The recently-released numbers for the United States’ fourth-quarter gross domestic product (GDP) represent a relative win on several fronts. The numbers are looking quite positive. Given that these are some of the first numbers to emerge after pandemic restrictions were finally put to bed, they’re especially positive.
However, the first full year of Joe Biden’s America has some potential issues lurking in the background that may make the rest of his time in office much worse by comparison.
Inside the GDP Numbers
The early word notes that fourth-quarter GDP numbers show the strongest economic year in decades. The U.S. economy grew 6.9% for that quarter. That’s actually three times more growth than the 2.3% seen in the third quarter. Contributing to that growth rate was household spending—likely amplified by the holiday season—as well as corporate pushes to restock shelves.
Estimates were looking for substantial gains, but the actual gains produced shattered those expectations. Estimates looked for 5.5% growth in the economy. That would have been somewhat conservative but a bit more in line with the rest of the year. The first quarter saw 6.3% growth. The second, meanwhile, pulled in 6.7%. The third was a bit slack, coming in at just 2.3%. However, the fourth capped the year off with a huge gain.
The third quarter’s decline was attributed largely to a “summer spike” in COVID-19 cases, as well as supply chain issues that prevented some sales from ever being realized. With COVID-19 continuing to be a source of economic trouble, future growth may prove shaky.
Harsh government crackdowns were seen coming back into play in some areas. Yet other areas—sometimes even the same ones—rescinded those new crackdowns not long thereafter. The arrival of the omicron variant delivered a slowdown to hiring, as companies dealt with growing numbers of sick workers.
Ongoing Volatility in the United States
It would be tempting to say that the U.S. was going to recover its more normal growth patterns. After all, COVID-19 seems to be at least somewhat on the decline. That’s thanks to a combination of vaccination rates and treatment options. Even if one treatment option, monoclonal antibodies, is suddenly off the table. Apparently, they have a reduced effectiveness against the omicron variant. Though what happened to all the others that it would work against is less clear.
COVID-19 is wild card enough for any economy. There are others, however, that could have even more impact. For instance, let’s not forget that 2022 is an election year. That’s going to throw enough chaos for any economy into the mix. However, it’s also likely to restrain several forms of chaos from stepping in.
Democrats have commonly associated themselves as the “party of lockdown” throughout much of the United States. In Michigan, it was briefly illegal to buy paint under Democrat governor Gretchen Whitmer, who is up for re-election this year herself. Thus, seeing lockdowns re-emerge at any point this year is unlikely. No potential candidate wants the Sword of Damocles re-hung.
Moreover, there’s an issue with one of the U.S.’ biggest economic engines: consumer spending. Consumer spending is already ramping up significantly. Recent word from American Express revealed credit card spending spiked to record levels. That’s the economic equivalent of drawing future business forward.
With the economy front-loaded like this, it’s possible that we may lose some of that impetus going forward. Just to top it off, throw in the rampant inflation pulling some of the teeth on potential discretionary income. People spending more at the grocery store and the gas pump aren’t likely to run out and buy less-essential items.
Closing Views
Trying to pin down the performance of the U.S. economy more than a few weeks in advance is like trying to predict the weather that far out. There are enough outlying elements and assorted wild cards to throw a monkey wrench in any such attempt. With so many moving parts, it’s no wonder predictions so frequently go awry.
The gains made this quarter were astonishing. However, there’s a supply chain in chaos and an election year brewing. There’s also a disease still lurking in the background and some possibilities we haven’t even seen yet to consider. All of these are signs of trouble ahead. Can we keep the growth going? It’s possible, but hedging your bets here will likely prove a worthwhile backup plan.
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