The economy should continue to expand at a healthy pace this year, although slower than the rapid growth of 2021 with continued constraints likely from labor and supply shortages, the coronavirus pandemic and inflationary concerns, a top Federal Reserve economist told Chattanooga business leaders Wednesday.
During the annual economic outlook seminar sponsored by the Chattanooga Area Chamber of Commerce, Atlanta Fed Research Director David Altig said he expects the nation's economy to grow about 2.5% to 3%, as measured by the gross domestic product. That would only be about half the robust 5.7% growth in GDP recorded last year. But Altig's forecast still sees continued growth in line or slightly above the long-range growth in the U.S. economy.
Altig also said he expects inflation, which jumped by a 40-year high of 7% last year amid supply shortages and pandemic problems, will probably be only half that rate in 2022. But even a 3% inflation rate on top of last year's increases would mark the highest inflation levels in four decades.
"We have to be back to the 1970s to find inflation as high," Altig said. "In a tight labor market, wages have clearly been increasing fairly rapidly over the past two years."
But wages, adjusted for inflation, have actually not increased as much as what would be expected in the tight labor market with more job openings than available workers, Altig said.
2021 signs of growth in Chattanooga
— 11,700 more jobs in metropolitan Chattanooga, bringing the employment total to 267,600.— 9.9% more home sales to a record high of 12,896 houses sold by Chattanooga realtors.— 8.1% more new vehicle sales in Hamilton County to 13,633, the highest since 2008.— 15.8% growth in local sales tax collections (October 2021 compared with a year earlier).Sources: Tennessee Department of Labor and Workforce Development, Greater Chattanooga Association of Realtors, Hamilton County Clerk’s Office, Tennessee Department of Revenue, Chattanooga Area Chamber of Commerce.
The Fed has set an inflation target of 2% and is expected to make multiple interest rate increases this year to slow inflation after keeping rates low throughout the pandemic to try to prop up the economy.
Altig also said he doesn't expect the labor force to return to the pre-pandemic levels for some time due to more retirements and the rethinking by many people caring for others or sick themselves during the pandemic.
The labor force participation rate for working-age adults fell from about 82% to just over 79% in the pandemic before rising back to just below 81%, according to Fed data. Altig said more than half of that drop reflects the aging population and retirement of Baby Boomers during the pandemic, and another 1.5 million workers were lost due to a decline in immigration into the U.S. since 2019.
In Chattanooga, the economy also showed strong gains in employment, home sales and tax collections last year. Christy Gillenwater, president of the Chattanooga Chamber, said the Chamber assisted with nine business announcements in the Chattanooga area during 2021 with a collective investment of nearly $240 million and nearly 1,500 new job additions,
"The trends and curves for Chattanooga and our region are on an upward swing in many regards," Gillenwater said.
But Gillenwater also noted the ongoing challenges with supply shipments, labor shortages and the 2-year-old coronavirus pandemic.
"These are definitely character-building times," Gillenwater said.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.
Staff Photo by Robin Rudd / Chamber of Commerce President Christy Gillenwater speaks during a visit to the Times Free Press in 2019.