As predicted, 2021 started on January 1st and will, without a doubt, end on December 31st, just like every year since 1582 and the adoption of the Gregorian calendar. But, what happens during the other 365 days of the year will be the result of whatever mother nature throws at us combined with geopolitical influences, most of which cannot be accurately predicted.
What happens in the environment and politics will have an effect on the economy, and to varying degrees, an effect on businesses.
Last year, drought in the western U.S. and Australia made us vulnerable to fires that devastated hundreds of thousands of acres of forest and brush. The warming of the ocean also caused a record number of hurricanes and named tropical storms. Both events caused millions of dollars’ worth of damages.
This year, meteorologists predict another very active hurricane season with 16 named storms, seven hurricanes, and three major hurricanes. The leading factor behind their prediction is an expected development of a weak La Niña by the third quarter of 2021.
However, before the hurricane season starts, scientists have been monitoring another weather occurrence. A break in the polar vortex has caused it to split and is expected to send a blast of cold Arctic air and significant snow blanketing the northern U.S. states and may reach as far south as northern Arizona.
As Americans prepare for these weather events, you can expect to see an interruption in the transportation of goods and a rise in the price of natural gas, fuel oil, and lumber products—part of the economic fallout from severe storms.
Last year, nature also threw the COVID-19 pandemic into the economic mix, and it is still affecting the economy as we enter 2021. Predictions are that we will still be suffering the economic effects of COVID well into the third quarter of this year.
Though the 2020 economy did not go exactly as predicted, it provided some insight into what to expect in 2021. On December 2, 2020, the Las Vegas Global Economic Alliance (LVGEA) and the UNLV Lee Business School Center for Business and Economic Research (CBER) held a virtual presentation of Outlook 21. The speakers were Christopher Thornberg, Ph.D., founder of Beacon Economics, and Stephen M. Miller, Ph.D., professor and director of UNLV’s CBRE.
Both speakers were optimistic about 2021, saying that the pandemic caused recession has been relatively short and that we are about 1/2 to 3/4 of the way back to where we were before the pandemic.
Thornberg describes this recovery as a sharp V and thinks that the Feds are holding back growth by not allowing interest rates to rise. Thornberg is also not in favor of another stimulus package because, according to him, the first stimulus has not been spent but instead is sitting in people’s savings accounts.
Miller was more conservative in his view of how much progress we have made toward recovery, breaking his numbers into two segments, workers in the entertainment, hospitality, and service industries that deal directly with people and the business type professionals. Miller believes the recession looks more like a K recovery, with the entertainment, hospitality, and service workers still in decline and the other businesspeople doing well. Contrary to Thornberg, Miller thinks that the Feds are doing a great job by keeping inflation flat and interest rates low. Miller also believes that a second stimulus is needed, especially for the hospitality, entertainment, and service workers.
Both economists agree that there is a lot of pent-up spending that will take place around the third quarter of 2021 after the majority of the general public have been vaccinated against COVID. They also agree that housing prices will remain high through 2021. But office space will suffer as business owners begin to evaluate the continuation of remote work by a percentage of their employees, and the amount of physical headquarter space is really needed.
Thornberg and Miller also agreed that, barring any unforeseen circumstances, the fourth quarter of 2021 should see a bounce in the economy as we start to return to normalcy. Whatever “normal” will be.
By the way, in 2020, Southern Nevada and several western states saw an invasion of locusts, which turned the sidewalks brown and people screaming. This spring, the largest brood of cicadas is set to emerge from the earth. But do not worry; Nevada and the western states will be mostly spared. Brood X (Roman numeral for 10) will be filling the air with a mating hum that can reach a deafening 100 decibels. The cicadas will be seen from as far west as Missouri, as far south as Georgia, as far north as Michigan, and east to Long Island, New York.
At Business Finance Corporation, we work to be your partner in success. We may not be able to control mother nature or the economy, but we can help you control your cashflow. If your business balance sheet is heavy on the receivables side and light on cash, let us help. We can provide immediate cash and assist in collecting your receivables. Go to https://bfc.vegas/ or call 702-947-3800.