When President Joe Biden delivers his State of the Union tackle Tuesday, the financial system will virtually definitely be one in every of his largest speaking factors. A ballot at the start of the yr discovered that two-thirds of Individuals listed the financial system as one in every of their high considerations for 2022, much more than COVID-19.
Through the speech, Biden will little question tout indicators that make it appear to be the financial system has boomed prior to now yr: gross home product up, wages up, over 6 million new jobs. And his critics will virtually definitely level to indicators that recommend a a lot grimmer image: a commerce deficit up 27%, decades-high inflation, unemployment nonetheless above 2019. So which image is nearer to actuality?
USAFacts, a nonpartisan knowledge middle, has created its personal State of the Union report that appears on the main financial indicators of the previous yr. The reality is extra advanced than both occasion’s image of the financial system, with indicators of each robust financial development and critical financial challenges.
First, the excellent news: The U.S. was capable of briskly pull itself out of the pandemic-induced recession. Whereas GDP dropped 3.4% in 2020, it was capable of shoot up 5.7% in 2021 – the very best development fee seen since 1984. The U.S. stays the richest nation on this planet with an general GDP of $23 trillion. Plus, common hourly wages are up 10%, from $28.56 in February 2020 to $31.40 in December 2021.
Sadly, that results in the dangerous information: inflation. When adjusted for inflation, common hourly wages are solely up 1.6%, though there may be some proof that wages rose greater than that for employees on the decrease finish of the wage spectrum. Costs for city shoppers had been up 7.5% from January 2021 to January 2022, the biggest single-year change prior to now 4 many years. For comparability, the Federal Reserve targets shopper value development at a median of solely 2 p.c, though they use a barely totally different inflation index.
The largest driver of value inflation: vitality, which went up a whopping 27% in a single yr, in response to the Bureau of Labor Statistics. Fuel costs alone went up 40%, and it is seemingly that Russia’s invasion of the Ukraine will add much more volatility to the worldwide vitality provide. Different inflated items embody meat, fish and eggs (up 12.2%) and used automobiles (up 40.5%). Hire, nonetheless, went up solely 3.8%.
Different financial indicators provide a extra combined view of how the financial system is recovering from the pandemic. General, the U.S. added 6.7 million jobs in 2021 – though that’s not fairly sufficient to make up the 9.3 million jobs misplaced in 2020. The typical unemployment fee for the yr was 5.4%, which was higher than 2020 however nonetheless greater than 2019, when the typical was 3.7%. Nonetheless, the roles scenario is already wanting higher in 2022, because the unemployment fee in January was all the way down to 4%.
There could also be fewer folks being employed partially as a result of fewer individuals are actively on the lookout for work. The labor pressure participation fee is 1.2 proportion factors under February 2020, which suggests about 896,000 fewer Individuals are working or on the lookout for work in comparison with earlier than the pandemic. Nonetheless, this can be a part of a extra long-term development, because the labor pressure participation fee has been dropping for a number of many years.
On the identical time, a file share of Individuals are quitting their jobs. Three p.c of all nonfarm workers give up their jobs in September and November 2021, a 20-year excessive. This development poses complications for employers who’re making an attempt to cope with staffing shortages, nevertheless it additionally means that workers are in a stronger bargaining place and really feel assured that they’ll give up their present job and discover a higher one.
All these financial indicators collectively recommend that the union is rising stronger, economically talking – however there may be nonetheless undoubtedly room for extra enchancment, and loads of challenges forward for the president to navigate in 2022. Finally, the true state of the financial system will probably be seen within the pocketbooks of common Individuals as they navigate the unsure path ahead out of the pandemic.