Q3-2021 Quarterly Economic Update

Summary

In the 3^rd quarter of 2021, the U.S.’s dogged economic recuperation from the COVID-19 pandemic pushed up against constraints in supply and labor, inflationary pressures, and the specter of waning monetary policy supports. The American economy eked out gains in production despite the pandemic’s ongoing upheaval to global supply chains and labor markets.

Supply chains across the globe continue to face complex challenges in both production and shipment. Worker shortages represent a particular challenge to supply, affecting availability of parts as well as movement of both inputs and final demand goods by truck and at bottlenecked U.S. ports. Although the unemployment rate dropped low enough to put the U.S. economy technically at full employment, labor market participation remained depressed through September. Notably, the labor market participation rate inched down in September despite the end of federal programs that augmented unemployment compensation benefits, hinting that there may be more complex reasons holding workers back.

Balancing a robust economic recovery with stubborn inflationary pressures continues to be a main challenge for the U.S. Several consecutive months of elevated inflation prompted the Fed to tighten the predicted timeline for winding down their aggressive expansionary monetary policy. The Fed indicated they may begin selling off government securities as soon as the 4^th quarter of 2021 and raising target interest rates as soon as 2022.

As the U.S. economy continued to battle forward during the 3^rd quarter, the spread of the Delta variant fueled a brutal fourth wave of the COVID-19 pandemic. By the end of the quarter, COVID-19 had killed more than 1 in 500 Americans and surpassed the 1918 Spanish Flu to become the deadliest pandemic in United States history.