The COVID-19 pandemic is unlike any disaster the economy has experienced before. Neither the Great Depression nor any recession over the past two centuries caused such a steep economic decline in such a short time. Economic activity rebounded during third quarter 2020 after contracting sharply the previous quarter because of shelter-in-place restrictions. However, the recovery’s strength and pace slowed by the end of the third quarter due to the incomplete reopening of the economy, fiscal stimulus dissipating, and uncertainty regarding the pandemic’s future. Prospects for the economy’s reopening and recovery took an additional hit at the end of 2020 as the number of cases and deaths rose at an alarming rate.
Health outcomes will obviously be key to economic recovery in 2021. The pandemic is expected to be under control by the end of the year, in large part because of the distribution of the Pfizer and Moderna vaccines across the U.S. during the first of half of the year. This will allow for a gradual reopening of economy, especially in the service sector.
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