Year’s outlook for covid recovery looking grim in Stephens forecast
Economic projections for 2021 have come flooding out and now Little Rock’s own Stephens Inc. weighs in with its own commentary related to the potential for economic recovery.
Bottom line: The outlook is bleak. The U.S. economy has basically lost a year of growth since the pandemic hit in mid-March.
A turnaround is not on the horizon and the economy will likely hobble forward as the health crisis infects jobs, businesses and public spending.
Growth forecasts for 2021 are crippled by the pandemic, the recession, the size and effect of potential stimulus plans, unemployment and related labor-force issues and the working relationship between a new president and a continually divided Congress.
“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 International Monetary Fund said in a preface to its prediction for 2021.
The IMF projects worldwide growth at 5.5% for this year, led by the U.S. with gross domestic product predicted to increase by 5.1%. Economists surveyed by the Wall Street Journal this month estimated the U.S. economy will grow 4.9% this year.
The report offered by Stephens doesn’t predict GDP growth though it leans on the Congressional Budget Office predictions of 1.1% of real GDP growth per American.
Stephens cites six organizations, ranging from the IMF to the World Bank, that forecast an average estimate of 4.1% growth for the U.S. this year.
“By the end of 2021, the economy will not have recovered all its lost GDP from the 2020 recession,” the report says. “It could be 2022 before the economy returns to the 2019 level.”
That’s a dim outlook when considering that slow growth like the 1.1% per person would produce a standard of living that would double only every 65 years, far less than the typical doubling that has occurred between 15 and 30 years since World War II.
Others are a bit more optimistic. The Federal Reserve issued a report Feb. 12 that upgraded its earlier GDP forecast.
Based on a survey of 39 economists, the Fed projects GDP to grow at an annual rate of 4.5% in 2021 and 3.7% in 2022. The projections for 2021 and 2022 are up from 4% and 3%, respectively.
The Fed forecast cites improvements in employment as helping boost recovery. On an annual-average basis, the panelists predict the unemployment rate will decline by nearly half a point to 5.4% from earlier predictions of 5.9% in 2021.
The Stephens report notes several important factors to consider related to the economy:
■ The worsening federal debt burden, which has been increased with covid-related spending and could deter global bond investors from backing U.S. debt issuances.
■ The Federal Reserve is “a willing accomplice” in the public spending explosion by
supporting “irrationally low interest rates” that decrease the interest burden on the deficit.
■ State and local taxes are likely to increase to recover revenue lost during the pandemic.
In the end, the Stephens report predicts “American consumers, taxpayers and investors could be entering an ‘Economic Twilight Zone’ where almost anything can happen.”
There is no clear consensus on economic recovery and all the reports note it will be mid-year, at the earliest, before the fog clears.
GOING PUBLIC
Little Rock native Franklin McLarty, son of former White House Chief of Staff Mack McLarty, last week announced that his company, MDH Acquisition Corp., closed on an initial public offering of 27.6 million shares priced at $10 per unit.
The company, focused on fostering mergers and acquisitions in multiple industries, trades on the New York Stock Exchange. Class A common stock and warrants are listed under the symbols MDH and MDH.WS, respectively.
“Bringing MDH Acquisition Corp. public earlier this month was our first of many exciting milestones for MDH,” McLarty said in a statement.
“In coming weeks and months, our team will be hard at work pursuing an acquisition opportunity, ideally in an industry and region our management team has expertise in with a great focus on the heartland.”
The heartland region generally is the area bounded by the Rocky Mountains to the west, the eastern seaboard, the Rust Belt to the north and south to the Gulf of Mexico.
Though MDH could buy or sell companies in any sector, a news release noted the company “intends to focus on industries that complement its management team’s background in transportation and logistics, telecommunications, financial services and professional services, and to capitalize on the ability of its management team to identify and acquire a business.”
EXPERT ADVICE
The Sam M. Walton College of Business is offering the opportunity to gain business insight and wisdom from three members of the Arkansas Business Hall of Fame.
The one-hour online event, scheduled for 9 a.m. Thursday, will include Gerald Alley, Joe T. Ford and Johnelle Hunt, business leaders who have contributed to the economic growth and development of the state. The free event is sponsored by the University of Arkansas Alumni Association.
Billed as a “fireside chat,” the three will offer business advice and answer questions. Registration is required and more information is available at arkansasalumni.org.
WOMEN HELPING WOMEN
Women planning to start or grow their own companies can hear from other women who are excelling in research, innovation and business during two online seminars March 8 to celebrate International Women’s Day.
The “accelHERate,” initiative will be presented by the Arkansas Small Business and Technology Development Center and offer advice and support for budding entrepreneurs.
Each session has four speakers and includes a question-and-answer period for participants.
Topics will include management and growth strategies, startup mistakes and how to avoid them, key skills for entrepreneurial success and research commercialization strategies.
Sessions will be held from noon-1:30 p.m. and again from 4-5:30 p.m.
“We want to encourage more women to pursue entrepreneurship and consider it as a viable and rewarding path,” said Laura Fine, state director at the entrepreneurial center.
The webinars are free. For more information and to register go to asbtdc.org.
Column ideas or recommendations? Thoughts or musings that need pursuing? Contact me at amoreau@adgnewsroom.com or at 501-378-3567.