(Bloomberg) — The U.S.’s economic scarring from the pandemic is much less severe than initially feared, Goldman Sachs Group Inc.’s economics team said in a note that offered an upbeat take on America’s situation.
Commercial bankruptcy filings are below the pre-pandemic level, business closures have proved temporary and unemployment has fallen sharply, which bode well for medium-term recovery prospects, economists said in the note. A vaccine, combined with further fiscal support next year, is expected to limit long-term damage and keep the economy on track for a recovery that could “much more rapid than usual,” they said.
“When employment declined by 25 million in little more than a month, the labor market appeared at risk of again experiencing the deep distress seen after the financial crisis,” the economists including David Mericle said in the note. “Just five months later, the number of newly unemployed workers since the virus shock has indeed declined dramatically, and about half still report that they are on temporary lay-off.”
Despite a recent increase in long-term unemployment, the rapid recovery of labor demand and faster pace of labor reallocation should help most workers avoid long unemployment spells seen in prior recessions, the note said.
The decline in the labor-force participation rate since February largely reflects virus-related obstacles to taking part that should disappear with a vaccine, such as fear of getting sick or a need to take care of children while schools are closed, they said.
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