January 2022 National Economic Outlook

Another Month of Weak Headline Job Growth; Fourth Quarter GDP Growth Much Better

Executive Summary

The U.S. economy added 199,000 jobs in December, according to the preliminary estimate from a survey of employers by the Bureau of Labor Statistics. This was well below the consensus expectation for an increase of 400,000. As in November, however, the details of the report were much better than the headline number, with job gains for previous months revised higher. 

  • Job growth in November was revised up to 270,000, from the initially reported 210,000. And job growth in October saw another big upward revision to 648,000, from the 546,000 reported last month, and the 531,000 in the preliminary estimate. 
  • Revisions to job growth in recent months have been uniformly upward and large, suggesting that the headline gain in December is likely to be revised significantly higher over the next couple of months.
  • The unemployment rate fell to 3.9% in December, down from 4.2% in November. After peaking at 14.7% in April 2020, the unemployment rate is quickly approaching the 3.5% rate from before the pandemic. 

According to a survey of households, different from the survey of employers, employment increased by 651,000 in December. It could be that the household survey is doing a better job of capturing labor market dynamics than the employer survey as the economy continues to recover from recession.

Real GDP increased 6.9% at an annual rate in the fourth quarter of 2021, according to the advance estimate from the Bureau of Economic Analysis. This was well above the 2.3% pace in the third quarter, and the strongest growth since the third quarter of 2020, when the economy was emerging from recession after pandemic-related shutdowns in the first half of 2020. 

While fourth quarter growth was strong, demand growth was lackluster. Inventories accounted for almost 5 percentage points of annualized growth as businesses restocked after drawing down inventories earlier in the recovery.

Final sales of final domestic product—GDP minus the change in inventories, which measures domestic and international demand for goods and services produced in the U.S.—increased a rather pedestrian 1.9% in the fourth quarter, although this was up from 0.1% in the third quarter. 

Real GDP growth was 5.5% in the fourth quarter of 2021 on a year-over-year basis, up from 4.9% in the third quarter. Averaged across the four quarters of 2021, real GDP increased 5.7% in 2021, the best year of growth since 1984. This followed a record contraction of 3.4% in 2020.The fourth quarter GDP numbers were released after PNC prepared its January baseline forecast.

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January National Economic Outlook

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