IU Experts Forecast Continuation Of Economic Recovery To Pre-Pandemic Levels In 2021

The small amount of economic growth Indiana University economists forecasted a year ago vanished with the pandemic. Authors of the 2021 forecast expect that it will take next year and beyond to fully recover.

The latest forecast from IU’s Kelley School of Business shows while most economic levels are returning to where they were pre-pandemic, unemployment numbers will lag through next year and likely not recover until sometime in 2022.

During a panel discussion, experts said it’s important that there’s an effort made to keep people healthy and safe from COVID-19, but also to try to avoid another shutdown. COVID-19’s effects have driven up unemployment rates and lowered interest rates.

Finance professor Cathy Bonser-Neal said while people might see Wall Street doing well, the S&P 500’s top five companies don’t show the full picture.

“There are some firms that have been highly rewarded, but as the Russell 2000 Index is also showing, there have been many companies in terms of market performance that have not recovered,” Bonser-Neal said.

IU economist Kyle Anderson said the rapid rate of recovery being seen right now will slow down next year.

“When we're back together here next November of 2021, I think that time period will look very much like November of 2019 did,” Anderson said. “So we're going to have an economic output and employment situation very close to that, but we’ll have lost two years of growth. And that's a very significant loss due to this pandemic.”

He said an additional stimulus package would be beneficial to the state’s economy and help small businesses, especially those in the hospitality industry.

Similar to last year’s forecast, global trade wars will continue to be a challenge for U.S. growth in 2021, with Europe sticking tariffs on U.S. goods as recently as Monday morning.

The 2021 forecast assumes Gov. Eric Holcomb keeps the state in Stage 5 of the reopening plan. Additional local reports for several cities and towns in Indiana will be presented over the next two weeks.