Pandemic Won’t Slow Down Economy In 2022
January 7, 2022
- Author
- Jay Pfeifer
Erik Spanberg, managing editor of the Charlotte Business Journal and panel moderator; Jaya Jha, Boone Assistant Professor of Economics at 51ąŮÍř; Eric Freedman, chief investment officer for U.S. Bank Asset Management (top row); Katia Dmitrieva, economics reporter for Bloomberg, and Richard Rubin, U.S. tax policy reporter for the Wall Street Journal
The economy’s accelerator pedal remains down in 2022, according to a panel of national experts gathered by 51ąŮÍř who all forecast continued growth.
Then they put a coronavirus-shaped asterisk on what they said.
The panel, spanning banking, academia and financial journalism, dove into an hour-long discussion in which the group said the economy will overcome the current spike in inflation and supply chain clogs to stabilize and keep revving this year.
Who’s Working?
Eric Freedman, chief investment officer for U.S. Bank Asset Management, said his team is entering the new year with a “glass-half-full perspective.”
He and his team will be watching today’s jobs report for signs that the tight labor market is easing.
“We normally have about 67 or 68 percent of the able-bodied workforce that can be employed or are looking for a job,” Freedman said. “Right now, we’re at a little over 60 percent.”
That matters because of downstream implications, he said. Employed workers have more money, which works its way into the broader economy. The economy needs the workforce to grow.
Posters offering signing bonuses at McDonald's are not the only concern. Inflation hit the highest level in 40 years in December, putting pressure on the Federal Reserve to walk a tightrope between stoking growth while managing inflation.
But Jaya Jha, the Boone Assistant Professor of Economics at 51ąŮÍř, expects the high inflation rate to recede.
“Most forecasters, including myself,” Jha said, “expect inflation to decline to levels closer to the Fed’s two percent target by the end of 2022.”
Katia Dmitrieva, an economics reporter for Bloomberg, points to similar optimism around the gross domestic product increasing.
“Bloomberg surveys approximately 70 economists each month,” Dmitrieva said. “And in December, the most recent one, they're seeing that year-over-year, real GDP growth is going to be 3.9 percent this year.”
She tagged on the caution that all of the panelists were mixing in: the pandemic adds a dose of unpredictability.
“The past two years have really been this epic experiment in fiscal policy that we just haven't seen since the second world war,” she said, referring to unprecedented Federal Reserve actions that included holding interest rates down and making monthly bond purchases that buoyed the stock market.
Two other pieces of unpredictability in the global mix are U.S. tensions with China and a possible Russian invasion of Ukraine.
The Biden administration’s signature economic plan, the Build Back Better bill, was supposed to pump trillions into the economy but was shut down, at least temporarily, by opposition from Sen. Joe Manchin, a West Virginia Democrat.
“I still think that we'll get 'Build Back Something,’” said Richard Rubin, U.S. tax policy reporter for the Wall Street Journal.
The same inflation numbers that spooked the Fed into dialing back its economic support measures were among the reasons Manchin gave for his defection.
Biden’s legislation “might have been headed in one direction when the economy was slower and the virus looked like it was heading down,” Rubin said. “Now, cases are coming back up and it’s really tricky for [the administration] to adjust their course.”
The coronavirus continues to dictate the shape of the economy with each variant. A wave of the public isolating and quarantining defies what any policy might try to do.
“It was true 22 months ago and it’s still true,” Rubin said. “The virus is the economy.”
