A pedestrian wearing a protective face mask walks past a sign displayed outside a retail store in New York City.
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A Covid-19 vaccine will not create an “immediate stimulus” for the US economy, which needs even more financial support as its recovery loses momentum, an economist said Wednesday.
The markets recovered worldwide Pfizer and BioNTech announced Monday that their coronavirus vaccine was more than 90% effective in preventing the disease in people with no evidence of previous infection.
The vaccine news and Better than expected US employment 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 who worked in January and don’t work today. And those who remain unemployed see a much longer road back to full employment so they will continue to need some support,” said he to CNBC “Squawk Box Asia.”
“And the other element that I think is headwinds here in the US … is state and local governments whose budgets are in dire disarray because of lost revenue. They lay off people, cut services, and that’s bad for you economic activity. “
Therefore, the US cannot rely on a vaccine to “solve all of our problems,” said Tannenbaum. He stated that even if Pfizer and BioNTech’s Covid-19 vaccine is “optimistically” approved this year, there may not be enough doses by 2021 to immunize those who need it.
However, the economist said the US is unlikely to receive an economic aid package until the President’s inauguration in January, given deep divisions in Congress. Negotiations for a stimulus agreement ran into a stalemate ahead of last week’s elections as Democrats and Republicans couldn’t agree on the size and scope of a package.
“As a result, I think our recovery here in the US, which is already losing momentum, could pose some risk if we wait for a vaccine to solve all of our problems,” said Tannenbaum.
The business community and other economists have also said that the US economy needs further support as soon as possible.
Thomas Donohue, CEO of the US Chamber of Commerce on Monday called on Congress to provide additional incentives in front of the president-elect Joe Biden is privy, and says it will be months before the immediate economic benefits of a vaccine are felt.
– CNBC’s Sam Meredith and Kevin Stankiewicz contributed to this report.