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February 2, 2021

CBO releases updated economic outlook

On February 1, 2021, the Congressional Budget Office (CBO) released a report, An Overview of the Economic Outlook: 2021 to 2031, an updated economic outlook for the US economy.

The CBO expects the economic expansion that began in mid-2020 to continue, as it expects vaccinations to greatly reduce the number of new COVID-19 cases and reduce social distancing. According to the report, the CBO "projects a stronger economy than it did in July 2020, in large part because the downturn was not as severe as expected and because the first stage of the recovery took place sooner and was stronger than expected."

Highlights include:

  • As seen in Figure 1, the CBO projects that real GDP growth (annualized) will be 4.9% during the first quarter of 2021, fall to 2.5% in the second quarter, and then rise to 3.8% and 3.6% in the third and fourth quarters, respectively. Other forecasters have generally projected that growth would slow in the first rather than the second quarter before picking up for the remainder of the year.
  • The CBO projects the economy will expand with 4.6% real GDP growth in 2021 and reach its pre-pandemic level of GDP by mid-2021.
  • The CBO projects the unemployment rate will fall to 6.0% in the first quarter of 2021, 5.3% in the fourth quarter of 2021, and 4.9% in the fourth quarter of 2022, and will continue to gradually fall through 2026 to 3.9%.
  • Although the CBO projects employment will reach its pre-COVID level during the third quarter of 2024, the labor force participation rate is expected to remain roughly 1.5 percentage points below its pre-COVID level (near 61.5% rather than 63% before the pandemic) over the next decade. The CBO expects these longer-term effects of the pandemic on the labor force to translate into an economy that grows more slowly over the long term.

The CBO projections assume that taxes and spending under current law will remain in place and do not reflect the impacts of any additional COVID relief that Congress might enact.


Shifts in the economic outlook can significantly affect the federal government's fiscal outlook, impacting the trajectory of federal spending and revenue, the federal deficit and federal debt. The CBO expects to release updated estimates for the federal government's fiscal outlook (spending, revenues, deficits and debt) in mid-February. Companies and industry groups need to pay careful attention to the fiscal outlook as it can significantly influence the policy agenda.

Source: Congressional Budget Office, An Update to the Economic Outlook: 2021 to 2031, February 1, 2021.


Contact Information
For additional information concerning this Alert, please contact:
Quantitative Economics and Statistics Group
   • Robert Carroll (
   • James Mackie (
   • Brandon Pizzola (