The U.S. may struggle to reach full herd immunity from the coronavirus but the economy can probably grow quickly this year even without it, Richmond Federal Reserve president Tom Barkin said on Friday.
“Individual hesitance is going to be a real barrier for herd immunity,” Barkin said in webcast comments to the Harrisonburg-Rockingham Chamber of Commerce in Virginia, citing estimates that perhaps 85% of the population would need to be immune to keep the coronavirus from circulating.
“The good news is I am not sure the economy requires it...There still may be some caution, but I expect those who have been vaccinated to have large pent up demand – meals, entertainment, travel...As cases come down then with vaccines, warmer weather I expect businesses to start returning to normal operations.”
Barkin’s comments follow those of other policymakers and analysts who have grown more optimistic about the expected performance of the U.S. economy this year, with vaccines ramping up after early logistical stumbles, economic fuel in the form of government transfer payments being added to family accounts, and borrowing costs kept low for businesses and families by the Fed.
Forecasters see U.S. growth in 2021 approaching perhaps 6%, triple the estimated long-term trend. In one of the rosier recent projections, Treasury Secretary Janet Yellen said on CNBC this week that “if all goes well, I think we could be back to full employment next year,” an outcome that would defy current concerns about extended scarring to the U.S. labour market.
As of Thursday more than 41 million people in the U.S. had received least the first of two vaccine shots, a little over 12 per cent of the population, and the daily pace of inoculations is expected to accelerate as more supply becomes available.
Barkin said that while the first months of the year will remain “bumpy....the second third should brighten.”
Once a sort of tipping point is reached in terms of public perceptions of what it is safe to do, Barkin said change will come “in a wave...I could imagine a few high profile companies raising their hand and bringing folks back to work and a bunch of folks following.”
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