RCF Weekly Economic Update

January 29, 2021

Our guide to notable economic data, forecasts, and analyses. For more information contact Peter Bernstein at pbernstein@rcfecon.com. Additional updates and releases can be found at www.rcfecon.com/research/news-and-press-releases/

  • GDP report for 2020Q4
  • Real-Time Population Survey (RPS), January 10-16
  • Bureau of Labor Statistics, State Employment and Unemployment, December 2020
  • Opportunity Insights Economic Tracker, Affinity Solutions, early January 2021 consumer spending
  • Conference Board Consumer Confidence Index, January 2021
  • Morning Consult’s U.S. Index of Consumer Sentiment, weekly update
  • Standard Media Index, December 2020
  • House Price Indices, November 2020 (released January 26, 2021)
  • Recommended Analyses of the 2020Q4 GDP Report
  • International Monetary Fund, World Economic Outlook Update, January 2021
  • National Association for Business Economists, January Survey
  • Yelp Economic Average, 2020 Annual Report

Data Releases

GDP report for 2020Q4

In 2020Q4, real gross domestic product (GDP) increased at an annualized rate of 4.0% according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 33.4% which was revised upwards from 33.1%. 2020Q4 GDP was -2.5% compared to 2019Q4 and for the full year, 2020 GDP was -3.5% compared to 2019. Expectations ranged from +15.6% to -3.0% annualized with a median of 4.1% according to the Wall Street Journal’s January Economic Forecasting Survey, conducted in early January. Other consensus forecasts were between 4.3% and 4.6%. https://www.bea.gov/news/2021/gross-domestic-product-4th-quarter-and-year-2020-advance-estimate

Real-Time Population Survey (RPS), January 10-16

Compared to December, the employment rate was unchanged at 68.6%, labor force participation rate fell 0.4 percentage points to 77.4%, and the unemployment rate decreased 0.7 percentage points to 11.4%.  https://sites.google.com/view/covid-rps, https://drive.google.com/file/d/1uQrlBJ_w4b2Fps6Zp9qgc-9pMnbC-mjq/view

Bureau of Labor Statistics, State Employment and Unemployment, December 2020

Unemployment rates were lower in December in 19 states, higher in 12 states and the District of Columbia, and stable in 19 states, the U.S. Bureau of Labor Statistics reported today. Forty-five states and the District had jobless rate increases from a year earlier, one state had a decrease, and four states had little or no change. The national unemployment rate, 6.7 percent, was unchanged over the month but was 3.1 percentage points higher than in December 2019. In December 2020, nonfarm payroll employment increased in 15 states, decreased in 11 states, and was essentially unchanged in 24 states and the District of Columbia. Over the year, nonfarm payroll employment decreased in 48 states and the District and was essentially unchanged in 2 states. https://www.bls.gov/news.release/pdf/laus.pdf

Opportunity Insights Economic Tracker, Affinity Solutions, early January 2021 Consumer Spending

Average consumer spending increased notably during the first part of January and was very likely associated with the distribution of the second stimulus payments in early January. https://tracktherecovery.org/

Conference Board Consumer Confidence Index, January 2021

The Conference Board Consumer Confidence Index® improved moderately in January, after decreasing in December. The Index now stands at 89.3 (1985=100), up from 87.1 in December. However, the Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 87.2 to 84.4. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – increased from 87.0 in December to 92.5 this month.”  https://www.conference-board.org/data/consumerconfidence.cfm

Morning Consult’s U.S. Index of Consumer Sentiment, weekly update

Consumer confidence increased this month due to a combination of political and economic developments, with the rise signaling stronger consumer spending through the end of the first quarter. Morning Consult’s U.S. Index of Consumer Sentiment is 89.64 as of Jan. 26, up 2.48 points from the previous week. The weekly increase is the second-largest gain over the past three years, and so far this month, the ICS is 88.0, a 1.5 percent increase from December. https://morningconsult.com/2021/01/27/analysis-political-developments-new-stimulus-drive-consumer-confidence-higher-in-january/

Standard Media Index, December 2020

The U.S. advertising economy had its fifth consecutive month of expansion in December, rising 7.2% over December 2019, according to the final 2020 data generated by the U.S. Ad Market Tracker, a collaboration of MediaPost and Standard Media Index. https://www.mediapost.com/publications/article/359860/us-ad-economy-ends-2020-with-fifth-consecutive-m.html, https://www.standardmediaindex.com/StandardMediaIndex_TotalMarkets/

