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Latest data will give a sense of where the economic momentum is headed

RACHEL MARTIN, HOST:

The U.S. economy grew last year at the fastest pace since President Ronald Reagan was in office, but that growth was uneven, with hopes for a steady recovery repeatedly dashed by all these waves of the pandemic. The Commerce Department offered a snapshot of that roller-coaster economy this morning when it reported on GDP growth for the fourth quarter and all of last year. We also got a sense of the economic momentum heading into this new year as the Federal Reserve tries to regain control over the rapidly rising prices. We've got NPR's chief economics correspondent Scott Horsley with us. Hey, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Rachel.

MARTIN: All right, so let's start with the most recent numbers here. What does this morning's GDP report show about the fourth quarter of last year?

HORSLEY: It shows really strong growth in the final months of 2021, with the economy growing at an annual rate of 6.9%. That's a big improvement from the previous quarter, when GDP grew just 2.3%. But, you know, the October-to-December quarter was, like the rest of the year, uneven. Chief economist Mark Zandi of Moody's Analytics says it's just an example of how the economy has been moving in fits and starts.

MARK ZANDI: Q4 started with a bang and ended with a whimper. October was a fantastic month for the economy. Consumer spending, investment - everything was kind of firing on all cylinders. And then by December, of course, omicron came on the scene quickly and did a lot of damage.

HORSLEY: And that damage, Rachel, continues into the early weeks of the new year. Zandi and other forecasters think we could see a net loss of jobs in January, although the coming months could be better as the omicron wave recedes.

MARTIN: So let's talk about that. What is the outlook for beyond January?

HORSLEY: Yeah, forecasters expect another year of above-average growth, although not as strong as we saw in 2021. For all of last year, the economy grew 5.7%, which is, as you pointed out, the best performance since 1984. It might not have felt like it, though, because the recovery was so uneven. Zandi says the economy is still just yoked to the pandemic.

ZANDI: When we're suffering a wave of the virus, the economy struggles. People get sick; can't go to work. Supply chains gets disrupted. And then when the wave passes through and we get back to work, the economy revs right back up. You know, it's quite amazing that despite the pandemic, we were able to enjoy such very strong growth last year.

HORSLEY: With each new wave of the pandemic, we do seem to see less damage to the economy than the one before. But there are still challenges ahead, not the least of which is high inflation.

MARTIN: Yeah. So yesterday, the Federal Reserve sort of telegraphed that it's going to start raising interest rates soon to deal with that inflation. Explain the Fed's thinking.

HORSLEY: Yeah, prices are climbing fast, more than three times as fast as the central bank would like. That's not news to anybody who's been to the grocery store or the gas station lately. And at the same time, the unemployment rate has dropped pretty sharply. So Fed Chairman Jerome Powell says the economy no longer needs the kind of life support that the central bank has been offering throughout the pandemic. He and his colleagues expect to start raising interest rates at their next meeting in March. But Powell acknowledged this is still a very unusual, unpredictable economy, subject to the ups and downs of the pandemic and all the usual economic winds. So he and his colleagues will have to be nimble and ready to shift gears as the roller-coaster recovery unfolds.

MARTIN: NPR's Scott Horsley. Scott, thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Rachel Martin is a host of Morning Edition, as well as NPR's morning news podcast Up First.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.