Recovery Continues to Start 2022
Peter Bernstein, Chief Economist, pbernstein@rcfecon.com, 312-431-1540 x1515
The latest RCF Recovery Scorecard, which includes data from December 2021 and January 2022, reached 110%. This is the third straight month in which the scorecard exceeded 100%. Ten of our 16 individual variables are more than 100% recovered, meaning they now exceed their pre-recession levels. This is consistent with the recent 2021Q4 GDP numbers reporting that real GDP has climbed above its pre-recession level from two years earlier.
Notes and methodology: All data are seasonally adjusted monthly values. Variables 4 through 9, and 13 are data from January; all others are from December. Example calculation for economic variable #1, real income less government transfers fell 8.0% from its February 2020 value to its low point in April 2020. In the latest available report, the variable was 0.8% above its peak value. Therefore, it has recovered 110% of the loss. Data Sources: #1, 2, 3, 12, 13: Bureau of Economic Analysis; #4, 5, 6, 7, 8: Bureau of Labor Statistics; #9: U.S. Employment and Training Administration; #10: Federal Reserve; #11: Bureau of the Census; #14, 15: Bureau of the Census and U.S. Department of Housing and Urban Development, #16: National Association of Realtors.
Labor Market Still Below Pre-Recession Levels but Improving Steadily
Of our six measures that remain below 100%, five are labor market measures. As a group, our labor market variables are 95% recovered. That, however, represents steady improvement over the course of the recovery as shown in the chart below.
Labor Market indicators include Scorecard variables 4 through 9
Inflation Cuts into Economic Gains but is also a Result of Economic Gains
All our dollar-denominated measures are adjusted for inflation so that our scorecard tracks real gains in economic activity. The impact of rising inflation can be seen in the decline in the recovery percentages of three such variables – real income less government transfers, real consumer spending, and real durable goods orders. While all these variables are more than 100% recovered, their recovery percentages have declined in recent months as shown in the chart included in the Appendix of this report. For example, the recovery of real consumer spending has declined from 125% in our November scorecard to 118% in our current scorecard. Rising inflation is a big issue but our scorecard shows the economy can grow even taking inflation’s negative impact into account. Bear in mind, rising inflation is to a large extent a function of gains in incomes and spending, both of which are key drivers of the recovery. In fact, the last few months have shown some of the largest increases in our monthly recovery percentages, taking it from 97% in October to its current level of 110%.
Appendix – Recent History of Recovery Scorecard
Note: Historical data are often revised so comparisons with earlier RCF Scorecards may reflect the impact of revisions.
Monthly Recovery Percentages
