How did the economy perform in 2021?

As 2021 ends, the US economy is still feeling the effects of the COVID-19 pandemic.

In some ways, the economy looks closer to 2019. The unemployment rate continued to drop. Fewer people reported not having enough food to eat.

But people also quit their jobs at historically high rates. And inflation rose faster than it has in decades, making many common items more expensive.

Unemployment

Last year, the COVID-19 pandemic caused steep cuts to employment. As a result, the unemployment rate peaked at 14.8% in April 2020.

Since that peak, the unemployment rate steadily decreased. In 2021, it dropped from 6.3% in January to 4.2% in November. That averaged out to a monthly drop of 0.21 percentage points.

Unemployment differed by race, the Hispanic population and non-Hispanic Black population had higher unemployment rates than the national average throughout 2021. The white non-Hispanic and Asian non-Hispanic populations had rates lower than the average unemployment rates for the year.

While unemployment fell, the labor force itself also decreased by 1.5 percentage points from 2019 to 2021, as some people stopped looking for jobs.

Quits Rate

The quits rate for nonfarm employees hit a 20-year high in September and again in November 2021 when 3% of employees quit their jobs. The Bureau of Labor Statistics defines quits rate as the number of quits per month divided by the total number of employees.

The quits rate in 2021 was higher for every industry than it was in 2009, a year after the Great Recession. The biggest increases came in leisure and hospitality, retail trade, and manufacturing compared to 2009. The government quits rate increased the least during this time.

The leisure and hospitality sector has typically had the highest quits rates across all other industries, even before the COVID-19 pandemic. But more workers in the industry quit their jobs at higher rates than compared to the last 20 years. The quits rate in this industry peaked at 6.4% in November 2021.

As the quits rate reached new highs, more job openings increased as well. Total job openings reached a peak of 11.1 million in July 2021 compared to the monthly average of 4.6 million openings from 2000 to 2020.

Hourly Earnings

Average real hourly earnings decreased due to inflation and the end of many direct payments from the government at the beginning of the pandemic. The yearly average in 2021 was 21 cents lower than in 2020. So even if paychecks looked larger on paper, after inflation, they were lower this year than last.

Inflation

Inflation, or the measure of how much the price of goods and services changes over time, reached a 40-year high in December this year. The 2021 annual average was 3.6% higher than the annual average in 2020 and 5.4% higher than in 2019.

A wide range of common items rose in price. The cost for rent is up. So is the price of new and used cars, household furniture, and clothing.

Some of the largest increases came at gas stations and grocery stores. Energy prices were up 30% from last year and food prices went up 6%. The increases for both were the largest in 13 years.

Food scarcity

As Americans lost jobs at the onset of the pandemic, putting food on the table became more of a challenge for some families.

The Household Pulse Survey, conducted by the Census Bureau, defines food scarcity as the percentage of adults living in households where there was either sometimes or often not enough to eat in the last seven days.

Food scarcity peaked in late December 2020, reaching 11.3% of adults. By October 2021, about 9.4% of adults experience food scarcity.

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