Vaccination is the ultimate stimulus

One of the great strengths of Marketplace's Kai Ryssdal is his insistence on making sure listeners never have a chance to forget fundamental context. He opens or closes segments with reminders that the the markets are not the economy and that China doesn't pay the tariffs, we do.

Marketplace has also consistently pointed out that the economy can't recover in the middle of a deadly pandemic. The corollary being that the best way to help the economy is to speed up distribution of the mRNA vaccines and, perhaps more importantly, fast track the approval for AstraZeneca.

But it could be hard to sustain that optimism in the short term, said economist Robert Frick at Navy Federal Credit Union.

“If retail spending doesn’t climb back, if companies aren’t really investing because so many people have COVID, we can’t ignore how tough the next few months are going to be,” Frick said.

He predicts that six months from now, by midsummer, enough people will have been vaccinated that spending will pick up again. More people will be making restaurant reservations, going out to shop and buying airline tickets.

But, “a lot of people are assuming it’s going to be like a light switch,” Frick said. “Given the troubles with vaccine rollout and the number of people who don’t want to get vaccinated, there’s a light at the end of the tunnel, which is herd immunity. That’s going to take probably not until some time next year.”

Harvard economist Jason Furman said the economy is gonna have a lot of fuel to burn.

“People will have money. They actually had higher incomes after taxes and transfers in 2020 than normal, [and] they had lower spending,” Furman said. “So there will be about $2 trillion of dry powder — of excess saving — to spend.” 

Furman said there will be two big problems, though: A lot of long-term unemployed people will be out of savings altogether, and a lot of businesses will have closed their doors for good.