Experts Outline Forecasts for 2022 at the GBC’s Annual Economic Outlook Conference

Three top economic experts that spoke at the GBC’s annual Economic Outlook Conference said that parts of the U.S. economy were able to weather the worst of the COVID-19 pandemic so far, while some sectors, like tourism, continue to recover. Meanwhile some current economic crosscurrents, triggered in part by the pandemic, may continue well into 2022, the experts concluded during the October 22 virtual event.

Economic uncertainty, labor shortages, the shift to remote work and discord in Washington are among the trends likely to effect the economy in 2022, the three experts agreed.

Tom Barkin, President and CEO of the Federal Reserve Bank of Richmond, said that economically the last 18 months have been like “Driving in the dark on an icy road” and taking every measure possible not to fishtail and hit the guard rails.

On the plus side however “demand is healthy,” he said, and will remain healthy as consumers have high savings, while corporations have strong balance sheets and are investing, particularly, in technology. On the negative side for the economy “the supply situation is absurdly tight,” Barkin said. “This pressure could continue for a while.”

Mark Vaselkiv, Vice President and Chief Investment Officer, Fixed Income Division, at T. Rowe Price said “the train of recovery is experiencing major frictions.” But his firm sees those impediments to recovery diminishing in 2022.

Vaselkiv said T. Rowe sees three major trends ahead in 2022: First, the U.S. and the world will learn to live with and adapt to Covid-19. Second, there may be higher inflation, which may be beneficial as it pushes up incomes for the middle-class, and third, there is a lot of pent-up demand that will unlock spending by consumers and businesses.

Anirban Basu, Chairman and CEO of the Sage Policy Group, said one of the lessons learned from the pandemic is that it is relatively easy to wind an economy down, but is very difficult to get it back up and running. This has been especially true for the supply of labor in recent months, he said.

But, he noted, the International Monetary Fund (IMF) forecasts many world economies to see robust growth in 2022. For the U.S., the IMF forecasts economic growth of 5.2% in 2022. Basu said he thought that was too optimistic as the labor force seems to be slow to come back from layoffs and unemployment, which is impacting a number of industries.

“One of the factors at work, is that a lot of Americans are looking for a different kind of job,” Basu said. “Compensation matters, no question. But so too does flexibility and work-life balance.”