Data is confirming the pattern of the economic bounce back. As restrictions are eased, spending on services are increasing. Restaurants, leisure, and hospitality are the main beneficiaries, as consumers look to make up for lost time. This can be seen in the US payroll data that was published on Good Friday, where 916,000 jobs were added in March. The sector with the largest increase was leisure and hospitality. This is exactly what we would expect as the lockdown restrictions are lifted.
This joy is being delayed in Europe though, as the number of COVID-19 cases continue to rise, and additional restrictions are implemented. France announced a four-week lockdown and Italy is extending their current restrictions to the end of April. German Chancellor Merkel has also warned that further restrictions may be required in Germany. A sombre week when compared to the UK, where we enjoyed an Easter weekend with lesser restrictions.
However, the consequence of these lockdowns in Europe may mean a delay to easing restrictions for the UK population to holiday abroad. While this will be disappointing to many of us, it arguably matters more for Europe. Tourism is a significant part of the European economy, and while certain elements of demand are only delayed because of lengthened restrictions, holidays are time sensitive, and the summer could be lost if control is not established quickly.
While data is looking positive, policymakers are yet to take their foot off the gas. President Biden unveiled his once-in-a-generation infrastructure investment plan for the US, which will see almost $2 trillion pledged to rebuild roads, highways, and bridges. This is not a patch though, as the proposal, called the ‘American Jobs Plan’, is being used to confront climate crisis, curtail wealth inequality, and strengthen competitiveness.
The proposal will take eight years and generate millions of jobs, with an increase in corporate taxes over the next 15 years to help offset the cost. In reality, much of the tax increase is simply unwinding the tax cuts that President Trump introduced during his term in office. One thing is for sure, this will take considerable time to be signed off by Congress as everyone looks to amend the plan to benefit their own constituencies.
As we start the second quarter of 2021, there are a lot of factors to be weaved together before we can finally reach the light at the end of the tunnel, but the progress is encouraging.