U.S. economy grew by 5.7 percent last year, fastest pace since 1984
S E E D E D C O N T E N T
The U.S. economy grew last year at its fastest pace since 1984, rebounding from a sharp but brief coronavirus-induced recession in March 2020.
The nation's gross domestic product, a measure of all goods and services produced, expanded by 5.7 percent in 2021, the Commerce Department reported Thursday. Growth accelerated even faster during the period from October to December, rising to 6.9 percent on annualized basis.
With inflation running hot and Covid-19 cases from the highly contagious omicron variant filling overworked hospitals and keeping workers at home, the economy is expected to grow at a slower rate in 2022. Economists have already slashed their forecasts for the first quarter, due to the impact of omicron.
Federal Reserve chairman talks labor market progress ahead of interest rate hike
"The economy finished 2021 on a strong note, though GDP growth was driven largely by rising inventories," said Greg McBride, chief financial analyst for Bankrate. "Omicron will put a dent in first quarter economic growth — we're already seeing some of this with increased jobless claims — but demand remains strong, the labor market is tight, and the economy is poised for another year of solid, above-trend growth."
Multiple forces are working to drag down what would otherwise be more buoyant growth. Consumer spending is the main engine of GDP, and it was bolstered during 2021 with stimulus payments and other pandemic-era emergency relief. Households broke up the tedium of quarantines by splurging on everything from new decks and home office spaces to sporting goods and pet products. But those relief programs have largely lapsed, and consumer savings — boosted to record highs during the pandemic — are starting to draw down.
Businesses remain squeezed by omicron, especially those in hospitality and leisure. Job openings in these areas remain high, but are going unfilled as workers hang back for health and child care reasons and in hopes of better prospects.
The Federal Reserve said Wednesday it plans to raise interest rates more than once this year. Those rate increases will make borrowing more expensive, driving up the costs of buying a new car or house, or carrying credit card debt, and perhaps slow the economy.
Earlier in the pandemic, Federal Reserve Chairman Jerome Powell said inflation was "transitory," but he acknowledged Wednesday at a news conference following the central bank's latest monetary policymaking meeting that his view has changed, as inflation has soared to its highest level in four decades.
"Bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term" and "these problems have been larger and longer lasting than anticipated," Powell said.
Over 22 million jobs were cut following the March 2020 outbreak of Covid in the U.S. as authorities imposed lockdowns and businesses shuttered or severely curtailed their hours. The economy went into a recession.
But emergency action from the Fed, including slashing interest rates to zero, rafts of government stimulus to households, and the eventual rollout of vaccines revived the economy. Consumers had the confidence and cash to resume spending.
However, many businesses were thrown off by the surge in demand, since it did not follow the typical economic recession playbook. Larger companies reacted by hiking their prices and squeezed supply by ordering up even larger amounts to lock in costs, tightening the remaining supply even further — and leading to even higher prices. Lumber at one point shot up from $350 per thousand board foot to more than $1,600.
Powell has pointed to lumber as an example of temporary supply-driven price hikes that eventually ease. However, after settling in to around $500, it has recently shot back up past the $1,000 level.
With so many homebound workers now diverting their discretionary income from in-person services, shortages spiked for home goods from appliances to sporting goods to electronic equipment. A shortage of semiconductor chips has left auto dealers with empty lots and long reservation lists. The demand for cars has grown so fierce that some owners are able to sell their used cars for more than their purchase price.
Logistical hubs from factories to ports to freight yards to trucking outfits were slammed, and supply chains backed up. Inflation began to rev up. Consumer prices soared by 7 percent over the past year, with shortages and high prices hitting everything from bacon to butane to Ford Broncos.
Despite the growth numbers, consumer confidence slipped in January and some households are pessimistic about the outlook ahead.
Administration officials acknowledged the disconnect Thursday.
"I think that this pandemic has gone on for a very long time," Commerce Secretary Gina Raimondo told NBC News. "People are frustrated. Moms and dads are still struggling, will school be open today? Inflation is real and it's in everything. It's a combination of Covid and increased prices and the supply chain disruption."
"I think the fundamentals are there," Raimondo said. "People are working. People are making more money. But we've got to get past Covid."
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Here comes the cries of INFLATION! INFLATION! INFLATION!
