2021: The US Economy in Charts
15:12, 20 December 2021
It is the time of year when businesses send out holiday greetings cards. The economics team at Wells Fargo Securities, however, prefer to send charts in a long-standing tradition in which the team selects the charts and tables that best tell the story of what happened in the US economy over the course of the year.
What follows is a curated selection of charts and tables that tell the economic story of 2021.
The terror of knowing what this world is about might only be exceeded by the uncertainty of not knowing when supply chain problems will get better. Unsatisfied with external estimates of when the bottlenecks standing in the way of economic growth will clear, Wells Fargo economists built this pressure gauge chart to monitor the struggle.
“With most of the various components still flashing amber and red, we are a long way from a return to normal, but the pressure gauge offers a glimpse to quickly interpret what the best leading indicators are telling us,” Wells Fargo economists said.
Trend of the spend
By plotting the deviation from the trend in place in the prior cycle business cycle, we can see how the various components of spending have fared since the start of the pandemic as well as how we see things might unfold from here.
“After almost two years of above-trend growth in goods spending, which came partly at the expense of weak services outlays, our forecast implies a reversion to trend. In short, the pivot to services, which is already under way, continues for the next couple of years,” the economists said.
It took nine years in the prior cycle to match the percentage increase in sales that retailers have experienced in just the past 21 months.
Since retail sales are reported nominally, this cycle’s surge gets a big lift from inflation, but it is also true that the demand surge is playing a role in driving prices higher.
Inflation to the moon
Soaring goods demand has had a predictable effect on pricing.
This chart shows a quarter century of durable goods price deflation, and then nearly double-digit inflation in the Covid-era.
Good help hard to find
In recent months, Wells Fargo’s economists have seen an all-time high in the share of firms saying that jobs are hard to fill as well as the share of consumers saying jobs are plentiful.
Against that backdrop, why is the labour force participation rate lower now than it was in the 1990s and 2000s?
When were they last seen?
Wells Fargo’s own analysis of which workers are missing from the labour force offers clues about where some of them may have gone. Labour force participation over most demographics was shattered by the pandemic, and the recovery has seen laggards in significant areas.
Amid concerns about the availability of affordable daycare, the greatest share of missing workers is women between the ages of 25 and 54. The next largest share is people over the age of 65, in line with anecdotal reports of people taking early retirement.
In fact, if you combine people over the age of 55 and women between the ages of 25 and 54, those groups together comprise three-quarters of the missing workers.
US jobs coming back
It has been nearly two years since Covid-19 reached the US and while constraints on available workers have led to a slower job recovery than originally anticipated, the US has recovered just over 80% of the jobs lost at the onset of the pandemic.
“State-level recoveries depend on many factors, including those tied to Covid itself, such as outbreaks and vaccination rates, as well as economic considerations like the share of the workforce in the hard-hit leisure & hospitality industry,” the economists at Wells Fargo said.
There are more buyers than sellers in the housing market. Amid a 10-year-long trend decline in the supply of existing homes, prices are rising as fast as they have in a decade.
All about perception
Higher home prices mean different things depending on who is asked.
Homebuilder confidence has started to rise again, as supply issues in the sector have eased up a bit, and higher home prices mean a better payout for builders. But when it comes to consumers, home-buying conditions have plummeted almost certainly due to scarce inventory and sky-high home prices.
US non-residential construction picked up in 2021. Overall, year-on-year spending was positive through October despite sharp declines in a half dozen categories. Unsurprisingly, there was not a ton of new investment in hotels during an ongoing pandemic, though prices in that space are holding up.
“Far and away the category that saw the most growth in new construction was warehouses. This could be a reflection of continued e-commerce growth and the associated need for new distribution centres or firms seeking more storage space for critical supplies and inventories. After a period of scarcity and supply chain woes, it would be an understandable impulse to secure your own supply of needed parts and material,” Wells Fargo economists said.