The Economic Outlook for the United States in 2022 and Beyond

Concerns about inflation and rising interest rates loom large

The US economy accelerated in 2021, but the combination of increased growth and global supply chain constraints pushed inflation higher than expected. Interest rate hikes were announced in March 2022, and the economy is expected to cool.

The State of the American Economy in 2022

The economy finished 2021 on a high note, with GDP increasing 6.9% in the fourth quarter. 2 Along with the expansion came a spike in inflation: 7% year over year, well above the Federal Reserve's target of 2%. At the end of 2021, the unemployment rate was just 3.9 percent, down from 6.4 percent at the start of the year. When the economy collapsed in April of 2020, unemployment reached a pandemic high of 14.7 percent. Interest rates on everything from home loans to car loans to personal loans were at or near historic lows, fueling economic growth, thanks to the Federal Reserve's near-zero fed funds rate and historic purchases of mortgage and Treasury securities. However, at its December 2021 meeting, the Board announced that it would reduce its accelerated purchases of Treasurys and mortgage-backed securities (the "taper"), indicating that higher interest rates were on the way. The Federal Reserve raised rates by half a percentage point on May 4, bringing the federal funds rate target range to 0.75 percent to 1 percent. 6 The Board of Governors stated that they will likely keep raising rates throughout the year to combat rising inflation caused by supply chain disruptions in China as a result of COVID-related lockdowns and Russian attacks on Ukraine.

Economic Development

The December 2021 forecast released at the Federal Open Market Committee (FOMC) meeting on December 15 predicted that US GDP growth would be 4% in 2022. It was predicted that in 2023, growth would slow to 2.2 percent, and in 2024, it would slow even more to 2%. 7 The Fed revised their previous projections at their March 16, 2022 meeting, predicting a lower 2.8 percent increase in GDP in 2022, followed by a 2.2 percent increase in 2023, and a 2% increase in 2024.


The Federal Reserve estimated a 3.5 percent unemployment rate for 2022 based on the same report released in March 2022. In 2023, the rate was expected to remain at that level, rising to 3.6 percent in 2024. Workers were laid off in response to the pandemic, and the rate peaked at 14.8 percent in April 2020.


Every year, the Bureau of Labor Statistics (BLS) publishes an occupational outlook that includes extensive information on each industry and occupation. Between 2020 and 2030, the BLS predicts an increase of 11.9 million jobs in total employment. The effects of the pandemic on employment, as well as structural changes in the economy due to an aging population, are factored into the BLS projections for 2020 through 2030. Over the next ten years, jobs in healthcare and social assistance are expected to grow to 3.3 million, with 23.1 million by 2030. The BLS also forecasts strong growth in the leisure and hospitality industries, as companies make up for lost ground during the pandemic. Most manufacturing and retail industries, on the other hand, will continue to lose jobs, while e-commerce will continue to grow. Other industries that will experience declines include consumer rental and wired communications.


Inflation in the core is expected to be 4.1 percent in 2022, 2.6 percent in 2023, and 2.3 percent in 2024. 8 The Federal Reserve's target inflation rate is 2%. 11 The core inflation rate, which the Fed prefers when deciding on monetary policy, excludes volatile gas and food prices.

Interest Rates

The FOMC held an emergency meeting in March 2020 to address the economic impact of the COVID-19 pandemic, and the fed funds rate was lowered to a range of 0% to 0.25 percent. 12 The FOMC announced that, in order to combat rising inflation, it would raise interest rates for the first time since 2018, at its meeting on March 16, 2022. 13 From 0% to 0.25 percent to 0.25 percent to 0.50 percent, the target range was increased by 0.25 percent (25 basis points). The FOMC projected a steady rise in the target fed funds rate to 1.9 percent in 2022 in its March projections. In 2023 and 2024, the target rate is expected to rise to 2.8 percent. Short-term interest rates are governed by the fed funds rate. Bank prime rates, most adjustable-rate loans, and credit card rates are among them. The Federal Reserve has been working to keep long-term interest rates low in order to make borrowing money more affordable, which will encourage consumer and business spending. It restarted its quantitative easing (QE) program, which was quickly expanded to an unlimited amount of purchases. The Federal Reserve announced in March 2020 that it would buy $500 billion in US Treasury bonds and $200 billion in mortgage-backed securities. Its balance sheet had reached a new high of $7.2 trillion by June 2020. By June 2021, the figure had risen to $8.1 trillion, and by December 2021, it had risen to nearly $9 trillion. The Fed reduces supply in the Treasury market by buying bank securities, which raises prices and lowers the return (or yield) on these long-term notes. Long-term fixed-rate mortgages and corporate bonds are benchmarked by these yields. Treasury yields are also influenced by the dollar's demand. Yields are under pressure due to high demand. Investors may demand less of this ultra-safe investment once the global economy recovers, raising yields and interest rates.

Price of Oil and Gas

According to the EIA's energy outlook, oil prices are expected to rise by 2050. According to the data, the average Brent oil price in constant 2021 dollars could reach $170 per barrel in 2050. The government's efforts to increase renewable energy production in order to combat global warming are not included in this forecast.

Climate Change

The Federal Reserve is concerned about the economic impact of climate change. Climate change, according to research from the Richmond Fed, could reduce annual GDP growth by up to a third of the historical average if the country continues to produce high levels of emissions. As in previous years, hurricanes and wildfires wreaked havoc on the United States in 2020. Natural disasters linked to climate change, such as hurricanes, floods, and wildfires, caused $210 billion in global damage in 2020, up from $166 billion in 2019. Insurance losses in the United States totaled $82 billion in 2020 and $57 billion in 2019. As a result of global warming, damage claims have increased in severity and frequency. In 2020, there were 980 natural disasters, up from 860 in 2019.

Most Commonly Asked Questions (FAQs)

What kind of economy does the United States have?

The economy of the United States is a mixed economy. The US government encourages free market activity, but it does so on occasion, such as with the Federal Reserve's quantitative easing programs. 

What is the size of the US economy?

Money can refer to the amount of money in circulation or the amount of credit in the economy, but GDP is more easily measured in dollar amounts. Aside from a dip during the onset of the COVID-19 pandemic in 2020, the US GDP has remained above $21 trillion in recent years.

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