If you think you see light at the end of America’s economic tunnel, think again. Some of the country’s top economic experts are predicting that the crises affecting the United States will continue into 2022. This prediction is casting a large shadow on present economic growth.
The Wall Street Journal polled some economists earlier this month. They focused on high inflation, constrained supply chains, labor shortages, and other bottlenecks that continue to be a threat to economic recovery. These have risen since the COVID-19 pandemic and the lockdown-induced recession.
The poll indicated that all these recent issues have cut their economic growth predictions in half since their earlier predictions. They chiseled their growth forecasts to an average 3.1% annualized in the third quarter from 7% in the July survey. The experts also lowered projected fourth-quarter growth to 4.8% from 5.4%.
Michael Brown, a Visa economist, told the Wall Street Journal, “Consumer spending, and by extension GDP growth, is being limited by high rates of inflation eroding the real purchasing power of consumers.”
Other economists raised their inflation forecasts saying that Consumer-price inflation will drop to 3.4% by June of next year, then 2.6% by the end of 2022. This is according to the poll respondents’ average estimates.
Many of the respondents pointed to the supply chain crisis and labor shortages as the primary factors that will limit economic growth. There are growing concerns about the limited supply factor. In fact, about half of the respondents considered supply-chain bottlenecks as the biggest threat to growth in the next 12 to 18 months.
And almost one-fifth focused on labor shortages. There seems to be across the board expectations that supply-chain issues will weigh on the economy through much of next year. About half have estimated that it will take until the second half of 2022 for the bottleneck problems to recede.
A bottom line of the survey reveals real worry that the effect of all the facets of this crisis will send the United States into another recession.
David Blanchflower of Dartmouth College and Alex Bryson of University College London released a paper earlier this month that was titled, “The Economics of Walking About and Predicting US Downturns.” They remembered the analysts’ failure to predict the 2008 recession. These two professors maintain the the “wisdom of crowds” held by non-expert consumers is a reliable predictor of recessions.
It has been the rapid downturns in major consumer sentiment surveys from places like the Conference Board and the University of Michigan that have successfully forecasted recessions for the past four decades.
Both Blanchflower and Bryson indicate that it is these kinds of metrics that have seen double-digit declines in the last six months, and they suggest that the United States economy may now be retracting.
So it doesn’t look like the price of gas will come down, or the prices of eggs, bacon, steak, toilet paper and diapers will become more moderate. There are no promises that this Christmas season won’t feature empty store shelves and gifts won’t be delayed until 2022.
And it seems that President Biden and his advisors are at a loss for what to do. There has been too much federal spending and it has been driving inflation and many Americans know it. How in the world can pass another $3.5 trillion of spending to boost entitlements that are not just for the needy but being doled out to every household not undermine work? If we want inflation to moderate and workers to return, the huge spending bill is not the answer.