Mandel Ngan/AFP via Getty Images
- The CBO is forecasting a quick economic rebound, partly because of Biden's stimulus.
- US GDP will expand 7.4% this year, the highest level since the Ronald Reagan administration.
- It revised its forecast to account for Biden's stimulus and easing of social distancing restrictions.
- See more stories on Insider's business page.
The Congressional Budget Office said on Thursday that the US economy was on course to regain all the jobs lost during the pandemic by mid-2022. The nonpartisan scorekeeper attributed some of this to the $1.9 trillion stimulus law that President Joe Biden signed in March.
The CBO said unemployment would fall to a near pre-pandemic low of 3.6% on average next year, compared to the February 2020 level of 3.5%. It also said the budget deficit – the gap between federal spending and tax revenue – will reach $3 trillion this year, the product of aggressive stimulus aimed at shoring up a pandemic-battered economy.
The organization revised its estimates to account for three factors:
- The stimulus law, which is expected to strengthen output.
- A quicker return to normalcy as social distancing restrictions are relaxed.
- Larger consumer spending due to household savings, which grew during the pandemic (under President Donald Trump as well).
CBO analysts are forecasting America's gross domestic product to grow by 7.4% this year, the fastest pace of growth since the Reagan administration. But it will drop to 3.1% in 2022, a still vigorous level of expansion. The deficit in 2022 will taper down to $1.2 trillion, but continue to swell after that.
Biden approved a rescue package earlier this year that provided $1,400 stimulus checks, a renewal of $300 weekly unemployment benefits, and emergency assistance to state and local governments. That came on the heels of a $900 billion coronavirus relief package that President Trump ultimately signed into law late in his term.
The CBO did revise one metric upward: inflation. It expects inflation to reach 2.8% this year before leveling off to 2% in 2022 and for much of the remaining decade. This forecast aligns with that of the Federal Reserve.