By Joe Higgins, Quest 4 Quality
- Inventory is scarce
- Prices are skyrocketing
- And we’re closing out one of the best years in memory
What’s happening in our country? Gasoline is $4 a gallon, used car prices are up 26 percent, food costs keep increasing, and homes are out of reach for the average buyer.
The ports are a mess, cargo ships are stuck at sea waiting to get unloaded, containers are in short supply, and there aren’t enough trucks or drivers. The scarcity of semiconductors has devastated the automotive industry, depleted the electronics market, and impacted appliances, and there’s a chance that five hundred million consumers won’t receive credit cards this winter.
The current situation is unprecedented and is not going to get better any time soon. The pandemic has caused shortages across the economy, from Ford F-150s to processed foods to furniture. The American citizenry is frustrated and angry with the inflation levels at gas stations, in grocery stores, and even at Costco.
You would think that our world is separating at the seams!
But is it really that bad? Let’s take a closer look.
Americans have seen record levels of home equity brought on by the shortage of homes, and as a result, we are sitting on more net worth in our housing than at any time in U.S. history. According to Goldman Sachs, home prices could rise another 16 percent next year. It is better than gold.
Your 401(k)’s are up by a factor of seven since 2009 and have increased 17.9 percent this year alone. Your investment choices have proven lucrative through 2021 and will continue as such, as the stock market still has room to grow.
The Dow Jones topped out over 36,000 last week and is currently at record highs. I could say the same for the Nasdaq and the S&P 500, as all the exchanges are moving forward with the record profitability of our corporations. An old saying is that the markets take the stairs up and the elevator down, so look to the long term with your portfolio. There is always a possibility of a correction, but we are about done with the Q3 earnings season, and the numbers are positive.
Wages have jumped up 4.9 percent in 2021; American workers have not seen increases like this in 35 years. The significance of the wage gains is that they are benefiting our lowest-paid workers. It is a significant boost in income for those who need it the most, especially those with consumer-facing jobs.
Unemployment dropped last week to 4.6 percent, the lowest in two years, and there are 10.4 million job openings across the country. We expect unemployment to end the year at 4.2 percent as more consumers begin to travel and the leisure and hospitality sectors that were devastated by the pandemic begin ramping up again.
Retail sales have been off the charts as the government handed out trillions in stimulus over the past four years. It was evident again in October as total retail sales rose 16.3 percent year over year, while sales at electronics and appliance stores were up 18.4 percent and furniture gained 12 percent. These monthly retail reports by the Census Bureau are the best we have seen in 30 years. And consumers still have the savings and available credit to continue this streak of spending into 2022.
All this brings us to Gross Domestic Product (GDP), the final arbiter of the economy’s performance in any given year. GDP is defined as the amount of goods and services America produces in one year. To an economist, this is where we look to determine if our economy is flourishing. GDP was up 6.2 percent in the first quarter of 2021 and rose 6.7 percent in Q2. These increases are extraordinary; we have not seen numbers like this since the start of the dot-com era. Simply put, our economy had a great first half. Growth slowed in Q3 due to the summer surge of the Delta virus, but GDP was still up 2 percent.
So how is the fourth quarter faring given all the problems we stated up top? The Atlanta Fed puts out a prediction called GDP Now, which is the monthly estimate of real GDP growth based on current economic data. Their latest estimate as I write this is 8.2 percent for the fourth quarter. If we even come close to that number, the U.S. will end 2021 with GDP growth above 5 percent. That would be the best year we have had in three decades.
The Delta virus will still play a role in the final analysis, as the number of cases is rising again. I cannot predict what the virus will do. Still, given that about 60 percent of the U.S. population is vaccinated, it will not overwhelm us with hospitalizations and deaths in most states if there is another surge.
True, inflation is up 6.2 percent this year and has had a deleterious impact on consumers. Shortages are evident by the empty shelves I see in stores today, and there have been reports that the Christmas shopping season will be hurt by a severe absence of inventory.
But from a purely economic perspective, we are nearing the end of what will be one of the best years in an exceptionally long time. Just think: What would retail sales and GDP have been like this year if we had automobiles to sell, a steady supply of semiconductors, and the ports were not jammed?
I know it has been another excellent year for the appliance, home furnishings and consumer tech industries, but do you ever think what it could have been with availability? Yet even with all these constraints, America will end 2021 in record-breaking fashion.
As they say in New Orleans, let the good times roll.
Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YourSource News contributor. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.