People shop in The Galleria mall in Houston during Black Friday on November 26, 2021. The economy grew strongly last year but at an uneven rate because of the pandemic.
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People shop in The Galleria mall in Houston during Black Friday on November 26, 2021. The economy grew strongly last year but at an uneven rate because of the pandemic.
Brandon Bell / Getty Images
Last year saw the fastest rate of economic growth since Ronald Reagan was president. But for many, 2021 feels less like “Morning in America” and more like a night without rest, dogged by fitting dreams about the ongoing pandemic.
The Commerce Department reported on Thursday that the country’s gross domestic product grew 5.7 percent last year – the biggest increase since 1984. But this growth has begun to match and kick in. , with hopes of a steady recovery being dashed by successive waves of infections.
And now, the uncertainty continues into next year, as the omicron variation continues to spread. Meanwhile, the Federal Reserve is preparing to raise interest rates, possibly aggressively, in an effort to combat high inflation.
“It wasn’t a straight line for the economy last year,” said Mark Zandi, chief economist at Moody’s Analytics. “The economy remains constrained by the pandemic.”
Business boomed last year in spring and early summer, when millions of Americans are vaccinated and feel more free to travel and dine out. In June and July alone, employers added more than 2 million jobs – nearly a third of the year’s total.
But growth slows as delta variation reaches.
“It’s crazy. It’s a roller coaster,” said Dave Krick, owner of three restaurants in Boise, Idaho.
Krick has high hopes for the end of the year, after a busy October and he is planning to continue hosting private parties in his restaurant, only to pull the plug when The infection rate started to rise again when the omicron variation begins to spread.
“It’s a teaser. We though the holiday season will be really good,” Krick said. “Those holiday parties for us were a big part of the year’s success. And we basically canceled them all.”
A flight information display system shows canceled flights at Ronald Reagan Washington National Airport on December 27, 2021, in Arlington, Va. Flight cancellations became a regular phenomenon in December due to the omicron variant infecting employees at airports and airlines.
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A flight information display system shows canceled flights at Ronald Reagan Washington National Airport on December 27, 2021, in Arlington, Va. Flight cancellations became a regular phenomenon in December due to the omicron variant infecting employees at airports and airlines.
Anna Moneymaker / Getty Images
An economic boom – and a groan
The Commerce Department said GDP grew at an annualized rate of 6.9% in the last three months of the year, driven in part by stronger exports and a build-up of inventories.
But the fourth quarter was not as flat as nine months earlier.
“Q4 starts with a bang and ends with a whimper,” said Zandi. “October was a great month for the economy – consumer spending, investment – everything boomed on all pillars. And then in December the omicrons quickly came in and caused a lot of it. damages.”
While the unemployment rate fell to just 3.9% – the lowest level since the start of the pandemic – Employers added just 199,000 jobs in December.
And forecasters expect that weakness to continue into the new year.
Initial claims for unemployment benefits in recent weeks suggest that some employers are cutting jobs in response to the omicron wave.
Wanted signs help, such as this one outside a retail store in Hattiesburg, Miss., on March 27, 2021, was a common sight last year as trading companies struggled to recruit workers.
Rogelio V. Solis / AP
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Rogelio V. Solis / AP
Wanted signs help, such as this one outside a retail store in Hattiesburg, Miss., on March 27, 2021, was a common sight last year as trading companies struggled to recruit workers.
Rogelio V. Solis / AP
While economic growth last year was the strongest in decades, it fell short of the levels economists had hoped for. After the $1.9 trillion American Rescue Plan was passed, some forecasters have predicted growth as high as 7%driven by widespread vaccination and pent-up demand.
“Too many people are not vaccinated,” says Zandi. “It’s amazing how well the economy has performed, despite the fact that vaccines don’t exactly solve the problem.”
Driven by the pandemic supply chain problem and lack of labor weighed on economic growth, and at the same time increased prices.
“Although we had a lot of demand, we weren’t able to do as much as we expected,” said restaurant owner Krick.
His labor costs have risen sharply this year, thanks to higher wages and new health benefits. Restaurant food prices have also increased.
“Our supply chain doesn’t like this roller coaster ride,” said Krick. “It’s very difficult for us to predict what we’ll get and won’t get, so we have to adjust quickly with menus, and that takes a lot of our energy and time. And the costs are certainly high. It must have been very difficult.”
Restaurant meal prices nationwide in December were 6% higher than a year ago, while General inflation reached 7% – the highest level since 1982.
Will 2022 be better?
The new year will likely continue to be marked by the path of the pandemic – as well as the fight against inflation.
The Federal Reserve signaled Wednesday that it plans to start raising interest rates at its next meeting in March, in an effort to keep prices and markets slated for three rate hikes. added during the year.
The central bank’s challenge is not to brake too hard and slow the economy down too much – an uphill feat as some economists believe the central bank has waited too long to tackle inflation.
“We expect the economy to soften a bit from the omicron, but we think that’s temporary,” Fed Chairman Jerome Powell told reporters. “We think the underlying strength of the economy will show up pretty quickly after that.”
Supermarkets like this one in Orlando, Fl., are experiencing shortages of some products as the omicron variant infects workers and exacerbates supply chain woes.
John Raoux / AP
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John Raoux / AP
Supermarkets like this one in Orlando, Fl., are experiencing shortages of some products as the omicron variant infects workers and exacerbates supply chain woes.
John Raoux / AP
Zandi expressed confidence that the central bank can phase out its easy money policies without stalling the recovery.
“I think they’ll do it and land the plane economically on the runway,” he said. “It can be a bit bumpy here. There’s a lot of headwinds in the economy.”
Most of the federal relief programs that pumped trillions of dollars into people’s pockets during the pandemic have now expired, too, though restaurateurs are petitioning Congress for more help.
Zandi thinks the economy will continue to expand into 2022, albeit at a slower rate of about 4%.
“We are all getting better at navigating the virus and learning to live with it and manage it,” said Zandi. “Hopefully, we have another good year in 2022.”
Krick also hopes that business will continue to recover, but he doesn’t make any firm predictions about next year.
“One thing we know right now is that we don’t know what 2022 will bring us,” he said. “We’re running out a lot of cash, hoping that this spring and summer will be better, mainly because we don’t have any options. It’s a strange time to be in the single-family business. row.”
