April economic outlook: Searching for signs of positivity

Quick takeaways

  • There’s lots of data in the news—but not all of it is worthy of your attention or worry. The scope of the impact of COVID-19 on every aspect of life is unlike anything in recent memory. Even the experts don’t fully understand it.
  • If you’re in a good financial position and you benefited from the most recent relief package, it’s OK to think about buying something you’ve had your eye on. For example, you might want a new bike to enjoy the outdoors or consider a small deposit in your emergency fund.
  • No matter the news, focus on long-term financial goals. Make short-term decisions to help you reach them.

Flip a coin: That’s about as much certainty as you can get for the economic outlook. On one side of the coin you’ll find better-than-expected jobs numbers, a big stimulus package, and positive trend lines on vaccinations. But on the other side, you’ll surface multiple worries, including the unknowns for a COVID-19 resurgence, long-term unemployment, and the sustained impacts on service-oriented industries.

We could all use a dose of certainty. Until then, here’s what data, new legislation, and other economic factors can tell us.

The data: The overall economic picture

Think of the current economy as a parked car with the emergency brake released. It’s stuck in neutral, idling, not sure whether to move forward or back, says Heather Winston, assistant director of financial advice and planning at Principal®.

To get a sense of what direction that car will go, Winston pays attention to employment statistics, including job growth and unemployment. On the former, 2021 offers cautious bits of good news, with unexpectedly strong numbers for the first time in many months.1 But millions remain out of work or have been forced to leave the workforce entirely.

“While the trend has been moving in the right direction, we still have a ways to go until we’re back to pre-pandemic numbers,” Winston says.

We might not get the whole picture for some time. “There’s this saying that, ‘You buy on the rumor and sell on the news.’ Basically, you buy when you anticipate good things are coming,” she says. “People aren’t ready to put their money behind good things coming. They want to see continuous increases in everything—except new COVID cases and deaths.”

One piece of good economic news or one bad bit of data may not paint the whole picture.

Your wallet: Sometimes bits of bad news prompt quick dips into retirement funds or savings. Before you do that, focus on immediate needs (can you pay all your bills) and long-term goals, such as saving to buy a home. One piece of information shouldn’t prompt you to radically change your course of action. "It's why we always talk about investing for the long term," Winston says. Don’t let the short-term outlook prevent your longer-term goals from coming to fruition.

The legislation: The near- and long-term effect

Vast amounts of aid poured into the economy made a real difference for all points of the financial spectrum last year. Some saved money and some spent, stabilizing many businesses and states’ sales tax collection efforts.

The same may happen with the passage of the American Rescue Plan Act of 2021. Stimulus payments, extended unemployment benefits, rental assistance, childcare tax credits: all help individuals stay in their homes, feed their families, and spend to help keep businesses afloat. The bill includes:2

Icon of an arrow. Stimulus checks

Single: $1,400 if you make less than $75,000 a year

Married: $2,800 per household for joint filers earning less than $150,000

With kids: $1,400 per dependent in qualifying households

Icon of an arrow. Infrastructure projects

$10 billion for state and local governments to invest in capital projects enabling remote work, education, and health monitoring

Icon of an arrow. Unemployment extensions

Extra $300/week through September 6

Icon of an arrow. Expansion of tax credits

Child tax credit expansion: from $2,000 to $3,000, and $3,600 for kids under the age of six

Earned-income tax credit: increased credit percentage and phased-out thresholds

Child and dependent care tax credit: an increase of $15,000 for those earning less than $125,000

The hope is that hiring continues, confidence builds, and the nation turns a corner in April and beyond. "While we’re seeing continued uncertainty, there’s also room for cautious optimism.”

Your wallet: As the crisis creeps into its second year, it’s changed how we look at ourselves and our own economic picture. “Are we healthy? Have we saved enough or spent too much? Has our belief system permanently changed? All those are important questions,” Winston says.

While we’re seeing continued uncertainty, there’s also room for cautious optimism.”

Heather Winston, assistant director of financial advice and planning

In your own life, it may be time to consider your tentative next steps. Have you decided to accelerate any financial goals, such as your hoped-for retirement age? A check-in on your accounts and progress might be in order. If you’ve been able to save more than expected, maybe you “do something fun—and in doing so you potentially stimulate the economy,” Winston says.

Get the help you need. A financial professional may talk you through how economic news effects your short- and long-term goals. Check with your HR department or employer to see if your company’s retirement savings plan offers this service. Or, we can help you find one.

1 https://www.nytimes.com/2021/03/05/business/economy/february-2021-jobs-report.htmlhttps://www.nytimes.com/live/2021/03/06/business/stimulus-check-plan-detailshttps://www.nytimes.com/interactive/2021/03/09/business/economy/covid-employment-demographics.htmlhttps://www.wsj.com/articles/whats-new-in-the-third-covid-19-stimulus-bill-11615285802?mod=hp_lead_pos5

2 https://www.bipc.com/analysis-congress-passes-covid-19-relief-package-american-rescue-plan-of-2021#:~:text=Stimulus%20Checks%3A%20The%20American%20Rescue,(earning%20up%20to%20%24150%2C000)

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other professionals on all matters pertaining to legal, tax, investment or accounting obligations and requirements.​

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