National Economic Outlook
By Ingo Winzer
In July the US economy finally regained the same level of jobs that existed before the pandemic. It’s in this modest context that we have to view recent economic gains. Sure, things are better, but…
Gross domestic product, adjusted for inflation, is now three percent higher than before the pandemic. But it decreased in the last two quarters, even if only slightly.
Population growth in 2022 is likely to be better than in 2021. But it was almost zero in 2021, so an increase to a half a percent or so won’t help the economy very much.
The problem with modest gains this year is the possibility that the boom in home prices will come to an unhappy end unless economic growth is strong enough to boost incomes. This was already a problem before the recent surge of inflation, caused partly by supply-chain shortages that will eventually ease, and partly by higher energy costs that will not. Homeowners and renters are looking at a fall in real income, not an increase.
That doesn’t mean home prices and rents will come crashing down, in fact home prices will probably keep rising this year; but a long period of adjustment is likely between rents and home prices, on the one hand, and the reality of modest or flat income gains.
Compared to October 2021, when most covid restrictions had been lifted, jobs in July were 3 percent higher, including gains of 2 percent in retail, finance, and healthcare, 3 percent in manufacturing and construction, and 3.5 percent in business services. Jobs at restaurants were 6 percent higher, but jobs in government only 1 percent.
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