Recovery Scorecard – May 2021

Data Revisions Reveal Stronger Recovery

Peter Bernstein, Vice President,, 312-431-1540 x1515

The Bureau of Economic Analysis recently revised its estimate of wages and salaries earned by U.S. workers, revealing a stronger recovery than initially reported.  The revisions, which go back to October 2020 also affect real income less government transfers.  The new data show that both these measures now exceed their pre-recession levels. 

Overall, the RCF recovery index for May stands at 94%.  This is actually somewhat lower than the upwardly revised value of 97% for April because the booming housing market took a step back last month.  Nonetheless, the index indicates that most of the ground lost during the pandemic has been recovered.  Similarly, when the 2021Q2 estimate of real GDP is released in July it will likely show a full recovery of overall economic output.   

While 7 of our 16 measures have recovered more than 100% of their recession losses, all 6 of our employment indicators continue to lag the rest of the economy.  Most notably, payroll employment has only recovered two-thirds of the huge drop it saw last spring and remains 5% below its pre-recession peak.  One good sign is the steady drop in new unemployment claims which suggests that employment conditions will continue to improve throughout the year.

Recovery Progress by Economic Variable

Notes and methodology:  All data are seasonally adjusted monthly values.  Variables 4 through 9, and 13 are data from May; all others are from April. Example calculation for economic variable #1, real income less government transfers fell 8.1% from its February 2020 value to its low point in April 2020.  In the latest available report, the variable was 0.3 above its peak value.  Therefore, it has recovered 104% of the loss.  Data Sources: #1, 2, 3, 12, 13: Bureau of Economic Analysis; #4, 5, 6, 7, 8:  Bureau of Labor Statistics; #9: U.S. Employment and Training Administration; #10: Federal Reserve; #11: Bureau of the Census; #14, 15: Bureau of the Census and U.S. Department of Housing and Urban Development, #16:  National Association of Realtors.

Inflation is Higher – or Is It? 

Much attention has been paid to the rise in inflation.  The most recent report from April showed prices up 4.2% vs. a year earlier, the largest increase in almost 15 years.  Even core-inflation was up 3%, well above the Fed’s goal of 2% annual price increases.

But for now, much of the reported increase in year-over-year inflation is because inflation was non-existent a year ago.  Looking instead at April 2019 to April 2021, inflation averaged 2.2% per year, not much different from the Fed’s goal.  In fact, this is consistent with the Fed’s new inflation guidance that emphasizes longer-term average price increases. 

CPI and Core CPI Inflation (percent change vs. same month prior year)

Source:  Bureau of Labor Statistics

It is likely that the next few months will show similar, or even greater, jumps in prices.  Whether this is a transitory development (as the Fed expects) or a more permanent feature of the current recovery should become clearer by the end of the year.

Appendix – Recent History of Recovery Scorecard

Note:  Historical data are often revised so comparisons with earlier RCF Scorecards may reflect the impact of revisions.