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The summer of 2021

Summary:
This will be a very weird summer. By June 6th, everyone who wants a vaccine will have had at least one shot. People will still be dying of Covid, but the situation will seem much different. People will begin to act like the pandemic is over. But what will the new normal look like? We won’t know for an additional three months, not until the extended unemployment compensation expires on September 6th. Until then, we’ll have a very unusual period for the US economy. Here are some predictions. 1. Because millions of unemployed workers in low pay service sector jobs earn more on unemployment than they did on their previous jobs, and because most of those jobs are unpleasant, employment will likely remain quite depressed all summer, before bouncing back in the fall.

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This will be a very weird summer. By June 6th, everyone who wants a vaccine will have had at least one shot. People will still be dying of Covid, but the situation will seem much different. People will begin to act like the pandemic is over. But what will the new normal look like?

We won’t know for an additional three months, not until the extended unemployment compensation expires on September 6th. Until then, we’ll have a very unusual period for the US economy. Here are some predictions.

1. Because millions of unemployed workers in low pay service sector jobs earn more on unemployment than they did on their previous jobs, and because most of those jobs are unpleasant, employment will likely remain quite depressed all summer, before bouncing back in the fall. That’s not to say the economy won’t grow.  The end of Covid makes it likely that sectors such as travel will pick up, but the quality of service will be lousy, perhaps the worst of my entire life.

2.  America will become more corrupt, with more work being done “off the books” in small businesses.  People will collect both wages and unemployment comp.  Is there “hysteresis” in corruption?

3. In a macro sense, this is like the federal government hitting the accelerator and brake at the same time. The results will be interesting–perhaps a temporary spike in inflation. The RGDP numbers will look better than the employment numbers. Productivity will look good (relative to 2019), but the productivity figures will be unsustainable.

4. For many lower-skilled younger people it will be the best summer of their life. Three months without having to work and without the fear of Covid, all paid for by Uncle Sam.

5. There’s always a price to pay for unsustainable good times, and thus I expect the public’s mood to turn sour in the fall and winter, even as employment recovers—indeed because employment recovers.  Someone has to do all those crappy jobs.

PS.  Least I sound like a grouchy old guy, let me say that while the public policy here is not optimal, I’m not displeased to see young people have some fun.  Over the past year they sacrificed a lot for older people like me.

Enjoy the summer everyone!

PPS.  But stay off my lawn.

The summer of 2021

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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