Somehow, the economy grew last year at the fastest pace since 1984 The U.S. economy grew last year at the fastest pace since 1984, but growth was tempered by successive waves of the pandemic.

Believe it or not, the economy grew last year at the fastest pace since 1984

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ASMA KHALID, HOST:

The U.S. economy grew last year at the fastest pace since 1984, regaining much of the ground it lost during the pandemic downturn. But the recovery has been uneven. It seems like hopes for a consistent rebound keep getting dashed by new variants of the coronavirus.

Joining us now to discuss all this is NPR's Scott Horsley. Thanks for joining us.

SCOTT HORSLEY, BYLINE: Hi, Asma.

KHALID: So Scott, today's report on the economy's progress came from the Commerce Department. What should we make of this rapid growth?

HORSLEY: GDP grew 5.7% last year. That is really strong by historical standards. As you point out, it's the fastest since Ronald Reagan was president. It's a huge improvement over 2020, when the economy actually shrank more than 3%.

But the rebound might have been even stronger had we been able to make more progress in tamping down the pandemic. Instead, with each new wave of infections - first delta, then omicron - we get a dent in the recovery, especially at face-to-face businesses like restaurants. Dave Krick runs three restaurants in Boise, Idaho, and he saw that up close.

DAVE KRICK: It was crazy. It was a roller coaster. Even though we had a lot of demand, we weren't able to do as much with it as we had hoped.

HORSLEY: Krick has struggled during the year to hire workers and buy supplies. And, you know, that's a common story. The pandemic continues to play havoc with supply chains. It's keeping lots of would-be workers on the sidelines. The Census Bureau reported earlier this month that nearly 9 million people were unable to work because they were sick with COVID or taking care of someone who was. And it's hard to have a complete recovery until we get a better handle on the pandemic.

KHALID: So Scott, what does today's report tell us about what the upcoming year might look like?

HORSLEY: On paper, the economy ended 2021 on a high note. GDP actually accelerated in the final months of the year to grow at an annual rate of 6.9%. But that's a little bit misleading because while growth was really strong in October, it fizzled in December. So we begin the new year without a whole lot of momentum.

At Krick's restaurant, he was forced to cancel a lot of holiday parties because of omicron. And that was a blow to his bottom line. He is still hiring right now in anticipation that business will pick up when infections slow down, but there's still just a lot of uncertainty.

KRICK: The one thing we know right now is we don't know what 2022 is going to bring us. We're bleeding a lot of cash, hoping that this spring and summer will be better. It's a weird time to be running a restaurant.

HORSLEY: And, of course, like everyone else, Krick has seen his costs go up. Wages for restaurant workers and others got a pretty good bump last year, which is good. But food costs have also been going up, and supplies are still hard to come by.

KHALID: You know, speaking of rising prices, though, policymakers at the Federal Reserve said this week that they are expecting to raise interest rates soon to tackle inflation. What would that potentially do for the economy?

HORSLEY: Well, the hope is that the Fed will cool things off just enough to stop prices from spiraling upwards but not so much that the recovery stalls. And that's a really delicate balancing act. Uncertainty about the Fed's ability to pull that off is one reason you continue to see big swings in the stock market.

We do know that borrowing costs for consumers and businesses will be higher in 2022. And what's more, the federal government won't be pumping as much money into people's pockets as it was last year. Most of those pandemic-era relief programs have now expired. So all this points to somewhat slower growth in 2022, but it could still be above average if we make progress against the pandemic.

KHALID: NPR's Scott Horsley, thanks, as always.

HORSLEY: You're welcome.

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