The ongoing pandemic makes the outlook for the coming year more contingent on noneconomic variables than is normal.

A second wave of Covid-19, how governments respond to a second wave should it occur, and how soon a vaccine will be available and accepted by the public are noneconomic contingencies for which we have to make some assumptions.

Regarding a second wave, no one knows if there is going to be one.

People can guess, suppose, and speculate, but studying past pandemics reveals that it is impossible to say, “There will be a second wave.” There might not be. Our outlook assumes that there will be, but that it will not have the disastrous consequences of the first wave because the fatality rate has dropped precipitously.

It turns out that the medical community, when given a chance to observe and discern this coronavirus, has become more adept at saving lives. That in turn should mean governors and heads of state will not feel the political pressure to shut down economies to the extent they did in March and April.

Another thing we seem to have going in our favor is that the incidence of influenza so far this flu season is well below normal. Face masks and frequent washing of hands are seemingly good preventatives for more than just Covid-19, just like our mothers taught us.

Regarding a vaccine, our outlook assumes that there will be one in the first half of 2021, and that it will take a year or more before it is widely dispersed and the public decides it is safe.

There are also “known” variables. We are drawing from consumer trends discernible through the third quarter along with leading indicator trends. The fiscal and monetary policy stimulus packages of 2020 will also have a bearing on 2021.

The consumer was provided the additional means to spend money via the largess of the federal government. Thanks to lessons learned during the Great Recession of 2008-2009, consumers went into the Covid-19 crisis with more savings than is normal for Americans, and, based on the retail sales trends, they did not lose their desire to spend money.

Retail sales are back to running above corresponding year-earlier levels.

After-tax income is up. We were provided the means, and as consumers we never lacked the motive.

That is not to say personal consumption expenditures for corrective eyeglasses and contact lenses didn’t take a severe hit this year. When governors tell you to stay home, and we are concerned about being in crowds, and “nonessential” businesses are ordered to close, it is not surprising to see a spending decline in our space that is truly epic.

Expenditures in the second quarter of 2020 were down 28.4% from the prior year. The previous worst quarter was the second quarter of 2001, with expenditures dropping 9.8% year over year.

However, consumers are coming back.

We expect that the second quarter of 2020 will be the low point of this debacle. The worst is over.

Unemployment is coming down at a brisk pace (despite what some headlines say), and that is good news for our industry. Employed people have money in their pockets and insurance cards in their wallets.

Unemployment peaked at over 14%. It is down to 7.9% as we head into the November elections. Expect the rate to be down to somewhere between 5.5% and 6.5% by the end of 2021. That reflects the resiliency of the economy as we bounce back from Covid chaos.

The economy was never broken. We were hit with a natural disaster that disrupted the economic fundamentals. We know from studying prior natural disasters that economic fundamentals eventually reassert themselves, and the economy responds accordingly. The direction of that response is rise. It started in the second half of 2020 and will extend through all of 2021.

We are fortunate that the politics of this election are not a major disruptor. Regarding civil unrest, it can be extremely disruptive where it occurs locally, but it does not have sufficient economic “weight” to alter the course of the economy.

Plan on your businesses rising up from the devastation of the second quarter of 2020 and gaining traction the deeper you go into 2021.

You will read about threats to the rising trend (stock market, discussion about tax increases, and deficit spending, to name but three), but we have factored those into our thinking and our outlook for the industry. If we may offer you some advice:

1. Plan on the rising trend. Have it in your budgets and cash flow projections. Recoveries consume cash.
2. Seek opportunities, because fear breeds hesitation, and you have an opportunity to move ahead.
3. Leverage your plans for recovery/growth at these incredibly low interest rates.
4. Find people with the right attitude, and make sure you have the training programs to teach them. Right now, there are more people who are willing and able out there, and you can teach them the skills they need.
5. Understand that, at the end of the day, it is the decisions that you make that matter the most in terms of how well 2021 turns out for you.

ABOUT BRIAN BEAULIEU

An economist with ITR Economics since 1982 and its CEO since 1987, Beaulieu is also chief economist for TEC, a global organization comprising more than 13,000 CEOs. Previously, he was an economist for the U.S. Department of Labor.