A pedestrian wearing a protective face mask walks by a going out of business sign displayed outside a retail store in New York City.
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A Covid-19 vaccine will not result in an “instant stimulus” to the U.S. economy, which still needs greater fiscal support as its recovery loses momentum, an economist said on Wednesday.
Markets globally rallied after Pfizer and BioNTech announced on Monday that their coronavirus vaccine was more than 90% effective in preventing the disease among those with no evidence of prior infection.
The vaccine news and better-than-expected U.S. jobs growth in October are “encouraging” developments for the world’s largest economy — but that doesn’t reduce the need for further economic stimulus, said Carl Tannenbaum, chief economist at Northern Trust.
“On the employment front, we still have 10 million Americans that were working in January that are not working today. And those that remain unemployed are seeing a much longer track back to full employment, so they will continue to need a certain amount of support,” he told CNBC’s “Squawk Box Asia.”
“And the other element that I think is a headwind here in the United States … is state and local governments whose budgets are in terrible disarray at the moment for loss of revenue, they’re laying people off, cutting services and that’s bad for economic activity.”
That’s why the U.S. can’t depend on a vaccine to “solve all our problems,” said Tannenbaum. He explained that even if the Covid-19 vaccine by Pfizer and BioNTech is “optimistically” approved this year, there may not be enough doses through 2021 to immunize those who need it.
But the economist said the U.S. is not likely to get an economic relief package before the presidential inauguration in January, given deep divisions in Congress. Negotiations for a stimulus deal hit a stalemate before last week’s election, with Democrats and Republicans failing to agree on the size and scale of a package.
“As a result, I think our recovery here in the United States, which is already losing momentum, could be at some risk if we’re waiting for a vaccine to solve all of our problems,” said Tannenbaum.
The business community and other economists have similarly said the U.S. economy needs further support as soon as possible.
U.S. Chamber of Commerce CEO Thomas Donohue on Monday called on Congress to pass additional stimulus before President-elect Joe Biden is inaugurated, saying that it will be months before the immediate economic benefits of a vaccine may be felt.
— CNBC’s Sam Meredith and Kevin Stankiewicz contributed to this report.