As we enter 2022, the global economy is surprisingly in strong health with a relatively swift recovery despite the obstacles businesses and individuals have faced these past two years during the pandemic.

The Conference Board currently projects 3.9% global growth in 2022. The annual projected global growth for the years 2022-2026 is projected to average 2.5%, and while this growth is good news, we should note that it is down from the 3.3% average in years prior to 2019.

While the growth side for many companies has been flat, we see some real momentum as a firm as well as our optimistic client base with a keen focus on growth, overcoming challenges, and taking advantage of opportunities as we head into the new year.

Global Economy

Global Economic Challenges

Some key challenges driving the global economy include monetary policy changes, market volatility and inflation.

  • There is a potential of higher financing costs as monetary policy changes are implemented to address possible inflation. Recent statistics show more than 6% annualized inflation year-over-year, but it’s yet to be determined how much monetary policy will impact inflation over the next year.
  • Heightened financial market volatility continues as the market reacts quickly to negative news, especially the newest COVID-19 variant, but then pivots back up when there is better news about growth projections despite a new variant. For example, 2020 fueled some sell off and stocks surged in 2021.
  • We have also seen inflation risks driven primarily by rebounding growth, supply chain bottlenecks and labor shortages.

One of the largest risks facing the global economy is the policies of the federal reserve as it manages inflation. In addition, the continued threat of the pandemic and rising global political tensions will keep both global and local leaders busy in the months ahead.

Global Economic Growth Trends

The critical trends driving the global economy include quantitative and qualitative growth drivers.
There’s a decline in the quantitative growth factor as populations age worldwide. It’s just simply a function of births versus deaths. This trend collides with other factors like the human capacity to work and focus on work, etc., during and after the pandemic.

Qualitative growth drivers won’t be enough to fill this gap. Companies will be focused on optimizing their productivity with new technologies that may have existed but weren’t being used. Digital transformation will likely play a part in supporting other efficiencies, by reducing or eliminating manual tasks done in a pre-COVID era. Further slides toward deglobalization risk acting as a drag on growth of productivity is very likely. And last, inflation may be structurally higher in the coming decades due to the perfect storm of demography, deglobalization and China’s inward focus.

The global economy is in the midst of strong recovery, and while COVID-19 is still with us in some capacity, the good news is that the economic impact of the virus is weakening. While the economic and political environment continues to play a role in global growth, we are currently seeing demand growth surpassing supply growth and inflation issues as we head into the new year. We anticipate strong emphasis on labor force growth and labor force productivity initiatives foundational to economic growth.

U.S. Economy

U.S. Economic Outlook

The Conference Board forecasts that U.S. real GDP growth will rise 6% annualized in Q4 2021 versus 2.3% in Q3 2021 with the year-over-year annualized growth at 5.6%. The forecast for the U.S. economy to grow by 3.5% in 2022 was helped greatly by the $17 trillion aid from D.C. over the past several years.

In the fall of 2021, U.S. gross domestic product was up 8% over pre-COVID levels, personal income was at an all-time high, and household net worth was 33% higher, with U.S. consumers having three times the amount of cash as prior to the pandemic.

However, while economic growth looks positive, it is overall down from what we’ve seen in previous years if you look back at averages from 2015 to 2019. The driving factors include inflation, labor shortages, and possibly deglobalization.

Recent bottlenecks in supply chains, elevated demand for goods and services, and higher energy prices all seem to be more persistent than previously thought. Goldman Sachs reported in December 2021 that the U.S. economy will be battling a continued slowdown in 2022, contending with sticky inflation and supply chain. Growth is clearly slowing past its peak rate but is a relatively gradual slowdown right now, though still a significant trend. The group issued a 3.8% GDP growth projection for 2022, citing risks and uncertainty around the emergence of new COVID-19 cases and variants and overall labor shortages.

U.S. Economic Challenges

Top challenges leading to the downgrade of the U.S. economy forecast include inflation, supply challenges and labor shortages, according to Bloomberg.

While we have weathered the end of 2021 fairly well, watch consumer sentiment, as it could be hit hard by the rise of inflation in early 2022. It’s projected that the U.S. Federal Reserve will likely raise policy rates earlier and more frequently than previously anticipated based on the most recent inflation numbers. Persistence of high inflation rates and a recent rebound in hiring are likely to result in the Fed reining in supportive policy more rapidly. We will have to wait and see what the Fed’s going to do.

While retail sales are up and motor vehicle sales climb with evidence of auto production ramping up, there will still be a microchip issue for quite some time. While adapting in some ways, supply chain issues will still be an issue across industries. Finding creative ways to recruit and retain talent and keeping close attention on driving workforce productivity will also remain at the forefront.

At LBMC, with labor shortages and retention of great talent top of mind, we implemented mid-year salary market adjustments, which is something we have not previously done in the past 25 years. While labor prices, wages, and the whole labor value and output equation is still yet to be determined, this proactive move on our end reaped strong benefits.

While there are challenges ahead of us to overcome, we are seeing a resurgence in determination for growth despite all the odds. With proactive attention to innovate and problem solve to reach high growth goals in the new year along with taking a little more control when that escaped us during the pandemic landscape, we are charting a positive path forward.

Economists pare U.S. third-quarter GDP, spending and investment forecasts

US Economic Challenges Bloomberg
Source: Bloomberg monthly survey
Note: Figures are annualized percent changes

U.S. Economic Growth Trends

Key trends driving economic growth in the U.S. include government and consumer spending.

