Opinion | Here’s what saved the economy in 2022

The first two quarters of 2022 began with negative growth in the gross domestic product. It seemed as if we were headed into a recession. The Fed had to tame inflation that was getting out of control, so it raised the target Fed funds rate from 0.25% in March to 4.5% now. In the face of these higher interest rates, rising debt levels worldwide stemming from policies to weather the pandemic put severe constraints on fiscal policy. In the U.S., federal debt held by the public was $24 trillion in the third quarter of 2022, which amounted to 95% of GDP, up from 80% before the pandemic. China’s zero-Covid policy continued to put a drag on global supply chains. Russia’s war on Ukraine created global anxiety and rising oil and food prices. 

You could be forgiven for thinking that 2022 was an awful year for the economy. But it could have been an absolute disaster. What saved the day was the job market. As a result, the economic pain has been more tolerable to more people — because they continue to have paychecks — and the overall economic picture at the end of the year is far less dire than many expected.

In December 2021, the unemployment rate was at 3.9%, reflecting an amazing recovery from 14.7% at the height of the pandemic — but it continued to fall to 3.7% by October. Overall, more people were being employed during 2022. At the start of the pandemic, 80.5% of the population ages 25 to 54 were employed. That dipped to 69.6% at the end of lockdowns, but it had recovered to 79% at the end of 2021 and continued to rise to 79.7% in November.