Yes, everything is horrible right now and it's Biden/Harris fault. /s
I'm not going to get into a contest here, but I go by what my eyes and my bank account show me. I go grocery shopping and every item in the store has skyrocketed in price in the last 6 months to a year with minimal inventory on some items. I go to put gas in my vehicles and the price has jumped up more than a dollar per gallon in the same time period. I cannot speak for others but I'm going to blame the people in charge of the government in the last year. Like it or not, that is President Joe Biden and the Democrats who control the House and Senate. I say here and now that I am not a Trump fan, but he is no longer president, has not been for over a year, and said prices were not this high under his watch. Bottom line is for me personally is that inflation seems rampant and I sure do not see anything improving this far. I welcome somebody reasonably showing me otherwise.
Ed,
For sure there is inflation, but how can you blame supply issues on the government? Please explain what they can do to counter labor shortages, transportation shortages, etc?
The only thing you can blame on the gov, is energy price increases. Other than that, our problems are out of their hands.
So were President Biden to act, to execute, a federal policy (some conservatives are keen to establish that a president is a federal-level 'manager' only and has limited control over state 'managers' - governors): Which conservative think tank, writer, organizational team of lawyers, would be the first to respond with a 'federal case' seeking legal remedy and SCOTUS opinion?
This "buck stoppage" you seek is on the desk of corporate CEOs and sadly "ma and pa" businesses (who frankly want to recoup some of their losses from the pandemic years thrusted upon us all and continuing through to right now. "All-Clear" has not sounded responsibly even now.
(Yes, I see inflated prices in my community stores. I hate it too. I don't indulge myself. That said, I just might AID our struggling downtown stores (I don't routinely go there) by giving them my 'purchasing power' because I want them to survive these hard days if they can.)
My Niece works in the hospitality industry. My sister had to loan her 600 bucks to pay bills as she got covid, again....Her second time and she had to stay at home for two weeks.
I can see why some people don't want to work with the public directly.
If she is in CA, our governor just reinstated payments for those who get covid or takes care of a family member who is sick. It is retroactive to Jan 01.
The Covid bounce back
Yeah....inflation is no big deal....unless you're poor, on fixed income, out of work, etc....
My friend, FREE MARKET CAPITALISM and the "Ma and Pa" small business model is a conservative cliché and mantra. Do explain the myth of President Biden being responsible for any inflation. Can you take your time in doing so as I don't wish to miss something instructive. Please proceed. . . .
I can tell you do not live in a small rural community of 12,000 or less like I do. We do have a Walmart super center on the far side of town, but said Ma and Pa small businesses are the staple here on the AZ/Mexico border and what keeps the town going. It is not a conservative or leftist liberal issue at all, but a matter of community survival.
President Harry S. Truman kept a wooden sign on his desk his entire time in office that said "THE BUCK STOPS HERE" meaning he accepted ultimate responsibility as president for all that happened under his administration. A concept sadly lacking in DC politics for the last couple of decades or so.
Why do you persist?
But when the decision is up before you -- and on my desk. . . .
That is the operative phrase right there concise. In its proper context. Inflation is not on the president's (any president) desk to be decided and action taken. And there remains a larger observation for conservatives and some conservatives alike: You clamor on and on about free markets, liberties, and rights. . . register your COMPLAINS where it can do some good with the PRIVATE SECTOR.
And yes, I live in a relatively small city. Just more than 12,000 and non-rural. In a way, I get the best of both worlds. (Though we do have a homeless problem to strive against.)
Incidentally, small-town U.S.A. is not the leading edge of progress in this country. The world looks to our world-class cities and metropolises for national points of view. It is a mistake for small rural villages and the like to try to 'govern' national policy in over-sized political ways and means. It simply can not work this way. We can't lead from 'down here.'
Agree to disagree.
Well considering it was in the shitter at the end of 2020 due to Covid, 5.7 isn't really that amazing but it is good news.
The economy contracted a net of about 6.5% in the previous two years. So this 5.7% in 2021 while good news, has not even brought us back to 2018 levels.
Fun with statistics ..... politicians rarely spin the numbers in a completely honest manner.
The truth will be told in time. Big difference today over Reagan’s time, more restrictive business policy by the Biden admin and the trillions of free money and bailouts that have happened in the last ten years or so.
Kicking the economic can further down the road for our kids and grandkids to pay.
Gross domestic product (GDP) 2026 - United States - Statista
The numbers for GDP in 2020 and 2021 are higher than 2018.
Not growth rate, not according to this source.
Your source has no numbers for 2021.
But Hillary's emails !!!!!!!!!!!!!!!!