Stimulus checks could power U.S. economy to nearly 10% GDP growth: economist

Brian Sozzi
·Executive Editor
2 min read
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The bullish Wall Street calls on the U.S. economy in light of the new $1.9 trillion stimulus plan are starting to pick up.

"I think we are on track for pretty strong growth. I am expecting 9.5% GDP growth in the first quarter, and growth averaging almost 7% this year," Jefferies chief financial economist Aneta Markowska told Yahoo Finance Live. "I think the economy is in great shape. We are going to see the data continue to surprise on the upside probably for the next three or four months. What retail sales for January really showed us is there is tremendous propensity to spend stimulus checks."

Markowska tracks economic activity through the lens of various real-time indicators such as online shopping and restaurant bookings. Those measures — and others Markowska tracks such as employment gains/losses — have begun to pick up in recent weeks as captured in the Jefferies U.S. Economic Activity Index.

The index rose by 2.3 points last week from the prior week. It's up a solid 5.6 points since bottoming on Jan. 15, suggesting momentum in the economy that stands to only accelerate into the spring amid the latest round of stimulus checks and increasing vaccinations.

In fact, economic data is already beginning to surprise to the upside.

Non-farm payrolls rose by 379,000 in February, above the 200,000 expected. The unemployment rate fell to 6.2%, unexpectedly improving from January's 6.3%. And private payrolls improved 456,000 versus estimates for a 200,000 increase.

January retail sales (reported in mid-February) surged 5.3%, smashing estimates for a 1.2% gain. U.S. retail sales spiked 4.6% in February, according to recent data from MasterCard SpendingPulse. Online sales rose 54.7%.

To be sure, others on the Street are in Markowska's camp.

Goldman Sachs' chief economist Jan Hatzius reiterated his 7.7% U.S. GDP forecast for this year, the highest among Wall Street firms. Hatzius sees first quarter U.S. GDP growth of 5.5% and then accelerating to 11% in the second quarter. Economic growth will hit 8.5% in the third quarter and 6% in the fourth quarter as stimulus checks run out, according to Goldman's modeling.

Hatzius sees the unemployment rate reaching 4.1% by year end, the lowest among his peers on the Street.

"The main reason that we expect a hiring boom this year is that reopening, fiscal stimulus, and pent-up savings should fuel very strong demand growth," Hatzius said in a new report Monday titled "The Coming Jobs Boom."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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