In this article, you will find 18 graphs that tell the story of how our financial situation changed in 2022.
Inflation
If there is one phenomenon that affected people’s financial situations in 2022, it is inflation. We are now paying more for basic things than we were a year ago. Fuel prices skyrocketed quickly following the Russian invasion. Prices have been volatile since then, but by the end of the year, they returned to pre-invasion levels.
However, it is worth noting that even at the peak of 2022, fuel prices in the past were higher when taking inflation into account.
Fuel was not the only thing that experienced rapid price increases. The cost of food, especially groceries, rose significantly, to the extent that some people began to wonder if it was worth cooking at home instead of dining out.
General inflation peaked in June, driven by rising food and fuel prices.
One positive aspect of all these price increases? The Social Security Administration announced that beneficiaries would receive their largest increase since the 1980s starting in December.
The second half of the year saw a gradual cooling of inflation as supply chain bottlenecks were cleared and the Fed’s aggressive prospects for raising interest rates continued to combat inflation. However, price increases remained above the Fed’s target of 2%.
Spending
Many economists believed that the Fed’s rate hikes, which increased borrowing costs on all types of consumer loans, would deter consumer spending, allowing supply and demand to rebalance. Instead, consumers simply ramped up their use of credit cards.
Continued spending in the face of rising prices means that many people were depleting the savings they had built up during the pandemic.
While people continued to spend, they were not necessarily purchasing the same things they used to in the past. Compared to a previous year, purchases at bars and restaurants increased, while purchases in electronics and home appliances declined. Changes in spending on those categories outpaced changes in prices, indicating that not everything could be explained by inflation or negative inflation.
Housing Market
Just as inflation faced a turning point in 2022, the housing market did as well. At the beginning of the year, prices were still on a steep rise. By June, they had risen by 42% compared to pre-pandemic levels. For some experts, the massive increases in home prices during the pandemic appeared to be a bubble – one that was starting to burst.
A late warning early last year came from a measure of “exuberance” in the Dallas housing market (i.e., how much homes were selling for compared to what basic economic measures like income and housing supply would dictate). The exuberance measure soared in 2022.
Sky-high mortgage rates – a result of the Fed raising the benchmark interest rate – made mortgages extremely inaccessible for many buyers, leading to a decline in sales.
Many buyers resorted to adjustable-rate mortgages to save money on their payments. This type of mortgage was unpopular during the pandemic when fixed-rate mortgages were extremely cheap.
This summer, more sellers began to lower their asking prices.
Finally, general prices began to decline.
Jobs
In
In 2022, the labor market reversed the damage inflicted on the economy due to the onset of the COVID-19 pandemic, with job numbers rising above pre-pandemic levels. This was a remarkably swift recovery compared to previous downturns.
The workforce also regained its pre-pandemic size.
Signs of weakness in other parts of the economy did not deter employers from hiring and retaining employees. Job layoffs remained rare.
However, there may be pulls on the horizon. The Federal Reserve’s campaign to raise interest rates threatens to slow the economy in a way that could lead to layoffs. In the past, workers have paid the price for controlling inflation, as price increases typically recede after unemployment rises.
By October, the pace of job growth slowed to its lowest level of the year.
Many economists are counting on a continuing depletion of job opportunities and increased layoffs in 2023, as the economy enters a “mild recession.” But as 2022 showed, economic forecasts have a way of going sideways in pandemic times.
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Source: https://www.thebalancemoney.com/a-year-of-turning-points-2022-in-charts-6835570
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