As recently as last February, the Congressional Budget Office predicted that it might take until 2024 to reach the current unemployment rate of 3.9 percent, down from a peak of 14.7 percent in April 2020.
President Biden hailed the year’s economic growth and job gains as evidence that his policies were yielding substantial fruit. “The G.D.P. numbers for my first year show that we are finally building an American economy for the 21st century,” he said in a statement on Thursday.
But the economic recovery has been overshadowed recently by the highest rates in inflation since 1982. Consumer price increases — which reached 7 percent in the year through December — began to intensify in the spring when demand overstrained supply networks already discombobulated by the pandemic.
Import prices, for instance, were 10.4 percent higher in December than a year earlier, according to the Labor Department. Many businesses, large and small, are preparing for such supply chain issues to stretch beyond the summer — an unwelcome sign for workers whose wages have grown at the fastest pace in decades, while their purchasing power as consumers has been dented by costlier goods.
A Gallup survey conducted this month found that Americans view the economy more negatively than positively — with only 29 percent saying that the economy is improving, while 67 percent believe it is getting worse.
Still, 72 percent say it is a good time to find a quality job.
“It’s all about what you prioritize,” said Allison Schrager, an economist and senior fellow at the Manhattan Institute, a conservative think tank. Policymakers in Washington decided to err on the side of delivering too much pandemic aid rather than too little — and Ms. Schrager is among the analysts who say the trade-offs of that decision are becoming evident. If there had been less stimulus, she said, “inflation wouldn’t be as bad as it is.”
At a news conference on Wednesday, Jerome H. Powell, the Fed chair, conceded that “bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term” and that “these problems have been larger and longer lasting than anticipated.”
As analysts mull the direction and degree of price increases this year, many see the spring months as a crucial pivot point, said Ellen Zentner, a managing director and the chief U.S. economist at Morgan Stanley. This is partly because the Consumer Price Index reports in March and April of this year will provide the first relatively stable year-over-year comparisons that experts will have seen in three years: 2020 data was juxtaposed with the prepandemic normal of 2019; reports in 2021 after the economy reopened were measured against the abnormal, partly depressed environment of the vaccine-less economy in 2020.
“The hope is that changes as we’re getting into the second quarter,” Ms. Zentner said. And that high-single-digit inflation “doesn’t drag on further into the year.”
During quarterly earnings calls, JPMorgan Chase and Bank of America, which serve a combined 140 million households, have reported that families’ finances are technically better off than before the pandemic. Bank of America said its customers spent a record $3.8 trillion in 2021, a 24 percent jump from 2019 levels. But analysts note that dwindling savings and continuing price increases — along with any new coronavirus variants — could curb consumption.
The report on Thursday indicated that the cash reserves many Americans were able to build up during the pandemic continued to dwindle: Real disposable personal income decreased by 5.8 percent in the fourth quarter, and the personal saving rate — the percentage of overall disposable income that goes into savings each month — was 7.4 percent, compared with 9.5 percent in the third quarter.
Although factory production was up 3.5 percent in December from a year earlier, manufacturing output fell by 0.3 percent last month, a weaker showing than most forecasts. The spread of the Omicron variant appears to be extending manufacturers’ struggles with finding consistent labor, as infections drive absences. With businesses outbidding one another to get to the front of the line for supply parts that make up their finished products, materials shortages for hard-to-source components, such as computer chips, also remain a headache.
Core capital goods shipments — a popular gauge of business investment in U.S. equipment spending — were up a strong 1.3 percent in the fourth quarter, yet flat in December. Some industry analysts are emphasizing the broader quarterly trend as a sign that the private sector believes strong growth will persist through both inflationary pressures and speed bumps associated with coronavirus variants.
The average business owner “sees a very strong environment right now,” said Oren Klachkin, the lead economist for U.S. industry and regional research at Oxford Economics. “They want to ramp up investment because they want to meet that demand — and they have every reason to invest.”
The International Monetary Fund, citing tighter Fed policy and an anticipated halt to any further stimulus spending by Congress, this week reduced its U.S. growth forecast for 2022 by 1.2 percentage points, to 4 percent — though that increase would still outpace the annual average from 2010 to 2019.
