November 15, 2021
Unfortunately, the U.S. economy has taken a significant turn downward.
The economy grew by a 4.3% annualized rate in the fourth quarter of last year, 6.3% for first quarter of 2021, and 6.7% in second quarter of this year. The growth since COVID-19 has been the strongest in decades. Job creation has been outstanding.
But there are storm clouds brewing.
The economy appears to be rolling to the downside in a hurry, based on data from August, September, and October. We all knew the economy was likely to weaken in the second half of the year, but the latest data show it’s contracting much faster than most forecasters expected.
The latest GDPNow forecast from the Federal Reserve Bank of Atlanta said the economy has deteriorated since late August:
Many still see the economy humming along at 6% or better. The Atlanta Fed said the economy shrunk to an annual rate of 1.3%. That’s an enormous drop off in such a short period of time, especially since it held just north of 6% most of this year. We haven’t seen a decline like this since the Great Recession.
Most thought hiring would pick up with the end of extended unemployment benefits, schools reopening, and continued vaccinations. But that thinking proved flawed after the September jobs report showed 194,000 net new jobs when forecasters expected 500,000.
There are 11 million unfilled jobs and 8 million unemployed workers not returning to the labor force. Most experts expected September to be the month when things got back to normal.
But it obviously didn’t happen. It remains to be seen what happens next.