grow 6.9% in real terms in 2021 and 3.6% in 2022.

Substantial additional fiscal stimulus and a rapid vaccination campaign have fueled the economic recovery.

For the OECD, the unemployment rate will continue to fall, even as more discouraged workers are drawn back into the job market.

Rising wages, combined with government transfers and accumulated household savings, will boost consumption.

In the meantime, core price inflation will rise but should be kept under control.

The recovery of the United States economy accelerated.

In general, indicators of consumption activity have increased, with strong growth in household income and a gradual relaxation of the containment measures that boost spending.

At the same time, household savings rates remain high compared to pre-pandemic levels.

Labor market conditions continue to improve, with strong job growth recently in virus-sensitive sectors such as leisure and hospitality.

The unemployment rate was around 6% in April 2021, although only about two-thirds of the jobs lost at the start of the pandemic have been added so far (in net terms).

United States economy

For their part, job losses have been especially severe for low-wage workers in the service sector and for African Americans and Hispanics.

Core inflation has recovered, with strong growth in the prices of some tourism-related services.

As for manufacturing activity, it has returned to pre-pandemic levels and housing construction remains strong despite some increases in market interest rates.

So far, macroeconomic policy is strongly supporting activity

Fiscal policy has strongly boosted activity.

The American Rescue Plan was approved by Congress in mid-March, with spending measures worth around 8.5% of GDP largely concentrated in this year.

The package had a very wide scope.

Supplemental unemployment benefits were extended through September 2021 and eligible families received a new round of stimulus payments beginning in mid-March.

Financial assistance is being provided to support subnational governments and schools in their effort to reopen.

Additionally, temporary provisions were included to expand health insurance coverage and support low-income households, such as the Child Tax Credit and the Earned Income Tax Credit.

Fiscal stimulus

In 2022, according to the OECD, fiscal policy will begin to exert a contractive influence on the growth of the United States economy as support measures expire.

In addition, the administration has proposed additional spending that may mitigate this effect, with the «American Employment Plan» and the «American Families Plan» targeting a wide range of priority areas.

These plans include fiscal support for decarbonization, infrastructure, research and development, care for the elderly and disabled, job training, childcare, tax credits, paid leave, and universal preschool.

If legislated as proposed, these packages would be worth an additional 19 percent of combined GDP over the next ten years, funded in part by higher taxes.

Also financial and money market policy continues to provide substantial support to the economy.

The Federal Reserve expects to keep the federal funds rate in the target range of 0-¼ percent until the labor market has returned to peak employment and inflation is above 2% and on track to moderately exceed it for some time. .