What to Expect from the Economy in 2022

If you’re running your business the way an MBA might, strategizing and forecasting and budgeting for 2022 is now behind you. Not everyone does, of course, so we thought a quick rundown on a few big-picture questions might be useful.

COVID, of course, colors everything but here’s what the economists are telling us:

GDP growth:  Despite ongoing supply-chain disruptions, GDP was expected to have climbed to a 37-year high when all is said and done for 2021, with solid readings for 2022. But less solid now that Omicron is spreading.

The economists at Goldman Sachs, among others, anticipate GDP will grow 3.8% on a full-year basis in 2022. That, we should note, is down from the 4.2% clip it predicted before Omicron cropped up.

Supply chain:  Supply-chain disruptions will continue to be the largest stumbling block for the U.S. economy. Although easing, price pressures are expected to last well into 2022, meaning rising inflation will continue to be present in the year ahead.

Labor force: Unemployed workers are landing jobs at a fast pace. However, the decline in labor force participation, particularly prime-age workers, will continue to be an issue for productivity and growth.

Unemployment:  The U.S. unemployment rate, at 4.6% at the moment, is closer to pre-pandemic levels. When adjusted for the labor force exit, it’s 6.4%. The experts expect the adjusted unemployment rate to reach its pre-crisis lows in the first quarter of 2023.

The well-respected UCLA Anderson Forecast forecasts that the U.S. economy will add an average of approximately 200,000 to 400,000 jobs per month throughout 2022, with the potential for smaller gains in the first quarter if the Omicron variant forces consumers to cut back on in-person services.

The Fed:  The Fed began tapering asset purchases late this year at $15 billion a month. Those who watch these things closely expect the Fed to reduce monthly purchases by a greater amount next year to reach zero three months earlier in 2022 than at the current “$15 billion” pace, with its first interest rate hike a little later in the year – probably in the fourth quarter.

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