In 2021, people selling their houses had an easy go of it — buyers, not so much. The stock market was nearly as hot as the housing market, and while employers struggled to keep their businesses staffed, millions of workers quit jobs that most people would have been happy to have just one year earlier.
With such a wild and unpredictable year in the books, it’s time to look forward to the economy of tomorrow. GOBankingRates asked the experts about what changes appear to be on the horizon for 2022.
The Red-Hot Housing and Financial Markets Are Likely To Cool Off
Paul Knag is the founder of Ratezip.com, as well as a duly licensed mortgage broker, a marketing lead generator in 26 states and a graduate of Carnegie Mellon and Northwestern universities.
He’s incredibly concise in his predictions for the 2022 economy.
“I believe that a hawkish Fed combined with Omicron uncertainty could bring higher interest rates amid domestic hardship, cooling-off home values and putting pressure on stock and crypto markets in 2022,” Knag said.
There’s plenty of data to back up his points.
Fortune is reporting that exhausted and priced-out homebuyers are finally starting to get a break as housing prices are already cooling slightly after a year where they rose faster than at any period in tabulated U.S. history. That cooling off is expected to continue throughout next year, with Redfin predicting growth of just 3% in December 2022 compared to 2021’s 19.5% year-over-year-growth.
As for the “Omicron uncertainty” that Knag referenced when discussing the stock and crypto markets, COVID variants are precisely what Bank of America cited in a recent report as the chief risk to the 2022 financial markets.
Inflation Will Probably Begin To Recede Halfway Through the Year
Rising prices were one of the biggest stories of the 2021 economy — but will the dollar’s buying power continue to fall in 2022?
“I don’t see inflation ending anytime soon,” said Luke Zhang, financial expert, MBA, and co-founder of the sports site Dunk or Three. “With the lack of workers and a shortage of supplies, it’s clear that inflation will continue to be an issue well into 2022.”
How “well into” 2022 remains to be seen. The National Institute of Economic and Social Research predicts the inflation rate will fall from its current 5.1% to 2.3% by Q4 of 2022.
Dr. Tenpao Lee, professor emeritus of economics and faculty director at Niagara University, thinks it’s safe to assume that prices will keep rising for six months or so.
“We will have significant inflation in the first half of 2022 until the supply chain issues are resolved and the global economy is restructured,” said Lee.
Expanding on the concept of global economic restructuring, Lee said that “the USA will be continuously challenged by China,” in the coming year, adding that, “I hope both countries will benefit with cooperation rather than hurting each other with destructive competition.”
That might not only be wishful thinking.
In October, The Diplomat reported on America’s distinct shift away from the confrontational and aggressive tone and policies of the previous administration. The publication called it a move from “all-out” to “responsible” competition with China that is collaborative when possible and adversarial only when necessary.
The Biden administration implemented the shift in 2021 and the results will become evident in 2022 — but dialing down the tension could have unforeseen consequences.
“In its latest risk outlook report, the EIU notes that the U.S. and China are vying for global influence,” said Olivia Tan, a Florida-based personal finance coach and the co-founder of CocoFax. “In an extreme scenario, this could lead to a neutral stance becoming economically prohibitive for third countries, dividing China-supporting and U.S.-supporting economies. Full global economic bifurcation would force companies to operate two supply chains with different technological standards.”
The Great Resignation Could Lead To the Great Raise
Many experts believe that the Great Resignation that began in April is directly tied to the extraordinary circumstances brought on by the virus, and when the virus fades, so, too, will the mass exodus from the workplace.
“As the pandemic diminishes, gradually, the job market will move back to normal, and the unemployment rate will be around 4%,” said Lee.
But the paychecks might be a whole lot bigger.
Zach Blenkinsopp is the founder of Digital Roofing Innovations, which has completed projects in 20 states. He’s intimately familiar with the labor issues that defined so much of the 2021 economy.
“The job market is now in favor of employees rather than employers and this is their chance to make a stand and demand better rates in these difficult times,” Blenkinsopp said. “The added burden on employees as more of their colleagues leave the workforce has strained employees’ professional and personal lives. This added strain is creating a vicious cycle that is driving more employees to quit their jobs. Inflation is making life even more expensive for everyone, and employers who increase their remuneration rates will attract more potential employees.”
He’s even got a catchy name for that increased remuneration.
“The Great Raise will be adopted by numerous organizations seeking to retain their core employees and attract more talent,” Blenkinsopp said.
Or the Jobs Might Just Go to Robots
Many businesses simply can’t keep up with ever-increasing employee demands for higher salaries and better benefits. To save money on labor, and to future-proof themselves against any human-worker uprisings that might be yet to come, it’s likely that 2022 will see businesses respond to the Great Resignation with the Great Automation.
“The primary cause of inflation is the lack of labor supply and lower-than-usual labor force participation rate,” said Zach Reece, a CPA, former employee of Deloitte and the owner and chief operating officer at Colony Roofers. This will be the defining challenge of 2022 and the years to come. “I expect that this will accelerate the adoption of automation and artificial intelligence because if we can’t get people to work, we have no choice but to use robots and technology to do the work.”
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