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COVID Variants & Economic Recovery

September 24, 2021

With COVID variants on the rise, will this be enough to derail the economy recovery? We don't expect this to be the case — catch our newest TrendsTalk episode with ITR Economist and Speaker Lauren Saidel-Baker to learn more.



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Transcript by Rev

Hi, I'm Lauren Saidel-Baker. And welcome to this episode of ITR Economics TrendsTalk from the road. That's right. ITR Economics speakers out on the road, traveling and giving presentations at conferences and speaking at other events. And we are so excited that these events seem to be picking back up. We're seeing more and more folks in person again, not just through a computer screen and it feels good. But it does bring up the question, "Aren't we still in the middle of this pandemic?" Especially with some of the new variants, and that's really one of the biggest questions that we've been getting. So let's talk about Delta variant and other variants that may or may not be emerging. Is this enough to derail our economic recovery? In a word, no. This recovery is on pace on tracks, and we really don't see any of these variants as being of significant magnitude and specifically in the right way to really negate the gains that our economy's made.

So what do I mean by that? Well, first I want to decouple the health outcomes of the pandemic from the economic outcomes. They're not the same thing. In the health outcomes, yes, this variant is not good news. There will be more illnesses, more deaths as a result of it, but from an economic stance, we really aren't worried about that side of things. Really what affects us from the economic perspective is the closures, the quarantine, the shelter in place and isolation mandates. So the question really will be, is the Delta variant enough for the governors or some other authority to shut us back down? To issue those stay at home orders and keep us all locked up again? I really can't believe that it would be, it seems like we've let the horses out of the barn. I just don't see us socially going back to that way of life, especially with the vaccines available and the fact that we've really all learned to kind of live more or less in this pandemic era.

So the question is then from an economic sense, what would be required of the variance or of the pandemic to really negate the gains we've made? I don't think it's something like a mask mandate. We can all still go about our business, go out and spend money, buy goods and services even if we have to wear a mask. Maybe there's some robustness lost in the recovery if we have different capacity limitations or distancing, but really that's not the economic driver. In fact, demand is back so aggressively and demand is outpacing supply, outpacing available capacity by so much that we almost could serve to have demand cool just a little bit. Now we at ITR don't think that's happening. We think the peak of the business cycle for our US industrial production index should come in early 2022. At that point, we will continue to grow just at a slightly slower pace.

We don't see any reversal, any secondary contraction as a result of the pandemic. And let's think about that from a few you different ways. The first is just that American businesses are so creative, are so resilient that we've really learned how to adapt in unusual and changing times. You and I, we all learned how to go out and download Zoom, how to conduct these meetings virtually. So we're through the worst of that learning curve. If we did, for any reason have to go, we've learned how to function, how to continue our businesses. And critically, the magnitude that would be required to negate these gains is just so significant.

Demand is just growing at such a rapid pace, we really have our economy firing again, it would take so much to pull us back to where we were to that trough level or worse that I just don't see us getting there. So those are a few of the reasons that we have confidence in these forecasts that we don't think these variants are enough to change the outlook. We do expect growth this year, next year, and end into the future. And we are certainly back out on the road. We hope to see you at some of these or to see you out there on the road. But until then, and until next time, I'm signing off, this is Lauren Saidel-Baker for ITR Economics TrendsTalk. Let's talk more soon.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.