The Federal Reserve announced last Friday the problems that are holding back the United States economy from fulling recovering from the COVID-19 pandemic. Raw material and labor shortages were the main issues keeping the U.S. from fulling prospering, though they weren’t the only ones discussed. Global supply chain issues price hikes have also complicated things. All of these problems have also resulted in a transitory bout of inflation.
Earlier this year, many Americans started to become fully vaccinated for the first time. As millions became vaccinated, governments and businesses started to do away with regulations put in place over a year ago. The CDC also started suggesting that vaccinated Americans no longer had to wear masks indoors or outdoors, or social distance. All of these factors resulted in a huge increase in business activity in a short amount of time.
This surge in consumer demand naturally led to a shortage of products and services, as many businesses didn’t expect the massive surge in demand that they received. This led to shortages in materials — lumber and chips used to make cars are the most notable today — which has made certain products and services skyrocket.
This has also led to a labor shortage. For the past year, many businesses were forced to lay off workers as they struggled to survive the lack of business the pandemic brought them. Even earlier this year, people were being laid off by a mass amount. However, now businesses need workers again… but they’re having a hard time finding them.
A massive labor shortage has gripped the country. For many, there are still worries over working during the pandemic, especially with new variants of the virus spreading. Lack of childcare, early retirements, and changes in career have also affected this labor shortage.
Global supply chain problems have also led to major problems for many industries worldwide. Plus, prices for many items continue to rise, which could greatly hurt the economy if not stopped.
However, the Federal Reserve made sure to say on Friday that the United States economic recovery is largely on track, even as businesses attempt to navigate these problems. This latest report was put out before a set of hearings in Congress where the Fed Chair Jerome Powell will discuss these issues, as well as the overall outlook for the U.S. economy.
While these problems are continuing to persist, the Fed doesn’t believe that they will stick around for too much longer. According to this report, many of the major factors and problems should start to diminish in the next few months. Ideally, more people will be hired and material shortages will naturally work themselves out by the end of the year.
Plus, it doesn’t seem as if Americans will stop spending money on businesses in the next few months. Already, economists have forecasted that 2021 will see large economic growth, one not seen since the 1980s — or even the 1950s. For the past year, people have saved money and received government fiscal support, which may be a reason why many are spending money today.
