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1 An Overview of the Economic Outlook: 2021-2031 1 (February 2, 2021)

handle is hein.congrec/cbooecnmic0001 and id is 1 raw text is: Congressional Budget Office Nonpartisan Analysis for the US. Congress An Overview of the Economic Outlook: 2021 to 2031 FEBRUARY 1 2021 The 2020-202 1 coronavirus pandemic caused severe economic disruptions last year as households, governments, and busi- nesses adopted a variety of mandatory and voluntary measures-collectively referred to here as social distancing-to limit in-person interactions that could spread the virus. The impact was focused on particular sectors of the economy, such as travel and hospitality, and job losses were concentrated among lower-wage workers. Over the course of the coming year, vaccination is expected to greatly reduce the number of new cases of COVID-19, the disease caused by the coronavirus. As a result, the extent of social distancing is expected to decline. In its new economic forecast, which covers the period from 2021 to 2031, the Congressional Budget Office therefore projects that the economic expansion that began in mid-2020 will continue (see Table 1). Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its prepandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO's projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its prepandemic level in 2024. CBO is using this economic forecast as the basis for updating its budget projections for 2021 to 2031. The agency plans to release those budget projections later in February and a more detailed report about this forecast later this winter. The forecast incorporates economic and other information available as of January 12, 2021, as well as estimates of the economic effects of all legislation (including pandemic-related legislation) enacted up to that date. The Economic Outlook for 2021 to 2025 In CBO's projections, which incorporate the assump- tions that current laws governing federal taxes and spending (as of January 12) generally remain in place and that no significant additional emergency funding or aid is provided, the economy continues to strengthen during the next five years. Real GDP expands rapidly over the coming year, reaching its previous peak in mid-2021 and surpassing its potential level in early 2025. The annual growth of real GDP averages 2.6 percent during the five-year period, exceeding the 1.9 percent growth rate of real potential GDP (see Figure 1). . Labor market conditions continue to improve. As the economy expands, many people rejoin the civilian labor force who had left it during the pandemic, restoring it to its prepandemic size in 2022.1 The unemployment rate gradually declines throughout the period, and the number of people employed returns to its prepandemic level in 2024. Inflation, as measured by the price index for personal consumption expenditures, rises gradually over the next few years and rises above 2.0 percent after 2023, as the Federal Reserve maintains low interest rates and continues to purchase long-term securities. - Interest rates on federal borrowing rise. The Federal Reserve maintains the federal funds rate (the rate that financial institutions charge each other for overnight loans of their monetary reserves) near zero through mid-2024 and then starts to raise that rate gradually. The interest rate on 3-month Treasury bills closely 1. The labor force is the number of people age 16 or older in the civilian noninstitutionalized population who have jobs or who are available for work and are actively seeking jobs. Notes: Unless this report indicates otherwise, all years referred to are calendar years. Federal fiscal years run from October 1 to September 30 and are designated by the calendar year in which they end. Numbers in the text and tables may not add up to totals because of rounding.

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