Former U.S. Treasurer on the economy: ‘I’m much more optimistic about 2022’
Count former U.S. Treasurer Rosie Rios among the experts who sees brighter days ahead for the U.S. economy. If she’s right, it could mean good news for businesses and shoppers.
“I’m much more optimistic about 2022 than I was about 2021,” Rios, who served in that role as part of the Obama Administration from 2009 to 2016, tells CNBC Make It.
A host of issues stemming from the pandemic — including labor shortages, supply chain disruptions and rising inflation — hampered economic growth in 2021, and Rios admits that continued uncertainty around Covid-19, and variants like delta and omicron, could always throw the country’s economy off course yet again.
“The pandemic is still, obviously, out there. And who knows what other variants are going to come our way,” Rios continues. “But optimism, I think, across the board, hopefully, is going to come true.”
Among the positive signs Rios points to is the expected surge in consumer spending for the current holiday season, even with shoppers and businesses concerned about the effects of rising inflation and supply chain issues. But if holiday spending reaches the record levels that have been forecasted by the National Retail Federation, that would help bolster the economy heading into 2022.
Meanwhile, like everyone else, Rios has her eye on inflation, which increased in November at its fastest pace in nearly 40 years and has meant higher prices for consumers. On Wednesday, the Federal Reserve released a forecast signaling plans to tackle inflation with three interest rate hikes in 2022. However, Rios also points out that, despite its drawbacks, inflation isn’t necessarily a bad sign for the economy.
“Inflation is also a sign that the labor market is tight wages are good,” she says. It is true that average hourly wages in the U.S. have increased this year, though inflation has increased faster, which still makes it hard for workers to keep up with rising prices.
Rios says “there’s definitely a balance and a rebalance that’s going to have to happen moving forward” when it comes to controlling inflation but holding onto improved wages that increase consumer spending power in 2022. There’s hope that the Fed’s planned moves can help keep inflation in check next year.
In terms of the overall economy, she says, “the fundamentals in general are looking good for 2022.”
She’s not the only one feeling optimistic. Even with its inflation battle looming, the Fed on Wednesday also raised its projections for U.S. gross domestic product growth in 2022, from 3.8% to 4%. And major financial institutions like JPMorgan and Goldman Sachs expect the stock market to continue rallying well into 2022.
More workers are expected to return to the workforce in 2022 as consumer spending continues to tick upward, which would help address the ongoing labor shortage. That’s good news for business owners, many of whom plan to hire more workers in 2022 — a factor of increased optimism, especially among small business owners, for the year ahead.
Of course, much of that optimism also depends on what happens next with the pandemic, especially as the Covid-19 omicron variant spreads rapidly. Still, medical experts tend to be hopeful that the coming year will finally bring the pandemic to something resembling an ending.
“I think there’s still a lot of variables to consider in thinking about 2022 that we haven’t even encountered yet,” Rios says.
Still, the uncertainty that remains is not stopping her from feeling confident about what’s to come, she says: “I’m actually looking forward to 2022 [and] putting 2021 behind us.”