Moody’s co-founder shares economic outlook at virtual NACDS Total Store Expo
Moody’s co-founder and chief economist Mark Zandi took the virtual stage during the virtual NACDS Total Store Expo’s first day Business Program Monday, offering a forecast of the economy and the potential risks still posed by the COVID-19 pandemic.
Overall, Zandi said he's optimistic about the economy's near-term prospects over the next 18 to 24 months.
"We’ve made a lot of progress. The economy has come back. We’re recovered 16 million of the jobs we lost," he said, noting jobs in leisure, hospitality, restaurant, bars, transportation, and personal services are still down. “We still have a way to go. We are still 5 million down. We’ve made progress, but we still have a long way to get to 3.5% unemployment."
Zandi said he expects the economy to continue to improve, assuming that we’ve achieved something consistent with herd immunity. “I’m assuming in this baseline outlook that the Delta variant does not become an overwhelming problem, that it doesn’t spread beyond parts of the country where vaccination rates are low and derail the economic recovery."
He said a big part of the recovery has been government support, which he pegged at roughly $5 trillion in spending and tax breaks — marking roughly 25% of the country's GDP and spending at a level higher than was seen during the Great Recession, when support was some 10% of GDP.
Zandi said he expects the Federal Reserve to remain aggressive in supporting the economy. "But they will start to wind down that support as we create more jobs."
He also noted that short-term interest rates, will start to rise. probably when the economy is back in early 2023. "Long terms rates have started to rise. They are still low. I expect they will start to rise as well."
Finally, Zandi said he foresees some changes from the pandemic that will become more entrenched, such as remote work, increased online use, less business travel, and people moving from urban to suburban areas.
"We will get back to in person meetings, but not to the degree prior to the pandemic. It’s just too convenient to communicate online," he said. "The zooming technology is very effective and prudent from a cost perspective, The last data point in July, for the last 12 months shows that almost 600,000 people have left urban areas. That has more than doubled from pre-pandemic times. That has tremendous implications for regional economies, the real estate market, housing, tax revenues, and commercial real estate."