US Economic Growth Revised up to 7% for End of 2021 Before Impact of Omicron

U.S. economic growth was revised slightly higher in the final months of 2021, helping the nation record its best year for growth in nearly four decades before the highly contagious omicron variant of the coronavirus dampened consumer spending and further strained the global supply chain.

Gross domestic product, the broadest measure of goods and services produced across the economy, grew by 7% on an annualized basis in the fourth quarter, the Commerce Department said in its second reading of the data Thursday. The economy grew at an annual revised rate of 2.3% in the third quarter.

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The change stemmed from increased contributions to fixed investment and state and local government spending, which were offset by some downward revisions to consumer spending and exports.

Looking at the quarterly data, the nation’s GDP grew about 1.7% from the third to the fourth quarter, compared with an increase of just 0.6% between the second and third quarters, marking a substantial uptick as businesses reopened and Americans spent down their savings following the delta variant surge in the summer and fall.  

People shop for groceries at a supermarket in Glendale, California, on Jan. 12, 2022. (Robyn Beck/AFP via Getty Images) / AP Newsroom)

The strong end-of-year growth boosted GDP to 5.7% in all of 2021, compared to the previous year. It was the strongest one-year growth since 1984, when the economy expanded by 7.2% following a previous recession.  

Still, the economy is expected to slow this year as it confronts the hottest inflation in nearly four decades. The dramatic rise in consumer prices over the past 12 months – in January, inflation hit a fresh 40-year high – has forced the Federal Reserve to dramatically shift its policy stance, including rapidly slowing its bond purchases, ending the buying program earlier than expected and setting the table for a March interest rate hike.

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Russia’s invasion of Ukraine has also scrambled the outlook for a global economy already confronting red-hot inflation and supply-chain disruptions. 

Extensive fighting in the region could disrupt the oil flow from Russia, the world’s second-largest producer, pushing prices higher at a time when demand is already far outstripping supply. The economic impact may also hinge on the scale of the fighting and the harshness of the sanctions levied by the U.S. and its European allies. 

A man stands in front of a Russian Ka-52 helicopter gunship after a forced landing outside Kyiv, Ukraine, Thursday, Feb. 24, 2022. (AP Photo/Efrem Lukatsky / AP Newsroom)

In other economic news, the Labor Department reported on Thursday that 232,000 Americans filed for unemployment benefits the week ending Feb. 19, slightly lower than expectations.

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The report shows that roughly 2 million Americans were collecting jobless benefits for the week ending Feb. 5, a modest decrease from the previous week; by comparison, just a little over one year ago, more than 19.8 million Americans were receiving benefits.

Claims have largely moderated as the economy recovers from the pandemic and Americans venture out to travel, shop and eat. Businesses have struggled to keep up with the demand, however, and have reported difficulties in onboarding new employees. Despite the slight uptick in claims, Thursday’s report suggests that companies are making an effort to retain the workers they already have. 

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