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Americans are hoping for a much better year in 2021. This year can’t get much worse with coronavirus cases exploding again.
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The U.S. economy was supposed to struggle after most federal aid expired in July. It didn’t.
Then it was supposed to hit a wall because the pace of hiring slowed in the fall. Nope.
Now it’s supposed to falter because coronavirus cases have soared to a record high and Washington is gridlocked.
Maybe this time the pessimists will be right.
Forget a slew of economic data this coming week that’s expected to show a solid U.S. recovery carried on in October and early November. The big story, as it’s been for months, is the coronavirus pandemic.
See: MarketWatch Economic Calendar
It’s still too early to tell, but emerging signs point to the economy hitting another rough patch, perhaps even the rockiest since the U.S. closed down in March and April.
In the past week fewer people used public transportation or made restaurant reservations, according to a variety of “real-time” measures. They also spent less with credit cards and didn’t venture as far from their home in other warning signs.
The angst over the coronavirus resurgence in many states also showed up in a survey of consumers in early November. The so-called consumer sentiment survey fell to a three-month low.
Read: Biden to talk more diplomatically toward China, but keep Trump’s big tariff ‘stick’
Around the country, meanwhile, some cities and states with the biggest coronavirus outbreaks reimposed restrictions on restaurants and large gatherings. New York City might even send students back home for remote learning.
In Washington, outgoing President Donald Trump has taken a backseat on another round of fiscal stimulus talks while House and Senate leaders remain at odds. Prospects for more federal relief before the end of the year appear dim.
Read: The election haven’t thawed the ice on a a stimulus deal
All of this could add up to big trouble for the economy. What remains to be seen is how much more the coronavirus caseload expands and what steps government takes to limit the spread.
“Double-dip recession risks are rising as the health situation worsens,” said lead U.S. economist Oren Klachkin of Oxford Economics.
The rising risk briefly derailed a Wall Street rally that started shortly before the election, though the Dow Jones Industrial Average DJIA and the S&P 500 SPX resumed their upward climb on Friday.
The news is not all bad, however, and the U.S. is in a very different spot than it was in the spring.
Read: U.S. jobless claims fall to pandemic low of 709,000
Start with medical progress. Doctors are better able to treat patients, reduce hospital stays and save lives, for one thing though a few hospitals are close to capacity again.
See: U.S. again shatters daily case record as experts worry holidays will be superspreader event
Companies have also become more adept at coping with the virus and safeguarding their employees and customers. They’ve brought back millions of workers and are likely to continue doing so.
“Many businesses have become used to operating under Covid protocols and are more nimble in adapting their operations to changes,” said Michael Gregory, deputy chief economist BMO Capital Markets.
In light of these changes, local and state governments are unlikely to order broad lockdowns like the ones they resorted to in the spring. So far they have targeted specific issues such as late-night dining or large social gatherings, imploring people to stay at home more and avoid risky behavior.
Even so, many economists think the U.S. recovery needs another helping hand from Washington. Extended unemployment benefits run out at the end of the year and more aid might be needed to bridge the gap between now and the expected availability of a coronavirus vaccine next spring or summer.
Last week, Pfizer PFE, +2.85% said its pending vaccine was more than 90% effective. Other companies also reported significant progress.
Read: Americans grow more anxious about coronavirus as Republicans fret over Trump loss
Such a helping hand might have to wait, however, until President-Elect Joe Biden takes office, when he’ll have a chance to broker a deal between the Democratic-led House and a Senate that’s likely to remain under Republican control. The two chambers have been in a standoff for months.
