The State of the Economy
The U.S. economy has suffered as a result of Covid-19, but will we see its recovery in 2022?
By Tiarra Drisker ‘25
2021 was a year full of quarantines, lockdowns, bankruptcies, and business closures. To the average eye, it may seem that the American economy is still suffering due to the pandemic, but Dennis Jansen, a professor in the Department of Economics, says that determining the health of an economy is more complex than that.
“Real gross domestic product (GDP) before the pandemic reached a peak of $19.2 trillion in the fourth quarter of 2019,” Jansen said. “By the second quarter of this year, 2021, Real GDP was at $19.4 trillion, and by the third quarter it was $19.5 trillion. So, in terms of Real GDP, not only is the recession over and we are growing, but our economy is larger than it was pre-pandemic.”
The rate of employment tells a different story, though. The pandemic brought the tremendous loss of jobs which can still be seen in our current economy.
“Employment has been slower to recover after our most recent recessions, including the pandemic recession,” Jansen explained. “Nationally, nonfarm employment reached 152.5 million in February 2020, our all-time peak. The U.S. Bureau of Labor Statistics’s latest report, for November 2021, has nonfarm employment at 148.6 million. This is 2.6% below our previous peak employment level from February 2020, indicating that the labor market has not yet fully recovered from the pandemic recession.”
The labor market is still recovering, but in recent months, large numbers of workers have begun quitting their jobs. This has become known as “The Great Resignation.” Essentially, the rate of workers who quit their jobs pre-pandemic was lower than the post-pandemic rate.
“Workers may have not quit during the pandemic recession and its immediate aftermath since there were government programs in place to encourage workers and businesses to keep employees attached to their jobs,” Jansen shared. “Now that the economy is well on its way to full recovery, workers may take advantage of the plentiful job opening and rising wages to quit and move to a new job. In fact, hires are also up, indicating that those who quit can indeed find jobs if they so desire. Further, employment is rising, not falling, also indicating that those who quit are not causing an aggregate decline in employment.”
According to Jansen, “The Great Resignation” should not be a cause for worry or concern.
“The recent news about the rise in workers resigning from their jobs should be placed in the context of the concurrent rise in job openings and the ongoing rise in employment ratios,” Jansen said. “Workers who have resigned in recent months likely waited to switch jobs until there was more certainty about the economy’s recovery. Rather than a new phenomenon, the “Great Resignation” represents both a delayed response to normal job transitions combined with an increase in new opportunities.”
As we move on to 2022, there is one thing that we and our government officials can keep in mind to ensure the economy returns to normalcy: We should aim for lower inflation rates.
“The longer inflation remains so high above the 2% target, the more wages and rents get adjusted to increase at higher rates, and the harder it is for the federal government to get the inflation rates restored to the target level,” Jansen explained.
Overall, our economy is slowly but surely recovering from the impacts of Covid-19.
“Our recovery has been progressing rather rapidly compared to what happened after previous recessions, and in terms of output it seems the recovery is complete, although employment data indicates we have some ways to go,” Jansen said.