“Democrats are likely to pass further fiscal stimulus in Q1,” Goldman Sachs economists wrote in a client note.
Goldman Sachs is now projecting GDP growth of 6.4% in 2021, up from 5.9% previously. That’s well above consensus estimates of about 3.9%.
That faster growth also should translate to more hiring and less firing. The Wall Street bank now expects unemployment to dip to 4.8% at the end of 2021 and 3.9% at the end of 2023.
Morgan Stanley is similarly growing more optimistic about the economy: The bank anticipates US GDP growth of 5.9% in 2021.
“With the likelihood of further fiscal expansion, this gives us greater confidence that the recovery in the US economy will be on a solid footing,” Morgan Stanley economists wrote in a note to clients Wednesday.
Another $750 billion in relief on the way?
President-elect Joe Biden has called the $900 billion stimulus package enacted by Congress last month a “down payment.”
Goldman Sachs now expects Congress to enact another $750 billion in fiscal stimulus in February or March, including $300 billion in stimulus checks, $200 billion of aid to state and local governments, and $150 billion in additional unemployment benefits.
“Discouraging news on the virus front — including the slow pace of vaccination and the emergence of more infectious virus strains — suggests the spending boost from stimulus will be more lagged than usual,” Goldman Sachs economists said.
In other words, the next stimulus package may not accelerate economic growth as much as hoped, at least initially.
Economists and policy analysts do not expect Democrats to enact dramatic tax hikes that would threaten the recovery. The narrow majorities in the Senate and the US House of Representatives will make it difficult to get sweeping legislation through Congress.
Top Democrat is bullish on infrastructure, stimulus
However, some senior Democrats are optimistic about the ability to pass major legislation.
Democratic Senator Sherrod Brown said the fact that Republican Senate Majority Leader Mitch McConnell will no longer…
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