Bureau of Business Research


Date of this Version



Copyright 2021 University of Nebraska, Bureau of Business Research


The Covid-19 Pandemic threw the U.S. economy into a severe and sharp recession during the first half of 2020. A combination of government “shutdown” restrictions and private actions led to a particularly severe decline in economic activity in late March and April. The lifting or reduction of government restrictions across the United States led to a fast recovery in subsequent months, especially as businesses and consumers learned to adapt to their new operating conditions. However, the rate of recovery has slowed recently as the spread of Covid-19 has accelerated and many businesses have curtailed travel, maintained “work from home” policies, and made other efforts to protect their employees and customers from Covid-19. Likewise, some customers have curtailed “non-essential” activities which require face-to-face interaction such as restaurant dining, air travel, personal services, and entertainment which require gathering in crowds. Impacted industries will continue to recover during 2021 as the spread of Covid-19 slows, and vaccinations rise, but the recovery may be slow during the first half of the year. There also may be some permanent decline. As a result, employment in these industries and overall U.S. economic activity will remain below pre-pandemic levels during much of the year. On a positive note, goods-producing industries performed well during the second half of 2020, in part due to unusually low interest rates. In recent months interest rates have risen but the value of the U.S. dollar also has dropped. The weaker dollar supports export-oriented industries such as manufacturing and agriculture. Oil prices and production also have risen with optimism about future growth in travel. Additional fiscal stimulus has been added to the economy. All of these factors should support short-term economic growth, although experts and the public may debate the merits of the stimulus programs and their long-term consequences. A correction in asset prices remains a risk. Looking forward, the U.S. economy should experience solid economic recovery during 2021, especially in the second half of the year. Comparisons between calendar years 2021 and 2020 will be especially strong, given that the U.S. economy was in a sharp recession during the 2nd quarter of 2020. U.S. real GDP dropped by 3.5% in 2020 and is expected to grow by 5.0% in 2021 and 2.9% in 2022 before returning closer to trend growth of 2.6% in 2023. Employment will recover more slowly, given the challenges in putting some displaced workers into new jobs. U.S. employment declined by 5.1% in 2020 and is expected to grow by 3.0% in 2021, 2.4% in 2022, and 2.1% in 2023. While the economic recovery, central bank policy, and disruptions to global supply chains suggest the potential for stronger inflation, those pressures are expected to be short-lived. Inflation will hit 1.8% in 2021 but fall well below 2.0% thereafter, as it has in so many recent years. Inflation of 1.6% is expected for 2022 with inflation at 1.5% in 2023.