November 28, 2020

The American Economy Was Hit by a Bus. It’s Healing, but Slowly.

(Those numbers, and those that follow, are seasonally adjusted comparisons of the newly released third-quarter numbers with the fourth quarter of 2019.)

That said, the loss of services spending remains greater than the gain in goods spending, and total consumption spending remains 3.3 percent below pre-pandemic levels — implying a continuing shortage of demand in the economy. And spending levels have been propped up by stimulus checks and expanded unemployment insurance benefits, both of which have gone away amid a stalemate in Washington over additional relief. This could mean families’ ability to keep up spending will come under pressure through the winter.

Another major area of loss offers some alarm. American exports of services are 25 percent below pre-pandemic levels, representing a $193 billion annualized loss of economic activity. In the math of G.D.P., spending by overseas tourists and tuition paid by international students count as services exports, so it is no surprise these numbers are down.

But it is plausible that domestic spending will snap back faster than international spending once public health concerns start to ebb. You could imagine that Americans will return to their neighborhood restaurant more quickly than Chinese tourists will begin filling up New York City hotels again.

Other lines in the G.D.P. tables show a mix of worrying and reassuring signs. For example, the housing sector has been a welcome source of economic strength, with residential investment up 5.1 percent (that new deck your neighbor is building is contributing to those numbers).

But business investment is not so strong, suggesting that the corporate sector is acting with caution in ways that could have lasting consequences.

Some of that we can chalk up to the direct effects of the pandemic. Investment in transportation equipment is down 21.9 percent, and on entertainment products down 12.2 percent. Presumably those numbers will rebound when people start flying again and when film sets can more easily operate without risking the health of all involved.

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