Economists predicted Thursday that it likely will be the end of 2022 before the state and the nation experience a full economic recovery from the coronavirus pandemic.
The projections were outlined as part of an annual briefing on the national, state and Little Rock economies hosted by the St. Louis office of the Federal Reserve and included predictions from economists with the Arkansas Economic Development Institute.
This year has been "the mother of all roller-coaster rides," said Kevin Kliesen, research officer and business economist with the St. Louis Fed branch.
"The economy is operating well below potential," he added, noting there should be a gradual recovery over the next two years.
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Kliesen and the state economists predicted employment and consumer spending will rise through the end of 2022 -- that's assuming covid-19 infection rates remain manageable, a vaccine is developed to stem the tide and economies remain open for business.
"Another round of widespread lockdowns would be extraordinarily damaging to the economy," he cautioned.
Before the pandemic began throttling the economy in March, the nation enjoyed 127 months of consecutive improvement. Getting back to that level will not be quick and easy. Economic losses have led to a recession.
"It would take a little over four years to get back to peak," he added.
However, Kliesen predicted consumer spending will begin to improve and unemployment should be about 5.6% in 2021 and 4.6% in 2022. That national unemployment rate was 3.5% in February, before the pandemic, and is currently at 6.9% for October.
Likewise, Little Rock and the state as a whole also should build back up, though at a slower rate than the national recovery, according to local economists.
Carlos Silva, who monitors the Little Rock regional economy for the Arkansas Economic Development Institute, said there will be an "upward trend" in job gains, with unemployment projected to be about 4% by year-end 2022. "We think it will take awhile to catch up," he added.
Statewide economic recovery is on the way though it too will take years to make up for pandemic-driven losses. "We're seeing a steady convergence to full employment over the next couple of years," said Michael Pakko, who covers the state for the Arkansas institute.
The state dropped nearly 119,000 jobs from February to April when the pandemic was at its initial peak but has gained back 63,000 workers through September for a net loss of nearly 59,000 jobs.
As for statewide unemployment, Pakko estimates it will fall to 4.8% next year and to 4.1% through 2022 -- close to the 3.5% Arkansas unemployment rate before the pandemic in February. Statewide unemployment was 7.3% in September, the most recently announced rate.
Total personal income is up 7.6% with the help of federal economic stimulus payments. For the full year, Pakko is predicting personal income (minus payments such an unemployment benefits) will be down just under 1% before gaining 2.3% next year and 3.7% through 2022.
Consumer spending will be down about 1% this year, Pakko said, before increasing by 4.4% next year and by 4.2% in 2022. It is clear, however, that spending habits have shifted and a transformation is underway as more buyers are using the internet during the pandemic.
That is unlikely to change much, according to Pakko. "Brick and mortar is going to be a smaller share of the recovery than it normally would be," he said.
On the inflation side, Kliesen is predicting a 2% increase and Pakko cautioned that it could be as high as 4%, though both economists said much of that will depend on the nation's fiscal and monetary policy -- including whether a new Congress approves more economic stimulus packages.
Future growth, or a deeper recession, will be guided by covid-19 infection rates and implementation of a successful vaccine. "The course of the pandemic obviously is a key determinant in where we go from here," Pakko said.