A Look Back
By: Dr. M. Ray Perryman
Published in syndication December 28, 2022
This past year has been a wild ride - full of peaks and valleys, with good news, bad news, and not a lot of calm and predictable in between. Let's take a quick look back at 2022 and its implications for the economy and its future performance
One of the most promising developments of the year is that the numbers of serious COVID-19 cases finally dropped to levels sufficiently low for us to resume most normal activity. Back in January, the United States was in the midst of a surge with cases averaging about 800,000 per day, compared to fewer than 70,000 now. While there is always the risk of another wave of serious cases, 2022 saw notable improvement. As the economy has continued to reopen, we've seen the addition of nearly 400,000 jobs per month. Although not as rapid as 2021 during the early stages of recovery, it is nonetheless very strong growth which sets the stage for future expansion even in the face of near-term headwinds.
However, fallout from the pandemic and related disruptions linger. The phrase "supply chain" wasn't one most people thought much (if any) about before the pandemic, but now it's part of our everyday language. The intricate system of production and logistics took a major hit during the shutdowns, and snarls akin to global traffic jams rapidly developed. The result was factories without key parts, ships backed up at ports, shortages and empty shelves, and similar problems. The past year has seen products flowing more smoothly from manufacturers to customers. Disruptions to the supply chain cause inefficiencies and slow potential growth. Many companies are taking action to insulate themselves from potential future calamities.
We are finally seeing signs of inflation beginning to ease, although it's taken unprecedented interest rate hikes to get there. A variety of factors contributed to price escalation at historic rates. Trillions in stimulus money and the aforementioned supply-chain-related shortages led to too much money chasing too few goods. Inflation has been hard on families, businesses, and public entities. The Federal Reserve has shown resolve in raising interest rates to slow the economy, with the magnitude of the adjustments beginning to diminish; the challenge will be doing so without causing a recession. I remain optimistic that a major downturn can be avoided.
On the international front, we've seen a war in Ukraine and increasing tensions in other areas as well as ongoing shutdowns in China. If any of these situations dramatically escalate, the economy will respond.
The US economy displayed remarkable resilience in 2022. Difficulties remain, but the progress of the past year has been substantial. Let's hope 2023 brings only a modest slowdown, followed by further improvements. Happy New Year!