Don’t tell anyone, but 2021 was pretty amazing

Yet there’s a good chance that once time has passed
and we’ve had a chance to regain perspective, we’ll consider 2021 to have been
a very good year, at least in some ways. In particular, although nobody seemed
to notice, it was a year of spectacular economic recovery — and one in which
many dire warnings failed to come true.

Let me give you some background: 1979 marked the
beginning of a nasty double-dip recession that was, at the time, the worst
slump to hit the US since the 1930s.

The good news about that episode was that when the
slump finally ended, the economy bounced back quickly — so quickly that Ronald
Reagan was able to boast about “morning in America” and ride the recovery to a
landslide electoral victory.

After that, however, we seemed to lose our knack for
economic recovery. The next three recessions — 1990-91, 2001 and 2007-09 — were
followed by sluggish recoveries in which unemployment took years to come down.

Then came COVID. The economics of 2020 were, to use
the technical term, weird. The economy went into lockdown, experiencing a huge
but temporary spike in unemployment. But what would 2021 look like? Many people
expected at least a partial replay of the sluggish recovery that followed the
2008 financial crisis; in late 2020, forecasters surveyed by the Philadelphia
Fed expected a 5.8% unemployment rate at the end of 2021. In fact, unemployment
was already down to 4.2% by November.

By many measures, we’re in the middle of another
morning in America, despite the drag caused by a lingering pandemic and supply
chain disruptions.

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So, about those disruptions: Can we talk for a moment
about the Grinch that didn’t steal Christmas? There was a lot of scepticism a
couple of months back, when major retailers said that despite supply issues,
they expected to be able to meet consumer demand. But I’ve seen almost no
reports of empty shelves and frustrated shoppers. And in this case, absence of
evidence really is evidence of absence, because you know that some media organisations
would have loved to hype stories of holiday woe if they could find them. But
because Fox News and Newsmax recently got busted using photos of empty shelves
taken in other years and other countries to bash Joe Biden, they appear to have
been cautious about reporting a miserable Christmas experience unless they
could find actual examples — and apparently, they couldn’t.

So why are people still so downbeat? There continues
to be a huge divergence between people’s negative views about “the economy” — a
perception based in part on partisan attitudes, in part on media coverage — and
their mostly favourable reporting on their own financial situation.

Still, inflation is a real problem, and what happens
to inflation over the course of 2022 will have a big retrospective effect on
how we regard the economy of 2021.

I still expect (hope?) to see inflation gradually
subside as we work through the remaining kinks in the supply chain. Measures
like the cost of container shipping are still elevated but off their peaks;
surveys of purchasing managers suggest that delivery times are still bad but
improving. If inflation does come down, 2021 will look in the rearview mirror
like an unambiguous success story, a tale of an economy that powered through
temporary bottlenecks and rapidly returned to full employment.

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Obviously, that’s not the only possible outcome — and
for a variety of reasons, it will be quite a few months before we’ll have a
clear picture on the inflation front.

But one thing is clear: 2021 was a banner year for
economic recovery. And people should know that.

© 2021 The New York Times Company

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