“Balancing a robust economic recovery with searing inflationary pressures continues to be a main challenge for the U.S.”
In the 4th quarter of 2021, the U.S. economy pressed forth in its recuperation from the blow of the COVID-19 pandemic, posting strong gains in production despite continued disruptions to supply chains and labor availability, soaring inflation, and the anticipation of waning monetary policy supports.
Supply chains across the globe continue to face challenges in capitalizing on vigorous consumer demand. With COVID-19 case rates soaring, worker shortages continue to challenge supply, affecting both production and shipping at the wholesale and retail levels. Although the unemployment rate continues to drop, nearing pre-pandemic levels, labor market participation remained depressed throughout the quarter. Prior to the COVID-19 pandemic, the last time labor force participation was as low was more than 45 years ago.
Balancing a robust economic recovery with searing inflationary pressures continues to be a main challenge for the U.S. Inflation reached 30-year highs during the 4th quarter, taking a toll on consumer sentiment. In December, the Fed reiterated its plans to raise target interest rates and taper its bond-buying programs in 2022.
As the U.S. economy continued to expand during the 4th quarter, the Delta variant-dominant 4th wave of the COVID-19 pandemic receded and gave way to the ultra-contagious Omicron variant. Omicron rapidly swept the globe, becoming the dominant strain in the U.S. within 3.5 weeks after being declared a variant of concern by the WHO. Daily confirmed cases of COVID-19 in the U.S. jumped by 3.5 times by the end of the fourth quarter and continued to trend steeply upward. However, daily deaths, which lag one to two weeks behind case trends, were down by nearly one-third at the end of December.