The spread of the Delta variant has led to more than just increased safety measures across the nation. It’s also resulted in the economic growth of the United States to drop from excellent to “solid,” according to research from UCLA.
The September forecast from UCLA Anderson School of Managementpaints the picture of a long road to economic recovery .
It predicts gross domestic product will grow this year at 5.6 percent, down from the 7.1 percent rate forecast in June, according to the L.A.Times.
UCLA economists point to the Delta variant as a leading cause of the slow down.
Since the school’s June forecast, the highly contagious variant emerged and quickly spread around the world. As a result, the economy is going through “the big shift,” according to Leo Feler, a senior economist with the UCLA Anderson Forecast team.
“Back in the spring, the economic optimism was palpable,” Feler wrote in the September report. “The U.S. was vaccinating an average of two to three million people per day. The economy was reopening. Hiring was accelerating. It looked like COVID was finally behind us.”
Additionally, global supply chains continue to battle disruptions, leading to ships parked outside of ports for weeks as they wait for to be emptied.
Just last month dozens of container ships dotted the waters off the coast of Los Angeles, waiting to be let into the Port of Los Angeles, the busiest container port in North America.
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Feler said the group expects the economy’s stagnation to ease as “Delta calms down and more people begin to go out.”
The rightmost data table below shows the 2021, 2022 and 2023 broken down into quarters. The jump from 3.3 percent in quarter three to 4.3 percent in quarter four this year relates to how UCLA’s Anderson Forecast team expects the remainder of the year to go after holiday spending is factored in.
The report forecasts that the U.S. will run at about the four percent rate through the beginning of 2022, then ease back down closer to the two percent to trend by the fourth quarter.
"What makes this growth 'ho-hum' is the comparison to what could have been if, globally, we had gotten COVID under control and had been able to transform pent-up demand, pent-up savings and a tremendous amount of government support into faster economic growth," Feler wrote in the September forecast.
Several other factors are contributing to the “ho-hum” economic growth that Feler described, including an increase in the number of retirements.
“We had about two million more retirements than expected, based on our pre-covid trend,” he said. “Many are baby boomers, so they were going to retire anyway, but the surge is happening beyond our pre-pandemic trend.”
Feler pointed to concerns over job safety, and said many employees in the service industry may have retired to reduce their risk of infection on the job at hair and nail salons and restaurants.
UCLA’s forecast is slightly less optimistic than that of the Federal Reserve, according to the L.A. Times. The newspaper reported the feds project a GDP growth of 5.9 percent, down from its June forecast of 7 percent.