This can be a confusing time, for those of us who like to keep track of the economy, and where it may be headed.
Just last Thursday, as you'll recall, we were talking about how strong the economy looked, as it was announced that the Nation's Gross Domestic Product, its GDP, came in at a remarkable 6.9% annualized growth rate for the fourth quarter of 2021.
I say remarkable, because the nation hasn't seen growth anywhere close to this for over three decades. Not since the mid-1980s has there been growth like this.
The President has been quick to point out just what a remarkable event this has been. Extolling his record of providing one of the best “economic growth” periods of our lifetimes.
Real Economic Growth. That's what all the hype has been about. But is that what the numbers really show. Or has this all been a reflection of something much more mundane? Something that doesn't bode so well for our immediate future.
The question that you and I have to consider is that what we're seeing isn't growth at all. It may really have just been the full impact of the stimulus. Monetary pumping. The somewhat delayed effect of handing most everyone in the country a check.
And over the next few months, that additional income, if you can call it that. I prefer to call it a gift, trickled through the economy, providing the illusion of growth, as people spent their windfall. But not providing real sustainable growth at all.
That seems to be what the good folks down at the Atlanta Federal Reserve, seem to be telling us.
After all growth, real sustainable growth builds economic momentum. People are put to work, wages, real working wages increase, as businesses hire, and new enterprises come online.
The economy is like a high-speed automobile, once you accelerate to 100 miles an hour, it creates a lot of momentum. And plenty of room to get back to a more normal speed.
And that's how we should expect our economy to behave right now. After achieving those spectacular results last year, we should expect that momentum to carry through to this year, 2022.
But that's not at all what Atlanta is telling us. In their current GDP projection, called the GDP Now Model, they show that the nation's total goods and services have essentially no growth at all. Technically they are measuring the nation's economic growth at 1/10%. Call it flat.
Essentially saying that our economic “car” went from 100 miles per hour to zero, in the space of less than a month.
In the real world that's simply not possible.
Now admittedly we're only one-third of the way through the first quarter of 2022. And I expect several changes in the Atlanta Fed's estimate of economic growth between now and quarter-end.
But if you're to ask me, what I consider a better reflection of the real economy: 2021 when we broke every rule in the book, sending money “willy nilly” throughout the economy, driving inflation to un-imagined heights. Or 2022, where we seemed to have returned to normal.
I think that the economy unfolding in 2022 is the real one. And, so far, that's not good news.