The new normal in the economy.
By: Diana Bello Aristizabal
Para leer en Español
Since March 2020, the United States has been experiencing a game-changing economic transformation, both positively and negatively. For this reason, 2022 will be the year of readjustment, which does not mean going back to pre-pandemic levels, but rather starting to face a new normal.
This new normal that we have arrived at has been conditioned by factors such as government economic stimuli, quarantines and the closure of businesses due to COVID-19, which have served as fertilizer to revolutionize the labor market and the new variants of the coronavirus.
As a result, today we as a society are faced with the consequences of all that has happened since 2020, allowing experts to project how the economy might develop this year and the challenges that await us.
Inflation and growth
According to Nelson Sotomayor, professor of economics at Miami-Dade College, the economic growth rate was 5.5% for 2021 and is expected to reach 4% this year.
“The typical growth rate in the United States is between 2 and 3%. In 2020, there was a slowdown in economic growth due to the onset of the pandemic, then in 2021 it went above average, and for this year it will decline further, which is normal and not doesn’t mean the economy is stagnating,” he said.
However, according to Tulio Rodriguez, economist and real estate developer, the apparent economic growth of 2021 comes from the printing of inorganic dollars, that is, money not supported by the strengthening of the internal economy but by factors. such as stimulus checks.
“Printing what we call inorganic money leads to inflationary cycles, and inflation is the greatest enemy of any economy. That’s why you have to control it.
On this subject, at the time of going to press, it was announced that inflation based on the consumer price index had reached its highest level since June 1982 with 7% at the end of last year. , according to the Bureau of Labor Statistics.
In this context, although it is not yet possible to predict whether it will continue to increase or not, the trend is that over the next 24 months, the prices of goods and services will increase steadily, as it will is produced in 2021 when the price increase hasn’t stopped even in the last month.
For Nelson Sotomayor, the problem of inflation started, among other things, when the power of consumers increased. “There was a very strong demand and a weak increase in supply, this relationship being one of the reasons that led to the increase in inflation.”
From this point of view, he thinks that this year the demand will continue to be strong because citizens are looking for better paying jobs and, for this reason, they will spend more money. However, for the economist, this year, the gap between supply and demand would decrease, just as prices would do throughout the year, excluding energy and food, which tend to be volatile.
But, a question arises, are we going to continue to see empty shelves? Tulio Rodriguez says, yes. “2022 and 2023 will be more or less the same. We will continue to see shortages.
The above is due to the fact that the market has yet to recover from the disruption to the supply chain that occurred last year when ships were unable to unload cargo at certain ports and there there was a staff shortage, which delayed delivery times.
Another factor that negatively impacted the delivery and receipt of products around the world last year was the difficulty in sourcing essential parts in the production of a good, as happened in the automotive industry when the semiconductors needed to make cars began to become scarce. As a result, the supply of automobiles was low relative to demand.
“It takes time to restore this interruption in the supply chain, and for this reason, the next two years are likely to be complicated with a tendency to improve”, explains Tulio Rodriguez.
Labor Market Outlook
One of the aspects that has most influenced the economy is, without a doubt, the workforce. This question deserves rigorous analysis even when the unemployment figures indicate that we are on the right track, since there are still four million fewer Americans in the market than on the eve of the pandemic.
“According to the latest report, the current unemployment rate is 3.9%. If we only look at this figure, we may think that we are within normal parameters, but this is not the reality,” says Nelson Sotomayor.
According to his analysis, one of the things that has changed the labor market the most is that flexibility has become the main attribute of employees due to the pandemic. These days it is increasingly common for people to quit their jobs expecting something better in terms of working conditions and salary.
“For 3 job offers, there are 2 people looking. This relationship changes when we look at lower paying jobs. In this case, the tendency is that there are many more vacancies than people interested in taking them,” he adds.
For Tulio Rodriguez, the fact that there are fewer job applicants is a problem that, for the moment, is not on the way to being solved. “You have to teach people to fish, not give them the fish, but the government did the latter with the stimulus checks, which led many to prefer to live off it rather than work.” Failing to address this issue could create a bigger negative impact on inflation and growth by 2022, he said.
However, increasing the number of small businesses could benefit the economy, although the benefits would be seen in 2023 as it is a gradual process that requires time for incubation and development.
The difficulty for these small companies is that it will be difficult for them to compete with large companies in terms of salary and benefits, but it also depends on the industry in which they operate. “By 2022, growth in tourism and consumer staples is expected, while the finance and construction sectors will struggle more,” Nelson Sotomayor suggests.