House price indices, November 2020 (released January 26, 2021)

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 9.5% annual gain in November, up from 8.4% in the previous month. The 10-City Composite annual increase came in at 8.8%, up from 7.6% in the previous month. The 20-City Composite posted a 9.1% year-over-year gain, up from 8.0% in the previous month. The chart shows the index levels for the U.S. National, 10-City and 20-City Composite Indices. As of November 2020, average home prices for the MSAs within the 10-City and 20-City Composites are exceeding their winter 2007 levels.


House prices rose nationwide in November, up 1.0 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index(FHFA HPI®). House prices rose 11.0 percent from November 2019 to November 2020. The previously reported 1.5percent price change for October 2020 remained unchanged. For the nine census divisions, seasonally adjusted monthly house price changes from October 2020 to November 2020 ranged from +0.3 percent in the West South Central division to +1.6 percent in the Pacific division.  The 12-month changes ranged from +8.7 percent in the West South Central division to +14.0 percent in the Mountain division.https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/hpi-monthly_01262021.pdf

Economic Forecasts and Analyses

Recommended Analyses of the 2020Q4 GDP Report

Keys takeaways related to the 2020Q4 GDP report via Jason Furman (PIIE) and Wilson Powell III (Harvard Kennedy School):

  • The largest contraction in annual GDP since the demobilization from World War II.
  • Among the largest four-quarter contractions in GDP since the demobilization from World War II.
  • The contraction in GDP was not nearly as bad as most predictions earlier this year. While the economic contraction in 2020 was among the largest on record, in the early part of the pandemic, forecasters expected the decline to be about twice as large. As the year progressed and the speed of the initial recovery and the effects of the policy response became apparent, forecasters became less pessimistic.
  • The contraction in GDP was likely less bad than for other advanced economies.
  • The largest increase in annual disposable personal income since 1984. Overall, real annual disposable personal income grew by 6.0 percent in 2020 over the course of the year. This was entirely driven by increases in government benefits, without which income would have fallen 0.9 percent.
  • Consumption grew for durable goods and nondurable goods while falling sharply for services.
  • The 13.7 percent growth in residential housing in 2020 was a particularly strong part of the economy.
  • The US economy enters 2021 with $1.6 trillion of excess savings due to both higher incomes in 2020 and reduced consumption.


Additional analysis and looking ahead via Ben Casselman (NYT).


International Monetary Fund (IMF), World Economic Outlook Update, January 2021

Summary excerpts:

  • Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook. Amid exceptional uncertainty, the global economy is projected to grow 5.5 percent in 2021 and 4.2 percent in 2022. The 2021 forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.
  • The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors. The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).
  • The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis.

IMF forecasts GDP growth in the United States of 5.1% in 2021 and 2.5% in 2022.


National Association for Business Economists, January Survey

“Momentum has continued to build, and survey respondents seem much more positive about the future today than in October. Furthermore, expectations regarding GDP growth continue to improve, with 69% of respondents expecting growth in inflation-adjusted gross domestic product over the next year of 3.0% or higher, compared to just 59% in the October survey.” 


Yelp Economic Average, 2020 Annual Report

Last year was full of unexpected challenges and local businesses served as a mirror for the fluctuations that defined the U.S. economy. In our previous Yelp Economic Average reports in Q2 and Q3, we reported on business closures across the country and the resilience of local businesses evidenced through new openings and reopenings, respectively. While the pandemic continues to drive uncertainty in the economy, Q4 data demonstrates early evidence of an economic recovery.

To conclude the year, we’ve extended our analysis on the openings and reopenings of local businesses during yet another wave (the highest on record) of COVID-19 cases across the nation, noting a sustained volume of both measures through Q4. Business owners had nearly nine months of experience operating during the pandemic and were better prepared to adapt their businesses amidst the new set of local restrictions. Similarly, consumers have adjusted to the ‘new normal,’ showing restraint in their vacation plans, displaying an increased interest in non-traditional wedding celebrations, and learning how to adapt their weekend plans to meet their COVID-safe lifestyle.