Government spending should grow more rapidly as money associated with the infrastructure package begins to be spent. When you look at the infrastructure package, it’s very clear that the market likes to see spending, but does it really care who’s doing the spending? Whether it’s consumers, business or government, the market likes it when money’s being spent.

The bulk of economic growth will be associated with continued expansion in consumer spending. This is something we saw in 2021 to a degree. It was a safer measure of growth as opposed to capital investment in an uncertain time. That was a real theme of the 2021 data, and it’s held true through this year. We’ve seen it with our clients with the expansion of existing business to focus on reduced capital expenditures.

The U.S. economy is still solidly growing. According to CBS News, consumer spending is up despite inflation. Retail sales beat expectations in 2021; higher prices and the ability to online spend drove some of that. Consumers are spending, but their spending patterns are changing. No longer are they spending on one day like Black Friday. Instead of this big bubble built up where people spend a large amount of money in a short, confined period, we’re seeing that spend is more spread out. A dip in Black Friday is not necessarily the same indication that it once was – when everyone was either going to the stores or not going to the stores. Online shopping and delivery is another example of how COVID has had an impact on our buying landscape.

We are seeing that organizations who are experiencing high growth are investing heavily in productivity by enhancing technology and improving processes as well as creative efforts to recruit and retain top talent.

We continue to see investments focused on process and not current events help long term sustainability in the market.


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“Most professional services firms were extremely dependent upon being in the office. Within the matter of a week, the office-centric operating model was turned on its head. What we learned was that being in the office isn’t necessary to continue to do business and serve clients well. We’re more confident now than ever in doing business anywhere, in any place. Based on surveys, our internal communication in many ways actually improved because we were more intentional about our communication.

The last year has pushed us forward perhaps five or 10 years. Our goal is to take the best of what we’ve learned through the pandemic and combine it with the best of the previous years. We’ll come out the other side better, but it will take some time to figure out what exactly is the best operating model. Our goal is to have a defined work model plan, which will most certainly be a hybrid model. Right now, anywhere from 25% to a third of our people are in the office on any given day.”

State of TN Economy

State of Tennessee Economic Outlook

The 2022 Economic Report to The Governor referred to 2021 as a year of recovery. Tennessee’s real GDP has fully recovered to pre-pandemic levels, and the report projected 2021 growth at 5.6% with a continuation of growth through 2022 at 4.2%. Even with a positive trend for growth, the State of Tennessee still has 55,000 fewer workers than there were prior to the pandemic. Moving into 2022, there are continued challenges to economic growth, including supply chain issues, inflation and new COVID-19 cases and variants.

State of Tennessee Economic Challenges

The top business challenge across the state continues to be around economic conditions, according to The Boyd Center for Business and Economic Research’s Business Leaders Survey. However, it’s rapidly improving with their newest report noting 39% of respondents listing adverse economic conditions as a top business challenge, down from 80% in August 2020. Other business challenges reported were around human resources, government regulations and rising supplier costs. In response to these challenges, 77% of business leaders plan to focus on enhancing workforce development, and 67% plan to focus on their technology infrastructure.

These challenges aren’t only being addressed among businesses, but also in our state government. The Financial Stimulus Accountability Group released their Strategic Technology Solutions proposal for $196 million in technology improvements across cloud, cybersecurity, enterprise data analytics, business process automation, infrastructure and modernization in response to COVID’s impact on state operations.

State of Tennessee Economic Growth Trends

An interesting trend for the State of Tennessee is how we sustain at the macro level. According to IBIS World, the growth rate for Tennessee from 2014 to 2019 in businesses was 2.7%. Our population growth rate during the same period was 0.9%. In Middle Tennessee, we’re experiencing vast growth with corporate relocation, expansion, and private equity investments.

There’s not a shortage of opportunities for talent, and that’s only going to continue to develop, and most likely widen as more companies that are in the pipeline to relocate haven’t arrived yet. It is no surprise that’s going to be an ongoing common theme, particularly in Middle Tennessee, a very hot job market with strong talent candidates having the advantage. As we start the new year in Tennessee, we are seeing a much more positive outlook within the firm and our clients.

Tennessee had some key success in the automotive growth space as Ford Motor company and others make the state their new homes. The state is doing something right, proactively making it friendly and financially attractive for new businesses while aggressively creating programs to create and find top talent.

Governor Bill Lee noted in his presentation at LBMC’s Catalyst 2021 event in October that Tennessee has the lowest tax rate per capita of any state in America, another strong selling point for individuals and businesses alike. The Ford Motor Company created 27,000 direct and indirect jobs with their Greenfield automobile assembly plant. State lawmakers are considering close to $900 million in incentives for the new Ford manufacturing campus for electric trucks in West Tennessee. Tennessee is one of four states with manufacturers who are building electric vehicles at their plants. Think about the future of the automotive industry five, 10 and 15 years from now. What will our world look like in terms of electric vehicles and other innovative options that are here to stay? Tennessee seems ready for them.

Growth in Tennessee patterns the U.S. most of the time. Over the past 20 years, you can note the major points of recession were 2000-2001, the obvious 2008, and as we entered the pandemic it still trended up. We experienced more than 25% in growth in 2020, and many of our clients also had strong growth.

Gross State Product Growth in Tennessee
Gross State Product Growth in Tennessee
Gross State Product in Tennessee
Source: U.S. Bureau of Economic Analysis(BEA)



It appears people are more cautiously optimistic about 2022 and the potential for growth. With commodity production increases, business innovation, and supply chains learning to adapt, we expect inflation to cool over the next year, a positive sign for meeting growth goals.

This research is provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as advice to take any specific action. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.