The recovery after the Corona recession brought the USA the highest economic growth since 1984 in 2021. As the Office for Economic Analysis announced on Thursday in Washington, gross domestic product has increased by 5.7 percent over the past twelve months compared to 2020. On average, experts had expected a slightly lower increase of 5.5 percent.
It is doubtful whether the record value for President Joe Biden is a reason to celebrate. On the one hand, the year 2021 was characterized by special features and many ups and downs. On the other hand, despite all the good data, two-thirds of citizens have the impression that their country is on the wrong track economically. This is mainly due to inflation, which also reached its highest level in 40 years at seven percent in December. Biden’s poll numbers are correspondingly miserable.
The record growth in 2021 was due, among other things, to several economic stimulus and reform packages that Congress had proposed at the suggestion of Biden, but in some cases even under his predecessor Donald Trump. The programs flushed trillions into the coffers of citizens and companies, saved companies from bankruptcy and people from poverty. For this reason – and because of the slumps in the comparison period of 2020 – growth was very high right at the beginning of the year, weakened significantly in summer and then picked up again strongly in autumn. Extrapolated for the year as a whole, GDP rose by 6.9 percent in the fourth quarter.
The economic prospects for 2022 are mixed
However, this news also sounds better than reality, because in the last few weeks of 2021 the omicron wave also caused millions of infections in the USA and caused the economy to slow down again. It is correspondingly uncertain how things will continue in 2022: On the one hand, citizens are still sitting on a lot of money that they want to spend as soon as going to restaurants, traveling and many other things are safe again. On the other hand, the US Federal Reserve is likely to start raising interest rates as early as March in order to curb inflation. If commercial banks follow the trend and raise lending rates themselves, this could slow down economic development.
The situation on the labor market is similarly ambiguous. The economic upswing ensured that the number of employees rose by 6.4 million in 2021 and the unemployment rate fell to 3.9 percent. At the same time, employment is still more than three million people below the level before the pandemic began. Some of those affected have obviously taken Corona as an opportunity to retire early. Others have temporarily stopped looking for a job, for example because they have to take care of their children or do not want to deal with customers or guests again for fear of infection. How many of them will permanently turn their backs on the labor market is one of the mysteries that currently occupies economists, economic politicians and central bankers in the USA the most.