This fall, GBA partnered with the Institute of International Bankers (IIB) to launch the Economic Advisory Council, an event series that convenes leading economists from the world’s top banking institutions to highlight the economic research and expertise of international banks and their substantial investments in America’s economic growth. For its inaugural event, the Economic Advisory Council held a virtual briefing entitled, “Assessing America’s Post Pandemic Economic Trajectory,” led by Mizuho Bank’s Chief Economist Steve Ricchiuto, who detailed the short- and long-term dynamics that are affecting America’s economic growth and its prospects of overcoming the pandemic.
Mr. Ricchiuto highlighted three long-term effects of the pandemic to keep an eye on: its impact on foreign direct investment in the United States, a changing workforce demographic and evolving market expectations.
Foreign Direct Investment in the U.S.
Mr. Ricchiuto expects the United States to continue to outperform other regions in terms of attracting foreign direct investment. With the U.S. leaving the deflation trap that nations in the EU and Asia are still struggling with, America will continue to be a competitive investment prospect for foreign companies looking to grow their operations. The current state of foreign direct investment and growth will continue under these long-term interest conditions.
Changing Workforce
Due to the pandemic, the American economy is forced to reckon with record-level worker shortages. In the short term, Mr. Ricchiuto predicts that the U.S. economy will see improvements in the employment market, with the unemployment rate returning to its pre-pandemic level of 4.86 percent. However, a tightening labor market that wants higher wages will lead to increased pressures on longer term employment recovery.
Also of long-term concern is an aging workforce. With over 60 percent of global GDP being generated in rapidly aging countries, this older population will reduce demand and lead to an excess supply of tradable goods.
Evolving Market
Mr. Ricchiuto predicts that the cyclical short-term interest growths from the federal stimulus package will fade in the long-term with or without the Biden Administration’s “Build Back Better” program. The short-term levels of growth we see now will be benign, and interest rates will eventually return to pre-pandemic levels as the Federal Reserve preemptively raises rates.
Watch the full virtual briefing below.