Where will the economy go?
The economic outlook for 2022 and 2023 in the United States is good, though inflation will remain high and storm clouds grow in later years.
The war in Ukraine raged with uncertain outcomes while this forecast was prepared. The war will play only a small role in the American economy—unless it really turns into World War III, which doesn’t seem likely.
A reporter recently asked, “What’s the most important economic statistic for business leaders to follow in 2022?” It is not an economic statistic; it’s Covid. The best working assumption for an economic forecast is that Covid has less impact, thanks to vaccinations and past infections. Assume no more lockdowns and people will dine out, travel and go to concerts. But keep your fingers crossed, as new variants are quite possible.
Economic growth will be pushed up by past stimulus, both fiscal stimulus and monetary stimulus. No additional major stimulus will come this year, but stimulus always works with time lags. So this year’s economy is mostly driven by past stimulus.
Supply constraints limit our growth no matter how much stimulus is pushed into the economy. Look for inflation-adjusted GDP to increase by 4% this year, then a little faster 2023.
The current supply constraints will ease gradually but not go away. More workers will return to the labor force as schools re-open reliably and as stimulus payments and unemploy …