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Five questions ahead for the recovering economy

After more than a year of pandemic heartbreak and hardship, the U.S. appears to be on the cusp of a major economic boom.

Forecasters expect the U.S. economy to grow anywhere from 6 to 8 percent this year after the steepest decline in nearly a century, regaining millions of jobs lost to the coronavirus.

There will, however, likely be plenty of speed bumps on the road to recovery. Here are five questions facing the U.S. economy as it climbs out of the COVID-19 recession.

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How soon, and quickly, do workers return to the office?

A growing portion of the U.S. workforce had already been spending less — if any — time in the office before the pandemic made teleworking the norm for millions. With COVID-19 vaccinations rapidly accelerating, businesses are gaming out how quickly to reopen their offices while workers consider the benefits of staying remote.

More than 80 percent of employers surveyed by audit firm PWC in January said that the shift to remote work has been successful, and only 17 percent ruled out allowing employees to work from home after the pandemic is over.

Workers may be eager to avoid commuting at their pre-pandemic frequency or hesitant to use public transportation, raising questions for bus and ride-share drivers and other workers in the transportation and infrastructure field.

"Employers will have to recognize that workforce needs and desires have shifted due to the pandemic. They need to understand the concerns of their employees and work with them to build policies and approaches," wrote PWC's Deniz Caglar, Vinay Couto, Ed Faccio and Bhushan Sethi.

How many workers come back and how many days a week they’ll be in the office also has implications for the commercial real estate market, business districts and one of the most vulnerable sectors of the economy: the food and beverage service industry.

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What happens to restaurants and bars?

Few industries have been hit harder by the pandemic than food and beverage service. While many have weathered the pandemic thanks to a combination of government aid and ingenuity, countless others are facing precarious futures.

The threats facing restaurants and bars include a potentially permanent drop in revenue from businesses, a labor shortage caused mainly by health concerns and other long-standing issues within the industry, and rising food costs driven by the rapid return of consumer demand.

How long will supply chain bottlenecks last?

An economic crisis that started with shortages of toilet paper and disinfectant wipes appears to be ending with runs on ketchup and lumber.

Producers, warehouses and transportation companies have struggled to keep up with the quick rebound in demand for many goods driven by the reopening of the economy. Prices for construction materials, steel, shipping pallets, copper, fuel and other products have risen thanks to the spike in demand, according to the Institute for Supply Management, along with the costs of shipping and delivering them.

While these costs are likely to even out as suppliers ramp up production, the acute shortage of lumber is fueling a rapid rise in housing prices that began long before the economy kicked back into gear.

"Froth will start dissipating as the economy reopens, but industrial production’s hot streak won’t end once herd immunity is reached," Oren Klachkin, lead U.S. economist at Oxford Economics, wrote in a Thursday research note. "Supply chain and shipping backlogs will slowly clear as the global economy returns to full health."

How much hotter does the housing market get?

The coronavirus pandemic has created the hottest housing market since the run-up to the 2007-08 financial crisis, exacerbating an already dire shortage of houses. Ultralow interest rates, a mini exodus from expensive cities and plain old cabin fever have driven a surge of demand for a housing supply limited by wary sellers and a construction slowdown.

The average price of a home sold in February was $416,000, according to the Commerce Department, as buyers bid against one another with the number of realtors outnumbering the homes available for sale.

Investment funds snapping up homes to rent that would otherwise be bought by residents are also driving prices to searing levels.

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“Affordability is becoming a concern as investors snap up more new construction to rent instead of sell. This is hindering the ability of many first-time buyers to start building wealth via home ownership,” wrote Yelena Maleyev, economist at Grant Thornton, in a Friday research note.

“New research from Freddie Mac indicates that 3.8 million single-family homes need to be built to meet demand from new household formation, second-home buyers and replacement for aging stock. At the current pace of construction, it will take three years to fulfill that need,” Maleyev added.

Are the White House and Fed right about inflation?

There’s little doubt that the swift economic boom expected by economists will boost the rate of price and wages. Inflation had been below the Federal Reserve’s ideal annual target of 2 percent well before the pandemic gutted the global economy and caused prices to plummet.

The Fed, White House and many economists are confident that sharp rise in inflation over the summer will balance out as the U.S recovers jobs and businesses lost to the pandemic and settles into a more sustainable growth rate.

“We don't want inflation to go up materially above 2 percent and go back to the bad, old inflation days that we had when you and I were in college back a long time ago,” Fed Chairman Jerome Powell told “60 Minutes” in an interview aired Sunday.

“But at the same time, we do have the ability to wait to see real inflation,” he added.

Even so, Republicans and inflation hawks fear that the Biden administration and Fed have risked overheating the economy with a flood of stimulus, including the $1.9 trillion COVID-19 relief bill passed in March.