The U.S.economy grew 5.7 percent in 2021, the fastest full-year clip since 1984, roaring back in the pandemic’s second year despite two new virus variants that rocked the United States.The growth was uneven, with a burst of government spending helping propel a fast start, even as a surge in new cases and deaths in the second half of the year created new pressures.The economy grew 6.9 percent from October to December, the Bureau of Economic Analysis said Thursday, a sharp acceleration from the 2.3 percent it grew in the previous quarter .Get the full experience.
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In a powerful rebound from 2020, when the economy contracted by 3.4 percent — its worst result since 1946 — 2021′s strong growth created a record 6.4 million jobs .But also brought with it a host of complications, helping fuel the highest inflation in 40 years and creating supply chain snarls as consumers hungry for products overwhelmed the global delivery system.To beat back rising prices, the Federal Reserve is now shifting its strategy and preparing for multiple interest rate hikes this year, convinced it has given enough support to help the labor market and now must keep the economy from overheating even further.Fed ready to tackle inflation with interest rate increase in March, pointing to strong job growth amid pandemic While the omicron variant had begun its vicious surge by the end of 2021, economists didn’t expect to see any fallout in Thursday’s data.
Rather, forecasters anticipated that the GDP report would represent a year of blockbuster growth despite the ongoing unpredictability of the pandemic economy, from labor shortages to supply chain backlogs to inflation.Earlier in the year, economists worried that global supply chain issues would keep businesses from being able to keep shelves fully stocked.But a rush by companies in the final months of 2021 to bolster their inventories ultimately drive GDP much higher, as companies started to refill empty storerooms.Many firms, such as Georgia hospitality solutions firm Agilysys, are building up inventories to guard against disruptions in supply chains.The company, which specializes in technology such as hotel check-in systems, has increased its inventory levels by 175 percent in the past nine months to “mitigate supply chain risk,” CFO Dave Wood said on a recent earnings call.Experts weigh in with 12 ideas on how to deal with inflation But even that silver lining comes with the reminder of how parts of the economy remain extremely disrupted.“We’re hitting on all cylinders producing goods, and that’s good,” said Ben Herzon, executive director at IHS Markit.
“But it’s also bad, because the economy wasn’t really set up to produce goods at the level that it’s producing now.That’s one of the reasons we’re seeing some of the problems on the supply side.”The economy has made tremendous strides since being gutted by the coronavirus pandemic in the spring of 2020, and the Biden administration often touts last year’s gains as a vote of confidence for Democrats’ sprawling stimulus measures, which juiced the broader economy and cushioned peoples’ pocketbooks.The Federal Reserve, too, has kept up enormous support for the financial system, and has only recently mounted an aggressive effort to unwind its pandemic-era interventions .GDP, which measures the value of all goods and services produced in the economy, is typically reported after adjusting for inflation.
Without inflation, growth in the third quarter would have been 10 percent, meaning a significant portion of the quarter’s growth was absorbed by rising prices.Since June of last year, economists have raised their inflation forecasts by 1.1 percentage points, according to a survey by Wolters Kluwer’s Blue Chip Economic Indicators.
Over that time, they lowered their expectations for GDP growth by the same amount: 1.1 percentage points.What should the White House do to combat inflation? Experts weighed in with 12 ideas.High inflation can reduce the purchasing power of consumers and businesses, which can chip away at GDP.But Herzon said that the overwhelming stimulus that went into the economy in 2021 went a long way in countering the effect of rising prices.“Inflation had some stiff competition from the federal government,” Herzon said.Since the recession, sports- and recreational-vehicle sales have consistently been among the economy’s brightest spots.But supply-chain issues have dogged the sector.
Minnesota-based Polaris, best known for its off-road vehicles, reported retail sales fell by about a quarter in North America in the final three months of the year as inventories at its dealerships are down 70 percent from their pre-pandemic levels.2021 shattered job market records, but it’s not as good as it looks “Predicting when the supply chain pressures ease remain difficult, but our most current view is that modest improvement should start to materialize sometime in the third quarter of 2022,” said Polaris CEO Michael Speetzen on a recent earnings call, latter adding that while sales are strong so far this year, the semiconductor shortage continues to weigh on production.Omicron began to rip through the labor market at the end of 2021, with December registering record-high levels of sick leave, according to Liz Wilke, principal economist at Gusto, a payroll and benefits provider.But those numbers are already ebbing.
The share of employees taking sick time remains elevated, but has fallen by almost a third over the past two weeks.Separate data show that after almost two years of sweeping cuts and slow growth, museums and libraries are returning to pre-pandemic spending levels.In Muskogee, Oklahoma, the Five Civilized Tribes Museum saw gift-shop sales grow in 2021 thanks to sales of books and Native-made crafts, even as attendance fell slightly.The museum only saw a quarter as many school groups in 2021 as it gets in a typical year, said Sean Barney, its executive director.And walk-in visitor traffic slumped as gas prices soared and fewer people lit out to explore the back roads of Eastern Oklahoma’s Indian Country.But Barney is optimistic that 2022 will represent a full return to normal.The school groups are starting to come back, and the museum is in excellent condition after pandemic-era shutdowns allowed renovation of exhibits on native art and life after the Trail of Tears..