First quarter growth of 6.4% along with solid job gains in April indicate a growing economy, but is there more to it?
A lot of information has passed through the minds of analysts in the past few weeks. We have had a preliminary measure of economic growth of 6.4% for the first quarter, which would be astounding if it were not seen within the perspective of a rebound from the pandemic and pumped up by stimulus. The jobs report for April showed a gain of 266,000 jobs, usually a solid number, but also seen as disappointing within the perspective of being down eight million jobs since last year.
Finally, the Fed acknowledged that the economy is likely to roar back this year due to the same factors but sees the threat of inflation as “transitory” -- a new word for analysts to banter about. The next question is, what does all this mean? There seems to be a consensus that the economy will strongly grow this year, but we are not sure of two things.
First, will this strong economy cause inflation to rise in the long-run and thereby raise interest rates significantly – leaving historic lows in the rearview mirror? Secondly, will enough American’s get vaccinated to let us return to normalcy, giving us a better chance that this recovery will stick around for the long-term? While we see blue skies in the immediate future, it is these long-term questions which will take some time to sort out.