28th Annual Economic Forecast Recap
Experts at Economic Forecast Event discuss what to expect for the economy in 2021.
2020 was certainly a year of seismic surprises and incredible change. As we look ahead to 2021, what key trends should be considered and what market signals will be important to watch?
At Vectra Bank’s 28th Annual Economic Forecast event, held virtually for the first time, The Metro Denver Economic Development Corporation’s economic expert, Patty Silverstein, and former CNBC Chief Economist Dr. Marci Rossell shared information on the current state of the economy from both a national and Colorado perspective. Topics included the economic impact of COVID-19, government stimulus programs, housing, unemployment, consumer spending, and potential inflation and interest rate expectations.
“In a year of ‘what could possibly be next,’ we saw many social and economic changes that no one could have predicted,” said Bruce Alexander, Vectra Bank President and CEO. “Today we’ll talk about what we learned from 2020, and what to expect in 2021.”
Silverstein began by “tracking the great divide” – how there are some sectors of our economy that are doing really well, and others that have been challenged over the past year. One of the differentiators is average weekly wages for Colorado, which can be divided up by high-, mid- or low-wage ranges. High-wage sectors include industries like information and technology, while low-wage sectors include retails trades and leisure and hospitality jobs. Understanding the different wage sectors is important when looking at what sectors have been most affected by the economic downturn.
While unemployment claims have dropped significantly since March-April of last year, just after the pandemic began, rates still remain higher than average. As of December, 53% of the unemployment claims come from that low-wage sector. This is not surprising, due to the restrictions on services like restaurants and hotels. High-wage job levels remain about the same as they were in 2019.
Silverstein pointed out how vastly different the COVID recession is from the great recession of 2008. We lost many more jobs over a very short period of time, but those jobs are also coming back at a quicker rate. She predicts that is may take until early 2023 before all jobs lost are fully recovered. However, things will start to recover more quickly as the COVID vaccine becomes more widely available.
Employment gains and losses across Colorado’s metro areas look very different. Grand Junction has lower job loss due to their outdoor lifestyle and higher population of retirees. Colorado Springs has struggled less due to military spending and a concentration of the cyber security industry, which has been key with more people working from home. Denver sits in the middle with a diversified economic base and 62% of the workforce for the state. Fort Collins, Boulder, and other northern Colorado areas have had the highest job loss rates, largely influenced by the lack of their normal university student populations.
Colorado’s age population breakdown is important to consider in consumer spending. Millennials make up the largest group, and the primary spenders in real estate as they purchase homes (median prices for which are vastly different across the state). Baby boomer are now the fourth largest population group, but remain important because they hold the majority of the wealth.
Dr. Rossell began her presentation on a high note; “We’re beginning to exit from the COVID cave. Hospitalizations are down, and I think we can expect to see the economy really begin to bounce back in the second half of this year. However this recovery will not look like anything any of us have ever seen, as the downturn did not look like anything any of us have ever seen.”
She discussed how typically, recessions begin in one small sector of the economy, like technology or agriculture, and slowly spreads to other areas of the economy. This time around, the shock came from outside the economy and made its way in very quickly. It was more like a natural disaster that hit very rapidly, and forced the economy to adjust quickly. Usually employment and labor markets are the last areas to respond, instead of this first.
The good news is, that again unlike other recessions, many Americans were able to save a lot more of their income since we were forced to stop consuming leisure activities like we normally do. The average savings rate for someone who was able to keep their job over the past year reached 14%. This will be important for the recovery, as people will have extra money they will be eager to spend on activities that had been limited by the pandemic.
Another oddity of this downturn is who was most affected. Normally, men are more likely to lose their jobs, as sectors like construction or manufacturing are more heavily affected, which tend to be male-dominated industries. This time around, as families were stuck in the house and women tend to be the primary care-givers, women were forced to step back from the labor force to take care of the household. Women also hold more jobs in the sectors that had higher job loss, such as hospitality.
Dr. Rossell explained the difference between relief vs. stimulus checks. Stimulus checks are meant to revive the economy and get people spending. Since so much was shut down and restricted due to COVID, spending hasn’t been able to take place. What was distributed was more of a disaster relief check, and many people, especially those that remained employed, simply saved the money. She emphasized that any future relief should be targeted to those that truly need it – those that have lost their jobs or in struggling and low-wage sectors.
The pandemic has greatly accelerated trends that were already happening – seeing our worlds move online. Working from home and ecommerce were already becoming more common, but the pandemic escalated these trends exponentially. Companies will need to be more flexible with working arrangements, and retailers will need to find a balance between brick-and-mortar stores and ecommerce. This downturn will permanently change the way we live, work and play.
Just as COVID has dictated the downturn in the economy, it will dictate the recovery. Once people feel safe going back to “normal” life, we should expect to see explosive growth and recovery. Dr. Rossell expects “fireworks in the second half of this year.”
Speaker presentations and a full video of the event can be found here.
The views expressed herein may not be the views of Zions Bancorporation, N.A. dba Vectra Bank and, therefore, are submitted as informational purposes only.