A year of uneven and incomplete recovery lies ahead – leading macroeconomic influencers
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A year of uneven and incomplete recovery lies ahead – leading macroeconomic influencers

30 Jun 2021

While infections recede and lockdowns ease, challenges such as potential corporate credit losses and capital and labour reallocation come to the fore for economies.

A year of uneven and incomplete recovery lies ahead – leading macroeconomic influencers
Credit: Solarbeamk, Shutterstock.com.

Some economists believe that diverging economic conditions could pose policy challenges for emerging market economies. The key task is to lay a solid foundation for the recovery to allow for policy normalisation and to manage tensions arising between fiscal and monetary policy.

Nouriel Roubini

Nouriel Roubini, economist and professor at New York University’s Stern School of Business, retweeted an article on how fiscal and monetary policy actions have cushioned the impact of the Covid19 pandemic. However, the economic recovery remains uneven across the globe, with the US and China rebounding more quickly than others, and some sectors recovering at a faster pace.

According to the BIS annual economic report 2021, the next stage of the pandemic will be different, but no less difficult in terms of challenges. Continuous vaccine rollouts and new treatments to manage the pandemic are expected to reshape governments’ response to economic reallocation and work practices.

Meanwhile, the rebound of economies is marked by upside and downside risks. For example, the enormous fiscal stimulus and accumulated household savings in the US could deliver stronger consumer spending and growth but will lead to increased inflation. Additionally, the growth could disappoint and business credit losses mount if the virus is not controlled.

Paul Krugman

Paul Krugman, an economist and professor of economics at the Graduate Center of the City University of New York, shared an article on the cure for high prices being high prices and for which areas that could be true or not to understand the true meaning of inflation. Experts believe that decisions made early in the pandemic are having lasting effects on the ability of industries to fulfil the demand that is surging with Americans’ accumulated savings. As a result, markets may work but untangling global supply chain issues of some industries is going to take time.

For instance, auto manufacturing is a complex process which requires the assembling of lots of pieces. Meanwhile, the current shortages and higher prices of cars are likely to persist for some time.

The idea that when the price of a commodity soars because demand outstrips the supply, it has a way of self-correcting has eased some in recent weeks. Buyers, discouraged by high prices, tend to find other options, and sellers increase production to make further profits.

Ludovic Subran

Ludovic Subran, chief economist of Allianz, a financial services company, retweeted an article on US workers quitting their jobs at historic rates as the pandemic fades, indicative of their confidence in finding new jobs. In addition, many unemployed have refused to come back to work despite record job openings.

Approximately 541,000 jobs were added to the US labour market in the past three months, a pace that is rapid in normal times but slower than expected given the 10 million jobs deficit from the pre-pandemic levels and the record number of openings.

Economists believe that transitions from unemployment to employment have been reduced to several factors, including the time needed to find a job, lingering effects of the pandemic, pace of vaccinations, and increased and expanded unemployment insurance benefits. However, they also believe that these factors are temporary, with job growth likely to rise to 750,000 or more per month when people gradually come out of unemployment for jobs as expected.